10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2005

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

Commission File Number: 000-25887

PRIVATEBANCORP, INC.

(Exact name of Registrant as specified in its charter)

Delaware	36-3681151
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

Ten North Dearborn Street, Chicago, Illinois 60602

(Address of principal executive offices)

(312) 683-7100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, no par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

Indicate by check mark 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

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

Large accelerated filer ¨                    Accelerated filer x                    Non-accelerated filer ¨

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

The aggregate market value of the voting common equity of the Registrant held by non-affiliates of the Registrant was approximately $618,515,884 based on the closing price of the common stock of $35.38 on June 30, 2005, as reported by the NASDAQ National Market.

As of March 6, 2006, the Registrant had outstanding 21,149,288 shares of common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s Proxy Statement for the 2006 Annual Meeting of Stockholders are incorporated by reference into Part III.

FORM 10-K

Table of Contents

		Page Number
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	27
Item 1B.	Unresolved Staff Comments	31
Item 2.	Properties	31
Item 3.	Legal Proceedings	32
Item 4.	Submission of Matters to a Vote of Security Holders	32
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	33
Item 6.	Selected Financial Data	35
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	69
Item 8.	Financial Statements and Supplementary Data	73
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	73
Item 9A.	Controls and Procedures	73
Item 9B.	Other Information	73
PART III
Item 10.	Directors and Executive Officers	74
Item 11.	Executive Compensation	74
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	74
Item 13.	Certain Relationships and Related Transactions	75
Item 14.	Principal Accounting Fees and Services	75
PART IV
Item 15.	Exhibits, Financial Statement Schedules	75
Index to Consolidated Financial Statements		F-1

PART I

ITEM 1. BUSINESS

Overview

We organized PrivateBancorp as a Delaware corporation in 1989 to serve as the holding company for a Chicago-based de novo (or start-up) bank designed to provide highly personalized financial services primarily to affluent individuals, professionals, entrepreneurs and their business interests. In 1991, The PrivateBank and Trust Company was one of the first banks newly formed in the Chicago area at that time. The organizers had significant senior level banking experience and many potential client contacts from prior banking positions.

As the financial industry has consolidated, and smaller, independent banks have been acquired by national, multi-bank holding companies, many financial institutions have focused on a mass-market approach using automated customer service which de-emphasizes personal contact. We believe that the centralization of decision-making power at these large institutions has resulted in disruption of client relationships as frontline bank employees who have limited decision-making authority fill little more than a processor role for their customers. At many of these large institutions, services are provided by employees in the “home office” who evaluate requests without the benefit of personal contact with the customer or an overall view of the customer’s relationship with the institution.

We believe that this trend has been particularly frustrating to affluent individuals, professionals, owners of closely held businesses and commercial real estate investors who traditionally have been accustomed to dealing directly with senior bank executives. These clients typically seek banking relationships managed by a decision-maker that can deliver a prompt response to their requests and custom tailor a banking solution to meet their needs.

We have three banking subsidiaries—The PrivateBank and Trust Company, which we also refer to as The PrivateBank – Chicago, The PrivateBank, which we also refer to as The PrivateBank – St. Louis (which includes The PrivateBank – Wisconsin), and The PrivateBank – Michigan, which was acquired on June 20, 2005. Using the European tradition of “private banking” as our model, we provide our clients with traditional individual and corporate banking services, including a variety of loan and deposit products, and wealth management services. Our goal is to be the primary source of financial products and services for our clients. We strive to develop a valued relationship with our clients, using an experienced team of managing directors, to serve client’s individual and corporate banking needs, and by tailoring our products and services to consistently meet those needs. Our clients consist of individuals, small to medium-size businesses, commercial real estate investors and professionals. On June 15, 2004, we formed a new subsidiary, The PrivateBank Mortgage Company, as a result of our acquisition of Corley Financial Corporation, a Chicago-based mortgage-banking boutique.

Our managing directors are strategically located in 13 banking locations in addition to the offices of Lodestar Investment Counsel, LLC (“Lodestar”) and The PrivateBank Mortgage Company, all in the Midwestern United States. Currently, we have eight offices in the Chicago metropolitan area. These offices are strategically located in downtown Chicago and Chicago’s Gold Coast neighborhood; in the affluent North Shore communities of Wilmette, Winnetka and Lake Forest; in Oak Brook, centrally located in the fast growing west suburban DuPage County; and in St. Charles and Geneva, in the far western Fox Valley area. We currently operate from one location in the St. Louis market where we established The PrivateBank – St. Louis, a federally chartered savings bank, in June 2000. On December 30, 2002, we purchased a controlling interest in a Chicago-based investment adviser, Lodestar. In March 2005, the Company opened a new office in downtown Milwaukee, Wisconsin, known as The PrivateBank – Wisconsin. On June 20, 2005, the Company completed its acquisition of

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Bloomfield Hills Bancorp Inc. (“BHB”), and its wholly owned subsidiaries, The Private Bank, now referred to as The PrivateBank – Michigan, and a mortgage banking subsidiary. The PrivateBank – Michigan has three banking offices located in the suburban Detroit communities of Bloomfield Hills, Grosse Pointe and Rochester.

We completed our initial public offering in June of 1999. Since year-end 2001 to December 31, 2005, we have grown our asset base at a compounded annual rate of 31% to $3.5 billion. During the same period, loans have grown at a compounded annual rate of 35% to $2.6 billion, deposits at a compounded annual rate of 35% to $2.8 billion and core deposits at a compounded annual rate of 33% to $2.2 billion. Wealth Management assets under management grew at a compounded annual rate of 36% to $2.4 billion since year-end 2001. Diluted earnings per share (EPS) have grown at a compounded annual rate of 39% to $1.58 since year-end 2001. Excluding loans acquired from The PrivateBank – Michigan, loans grew at a compounded annual rate of 39% from year-end 2001 to December 31, 2005. Excluding deposits acquired from The PrivateBank – Michigan, deposits grew at a compounded annual rate of 35% from year-end 2001 to December 31, 2005. Excluding wealth management assets acquired from The PrivateBank – Michigan, wealth management assets grew at a compounded annual rate of 33% from year-end 2001 to December 31, 2005.

The PrivateBank Approach

We are a client-driven organization and believe we have developed a unique approach to private banking designed to provide our clients with superior service. We emphasize personalized client relationships and custom-tailored financial services, complemented by the convenience of technology. We target the affluent segment of the market because we believe that there is significant unmet demand for personalized services within this segment, and also because we believe it offers significant growth potential. The key aspects of our private banking approach are:

• Personal Relationships. Our approach begins with the development of strong, dedicated relationships with our clients. Clients are matched with a team of individuals headed by a managing director, who is the client’s central point of contact with us. Our 114 managing directors and associate managing directors, who are senior financial professionals, act as the financial partners of our clients, working with them to identify and service their banking needs. By dedicating a team of executives to clients, we are able to build ongoing relationships that allow our managing directors to use their increasing knowledge of the client’s financial history and goals to quickly adapt our services to the client’s individual needs. The purpose of this approach is to give our clients a sense of security and continuity of personal service in their banking relationship. On the basis of this trust and confidence, we then seek to expand the scope of services provided to each client, often including banking needs related to the business affairs of our clients. Satisfied clients provide our most fertile source of new business and new client referrals as well. While we encourage our clients to contact us directly, we also utilize technology to complement and enhance client service. We offer products such as Private NetBanking and Business NetBanking, Master Money debit cards and Private Line Access, our voice-response communication system, to enhance, not replace, personal contact. This technology allows us to afford our clients the convenience of accessing our services from remote locations at any time of day.

Our clients may connect to Trust Plus Online Access, Private NetBanking, and Business NetBanking directly through the Internet. Clients can also connect to PrivateLine Access directly through the telephone. Through Trust Plus Online Access, wealth management clients may access account balance and history information in a read-only format through the Internet. Business NetBanking allows clients to access real-time deposit and loan information, initiate loan payments, place stop payments, schedule bill payments, transmit book and express transfers, establish repetitive and free form wire transfers, upload check issue files, view

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positive pay exceptions, download deposit statements, export transactional data in BAI2 and CSV formats and authorize transactions that clear through the Automated Clearing House (ACH). Currently, clients may:

• access information regarding their wealth management account balances and recent transactions;

• access deposit information;

• transfer funds among deposit accounts;

• utilize a bill payment service with a variety of options;

• export information to financial software packages;

• access the Private NetBanking and Business NetBanking help desk which is staffed 24 hours a day, seven days a week; and

• send e-mail messages to bank personnel.

As technology changes, we intend to modify and enhance our electronic banking products. We believe that in the future, a growing number of our clients will desire both personal and electronic services. We intend to work to improve and expand dual-delivery systems providing the quality of service to which our clients are accustomed.

• Affluent Target Client. In the Chicago, St. Louis, Milwaukee and Detroit metropolitan areas, we target affluent individuals, professionals, owners of closely-held businesses, and commercial real estate investors with annual incomes in excess of $150,000, because we believe that they have significant unmet demand for personalized financial services. We offer our services to those members of this segment who are focused on building and preserving wealth. Our clients include affluent individuals, professionals, entrepreneurs and their business interests. We target service industries such as the accounting, legal and medical professions, as well as owners of closely-held businesses, commercial real estate investors, corporate executives and very high net worth families. We believe that this segment of the market is most suited to our business and that these individuals are most likely to develop long-term relationships with us. Although we generally target individuals with high annual incomes and net worth, we also recognize the growth potential of certain young professionals and extend our services to those individuals whose incomes or net worth do not initially meet our criteria.

• Customized Financial Services. In taking a long-term relationship approach with our clients, we are able to differentiate our services from the “one-size-fits-all” mentality of many other financial institutions. Our clients use a wide variety of financial services beyond the traditional banking products, and we work with them to identify their particular needs and to develop and shape our services tailored to meet those needs. While we offer a portfolio of banking products, we believe that it is our personalized service that distinguishes us from most of our competitors. We encourage, not discourage, our clients to contact us. We use regular contact as a way to strengthen our relationships, increase services to existing clients and earn referral business.

• Streamlined Decision-Making Process. Unlike many other banks, we do not have a lengthy chain of command. Our clients generally deal directly with their dedicated managing directors, who are given broad decision-making authority. This allows our managing directors to respond quickly and efficiently to our clients’ needs. We are able to use a streamlined approach because our organization has many qualified, experienced credit officers. Officers with credit approval authority make themselves available on short notice to help consult on or approve credits when time is of the essence. Generally, we use an “on call” approach, rather than structured meetings, to approve credit. As the amount and the complexity of the credit increases, we use a more rigorous approval process.

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• Network of Comprehensive Financial Services. In order to compete with other financial service providers, we rely on a network of professionals in the financial and investment communities with whom we have developed strategic alliances over the years. This enables us to offer our clients a broad array of high quality services. For example, we work with selected investment management firms in providing services to our wealth management clients. Our clients can either maintain their existing investment management relationships when they become wealth management clients, use our subsidiary, Lodestar, or use our approved providers of investment management services. We believe this choice distinguishes our service from the rigid policies set by some of our competitors. We, in turn, assist our clients in selecting a complete package of services best suited to their individual needs without incurring the overhead associated with directly employing diversified portfolio managers. We also have selected strategic partners who provide our clients with a full range of personal and corporate insurance products and on-site securities brokerage services.

Strategy for Growth

We seek to enhance long-term stockholder value through internal growth, expanded product lines and selective geographic expansion. We expect to continue to evaluate possible acquisition candidates and new office locations and we intend to pursue opportunities that we perceive to be attractive to the long-term value of our franchise. Our growth strategy, which relies on our continued development, retention, and expansion of our experienced management group, entails five key components:

• Developing Our Existing Relationships. An important part of our future growth will be the continued development of our existing client relationships. As the needs of our clients change and grow, we seek to grow with them and continue to provide them with our custom-tailored, flexible services. For example, we strive to follow our clients from the purchase of their homes, through the financing of their own business, to the development and planning of their estate and continuing the relationship tradition with their children and grandchildren. We believe we have a significant opportunity to further develop our existing client relationships in each of our offices. In particular, we seek to develop additional wealth management business through our existing clients.

• Increasing the Reach of Our Existing Offices. In addition to increasing the services provided to our existing clients, we seek to expand the market presence of our existing offices. On January 27, 2005, we opened a new banking office in Chicago’s Gold Coast neighborhood. During the first quarter 2006, The PrivateBank – St. Louis plans to open a new office in suburban Chesterfield, Missouri in temporary space. Our Oak Brook location will be relocating into an expanded facility during the second quarter 2006. Our Chicago headquarters will be moving in the third quarter 2006 to a new location at 70 W. Madison Street in downtown Chicago. Additionally, our Geneva office will be moving into larger offices in 2006. We believe that the growing need for private banking services in these markets is still largely unmet and we believe there is a significant opportunity to increase our client base in these offices. Key to this strategy is attracting quality people. We hope to capitalize on our reputation and the reputations of our managing directors in increasing our market presence. Our managing directors, with their personal and professional contacts in the financial and corporate arenas, have been instrumental in developing our business. We encourage our senior executives to attend and host business receptions, charitable activities and promotional gatherings so that we may interact with our clients in a unique and personal manner. We also hope to grow our business through referrals from our existing clients. Referrals have been a significant source of new business for us. We value this system of networking because it allows us to further develop and strengthen our personal and professional relationships with both new and existing clients.

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• Acquisition of Wealth Management Firms. We intend to continue to direct our energies towards building the breadth and depth of our wealth management area. During 2006, we plan to submit an application to establish a national trust company which will include our combined wealth management and trust business. We expect regulatory approval during the second half of 2006. We are very focused on acquiring additional wealth management and financial planning capabilities as well as other fee income generating lines of business. As part of this ongoing strategy, we acquired a controlling interest in Lodestar, a Chicago-based investment adviser, in December 2002.

• Expanding into New Product Lines and Services. Our goal is to be the primary source of financial products and services for our clients. We believe that by broadening our product line and adding financial services not currently offered by us, we should be able to achieve an increase in our franchise value by diversifying our fee income and strengthening of our client relationships. To reach this goal, we intend to consider select acquisitions, joint ventures or strategic alliances with other financial service companies that emphasize quality service and the value of relationships. Our targets are businesses that complement our services and enable us to broaden our product line to better serve our clients and help us develop new client relationships. Strategically, we plan to grow our mortgage banking business by increasing the number of mortgage brokers at each of our banking locations. To that end, in June 2004, The PrivateBank – Chicago formed a new subsidiary, The PrivateBank Mortgage Company, as a result of our acquisition of Corley Financial Corporation. Residential real estate loans originated by The PrivateBank Mortgage Company are either sold or held in the portfolio of our bank subsidiaries.

• Expanding into New Markets. We believe that the trend toward bank consolidation and centralized decision-making that has created a demand for our private banking services is not unique to Chicago, St. Louis, Milwaukee or suburban Detroit. As we identify quality people in other markets with over 1 million people that present opportunities for growth and development similar to those in the Chicago, St. Louis, Milwaukee and suburban Detroit markets, we will consider selective geographic expansion through possible acquisitions of existing institutions or by establishing new banking offices. As a federal savings bank, The PrivateBank – St. Louis has greater regulatory flexibility in pursuing these geographic expansion opportunities. In March 2005, we opened a new banking office in Milwaukee, Wisconsin, The PrivateBank – Wisconsin, which is an office of The PrivateBank – St. Louis. The PrivateBank – Michigan was acquired on June 20, 2005. We are actively considering expansion into selected sunbelt cities in locations such as Florida or Arizona.

The PrivateBank – Chicago, The PrivateBank – St. Louis and The PrivateBank – Michigan

We offer banking services to our clients at a personal level. We believe this is not the same as personal banking service. We define private banking as offering banking products and services to our clients when they want it, how they want it and where they want it. We tailor our products and services to fit our clients instead of making our clients fit our products and services. Our services fall into four general categories:

• Commercial Lending and Banking Services. We offer a full range of lending products to businesses owned by or affiliated with our clients. We offer lines of credit for working capital, term loans for equipment and other investment purposes, and letters of credit to support the commitments our clients make. We tailor these products to meet the varied needs of our clients. Non-credit products we offer include lockbox, cash concentration accounts, merchant credit card processing, electronic funds transfer, other cash management products and insurance. We strive to offer banking packages that are competitive and allow us to provide service to our clients beyond what is expected in our industry.

• Real Estate Lending Services. We provide real estate loan products to businesses and individuals. Our commercial real estate lending products are designed for real estate investors. We provide a full range of fixed and floating rate permanent and interim mortgages for our clients

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to finance a variety of properties such as apartment buildings, office buildings, strip shopping centers, and other income properties. In certain circumstances, we also provide construction lending for residential and commercial developments. We believe that our lending products are competitively priced with terms that are tailored to our clients’ individual needs. We offer residential mortgage products and personal construction lending through The PrivateBanks, with longer term (i.e. 30-year fixed rate products) provided through The PrivateBank Mortgage Company. The home mortgage market is very competitive and we believe that our service is what separates us from our competition. Many mortgage lenders cannot work with borrowers who have non-traditional income sources or non-traditional properties, such as co-ops. Our mortgage lending staff is trained to work with successful individuals who have complex personal financial profiles. We have developed a proficiency for jumbo mortgages and will work with our clients and market sources to place these loans into the secondary market. Our experience has been that residential lending is an excellent vehicle to attract new clients.

• Wealth Management. Our wealth management services include investment management, personal trust, guardianship and estate administration services, custody services, retirement accounts, and investment services. Our trust personnel work with our clients to define objectives, goals and strategies for their investment portfolios. We assist the client with the selection of an outside investment manager, as necessary, and work to tailor the investment program accordingly. Our wealth management and estate account administrators also work with our clients and their attorneys to develop their estate plans. We work closely with our clients and their beneficiaries to ensure that their needs are met and advise them on financial matters. When serving as agent, trustee or executor, we often structure and periodically monitor the performance of the investment management of our clients’ investment portfolios. In some situations, we provide the asset allocation and investment planning services related to the management of these assets. We also provide our clients with custodial services for safekeeping of their assets. Consistent with our private banking approach, we emphasize a high level of personal service in our wealth management area, including prompt collection and reinvestment of interest and dividend income, daily portfolio valuation, tracking of tax information, customized reporting and security settlement. We also offer retirement products such as individual retirement accounts and IRA rollovers. Wealth management services are currently offered at The PrivateBank – St. Louis and Milwaukee offices through the Wealth Management Department of The PrivateBank – Chicago. In December 2002, we acquired a controlling interest in Lodestar, a Chicago-based investment adviser. This acquisition has provided additional sources of revenue in our wealth management segment. In June 2005, The PrivateBank – Chicago acquired The Private Bank – Michigan, expanding our wealth management clientele. During 2006, we plan to submit an application to establish a national trust company which will include our combined wealth management and trust business. We expect regulatory approval during the second half of 2006.

• Individual Banking Services. Our typical private banking client has several of the following products: interest bearing checking with credit line, money market deposit accounts, certificates of deposit, ATM/debit card, internet banking, and brokerage accounts. Some of our clients also use the PrivateLine Access telephone banking product. In addition to residential mortgages, we provide clients a variety of secured and unsecured personal loans and lines of credit as well as domestic and international wire transfers and foreign currency exchange. Through our affiliations and contractual arrangements with an independent insurance brokerage firm and a registered securities broker-dealer firm, we offer insurance products and securities brokerage services.

• Corporate Banking Services. We offer our clients many cash management products and services. Through our Business NetBanking product, clients may perform: real-time balance reporting, daily transaction detail reports including cleared check images, ACH origination with

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standard entry class codes of PPD, PPD+, CCD and CCD+, Federal and State tax payments, positive pay, free-form and repetitive wire transfers, stop payments, express transfers between PrivateBank accounts, loan payments, bill payments, and interface downloads to Quickbooks and Quicken. We also offer CD ROM imaging of cleared checks, lockbox services with next day images available via the Internet, and account reconciliation.

Lending Activities

We provide a full range of commercial, real estate and personal lending products and services to our clients. Our loans are concentrated in six major areas: (1) commercial real estate; (2) commercial; (3) construction; (4) home equity; (5) personal; and (6) residential real estate. We have adopted loan policies that contain general lending guidelines consistent with regulatory requirements and are subject to review and revision by our board of directors. We extend credit consistent with these comprehensive loan policies.

The goal of our lending program is to meet the credit needs of our diverse client base while using sound credit principles to protect our asset quality. Our business and credit strategy is relationship-driven and we strive to provide a reliable source of credit, a variety of lending alternatives, and sound financial advice to our clients. When extending credit, our decisions are based upon our client’s ability to repay the loan from non-speculative sources. The quality and integrity of the borrower is crucial in the loan approval process. We monitor the performance of our loan portfolio through regular contact with our clients, continuous portfolio review, careful monitoring of delinquency reports and reliance on our loan review function.

We have retained an independent, outside resource to perform our loan review function, which ensures that our loan review process remains independent of the loan production and administration processes. Our loan reviewer examines individual credits to critique individual problems and the entire portfolio to comment on any systemic weaknesses. The reviewer reports directly to the audit committee of our board of directors on a quarterly basis. The board reviews the report on the adequacy of the allowance for loan losses on a quarterly basis. The methodology for computing the allowance for loan losses includes loan loss provisions based on the loan reviewer’s findings, delinquency trends, historical loan loss experience and current economic trends.

Our legal lending limits, based on our banks’ statements of financial condition, are calculated not to exceed 25% of capital plus unencumbered reserves. At December 31, 2005, The PrivateBank – Chicago’s legal lending limit was $53.1 million, The PrivateBank – St. Louis’s legal lending limit was $5.8 million and The PrivateBank – Michigan’s legal lending limit was $9.9 million. A bank’s legal lending limit is the maximum amount of credit that the bank may commit to any one individual or business entity after aggregating all related credit.

In addition to our chief credit officer, certain individuals have been designated acting chief credit officers, credit officers, officers with lending authority, and residential real estate lending officers. No single individual has sole authority to approve a loan. As the size of aggregate credit exposure increases, additional officers are required to approve the loan requests. This serves several purposes: (a) larger credits get more scrutiny, (b) most senior credit officers become involved in the decision making process for the vast majority of dollars loaned without approving a proportionate number of loan requests, and (c) we become more consistent in administration of credit as credit officers gain a better understanding of our overall portfolio and credit culture.

Our chief credit officer, or his designee, is involved in all credit decisions when the aggregate credit exposure is in excess of $500,000. The loan committee of The PrivateBank – Chicago reviews all credit decisions over $2.5 million, and the loan committee of The PrivateBank – St. Louis reviews all

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credit decisions over $250,000. At the Chicago office, prior approval by the loan committee is required for credit exposure in excess of $10.0 million and for all credits related to our board members or our managing directors. Currently, all loans are reviewed by the loan committee of The PrivateBank – Michigan, regardless of size. Loans are approved at the bank level by a management loan committee or by obtaining the approval of credit officers as required by our loan policies. We believe that this process allows us to be more responsive to our clients’ needs by being able to approve credit without waiting for scheduled committee meetings. We also use management committee meetings to discuss complex credits or when we feel that a particular credit may be informative to everyone in the loan approval process. As a thrift, The PrivateBank – St. Louis is required to maintain a specific percentage of its loan portfolio in qualified residential real estate loans. To address this regulatory requirement, from time to time, The PrivateBank – St. Louis has and intends to continue to purchase qualifying loans from The PrivateBank – Chicago in exchange for loans generated in the St. Louis market that do not meet the criteria for qualified-thrift-loans. In addition, The PrivateBank – Chicago purchases loans from The PrivateBank – Wisconsin and The PrivateBank – Michigan. We attempt to price sales of loans between the banks so as to allow each bank to achieve equal risk rewards from a yield perspective.

Prior to purchasing any loans, the chief credit officer of The PrivateBank – Chicago will apply the same credit policies and procedures as are followed for any other loan approval. Likewise, The PrivateBank – St. Louis and The PrivateBank – Michigan will apply the same lending discipline to loans purchased from The PrivateBank – Chicago as they do for externally generated loans.

The following table sets forth our loan portfolio by category as of December 31, 2005 and 2004:

	December 31, 2005		Percentage of total loans		December 31, 2004		Percentage of total loans
	(dollars in thousands)
Commercial real estate	$	1,268,851	48	%	$	855,396	52	%
Commercial		436,416	17	%		285,336	17	%
Construction		392,597	15	%		219,180	13	%
Home equity		114,679	4	%		119,115	7	%
Personal		173,738	7	%		83,746	5	%
Residential real estate		221,786	9	%		90,590	6	%
Total loans	$	2,608,067	100	%	$	1,653,363	100	%

Commercial Real Estate Loans. Our commercial real estate portfolio is comprised of loans secured by various types of collateral; 15% of the portfolio is secured by 1-4 family housing units located in the banks’ market areas. 15% is secured by multi-family real estate; 21% is secured by construction and land developments and 28% is secured by other types of commercial real estate collateral including commercial and service businesses owned by clients. The remainder of the portfolio is comprised of loans secured by industrial developments, warehouses, or retail centers.

Risks inherent in real estate lending are related to the market value of the property taken as collateral, the underlying cash flows and documentation. It is important to accurately assess property values through careful review of appraisals. Some examples of risky commercial real estate lending include loans secured by properties with widely fluctuating market values or income properties occupied by renters with unstable sources of income, and not perfecting liens on property taken as collateral. We mitigate these risks by understanding real estate values in areas in which we lend, investigating the sources of cash flow servicing the debt on the property and adhering to our loan documentation policy.

Commercial real estate loan products include permanent and mini-permanent financing, transaction loans to purchase properties prior to permanent financing, and lines of credit secured by

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commercial real estate portfolios. We typically structure mini-permanent and permanent financing as adjustable rate mortgages, or ARMs. An ARM structure allows our clients to lock in an interest rate for a fixed period of time in order to avoid interest rate risk during the lock-in period. The vast majority of our ARM loans have initial fixed pricing for between one to five years. Each ARM loan has language defining repricing beyond the initial fixed pricing term. Transaction loans to purchase commercial property typically have maturities of one year or less. Lines of credit secured by commercial real estate portfolios are typically granted for one year with annual extensions after a successful underwriting review. Interest rates for our lines of credit typically are based on a floating rate formula.

In our credit analysis process for commercial real estate loans, we typically review the appraised value of the property, the ability of the property as collateral to service debt, the significance of any outside income of the borrower or income from other properties owned by the borrowers, and the strength of guarantors, if any. Our real estate appraisal policy addresses selection of appraisers, appraisal standards, environmental issues and specific requirements for different types of properties, and has been approved by our loan committee.

While we have included prepayment penalty clauses in our commercial real estate fixed loan portfolio, due to the relatively short-term nature of the portfolio, collection of prepayment penalties has not had a significant impact on our overall reported yield.

Commercial Loans. Our commercial loan portfolio is comprised of lines of credit for working capital, term loans for equipment and expansion, and letters of credit. These loans are made to businesses affiliated with our clients, or to clients directly for business purposes. The vast majority of our commercial loans are personally guaranteed. Unsecured loans are made to businesses when a guarantor, as a secondary source of repayment, has a significant ability to repay and a significant interest in the business entity. Commercial loans can contain risk factors unique to the business of each borrower. In order to mitigate these risks, we seek to gain an understanding of the business of each borrower, place appropriate value on collateral taken and structure the loan properly to make sure that collateral values are maintained while loans are committed. Appropriate documentation of commercial loans is also important to protect our interests.

Our lines of credit typically are limited to a percentage of the value of the assets securing the line, and priced by a floating rate formula. In general, lines of credit are reviewed annually and are supported by accounts receivable, inventory and equipment. Depending on the risk profile of the borrower, we may require periodic aging of receivables, and inventory and equipment listings to verify the quality of the borrowing base prior to advancing funds. Our term loans are also typically secured by the assets of our clients’ businesses. Term loans typically have maturities between one to five years, with either floating or fixed rates of interest. Commercial borrowers are required to provide updated personal and corporate financial statements at least annually. Letters of credit are an important product to many of our clients. We issue standby or performance letters of credit, and can service the international needs of our clients through correspondent banks. We use the same underwriting standards for letters of credit as we do for funded loans.

Our credit approval process for commercial loans is comprehensive. We typically review the current and future cash needs of the borrower, the business strategy, management’s ability, the strength of the collateral, and the strength of the guarantors. While our loan policies have guidelines for advances on different types of collateral, we establish eligible asset values on a case-by-case basis for each borrower. Our officer on the account must be able to validate his or her position during the approval process.

Our commercial lending underwriting process includes an evaluation of the borrower’s historical and projected balance sheet, income statement, liquidity and cash flow as well as the collateral to

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determine the level of creditworthiness of the borrower. Generally, these loans are secured by a first priority security interest in all the assets of the borrower and also include the support of a personal guarantee of one or more of the principals of the borrower. Our policy permits an advance rate of 80% for accounts receivable; 25-50% for inventory; and 65% for machinery/equipment, which are confirmed periodically with the use of monthly borrowing base certificates to monitor the eligible collateral. In each case, based upon the overall credit, liquidity and the collateral, a risk rating is established for the loan.

At December 31, 2005 our commercial loan portfolio totaled $436.4 million. The Company tracks this portfolio by the portion that is secured by collateral and the portion that is unsecured. At December 31, 2005, $393.6 million of the total commercial loan portfolio was secured and $42.8 million was unsecured.

Residential Real Estate Loans. Our residential real estate portfolio consists primarily of first and second mortgage loans for 1-4 unit residential properties. We do not generally originate long-term fixed rate loans for our own portfolio due to interest rate risk considerations. However, we do originate these loans for sale into the secondary market. On June 15, 2004, we formed a new subsidiary, The PrivateBank Mortgage Company, as a result of our acquisition of Corley Financial Corporation. Many of the loans originated by The PrivateBank Mortgage Company are sold into the secondary market; otherwise the loans are purchased by one of the subsidiary banks and held in the respective loan portfolios. The PrivateBank – St. Louis and The PrivateBank – Michigan also originate residential real estate loans for sale in the secondary market. For our own portfolio, we originate ARM loans typically structured with 30-year maturities and initial rates fixed for either three or five years with annual repricing beyond the initial term.

Our credit review process mirrors the standards set by traditional secondary market sources. We review appraised value and debt service ratios, and we gather data during the underwriting process in accordance with the various laws and regulations governing residential real estate lending. Our real estate appraisal policy sets specific standards for valuing residential property.

Following the establishment of The PrivateBank Mortgage Company, we have begun to enter into forward mandatory commitments to sell mortgage loans. We have not sought to establish contractual arrangements to sell a pipeline of loan originations. Rather, we tend to sell mortgage loans on a loan-by-loan best efforts basis to certain mortgage investors. Our policy is to obtain prior approval from secondary market sources regarding the planned loan sale before we commit to originate any fixed-rate residential mortgage loans.

We believe that we have a competitive advantage in our ability to offer financing for our clients who have non-traditional income sources or require large mortgage loans. We have developed secondary market sources for mortgages, including several able to provide financing in amounts in excess of $1.0 million per loan. By offering our own ARM loans, we can offer credit to individuals who are self-employed or have significant income from partnerships or investments. The secondary market often will not take the time or will be unable to make exceptions for otherwise qualified borrowers. We believe that this approach makes us one of a limited number of financial institutions in the banks’ market areas making these loans.

Personal Loans. Our personal loan portfolio consists of loans to secure funds for personal investment, loans to acquire personal assets such as automobiles and boats, and personal lines of credit. Frequently, our borrowers prefer not to liquidate assets to secure funds for investment or personal acquisitions. They will use these assets as collateral for personal loans, or if their financial statements and personal reputations are sufficient, we will grant unsecured credit. Knowing our borrowers is a key factor in originating personal loans. When personal loans are unsecured, we believe that the character and integrity of the borrower becomes as important as the borrower’s financial statement.

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Our clients request a combination of lines of credit, floating-rate term loans and fixed-rate term loan products. Many of our clients use their personal investment portfolios as collateral for personal loans. Personal lines of credit are used for a variety of purposes such as the comfort of having funds available for future uses or establishing a line of credit as overdraft protection. We respond quickly to the needs of our clients within the limits set by our loan policy.

Personal loans are subject to the same approval process as all other types of loans. Each loan is underwritten to ensure that it has adequate collateral coverage and/or cash flow. Annual financial statements are required of each personal borrower.

Home Equity Loans. Our home equity loan portfolio consists of traditional home equity lines of credit prevalent in the market today. In general, we advance up to 80% on the value of a home, less the amount of prior liens. However, we may vary from that percentage depending on the value of the home, type of dwelling, and the personal financial situation of the borrower. Home equity loans are funded either through draws requested by our clients or by special home equity credit drafts that function as bank checks. Home equity loans are approved using the same standards as residential mortgage loans. Our borrower’s personal cash flow is compared to debt service requirements to determine our borrower’s ability to repay. Home equity loans are competitively priced and are based on a floating rate formula.

Construction Loans. Our construction loan portfolio consists of single residential properties, multi-family properties, and commercial projects. As construction lending has greater inherent risk, we closely monitor the status of each construction loan throughout its term. Typically, we require full investment of the borrower’s equity in construction projects prior to injecting our funds. Generally, we do not allow borrowers to recoup their equity from the sale proceeds of finished units (if applicable) until we have recovered our funds on the overall project. We use a title company to disburse periodic draws from the construction line to ensure that there will be no title problems at the end of the project.

Our construction loans are often the highest yielding loans in our portfolio due to the inherent risks and the monitoring requirements. These loans typically have floating rates, commitment fees and release fees. During our credit approval process, factors unique to construction loans are considered. These include assessment of the market for the finished product, reasonableness of the construction budget, ability of the borrower to fund cost overruns, and the borrower’s ability to liquidate and repay the loan at the point when the loan-to-value ratio is the greatest. We seek to manage these risks by, among other things, ensuring that the collateral value of the property throughout the construction process does not fall below acceptable levels, ensuring that funds disbursed are within parameters set by the original construction budget, and properly documenting each construction draw. Due to our more stringent standards for underwriting and monitoring construction loans and the credit profile of our borrowers, we are comfortable with the risk associated with this portfolio and are committed to construction lending as an integral part of our lending program.

Investment Activities

Each bank maintains an actively managed investment portfolio intended to maximize risk-adjusted total return, provide liquidity, enhance net interest margin, and improve the quality of our asset/liability position. We invest primarily in mortgage-backed securities and collateralized mortgage obligations (“CMOs”) backed by U.S. agencies such as Fannie Mae and Freddie Mac, bank-qualified tax-exempt obligations of state and local political subdivisions, and the common stock of the Federal Home Loan Bank of Chicago (“FHLB(Chicago)” or “FHLBC”). We also may invest in corporate debt or other securities as permitted by our investment policy. More than 90% of the bond portfolio is rated either “AAA” by S&P or “Aaa” by Moody’s, as it is our stated intent to take very little credit risk in the investment portfolio.

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When evaluating the effectiveness of our investment strategy, we employ a methodology that focuses on the total return of the portfolio over reasonably long periods of time such as one, three and five years. The investment portfolios are managed by the Chicago Bank’s Investment Officer; he reviews the portfolio management activities and financial results with the investment committee of the board of directors.

As currently structured, the investment portfolio attempts to manage the bank’s net asset/liability position by countering the interest rate risk characteristics of the loan portfolio. Most of the loans on the balance sheet are either floating-rate or have very short maturities. If interest rates change, these assets will reprice very quickly. Overall, the investment portfolio has a longer duration than the loan portfolio, which has the effect of making the bank’s net interest rate risk position more neutral.

At December 31, 2005, the Company’s consolidated investment in Federal Home Loan Bank (FHLB) stock was $142.4 million, compared to $208.1 million at December 31, 2004. The reduction in this investment reflects gradual redemptions of excess FHLB (Chicago) stock initiated by the Company in response to reductions in the dividend rate paid on such stock and to take advantage of higher yields available on loans and other investments. The Company redeemed $20.0 million of its excess FHLB (Chicago) stock in each of the first three quarters of 2005, and an additional $10.0 million of its FHLB (Chicago) stock on October 13, 2005, after which its investment totaled $137.0 million. The $142.4 million of FHLB stock at December 31, 2005 was comprised of $138.5 million of FHLB (Chicago) stock, $1.4 million of FHLB (Des Moines) stock and $2.5 million of FHLB (Indianapolis) stock. The Company is required to maintain a ratio of 20:1 of FHLB borrowings to FHLB stock. As of December 31, 2005, the Company had $171.1 million in advances from the FHLB (Chicago) and, accordingly, was required to hold $8.6 million in FHLB (Chicago) stock. The remainder of FHLB (Chicago) stock represents excess or “voluntary” stock. For further discussion of our investment in FHLB (Chicago), please see the “Investment Securities” section beginning on page 58.

In addition, we have made investments in the communities surrounding our banking offices as a part of our community reinvestment program. In 2003, The PrivateBank – Chicago committed to a multi-year program of investment in the Chicago Community Reinvestment Fund of $3.0 million and to the Chicago Equity Fund of $2.0 million. These groups focus on rebuilding and revitalizing Chicago neighborhoods through tax credit incentives. We have also purchased participations in pools of loans from Neighborhood Housing Services (NHS). NHS is a not-for-profit organization that helps provide affordable housing to low- and moderate-income residents in the Chicago area. In 2004, we purchased $5.3 million in mortgage-backed securities, which are comprised of CRA eligible loans from within The PrivateBank – Chicago’s assessment area. In helping to create a market for these loans, we believe we have taken steps to encourage origination of CRA eligible loans by many financial organizations within this bank’s surrounding communities. In 2005, we committed to investing $500,000 in the Great Lakes Redevelopment Fund, which focuses on redeveloping brownfield sites around the Chicago area.

Additional Chicago community development activities in 2005 included over $125.9 million in community development lending. These loans are designed to create and develop affordable housing in low to moderate income areas found within our communities or to support stabilization and revitalization in economically stressed neighborhoods. Additionally, CRA qualified grants or contributions by The PrivateBank – Chicago grew by more than 20% in 2005 compared to 2004. Finally, The PrivateBank – Chicago managers and staff donated more than 1,300 hours to CRA qualified organizations and more than 1,550 hours to other not-for-profit community organizations. In 2005, more than 1,700 hours of qualified volunteer CRA service hours were provided not-for-profit organizations—a 30% increase over 2004. Chicago personnel continued strong support of Operation Hope’s Financial Literacy Program in the Chicago Public Schools and the Tax Assistance Program (TAP) to help low income citizens complete their tax returns. Volunteer work in the TAP helped return more than $115,000 in 2004 tax refunds to this group and returned nearly $700,000 in tax refunds to low and moderate income workers in 2005.

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In 2005, The PrivateBank – St. Louis continued to expand its CRA program through a combination of a focus on small business lending and an ongoing effort to work with community housing organizations in the St. Louis area. Small business lending emphasized financing new housing construction and the rehabilitation of existing housing in low and moderate income census tracts. For example, The PrivateBank – St.Louis partnered with a developer to purchase land and construct eight town homes in the Gaslight Square area of St. Louis, a revitalization zone now experiencing a renaissance. In addition to being a 50% owner of the project, The PrivateBank – St. Louis is also the construction lender. The project broke ground in January 2005.

Executive management of The PrivateBank – St.Louis has taken a leadership role in several community housing and small business assistance organizations. Our managing directors currently serve on the Board of Directors for several of these assistance organizations. The PrivateBank – St. Louis was also the first local bank to commit to the Ways to Work Program, which provides loans to low and moderate-income borrowers to finance the purchase of automobiles.

In 2005, The PrivateBank – Michigan significantly expanded its assessment area for CRA purposes. The Bank has chosen to focus on the city of Pontiac and is working with two non-profit organizations, Lighthouse of Oakland County and Beyond Basics to increase homeownership and revitalize neighborhoods. It is this bank’s intention to provide affordable lending opportunities to first time home buyers and low to moderate income home buyers. The bank plans to participate in activities that preserve home ownership and foster community development. A mortgage program for new homebuyers in a low income neighborhood was developed in 2005 and is expected to be fully operational during 2006. Other projects include improving the financial literacy of low income home buyers and providing financial assistance for low income homeowners facing foreclosure.

The PrivateBank – Michigan teamed up with The PrivateBank – St. Louis to finance the acquisition and renovation of a multi-family high rise building in downtown Detroit. The combined commitment by The PrivateBank – St. Louis and The PrivateBank – Michigan to this project is $6.0 million.

Asset-Liability Management Committee

We have an asset/liability committee (“ALCO”) comprised of selected senior executives who are charged with the dual goals of optimization and stabilization of net interest income over time while adhering to prudent banking practices. ALCO oversees asset growth, liquidity and capital, and directs our overall acquisition and allocation of funds. At its meetings, ALCO reviews issues including:

• data on economic conditions;

• current interest rate outlook;

• current forecast on loans and deposits;

• mix of interest rate sensitive assets and liabilities;

• bank liquidity position;

• investment portfolio purchases and sales;

• status of our FHLB (Chicago) investment; and

• other matters as presented.

ALCO is also responsible for monitoring compliance with our investment policy. On a monthly basis, ALCO presents asset liability management reporting to the investment committee of the board of directors who reviews the portfolio of reports we prepare for our board of directors and all the decisions made by ALCO affecting net interest income.

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Wealth Management

Our Wealth Management Business Unit includes three operating groups: the Wealth Management Department of The PrivateBank – Chicago; the Wealth Management Department of The PrivateBank – Michigan and Lodestar. Wealth management services are provided in The PrivateBank – St. Louis and The PrivateBank – Wisconsin by employees of the Wealth Management Department – Chicago who are located in St. Louis and Wisconsin.

Both of our Wealth Management Departments provide fiduciary, investment and other wealth management services. These services are provided primarily to high net worth individuals and families. Our investment management services include active and passive strategies using individual marketable securities as well as funds and other commingled vehicles. Our fiduciary services include personal trust and estate administration, guardianship administration, retirement plan and account administration, and custodial services. Our wealth management services include investment planning, assisting with the selection and oversight of external investment managers, and other financial planning services.

In these Wealth Management Departments, our experienced professionals work with clients to help them define their investment objectives, goals and constraints, and develop appropriate investment strategies. We help clients decide whether to utilize internally implemented passive investment strategies or external investment managers. We have chosen to make external investment managers available to our clients, thereby providing them opportunities for better manager diversification than if they were restricted to using only internal investment management services. We also allow our clients to designate specific investment managers, thereby enabling them to maintain existing relationships they may have within the financial community. We help clients electing to use external investment managers with the selection of those managers, and we then monitor the managers’ ongoing performance.

Our wealth management and fiduciary personnel work with our clients and their attorneys to help them develop and implement their estate plans. Fiduciary personnel administering trusts and estates work closely with beneficiaries to ensure that their needs are met and to advise them on financial matters. For example, as fiduciaries of a trust or estate, our responsibilities include:

• administering the account pursuant to applicable document and governing laws;

• collecting, safekeeping and valuing assets;

• structuring and monitoring investment portfolios;

• paying debts, expenses and taxes;

• distributing property;

• advising beneficiaries; and

• preparing and signing tax returns.

In addition to administrating accounts related to trusts and estates, we also administer accounts where we serve in the following capacities: discretionary investment agent, guardian, escrow agent, custodian or qualified intermediary for IRC Section 1031 like-kind exchanges.

Consistent with our private banking approach, we emphasize a high level of personal service throughout our Wealth Management Departments, including prompt responses to client inquiries, the daily collection and investment of interest and dividend income, daily portfolio valuations, tracking of tax information, customized reporting, and prompt security settlement. We also administer individual retirement accounts and certain types of retirement plans.

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We expect to continue to grow both Wealth Management Departments through referrals from personnel throughout the Company, referrals from other professional advisors to wealthy individuals and families, referrals from existing clients, and direct business development efforts of personnel in both Wealth Management Departments. Some growth also may occur as a result of hiring experienced individuals who bring or attract new clients.

In December 2002, The PrivateBank – Chicago acquired a controlling interest in Lodestar, a Chicago-based investment adviser. Lodestar applies an active investment management philosophy to equity, fixed income and balanced accounts for clients of The PrivateBank – Chicago as well as its own investment management clients who do not receive other wealth management services from The PrivateBank – Chicago. Lodestar manages accounts primarily for high net-worth individuals and families, retirement plans and charitable organizations with investable assets in excess of $1.0 million, and shares a similar focus on highly personalized client service. We expect to continue to grow Lodestar’s business through referrals from managing directors and other personnel throughout the Company, referrals from other professional advisors to wealthy individuals and families, referrals from existing clients, and direct business development efforts of personnel in Lodestar. Some growth also may occur as a result of hiring experienced individuals who bring or attract new clients.

At December 31, 2005, Lodestar managed $109.2 million in accounts for which the Wealth Management Department – Chicago served as trustee, investment agent or custodian. Except for activities related to these accounts, Lodestar operates independent of both Wealth Management Departments.

The three operating groups within our Wealth Management Business Unit had responsibility for accounts containing approximately $2.5 billion in assets at December 31, 2005, including $1.4 billion for the Wealth Management Department – Chicago, $510.0 million for the Wealth Management Department – Michigan, and $690.0 million for Lodestar. On a consolidated basis, adjusting for assets in accounts serviced by both Lodestar and the Wealth Management Department – Chicago, the Wealth Management Business Unit had responsibility for approximately $2.4 billion.

The following table shows the breakdown of these assets by account classification and related gross revenue for the twelve months ended December 31, 2005:

	At or for the twelve months ended December 31, 2005
Account Type	Market Value			Revenue(1)
	(in thousands)
Wealth Management Department (Chicago and Michigan)(1)
Trust, estate and guardianship—managed	$	748,891		$	2,755
Investment agency—managed		488,167			2,483
Custody—not managed		539,312			937
Retirement plan—managed		80,405			172
Lodestar—managed		689,185			4,085
Less assets managed and revenue earned by Lodestar(2)		(109,194	)		(487	)
Total	$	2,436,766		$	9,945

(1) Includes The PrivateBank – Michigan results since June 20, 2005, the acquisition date.

(2) These assets are held in managed or unmanaged accounts at the Wealth Management Department (Chicago) and (Michigan) as well as in managed accounts at Lodestar. The revenues related to these assets are allocated based on the services provided.

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We plan to continue to increase the breadth and depth of our Wealth Management Business Unit through organic growth as well as acquisitions of wealth management, investment consulting and/or investment management firms in transactions similar to the acquisition in 2002 of an 80% interest in Lodestar by The PrivateBank – Chicago.

We recognized trust fee revenue of approximately $3.1 million during 2005 from wealth management services provided for those clients where a third party investment manager is utilized, including Lodestar revenue, which was $1.0 million for the year 2005. In 2005, we paid $882,000 to third party investment managers. Fees paid to Lodestar totaled approximately $487,000 in 2005. The fees we pay to third-party investment managers are included in the professional fees category of non-interest expense. Of our third-party investment managers, none individually managed more than 5% of total Wealth Management assets under management as of December 31, 2005.

For fiduciary activities conducted in both Wealth Management Departments, we have established controls to safeguard the assets of our clients against operational and administrative risk. We have a system of internal controls that is designed to keep our operating risk at appropriate levels. Our system of internal controls includes policies and procedures relating to the authorization, approval, documentation, and monitoring of transactions. Administrative risk involves potential losses associated with our performance of fiduciary responsibilities to clients. To manage this risk, we have established corporate policies and procedures to ensure that obligations to clients are discharged faithfully and in compliance with applicable legal and regulatory requirements. These policies and procedures provide guidance and establish standards related to the creation, sale, and management of investment products, trade execution, and counterparty selection.

Competition

We do business in the highly competitive financial services industry. Our geographic market is primarily the greater Chicago, St. Louis, Milwaukee and Detroit metropolitan areas. The financial services industry is comprised of commercial banks, thrifts, credit unions, investment banks, brokerage houses, money managers, and other providers of financial products and services. These firms compete with us for one or more of the following: loans, deposits, wealth management services, or investment products. Some of these firms have business units that promote themselves as “private banks.” The typical private banking competitor is a unit of a large commercial bank catering to the upper echelon of that bank’s customer base.

We view ourselves as the only private bank in the Chicago, St. Louis, Milwaukee and suburban Detroit markets focused solely on offering an extended range of traditional banking and wealth management products to affluent professionals, entrepreneurial individuals and their business interests. While our products may be similar to those of our competitors, we attempt to distinguish ourselves by emphasizing consistent delivery of the superior levels of personal service and responsiveness desired by our clients.

For commercial and commercial real estate lending, we compete with a number of major Chicago-area financial institutions and suburban banks, in the St. Louis market, with St. Louis-based financial institutions and banking offices, and in Michigan with regional banks based in Detroit and surrounding states as well as local community-based banks. For wealth management services, we compete with the largest Chicago-area banks and some investment managers and in Michigan we compete with major banks, community banks and national brokerage firms and investment managers. For private banking services, we compete with the private banking departments of major Chicago, St. Louis and Detroit-area financial institutions, some suburban banks, and brokerage houses. For residential mortgage lending, we compete with banks, savings and loans, mortgage brokers and numerous other financial services firms offering mortgage loans in our market areas. Several of our competitors are national or international in scope.

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Some of our competitors are not subject to the same degree of regulation as that imposed on bank holding companies, federally insured state chartered banks, national banks and federal savings banks and may be able to price loans and deposits more aggressively. In addition, the larger banking organizations, investment banks and brokerage houses have significantly greater resources than we do. As a result, some of our competitors have advantages over us in name recognition and market penetration.

Employees

As of December 31, 2005, we had approximately 386 full-time equivalent employees, including 7 full-time Lodestar employees. The salaries of all of our employees are paid by either The PrivateBank – Chicago, The PrivateBank – St. Louis, The PrivateBank – Michigan or The PrivateBank Mortgage Company, with the exception of certain employees who perform services for the Holding Company, whose salaries are partially paid by PrivateBancorp, Inc.

We provide our employees with a comprehensive program of benefits, some of which are on a contributory basis, including comprehensive medical and dental plans, life insurance plans, and a 401(k) plan. We consider our relationship with our employees to be good.

Available Information

Our Internet address is www.pvtb.com. We make available at this Internet address, free of charge, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

SUPERVISION AND REGULATION

General

Banking is a highly regulated industry. The following is a summary of several applicable statutes and regulations. However, these summaries are not complete, and you should refer to the statutes and regulations for more information. Also, these statutes and regulations are likely to change in the future, and we cannot predict what effect these changes, if made, will have on our operations. Finally, please remember that the supervision, regulation and examination of banks and bank holding companies by bank regulatory agencies are intended primarily for the protection of customers rather than stockholders of banks and bank holding companies.

Bank Holding Company Regulation

PrivateBancorp is registered as a “bank holding company” with the Board of Governors of the Federal Reserve System (the “Federal Reserve”) pursuant to the Bank Holding Company Act of 1956, as amended (the Bank Holding Company Act of 1956 and the regulations issued thereunder are collectively referred to as the “BHC Act”), and we are subject to regulation, supervision and examination by the Federal Reserve.

Minimum Capital Requirements. The Federal Reserve has adopted risk-based capital requirements for assessing bank holding company capital adequacy. These standards define capital and establish minimum capital ratios in relation to assets, both on an aggregate basis and as adjusted for credit risks and off-balance sheet exposures. Under the Federal Reserve’s risk-based guidelines applicable to PrivateBancorp, capital is classified into two categories.

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For bank holding companies, Tier 1, or “core,” capital consists of:

• qualifying common stockholders’ equity;

• qualifying noncumulative perpetual preferred stock;

• minority interest related to qualifying common or noncumulative perpetual preferred stock directly issued by a consolidated U.S. depository institution or foreign bank subsidiary; and

• certain restricted core capital elements (subject to certain quantitative restrictions).

less:

• goodwill;

• specified intangible assets;

• certain credit-enhancing interest-only strips receivables;

• deferred tax assets; and

• non-financial equity investments

Tier 2, or “supplementary,” capital consists of:

• the allowance for loan and lease losses (subject to some limitations);

• perpetual preferred stock and related surplus (subject to some conditions);

• hybrid capital instruments, perpetual debt and mandatory convertible debt securities;

• term subordinated debt and intermediate-term preferred stock, including related surplus (subject to some limitations); and

• unrealized holding gains on equity securities (subject to some limitations).

Under the Federal Reserve’s capital guidelines, bank holding companies are required to maintain a minimum ratio of qualifying total capital to risk-weighted assets of 8%, of which at least 4% must be in the form of Tier 1 capital. The Federal Reserve has established a minimum ratio of Tier 1 capital to total assets of 3% for strong bank holding companies (those rated a composite “1” under the Federal Reserve’s rating system). For all other bank holding companies, the minimum ratio of Tier 1 capital to total assets is 4%. In addition, the Federal Reserve continues to consider the Tier 1 leverage ratio (after deducting all intangibles) in evaluating proposals for expansion or new activities.

In its capital adequacy guidelines, the Federal Reserve emphasizes that the foregoing standards are supervisory minimums and that banking organizations generally are expected to operate well above the minimum ratios. These guidelines also state that banking organizations experiencing growth, whether internally or by making acquisitions, are expected to maintain strong capital positions substantially above the minimum levels.

As of December 31, 2005, we had regulatory capital in excess of the Federal Reserve’s well-capitalized requirements. Our total risk-based capital ratio at December 31, 2005 was 10.54% and our leverage ratio was 7.09%.

Acquisitions. The BHC Act requires prior Federal Reserve approval for, among other things, the acquisition by a bank holding company of direct or indirect ownership or control of more than 5% of the voting shares or substantially all the assets of any bank, or for a merger or consolidation of a bank holding company with another bank holding company. With limited exceptions, the BHC Act prohibits a bank holding company from acquiring direct or indirect ownership or control of voting shares of any company which is not a bank or bank holding company and from engaging directly or indirectly in any

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activity other than banking or managing or controlling banks or performing services for its authorized subsidiaries. A bank holding company may, however, engage in or acquire an interest in a company that engages in activities which the Federal Reserve has determined, by regulation or order, to be so closely related to banking or managing or controlling banks as to be a proper incident thereto, such as owning and operating a savings association, performing functions or activities that may be performed by a trust company, owning a mortgage company, or acting as an investment or financial advisor. The Federal Reserve, as a matter of policy, may require a bank holding company to be well-capitalized at the time of filing an acquisition application and upon consummation of the acquisition. Under the BHC Act and Federal Reserve regulations, we are prohibited from engaging in tie-in arrangements in connection with an extension of credit, lease, sale of property, or furnishing of services. That means that, except with respect to traditional banking products, we may not condition a client’s purchase of one of our services on the purchase of another service. The passage of the Gramm-Leach-Bliley Act, however, allows bank holding companies to become financial holding companies. Financial holding companies do not face the same prohibitions to entering into certain business transactions that bank holding companies currently face. See the discussion of the Gramm-Leach-Bliley Act below.

Interstate Banking and Branching Legislation. Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the “Interstate Banking Act”), bank holding companies are allowed to acquire banks across state lines subject to various requirements of the Federal Reserve. In addition, under the Interstate Banking Act, banks are permitted, under some circumstances, to merge with one another across state lines and thereby create a main bank with branches in separate states. After establishing branches in a state through an interstate merger transaction, a bank may establish and acquire additional branches at any location in the state where any bank involved in the interstate merger could have established or acquired branches under applicable federal and state law.

Ownership Limitations. Under the Illinois Banking Act, any person who acquires more than 10% of our stock may be required to obtain the prior approval of the commissioner of the Illinois Department of Financial and Professional Regulation (the “Commissioner”). Under the Change in Bank Control Act, a person may be required to obtain the prior regulatory approval of the Federal Reserve before acquiring the power to directly or indirectly control the management, operations or policies of PrivateBancorp or before acquiring control of 10% or more of any class of our outstanding voting stock.

Dividends. The Federal Reserve has issued a policy statement on the payment of cash dividends by bank holding companies. In the policy statement, the Federal Reserve expressed its view that a bank holding company experiencing earnings weaknesses should not pay cash dividends exceeding its net income or which could only be funded in ways that weakened the bank holding company’s financial health, such as by borrowing. Additionally, the Federal Reserve possesses enforcement powers over bank holding companies and their non-bank subsidiaries to prevent or remedy actions that represent unsafe or unsound practices or violations of applicable statutes and regulations. Among these powers is the ability to prohibit or limit the payment of dividends by banks and bank holding companies.

Under a longstanding policy of the Federal Reserve, we are expected to act as a source of financial strength to our banking subsidiaries and to commit resources to support them. The Federal Reserve takes the position that in implementing this policy, it may require us to provide financial support when we otherwise would not consider ourselves able to do so.

In addition to the restrictions on dividends imposed by the Federal Reserve, Delaware law also places limitations on our ability to pay dividends. For example, we may not pay dividends to our stockholders if, after giving effect to the dividend, we would not be able to pay our debts as they become due. Because a major source of our revenue could be dividends that we expect to receive from our banking subsidiaries, our ability to pay dividends will depend on the amount of dividends paid by our banking subsidiaries. We cannot be sure that our banking subsidiaries will pay such dividends to us.

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Bank Regulation

The PrivateBank – Chicago. The PrivateBank – Chicago is subject to supervision and examination by the Illinois Department of Financial and Professional Regulation and, as a non-member, FDIC-insured bank, to supervision and examination by the Federal Deposit Insurance Corporation (“FDIC”). As an affiliate of The PrivateBank – Chicago, we are also subject to examination by the Department of Financial and Professional Regulation. The PrivateBank – Chicago is currently a member of the FHLB (Chicago), but is in the process of withdrawing its membership. The PrivateBank – Chicago expects to complete the withdrawal process during the second quarter 2006. The Federal Deposit Insurance Act (“FDIA”) requires prior FDIC approval for any merger and/or consolidation by or with another depository institution, as well as for the establishment or relocation of any bank or branch office. The FDIA also gives the FDIC the power to issue cease and desist orders. A cease and desist order could either prohibit a bank from engaging in certain unsafe and unsound bank activities or could require a bank to take certain affirmative action. The FDIC also supervises compliance with the federal laws and regulations which, in addition to several other mandates, place restrictions on loans by FDIC-insured banks to an executive officer, director or principal shareholder of the bank, the bank holding company which owns the bank, and any subsidiary of such bank holding company. The FDIC also examines The PrivateBank – Chicago for its compliance with statutes that restrict and, in some cases, prohibit certain transactions between a bank and its affiliates. Among other provisions, these laws place restrictions upon:

• extensions of credit to the bank holding company and any non-banking affiliates;

• the purchase of assets from affiliates;

• the issuance of guarantees, acceptances or letters of credit on behalf of affiliates; and

• investments in stock or other securities issued by affiliates or acceptance thereof as collateral for an extension of credit.

Also, The PrivateBank – Chicago is subject to restrictions with respect to engaging in the issuance, underwriting, public sale or distribution of certain types of securities and to restrictions upon:

• the nature and amount of loans which it may make to a single borrower (and, in some instances, a group of affiliated borrowers);

• the nature and amount of securities in which it may invest;

• the amount of investment in The PrivateBank – Chicago premises; and

• the manner in and extent to which it may borrow money.

Furthermore, all banks are affected by the credit policies of the Federal Reserve, which regulates the national supply of bank credit. Such regulation influences overall growth of bank loans, investments, and deposits and may also affect interest rates charged on loans and paid on deposits. The Federal Reserve’s monetary policies have had a significant effect on the operating results of commercial banks in the past and we expect this trend to continue in the future.

Dividends. The Illinois Banking Act provides that an Illinois bank may not pay dividends of an amount greater than its current net profits after deducting losses and bad debts while such bank continues to operate a banking business. For the purpose of determining the amount of dividends that an Illinois bank may pay, bad debts are defined as debts upon which interest is past due and unpaid for a period of six months or more unless such debts are well-secured and in the process of collection.

In addition to the foregoing, the ability of PrivateBancorp and The PrivateBank – Chicago to pay dividends may be affected by the various minimum capital requirements and the capital and non-capital standards established under the Federal Deposit Insurance Corporation Improvements Act of 1991 (“FDICIA”), as described below.

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Federal Reserve System. The PrivateBank – Chicago is subject to Federal Reserve regulations requiring depository institutions to maintain non-interest-earning reserves against their transaction accounts (primarily NOW and regular checking accounts). The Federal Reserve regulations generally require 3% reserves on the first $48.3 million of transaction accounts and 10% on the remainder. The first $7.8 million of otherwise reservable balances (subject to adjustments by the Federal Reserve) are exempted from the reserve requirements. The PrivateBank – Chicago is in compliance with that requirement.

Standards for Safety and Soundness. The FDIA, as amended by FDICIA and the Riegle Community Development and Regulatory Improvement Act of 1994, requires the FDIC, together with the other federal bank regulatory agencies, to prescribe standards of safety and soundness, by regulations or guidelines, relating generally to operations and management, asset growth, asset quality, earnings, stock valuation, and compensation. The FDIC and the other federal bank regulatory agencies have adopted a set of guidelines prescribing safety and soundness standards pursuant to FDICIA. The guidelines establish general standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, and compensation, fees and benefits. In general, the guidelines require, among other things, appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines. The guidelines prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director or principal stockholder. In addition, the FDIC adopted regulations that authorize, but do not require, the FDIC to order an institution that has been given notice by the FDIC that it is not satisfying the safety and soundness guidelines to submit a compliance plan. If, after being so notified, an institution fails to submit an acceptable compliance plan or fails in any material respect to implement an accepted compliance plan, the FDIC must issue an order directing action to correct the deficiency and may issue an order directing other actions of the types to which an undercapitalized institution is subject under the “prompt corrective action” provisions of FDICIA. If an institution fails to comply with such an order, the FDIC may seek to enforce its order in judicial proceedings and to impose civil money penalties. The FDIC and the other federal bank regulatory agencies have also proposed guidelines for asset quality and earning standards.

Prompt Corrective Action. FDICIA requires the federal banking regulators, including the Federal Reserve and the FDIC, to take prompt corrective action with respect to depository institutions that fall below minimum capital standards and prohibits any depository institution from making any capital distribution that would cause it to be undercapitalized. Institutions that are not adequately capitalized may be subject to a variety of supervisory actions, including restrictions on growth, investment activities, capital distributions and affiliate transactions, and will be required to submit a capital restoration plan which, to be accepted by the regulators, must be guaranteed in part by any company having control of the institution (for example, the company or a stockholder controlling the company). In other respects, FDICIA provides for enhanced supervisory authority, including greater authority for the appointment of a conservator or receiver for critically under-capitalized institutions. The capital-based prompt corrective action provisions of FDICIA and its implementing regulations apply to FDIC-insured depository institutions. However, federal banking agencies have indicated that, in regulating bank holding companies, the agencies may take appropriate action at the holding company level based on their assessment of the effectiveness of supervisory actions imposed upon subsidiary insured depository institutions pursuant to the prompt corrective action provisions of FDICIA. Also, under FDICIA, insured depository institutions with assets greater than $500 million at the beginning of a fiscal year, must submit an annual report for that year, including financial statements and a management report, to each of the FDIC, any appropriate federal banking agency, and any appropriate bank supervisor. The PrivateBank – Chicago had assets of more than $500 million at the beginning of fiscal year 2004, and must therefore provide an annual report as required by FDICIA.

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As of December 31, 2005, PrivateBancorp, Inc. and each of its subsidiaries had capital in excess of the requirements for a “well-capitalized” institution under the prompt corrective action provisions of FDICIA.

Insurance of Deposit Accounts. Under FDICIA, as FDIC-insured institutions, The PrivateBank – Chicago and The PrivateBank – Michigan are required to pay deposit insurance premiums based on the risk they pose to the Bank Insurance Fund (“BIF”) and The PrivateBank – St. Louis is required to pay deposit insurance premiums based on the risk it poses to the Savings Association Insurance Fund. The FDIC has authority to raise or lower assessment rates on insured deposits in order to achieve statutorily required reserve ratios in the insurance funds and to impose special additional assessments. Each depository institution is assigned to one of three capital groups: “well capitalized,” “adequately capitalized” or “undercapitalized.” Within each capital group, institutions are assigned to one of three supervisory subgroups: “A” (institutions with few minor weaknesses), “B” (institutions which demonstrate weaknesses which, if not corrected, could result in significant deterioration of the institution and increased risk of loss to BIF), and “C” (institutions that pose a substantial probability of loss to BIF unless effective corrective action is taken). Accordingly, there are nine combinations of capital groups and supervisory subgroups to which varying assessment rates would be applicable. An institution’s assessment rate depends on the capital category and supervisory category to which it is assigned. During 2005, The PrivateBank – Chicago paid deposit insurance premiums in the aggregate amount of $236,088, The PrivateBank – St. Louis paid deposit insurance premiums in the aggregate amount of $100,327 and The PrivateBank – Michigan paid deposit insurance premiums in the aggregate amount of $18,621 for the period June 20, 2005 through December 31, 2005.

Deposit insurance may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. Such terminations can only occur, if contested, following judicial review through the federal courts. We do not know of any practice, condition or violation that might lead to termination of our deposit insurance.

Community Reinvestment. Under the CRA, a financial institution has a continuing and affirmative obligation to help meet the credit needs of its entire community, including low- and moderate-income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions, or limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community. However, institutions are rated on their performance in meeting the needs of their communities. Performance is tested in three areas: (a) lending, to evaluate the institution’s record of making loans in its assessment areas; (b) investment, to evaluate the institution’s record of investing in community development projects, affordable housing, and programs benefiting low or moderate income individuals and business; and (c) service, to evaluate the institution’s delivery of services through its branches, ATMs and other offices. The CRA requires each federal banking agency, in connection with its examination of a financial institution, to assess and assign one of four ratings to the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by the institution, including applications for charters, branches and other deposit facilities, relocations, mergers, consolidations, acquisitions of assets or assumptions of liabilities, and savings and loan holding company acquisitions. The CRA also requires that all institutions make public disclosure of their CRA ratings.

The PrivateBank – Chicago was assigned a “satisfactory” rating in September 2003 as a result of its last CRA examination. The PrivateBank – St. Louis was assigned a “satisfactory” rating in May 2005 as a result of its last CRA examination. The PrivateBank – Michigan was assigned a “satisfactory” rating in October 2004 as a result of its last CRA examination.

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Bank Secrecy Act. Under the Bank Secrecy Act (“BSA”), a financial institution is required to have systems in place to detect certain transactions, based on the size and nature of the transaction. Financial institutions are generally required to report cash transactions involving more than $10,000 to the United States Treasury. In addition, financial institutions are required to file suspicious activity reports for transactions that involve more than $5,000 and which the financial institution knows, suspects or has reason to suspect involves illegal funds, is designed to evade the requirements of the BSA or has no lawful purpose. The USA PATRIOT Act of 2001, enacted in response to the September 11, 2001 terrorist attacks, requires bank regulators to consider a financial institution’s compliance with the BSA when reviewing applications. In addition, regulations implementing customer identification procedures to be followed by financial institutions must be complied with by all financial institutions subject to the BSA.

Compliance with Consumer Protection Laws. The PrivateBank – Chicago is subject to many federal consumer protection statutes and regulations including the CRA, the Truth in Lending Act, the Truth in Savings Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Real Estate Settlement Procedures Act and the Home Mortgage Disclosure Act. Among other things, these acts:

• require banks to meet the credit needs of their communities;

• require banks to disclose credit terms in meaningful and consistent ways;

• prohibit discrimination against an applicant in any consumer or business credit transaction;

• prohibit discrimination in housing-related lending activities;

• require banks to collect and report applicant and borrower data regarding loans for home purchases or improvement projects;

• require lenders to provide borrowers with information regarding the nature and cost of real estate settlements;

• prohibit certain lending practices and limit escrow account amounts with respect to real estate transactions; and

• prescribe possible penalties for violations of the requirements of consumer protection statutes and regulations.

From time to time we have been made aware of certain deficiencies in our consumer compliance program. Management believes that any deficiencies have already been or are in the process of being corrected. In the event that consumer compliance deficiencies were to continue over time, enforcement or administrative actions by the appropriate federal banking regulators could result. Such action could in turn affect the implementation of our growth strategies.

Enforcement Actions. Federal and state statutes and regulations provide financial institution regulatory agencies with great flexibility to undertake an enforcement action against an institution that fails to comply with regulatory requirements, particularly capital requirements. Possible enforcement actions range from the imposition of a capital plan and capital directive to civil money penalties, cease and desist orders, receivership, conservatorship or the termination of deposit insurance.

Impact of the Gramm-Leach-Bliley Act. The Gramm-Leach-Bliley Act (the “GLB Act”) amended or repealed certain provisions of the Glass-Steagall Act and other legislation that restricted the ability of bank holding companies, securities firms and insurance companies to affiliate with one another. The GLB Act has established a comprehensive framework to permit affiliations among commercial banks, insurance companies and securities firms. Also, a bank holding company that meets certain criteria may certify that it satisfies certain criteria and become a financial holding company, and thereby engage in a broader range of activity than permitted for a bank holding company.

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The GLB Act also imposes requirements on financial institutions with respect to customer privacy by generally prohibiting disclosure of non-public personal information to non-affiliated third parties unless the customer has been given the opportunity to object and has not objected to such disclosure. Financial institutions are further required to disclose their privacy policies to customers annually. The FDIC and the other federal regulators have promulgated implementing regulations outlining the duties or responsibilities of financial institutions with regard to customer privacy. These regulations do not supersede state regulations regarding privacy, except to the extent that state regulations conflict with these regulations. The privacy regulations of the Illinois Banking Act continue to apply to The PrivateBank, except to the extent they conflict with the GLB Act and its implementing regulations.

To the extent the GLB Act permits banks, securities firms and insurance companies to affiliate, the financial services industry may experience further consolidation. This consolidation could result in a growing number of larger financial institutions that offer a wider variety of financial services than we currently offer and that can aggressively compete in the markets we currently serve.

The PrivateBank – Michigan. PrivateBancorp acquired The PrivateBank – Michigan in June 2005. The PrivateBank – Michigan is a Michigan-chartered, non-member bank. Accordingly, the FDIC is the primary federal regulator for The PrivateBank – Michigan and the same federal regulatory scheme applicable to The PrivateBank – Chicago, as described above, is applicable to The PrivateBank – Michigan. As a Michigan-chartered bank, The PrivateBank – Michigan is also subject to regulation by the Michigan Office of Financial and Insurance Services.

The PrivateBank – St. Louis. The PrivateBank – St. Louis is a federally chartered savings bank. Accordingly, it is governed by and subject to extensive regulation, examination and supervision by the Office of Thrift Supervision (“OTS”), and is required to comply with the rules and regulations of the OTS under the Home Owners’ Loan Act (“HOLA”). As a federally chartered savings bank, The PrivateBank – St. Louis has greater flexibility in pursuing interstate branching than an Illinois state bank. Due to its ability to establish branches in other states, The PrivateBank – Wisconsin has been established as a branch office of The PrivateBank – St. Louis. Thus, The PrivateBank – Wisconsin is subject to the same regulation and supervision as The PrivateBank – St. Louis. The activities of The PrivateBank – St. Louis are also governed by the FDIA. The FDIC has back-up regulatory authority over The PrivateBank – St. Louis. Although The PrivateBank – St. Louis has a different primary federal regulator from The PrivateBank – Chicago, most, if not all, of the federal statutes and regulations applicable to The PrivateBank – Chicago are also applicable to The PrivateBank – St. Louis. The PrivateBank – St. Louis is a member of the FHLB of Des Moines and may be subject to examination by the FHLB of Des Moines.

Under such regulation and supervision, The PrivateBank – St. Louis is required to file reports with the OTS and the FDIC concerning its activities and financial condition in addition to obtaining regulatory approvals prior to establishing branches or entering into certain transactions such as mergers with, or acquisitions of, other financial institutions. In addition, The PrivateBank – St. Louis is required in situations to either apply to or provide notice to the OTS before declaring a dividend. The OTS also conducts periodic examinations to test The PrivateBank – St. Louis’s compliance with various regulatory and safety and soundness requirements. This regulation and supervision establishes a comprehensive framework of supervision and is intended primarily for the protection of the insurance fund and depositors. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including discretion with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such regulatory requirements and policies, whether by the OTS, the FDIC or the Congress, could have a material adverse impact on us, The PrivateBank – St. Louis and our operations.

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The PrivateBank – St. Louis is also required to be a qualified thrift lender (“QTL”). The HOLA requires savings institutions to meet a QTL test, under which the institution is required to either qualify as a “domestic building and loan association” under the Internal Revenue Code or maintain at least 65% of its “portfolio assets” (total assets less (1) specified liquid assets up to 20% of total assets; (2) intangibles, including goodwill; and (3) the value of property used to conduct business) in certain “qualified thrift investments,” (primarily residential mortgages and related investments, including certain mortgage-backed securities) in at least nine months out of each twelve-month period. A savings institution that fails the QTL test is subject to certain operating restrictions, such as not being able to retain or operate out-of-state branches, and may be required to convert to a bank charter. In meeting the QTL test, The PrivateBank – St. Louis may be assisted by The PrivateBank – Chicago through the purchase by The PrivateBank – St. Louis of certain mortgage loans from The PrivateBank – Chicago.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This report contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we are including this statement for purposes of these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain and actual results may differ materially from those predicted in forward-looking statements. Factors which might cause such a difference include, but are not limited to, fluctuations in market rates of interest and loan and deposit pricing; greater than anticipated deterioration in asset quality due to a prolonged economic downturn in the greater Chicago, St. Louis, Milwaukee and Detroit metropolitan areas; legislative or regulatory changes; adverse developments or changes in the composition of our loan or investment portfolios; significant increases in competition; the Company’s ability to ultimately redeem the FHLBC stock that it owns; an increase in the Company’s funding costs as a result of its decision to withdraw as a member of the FHLBC; difficulties in identifying attractive acquisition opportunities or strategic partners to complement our private banking approach and the products and services we offer; unforeseen difficulties in integrating the acquisition of The PrivateBank – Michigan, slower than anticipated growth of its business, unanticipated business declines or higher than expected operational costs; unexpected difficulties in the continued integration of or in operating our mortgage banking business; the possible dilutive effect of potential acquisitions or expansion; and our ability to raise new capital as needed and the timing, amount and type of such capital raises. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

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EXECUTIVE OFFICERS

The following persons serve as executive officers of PrivateBancorp:

Ralph B. Mandell (65), a director since 1989, is a co-founder of PrivateBancorp and The PrivateBank – Chicago. A director of The PrivateBank – Chicago and a director of The PrivateBank – St. Louis, he has served as Chairman and Chief Executive Officer of PrivateBancorp and The PrivateBank – Chicago since 1994 and assumed the additional title of President of both entities in March 1999. From inception until 1994, Mr. Mandell had the title of Co-Chairman. Prior to starting The PrivateBank – Chicago and PrivateBancorp, Mr. Mandell was the Chief Operating Officer of First United Financial Services, Inc., from 1985 to 1989, and served as its President from 1988 to 1989. First United, a company that was traded on the NASDAQ National Market, was sold to First Chicago Corporation in 1987. He also served as President of Oak Park Trust & Savings Bank from 1985 until 1988. Prior thereto, Mr. Mandell had served as Executive Vice President of Oak Park Trust & Savings Bank since 1979.

Gary S. Collins (47) has been a Managing Director of The PrivateBank – Chicago since 1991, and in 2001 was elected Co-Vice Chairman of The PrivateBank – Chicago. Prior to joining The PrivateBank, he served as Senior Vice President at First Colonial Bancshares of Avenue Bank of Oak Park and before that, Senior Vice President at First Chicago Bank of Oak Park, formerly known as Oak Park Trust and Savings Bank. Mr. Collins is a graduate of DePaul University with a B.S. in Finance. In the past, he has served as Director of the Illinois Mortgage Bankers Association and Chairman of the Loan Committee of the Oak Park Development Corporation.

Richard C. Jensen (60) has been a Director since January 2000. Mr. Jensen has been a Managing Director of The PrivateBank – Chicago since November 1999. He became Chairman, Chief Executive Officer and a Managing Director of The PrivateBank – St. Louis upon receipt of its banking charter in June 2000. From May 1998 until joining us, Mr. Jensen served as Chairman and Chief Executive Officer of Missouri Holding, Inc. From March to May 1998, he served as President and Chief Executive Officer of Royal Banks of Missouri. For the previous 18 years, Mr. Jensen served in various executive positions with National Bank and its predecessor, Boatmen’s Bank, in St. Louis.

Hugh H. McLean (47) has been Co-Vice Chairman of The PrivateBank – Chicago since 2001 and a Managing Director of The PrivateBank – Chicago since 1996. He serves as head of The PrivateBank – Chicago suburban offices. Prior to joining the bank, he served as a regional manager with Firstar Bank Illinois and its predecessor from 1990 to 1996, and as head of a commercial banking division at American National Bank and Trust Company in Chicago from 1987 to 1990, where he was employed from 1980 to 1990.

James A. Ruckstaetter (58) has been a Managing Director since 1999, the Chief Credit Officer of The PrivateBank – Chicago since January 2000, and Chief Credit Officer of PrivateBancorp, Inc. since 2005. His diverse experience includes credit and loan administration, commercial lending and residential real estate lending. Mr. Ruckstaetter’s career spans 35 years including various executive positions with leading Chicago area financial institutions. From January 1998 until June 1999, he was President and CEO of Pan American Bank, a community bank on the west side of Chicago. From September 1994 to December 1997, Mr. Ruckstaetter served as a Senior Relationship Manager at Bank of America.

Dennis L. Klaeser (48) was named Chief Financial Officer of PrivateBancorp and Chief Financial Officer and Managing Director of The PrivateBank – Chicago on April 1, 2003. Prior to joining the Company, Mr. Klaeser was a senior research analyst with Robert W. Baird & Co. since mid-2002. From 2000 until mid-2002, he was managing director and head of the US Financial Institutions Group at Andersen Corporate Finance, a division of Arthur Andersen LLP. From 1994 until 2000, Mr. Klaeser served in various capacities at First Union Securities (previously EVEREN

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Securities), including managing director of EVEREN’s financial institutions group from 1997 until 1999, and following First Union’s acquisition of EVEREN, as managing director of the bank group from 1999 until 2000.

William A. Goldstein (65) is the President of Lodestar, and Managing Director of the Company, and has over 40 years of experience in the investment industry. Mr. Goldstein was appointed to the Board of Directors of The PrivateBank – Chicago in January 2003 and elected a Director of PrivateBancorp in April 2003. Prior to founding Lodestar in 1989, he was a Principal in the founding of Burton J. Vincent, Chesley & Co. where he served as Executive Vice President and Director. In 1983 the firm was acquired by Prescott, Ball & Turben (a subsidiary of Kemper Corporation). There Mr. Goldstein was Chairman and Director of Prescott Asset Management, and President of Selected Special Shares, a publicly traded mutual fund.

John B. Williams (54) has been a director since April 2004, and serves as Managing Director and Chief Executive Officer of The PrivateBank – Wisconsin. Mr. Williams was president of U.S. Bank Wisconsin from 2000 through 2003. For the previous 30 years, Mr. Williams held various positions with U.S. Bank and its predecessors Firstar and First Wisconsin. Mr. Williams also serves on the board of directors of United Way of Greater Milwaukee, St. Norbert College, the Milwaukee Public Library Foundation, the Medical College of Wisconsin, Southeastern Wisconsin Professional Baseball Park District, and Wisconsin Tax Payers Alliance.

Wallace L. Head (55), a director of The PrivateBank – Chicago since December 2004, was named Chairman and Chief Executive Officer and a Managing Director of a soon-to-be created subsidiary of PrivateBancorp, which will include its wealth management and trust business. Mr. Head served as the President and Chief Operating Officer of Family Office Exchange LLC, from 2002 until joining The PrivateBank – Chicago. Previously, he was Senior Vice President and Chief Executive Officer of the Strong Private Client Business unit at Strong Capital Management, Inc. beginning in 1999. From 1992 until 1999, he was a Managing Director at Sanford C. Bernstein & Co., establishing a new Chicago office providing discretionary investment management and related investment planning services to high net worth individuals and families, foundations and endowments. Mr. Head founded Head/Ellerman, Inc. in 1980, a consulting firm that provided comprehensive personal financial planning services to corporate executives and other individuals. After Head/Ellerman, Inc. was acquired by Arthur Andersen & Co. in 1983, Mr. Head became a tax partner and national director of individual tax and financial advisory services at Anderson and served in that capacity until 1992. He began his career in 1976 with the former Continental Illinois National Bank & Trust Co. (now Bank of America) in the bank’s personal financial planning division.

David T. Provost (52), is Chairman and CEO of The PrivateBank – Michigan, formerly Bloomfield Hills Bancorp, Inc., which he co-founded in 1989. Prior to Bloomfield Hills, Bancorp, Inc., Mr. Provost served 13 years in various capacities with Manufacturers National Bank of Detroit and Manufacturers National Bank of Novi, now Comerica Bank. Mr. Provost attended Alma College where he earned his bachelor’s degree. He also earned an MBA from Eastern Michigan University and graduated from the University of Wisconsin School of Banking. In addition, Mr. Provost is currently Chairman of the Board of Trustees at Alma College.

ITEM 1A. RISK FACTORS

Our business, financial condition and results of operations are subject to various risks, including those discussed below, which may affect the value of our securities. The risks discussed below are those that we believe are the most significant risks, although additional risks not presently known to us or that we currently deem less significant may also impact our business, financial condition and results of operations, perhaps materially. See “Cautionary Statement Regarding Forward-Looking Information” on page 25.

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We may not be able to implement aspects of our growth strategy.

Our growth strategy contemplates the further expansion of our business and operations, possibly through the addition of new product lines, the establishment of additional banking offices or the acquisition of other banks or banking offices in our existing markets or in new metropolitan markets in the Midwest or the Sunbelt as well as the acquisition of additional wealth management firms. Implementing these aspects of our growth strategy depends in part on our ability to successfully identify acquisition opportunities and strategic partners that will complement our private banking and wealth management approaches and to successfully integrate their operations with ours. To successfully acquire or establish new banks or banking offices, we must be able to correctly identify profitable or growing markets, as well as attract the necessary relationships to make these new facilities cost-effective. It is possible that the costs associated with future expansion or acquisitions may have adverse effects on our earnings per share. To the extent we undertake de novo (start-up) bank or banking office formations, our level of reported net income, return on average equity and return on average assets will be impacted by start-up costs and overhead expenses associated with such operation, the profitability of which will also depend on the time lag typically involved in redeploying deposits into attractively priced loans and other higher yielding assets. We are likely to experience the effects of higher expenses relative to operating income from any new operation. These expenses may be higher than we expected, and it may take longer than expected for new banks and/or offices to reach profitability. In addition, we cannot be sure that we will be able to identify suitable opportunities for further growth and expansion, or that if we do, that we will be able to successfully integrate these new operations into our business. If we are unable to effectively implement our growth strategies, our business may be adversely affected.

Our growth and expansion may strain our ability to manage our operations and our financial resources.

Our financial performance and profitability depend on our ability to execute our growth strategy. In addition to continuing to develop our existing client relationships and expanding the market presence of our current banking offices, we intend to continue to evaluate possible acquisition candidates and expansion opportunities in identified strategic markets. We also intend to direct our energies towards building the breadth and depth of our wealth management area, including through the possible acquisition of additional wealth management firms and financial planning capabilities. This continued growth, however, may present operating and other challenges that could adversely affect our business, financial condition, results of operations and cash flows. Accordingly, there can be no assurance that we will be able to execute our growth strategy or maintain the level of profitability that we have recently experienced.

Our growth may also place a strain on our administrative, operation and financial resources and increased demands on our systems and controls. Our growth may require continued enhancements to and expansion of our operating and financial systems and controls and may strain or significantly challenge them. The process of consolidating the businesses and implementing the strategic integration of any acquired or newly-established banking offices and businesses with our existing business may take a significant amount of time. It may also place additional strain on our resources and require us to incur substantial expenses. We cannot assure you that we will be able to integrate any businesses we acquire or establish successfully or in a timely manner. Our continued growth may also increase our need for qualified personnel. We cannot assure you that we will be successful in attracting, integrating and retaining such personnel.

The loss of key managing directors may adversely affect our operations.

We are a relationship-driven organization. Our growth and development to date have resulted in large part from the efforts of our 114 managing directors. Our managing directors have primary contact with our clients and are extremely important in maintaining personalized relationships with our client base, which is a key aspect of our business strategy, and in increasing our market presence. The loss

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of one or more of these key employees could have a material adverse effect on our operations if remaining managing directors are not successful in retaining client relationships of a departing managing director.

We have entered into employment contracts with Ralph B. Mandell, our chairman, president and chief executive officer, and ten managing directors, Richard Jensen, William Goldstein, Dennis Klaeser, Hugh McLean, Gary Collins, Jay Williams, Wallace Head, David Provost, Jim Ruckstaetter and Thomas Castronovo. In connection with our acquisition of Lodestar, we entered into employment contracts with each of Lodestar’s four portfolio managers. Despite these agreements, there can be no assurance that any of these individuals will decide to remain employed by us or that our business will be protected by various covenants not to compete or covenants not to solicit our clients that are contained in these agreements. Currently, we do not have employment agreements in place with any of our other managing directors or officers and none of these individuals are currently subject to any covenants not to compete or covenants not to solicit our clients.

Our commercial real estate loans generally involve higher principal amounts than our other loans, and repayment of these loans may be dependent on factors outside our control or the control of our borrowers.

At December 31, 2005, our commercial real estate loans totaled approximately $1.3 billion, or 49% of our total loan portfolio. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans generally is dependent, in large part, on the successful operation of the property securing the loan or the business conducted on the property securing the loan. These loans may be more adversely affected by general conditions in the real estate markets or in the economy. For example, if the cash flow from a borrower’s project is reduced due to leases not being obtained or renewed, that borrower’s ability to repay the loan may be impaired. Many commercial real estate loan principal payments are not fully amortized over the loan period, but have balloon payments due at maturity. A borrower’s ability to make a balloon payment typically will depend on its ability to either refinance the loan or complete a timely sale of the underlying property.

Our allowance for loan losses may prove to be insufficient to absorb losses in our loan portfolio.

Lending money is a substantial part of our business. However, every loan we make carries a certain risk of non-payment. This risk is affected by, among other things:

• the credit risks of the particular borrower;

• changes in economic and industry conditions;

• the duration of the loan; and

• in the case of a collateralized loan, the changes and uncertainties as to the future value of the collateral.

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 all 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 and credit undertakings that are not specifically identified. Loan quality is continually monitored by management and reviewed by the loan committees of the boards of directors of the banks on a quarterly basis. 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:

• assessment of the credit risk of the portfolio,

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• evaluation of loans classified as special mention, sub-standard and doubtful loans,

• delinquent loans,

• evaluation of current economic conditions in the market area,

• actual charge-offs during the year,

• historical loss experience, and

• industry loss averages.

Our allowance for loan losses as a percentage of non-performing loans was 2201% at December 31, 2005, and 751% at December 31, 2004. As a percentage of total loans, the allowance was 1.13% at December 31, 2005 compared to 1.15% at December 31, 2004. Over the past year, we decreased our allowance as a percentage of total loans based on management’s analysis of our historical credit quality. Although we believe our loan loss allowance is adequate to absorb probable losses in our loan portfolio, the allowance may not be adequate. If our actual loan losses exceed the amount that is anticipated, our earnings could suffer.

There can be no assurance that our investment strategy will be successful.

Our investment strategy is designed to reduce the sensitivity in our balance sheet to changes in interest rates. To implement this strategy, we invest in interest sensitive instruments, including derivatives. Securities available-for-sale decreased to $695.2 million at December 31, 2005, down 9% from $764.0 million as of December 31, 2004. The contraction in the investment security portfolio since December 31, 2004 resulted primarily from the redemption of $70.0 million of FHLB (Chicago) stock during 2005. While the purpose of our investment security portfolio, including derivatives, is to mitigate our interest rate sensitivity, we cannot predict whether these instruments will perform as expected. In addition, the failure of any counterparty to meet its obligations under these financial instruments would cause such instruments to lose substantial value. The dividend and redemption practices of the FHLB (Chicago) relating to its stock and the Company’s ability to ultimately redeem the shares of FHLB (Chicago) stock it owns could have a material adverse effect on the operations and future prospects of the Company. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Financial Condition—Investments Securities.”

Our investment policy gives us investment discretion and allows us to invest in certain asset classes and in certain amounts and concentrations that may increase losses in the event our investment portfolio performs in a manner we did not anticipate.

The unavailability of alternative funding sources may constrain our growth.

We have in the past and continue to utilize brokered deposits as one of our funding sources that supports our asset growth. In addition, as a part of our liquidity management strategy, we intend to limit our use of brokered deposits as a percentage of total deposits to levels no more than 40% as we determine prudent from time to time. At December 31, 2005, brokered deposits comprised 21% of our total deposits. If this funding source becomes more difficult to access, we will have to seek alternative funding sources in order to continue to fund our asset growth. This may include attempting to attract significant new core deposits, reducing our available-for-sale securities portfolio and selling loans. There can be no assurance that brokered deposits will be available, or if available, sufficient to support our continued growth.

We rely on the services of third parties to provide services that are integral to our operations.

We rely on third-party service providers to support our operations. In particular, in our wealth management segment, we have not, in the past, provided investment management services directly

30

through our own personnel. Rather, we have relied, and continue to rely, upon selected outside investment managers to provide investment advice and asset management services to our clients. We cannot be sure that we will be able to maintain these arrangements on favorable terms. Also, many of the investment managers with whom we work are affiliated with our competitors in the financial services field. We cannot be sure that our investment managers will continue to work with us in these arrangements or that our clients will continue to utilize the services of these investment managers through us, rather than directly from the investment management firms themselves. The loss of any of these outside investment managers may impact our ability to provide our clients with quality service or certain types of portfolio management without incurring the cost of replacing them. We also are dependent on third-party service providers for data processing and other information processing systems that support our day-to-day trust and banking activities. Any disruption to the services provided by these third parties could have an adverse impact on our operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We currently have 13 physical banking locations, in addition to the space occupied by each of Lodestar and The PrivateBank Mortgage Company. We have a variety of renewal options for each of our properties and certain rights to secure additional space. The main offices of PrivateBancorp Inc. and The PrivateBank – Chicago are located in the central business and financial district of Chicago. We lease 43,058 square feet comprising the entire second, fifth, seventh, eighth, ninth and tenth floors and part of the eleventh floor of a building located at Ten North Dearborn Street. This lease expires on or about August 31, 2006. Late in 2004, we announced that we signed a long term 77,381 square foot lease at 70 West Madison Street, Chicago. We will relocate our headquarters and Loop banking office to that location during the third quarter 2006.

We established a north suburban office in the affluent North Shore area located at 517 Green Bay Road, Wilmette, Illinois, in October 1994. We lease approximately 5,300 square feet on the first floor of a commercial building. This lease expires on June 30, 2006 with three one year options to renew.

In January 1997, we opened a third office of The PrivateBank – Chicago in rapidly growing, west suburban DuPage County at 1603 West Sixteenth Street, Oak Brook, Illinois. We lease approximately 4,200 square feet on the first floor of a two-story office building. This lease expires on December 14, 2006. The Oak Brook location will move to expanded facilities in 2006, having signed a 10 year lease to rent 6,600 square feet at 1110 Jorie Boulevard in Oak Brook, Illinois, with a commencement date of May 1, 2006.

In January 2000, we opened our Fox Valley office at 24 South Second Street, St. Charles, Illinois. We purchased this building from Towne Square Realty in June of 2002. The office currently pays rent to us.

In May 2001, we opened a second office in the Fox Valley area at the Herrington Train Station at 308 Crescent Place in Geneva, Illinois. We lease approximately 1,700 square feet within the commuter station building. This lease expires March 1, 2006. The Geneva location will move to expanded facilities in 2006, having signed a 10 year lease to rent 4,380 square feet at 501 W. State Street in Geneva, Illinois with a commencement date of May 1, 2006.

The PrivateBank – St. Louis office is located at 1401 South Brentwood Boulevard, St. Louis, Missouri. We lease approximately 16,508 square feet in total on the first and second floors of a commercial building. This lease expires on February 4, 2009. In 2004, the Bank signed an amendment to this lease for an additional 2,576 square feet of space included in this total.

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In 2005, The PrivateBank – St. Louis announced the opening of a new location in Chesterfield, Missouri at 500 Chesterfield Center. We will lease approximately 8,000 square feet beginning March 1, 2006 and expiring on April 30, 2016.

Our offices in Lake Forest and Winnetka, Illinois, were both acquired as part of the purchase of Johnson Bank Illinois. Our Lake Forest office is on the first floor of a two-story office building located at 920 South Waukegan Road, Lake Forest, Illinois. The lease is for approximately 9,400 square feet and expires on June 30, 2016 with one option to renew for a second ten-year term. Our Winnetka office leases approximately 5,100 square feet and is located at 1000 Green Bay Road, Winnetka, Illinois. Effective June 30, 2003, management exercised the first of three possible options to extend the lease to June 30, 2008 on the same terms, covenants and conditions as the base lease.

Lodestar leases approximately 4,759 square feet in a building located at 208 South LaSalle Street in downtown Chicago. The lease expires on December 31, 2007.

The PrivateBank Mortgage Company leases approximately 4,183 square feet in a building located at 640 North LaSalle in downtown Chicago. The lease expires on June 29, 2007.

In July of 2004, The PrivateBank – Chicago leased approximately 4,800 square feet of space at 919 N. Michigan Avenue located in the historic Palmolive Building in Chicago’s Gold Coast neighborhood. The lease expires in 2014.

The PrivateBank – Wisconsin leases approximately 12,920 square feet at 743 Water Street in downtown Milwaukee. The lease expires in 2014.

The PrivateBank – Michigan, leases 15,903 square feet at the Bloomfield Hills location through a lease that expires on December 31, 2014, 2,734 square feet at the Grosse Pointe location through a lease that expires on March 31, 2007, and 3,738 square feet at the Rochester location through a lease that expires on November 30, 2008.

ITEM 3. LEGAL PROCEEDINGS

The PrivateBank – Chicago is one of the named defendants in the matter of G. George Fox v. North Federal Savings Bank and The PrivateBank (Case No. 03 L 006102) filed in May 2003 and now pending in the Law Division of the Circuit Court of Cook County, Illinois. The suit asserts various claims resulting from the alleged wrongful dishonor by the bank of a $400,000 cashier’s check drawn on the bank and made payable to the plaintiff in May 2000 as earnest money for a proposed real estate transaction involving a client of the bank. The plaintiff claims damages in excess of $150,000 plus interest, costs and attorneys’ fees. This matter continues in litigation, and the Company cannot reasonably estimate potential liability, if, any, that the Company may incur in connection with this matter. However, management does not expect the ultimate resolution of this matter to materially impact the Company’s financial condition or results of operation.

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

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is quoted on the NASDAQ Global Market under the symbol “PVTB.” As of March 6, 2006, we had approximately 329 holders of record of our common stock and approximately 5,500 stockholders held their shares in street name. The table below sets forth the intra-day high and low sales prices of our common stock as reported by NASDAQ for the periods indicated (on a split-adjusted basis).

	High		Low
2005
First Quarter	$	35.000	$	29.260
Second Quarter		35.850		29.600
Third Quarter		38.150		32.600
Fourth Quarter		37.850		32.380
2004
First Quarter	$	27.740	$	21.130
Second Quarter		29.500		25.025
Third Quarter		32.550		25.510
Fourth Quarter		34.760		26.640

Holders of our common stock are entitled to receive dividends that the board of directors may declare from time to time. We may only pay dividends out of funds that are legally available for that purpose. Because consolidated net income consists largely of the net income of our subsidiaries, dividend payments to stockholders are dependent upon our receipt of dividends from our subsidiaries. See “Supervision and Regulation” above for a discussion of regulatory restrictions on dividend declarations. Our dividend declaration is discretionary and will depend on our earnings and financial condition, regulatory limitations, tax considerations and other factors.

We have paid quarterly dividends on our common stock since the third quarter of 1995. While the board of directors expects to continue to declare dividends quarterly, there can be no assurance that we will continue to pay dividends at these levels or at all. The following table shows the history of per share cash dividends declared and paid on our common stock for the last two years.

	Cash Dividends Per Share
2005
First Quarter	$	0.045
Second Quarter		0.045
Third Quarter		0.045
Fourth Quarter		0.045
2004
First Quarter	$	0.030
Second Quarter		0.030
Third Quarter		0.030
Fourth Quarter		0.030

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The following table provides information about purchases by the Company during the quarter ended December 31, 2005 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act.

Period	(a) Total Number of Shares Purchased		(b) Average Price paid per Share		(c) Total Number of Shares Purchased as part of publicly announced Plans or Programs		(d) Maximum Number of Shares that may be purchased under the Plans/ Program(2)(3)
10/01/05-10/31/05	—			—	—		225,192
11/01/05-11/30/05	2,763	(1)	$	33.57	2,763	(1)	225,192
12/01/05-12/31/05	—			—	—		225,192
Total	2,763	(1)	$	33.57	2,763	(1)	225,192

(1) Represents shares reacquired by the Company in payment of the exercise price and/or withholding taxes in connection with the exercise of certain employee/director stock options.

(2) The Company’s Board of Directors approved the repurchase by the Company of up to an aggregate of 231,192 shares of its common stock pursuant to the repurchase program that was publicly announced on July 25, 2001 (the “Program”). Unless terminated earlier by the Company’s Board of Directors, the Program will expire when the Company has repurchased all shares authorized for repurchase thereunder.

(3) Does not include shares reacquired by the Company in payment of the exercise price and/or withholding taxes in connection with the exercise of certain employee/director stock options.

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ITEM 6. SELECTED FINANCIAL DATA

The following table summarizes certain selected consolidated financial and other data of PrivateBancorp at or for the periods indicated. The balance sheet and statement of income data are derived from our December 31, 2005 consolidated financial statements that have been audited by Ernst & Young LLP for the years ended 2005, 2004, and 2003. This information should be read in conjunction with our audited consolidated financial statements and related notes included pursuant to Item 8 of this report. See “Index to Consolidated Financial Statements” on page F-1.

	Year Ended December 31,
	2005(1)		2004(1)			2003(1)			2002(1)			2001(1)
	(dollars in thousands, except per share data)
Selected Statement of Income Data:
Interest income:
Loans, including fees	$	139,613	$	79,499		$	62,793		$	52,560		$	50,975
Securities		36,319		33,571			24,633			19,156			14,377
Federal funds sold and interest-bearing deposits		500		40			68			126			244
Total interest income		176,432		113,110			87,494			71,842			65,596
Interest expense:
Interest-bearing demand deposits		864		548			553			636			923
Savings and money market deposit accounts		30,562		12,462			6,425			7,328			11,365
Brokered deposits and other time deposits		31,223		17,960			16,934			16,014			17,291
Funds borrowed		13,367		6,659			4,502			5,325			6,327
Long term debt—trust preferred securities		4,016		1,939			1,940			1,939			1,731
Total interest expense		80,032		39,568			30,354			31,242			37,637
Net interest income(12)		96,400		73,542			57,140			40,600			27,959
Provision for loan losses		6,538		4,399			4,373			3,862			3,179
Net interest income after provision for loan losses		89,862		69,143			52,767			36,738			24,780
Non-interest income:
Wealth management income		9,945		8,316			6,630			2,878			2,671
Mortgage banking income		3,886		2,856			3,474			2,248			319
Other income		4,276		3,029			2,323			1,955			1,038
Securities gains		499		968			1,759			11			2,095
Gains (Losses) on interest rate swap		404		(870	)		(238	)		(943	)		—
Total non-interest income		19,010		14,299			13,948			6,149			6,123
Non-interest expense:
Salaries and employee benefits		33,553		26,027			20,856			13,979			9,111
Occupancy expense, net		7,517		5,671			5,564			4,891			4,158
Data processing		2,832		2,009			1,528			1,509			1,295
Marketing		3,549		2,521			2,527			1,648			1,208
Professional fees		5,756		5,054			4,672			3,689			2,939
Goodwill amortization		—		—			—			—			824
Insurance		1,095		919			700			455			354
Other operating expenses		5,626		3,473			4,297			2,436			2,763
Total non-interest expense		59,928		45,674			40,144			28,607			22,652
Minority interest expense		307		270			193			—			—
Income before income taxes		48,637		37,498			26,378			14,280			8,251
Income tax provision		15,217		10,503			7,309			3,273			2,051
Net income	$	33,420	$	26,995		$	19,069		$	11,007		$	6,200
Per Share Data(2):
Basic earnings	$	1.65	$	1.37		$	1.12		$	0.75		$	0.44
Diluted earnings		1.58		1.30			1.06			0.71			0.43
Dividends		0.18		0.12			0.08			0.05			0.04
Book value (at end of period)		11.22		9.51			8.47			5.78			4.32
Selected Financial Condition Data (at end of period):
Total securities(3)	$	695,151	$	763,985		$	669,262		$	487,020		$	332,933
Total loans		2,608,067		1,653,363			1,224,657			965,641			780,771
Total assets		3,494,210		2,535,817			1,984,923			1,543,413			1,176,768
Total deposits		2,823,383		1,872,635			1,547,359			1,205,271			850,495
Funds borrowed		296,980		414,519			219,563			209,954			231,488
Long-term debt—trust preferred securities		98,000		20,000			20,000			20,000			20,000
Total stockholders’ equity		235,530		194,073			166,956			89,092			62,304
Wealth management assets under management		2,436,766		1,727,479			1,494,881			1,239,779			722,713

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	Year Ended December 31,
	2005(1)		2004(1)		2003(1)		2002(1)		2001(1)
	(dollars in thousands, except per share data)
Selected Financial Ratios and Other Data:
Performance Ratios:
Net interest margin(4)(12)	3.57	%	3.67	%	3.66	%	3.47	%	3.27	%
Net interest spread(5)	3.21		3.40		3.46		3.27		2.87
Non-interest income to average assets	0.64		0.64		0.80		0.47		0.64
Non-interest expense to average assets(10)	2.02		2.06		2.32		2.17		2.37
Net overhead ratio(6)(10)	1.38		1.41		1.51		1.70		1.73
Efficiency ratio(7)(10)(12)	49.97		49.53		54.09		57.63		63.17
Return on average assets(8)(10)	1.12		1.22		1.10		0.83		0.65
Return on average equity(9)(10)	15.70		14.96		15.43		15.17		10.59
Fee income to total revenue (12),(13)	15.81		16.18		17.86		14.85		12.59
Dividend payout ratio	11.15		8.98		7.39		6.27		8.39
Asset Quality Ratios:
Non-performing loans to total loans	0.04	%	0.15	%	0.09	%	0.14	%	0.41	%
Non-accrual loans to total loans	0.03		0.07		0.00		0.08		0.09
Allowance for loan losses to:
Total loans	1.13		1.15		1.23		1.20		1.06
Non-performing loans	2201		751		1,124		828		262
Net charge-offs to average total loans	-0.01		0.04		0.08		0.07		0.15
Non-performing assets to total assets	0.04		0.10		0.06		0.09		0.27
Balance Sheet Ratios:
Loans to deposits	92.4	%	88.3	%	79.1	%	80.1	%	91.8	%
Average interest-earning assets to average interest-bearing liabilities	112.6		114.1		110.5		107.9		109.8
Capital Ratios:
Average equity to average assets	7.16	%	8.12	%	7.13	%	5.50	%	6.13	%
Total risk-based capital ratio	10.54		11.29		12.71		8.29		9.71
Tier 1 risk-based capital ratio	8.50		10.24		11.59		6.91		8.18
Leverage ratio	7.09		7.71		8.25		5.47		6.64
Ratio of Earnings to Fixed Charges(11):
Including deposit interest	1.61	x	1.95	x	1.88	x	1.46	x	1.22	x
Excluding deposit interest	3.80		5.36		5.12		2.97		2.02

(1) Audited by Ernst & Young LLP. 2001 results were audited by Arthur Andersen LLP.

(2) Per share data has been adjusted to reflect the 2-for-1 dividend of our common stock effective May 31, 2004.

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

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

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

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

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

(8) Net income divided by average total assets.

(9) Net income divided by average common equity.

(10) In computing the ratio of earnings to fixed charges: (a) earnings have been based on income before income taxes and fixed charges, and (b) fixed charges consist of interest and amortization of debt discount and expense including amounts capitalized and the estimated interest portion of rents.

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

	Reconciliation of net interest income to net interest income on a tax equivalent basis
	For the Year Ended December 31,
	2005		2004		2003		2002		2001
	(in thousands)
Net interest income	$	96,400	$	73,542	$	57,140	$	40,600	$	27,959
Tax equivalent adjustment to net interest income		4,507		4,381		3,134		2,894		1,777
Net interest income, tax equivalent basis	$	100,907	$	77,923	$	60,274	$	43,494	$	29,736

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

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

PrivateBancorp was organized as a Delaware corporation in 1989 to serve as the holding company for a Chicago-based de novo bank. We currently have 13 banking offices, a mortgage company and an 80% interest in Lodestar, an asset manager. Our flagship downtown Chicago location opened in 1991. We expanded to Wilmette in north suburban Cook County in 1994 and Oak Brook in west suburban DuPage County in 1997. We established the St. Charles office in the Fox Valley in January 2000, in connection with our purchase of Towne Square Financial Corporation (a company which was in the process of forming a de novo bank) in August 1999. In February 2000, we consummated our acquisition of Johnson Bank Illinois adding two additional locations in Lake Forest and Winnetka, Illinois. On June 23, 2000, PrivateBancorp capitalized The PrivateBank – St. Louis. In May 2001, The PrivateBank – Chicago opened a second office in the Fox Valley area in Geneva, Illinois. In December 2002, The PrivateBank – Chicago acquired an 80% controlling interest in Lodestar, a Chicago-based investment adviser with $689.2 million of assets under management at December 31, 2005. Lodestar is a subsidiary of The PrivateBank – Chicago. On June 15, 2004, the Company formed a new subsidiary, The PrivateBank Mortgage Company, as a result of the acquisition of Corley Financial Corporation, a Chicago based mortgage banking firm. On January 27, 2005, the Company opened a new Chicago banking office in Chicago’s Gold Coast neighborhood. The PrivateBank – Wisconsin opened its permanent space at 743 N. Water Street in downtown Milwaukee in September 2005. On June 20, 2005, the Company completed its acquisition of Bloomfield Hills Bancorp, Inc., including its bank subsidiary, The Private Bank, now known as The PrivateBank – Michigan, and a mortgage banking subsidiary. The PrivateBank – Michigan has three banking offices located in the suburban Detroit communities of Bloomfield Hills, Grosse Pointe, and Rochester. The PrivateBank – Michigan also operates a trust and wealth management unit and a mortgage banking subsidiary. During 2005 and early 2006, we entered into three new leases for larger office space for established offices in Oak Brook and Geneva, Illinois and for a new office in Chesterfield, Missouri, which is scheduled to open in temporary space in March 2006 and in a permanent location during the second quarter 2006. The Chicago headquarters will relocate to 70 W. Madison during the third quarter 2006.

We completed our initial public offering in June of 1999. Since year-end 2001 to December 31, 2005, we have grown our asset base at a compounded annual rate of 31% to $3.5 billion. During the same period, loans have grown at a compounded annual rate of 35% to $2.6 billion, deposits at a compounded annual rate of 35% to $2.8 billion and core deposits at a compounded annual rate of 33% to $2.2 billion. Wealth Management assets under management grew at a compounded annual rate of 36% to $2.4 billion. Diluted earnings per share (EPS) have grown at a compounded annual rate of 39% to $1.58 (split-adjusted) since year-end 2001. Excluding loans acquired from The PrivateBank – Michigan, loans grew at a compounded annual rate of 39% from year-end 2001 to December 31, 2005. Excluding deposits acquired from The PrivateBank – Michigan, deposits grew at a compounded annual rate of 35% from year-end 2001 to December 31, 2005. Excluding wealth management assets acquired from The PrivateBank – Michigan, wealth management assets grew at a compounded annual rate of 33% from year-end 2001 to December 31, 2005.

For financial information regarding our four separate lines of business, The PrivateBank – Chicago, The PrivateBank – St. Louis, The PrivateBank – Michigan, Wealth Management Services and Holding Company Activities, see “Operating Segments Results” beginning on page 47 and “Note 2—Operating Segments” to our consolidated financial statements as of and for the year ended December 31, 2005, included on page F-13.

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 amounts and

37

yields of interest-earning assets as compared to the amounts and rates on interest-bearing liabilities. Net interest income is sensitive to changes in market rates of interest as well as to the execution of our asset/liability management strategy. The provision for loan losses is affected by changes in the loan portfolio, management’s assessment of the collectability of the loan portfolio, loss experience, as well as economic and market factors.

Non-interest income consists primarily of Wealth Management fee revenue, mortgage banking income, bank owned life insurance and to a lesser extent, fees for ancillary banking services. Net securities gains and net gains on an interest rate swap are also included in non-interest income. Non-interest income from fees and deposit service charges are below peer group levels. This is largely the result of the profile of our typical client. Our clients tend to have larger deposit account balances than customers of traditional banks. Because average balances tend to be high, we do not earn high service charge income typical of many retail banks.

Non-interest expenses are heavily influenced by the growth of operations. Our growth directly affects the majority of our expense categories. Our largest expense categories are salaries and benefits, occupancy expense (net) and professional fees.

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. Below is a discussion of our critical accounting policies. These policies are critical because they are highly dependent upon subjective or complex judgments, assumptions and estimates. Changes in such estimates may have a significant impact on the financial statements. Actual results could differ from those estimates. Management has reviewed the application of these policies with the Audit Committee of the Company’s Board of Directors.

For PrivateBancorp, Inc., accounting policies that are viewed as critical to us are those relating to estimates and judgments regarding the determination of the adequacy of the allowance for loan losses and the estimation of the valuation of goodwill and the useful lives applied to intangible assets.

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 and credit undertakings that are not specifically identified. Our allowance for loan losses is reassessed quarterly to determine the appropriate level of the allowance. The amount of the allowance for loan losses is determined based on a variety of factors, including assessment of the credit risk of the loans in the portfolio, evaluation of watch list loans, volume of loans in the portfolio, delinquent loans, impaired loans, evaluation of current economic conditions in the market area, actual charge-offs and recoveries during the period and historical loss experience. 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.

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Management adjusts the allowance for loan losses by recording a provision for loan losses in an amount sufficient to maintain the allowance at the level determined appropriate. Loans are charged-off when deemed to be uncollectible by management. We believe that the allowance for loan losses is adequate to provide for estimated probable credit losses inherent in our loan portfolio. The allowance for loan losses as a percentage of total loans was 1.13% as of December 31, 2005, compared to 1.15% at December 31, 2004.

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. The Company performs an annual goodwill impairment test in accordance with FAS 142, which requires that goodwill and intangible assets that have indefinite lives no longer be amortized but be reviewed for impairment annually, or more frequently if certain indicators arise. Prior to the adoption of FAS No. 142, goodwill was being amortized using the straight-line method over a period of 15 years. Impairment losses on recorded goodwill, if any, will be recorded as operating expenses.

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

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

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CONSOLIDATED RESULTS OF OPERATIONS

Net Income

Our net income for the year ended December 31, 2005 was $33.4 million, or $1.58 per diluted share, compared to $27.0 million, or $1.30 per diluted share, for the year ended December 31, 2004, and $19.1 million, or $1.06 per diluted share, for the year ended December 31, 2003. Our 2005 diluted earnings per share increased 21% as compared to 2004 earnings per share, and 23% as compared to 2003 earnings per share.

The increase in net income for 2005 compared to 2004 is primarily attributable to increases in interest earning assets and growth in fee income, mainly from increases in wealth management revenue. The acquisition of The PrivateBank – Michigan was accretive in 2005, including the consideration of all transaction costs. Our income growth was offset by growth in non-interest expense, evidenced by our efficiency ratio remaining at 50% at December 31, 2005, even with the prior year period.

The increase in net income for 2004 compared to 2003 is primarily attributable to growth in the balance sheet, particularly increases in loans, which were funded by growth in deposits and stabilization of our net interest margin. Increased fee income, mainly from increases in wealth management revenue, also contributed to the improvement in net income during 2004.

Net Interest Income

Net interest income is the difference between interest income and fees on earning assets and interest expense and amortization of fees on deposits and borrowings. Interest income includes amortization of loan origination fees recorded from loans. Interest expense includes amortization of prepaid fees on brokered deposits and issuance costs of trust preferred securities. Net interest margin represents the net interest income on a tax equivalent basis as a percentage of average earning assets during the period. Net interest margin reflects the spread between average yields earned on interest earning assets and the average rates paid on interest bearing deposits and borrowings. The volume of non-interest bearing funds, largely comprised of demand deposits and capital, also affects the net interest margin.

Net interest income was $96.4 million for the year ended December 31, 2005, compared to $73.5 million for 2004, an increase of 31%. Net interest income is affected by both the volume of assets and liabilities held and the corresponding rates earned and paid. The increase in net interest income for 2005 is primarily attributable to growth in earning assets. Average earning assets for 2005 were $2.8 billion compared to $2.1 billion for 2004, an increase of 33%. Our net interest margin (on a tax equivalent basis) was 3.57% for the year ended December 31, 2005 compared to 3.67% for the prior year.

During 2005, increased volumes of interest earning assets at higher rates were offset by increased interest rates on liabilities. Our cost of funds was greater during 2005 than 2004, 3.19% compared to 2.13%, respectively, and our earning assets yielded 6.40% in 2005 compared to 5.53% in 2004. Non-interest bearing funds impact net interest margin since they represent non-interest bearing sources of funds that are deployed in interest bearing assets. Non-interest bearing funds positively impacted net interest margin by 0.36% at December 31, 2005 and by 0.27% at December 31, 2004.

During 2005, our net interest margin was impacted by increases in the costs of our average interest bearing liabilities throughout the year. During 2005, total cost of funds increased by 105 basis points from 2004, as a result of volume increases and increases in wholesale funding costs, time

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deposit rates, and increased interest expense related to the $50.0 million of trust preferred securities issued on June 20, 2005 in connection with The PrivateBank – Michigan acquisition. The 100 basis point increase in our cost of funds was partially offset by improvements in our yield on earnings assets, which increased by 92 basis points during the year due primarily to increased loan volumes and increases in the prime rate, which increased 190 basis points over the course of the year. Margin was also compressed because of reduced dividends on our investment in FHLB (Chicago) stock. The Company’s annualized yield on this investment was 5.50% in 2005 compared to 6.11% for 2004. During 2005, dividends received on our investment in FHLB (Chicago) stock represented $9.2 million, or 5%, of our interest income on a tax equivalent basis, for the year, compared to 11% for the prior year.

We expect our net interest margin to remain stable or improve slightly if market interest rates increase relative to 2005 levels. Alternatively, if market interest rates decrease, we expect our net interest margin to experience pressure. Approximately 70% of the loan portfolio is indexed to the prime rate of interest or otherwise adjusts with other short-term interest rates. The rising interest rate environment that we experienced in 2005 increased the impact of our non-interest bearing funds on our overall net interest margin and also offset the decline in net interest spread on a year-over-year basis.

During 2004, increased volumes of interest earning assets at higher rates were offset by increased interest rates on liabilities. Our cost of funds was greater during 2004 than 2003, 2.13% compared to 2.04%, respectively, and our earning assets yielded 5.53% in 2004 compared to 5.50% in 2003. Non-interest bearing funds impact net interest margin since they represent non-interest bearing sources of funds that are deployed in interest bearing assets. Non-interest bearing funds positively impacted net interest margin by 0.27% at December 31, 2004 and by 0.20% at December 31, 2003.

During 2004, our net interest margin was impacted by increases in the costs of our average interest bearing liabilities throughout the year. We lengthened the maturity of funding sources, with a resulting increase in our cost of funds. The increase in cost of funds was primarily due to increases in money market deposit rates, some of which are tied to prime, as well as higher rates paid on short-term borrowings and FHLB advances. The increase in our cost of funds was partially offset by improvements in our yield on earnings assets, which were positively impacted by the increases in the prime rate of interest. The rising interest rate environment that we experienced in 2004 increased the impact of our non-interest bearing funds on our overall net interest margin and also offset the decline in net interest spread on a year-over-year basis.

A changing interest rate environment has an effect on our net interest margin. Approximately 70% of the loan portfolio is indexed to the prime rate of interest or otherwise adjusts with other short-term interest rates and may reprice faster than our deposits and floating rate borrowings. Currently, the interest rate yield curve is inverted which means that shorter term rates are higher than certain long-term rates. An inverted yield curve has the effect of compressing net interest margin as shorter term funding sources become more expensive and longer term assets experience declining yields. We expect to renew our maturing funding sources at higher rates than what we are currently recognizing. Over the long term, we expect our net interest margin to benefit during a rising interest rate environment and alternatively, if market interest rates decrease, we expect our net interest margin to decrease.

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The following table presents a summary of our net interest income and related net interest margin, calculated on a tax equivalent basis (dollars in thousands):

	Year Ended (dollars in thousands)
	2005							2004							2003
	Average Balance(1)			Interest		Rate		Average Balance(1)			Interest		Rate		Average Balance(1)			Interest		Rate
Fed funds sold and other short-term investments	$	14,730		$	500	3.39	%	$	2,358		$	40	1.69	%	$	6,348		$	68	1.07	%
Tax-exempt municipal securities		206,820			14,356	6.94	%		212,873			14,451	6.79	%		148,203			10,304	6.95	%
US Government Agencies, MBS, CMOs and Corporate CMOs		350,093			16,845	4.81	%		287,448			10,155	3.44	%		207,655			5,458	2.38	%
Taxable municipal securities		3,839			288	7.51	%		3,855			291	7.55	%		3,981			297	7.45	%
FHLB stock		167,012			9,191	5.50	%		209,759			12,807	6.11	%		190,705			11,232	5.89	%
Other securities		3,438			146	4.24	%		4,376			248	5.68	%		7,682			476	6.19	%
Total Taxable Investments	$	524,382		$	26,470	5.05	%	$	505,438		$	23,501	4.65	%	$	410,023		$	17,463	4.26	%
Commercial, Construction and Commercial Real Estate Loans		1,677,839			115,179	6.86	%		1,135,185			66,048	5.82	%		846,085			50,614	6.00	%
Residential Real Estate Loans		159,745			8,777	5.49	%		89,625			4,891	5.46	%		81,833			4,978	6.08	%
Personal Loans		242,906			15,657	6.45	%		179,486			8,560	4.77	%		154,485			7,201	4.66	%
Total Loans		2,080,490			139,613	6.71	%		1,404,296			79,499	5.66	%		1,082,403			62,793	5.80	%
Total earning assets	$	2,826,422		$	180,939	6.40	%	$	2,124,965		$	117,491	5.53	%	$	1,646,977		$	90,628	5.50	%
Allowance for Loan Losses		(23,725	)						(17,087	)						(13,109	)
Cash and Due from Banks		33,043							30,387							36,548
Other Assets		136,788							82,020							63,236
Total Average Assets	$	2,972,528						$	2,220,285						$	1,733,652
Interest Bearing Demand accounts		114,743			864	1.38	%		90,888			548	0.56	%		74,926			553	0.74	%
Regular Savings Accounts		15,920			101	0.63	%		13,758			115	0.84	%		8,375			77	0.92	%
Money Market Accounts		1,051,843			30,461	2.83	%		709,165			12,347	1.75	%		488,232			6,348	1.30	%
Time Deposits		441,518			14,374	3.26	%		320,574			6,900	2.15	%		325,284			7,367	2.26	%
Brokered Deposits		446,197			16,849	3.78	%		391,824			11,060	2.82	%		397,707			9,567	2.41	%
Total Deposits	$	2,070,221		$	62,649	3.03	%	$	1,526,209		$	30,970	2.03	%	$	1,294,524		$	23,912	1.85	%
FHLB advances		269,570			10,473	3.89	%		249,296			6,015	2.41	%		156,225			3,753	2.40	%
Other borrowings		116,613			2,894	2.48	%		66,423			644	0.97	%		19,226			750	3.90	%
Trust preferred securities		53,634			4,016	7.49	%		20,000			1,939	9.70	%		20,000			1,939	9.70	%
Total interest-bearing liabilities	$	2,510,038			80,032	3.19	%	$	1,861,928			39,568	2.13	%	$	1,489,975			30,354	2.04	%
Non-Interest Bearing Deposits	$	214,827						$	151,589						$	103,073
Other Liabilities		34,833							26,370							17,005
Stockholders’ Equity		212,830							180,398							123,599
Total Average Liabilities & Stockholders’ Equity		2,972,528							2,220,285							1,733,652
Tax equivalent net interest income(3)				$	100,907						$	77,923						$	60,274
Net interest spread(4)					96,400	3.21	%					73,542	3.40	%					57,140	3.46	%
Effect of non interest bearing funds					4,507	0.36	%					4,381	0.27	%					3,134	0.20	%
Net interest margin(3)(5)						3.57	%						3.67	%						3.66	%

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

(2) Nonaccrual loans are included in the average balances and do not have a material effect on the average yield. Interest due on non-accruing loans was not material for the periods presented.

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(3) We adjust GAAP reported net interest income by the tax equivalent adjustment amount to account for the tax attributes on federally tax exempt municipal securities. The total tax equivalent adjustment reflected in the above table is $4.5 million, $4.4 million and $3.1 million for the year ended December 31, 2005, 2004, and 2003, respectively. For GAAP purposes, tax benefits associated with federally tax-exempt municipal securities are reflected in income tax expense. The following table reconciles reported net interest income to net interest income on a tax equivalent basis for the periods presented:

Reconciliation of year-to-date net interest income to year-to-date net interest income

on a tax equivalent basis

(dollars in thousands)

	For the year ended December 31,
	2005		2004		2003
Net interest income	$	96,400	$	73,542	$	57,140
Tax equivalent adjustment to net interest income		4,507		4,381		3,134
Net interest income, tax equivalent basis	$	100,907	$	77,923	$	60,274

(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.

	Year Ended December 31,
	2005 Compared to 2004												2004 Compared to 2003
	Change due to rate			Change due to volume			Change due to mix			Total change			Change due to rate			Change due to volume			Change due to mix			Total change
	(dollars in thousands)
Federal funds sold and other short-term investments	$	39		$	207		$	214		$	460		$	39		$	(42	)	$	(25	)	$	(28	)
Investment securities: taxable		2,101			873			(5	)		2,969			1,585			4,028			425			6,038
Investment securities: non-taxable(1)		326			(411	)		(10	)		(95	)		(244	)		4,496			(104	)		4,148
Loans, net of unearned discount		14,995			37,866			7,253			60,114			(1,666	)		18,521			(149	)		16,706
Total tax-equivalent interest income(1)		17,461			38,535			7,452			63,448			(286	)		27,003			147			26,864
Interest bearing deposits		15,301			11,009			5,369			31,679			2,285			4,280			493			7,058
Funds borrowed		4,228			1,462			1,018			6,708			(801	)		3,550			(592	)		2,157
Trust preferred securities		(442	)		3,261			(742	)		2,077			—			—			—			—
Total interest expense		19,087			15,732			5,645			40,464			1,484			7,830			(99	)		9,215
Net tax-equivalent interest income(1)	$	(1,626	)	$	22,803		$	1,807		$	22,984		$	(1,770	)	$	19,173		$	246		$	17,649

(1) Interest income on tax-advantaged investment securities reflects a tax-equivalent adjustment based on a marginal federal corporate tax rate of 35%. The total tax equivalent adjustment reflected in the above table is approximately $4,507,000, $4,381,000, and $3,133,000, in the years ending 2005, 2004 and 2003.

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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 latest assessment of the inherent losses in the loan portfolio. Our allowance for probable loan losses is reassessed quarterly to determine the appropriate level of the reserve. Our analysis is influenced by the following factors: credit quality of loans, the volume and quality of loans in the portfolio, historical loss experience, and economic conditions. A discussion of the allowance for loan losses and the factors on which provisions are based begins on page 54.

The changes recorded in the components of the allowance for loan losses resulted in a provision for loan losses of $6.5 million for the year ended December 31, 2005, up from $4.4 million for each of the years ended December 31, 2004 and 2003. We added $315.6 million of loans and $3.6 million of allowance for loan loss from The PrivateBank – Michigan at its acquisition date. The Chicago and St. Louis banks continued to experience strong loan growth in 2005 and 2004, principally in residential real estate, construction and personal loan categories, however our credit quality remained strong. Net recoveries for the year ended December 31, 2005 were $250,000 compared to net charge-offs of $513,000 for the year ended December 31, 2004 and net charge-offs of $858,000 during 2003.

Non-interest Income

	For the Year Ended December 31,
	2005		2004		2003
	(in thousands)
Wealth management fee revenue	$	9,945	$	8,316	$	6,630
Mortgage banking income		3,886		2,856		3,474
Banking and other services		2,847		2,153		1,798
Bank owned life insurance		1,429		876		525
Total banking, wealth management, mortgage banking and other income	$	18,107	$	14,201	$	12,427

Non-interest income increased by $4.7 million or 33.0%, to $19.0 million for the year ended December 31, 2005 compared to $14.3 million for the year ended December 31, 2004. Non-interest income in 2005 includes the recognition of net investment securities gains of $499,000 during 2005, compared to gains of $968,000 million in the prior year period. The fair market value adjustment on a $25.0 million 10-year for three-month LIBOR interest rate swap resulted in gains of $404,000 for the year ended December 31, 2005, compared to losses of $870,000 in the prior year period. Mortgage banking income increased to $3.9 million from $2.9 million in the prior year period primarily due to increased business at The PrivateBank Mortgage Company and the inclusion of $409,000 of mortgage banking income from The PrivateBank – Michigan since its acquisition on June 20, 2005. Banking and other services income increased by $694,000 over the prior year due to growth in the Company.

Wealth management fee revenue totaled $9.9 million for 2005, an increase of $1.6 million, or 19%, from 2004 levels of $8.3 million. The year-over-year increase in wealth management income was partially due to the inclusion of $753,000 of income generated by The PrivateBank – Michigan since its acquisition on June 20, 2005, and the addition of new business. Our trust business contributed $6.3 million of revenue during the year compared to $4.6 million during the prior year and reflects growth of net new business from 2005. Wealth Management assets under management increased 41% to $2.4 billion at year-end 2005, compared to $1.7 billion at December 31, 2004. Lodestar’s assets under management at December 31, 2005 were $689.2 million, The PrivateBank – Michigan’s assets under management were $506.5 million and trust assets managed by The PrivateBank – Chicago, were $1.4 billion at December 31, 2005.

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Wealth management fee revenue totaled $8.3 million for 2004, an increase of $1.7 million, or 25%, from 2003 levels of $6.6 million. The year-over-year increase in wealth management income was primarily due to growth in our trust fee income of $1.1 million or 31%, due to growth in new accounts during 2004. Lodestar fee revenue increased by $581,000 or 19% during 2004 as compared to 2003. Our trust business contributed $4.6 million of revenue during the year compared to $3.5 million during the prior year. Including Lodestar, Wealth Management assets under management increased 16% to $1.7 billion at year-end 2004, compared to $1.5 billion at December 31, 2003. Lodestar’s assets under management at December 31, 2004 were $648.8 million. Trust assets managed by The PrivateBank – Chicago, not including Lodestar, were $1.1 billion at December 31, 2004.

During 2005, 2004, and 2003 we recognized income of $1.4 million, $876,000, and $525,000, respectively, related to the increased cash surrender value of bank owned life insurance (BOLI) policies. Income recognized on this product increased in 2005 as compared to 2004 primarily due to the inclusion of $96,000 of BOLI income from The PrivateBank – Michigan’s $5.3 million BOLI policy. Income increased in 2004 as compared to 2003 due to the purchase of an additional $22.0 million of BOLI in the second quarter of 2004. These policies cover certain higher-level employees who are deemed to be significant contributors to us. All employees included in this policy are aware and have consented to the coverage. The cash surrender value of BOLI at December 31, 2005 was $40.9 million, compared to $34.1 million at December 31, 2004 and $11.3 million at December 31, 2003, and is included in other assets on the balance sheet.

Residential mortgage fee income was $3.9 million during 2005 compared to $2.9 million during the prior year. The growth in residential mortgage fee income between years is primarily due to increased business at The PrivateBank Mortgage Company, which totaled $2.7 million, fee income generated by The PrivateBank – St. Louis of $1.8 million, and the inclusion of revenue generated of $407,000 by The PrivateBank – Michigan.

Residential mortgage fee income was $2.9 million during 2004 compared to $3.5 million during the prior year primarily due to a lower volume of loans sold as a result of relatively decreased demand for residential real estate loans.

Non-interest Expense

	Year Ended December 31,
	2005		2004		2003
	(in thousands)
Salaries and employee benefits	$	33,553	$	26,027	$	20,856
Occupancy		7,517		5,671		5,564
Professional fees		5,756		5,054		4,672
Marketing		3,549		2,521		2,527
Data processing		2,832		2,009		1,528
Postage, telephone and delivery		1,113		903		879
Office supplies and printing		715		557		579
Amortization of intangibles		411		168		169
Insurance		1,095		919		700
Other expense		3,387		1,845		2,670
Total non-interest expense	$	59,928	$	45,674	$	40,144

Non-interest expense increased $14.3 million or 31.2% to $60.0 million for the year ended December 31, 2005 compared to $45.7 million for 2004. The growth in non-interest expense during 2005 represents the inclusion of expenses of The PrivateBank – Wisconsin, which opened in 2005,

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and operating expenses from The PrivateBank – Michigan since acquisition. The PrivateBank – Michigan incurred non-interest expense of $5.2 million since the acquisition in June 2005. The PrivateBank – Wisconsin incurred $1.9 million of non-interest expense in 2005 and opened its permanent space in October 2005. Additionally, we continue to improve and expand current locations; the build-out of the new headquarters at 70 W. Madison in downtown Chicago began during the fourth quarter 2005. Other expenses increased by 58% from prior year, principally due to a charge of $980,000 associated with the early redemption of the Company’s outstanding 9.5% trust preferred securities that were redeemed on December 31, 2005.

Non-interest expense increased $5.5 million or 14% to $45.7 million for the year ended December 31, 2004 compared to $40.1 million for 2003. The growth in non-interest expense during 2004 represents the continued focus on expansion at the Company. Increases in expenses for salaries and benefits, data processing and insurance reflect the impact of growing our personnel and the improvement and expansion of current locations as well as the addition of the Gold Coast office and the establishment of The PrivateBank office in Wisconsin. Other expenses decreased by 20% from prior year, principally due to an early prepayment termination penalty of $400,000 on FHLB advances that were repaid during the third quarter of 2003 and a $400,000 fraud loss incurred during the second quarter of 2003 relating to a check fraud scheme involving a new deposit account.

The following table shows our operating efficiency over the last three years:

	December 31,
	2005		2004		2003
Non-interest expense to average assets	2.02	%	2.06	%	2.32	%
Net overhead ratio(1)	1.38		1.41		1.51
Efficiency ratio(2)	49.97		49.53		54.09

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

(2) Non-interest expense divided by the sum of net interest income, on a tax equivalent basis, plus non-interest income. Please refer to the footnotes on page 36 for a reconciliation of net interest income to net interest income on a tax-equivalent basis.

Our efficiency ratio (on a tax-equivalent basis), which measures the percentage of net revenue that is expended as non-interest expense, for the year ended December 31, 2005 remained at 50% as compared to 2004, and improved from 54% for the year ended December 31, 2003.

Our efficiency ratio during 2005 reflects the impact of faster growth in net interest income, coupled with slower growth in non-interest expense. On a tax-equivalent basis, this ratio indicates that during 2005 and 2004, we spent 50 cents to generate each dollar of revenue, compared to 54 cents in 2003. During the remainder of 2006, we expect our efficiency ratio to continue to increase modestly as a result of the inclusion of The PrivateBank – Michigan, given its higher efficiency ratio, and the continued growth of The PrivateBank – Wisconsin. Additionally, we continue to focus on expansion at the Company in 2006, as evidenced by the planned opening of the Chesterfield Missouri office, the expansion of the Oak Brook and Geneva offices to new space as well as the relocation of the Chicago headquarters to larger space. These initiatives will cause our efficiency ratio to increase in 2006. Our efficiency ratio will also be negatively impacted by the adoption of SFAS No. 123 (Revised), Share-Based Payment (SFAS No. 123(R)) on January 1, 2006. This statement requires us to account for stock options under the fair value method of accounting and to estimate expected forfeitures of stock grants instead of our current practice under APB No. 25. The Company anticipates the impact of the adoption will be an approximate expense in 2006 of $0.10 per share, after-tax, on its consolidated financial statements.

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Salary and employee benefit expense increased 29% to $34.0 million for the year ended December 31, 2005 from $26.0 million for the year ended December 31, 2004. During 2005, we added 125 full time equivalent employees, 73 of those through the acquisition of The PrivateBank – Michigan, to approximately 386 full-time equivalent employees from 261 at December 31, 2004, an increase of 48%. This includes the addition and/or promotion of 34 Managing Directors and Associate Managing Directors year over year, 18 of which are managing directors at The PrivateBank – Michigan. The PrivateBank – Michigan incurred salaries and benefits expense of $3.0 million during 2005.

Salary and employee benefit expense increased 25% to $26.0 million for the year ended December 31, 2004 from $20.9 million for the year ended December 31, 2003. During 2004, we added 42 full time equivalent employees, an increase of 19%, to approximately 261 full-time equivalent employees from 219 at December 31, 2003. This includes the addition and/or promotion of 17 Managing Directors and Associate Managing Directors.

Professional fees, which include fees paid for legal, accounting, consulting, information systems consulting services and third-party investment management fees, increased 13.9% to $5.8 million for the year ended December 31, 2005 from $5.1 million for 2004 and $4.7 million for 2003. The increase from 2004 to 2005 is primarily due to higher accounting fees for our growing Company, and the inclusion of The PrivateBank – Michigan, which contributed $338,000 to the year’s expenses. In addition, the increase in wealth management-related business has resulted in increased investment management fees paid to third parties during the years ended December 31, 2005, 2004 and 2003. These fees increased by 9% to $1.1 million in 2005, which includes $196,000 of fees paid to third-party investment managers by The PrivateBank – Michigan. During 2005, we incurred approximately $600,000 in connection with the implementation of Sarbanes-Oxley requirements, compared to approximately $500,000 in 2004. In 2004, we retained a real estate consulting firm to assist us in evaluating our continuing space needs for our headquarters in downtown Chicago.

Marketing expenses increased from $2.5 million for the year ended December 31, 2004 to $3.5 million for the year ended December 31, 2005. Marketing expenses included approximately $540,000 of expense incurred by The PrivateBank – Michigan since June 20, 2005 and approximately $185,000 in expenses incurred by The PrivateBank – Wisconsin.

During 2005, expenditures for information technology totaled $1.4 million, down from $1.6 million for 2004, and $1.7 million during 2003, primarily due to expenditures on existing systems as the Company grows. In 2005, we upgraded the existing wire transfer system in Chicago, implemented an enhanced data replication and recovery solution, and further strengthened our data management strategy. During 2004, expenditures for information technology represented optimization of both software and hardware for the overall information technology infrastructure. Initiatives for 2004 included streamlining existing system processes, upgrading several software components of our main data processing software, and integrating several additional operations into the overall network infrastructure for cost efficiency purposes.

The other expense category of non-interest expense consists primarily of postage, telephone, delivery, office supplies, training and other miscellaneous expenses. Other expenses increased by 58% during 2005 from prior year, principally due to a charge of $980,000 associated with the early redemption of the Company’s outstanding 9.5% trust preferred securities that were redeemed on December 31, 2005. During 2004, these expenses decreased relative to 2003 by 20%. Included in 2003 other expenses was a one-time early prepayment termination penalty of $400,000 on FHLB advances that were repaid during the third quarter 2003 and a $400,000 fraud loss incurred during the second quarter 2003.

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During 2005, we amortized $411,000 in intangible assets, $168,000 of which is related to our acquisition of a controlling interest in Lodestar and $243,000 of which is related to our acquisition of The PrivateBank – Michigan in June 2005. In 2004, we amortized approximately $168,000 in intangible assets relating to Lodestar.

Minority Interest Expense

On December 30, 2002, The PrivateBank – Chicago acquired an 80% controlling interest in Lodestar. The Company records its 20% noncontrolling interest in Lodestar related to Lodestar’s results of operations, in minority interest expense on the consolidated statement of income. For the year ended December 31, 2005 and 2004, we recorded $307,000 and $270,000, respectively, of minority interest expense.

Off-Balance Sheet Arrangements and other Contractual Obligations and Commitments

We do not have material off-balance sheet arrangements. We have various financial obligations, including contractual obligations and commitments that may require future cash payments. The following tables present, as of December 31, 2005 and 2004, significant fixed and determinable contractual obligations to third parties which are expected to become due and payable during the period specified.

	Note Reference(3)	Year Ended December 31, 2005
Contractual Obligations(1)		Payments due in (dollars in thousands):
		Total		< 1 year		1-3 years		3-5 years		> 5 years
		(in thousands)
Deposits with no stated maturity		$	1,657,765	$	1,657,765	$	—	$	—	$	—
Time deposits	10		579,012		513,764		32,461		32,461		326
Brokered deposits(2)	10		586,607		323,536		158,190		15,525		89,356
FHLB advances	10		258,363		136,334		95,145		21,884		5,000
Long-term debt-trust preferred securities	11		98,000		—		—		—		98,000
Fed funds purchased & demand repurchase agreements			38,616		38,616		—		—		—
Operating leases	7		39,337		3,189		10,349		8,196		17,603
Purchase obligations			35,537		20,668		6,553		8,316		—
Total		$	3,293,277	$	2,693,882	$	302,728	$	86,382	$	210,285

(1) Excludes obligations to pay interest on deposits and borrowings

(2) Includes $2.3 million of unamortized broker commissions

(3) See consolidated financial statements commencing on page F-4.

Our operating lease obligations represent short- and long-term lease and rental payments for facilities, equipment, and certain software or data processing. During 2005 and early 2006, we entered into three new leases for larger office space for our existing offices in Oak Brook and Geneva, Illinois and for new offices in Chesterfield, Missouri. During 2004, we entered into several new leases for office space as a result of both expiring leases on space then occupied and additional space required in light of growth initiatives. Leases on office space at 70 W. Madison and 919 N. Michigan Avenue in Chicago as well as 735 N. Water Street in Milwaukee were signed during 2004. As a result of the acquisition of The PrivateBank – Michigan on June 20, 2005, we assumed three leases in Bloomfield

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Hills, Rochester and Grosse Point, Michigan. The Chicago headquarters will relocate to 70 W. Madison during the third quarter 2006. As a result of the acquisition of Corley Financial Corporation (now The PrivateBank Mortgage Company), we added a lease for office space at 640 N. LaSalle in Chicago in 2004.

The purchase obligation amounts presented above primarily relate to the buildout of our new Chicago headquarters, the new office buildouts of the Oak Brook and Geneva locations, contractual payments for services provided for information technology, capital expenditures, and the outsourcing of certain operational activities. We expect to be reimbursed from the landlords at each of the Chicago, Oak Brook and Geneva locations for a significant portion of the buildout costs.

Commitments to extend credit, including loan commitments, standby letters of credit, and commercial letters of credit do not necessarily represent future cash requirements, because these commitments may expire without being drawn upon. Information on commitments and letters of credit can be found on page F-37.

Our commitments to fund civic and community investments, which represent future cash outlays for the construction and development of properties for low-income housing, small business real estate, and historic tax credit projects that qualify for CRA purposes, are not included in the contractual obligations table above. The timing and amounts of these commitments are projected based upon the financing arrangements provided in each project’s partnership or operating agreement, and could change due to variances in the construction schedule, project revisions, or the cancellation of the project. In 2003, we committed to a $3.0 million investment in the Community Reinvestment Fund and $2.0 million in the Chicago Equity Fund. We will contribute annually over the next six years in accordance with the Funds’ capital call schedule. In 2006, we are committed to $21,500 in grants to two CRA-qualifying community organizations. In 2007, we are committed to a cash outlay of $12,500, to one CRA-qualifying community organization. CRA-related commitments are not included in the above table. During the year, we increased our efforts to invest in CRA-qualifying investments. In 2005, we committed $500,000 to the Great Lakes Redevelopment Fund, which provides financing for the redevelopment of brownfield sites, and in 2006, plan to commit $1.0 million to the Apollo Fund, which provides financing for low-income housing redevelopment in the Chicago area. The funds for both funds would be drawn down on over the next one to six years.

Income Taxes

The following table shows our income before income taxes, applicable income taxes and effective tax rate for the years ended December 31, 2005, 2004, and 2003, respectively.

	Year Ended December 31,
	2005			2004			2003
	(dollars in thousands)
Income before taxes	$	48,637		$	37,498		$	26,378
Income tax provision		15,217			10,503			7,309
Effective tax rate		31.3	%		28.0	%		27.7	%

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 2005 as compared to 2004 reflects the growth in pre-tax income of 30% and the decrease in federally tax-exempt municipal securities income of 2% year over year. The average balance of municipal securities was $206.8, $212.9 million, and $148.2 million, for the years ended December 31, 2005, 2004 and 2003, respectively. Additionally in 2005, our effective tax rate increased reflecting the full impact of being a 35% corporate tax payer. The higher

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effective tax rate for the year ended December 31, 2004 as compared to the prior year period is also attributable to the increased profitability of The PrivateBank – St. Louis for 2004 relative to 2003 and has resulted in increased Missouri state tax requirements. During 2004, we transitioned from being a 34% corporate taxpayer to 35% for federal tax purposes.

Operating Segments Results

As described in Note 2 to the consolidated financial statements, our operations consist of five primary business segments: The PrivateBank – Chicago, The PrivateBank – St. Louis, The PrivateBank – Michigan, Wealth Management, and the Holding Company. The PrivateBank Mortgage Company results are included in The PrivateBank – Chicago since June 15, 2004, the date of our acquisition of Corley Financial. The PrivateBank – Wisconsin’s results are included in the results of The PrivateBank – St. Louis.

The PrivateBank – Chicago

The profitability of The PrivateBank – Chicago is primarily dependent on the net interest income, provision for loan losses, non-interest income and non-interest expense. Net income for The PrivateBank – Chicago for the year ended December 31, 2005 increased 32% to $34.9 million from $26.4 million for the year ended December 31, 2004. Net income for The PrivateBank – Chicago for the year ended December 31, 2004 increased 29% to $26.4 million from $20.5 million for the year ended December 31, 2003.

For 2005, the net income growth for The PrivateBank – Chicago resulted from improvements in net interest income, which were primarily driven by increases in loans. The improvement in net interest income for 2005 more than offset increases in operating expenses associated with continued growth of The PrivateBank – Chicago. Net interest income for The PrivateBank – Chicago for the year ended December 31, 2005 increased to $79.4 million from $63.2 million, or 26% primarily due to growth in earning assets. Total loans increased by 29% to $1.9 billion during 2005 as compared to $1.5 billion in 2004, or $426.1 million of growth. The majority of the loan growth for 2005 occurred in the commercial real estate and construction loan categories. Loans increased by 35% in 2004 as compared to 2003. Total deposits increased by 28% to $2.2 billion at December 31, 2005 from $1.7 billion at December 31, 2004. Core deposit growth increased year over year by 25% for The PrivateBank – Chicago. Growth in money market deposits and non-interest bearing deposits, as well as increased utilization of brokered deposits accounted for the majority of the deposit growth. For the year ended December 31, 2004, deposits increased by 19% to $1.7 billion from $1.4 billion in 2003.

Net interest income for The PrivateBank – Chicago for the year ended December 31, 2004 increased to $63.2 million from $49.1 million in 2003, or 29% primarily due to growth in earning assets. Total loans increased by 35% to $1.5 billion during 2004 as compared to $1.1 billion in 2003, or $378.3 million of growth. The majority of the loan growth for 2004 occurred in the commercial real estate and construction loan categories. Total deposits increased by 19% to $1.7 billion at December 31, 2004 from $1.4 billion at December 31, 2003. Core deposit growth increased year over year by 31% for The PrivateBank – Chicago. Growth in savings, money market deposits and non-interest bearing deposits, as well as increased utilization of brokered deposits accounted for the majority of the deposit growth.

The PrivateBank – St. Louis

Net income for The PrivateBank – St. Louis for the year ended December 31, 2005 decreased to $2.3 million from $2.8 million for the year ended December 31, 2004. The decrease in net income for The PrivateBank – St. Louis resulted from The PrivateBank – Wisconsin’s net loss of $1.3 million due to its first year of operations. Excluding the results of The PrivateBank-Wisconsin, net income of The

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PrivateBank – St. Louis increased 25% year over year mainly due to increases in net interest income which more than offset decreases in non-interest income and increases in operating expenses. Income on residential real estate loans was $1.8 million for the year ended December 31, 2005 compared to $1.4 million in the prior year period.

Net interest income for The PrivateBank – St. Louis for the year ended December 31, 2005 increased to $11.4 million from $7.7 million, or 49% primarily due to growth in earning assets and improving net interest margins for 2005 as compared to 2004. Net interest income for the year ended December 31, 2004 increased to $7.7 million from $5.4 million during 2003. Net income for the year ended December 31, 2004 increased to $2.8 million from $1.8 million for the year ended December 31, 2003. Total loans increased by 62%, or $127.3 million, to $333.4 million during 2005 as compared to 2004, due primarily to growth in construction and commercial real estate loans. Loans increased by $46.8 to $206.1 million during 2004 as compared to loans at December 31, 2003. Total deposits increased by $136.0 million to $336.0 million at December 31, 2005 from $200.0 million at December 31, 2004. A large portion of the deposit growth resulted from increases in money market deposits, jumbo certificates of deposit and brokered deposits. For the year ended December 31, 2004, deposits increased by $52.6 million to $200.0 million from $147.4 million in 2003.

The PrivateBank – Michigan

The PrivateBank – Michigan’s results of operations are included since the date of acquisition, June 20, 2005. Net income for The PrivateBank – Michigan for the period June 20, 2005 through December 31, 2005 was $2.3 million. Net interest income for the period was $8.2 million. Total loans at December 31, 2005 were $397.8 million and total deposits were $328.9 million.

Wealth Management

Wealth Management includes investment management, personal trust and estate services, custodial services, retirement accounts and brokerage and investment services. Consolidated Wealth Management assets under management increased by 41%, or $709.3 million, to $2.4 billion at December 31, 2005 as compared to $1.7 billion at December 31, 2004 due primarily to the inclusion of $506.5 million of assets under management of The PrivateBank – Michigan. Excluding Michigan, wealth management assets under management grew by 12% year over year. Lodestar’s assets under management at December 31, 2005 were $689.2 million, compared to $648.8 million in the year earlier period. At December 31 2005, Lodestar assets under management include $109.2 million of assets managed by the Wealth Management department for clients who have selected Lodestar as investment adviser, compared to $77.8 million in 2004. Excluding Lodestar, Wealth management assets under management for the Wealth Management segment were $1.7 billion at December 31, 2005, compared to $1.1 billion at December 31, 2004. Wealth management fee revenue increased to $10.0 million in 2005 compared to $8.3 million in 2004 and $6.6 million in 2003. The year-over year increase in wealth management income was primarily due to the inclusion of $753.2 million of wealth management income from The PrivateBank – Michigan and growth in new accounts during 2005. Lodestar fee income increased by $388,000, or 11%, during 2005 as compared to 2004. Net income for our Wealth Management segment decreased to $965,000 for the year ended December 31, 2005 from $1.4 million for the same period in 2004 and up from $620,000 for 2003.

Holding Company

Holding Company Activities consist of parent company only matters. The Holding Company’s most significant assets are its net investments in its three banking subsidiaries, The PrivateBank – Chicago, The PrivateBank – St. Louis, and The PrivateBank – Michigan and our mortgage banking subsidiary, The PrivateBank Mortgage Company. Holding Company Activities are reflected primarily by interest

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expense on borrowings and operating expenses of the parent company. Recurring holding company operating expenses consist primarily of compensation (amortization of restricted stock awards, other salary expense) and miscellaneous professional fees.

The Holding Company Activities segment reported a net loss of $7.0 million for the year ended December 31, 2005 compared to the net loss of $3.7 million for the same period in 2004. For the year ended 2003, the Holding Company Activities segment reported a net loss of $3.8 million. During 2005, the increased level of borrowings increased the interest expense recognized at the Holding Company segment from $2.0 million in 2004 to $4.4 million in 2005 primarily due to the issuance of $50.0 million of trust preferred securities in June 2005, the addition of $8.0 million of trust preferred securities acquired as a result of The PrivateBank – Michigan acquisition on June 20, 2005 and the drawdown on a line of credit with LaSalle Bank which was amended on December 1, 2005 to extend the maturity date to December 1, 2006. On September 29, 2005, the Company entered into a $65.0 million credit facility with LaSalle Bank. The new credit facility replaces an existing $40.0 million revolving credit facility that was originally entered into in February 2000 with LaSalle.

The new $65.0 million credit facility is comprised of a $40.0 million senior debt facility and $25.0 million of subordinated debt. The senior debt facility is comprised of a $250,000 term loan with a maturity of December 31, 2016, and a revolving loan with a maturity of December 1, 2006. Management expects to renew the revolving loan on an annual basis. The subordinated debt matures on December 31, 2016. The interest rate on the senior debt facility resets quarterly, and is based on, at the Company’s option, either the lender’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%. Currently, $20.0 million is available on the subordinated debt facility. 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 December 31, 2005, the Company had $8.25 million outstanding on the senior debt facility and $5.0 million of subordinated debt outstanding. The credit facility is used for general corporate and other working capital purposes. The Company expects to further draw down on the facilities over the next year to support continued balance sheet growth.

FINANCIAL CONDITION

Total Assets

Total assets were $3.5 billion at December 31, 2005 an increase of $958.4 million, or 38%, from $2.5 billion at December 31, 2004. The balance sheet growth during 2005 was accomplished mainly through the inclusion of $462.9 million in assets of The PrivateBank – Michigan and loan growth throughout the Company. The growth in assets experienced during 2005 was funded primarily through growth in core deposits and increases in brokered deposits.

Total assets were $2.5 billion at December 31, 2004 an increase of $550.9 million, or 28%, from $2.0 billion at December 31, 2003. The balance sheet growth during 2004 was accomplished mainly through loan growth throughout the Company. The growth in assets experienced during 2004 was funded primarily through growth in core deposits, and to a lesser extent, by increases in FHLB advances.

Loans

Total loans increased to $2.6 billion at December 31, 2005, an increase of $954.7 million or 58%, from $1.7 billion at December 31, 2004. The year over year increase is partially due to the addition of $397.8 million of loans from The PrivateBank – Michigan. Company-wide, the growth was due to

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increased volume in the commercial real estate, commercial and construction loan categories. The loan growth of $954.7 million experienced since December 31, 2004 is composed of $397.8 million in loans from The PrivateBank – Michigan, growth in loans at The PrivateBank – Chicago of $426.0 million and $127.3 million from The PrivateBank – St. Louis, which includes $29.1 million in loans from The PrivateBank – Wisconsin. All of The PrivateBank – Chicago offices posted gains in loan volume during 2005.

The following table sets forth the loan portfolio by category as of December 31 for the previous five fiscal years:

	Year Ended December 31,
	2005		2004		2003		2002		2001
	(in thousands)
Commercial real estate	$	1,268,851	$	855,396	$	639,296	$	452,703	$	310,869
Commercial		436,416		285,336		181,062		165,993		163,279
Construction		392,597		219,180		162,878		123,204		92,528
Home equity		114,679		119,115		94,855		80,776		59,795
Personal(1)		173,738		83,746		77,025		70,676		64,411
Residential real estate		221,786		90,590		69,541		72,289		89,889
Total loans	$	2,608,067	$	1,653,363	$	1,224,657	$	965,641	$	780,771

(1) Includes overdraft lines.

The following table classifies the loan portfolio, by category, at December 31, 2005, by date at which the loans mature:

	One year or less		From one to five years		After five years		Total		More than one year
									Fixed		Variable(1)
	(in thousands)
Commercial real estate	$	472,295	$	715,081	$	85,931	$	1,273,307	$	450,205	$	350,503
Commercial		288,473		151,384		6,628		446,485		80,167		77,845
Residential real estate		15,775		29,996		174,319		220,090		27,136		177,179
Personal		94,935		38,521		900		134,356		23,649		15,773
Home equity		19,973		92,847		26,284		139,104		—		119,434
Construction		275,652		117,531		1,542		394,725		17,340		101,733
Total loans	$	1,167,103	$	1,145,360	$	295,604	$	2,608,067	$	598,497	$	842,467

(1) Includes adjustable rate mortgage products.

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Allowance for Loan Losses

We believe our loan loss experience to date reflects the high credit quality of our loan portfolio. The following table shows changes in the allowance for loan losses resulting from additions to the allowance and loan charge-offs for each of the periods shown.

	December 31,
	2005			2004			2003			2002			2001
	(dollars in thousands)
Balance at beginning of period	$	18,986		$	15,100		$	11,585		$	8,306		$	6,108
Loans charged-off:
Commercial		(305	)		(363	)		(963	)		(658	)		(939	)
Personal		(233	)		(803	)		(255	)		(92	)		(113	)
Total loans charged-off		(538	)		(1,166	)		(1,218	)		(750	)		(1,052	)
Loans recovered:
Commercial		207			647			230			117			43
Personal		581			6			130			49			28
Total loans recovered		788			653			360			166			71
Net loans recovered (charged-off)		250			(150	)		(850	)		(584	)		(981	)
Provision for loan losses		6,538			4,399			4,373			3,862			3,179
Addition of The PrivateBank – Michigan loan loss reserve		3,614			—			—			—			—
Balance at end of period	$	29,388		$	18,986		$	15,100		$	11,585		$	8,306
Average total loans	$	2,077,000		$	1,382,762		$	1,062,235		$	858,783		$	669,114
Net (recoveries) charge-offs to average total loans		(0.01	)%		0.04	%		0.08	%		0.07	%		0.15	%

The following table shows our allocation of the allowance for loan losses by specific loan category and as a percentage of total loans at the dates shown. We considered various qualitative and quantitative factors about the loan portfolio that we deemed relevant in determining the level of the allowance for loan losses.

	December 31,
	2005				2004				2003				2002				2001
	Amount		% of Loans to Total Loans		Amount		% of Loans to Total Loans		Amount		% of Loans to Total Loans		Amount		% of Loans to Total Loans		Amount		% of Loans to Total Loans
	(dollars in thousands)
Commercial real estate	$	12,975	48	%	$	8,774	52	%	$	7,022	52	%	$	3,483	47	%	$	2,407	40	%
Commercial		6,453	17	%		3,895	17			2,922	15			1,962	17			1,923	21
Construction		4,686	15	%		3,178	13			2,835	13			1,540	13			1,225	12
Home equity		277	4	%		298	7			281	8			569	8			475	8
Personal		1,714	7	%		923	5			1,324	6			583	7			676	8
Residential real estate		419	9	%		360	6			342	6			344	8			500	11
Unallocated		2,864	—			1,558	—			374	—			3,104	—			1,100	—
Total	$	29,388	100	%	$	18,986	100	%	$	15,100	100	%	$	11,585	100	%	$	8,306	100	%

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

	December 31,
Allocation of the Allowance for Loan Losses	2005				2004				2003				2002				2001
(dollars in thousands)	Amount		% of allowance to total allowance		Amount		% of allowance to total allowance		Amount		% of allowance to total allowance		Amount		% of allowance to total allowance		Amount		% of allowance to total allowance
Allocated Inherent Reserve:
Commercial real estate	$	12,975	44	%	$	8,446	44	%		7,004	47	%		3,585	31	%	$	2,402	29	%
Commercial		6,453	22	%		3,277	17	%		2,295	15	%		1,727	15	%		1,835	22	%
Construction		4,686	16	%		2,659	14	%		2,227	15	%		1,268	11	%		936	11	%
Home equity		277	1	%		298	2	%		262	2	%		427	4	%		466	6	%
Personal		1,714	6	%		736	4	%		741	5	%		484	4	%		562	7	%
Residential real estate		419	1	%		222	1	%		191	1	%		192	2	%		518	6	%
Allocated Inherent Reserve		26,524	90	%		15,638	82	%		12,720	85	%		7,683	66	%		6,719	81	%
Specific Reserve		—	—			1,669	9	%		2,006	13	%		798	7	%		487	6	%
Unallocated Inherent Reserve		2,864	10	%		1,679	9	%		374	2	%		3,104	27	%		1,100	13	%
Total Reserve for Credit Losses	$	29,388	100	%	$	18,986	100	%	$	15,100	100	%	$	11,585	100	%	$	8,306	100	%

Loan quality is continually monitored by management and reviewed by the loan committees of the boards of directors of the banks on a quarterly basis. 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 assessment of the credit risk of the portfolio, evaluation of loans classified as special mention, sub-standard and doubtful loans, delinquent loans, evaluation of current economic conditions in the market area, actual charge-offs during the year, historical loss experience and industry loss averages. The unallocated portion of the reserve involves the exercise of judgment by management and reflects various considerations, including management’s view that the reserve should have a margin that recognizes the imprecision inherent in the process of estimating credit losses.

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 and credit undertakings that are not specifically identified. Management’s application of the methodology for determining the allowance for loan losses resulted in an allowance for loan losses of $29.4 million at December 31, 2005 compared with $19.0 million at December 31, 2004. The increase in the allowance for loan losses from December 31, 2004 reflects the addition of $3.6 million of loan loss reserves as a result of the acquisition of The PrivateBank – Michigan, management’s judgment about the generalized risk of real estate related lending in our various markets, the addition of new lending personnel as well as strong loan growth from all existing offices in 2005. We believe that the allowance for loan losses is adequate to provide for estimated probable credit losses inherent in our loan portfolio.

The allowance for loan losses as a percentage of total loans was 1.13% at December 31, 2005, down from 1.15% at December 31, 2004. Net recoveries totaled $205,000 for the year ended

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December 31, 2005 versus net charge-offs of $513,000 in the year earlier period. The provision for loan losses was $6.5 million for the twelve months ended December 31, 2005, versus $4.4 million in the prior year period.

Under our methodology, the allowance for loan losses is comprised of the following components:

Allocated Inherent Component of the Reserve

The allocated portion of the allowance for loan losses is based on loan type and, starting in the second quarter 2005, the allowance is also 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 take into account banking industry-wide loss statistics, current facts and circumstances, and long-term economic trends. During the second quarter 2005, the historical analysis was enhanced to include a five-year migration analysis of the Company’s losses and the documentation of the loss adjustment factors was augmented.

The allocated inherent component of the reserve increased by $10.9 million during 2005, from $15.6 million at December 31, 2004 to $26.5 million at December 31, 2005. The increase in the allocated portion of the reserve reflects higher loan volumes in every category, particularly construction, commercial, and residential real estate 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.” As of December 31, 2005, management has concluded that there are no loans in the portfolio that require specific reserves.

The specific component of the reserve decreased by $1.7 million during 2005, from $1.7 million at December 31, 2004 to zero at December 31, 2005 after giving effect to $205,000 in recoveries during the period.

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 $1.2 million for 2005, from $1.7 million at December 31, 2004 to $2.9 million at December 31, 2005 reflecting the impact of a larger overall loan portfolio and the addition of The PrivateBank – Michigan portfolio.

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Non-performing Loans

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

	December 31,
	2005			2004			2003			2002			2001
	(dollars in thousands)
Nonaccrual loans	$	663		$	1,090		$	36		$	749		$	664
Loans past due 90 days or more		280			1,438			1,088			650			2,504
Total non-performing loans		943			2,528			1,124			1,399			3,168
OREO		393			—			—			—			—
Total non-performing assets	$	1,336		$	2,528		$	1,124		$	1,399		$	3,168
Non-accrual loans to total loans		0.03	%		0.07	%		0.00	%		0.08	%		0.09	%
Total non-performing loans to total loans		0.04	%		0.15	%		0.09	%		0.14	%		0.41	%
Total non-performing assets to total assets		0.04	%		0.10	%		0.06	%		0.09	%		0.27	%

It is our policy to discontinue the accrual of interest income on any loan for which there exists reasonable doubt as to the payment of interest or principal. Nonaccrual loans are returned to an accrual status when the financial position of the borrower indicates there is no longer any reasonable doubt as to the payment of principal or interest.

Other than those loans reflected in the table above, we had no significant loans for which the terms had been renegotiated or restructured, or for which there were serious doubts as to the ability of the borrower to comply with repayment terms. We did not have any other real estate owned as of any of the dates shown.

Potential Problem Loans. In addition to those loans reflected in the table above, we have identified some loans through our problem loan identification process which exhibit a higher than normal credit risk. Loans in this category include loans with characteristics such as past maturity 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. The balance in this category at any reporting period can fluctuate widely based on the timing of cash collections, renegotiations and renewals. The principal amount of loans in this category as of December 31, 2005 was $280,000. At December 31, 2005, there were no significant loans classified by any bank regulatory agency that are not included above as nonaccrual, past due or restructured.

Nonaccrual loans were $663,000 as of December 31, 2005 compared to $1.1 million at December 31, 2004. Nonperforming loans include nonaccrual loans and accruing loans that are 90 days or more delinquent. Nonperforming loans were $943,000 as of December 31, 2005, compared to $2.5 million at December 31, 2004. Nonperforming loans were 0.04%, and 0.15%, of total loans at December 31, 2005 and December 31, 2004, respectively. Nonperforming assets were 0.04% and 0.10% of total assets as of December 31, 2005 and December 31, 2004, respectively.

As a result of the acquisition of BHB, the Company assumed $413,000 of other real estate owned (OREO), which is secured by various properties in the Detroit metropolitan area, consisting primarily of vacant land. The balance at December 31, 2005 of $393,000 reflects the value of these properties less proceeds received during the third quarter 2005 of approximately $202,000 arising from a condemnation action taken by Wayne County, Michigan, and the reclassification of a $182,000 loan to OREO during the fourth quarter 2005.

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Loan Concentrations. Loan concentrations are considered to exist when there are amounts loaned to a multiple number of borrowers engaged in similar activities which would cause them to be similarly impacted by economic or other conditions. At December 31, 2005, our commercial real estate loans totaled approximately $1.3 billion or 49% of our total loan portfolio. Commercial real estate typically involves higher loan principal amounts, and the repayment of these loans generally is dependant, in large part, on the successful operation of the property securing the loan or the business conducted on the property securing the loan. These loans may be more adversely affected by general conditions in the real estate markets or in the economy. Other than loans made to borrowers residing in the Chicago, St. Louis, Milwaukee and Detroit metropolitan areas and our involvement in lending secured by real estate, we had no concentrations of loans exceeding 10% of total loans at December 31, 2005. Other than loans made to borrowers residing in the Chicago and St. Louis metropolitan areas and our involvement in lending secured by real estate, we had no concentrations of loans exceeding 10% of total loans at December 31, 2004.

Investment Securities

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

All securities are classified as available-for-sale and may be sold as part of our asset/liability management strategy in response to changes in interest rates, liquidity needs or significant prepayment risk. Securities available-for-sale are carried at fair value, with related unrealized net gains or losses, net of deferred income taxes, recorded as an adjustment to equity capital. At December 31, 2005, reported stockholders’ equity reflected unrealized securities gains net of tax of $7.4 million. This represented an increase of $378,000 from unrealized securities gains net of tax of $7.1 million at December 31, 2004.

Net unrealized gains increased $500,000 during 2005 to $12.0 million at December 31, 2005 compared to net unrealized gains of $11.5 million at December 31, 2004. The increase in net unrealized gains occurred primarily due to decreases in ten-year interest rates during the period.

Securities available-for-sale decreased to $695.2 million at December 31, 2005, down 9% from $764.0 million as of December 31, 2004. The contraction in the investment security portfolio since December 31, 2004 resulted primarily from the redemption of $70.0 million of FHLB (Chicago) stock during 2005. We held no U.S. government agency obligations at December 31, 2005 or December 31, 2004. U.S. government agency mortgage backed securities and collateralized mortgage obligations decreased by $13.5 million to $319.5 million from December 31, 2004 to December 31, 2005. We held no corporate collateralized mortgage obligations at December 31, 2005, as compared to $1.8 million in the prior year period. Tax-exempt municipal securities were $214.9 million at December 31, 2005 as compared to the year-end 2004 amount of $212.2 million.

At December 31, 2005, the Company’s consolidated investment in Federal Home Loan Bank (FHLB) stock was $142.4 million, compared to $208.1 million at December 31, 2004. The reduction in this investment reflects gradual redemptions of excess FHLB (Chicago) stock initiated by the Company in response to reductions in the dividend rate paid on such stock and to take advantage of higher yields available on loans and other investments. The Company redeemed $20.0 million of its excess FHLB (Chicago) stock in each of the first three quarters of 2005, and an additional $10.0 million of its FHLB (Chicago) stock on October 13, 2005, after which its investment totaled $137.0 million. The

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$142.4 million of FHLB stock at December 31, 2005 was comprised of $138.5 million of FHLB (Chicago) stock, $1.4 million of FHLB (Des Moines) stock and $2.5 million of FHLB (Indianapolis) stock. The Company is required to maintain a ratio of 20:1 of FHLB borrowings to FHLB stock. As of December 31, 2005, the Company had $171.1 million in advances from the FHLB (Chicago) and, accordingly, was required to hold $8.6 million in FHLB (Chicago) stock. The remainder of FHLB (Chicago) stock represents excess or “voluntary” stock.

On October 18, 2005, the FHLB (Chicago) announced an annualized dividend rate of 3.75% payable in the fourth quarter 2005. This new dividend rate reflected a reduction of 125 basis points from the 5.0% annualized dividend rate that was declared in the third quarter 2005. In addition to announcing the lower dividend rate, the FHLB (Chicago) also announced at this same time that it would suspend redemptions of excess or “voluntary” capital stock until further notice. The FHLB (Chicago) further stated that it had entered into an amendment to its Written Agreement with the Federal Housing Board to reduce the FHLB (Chicago)’s minimum capital ratio from 5.1% to 4.5%, to require the FHLB (Chicago) to maintain minimum total capital of $3.964 billion, the balance as of October 18, 2005, and to provide that no FHLB (Chicago) stock will be redeemed if the redemption would cause the FHLB (Chicago) to fail to meet such capital requirements. On January 18, 2006, the FHLB (Chicago) issued a press release announcing another decrease in its annualized dividend rate to 3.0% from 3.75% in the prior quarter.

In announcing the suspension of redemptions of its voluntary stock, the FHLB (Chicago) stated that it took these actions to help ensure an adequate capital base for the FHLB (Chicago) to continue to service the needs of its members. The FHLB (Chicago) also stated an intention to resume redemptions as soon as possible, subject to Finance Board approval. Prior to this announcement, the FHLB (Chicago) had exercised its discretion with respect to redemptions of excess stock by maintaining a practice of redeeming such stock upon the request of the member. As an alternative to a discretionary redemption of excess stock, the FHLB (Chicago) is required to redeem all of a member’s stock in the event of a withdrawal from membership upon six months’ prior notice.

On October 31, 2005, the Company delivered to the FHLB (Chicago) written notice of its intent to withdraw its membership and obtain redemption of all of the FHLB (Chicago) stock held by the Company upon the effective date of the withdrawal. Pursuant to applicable regulation, the withdrawal and the FHLB (Chicago’s) obligation to redeem the Company’s stock will not be effective until April 30, 2006. In addition, the Company must pay its outstanding FHLB (Chicago) advances prior to the effective date of the withdrawal and will not have access for a period of five years thereafter to advances from the FHLB (Chicago). The Company has been advised by the FHLB (Chicago) that it is permitted to rescind its notice of membership withdrawal at any time prior to its effective date, without fee or penalty. In anticipation of withdrawing its membership and substantially reducing its investment in FHLB (Chicago) stock, the Company reduced its FHLB (Chicago) advances in the fourth quarter 2005 from $261.0 million to $171.0 million.

On November 18, 2005, the Company received a letter from the FHFB in response to its membership withdrawal. The letter states that the FHLB (Chicago) would not be required to redeem the Company’s stock at the effective date if the FHLB (Chicago) would fall below the 4.5% equity or $3.978 billion capital stock requirement if the existing written agreement with the FHFB was still in effect on April 30, 2006. In its Form 10 filed with the SEC on February 10, 2006, the FHLB (Chicago) reiterated this position. The Company believes that the redemption of its stock at the effective date of its withdrawal request is not limited by these October 18, 2005 capital requirements but instead governed by rules in effect before November 12, 1999, so long as the FHLB (Chicago) has not implemented its new capital plan. These prior rules require redemption of a withdrawing member’s stock upon the expiration of the six month notice period, subject only to a finding by the FHFB that the FHLB (Chicago)’s capital is impaired. No assurance can be given that the FHLB (Chicago) will have

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adequate capital under the prior rules to redeem the Company’s stock at the effective time of its withdrawal or that the FHLB (Chicago) or the FHFB will not take action which precludes such redemption.

The Company believes that adequate funding from a variety of wholesale funding sources, included brokered deposits and advances from either the FHLB (Indianapolis) or the FHLB (Des Moines), have been and will continue to be available to replace the FHLB (Chicago) advances on terms that will not have a material impact, either positively or negatively, on the Company’s net interest margin.

The following table presents the components of our available-for-sale investment securities portfolio for the years presented:

	December 31,
	2005		2004		2003
	(in thousands)
Available-for-Sale
U.S. government agency obligations	$	—	$	—	$	—
U.S. government agency mortgage backed securities and collateralized mortgage obligations		316,255		333,050		242,727
Corporate collateralized mortgage obligations		—		1,843		4,909
Tax exempt municipal securities		230,208		212,210		203,395
Taxable municipal securities		3,826		3,862		3,857
Federal Home Loan Bank stock		142,396		208,096		209,633
Other		2,466		4,924		4,741
Total	$	695,151	$	763,985	$	669,262

The following tables show the effective maturities of investment securities (based upon the amortized cost), by category, as of December 31, 2005, and the weighted average yield (computed on a tax equivalent basis) for each range of maturities of securities, by category, as of December 31, 2005. For the mortgage backed securities and collateralized mortgage obligations categories, the effective maturity and weighted average yield are based upon mortgage prepayment estimates. Actual mortgage prepayments may vary due to changes in interest rates, economic conditions and other factors.

	Within one year		From one to five years		From five to ten years		After ten years		Securities with no stated maturity		Total
	(in thousands)
U.S. government agency obligations	$	—	$	—	$	—	$	—	$	—	$	—
U.S. government agency mortgage backed securities and collateralized mortgage obligation		53,366		221,946		38,809		5,404				319,525
Corporate collateralized mortgage obligations		—		—		—		—		—		—
Tax exempt municipal securities(1)		68		5,610		132,664		76,553				214,895
Taxable municipal securities		—		—		3,825		—		—		3,825
Federal Home Loan Bank stock(2)		—		—		—		—		142,396		142,396
Other		1,367		100		—		1,000		—		2,467
Total	$	54,801	$	227,656	$	175,298	$	82,957	$	142,396	$	683,108

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	Within one year		From one to five years		From five to ten years		After ten years		Securities with no stated maturity		Total
U.S. government agency obligations	—		—		—		—		—		—
U.S. government agency mortgage backed securities and collateralized mortgage obligations	4.26	%	4.86	%	5.07	%	5.82	%			4.80	%
Corporate collateralized mortgage obligations	—		—		—		—		—		—
Tax exempt municipal securities(1)	2.80	%	5.89	%	6.56	%	6.86	%			6.65	%
Taxable municipal securities	—		—		7.51	%					7.51	%
Federal Home Loan Bank stock(2)	—		—		—		—		3.75	%	3.75	%
Other	1.08	%	3.88	%	—		5.06	%	—		2.81	%
Total	4.18	%	4.88	%	6.25	%	6.77	%	3.75	%	5.17	%

(1) The weighted average yield reflects a tax-equivalent adjustment based on a marginal federal corporate tax rate of 35% and the yields are derived from the amortized cost basis of investment securities.

(2) We are required to maintain a ratio of 20:1 of FHLB borrowings to FHLB stock.

Deposits and Funds Borrowed

Total deposits of $2.8 billion as of December 31, 2005 represented an increase of $950.7 million, or 51%, from $1.9 billion as of December 31, 2004. In 2005, our interest bearing demand deposits as a percentage of total deposits decreased by 1% as compared to 2004 while our other time deposits as a percentage of total deposits increased by 4%. Brokered deposits as a percentage of total deposits decreased to 21% as compared to 22% at December 31, 2004. We expect to continue to rely on brokered deposits in 2006 as a source of funding. During 2005, we continued to utilize brokered deposits as an alternative source of funding, however, core deposits grew 54% year over year, largely due to the addition of $328.9 million in deposits of The PrivateBank – Michigan. Excluding deposits of The PrivateBank – Michigan, core deposits grew 32% year over year. We experienced significant growth in our money market deposits, primarily resulting from growth in money market account relationships of $5.0 million or greater which was an area of strategic focus, and were priced at a spread to the prime rate of interest.

Non-interest-bearing deposits were $252.6 million as of December 31, 2005, an $87.5 million increase over the $165.2 million reported as of December 31, 2004. Interest-bearing demand deposits increased $25.9 million to $132.8 million at December 31, 2005 compared to $106.8 million at December 31, 2004. Money market deposit accounts increased by $420.7 million to $1.3 billion at December 31, 2005 as compared to $837.1 million at December 31, 2004. Other time deposits increased by approximately $255.7 million to $579.0 million as compared to $323.3 million at year-end 2004. Brokered deposits increased to $586.6 million at December 31, 2005 from $423.1 million at December 31, 2004.

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The following table presents the balances of deposits by category and each category as a percentage of total deposits at December 31, 2005, 2004 and 2003.

	December 31,
	2005				2004				2003
	Balance		Percent of Total		Balance		Percent of Total		Balance		Percent of Total
	(dollars in thousands)
Non-interest bearing demand	$	252,625	9	%	$	165,170	9	%	$	135,110	9	%
Savings		14,596	1			17,067	1			9,795	1
Interest-bearing demand		132,787	5			106,846	6			85,083	5
Money market		1,257,757	44			837,096	45			552,439	36
Brokered deposits		586,605	21			423,147	22			447,948	29
Other time deposits		579,013	20			323,309	17			316,984	20
Total deposits	$	2,823,383	100	%	$	1,872,635	100	%	$	1,547,359	100	%

The aggregate amounts of time deposits, in denominations of $100,000 or more (including brokered deposits), by maturity, are shown below as of the dates indicated:

	December 31,
	2005		2004
	(in thousands)
Three months or less	$	313,167	$	206,390
Over three through six months		235,231		104,899
Over six through twelve months		231,103		130,239
Over twelve months		307,722		246,766
Total	$	1,087,223	$	688,294

Over the past several years, our clients have chosen to keep the maturities of their deposits short. We expect these short-term certificates of deposit to be renewed on terms and with maturities similar to those currently in place. In the event that certain of these certificates of deposits are not renewed and the funds are withdrawn from the banks, those deposits will be replaced with traditional deposits, brokered deposits, borrowed money or capital, or we will liquidate assets to reduce our funding needs.

The scheduled maturities of time deposits (including brokered deposits) as of December 31, 2005, for the years 2006 through 2010 and thereafter, are as follows:

For year ending December 31,	(in thousands)
2006	$	839,190
2007		133,123
2008		37,739
2009		36,326
2010 and thereafter		119,239
Total	$	1,165,617

We continued to utilize brokered deposits as a source of funding for growth in our loan portfolio in 2005. As of December 31, 2005, we held twelve outstanding brokered deposits containing unexercised call provisions. We have brokered deposits with approximately nine different brokers and we receive periodic information from other brokers regarding potential deposits.

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The scheduled maturities of brokered deposits, net of unamortized prepaid broker commissions, as of December 31, 2005, for each quarter in 2006, and for the years 2007 through 2010 and thereafter, are as follows:

Scheduled Maturities of Brokered Deposits

net of unamortized prepaid brokered commissions

at December 31, 2005

Maturity Date	Rate(1)		12/31/2005
			(in thousands)
1st quarter 2006	3.55	%	$	70,079
2nd quarter 2006(2)	3.42	%		131,971
3rd quarter 2006	4.05	%		112,714
4th quarter 2006	4.47	%		11,086
2007	4.07	%		102,232
2008-2009(3)	4.06	%		55,958
Thereafter(4)(5)	5.14	%		104,881
Unamortized prepaid broker commissions				(2,316	)
Total brokered deposits, net of unamortized prepaid broker commissions			$	586,605

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

(2) On December 28, 2005, the Company issued $20.0 million brokered deposits with a fixed-rate of 4.60% and a maturity of June 28, 2006. The Company simultaneously designated a $20.0 million notional interest rate swap in which the Company receives a 4.60% fixed rate and pays three-month LIBOR minus 12.5 basis points for the same term.

(3) This segment includes two callable deposits: a $15.0 million brokered deposit with a maturity date of 3/26/2008 which is callable monthly and a $5.0 million brokered deposit with a maturity of 6/12/2009 which is callable monthly.

(4) This segment includes several callable deposits: a $1.6 million brokered deposit with a maturity date of 5/19/2010 callable quarterly; a $3.6 million brokered deposit with a maturity date of 11/19/2012 callable semi-annually; a $9.9 million brokered deposit with a maturity date of 2/11/2013 callable monthly; a $10.0 million brokered deposit with a maturity date of 1/21/2014 callable monthly; a $10.0 million brokered deposit with a maturity date of 12/17/2014 callable monthly; a $7.5 million brokered deposit with a maturity of 1/28/2015 callable semi-annually; a $12.3 million brokered deposit with a maturity date of 2/27/2019 callable monthly; $9.6 million brokered deposit with a maturity date of 3/12/2024 callable semi-annually; a $9.1 million brokered deposit with a maturity date of 4/23/2024 callable monthly; and a $7.4 million brokered deposit with a maturity date of 6/30/2025, an original call date of 12/30/2005, and semi-annually thereafter.

(5) This segment includes a zero coupon brokered deposit with a maturity date of 3/18/2024, an effective yield of 6.25% and callable semi-annually.

Membership in the FHLB System gives us the ability to borrow funds from the FHLB (Chicago) and from the FHLB of Des Moines for short- or long-term purposes under a variety of programs. We have periodically used services of the FHLB for funding needs and other correspondent services.

During 2005, our reliance on FHLB borrowings as a funding source decreased by $4.2 million from December 31, 2004. FHLB borrowings totaled $245.1 million at December 31, 2005 compared to $249.3 million at December 31, 2004. At December 31, 2005 our FHLB borrowings consisted of $171.1 million borrowed from the FHLB (Chicago), $50.0 million from the FHLB (Indianapolis), and

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$24.0 million from the FHLB (Des Moines). The FHLB requires us to pledge collateral in connection with obtaining FHLB advances. Our pledged collateral consists of residential real estate loans and certain qualifying multi-family loans and investment securities.

The following table presents detail on our short term borrowings for the years shown. For a detailed listing of all funds borrowed, see Note 9 to the financial statements:

Additional information for short-term borrowings (dollars in thousands):	2005			2004			2003
Average balance outstanding	$	221,469		$	194,888		$	117,792
Maximum amount outstanding at any month-end during the year		259,643			322,189			197,477
Balance outstanding at end of year		174,950			308,089			86,338
Weighted average interest rate during year		3.08	%		1.62	%		0.97	%
Weighted average interest rate at end of year		3.50			2.54			1.21

At December 31, 2005 and 2004, we had three FHLB letters of credit outstanding; a $3.1 million letter of credit with a maturity date of January 3, 2006 and a $6.2 million letter of credit with a maturity of February 28, 2006, both of which are held to secure public funds deposits, and a $3.3 million letter of credit that matures on October 25, 2007. We pay 0.125% per annum for FHLB letters of credit. The following table shows the maximum availability for and usage of FHLB advances and letters of credit for The PrivateBank – Chicago, The PrivateBank – St. Louis, and The PrivateBank – Michigan.

Date	Maximum Availability		Usage
	(in thousands)
As of December 31, 2005:
The PrivateBank – Chicago	$	183,672	$	171,129
The PrivateBank – St. Louis		30,684		24,000
The PrivateBank – Michigan		142,802		50,000
As of December 31, 2004:
The PrivateBank – Chicago	$	234,228	$	230,930
The PrivateBank – St. Louis		23,311		18,000

We accept deposits from a variety of municipal entities. Typically, these municipal entities require that banks pledge marketable securities to collateralize these public deposits. The State of Illinois also accepts FHLB letters of credit as collateral. At December 31, 2005 and 2004, we had approximately $185.1 million and $166.4 million, respectively, of securities collateralizing such public deposits. Deposits requiring pledged assets are not considered to be core deposits for regulatory purposes and the assets that are pledged as collateral for these deposits are not deemed to be liquid assets.

On September 29, 2005, the Company entered into a $65.0 million credit facility with LaSalle Bank NA. The new credit facility replaces an existing $40.0 million revolving credit facility that was originally entered into in February 2000 with LaSalle.

The $65.0 million credit facility is comprised of a $40.0 million senior debt facility and $25.0 million of subordinated debt. The senior debt facility is comprised of a $250,000 term loan with a maturity of December 31, 2016, and a revolving loan with a maturity of December 1, 2005. During the fourth quarter 2005, the maturity on the revolving loan was extended to December 31, 2006. Management expects to renew the revolving loan on an annual basis. The subordinated debt matures on December 31, 2016. The interest rate on the senior debt facility resets quarterly, and is based on, at the Company’s option, either the lender’s prime rate or three-month LIBOR plus 120 basis points, with

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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%. LaSalle has made $25.0 million available on the subordinated debt facility. 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 December 31, 2005, the Company had $8.25 million outstanding on the senior debt facility and $5.0 million of subordinated debt outstanding. The $25.0 million subordinated debt component of the facility qualifies as Tier 2 capital. The credit facility is used for general corporate and other working capital purposes. The Company expects to further draw down on the facilities over the next year to support continued balance sheet growth.

Risk Management

We are exposed to market risk from changes in interest rates that could affect our results of operations and financial condition. We manage our exposure to these market risks through our regular operating and financing activities. During 2001, we began to hedge interest rate risk through the use of derivative financial instruments. We use derivative financial instruments as a risk management tool.

Interest Rate Risk

We use a combination of financial instruments, including medium-term and short-term financings and variable-rate debt instruments and, to a lesser extent, interest rate swaps to manage the interest rate mix of our total debt portfolio and related cash flows. To manage this mix in a cost-effective manner, in 2001 we entered into our first interest rate swap transaction in which we agreed to receive a fixed rate in exchange for payment of a floating rate based on an agreed-upon notional amount. The fair value of the swap associated with this fair value hedge was $722,423 on December 31, 2004 and matured in October 2005.

As market interest rates continued to decline to historic lows in the second half of 2002, the value of our long-term tax-exempt bank-qualified municipal bond portfolio increased. In order to protect this gain should rates rise, we entered into a $25.0 million swap agreement whereby we sold the 10-year swap and bought three-month LIBOR to act as an economic hedge to a portion of our long municipal bonds. At December 31, 2005 the market value of the interest rate swap associated with this economic hedge was a liability of $203,596. As the result of market value changes on this swap throughout 2004, $870,000 of expense was recorded as compared to $404,000 of income in 2005. One of two interest rate swaps we have entered into is designated as a fair value hedge of a fixed rate $20.0 million brokered deposit. We have agreed to receive a 4.6% fixed rate in exchange for payment of three month LIBOR minus 12.5 basis points on an agreed upon notional amount of $20.0 million. The fair value of the interest rate swap was $3,050 at December 31, 2005. The purpose of the hedge is to expand the Company’s floating rate funding exposure in response to our net interest income models. In addition, while repositioning the FHLB (Chicago) advances in the fourth quarter 2005, we repaid a floating rate $25.0 million advance costing three month LIBOR plus 12.5 basis points. The hedged transaction replaces most of this funding at a savings of 25 basis points.

During 2005 and 2004, we continued to actively manage our interest rate exposure in our balance sheet. During 2005, unrealized gains increased by $378,000 on an after-tax basis, compared to a decrease of $2.8 million in 2004. Changes in market rates gave us the opportunity to make changes to our investment security portfolio as part of the implementation of our asset liability management strategies. Throughout 2005 and 2004, we continued to replace specific investment securities with alternative investment securities with greater risk/reward parameters on a selective basis. Our net interest margin declined to 3.57% as compared to 3.67% in 2004 as a result of the flattening yield

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curve. During 2005 our costs on wholesale funds, short-term borrowings and deposits outpaced the increase in earning asset yields due to increases in the prime rate of interest. Approximately 70% of the loan portfolio is indexed to the prime rate of interest or otherwise adjusts with other short-term interest rates. Our net interest margin of 3.63% for 2004 was stable as compared to 3.62% for 2003. The positive impact of rising interest rates and growth in non-interest bearing account balances offset the increases in cost of funds.

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

Capital Resources

Stockholders’ equity rose to $235.5 million at December 31, 2005, an increase of $41.4 million from the 2004 year-end level of $194.1 million, due primarily to net income generated during 2005. Common stock increased by $12.8 million due to the private placement of $7.6 million in June 2005 and approximately $5.2 million in stock options granted during the period.

During 2005, the Company granted 150,300 restricted shares to certain officers of the Company. These shares vest after five years. Restricted share grants are recorded as a contra equity account in stockholder’s equity.

The Company and its banking subsidiaries are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings and other factors, and the regulators can lower classifications in certain areas. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements.

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

The following table sets forth our consolidated regulatory capital amounts and ratios as of December 31, 2005 and 2004:

	December 31,
	2005								2004
	Capital			“Well- capitalized” Standard			Excess Capital		Capital			“Well- capitalized” Standard			Excess Capital
Dollar basis (in thousands):
Leverage capital	$	235,454		$	165,958		$	69,496	$	184,184		$	119,439		$	64,745
Tier 1 risk-based capital		235,454			166,183			69,271		184,184			107,941			76,243
Total risk-based capital		291,796			276,971			14,825		203,170			179,902			23,269
Percentage basis:
Leverage ratio		7.09	%		5.00	%				7.71	%		5.00	%
Tier 1 risk-based capital ratio		8.50			6.00					10.24			6.00
Total risk-based capital ratio		10.54			10.00					11.29			10.00
Total equity to total assets		6.74			—					7.65			—

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As of December 31, 2005, $76.0 million of the Company’s $98.0 million of trust preferred securities are included in Tier 1 capital. The Tier 1 qualifying amount is limited to 25% of Tier 1 capital under Federal Reserve regulations.

As of December 31, 2005 the Company owned 100% of the common securities of three trusts, PrivateBancorp Statutory Trust II, Bloomfield Hills Statutory Trust I and PrivateBancorp Statutory Trust III. PrivateBancorp Statutory Trust II and PrivateBancorp Statutory Trust III were established as wholly-owned subsidiaries of the Company in June 2005 and December 2005, respectively. Bloomfield Hills Statutory Trust I was acquired as part of the acquisition of BHB on June 20, 2005. The Trusts were formed for purposes of issuing trust preferred securities to third-party investors and investing the proceeds from the issuance of the trust preferred securities and common securities solely in junior subordinated debentures (“Debentures”) issued by the Company or BHB, as the case may be, with the same maturities and interest rates as the trust preferred securities. The Debentures are the sole assets of the Trusts.

On June 20, 2005, the Company issued $50.0 million in fixed/floating rate trust preferred securities through PrivateBancorp Statutory Trust II, a newly created business trust subsidiary. The trust preferred securities will pay interest quarterly at a fixed rate of 6.00% for the initial five years and then subsequently pay interest quarterly at a floating rate equal to 3 month LIBOR plus 1.71%. The trust preferred securities have a 30-year final maturity and are callable at par at the option of the Company in whole or in part after year five, on any interest payment date.

In connection with the acquisition of BHB, the Company acquired $8.0 million in floating rate junior subordinated debenture trust preferred securities. The trust preferred securities pay interest quarterly at a rate of 3 month LIBOR plus 2.65%. The trust preferred securities have a maturity date of June 17, 2034 and are callable beginning June 17, 2009 and at any interest payment date thereafter.

On December 5, 2005, the Company issued $40.0 million of trust preferred securities and related junior subordinated debentures. These securities mature in December 2035 but are redeemable at par at our option after five years. The trust preferred securities pay quarterly distributions at a rate of 6.10% for five years and thereafter at a rate equal to the three-month LIBOR rate plus 1.50%. A portion of the proceeds was used to fund the redemption, on December 31, 2005 of $20.0 million of previously outstanding 9.50% trust preferred securities that were originally issued in 2001. As a result of this redemption, the Company incurred a one-time, pre-tax charge of approximately $980,000. By refunding this $20.0 million of trust preferred securities at a rate of 6.1% from 9.5%, we will reduce our annual carrying cost by $700,000.

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,” an entity 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 December 31, 2005, the Company, The PrivateBank – Chicago, The PrivateBank – St. Louis and The PrivateBank – Michigan exceeded the minimum levels of all regulatory capital requirements, and were considered “well capitalized” under regulatory standards. At December 31, 2005, our total risk-based capital ratio was 10.54% compared to 11.29% at December 31, 2004.

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 our clients’ credit needs. Our liquidity principally depends on our cash flows from our operating activities, investment in and maturity of assets, changes in balances of deposits and borrowings and our ability to borrow funds

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in the money or capital markets. Liquidity management involves planning to meet anticipated funding needs at a reasonable cost. Liquidity management is guided by policies, formulated and monitored by our senior management and the banks’ asset/liability committees, which take into account the marketability of assets, the sources and stability of funding and the level of unfunded commitments. Our principal sources of funds are deposits, short-term borrowings and capital contributions by PrivateBancorp to the banks funded by proceeds from draws on our line of credit or through new capital.

Our core deposits, the most stable source of liquidity due to the nature of long-term relationships generally established with our clients, are available to provide long-term liquidity. At December 31, 2005, 59% of our total assets were funded by core deposits, compared to 54% at December 31, 2004. Core deposits for purposes of this ratio are defined as to include all deposits including time deposits but excluding brokered deposits and public funds. Time deposits are included as core deposits since these deposits have historically not been volatile deposits for us.

Over the past several years, our clients have chosen to keep the maturities of their time deposits short. In the event that certain of these certificates of deposit are not renewed and the funds are withdrawn from the bank, unless those deposits are replaced with other core deposits, brokered deposits, borrowed money or capital, we will liquidate assets to reduce our funding needs.

We have continued to use FHLB advances and brokered deposits as alternative methods of funding growth. During 1999, we first utilized brokered deposits as a funding tool to enhance liquidity in anticipation of increasing loan demand. During 2005 and 2004 we maintained our brokered deposits program in order to fund liquidity of The PrivateBank – Chicago and The PrivateBank – St. Louis. In 2006, we expect to continue to rely on brokered deposits as an alternative method of funding growth. Our asset/liability management policy currently limits our use of brokered deposits to levels no more than 40% of total deposits. We do not expect our 40% threshold limitation to limit our ability to implement our growth plan. We will first look toward internally generated deposits as funding sources, but plan to supplement our funding needs with wholesale funding sources as needed. Consistent with this policy, brokered deposits to total deposits were 21% of total deposits at December 31, 2005, compared to 22% of total deposits at December 31, 2004.

Liquid assets refer to money market assets such as federal funds sold, as well as available-for-sale securities. Net liquid assets represent the sum of the liquid asset categories less the amount of assets pledged to secure public funds and certain deposits that require collateral. At December 31, 2005, net liquid assets at The PrivateBank – Chicago were $282.7 million as compared to $272.6 million at December 31, 2004. At December 31, 2005, net liquid assets at The PrivateBank – St. Louis were $38.4 million as compared to $38.7 million at December 31, 2004. At December 31, 2005, net liquid assets at The PrivateBank – Michigan were $10.5 million.

Net cash inflows provided by operations were $38.0 million for the year ended December 31, 2005 compared to a net inflow of $34.9 million a year earlier. Net cash outflows from investing activities were $620.4 million for the year ended December 31, 2005, compared to net cash outflows of $552.6 million a year earlier. Cash inflows from financing activities for the year ended December 31, 2005 were $593.6 million compared to a net inflow of $518.2 million in 2004.

In the event of short-term liquidity needs, each of the banks may purchase federal funds from correspondent banks. On December 31, 2005, our total availability of overnight fed funds borrowings was $363.0 million, of which we had $30.0 million outstanding. Our total availability of overnight fed funds borrowings is not a committed line of credit, and is dependent upon lender availability. In addition, we currently have available borrowing capacity of $51.75 million under the $65.0 million credit facility with LaSalle Bank. We utilize this credit facility from time to time for general business purposes. At December 31, 2005, we had $13.25 in borrowings outstanding under the revolving line.

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Impact of Inflation

Our consolidated financial statements and the related notes thereto included in this report have been prepared in accordance with generally accepted accounting principles and practices within the banking industry. Under these principles and practices, we are required to measure our financial position in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation.

Unlike many industrial companies, virtually all of our assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on our performance than the general level of inflation. Over short periods of time, interest rates may not necessarily move in the same direction or in the same magnitude as inflation.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

We have structured our assets and liabilities to mitigate the risk of either a rising or falling interest rate environment. We manage our gap position at the one-year horizon. Depending upon our assessment of economic factors such as the magnitude and direction of projected interest rates over the short- and long-term, we generally operate within guidelines set by our asset/liability management policy and attempt to maximize our returns within an acceptable degree of risk. Our policy states that we shall maintain a rate sensitive assets to rate sensitive liabilities position at the one-year horizon between 85% and 115%. Our position at December 31, 2005 was 96.0% and was within the guidelines of our policy. We have continued to maintain our gap position set by our policy guidelines and expect to continue to operate in this manner as long as the general rate structure of the economy and our business opportunities remain consistent. A flattening yield curve has compressed net interest margin, however over the long term, we expect our net interest margin to benefit during a rising rate environment and alternatively, if market rates decrease, we expect our net interest margin to decrease.

Interest rate changes do not affect all categories of assets and liabilities equally or simultaneously. There are other factors that are difficult to measure and predict that would influence the effect of interest rate fluctuations on our income statement. For example, a rapid drop in interest rates might cause our loans to repay at a more rapid pace and certain mortgage-related investments to prepay more quickly than projected. This could mitigate some of the benefits of falling rates that are expected

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when negatively gapped. Conversely, a rapid rise in rates could give us an opportunity to increase our margins and slow the rate of repayment on our mortgage-related loans, which would increase our returns.

The following tables illustrate the estimated interest rate sensitivity and periodic and cumulative gap positions calculated as of December 31, 2005 and 2004.

	December 31, 2005 Time to Maturity or Repricing
	0-90 days			91-365 days			1-5 years			Over 5 years			Total
	(dollars in thousands)
Interest-Earning Assets
Net loans	$	1,718,484		$	205,543		$	625,756		$	34,165		$	2,583,948
Investments		74,004			40,212			222,383			252,764			589,363
FHLB stock		142,396			—			—			—			142,396
Fed funds sold		12,770			—			—			—			12,770
Total interest-earning assets	$	1,947,654		$	245,755		$	848,139		$	286,929		$	3,328,477
Interest-Bearing Liabilities
Interest-bearing demand deposits	$	—		$	—		$	—		$	132,787		$	132,787
Savings deposits		14,596			—			—			—			14,596
Money market deposits		1,257,757			—			—			—			1,257,757
Time deposits		261,445			252,319			64,922			326			579,012
Brokered deposits		67,763			255,771			167,782			108,833			600,149
Funds borrowed		109,301			65,634			117,045			103,000			394,980
Total interest-bearing liabilities	$	1,710,862		$	573,724		$	349,749		$	344,946		$	2,979,281
Cumulative
Rate sensitive assets (RSA)	$	1,947,654		$	2,193,409		$	3,041,548		$	3,328,477
Rate sensitive liabilities (RSL)		1,710,862			2,284,586			2,634,335			2,979,281
GAP (GAP=RSA-RSL)		236,792			(91,177	)		407,213			349,196
RSA/RSL		113.84	%		96.01	%		115.46	%		111.72	%
RSA/Total assets		55.74	%		62.77	%		87.05	%		95.26	%
RSL/Total assets		48.96	%		65.38	%		75.39	%		85.26	%
GAP/Total assets		6.78	%		-2.61	%		11.65	%		9.99	%
GAP/Total RSA		7.11	%		-2.74	%		12.23	%		10.49	%

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	December 31, 2004 Time to Maturity or Repricing
	0-90 days			91-365 days			1-5 years			Over 5 years			Total
	(dollars in thousands)
Interest-Earning Assets
Net loans	$	1,153,297		$	131,784		$	334,648		$	21,849		$	1,641,578
Investments		41,421			51,244			251,006			235,826			579,497
FHLB stock		208,096			—			—			—			208,096
Fed funds sold		47			—			—			—			47
Total interest-earning assets	$	1,402,861		$	183,028		$	585,654		$	257,675		$	2,429,218
Interest-Bearing Liabilities
Interest-bearing demand deposits	$	—		$	—		$	—		$	106,846		$	106,846
Savings deposits		17,067			—			—			—			17,067
Money market deposits		837,096			—			—			—			837,096
Time deposits		118,313			149,987			54,606			405			323,311
Brokered deposits		130,749			113,931			120,466			58,001			423,147
Funds borrowed		234,723			103,366			96,430			—			434,519
Total interest-bearing liabilities	$	1,337,948		$	367,284		$	271,502		$	165,252		$	2,141,986
Cumulative
Rate sensitive assets (RSA)	$	1,402,861		$	1,585,889		$	2,171,543		$	2,429,218
Rate sensitive liabilities (RSL)		1,337,948			1,705,232			1,976,734			2,141,986
GAP (GAP=RSA-RSL)		64,913			(119,343	)		194,809			287,232
RSA/RSL		104.85	%		93.00	%		109.86	%		113.41	%
RSA/Total assets		55.41	%		62.64	%		85.78	%		95.95	%
RSL/Total assets		52.85	%		67.36	%		78.08	%		84.61	%
GAP/Total assets		2.56	%		-4.71	%		7.69	%		11.35	%
GAP/Total RSA		2.67	%		-4.91	%		8.02	%		11.82	%

The following table shows the impact of immediate 200 and 100 basis point changes in interest rates as of December 31, 2005 and December 31, 2004. The effects are determined through the use of a simulation model based on our earning asset and interest-bearing liability portfolios, assuming the size of these portfolios remains constant throughout the measurement period. The simulation assumes that assets and liabilities accrue interest on their current pricing basis. Assets and liabilities then reprice based on their terms and remain at that interest rate through the end of the measurement period. The model attempts to illustrate the potential change in net interest income if the foregoing occurred.

	December 31, 2005								December 31, 2004
	-200 Basis Points		-100 Basis Points		+100 Basis Points		+200 Basis Points		-200 Basis Points		-100 Basis Points		+100 Basis Points		+200 Basis Points
Percentage change in net interest income due to an immediate 100 and 200 basis point change in interest rates over a one-year time horizon	-13.9	%	-6.4	%	3.9	%	7.2	%	-3.7	%	-1.0	%	1.3	%	3.4	%

This table shows that if there had been an instantaneous parallel shift in the yield curve of +100 basis points on December 31, 2005, net interest income would increase by 3.9% over a one-year period, as compared to a net interest income increase of 1.3% if there had been an instantaneous parallel shift of +100 basis points at December 31, 2004. Due to current market interest rates, a +100 basis point shift is presented for December 31, 2005 as a more reasonable illustration of possible rate

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changes. The measurement of a +200 basis point instantaneous parallel shift in the yield curve at December 31, 2005 would result in an increase in net interest income of 7.2% over a one-year period as compared to 3.4% measured on the basis of the December 31, 2004 portfolio. At December 31, 2005, if there had been an instantaneous parallel shift in the yield curve of –100, we would have suffered a decline in net interest income of 6.4%, as compared to 1.0% decline measured on the basis of the December 31, 2004 portfolio. At December 31, 2005, if there had been an instantaneous parallel shift in the yield curve of –200, we would have suffered a decline in net interest income of 13.9%, as compared to a 3.7% decline measured on the basis of the December 31, 2004.

Changes in the effect on net interest income from a 100 and 200 basis point movement at December 31, 2005, compared to December 31, 2004 are due to the timing and nature of the repricing of rate sensitive assets to rate sensitive liabilities within the one year time frame.

The table presented above reflects that the Company is more interest rate sensitive at December 31, 2005 as compared to December 31, 2004. There are several factors contributing to the Company becoming more asset sensitive in, 2005, including the impact of the acquisition of The PrivateBank – Michigan, and the growth of floating rate loans, which represent a larger percentage of the Company’s balance sheet at December 31, 2005 versus December 31, 2004. Additionally, the Company’s borrowed funds have a longer duration when comparing December 31, 2005 to December 31, 2004, further contributing to asset sensitivity. The lengthening of borrowed funds duration resulted from the partial conversion of federal funds purchased at December 31, 2004 to longer term funding at December 31, 2005, the renewal of maturity funding, and the addition of $50.0 million of fixed rate trust preferred securities issued in June 2005 in connection with the acquisition of The PrivateBank – Michigan.

In December 2005, we called $20.0 million of 9.50% trust preferred securities and replaced them with $40.0 million of trust-preferred securities. These securities, which mature in December 2035, but are redeemable at par at the Company’s option after five years, were issued initially at a rate of 6.10% until December 2010 and thereafter at a rate equal to the three-month LIBOR rate plus 1.50%.

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

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

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See “Index to Consolidated Financial Statements” on page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal controls over financial reporting during the quarter ended December 31, 2005 that have materially affected or are reasonable likely to materially affect, the Company’s internal control over financial reporting.

Report on Management’s Assessment of Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2005 based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2005.

Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included elsewhere herein.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

Information regarding the Company’s directors is included in the Company’s Proxy Statement for its 2006 Annual Meeting of Stockholders (the “Proxy Statement”) under the heading “Election of Directors” and the information included therein is incorporated herein by reference. Information regarding the executive officers of the Company is included in “Part I., Item 1. Business.”

Information regarding the Company’s Audit Committee of its Board of Directors and its “audit committee financial expert” is included in the Company’s Proxy Statement under the heading “Board Committees—Audit Committee” and is incorporated herein by reference.

The Company has adopted a Code of Ethics as required by the NASDAQ listing standards and the rules of the SEC. The Code of Ethics applies to all of the Company’s directors, officers, including the Company’s Chief Executive Officer and Chief Financial Officer, and employees. The Code of Ethics is publicly available on our website at www.pvtb.com. If we make substantive amendments to the Code of Ethics or grant any waiver, including any implicit waiver, that applies to any director or executive officer of the Company, we will disclose the nature of such amendment or waiver on our website or in a report on Form 8-K in accordance with applicable NASDAQ and SEC rules.

ITEM 11. EXECUTIVE COMPENSATION

Information regarding compensation of executive officers and directors is included in the Company’s Proxy Statement under the headings “Board of Directors’ Compensation,” “Executive Compensation,” and “Employment Agreements” and the information included therein is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information regarding security ownership of certain beneficial owners and management is included in the Company’s Proxy Statement under the heading “Security Ownership of Certain Beneficial Owners, Directors and Executive Officers” and the information included therein is incorporated herein by reference.

Equity Plan Compensation Information

The following table sets forth information as of December 31, 2005 regarding shares of the Company’s common stock to be issued upon exercise and the weighted-average exercise price of all outstanding options, warrants and rights granted under the Company’s equity compensation plans as well as the number of shares available for issuance under such plans.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options warrants and rights (b)		Number of securities remaining for future issuance under equity compensation plans (excluding securities reflected in column (a))(c)
Equity compensation plans approved by security holders	1,540,350	$	17.65	601,380
Equity compensation plans not approved by security holders	—		—	—
Total	1,540,350	$	17.65	601,380

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information regarding certain relationships and related transactions is included in the Company’s Proxy Statement under the heading “Transactions with Related Persons” and the information included therein is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Information regarding the fees the Company paid to its independent accountants, Ernst & Young LLP, during 2005 is included in the Company’s Proxy Statement under the heading “Principal Accounting Firm Fees” and the information included therein is incorporated herein by reference.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) (1) Index to Financial Statements

The consolidated financial statements of the Company and its subsidiaries as required by Item 8 are filed as a part of this document. See “Index to Consolidated Financial Statements” on page F-1.

(a) (2) Financial Statement Schedules

All financial statement schedules called for by Item 8 and Item 15 of Form 10-K have been omitted because the information requested is either not applicable or has been included in the consolidated financial statements or notes thereto.

(a) (3) Exhibits

EXHIBIT NO.	DESCRIPTION OF EXHIBITS
2.1	Agreement and Plan of Merger by and among PrivateBancorp, Inc., BHB Acquisition Corp., and Bloomfield Hills Bancorp. Inc., dated as of April 14, 2005 (filed as an exhibit to the Company’s Form 8-K filed on April 15, 2005 (File No. 000-75887) and incorporated herein by reference).
3.1	Certificate of amendment of the Amended and Restated Certificate of Incorporation of PrivateBancorp, Inc., as amended (filed as an exhibit to the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2004 (File No. 000-75887) and incorporated herein by reference).
3.2	Amended and Restated Certificate of Incorporation of PrivateBancorp, Inc., as amended (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 000-75887) and incorporated herein by reference).
3.3	Amended and Restated By-laws of PrivateBancorp, Inc. (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 000-75887) and incorporated herein by reference).
4.1	Certain instruments defining the rights of the holders of long-term debt of the Company and certain of its subsidiaries, none of which authorize a total amount of indebtedness in excess of 10% of the total assets of the Company and its subsidiaries on a consolidated basis, have not been filed as exhibits. The Company hereby agrees to furnish a copy of any of these agreements to the SEC upon request.

75

10.1	Lease Agreement for banking facility located at Ten North Dearborn, Chicago, Illinois dated January 1, 1992, as amended, by and between General American Life Insurance Company as successor-in-interest to LaSalle National Trust, N.A., as successor trustee to LaSalle National Bank, not personally but as Trustee under Trust Agreement dated November 6, 1985 and known as Trust No. 110519 and The PrivateBank and Trust Company (filed as an exhibit to the Company’s Form S-1 Registration Statement (File No. 333-77147) and incorporated herein by reference).
10.2	Lease Agreement for banking facility located at 1603 West Sixteenth Street, Oak Brook, Illinois dated October 1996 by and between Columbia Lisle Limited Partnership and The PrivateBank and Trust Company (filed as an exhibit to the Company’s Form S-1 Registration Statement (File No. 333-77147) and incorporated herein by reference).
10.3	First Amendment to Lease dated May 31, 2001 by and between Columbia Lisle Limited Partnership and The PrivateBank and Trust Company (filed as an exhibit to the Company’s Form 10-Q for the quarter ended September 30, 2001 and incorporated herein by reference).
10.4	Lease Agreement for banking facility located at 517 Green Bay Road, Wilmette, Illinois dated as of May 2, 1994 by and between Gunnar H. Hedlund, Doris S. Hedlund, Robert P. Hedlund and Gerald A. Hedlund, LaSalle National Trust, N.A., as successor trustee to LaSalle National Bank, not personally but solely as Trustee under Trust Agreement dated December 28, 1972 and known as Trust No. 45197 and The PrivateBank and Trust Company (filed as an exhibit to the Company’s Form S-1 Registration Statement (File No. 333-77147) and incorporated herein by reference).
10.5	First Amendment to lease dated January 1, 2002 by and between Towne Square Realty, L.L.C. and The PrivateBank and Trust Company (filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 000-75887) and incorporated herein by reference).
10.6	Sublease Agreement for banking facility located at 1401 South Brentwood Blvd., St. Louis, Missouri, dated as of December 13, 1999, by and between Union Planters Bank, National Association, St. Louis Brentwood Associates, L.P. and PrivateBancorp, Inc. (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 (File No. 000-75887) and incorporated herein by reference).
10.7	Lease Agreement for banking facility located at 312 Crescent Place, Geneva, Illinois by and between Shodeen Management Company as agent for the beneficiaries of a land trust with Harris Bank St. Charles, pursuant to Trust Agreement dated March 4, 1994, and known as Trust No. 2321, and The PrivateBank and Trust Company dated January 9, 2001, (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (File No. 000-75887) and incorporated herein by reference).
10.8	Lease Agreement dated August 31, 1995 between 208 South LaSalle Associates, L.P. and Lodestar Financial Services, Inc. (filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 000-75887) and incorporated herein by reference).
10.9	First Amendment to lease dated February 15, 2000 between LaSalle-Adams, L.L.C. and Lodestar Financial Services, Inc. (filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 000-75887) and incorporated herein by reference).

76

10.10	Second Amendment to lease dated August 12, 2002 between LaSalle-Adams, L.L.C. and Lodestar Investment Counsel, Inc. (filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 000-75887) and incorporated herein by reference).
10.11	Lease agreement for banking facility located at 919 North Michigan Ave., Chicago, Illinois dated July 22, 2004, by and between Palmolive Building Retail LLC and The PrivateBank and Trust Company (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q on the quarter ended September 30, 2004 (File No. 000-75887) and incorporated herein by reference).
10.12	PrivateBancorp, Inc. Amended and Restated Stock Incentive Plan (filed as Appendix A to the Company’s Proxy Statement for its 2000 Annual Meeting of Stockholders (File No. 000-75887) and incorporated herein by reference).*
10.13	PrivateBancorp, Inc. Incentive Compensation Plan (filed as Appendix A to the Company’s Proxy Statement for its 2003 Annual Meeting of Stockholders (File No. 000-75887) and incorporated herein by reference).*
10.14	PrivateBancorp, Inc. Deferred Compensation Plan (filed as an exhibit to the Company’s Form S-8 Registration Statement (File No. 333-104807) and incorporated herein by reference).*
10.15	Employment Agreement by and between Ralph B. Mandell and PrivateBancorp, Inc. dated July 1, 2001 (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 (File No. 000-75887) and incorporated herein by reference).*
10.16	Outsourcing Agreement by and between The PrivateBank and Trust Company and Marshall & Ilsley Corporation, acting through its division M&I Data Services, dated as of April 9, 1999 (filed as an exhibit to the Company’s Form S-1 Registration Statement (File No. 333-77147) and incorporated herein by reference).
10.17	Employment Agreement by and between Richard C. Jensen, PrivateBancorp, Inc. and The PrivateBank – St. Louis dated as of October 1, 2003 (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 (File No. 000-75887) and incorporated herein by reference).*
10.18	Form of Indemnification Agreement by and between PrivateBancorp, Inc. and its directors and executive officers (filed as an exhibit to the Company’s Form S-1 Registration Statement (File No. 333-77147) and incorporated herein by reference).*
10.19	Loan Agreement dated as of February 11, 2000, between PrivateBancorp, Inc. and LaSalle Bank National Association (filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 000-75887) and incorporated herein by reference).
10.20	Amendment No. 1 to Loan Agreement dated as of February 11, 2002 between PrivateBancorp, Inc. and LaSalle Bank National Association (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 (File No. 000-75887) and incorporated herein by reference).
10.21	Amendment No. 2 to Loan Agreement dated as of April 11, 2002 between PrivateBancorp, Inc. and LaSalle Bank National Association (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 (File No. 000-75887) and incorporated herein by reference).

77

10.22	Amendment No. 3 to Loan Agreement dated as of December 24, 2002 between PrivateBancorp, Inc. and LaSalle Bank National Association (filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 000-75887) and incorporated herein by reference).
10.23	Amendment No. 4 to Loan Agreement dated as of December 1, 2003 between PrivateBancorp, Inc. and LaSalle Bank National Association (filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 000-75887) and incorporated herein by reference).
10.24	Amendment No. 5 to Loan Agreement dated as of December 1, 2004, between PrivateBancorp, Inc. and LaSalle Bank National Association. (filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 000-75887) and incorporated herein by reference).
10.25	Amended and Restated Loan and Subordinated Debenture Purchase Agreement dated as of September 29, 2005 by and between PrivateBancorp, Inc. and LaSalle Bank National Association (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 (File No. 000-75887) and incorporated herein by reference).
10.26	Employment Agreement by and among William Goldstein and Lodestar Investment Counsel LLC, dated as of December 30, 2002 (filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 000-75887) and incorporated herein by reference).*
10.27	Employment Agreement by and among Dennis Klaeser and PrivateBancorp, Inc. dated October 1, 2003 (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 (File No. 000-75887) and incorporated herein by reference).*
10.28	Employment Agreement by and among Hugh H. McLean, PrivateBancorp, Inc. and The PrivateBank and Trust Company dated October 1, 2003 (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 (File No. 000-75887) and incorporated herein by reference).*
10.29	Employment Agreement by and among Gary S. Collins, PrivateBancorp, Inc. and The PrivateBank and Trust Company dated as of October 1, 2003 (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 (File No. 000-75887) and incorporated herein by reference).*
10.30	Form of Incentive Stock Option Agreement pursuant to the PrivateBancorp, Inc. Incentive Compensation Plan (filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 000-75887) and incorporated herein by reference).
10.31	Form of Director Stock Option Agreement pursuant to the PrivateBancorp, Inc. Incentive Compensation Plan. (filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 000-75887) and incorporated herein by reference).
10.32	Form of Restricted Stock Award Agreement pursuant to the PrivateBancorp, Inc. Incentive Compensation Plan. (filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 000-75887) and incorporated herein by reference).

78

10.33	Employment Agreement by and among Wallace L. Head and PrivateBancorp, Inc. dated as of April 6, 2005.(1)*
10.34	Employment Agreement by and among James A. Ruckstaetter, PrivateBancorp, Inc. and The PrivateBank and Trust Company dated as of April 6, 2005.(1)*
10.35	Employment Agreement by and among Jay B. Williams and PrivateBancorp, Inc. dated as of April 6, 2005. (1)*
10.36	Employment Agreement by and among David Provost and PrivateBancorp, Inc. dated as of June 20, 2005 (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 000-75887) and incorporated herein by reference).*
12.1	Calculation of Ratio of Earnings to Fixed Charges.(1)
21.1	Subsidiaries of the Registrant.(1)
23.1	Consent of Ernst & Young LLP.(1)
24.1	Powers of Attorney (set forth on signature page).
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(1)
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(1)
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(1)

(1) Filed herewith.

* Indicates management contracts or compensatory plans or arrangements required to be filed as an exhibit.

79

INDEX TO CONSOLIDATED FINANCIAL STATEMENT S

PRIVATEBANCORP, INC.

	Page
Reports of Ernst & Young LLP, Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2005 and 2004	F-4
Consolidated Statements of Income for the years ended December 31, 2005, 2004, and 2003	F-5
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2005, 2004, and 2003	F-6
Consolidated Statements of Cash Flow for the years ended December 31, 2005, 2004, and 2003	F-7
Notes to Consolidated Financial Statements	F-8
Selected Quarterly Financial Data (unaudited)	F-44

F-1

Report of Independent Registered Public Accounting Firm

PrivateBancorp, Inc. Stockholders and Board of Directors

We have audited management’s assessment, included in the accompanying Report on Management’s Assessment of Internal Control Over Financial Reporting, that PrivateBancorp, Inc. maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). PrivateBancorp Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that PrivateBancorp, Inc. maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, PrivateBancorp, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of PrivateBancorp, Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005 of PrivateBancorp, Inc. and our report dated March 2, 2006 expressed an unqualified opinion thereon.

/s/    Ernst & Young LLP

Chicago, Illinois

March 2, 2006

F-2

Report of Independent Registered Public Accounting Firm

Stockholders and Board of Directors

PrivateBancorp, Inc.

We have audited the accompanying consolidated balance sheets of PrivateBancorp, Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of PrivateBancorp, Inc. and subsidiaries as of December 31, 2005 and 2004, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with the U.S. generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Oversight Board (United States), the effectiveness of PrivateBancorp, Inc.’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 2, 2006 expressed an unqualified opinion thereon.

/s/    Ernst & Young LLP

Chicago, Illinois

March 2, 2006

F-3

PRIVATEBANCORP, INC.

CONSOLIDATED BALANCE SHEETS

As of December 31, 2005 and 2004

(In thousands, except per share data)

	December 31,
	2005			2004
Assets
Cash and due from banks	$	47,736		$	49,534
Fed funds sold and other short-term investments		14,133			1,120
Total cash and cash equivalents		61,869			50,654
Loans held for sale		5,269			7,200
Available-for-sale securities, at fair value		695,151			763,985
Loans net of unearned discount		2,608,067			1,653,363
Allowance for loan losses		(29,388	)		(18,986	)
Net loans		2,578,679			1,634,377
Goodwill		63,176			20,547
Premises and equipment, net		11,754			6,486
Accrued interest receivable		16,642			10,549
Other assets		61,670			42,019
Total assets	$	3,494,210		$	2,535,817
Liabilities and Stockholders’ Equity
Demand deposits:
Non-interest-bearing	$	252,625		$	165,170
Interest-bearing		132,787			106,846
Savings and money market deposit accounts		1,272,353			854,163
Brokered deposits		586,605			423,147
Other time deposits		579,012			323,309
Total deposits		2,823,382			1,872,635
Funds borrowed		296,980			414,519
Long-term debt—trust preferred securities		98,000			20,000
Accrued interest payable		8,767			3,949
Other liabilities		31,551			30,641
Total liabilities	$	3,258,680		$	2,341,744
Stockholders’ Equity
Preferred stock, 1,000,000 shares authorized		—			—
Common stock, without par value, $1 stated value; 39,000,000 shares authorized; 20,983,934 and 20,400,103 shares issued and outstanding as of December 31, 2005 and December 31, 2004, respectively		20,984			20,400
Treasury stock, 64,229 shares repurchased as of December 31, 2005		(2,728	)		(2,207	)
Additional paid-in-capital		113,029			100,091
Retained earnings		104,710			73,789
Accumulated other comprehensive income		7,434			7,056
Deferred compensation		(7,899	)		(5,056	)
Total stockholders’ equity		235,530			194,073
Total liabilities and stockholders’ equity	$	3,494,210		$	2,535,817

Note: All previously reported share and per share data has been

restated to reflect the 2-for-1 stock split which occurred on May 31, 2004.

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

F-4

PRIVATEBANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

Years Ended December 31, 2005, 2004 and 2003

(In thousands, except per share data)

	Year Ended December 31,
	2005		2004			2003
Interest income
Loans, including fees	$	139,613	$	79,499		$	62,793
Federal funds sold and interest bearing deposits		500		40			68
Securities:
Taxable		26,470		23,501			17,463
Exempt from Federal income taxes		9,849		10,070			7,170
Total interest income		176,432		113,110			87,494
Interest expense
Deposits:
Interest-bearing demand		864		548			553
Savings and money market deposit accounts		30,562		12,462			6,425
Brokered deposits and other time deposits		31,223		17,960			16,934
Funds borrowed		13,367		6,659			4,502
Long-term debt—trust preferred securities		4,016		1,939			1,940
Total interest expense		80,032		39,568			30,354
Net interest income		96,400		73,542			57,140
Provision for loan losses		6,538		4,399			4,373
Net interest income after provision for loan losses		89,862		69,143			52,767
Non-interest income
Wealth management income		9,945		8,316			6,630
Mortgage banking income		3,886		2,856			3,474
Other income		4,276		3,029			2,323
Securities gains, net		499		968			1,759
Gains (losses) on interest rate swap		404		(870	)		(238	)
Total non-interest income		19,010		14,299			13,948
Non-interest expense
Salaries and employee benefits		33,553		26,027			20,856
Occupancy expense, net		7,517		5,671			5,564
Professional fees		5,756		5,054			4,672
Marketing		3,549		2,521			2,527
Data processing		2,832		2,009			1,528
Insurance		1,095		919			700
Other non-interest expense		5,626		3,473			4,297
Total non-interest expense		59,928		45,674			40,144
Minority interest expense		307		270			193
Income before income taxes		48,637		37,498			26,378
Income tax provision		15,217		10,503			7,309
Net income	$	33,420	$	26,995		$	19,069
Basic earnings per share	$	1.65	$	1.37		$	1.12
Diluted earnings per share	$	1.58	$	1.30		$	1.06

Note: All previously reported share and per share data has been

restated to reflect the 2-for-1 stock split which occurred on May 31, 2004.

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

F-5

PRIVATEBANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Years Ended December 31, 2003, 2004 and 2005

(In thousands, except per share data)

	Common Stock			Treasury Stock			Additional paid-in- capital		Retained Earnings			Accumulated Other Comprehensive Income			Deferred Compensation			Loans to Officers		Total Equity
Balance January 1, 2003	$	15,408			—		$	37,663	$	27,784		$	8,826		$	(589	)	$	—	$	89,092
Net income		—			—			—		19,069			—			—			—		19,069
Net increase in fair value of securities classified as available-for-sale, net of income taxes and reclassification adjustments		—			—			—		—			1,083			—			—		1,083
Total comprehensive income		—			—			—		19,069			1,083			—			—		20,152
Cash dividends declared ($0.08 per share)		—			—			—		(1,410	)		—			—			—		(1,410	)
Issuance of common stock		4,299			—			56,280		—			—			—			—		60,579
Awards granted, net of forfeitures		—			—			—		—			—			(2,582	)		—		(2,582	)
Amortization of deferred compensation		—			—			—		750			—			375			—		1,125
Balance December 31, 2003	$	19,707		$	—		$	93,943	$	46,193		$	9,909		$	(2,796	)	$	—	$	166,956
Balance January 1, 2004	$	19,707			—		$	93,943	$	46,193		$	9,909		$	(2,796	)	$	—	$	166,956
Net income		—			—			—		26,995			—			—			—		26,995
Net decrease in fair value of securities classified as available-for-sale, net of income taxes and reclassification adjustments		—			—			—		—			(2,853	)		—			—		(2,853	)
Total comprehensive income		—			—			—		26,995			(2,853	)		—			—		24,142
Cash dividends declared ($0.12 per share)		—			—			—		(2,425	)		—			—			—		(2,425	)
Issuance of common stock		724						5,310		—			—			—			—		6,034
Acquisition of Treasury Stock		(31	)		(2,207	)		838		—			—			—			—		(1,400	)
Awards granted, net of forfeitures		—			—			—		—			—			(3,335	)		—		(3,335	)
Amortization of deferred compensation		—			—			—		3,026			—			1,075			—		4,101
Balance December 31, 2004	$	20,400		$	(2,207	)	$	100,091	$	73,789		$	7,056		$	(5,056	)	$	—	$	194,073
Balance January 1, 2005	$	20,400			(2,207	)	$	100,091	$	73,789		$	7,056		$	(5,056	)	$	—	$	194,073
Net income		—			—			—		33,420			—			—			—		33,420
Net decrease in fair value of securities classified as available-for-sale, net of income taxes and reclassification adjustments		—			—			—		—			378			—			—		378
Total comprehensive income		—			—			—		33,420			378			—			—		33,798
Cash dividends declared ($0.18 per share)		—			—			—		(3,726	)		—			—			—		(3,726	)
Issuance of common stock		536						12,755		—			—			—			—		13,291
Acquisition of Treasury Stock		48			(521	)		183		—			—			—			—		(290	)
Awards granted, net of forfeitures		—			—			—		—			—			(4,788	)		—		(4,788	)
Amortization of deferred compensation		—			—			—		1,227			—			1,945			—		3,172
Balance December 31, 2005	$	20,984		$	(2,728	)	$	113,029	$	104,710		$	7,434		$	(7,899	)	$	—	$	235,530

Note: All previously reported share and per share data has been

restated to reflect the 2-for-1 stock split which occurred on May 31, 2004.

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

F-6

PRIVATEBANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2005, 2004 and 2003

(In thousands)

	Year Ended December 31,
	2005			2004			2003
Cash flows from operating activities
Net income	$	33,420		$	26,995		$	19,069
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,968			1,724			1,655
Amortization of deferred compensation, net of forfeitures		1,945			1,075			375
Provision for loan losses		6,538			4,399			4,373
Net gain on sale of securities		(499	)		(968	)		(1,759	)
(Gains) losses on interest rate swap		(404	)		870			238
Net (increase) decrease in loans held for sale		3,241			(2,780	)		9,901
(Decrease) increase in deferred loan fees		(555	)		266			303
(Increase) decrease in accrued interest receivable		(4,172	)		(2,681	)		1,559
(Decrease) increase in accrued interest payable		4,814			(1,104	)		67
(Increase) in other assets		(10,455	)		(2,008	)		(823	)
Increase in other liabilities		197			9,147			12,073
Total adjustments		4,618			7,940			27,962
Net cash provided by operating activities		38,038			34,935			47,031
Cash flows from investing activities
Proceeds from maturities, paydowns and sales of securities		142,248			276,734			107,360
Purchases of available-for-sale securities		(144,384	)		(375,683	)		(286,440	)
Net loan principal advanced		(639,638	)		(429,296	)		(259,987	)
Acquisition of Corley Financial		—			(475	)		—
Acquisition of Michigan net of cash and cash equivalents acquired		(48,483	)		—			—
Redemption of FHLB Chicago Stock		77,602			—			—
Investment in bank owned life insurance		—			(22,000	)		—
Premises and equipment expenditures		(7,733	)		(1,905	)		(948	)
Net cash used in investing activities		(620,388	)		(552,625	)		(440,015	)
Cash flows from financing activities
Net increase in total deposits		676,850			325,287			342,100
Proceeds from exercise of stock options		1,169			2,633			799
Proceeds from common stock offering		—			—			57,199
Proceeds from Private Placement		7,565			—			—
Acquisition of treasury stock		(521	)		(2,207	)		—
Dividends paid		(3,727	)		(2,424	)		(1,410	)
Issuance of debt related to Acquisition of The PrivateBank – Michigan		57,000			—			—
Issuance of debt		346,718			331,518			193,563
Repayment of debt		(491,489	)		(136,563	)		(183,954	)
Net cash provided by financing activities		593,565			518,244			408,297
Net increase in cash and cash equivalents		11,215			554			15,313
Cash and cash equivalents at beginning of year		50,654			50,100			34,787
Cash and cash equivalents at end of year	$	61,869		$	50,654		$	50,100
Cash paid during year for:
Interest	$	75,214		$	40,672		$	30,287
Income taxes		21,333			3,800			1,920

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

F-7

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—BASIS OF PRESENTATION

a. Nature of Operations

PrivateBancorp, Inc. (the “Company”) was incorporated under the laws of the State of Delaware on November 7, 1989. The Company is a bank holding company with three bank subsidiaries, The PrivateBank and Trust Company (The PrivateBank – Chicago), which was formed as a de novo bank, on February 6, 1991, The PrivateBank (The PrivateBank – St. Louis), which was formed as a de novo federal savings bank on June 26, 2000, The PrivateBank (The PrivateBank – Michigan) which was acquired on June 20, 2005, and a mortgage banking subsidiary, The PrivateBank Mortgage Company. On February 11, 2000, the Company completed its acquisition of Johnson Bank Illinois. At closing, Johnson Bank Illinois was merged into The PrivateBank – Chicago. The two acquired offices, located on Chicago’s North Shore in Lake Forest and Winnetka, became additional offices of The PrivateBank – Chicago. On December 30, 2002, The PrivateBank – Chicago acquired a controlling interest in Lodestar, a Chicago-based investment adviser with $689.2 million of assets under management at December 31, 2005. Lodestar manages equity, balanced and fixed income accounts primarily for high net-worth individuals, retirement plans and charitable organizations with investable assets in excess of $1.0 million, and shares a similar focus on highly personalized client service. On June 15, 2004, the Company established The PrivateBank Mortgage Company as a result of the acquisition of Corley Financial Services. On January 27, 2005, the Company opened a new Chicago banking office in Chicago’s Gold Coast neighborhood. In March of 2005, the Company opened a new banking office in a temporary space in downtown Milwaukee, Wisconsin. The PrivateBank – Wisconsin opened its permanent space at 743 N. Water Street in downtown Milwaukee in September 2005. On June 20, 2005, the Company completed its acquisition of Bloomfield Hills Bancorp, Inc., including its bank subsidiary, The Private Bank, now known as The PrivateBank – Michigan. The PrivateBank – Michigan has three banking offices located in the suburban Detroit communities of Bloomfield Hills, Grosse Pointe, and Rochester, and operates a trust and wealth management unit and a mortgage banking subsidiary. The PrivateBank – St. Louis will be opening an additional office in suburban Chesterfield, Missouri, scheduled for the first quarter 2006. Additionally, our Oak Brook, Illinois office will be relocating into an expanded facility during the second quarter 2006.

The Company provides private banking and wealth management services primarily to affluent individuals, professionals, entrepreneurs and their business interests. The banks focus on the personal financial services needs of their clients as well as the banking needs of their clients’ various business and investment interests.

b. Consolidation

The consolidated financial statements of the Company and subsidiaries include the accounts of the Company and its wholly owned subsidiaries, The PrivateBank – Chicago, which includes Lodestar, The PrivateBank – St. Louis, which includes The PrivateBank – Wisconsin, The PrivateBank – Michigan and The PrivateBank Mortgage Company. Significant intercompany accounts and transactions have been eliminated in the preparation of these statements.

c. Statement of Cash Flows

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, federal funds sold and other short-term investments. Generally, federal funds are sold for one-day periods, but not longer than 30 days. Short-term investments mature in less than 30 days.

F-8

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

d. Securities

Available-for-sale securities are intended to be invested for an indefinite period but may be sold in response to events we expect to occur in the foreseeable future. Securities available-for-sale are reported at fair value, with unrealized gains and losses, net of taxes, reported as adjustments to other comprehensive income in a separate component of stockholders’ equity. Any decline in fair value of securities that is deemed other than temporary is charged against current period earnings. At December 31, 2005 and 2004, all securities were classified as available for sale.

Premium amortization and discount accretion on securities are included in interest income on securities using the effective interest rate method. Premium amortizations totaled $6.0 million, $8.0 million, and $9.2 million for the years ended December 31, 2005, 2004 and 2003, respectively. Discount accretion totaled $1.7 million, $1.7 million and $1.1 million at December 31, 2005, 2004 and 2003, respectively. The specific identification method is used to record gains and losses on security transactions.

e. Loans

Loans are generally reported at the principal amount outstanding, net of unearned income. Loan origination and commitment fees, offset by certain direct loan origination costs, are deferred and the net amount amortized as an adjustment of the related loan’s yield. The Company is generally amortizing these amounts over the contractual life of the related loans.

Loans are placed on nonaccrual status when, in the opinion of management, there are doubts as to the collectability of interest or principal, or when principal or interest is past due 90 days or more and the loan is not well secured and in the process of collection. All loans classified as nonaccrual are considered to be impaired. Any shortfall in the estimated value of an impaired loan compared with the recorded investment of the loan is identified as an allocated portion of the allowance for loan losses and is one of the factors considered by management in its overall assessment of the adequacy of the allowance for loan losses. Interest previously accrued in the current year but not collected is reversed and charged against interest income at the time the related loan is placed on nonaccrual status. Unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest payments received on impaired loans are recorded as reductions of principal if principal payment is doubtful.

f. Allowance for Loan Losses

The allowance for loan losses is determined by management based on factors such as past loan loss experience, known and inherent risks in the loan portfolio, the estimated value of any underlying collateral, prevailing economic conditions and other factors and estimates which are subject to change over time. Management adjusts the allowance for loan losses by recording a provision for loan losses in an amount sufficient to maintain the allowance at a level commensurate with management’s assessment of the risks in the loan portfolio. Loans are charged off when deemed to be uncollectible by management.

g. Loans Held for Sale

Loans originated and intended for sale in the secondary market are classified as held for sale and reported at the lower of aggregate cost or market value, with unrealized losses, if any, recorded by a

F-9

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

charge to income. Fair value is determined based on quoted market rates or, in the case where a firm commitment has been made to sell the loan, the firm committed price. Gains and losses on the disposition of loans held for sale are determined on the specific identification method. Mortgage loans sold in the secondary market are sold without retaining servicing rights.

h. Brokered Deposits

The Company utilizes brokered deposits as liquidity and asset-liability management tools in the normal course of business. Certain brokered deposits issued by the Company contain a purchased option, retained by the Company, to call (redeem) the brokered deposit prior to maturity at a specified date. Upon issuance of brokered deposits, the Company recognizes a liability that reflects the fees paid to brokers for raising the funds in the retail market. The deferred broker commissions are amortized to interest expense as an adjustment to the brokered deposit yield over the contractual maturity of the brokered deposit. In the event the Company notifies the certificate holders of its intent to exercise the call option on the callable brokered deposit, the remaining unamortized broker commissions are amortized to the call date.

i. Derivative Financial Instruments

All derivative instruments are recognized as either assets or liabilities in the balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as a hedge and further, on the type of hedge. The Company is also required to recognize certain contracts and commitments, including certain commitments to fund mortgage loans held-for-sale, as derivatives when the characteristics of those contracts and commitments meet the definition of a derivative. These interest rate locks and forward commitments are valued at zero at date of inception and subsequently adjusted for changes in market value resulting from changes in market interest rates. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument based on the exposure being hedged as a fair value or cash flow hedge. Fair value hedges are accounted for by recording the fair value of the derivative instrument and the fair value related to the risk being hedged of the hedged asset or liability on the balance sheet with corresponding offsets recorded in the statement of income.

In November 2001, the Company entered into its first interest rate swap, which is recorded on the balance sheet at fair value. The interest rate swap was entered into for asset liability management purposes and not for trading purposes. The interest rate swap has been designated as a fair value hedge of a fixed-rate $25.0 million advance with the FHLB (Chicago). Changes in the fair value of the interest rate swap are reported through income. Changes in the fair value of the borrowings from the date of designation are recorded through income. Documentation and evaluation of hedge effectiveness was performed at inception and on a recurring periodic basis.

The Company entered into a $25.0 million swap during the third quarter of 2002, swapping the 10-year rate for three-month LIBOR to act as an economic hedge of a portion of the Company’s available-for-sale municipal securities portfolio. During 2005, the fair market value adjustment on this swap resulted in a gain of $404,000 with a corresponding derivative asset of the same amount. This swap does not qualify for hedge accounting treatment; therefore, the mark-to-market adjustment flows through earnings.

F-10

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

j. Bank Premises and Equipment

Bank premises and equipment are stated at cost less accumulated depreciation and amortization. For financial reporting purposes, depreciation is computed using the straight-line method over the estimated useful lives of the assets. At December 31, 2005, the range of estimated useful lives of depreciable assets was between 3 and 39.5 years.

k. Income Taxes

The Company and its subsidiaries file a consolidated Federal income tax return. The subsidiaries provide for income taxes on a separate return basis and remit to the Holding Company amounts determined to be currently payable.

Income tax expense is recorded based on the liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using currently enacted tax rates in effect for the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

l. Earnings per Share

Basic earnings per common share are determined by dividing earnings by the weighted average number of common shares outstanding. Dilutive stock options are included as share equivalents using the treasury stock method in determining diluted earnings per share. All previously reported share and per share data in these financial statements has been restated to reflect the 2-for-1 stock split that occurred on May 31, 2004.

m. Comprehensive Income

Components of comprehensive income are reported in the Consolidated Statement of Changes in Stockholders’ Equity.

n. Use of Estimates in the Preparation of Financial Statements

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

o. Intangible Assets

During 2001, The PrivateBank – Chicago recorded approximately $12.2 million in goodwill in connection with the Johnson Bank Illinois acquisition. During 2002, The PrivateBank – Chicago recorded $8.4 million of goodwill and $2.5 million in customer intangibles in connection with the Lodestar acquisition. The customer intangibles reflect the estimated fair value of the Lodestar client relationships over a 15-year time horizon. On June 15, 2004, The PrivateBank Mortgage Company

F-11

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

recorded $1.3 million in goodwill in connection with the acquisition of Corley Financial Services. During the second quarter 2005, The PrivateBank – Michigan recorded $42.6 million in goodwill, $3.2 million of client deposit intangibles and $500,000 of wealth management intangibles in connection with the Company’s acquisition of The PrivateBank – Michigan. The amortization expense related to The PrivateBank – Michigan intangibles will be amortized over 10 years using an accelerated method of amortization. Effective January 1, 2002, the Company adopted FAS No. 142, which requires that goodwill and intangible assets that have indefinite lives no longer be amortized but be reviewed for impairment annually, or more frequently if certain indicators arise. Prior to the adoption of FAS No. 142, goodwill was being amortized using the straight-line method over a period of 15 years. There was no goodwill or intangible impairment at December 31, 2005. Total customer intangibles at December 31, 2005 were $5.6 million. Amortization expense related to the Lodestar customer intangible assets of $2.0 million is currently recognized at approximately $169,500 per year until 2017. The amortization expense related to The PrivateBank – Michigan intangibles of $3.5 million for the years 2005 through 2010 will be approximately $241,000, $441,000, $423,000, $406,000 and $389,000, respectively.

p. Reclassifications

Certain reclassifications have been made to prior periods’ consolidated financial statements to place them on a basis comparable with the current period’s consolidated financial statements.

q. Stock-Based Compensation

The Company accounts for its stock options in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB No. 25). Under APB No. 25, because the exercise price of Company stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. Compensation expense for restricted shares granted is ratably recognized over the period of service, usually the vesting period, based on the fair value of the stock on the date of grant.

Pursuant to SFAS No. 148, Accounting for Stock-Based Compensation (SFAS No. 148), pro forma net income and pro forma earnings per share are presented in the following table as if the fair value method of accounting for stock-based compensation plans had been utilized.

	2005		2004		2003
	(dollars in thousands)
Net income—
As reported	$	33,420	$	26,995	$	19,069
Pro forma		30,914		25,333		17,747
Basic earnings per share—
As reported	$	1.65	$	1.37	$	1.12
Pro forma		1.53		1.29		1.05
Diluted earnings per share—
As reported	$	1.58	$	1.30	$	1.06
Pro forma		1.46		1.22		0.99

During the second quarter of 2004, the Company adopted the binomial method of valuing options for options granted in the second quarter and going forward. Previously the Black-Scholes method was used. The binomial method takes into account more assumptions about a grant’s features and better estimates employees’ likely behavior regarding investments.

F-12

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In determining the fair value of each option grant for purposes of the above pro forma disclosures, the Company used an option pricing model with the following assumptions for grants in 2005, 2004 and 2003, respectively: dividend yield of 0.57%, 0.37%, and 0.40% for 2005, 2004 and 2003, respectively; risk-free interest rate of 3.81% to 4.10% for 2005, 3.74% to 4.27% for 2004, and 4.55% for 2003; and expected lives of 7 years for options granted in 2005 and 2004 and 10 years for 2003. The valuation utilizes an expected volatility of approximately 30%, 30%, and 46% for 2005, 2004 and 2003, respectively. The expected volatility of 30% for 2005 and 2004 is developed from a computation of strategic peer, or guideline companies, composite volatility over a five year basis.

During 2005, the Company granted 336,700 stock options at a weighted average strike price of $32.03 compared to 307,650 stock options granted in 2004 with a strike price of $27.39. The pro forma effect on net income as presented in the table was larger in 2005 as compared to 2004 due to an increased number of shares granted, the timing of the grants and the full application of the principles of SFAS No. 123 (Revised), Share-Based Payment (SFAS No. 123(R)) in relation to this disclosure. The Company will adopt SFAS No. 123(R) on January 1, 2006.

r. Advertising Costs

All advertising costs incurred by the Company are expensed in the period in which they are incurred.

s. New Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123(R). This statement requires use of the fair value method of accounting for share-based payment transactions with employees. With the adoption of SFAS No. 123R, the Company will be required to account for stock options under the fair value method of accounting and to estimate expected forfeitures of stock grants instead of its current practice of accounting for forfeitures as they occur. In addition, the Company will begin to classify the excess tax benefits, if any, related to employee option exercises as financing activities rather than operating activities in its consolidated statement of cash flows. The Company cannot estimate the impact this will have on the consolidated statement of cash flows because these amounts depend on the number of option exercises and the fair value of the Company’s stock at the time of exercise. These amounts can vary greatly period to period and are at the discretion of our option holders. The Company will adopt SFAS No. 123(R) on January 1, 2006. The Company anticipates the impact of the adoption will be an approximate expense in 2006 of $0.10 per share after-tax to its consolidated financial statements.

t. Fair Value Accretion

The Johnson Bank Illinois acquisition in 2000 and the Bloomfield Hills Bancorp (“BHB”) acquisition on June 20, 2005 were accounted for as purchases. All assets and liabilities were adjusted to fair value as of the effective date of the merger creating goodwill, which was pushed-down to The PrivateBank – Chicago in the Johnson Bank acquisition and pushed down to The PrivateBank – Michigan in the BHB acquisition. In connection with both acquisitions, the Company recorded premiums and discounts to mark-to-market the fair value of loans, deposits and FHLB advances, as applicable. These premiums and discounts are being recognized in the statements of income as yield adjustments to interest income on loans, interest expense on deposits and interest expense on FHLB advances and will end in February of 2007 for Johnson Bank and in June of 2012 for BHB.

F-13

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

u. Stock Repurchases

Acquisitions of the Company’s common stock are recorded using the cost method, which results in debiting the Treasury stock account for the reacquisition cost and in reporting this account as a deduction from the total paid-in-capital and retained earnings on the consolidated balance sheet.

NOTE 2—OPERATING SEGMENTS

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

We apply the accrual basis of accounting for each reportable segment and for transactions between reportable segments. During 2005, there were no changes in the measurement methods used to determine reported segment profit or loss as compared to 2004 and 2003. There are no asymmetrical allocations to segments requiring disclosure.

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

The PrivateBank – Chicago

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

Individual banking services include interest-bearing checking, money market accounts, certificates of deposit, ATM/debit cards and investment brokerage accounts. Additionally, The PrivateBank – Chicago offers secured and unsecured personal loans and lines of credit. Through The PrivateBank – Chicago’s affiliations with Mesirow Financial, Inc. and Sterling Investment Services, Inc., clients have access to insurance products and securities brokerage services. The PrivateBank – Chicago also offers domestic and international wire transfers and foreign currency exchange.

The PrivateBank Mortgage Company results are included in The PrivateBank – Chicago since June 15, 2004, the date of the Company’s acquisition of Corley Financial.

F-14

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The PrivateBank – Chicago’s balance sheet reflects goodwill of $19.2 million, which remained unchanged from December 31, 2004, and intangibles of $2.0 million at December 31, 2005, compared to $2.2 million at December 31, 2004.

	The PrivateBank – Chicago
	December 31,
	2005		2004		2003
	(in millions)
Total assets	$	2,626.1	$	2,267.2	$	1,786.1
Total deposits		2,164.3		1,689.7		1,422.0
Total borrowings		209.5		372.9		189.6
Total gross loans		1,877.9		1,451.8		1,073.5
Total capital		220.4		173.3		146.0
Net interest income		79.4		63.2		49.1
Provision for loan losses		3.7		3.9		3.7
Non-interest income		7.8		6.3		7.9
Non-interest expense		32.4		28.5		25.0
Year-to-date net income		34.9		26.4		20.5

The PrivateBank – St. Louis and The PrivateBank – Wisconsin

The PrivateBank – St. Louis, a federal savings bank, was established as a new bank subsidiary of the Company on June 23, 2000, and is headquartered in St. Louis, Missouri. The PrivateBank – Wisconsin was established under the charter of The PrivateBank – St. Louis and is presently an office of The PrivateBank – St. Louis. This new office opened in permanent space in downtown Milwaukee, Wisconsin in the third quarter 2005. Both locations offer a full range of real estate lending products including fixed and floating rate permanent and mini-permanent mortgages and construction loans. Personal loans include installment loans and lines of credit, home equity loans and a wide variety of home mortgage loans. Commercial lending products provided by The PrivateBank – St. Louis and The PrivateBank – Wisconsin include lines of credit for working capital, term loans for equipment and letters of credit to support the commitments made by its clients. Non-credit products include lock-box, cash concentration accounts, merchant credit card processing, electronic funds transfer, and other cash management products. Individual banking services include interest-bearing checking, money market deposit accounts, certificates of deposit, ATM/debit cards and investment brokerage accounts. The PrivateBank – St. Louis and The PrivateBank – Wisconsin also offer domestic and international wire transfers and foreign currency exchange. Financial results of The PrivateBank – St. Louis include the results of The PrivateBank – Wisconsin.

	The PrivateBank – St. Louis and The PrivateBank – Wisconsin
	December 31,
	2005		2004		2003
	(in millions)
Total assets	$	401.5	$	268.2	$	195.0
Total deposits		336.0		200.0		147.4
Total borrowings		27.2		45.9		30.0
Total gross loans		333.4		206.1		151.5
Total capital		35.7		20.3		15.9
Net interest income		11.4		7.7		5.4
Provision for loan losses		2.1		0.5		0.7
Non-interest income		2.2		2.4		3.5
Non-interest expense		8.2		5.6		5.5
Year-to-date net income		2.3		2.8		1.8

F-15

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The PrivateBank – Michigan

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

Individual banking services include interest-bearing checking, money market accounts, certificates of deposit, ATM/debit cards and investment brokerage accounts. Through The PrivateBank – Michigan’s affiliations with Linsco Private Ledger, clients have access to insurance products and securities brokerage services. The PrivateBank – Michigan also offers domestic and international wire transfers and foreign currency exchange. The PrivateBank – Michigan balance sheet reflects goodwill of $42.6 million and intangibles of $3.5 million at December 31, 2005, as a result of its acquisition by the Company on June 20, 2005.

	The PrivateBank – Michigan
	December 31, 2005
	(in millions)
Total assets	$	462.9
Total deposits		328.9
Total borrowings		51.0
Total gross loans		397.8
Total capital		81.4
Net interest income		8.2
Provision for loan losses		0.7
Non-interest income		0.7
Non-interest expense		4.6
Year-to-date net income		2.3

F-16

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Wealth Management

Wealth Management includes investment management, personal trust and estate services, custodial services, retirement accounts and brokerage and investment services. Investment management professionals work with wealth management clients to define objectives, goals and strategies of the clients’ investment portfolios. Wealth Management personnel assist some trust clients with the selection of an outside portfolio manager to direct account investments. Trust and estate account administrators work with clients and their attorneys to establish estate plans. Consistent with the Company’s philosophy, Wealth Management emphasizes a high level of personal service, including prompt collection and reinvestment of interest and dividend income, weekly valuation, tracking of tax information, customized reporting and ease of security settlement. The minority interest expense related to Lodestar is included in non-interest expense for this segment.

	Wealth Management
	December 31,
	2005		2004		2003
	(in millions)
Wealth Management assets under management	$	2,436.8	$	1,727.5	$	1,494.9
Wealth Management fee revenue		10.0		8.3		6.6
Net interest income		0.7		1.6		1.2
Non-interest income		10.0		8.3		6.6
Non-interest expense		9.4		7.5		6.7
Year-to-date net income		1.0		1.4		0.6

Holding Company Activities

Holding Company Activities consist of parent company only matters. The Holding Company’s most significant assets are net investments in its three banking subsidiaries, The PrivateBank – Chicago, The PrivateBank – St. Louis, and The PrivateBank – Michigan. On June 15, 2004, the Company formed a mortgage company subsidiary, The PrivateBank Mortgage Company, as a result of its acquisition of Corley Financial Corporation. On June 20, 2005, the Company acquired The PrivateBank – Michigan as part of its acquisition of BHB. Prior to the close of the acquisition, the Company completed a private placement of $7.6 million of its common stock to investors in that bank’s market area, including certain members of the bank’s management team.

During the first quarter 2001, in connection with the issuance of $20.0 million of 9.50% trust preferred securities, the Holding Company issued $20.0 million of subordinated debentures which are accounted for as long-term debt and also qualify as Tier 1 and Tier 2 capital (see note 8). The Tier 1 qualifying amount is limited to 25% of Tier 1 capital under Federal Reserve regulations. The excess amount qualifies as Tier 2 capital. On December 31, 2005, the Company redeemed the $20.0 million 9.50% trust preferred securities and related junior subordinated debentures. As a result of this redemption, the Company incurred a pre-tax charge of approximately $980,000.

On June 20, 2005, the Company issued $50.0 million in fixed/floating rate trust preferred securities through PrivateBancorp Statutory Trust II, a newly created business trust subsidiary, and related junior subordinated debentures. The trust preferred securities will pay interest quarterly at a fixed rate of 6.00% until September 2010 and then subsequently pay interest quarterly at a floating rate equal to three-month LIBOR plus 1.71%. The trust preferred securities mature in September 2035 and are callable at par at the option of the Company in whole or in part after year five, on any interest payment date. In connection with the acquisition of The PrivateBank – Michigan, the Company acquired $8.0 million in floating rate trust preferred securities. The trust preferred securities and related junior

F-17

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

subordinated debentures pay interest quarterly at a rate of three-month LIBOR plus 2.65%. The trust preferred securities have a maturity date of June 17, 2034 and are callable beginning June 17, 2009.

On December 5, 2005, the Company issued $40.0 million of trust preferred securities and related junior subordinated debentures. These securities mature in December 2035 but are redeemable at par at our option after five years. The trust preferred pay quarterly distributions at a rate of 6.10% for five years and thereafter at a rate equal to the three-month LIBOR rate plus 1.50%. A portion of the proceeds was used to fund the redemption, on December 31, 2005 of $20.0 million of previously outstanding 9.50% trust preferred securities that were originally issued in 2001. By refunding this $20.0 million of trust preferred securities at a rate of 6.1% from 9.5%, we will reduce our annual carrying cost by $700,000.

On September 29, 2005, the Company entered into a $65.0 million credit facility with LaSalle Bank N.A. (“LaSalle”). The new credit facility replaces an existing $40.0 million revolving credit facility that was originally entered into in February 2000 with LaSalle.

The new $65.0 million credit facility is comprised of a $40.0 million senior debt facility and $25.0 million of subordinated debt. The senior debt facility is comprised of a $250,000 term loan with a maturity of December 31, 2016, and a revolving loan with a maturity of December 1, 2005 which was extended to December 31, 2006 during the fourth quarter 2005. The subordinated debt matures on December 31, 2016. The interest rate on the senior debt facility resets quarterly, and is based on, at the Company’s option, either the lender’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%. LaSalle has made $25.0 million available on the subordinated debt facility. 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 December 31, 2005, the Company had $8.25 million outstanding on the senior debt facility and $5.0 million of subordinated debt outstanding. The credit facility is used for general corporate and other working capital purposes. The Company expects to further draw down on the facilities over the next year to support continued balance sheet growth and to maintain its well-capitalized position.

Holding Company Activities are reflected primarily by interest expense on borrowings and operating expenses. Recurring holding company operating expenses consist of compensation (amortization of restricted stock awards, other salary expense) and miscellaneous professional fees. In May of 2002, PrivateBancorp, Inc. acquired an office building located in St. Charles, Illinois, for $1.8 million from Towne Square Realty. The St. Charles location of The PrivateBank -Chicago continues to lease space in the building and pays rent to the Holding Company at the same terms and conditions as was paid to the prior owner.

	Holding Company Activities
	December 31,
	2005			2004			2003
	(in millions)
Total assets	$	345.4		$	213.3		$	186.8
Total capital		235.5			194.1			167.0
Total borrowings		13.3			—			—
Long term debt—trust preferred securities		98.0			20.0			20.0
Non-interest income		0.2			0.2			0.2
Non-interest expense		6.7			4.3			3.2
Net interest expense		4.1			1.6			2.5
Net loss		(7.0	)		(3.7	)		(3.8	)

F-18

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

2005	The PrivateBank – Chicago		The PrivateBank – St. Louis & Wisconsin		The PrivateBank – Michigan(2)		Wealth Management		Holding Company Activities			Intersegment Eliminations(3)			Consolidated
Total assets	$	2,626.1	$	401.5	$	462.9	$	—	$	345.4		$	(341.7	)	$	3,494.2
Total deposits		2,164.3		336.0		328.9		—		—			(5.8	)		2,823.4
Total borrowings(1)		209.5		27.2		51.0		—		111.3			4..0			395.0
Total loans		1,877.9		333.4		397.8		—		—			(1.0	)		2,608.1
Total capital		220.4		35.7		81.4		—		235.5			(337.5	)		235.5
Net interest income (expense)		79.4		11.4		8.2		0.7		(4.1	)		0.8			96.4
Non-interest income		7.8		2.2		0.7		10.0		0.2			(1.9	)		19.0
Non-interest expense		32.4		8.2		4.6		9.4		6.7			(1.4	)		59.9
Net income (loss)		34.9		2.3		2.3		1.0		(7.0	)		(0.1	)		33.4
Wealth Management assets under management		—		—		506.5		2,039.5		—			(109.2	)		2,436.8
Wealth Management fee revenue		—		—				10.0		—			—			10.0

2004	The PrivateBank – Chicago		The PrivateBank – St. Louis		Wealth Management		Holding Company Activities			Intersegment Eliminations(3)			Consolidated
Total assets	$	2,267.2	$	268.2	$	—	$	213.3		$	(212.9	)	$	2,535.8
Total deposits		1,689.7		200.0		—		—			(17.1	)		1,872.6
Total borrowings(1)		372.9		45.9		—		20.0			(4.3	)		434.5
Total loans		1,451.8		206.1		—		—			(4.5	)		1,653.4
Total capital		173.3		20.3		—		194.1			(193.6	)		194.1
Net interest income (expense)		63.2		7.7		1.6		(1.6	)		2.6			73.5
Non-interest income		6.3		2.4		8.3		0.2			(2.9	)		14.3
Non-interest expense		28.5		5.6		7.5		4.3			(0.2	)		45.7
Net income (loss)		26.4		2.8		1.4		(3.7	)		0.1			27.0
Wealth Management assets under management		—		—		1,805.3		—			(77.8	)		1,727.5
Wealth Management fee revenue		—		—		8.3		—			—			8.3
2003	The PrivateBank – Chicago		The PrivateBank – St. Louis		Wealth Management		Holding Company Activities			Intersegment Eliminations(3)			Consolidated
Total assets	$	1,786.7	$	195.0	$	—	$	186.8		$	(183.6	)	$	1,984.9
Total deposits		1,422.0		147.4		—		—			(22.0	)		1,547.4
Total borrowings(1)		189.6		30.0		—		20.0			—			239.6
Total loans		1,073.5		151.5		—		—			(0.3	)		1,224.7
Total capital		146.0		15.9		—		167.0			(161.9	)		167.0
Net interest income (expense)		49.1		5.4		1.2		(2.5	)		3.9			57.1
Non-interest income		7.9		3.5		6.6		0.2			(4.3	)		13.9
Non-interest expense		25.0		5.5		6.7		3.2			(0.3	)		40.1
Net income (loss)		20.5		1.8		0.6		(3.8	)		0.0			19.1
Wealth Management assets under management		—		—		1,548.5		—			(53.6	)		1,494.9
Wealth Management fee revenue		—		—		6.6		—			—			6.6

(1) Includes long-term debt-trust preferred securities for the Holding Company segment.

(2) Includes The PrivateBank – Michigan results since June 20, 2005, the acquisition date.

F-19

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

NOTE 3—EARNINGS PER SHARE

The following table shows the computation of basic and diluted earnings per share (in thousands, except per share data):

	Income (Numerator)		Weighted Average Shares (Denominator)	Per Share Amount
Year Ended December 31, 2005
Basic Earnings Per Share
Income available to common stockholders	$	33,420	20,202	$	1.65
Effect of Dilutive Stock Options		—	936
Diluted Earnings Per Share—
Income available to common stockholders	$	33,420	21,138	$	1.58
Year Ended December 31, 2004
Basic Earnings Per Share
Income available to common stockholders	$	26,995	19,726	$	1.37
Effect of Dilutive Stock Options		—	964
Diluted Earnings Per Share—
Income available to common stockholders	$	26,995	20,690	$	1.30
Year Ended December 31, 2003
Basic Earnings Per Share
Income available to common stockholders	$	19,069	16,974	$	1.12
Effect of Dilutive Stock Options		—	1,007
Diluted Earnings Per Share—
Income available to common stockholders	$	19,069	17,981	$	1.06

During 2005, 1,526,350 of 1,540,350 unexercised options are included in the diluted earnings per share calculation. During 2004 and 2003 the entire amount of unexercised option shares of 1,465,285 and 1,751,684, respectively, are included in the diluted earnings per share calculation as all options of the Company were dilutive. The exercise prices for all previously granted unexercised stock options ranged from $3.13 to $37.56 in 2005, from $2.61 to $33.45 in 2004, and $2.61 to $21.98 in 2003.

F-20

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 4—SECURITIES

The par value and amortized cost of securities as of December 31, 2005 and December 31, 2004 were as follows (in thousands):

	December 31, 2005
	Par Value		Gross Unamortized Premium		Gross Unaccreted Discount			Amortized Cost
Investment Securities—Available for Sale
U.S. Government Agency Mortgage-Backed Securities and Collateralized Mortgage Obligations	$	310,763	$	9,120	$	(358	)	$	319,525
Corporate Collateralized Mortgage Obligations		—		—		—			—
Tax-Exempt Municipal Securities		236,173		8,746		(30,024	)		214,895
Taxable Municipal Securities		3,825		—		—			3,825
Federal Home Loan Bank Stock		142,396		—		—			142,396
Other		2,467		—		—			2,467
	$	695,624	$	17,866	$	(30,382	)	$	683,108

	December 31, 2004
	Par Value		Gross Unamortized Premium		Gross Unaccreted Discount			Amortized Cost
Investment Securities—Available for Sale
U.S. Government Agency Mortgage-Backed Securities and Collateralized Mortgage Obligations	$	320,545	$	10,625	$	(55	)	$	331,115
Corporate Collateralized Mortgage Obligations		1,843		—		—			1,843
Tax-Exempt Municipal Securities		225,570		8,704		(31,172	)		203,102
Taxable Municipal Securities		3,841		—		—			3,841
Federal Home Loan Bank Stock		208,096		—		—			208,096
Other		4,522		118		(124	)		4,516
	$	764,417	$	19,447	$	(31,351	)	$	752,513

The amortized cost and the estimated fair value of securities as of December 31, 2005 and December 31, 2004 were as follows (in thousands):

	December 31, 2005
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Estimated Fair Value
Investment Securities—Available-for-Sale
U.S. Government Agency Mortgage-Backed Securities and Collateralized Mortgage Obligations	$	319,525	$941	$(4,212)	$	316,254
Corporate Collateralized Mortgage Obligations		—	—	—		—
Tax-Exempt Municipal Securities		214,895	15,356	(43)		230,208
Taxable Municipal Securities		3,825	1	—		3,826
Federal Home Loan Bank Stock		142,396	—	—		142,396
Other		2,467	—	—		2,467
	$	683,108	$16,298	$(4,255)	$	695,151

F-21

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	December 31, 2004
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Estimated Fair Value
Investment Securities—Available-for-Sale
U.S. Government Agency Mortgage-Backed Securities and Collateralized Mortgage Obligations	$	331,115	$3,690	$(1,755)	$	333,050
Corporate Collateralized Mortgage Obligations		1,843	—	—		1,843
Tax-Exempt Municipal Securities		203,102	9,270	(162)		212,210
Taxable Municipal Securities		3,841	21	—		3,862
Federal Home Loan Bank Stock		208,096	—	—		208,096
Other		4,516	408	—		4,924
	$	752,513	$13,389	$(1,917)	$	763,985

The following table presents the age of gross unrealized losses and fair value by investment category (in thousands).

	December 31, 2005
	Less than 12 months					Over 12 months					Total
	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
Investment Securities—Available-for-Sale
U.S. Government Agency Mortgage-Backed Securities and Collateralized Mortgage Obligations	$	178,854	$	(1,457	)	$	137,402	$	(2,755	)	$	316,256	$	(4,212	)
Corporate Collateralized Mortgage Obligations		—		—			—		—			—		—
Tax-Exempt Municipal Securities		230,133		(43	)		75		—			230,208		(43	)
Total	$	408,987	$	(1,500	)	$	137,477	$	(2,755	)	$	546,464	$	(4,255	)
	December 31, 2004
	Less than 12 months					Over 12 months					Total
	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
Investment Securities—Available-for-Sale
U.S. Government Agency Mortgage-Backed Securities and Collateralized Mortgage Obligations	$	162,390	$	(1,576	)	$	28,547	$	(179	)	$	190,937	$	(1,755	)
Corporate Collateralized Mortgage Obligations		—		—			252		—			252		—
Tax-Exempt Municipal Securities		13,441		(162	)		—		—			13,441		(162	)
Total	$	175,831	$	(1,738	)	$	28,799	$	(179	)	$	204,630	$	(1,917	)

F-22

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Management does not believe any individual unrealized loss as of December 31, 2005 represents an other-than-temporary impairment. The unrealized losses over 12 months reported for mortgage-backed securities and collateralized mortgage obligations relate primarily to securities issued by FNMA, FHLMC and private institutions. These unrealized losses over 12 months are primarily attributable to changes in interest rates and individually were 1% or less of their respective amortized cost basis.

The amortized cost and estimated fair value of securities at December 31, 2005, by expected maturity, are shown below (in thousands). Expected maturities will differ from contractual maturities because obligors may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Estimated Fair Value
Due within one year	$	54,801	$	54,261
Due after one year through five years		227,656		225,793
Due after five years through ten years		175,298		184,343
Due after ten years		82,957		88,357
Securities with no stated maturity		142,396		142,396
	$	683,108	$	695,151

During 2005 and 2004, securities were sold for total proceeds of $46,192,515 and $176,169,621 respectively, resulting in net gains of approximately $498,991 and $967,517, respectively. Gross gains and gross losses for 2005 were $1,065,045 and $531,560, respectively. Gross gains and gross losses for 2004 were $2,472,978 and $1,505,461, respectively. Taxes related to gross gains and gross losses on investment securities for 2005 were $408,445 and $216,085, respectively. Taxes related to gross gains and gross losses on investment securities for 2004 were $950,684 and $579,893, respectively.

At December 31, 2005, securities with a market value of $417.1 million were pledged to secure public funds, trust deposits and other collateralized deposits for other purposes as required or permitted by law, compared to $469.6 million for the prior year.

In the opinion of management, there were no investments in securities at December 31, 2005 that constituted an unusual credit risk for the Company. As market interest rates continued to decline to historic lows late in the third quarter of 2002, in order to protect a portion of the portfolio appreciation should rates rise, the Company entered into a $25.0 million swap. The Company swapped the 10-year rate for three-month LIBOR to act as an economic hedge to a portion of the available-for-sale municipal securities in the portfolio. The December 31, 2005 fair market value adjustment on this swap resulted in a gain of $404,000. Net securities gains of $499,000 were recognized during 2005.

The December 31, 2004 fair market value adjustment on this swap resulted in a loss of $870,000. Net securities gains were $968,000 in 2004.

F-23

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Change in fair value of securities available for sale is presented on a net basis in the Consolidated Statement of Changes in Stockholders’ Equity. The following table discloses the changes in other comprehensive income as of December 31, 2005 and 2004 on a gross basis (in thousands):

	December 31, 2005
	Before Tax Amount			Tax Effect			Net of Tax Amount
Change in unrealized gains on securities available-for-sale	$	1,070		$	385		$	685
Less: reclassification adjustment for gains included in net income		(499	)		(192	)		(307	)
Change in net unrealized gains	$	571		$	193		$	378
	December 31, 2004
	Before Tax Amount			Tax Effect			Net of Tax Amount
Change in unrealized (losses) gains on securities available-for-sale	$	(2,552	)	$	(297	)	$	(2,255	)
Less: reclassification adjustment for gains included in net income		(968	)		(370	)		(598	)
Change in net unrealized (losses) gains	$	(3,520	)	$	(667	)	$	(2,853	)

NOTE 5—LOANS

Amounts outstanding by selected loan categories at December 31, 2005 and 2004, including net unamortized deferred loan fees of $2.2 million and $2.6 million, respectively, were as follows (in thousands):

	2005		2004
Real estate—
Residential	$	221,786	$	90,590
Commercial		1,268,851		855,396
Construction		392,597		219,180
Commercial		436,416		285,336
Personal(1)		288,417		202,861
Total Loans	$	2,608,067	$	1,653,363

(1) Includes home equity loans and overdrafts.

As of December 31, 2005, $662,837 of loans were designated as nonaccrual, for which none is specifically reserved. The average balance of impaired loans amounted to $962,402 in 2005 and $501,965 in 2004, and $828,500 in 2003. The interest income that would have been recorded if the non-accrual loans had been current in accordance with their original terms was $60,826 in 2005, $26,018 in 2004, and $45,060 in 2003. Please refer to page 53 in this Form 10-K for additional disclosure on loans past due 90 days or more.

Loan concentrations are defined as amounts loaned to a multiple number of borrowers engaged in similar activities, which would cause them to be similarly impacted by economic or other conditions. The banks grant loans to clients located primarily in the metropolitan Chicago, St. Louis, Milwaukee and Detroit areas. There are no other significant concentrations of loans and commitments to make loans other than the categories of loans disclosed above.

F-24

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 6—ALLOWANCE FOR LOAN LOSSES

The changes in the allowance for loan losses for the three years ended December 31 were as follows (in thousands):

	2005			2004			2003
Beginning balance	$	18,986		$	15,100		$	11,585
Loans charged off		(537	)		(1,166	)		(1,218	)
Loans recovered		787			653			360
Provision for loan losses		6,538			4,399			4,373
Addition of The PrivateBank – Michigan loan loss reserve		3,614			—			—
Ending balance	$	29,388		$	18,986		$	15,100

NOTE 7—PREMISES AND EQUIPMENT

Bank and building premises and equipment at December 31, 2005 and 2004, consisted of the following (in thousands):

	2005			2004
Land	$	110		$	110
Building		1,640			1,640
Furniture, fixtures and equipment		13,439			8,603
Leasehold improvements		10,928			6,524
		26,117			16,877
Accumulated depreciation and amortization		(14,363	)		(10,391	)
Premises and equipment, net	$	11,754		$	6,486

Included in occupancy expense is depreciation and amortization expense of $4.0 million, $1.7 million, and $1.7 million for 2005, 2004 and 2003, respectively.

Each of the banks leases their main banking facilities and certain branch facilities under noncancellable operating lease agreements. The minimum annual rental commitments under these leases, at December 31, 2005, are as follows:

2006	$	3,189,064
2007		3,509,226
2008		3,643,972
2009		3,195,899
2010		3,055,092
2011 and thereafter		22,743,613
Total rental commitments	$	39,336,866

Total rent expense, including expenses paid for common area maintenance, included in the consolidated statements of income was $3.3 million, $2.6 million, and $2.4 million for 2005, 2004 and 2003, respectively.

F-25

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 8—INCOME TAXES

The components of the total income tax provision in the consolidated statements of income for the years ended December 31, 2005, 2004 and 2003 are as follows (in thousands):

	2005			2004		2003
Income tax provision—
Current—
Federal	$	17,550		$	5,807	$	4,296
State		3,694			1,690		150
		21,244			7,497		4,446
Deferred—
Federal		(5,501	)		2,740		2,424
State		(526	)		266		439
		(6,027	)		3,006		2,863
Total	$	15,217		$	10,503	$	7,309

The summary reconciliation of the differences between the total income tax provision (benefit) and the amounts computed at the statutory federal tax rate of 35% for the years ended December 31, 2005 and 2004, and 34% for the year ended December 31, 2003 is as follows (in thousands):

	2005			2004			2003
Income tax provision at statutory federal income tax rate	$	17,024		$	13,123		$	8,968
Increase (decrease) in taxes resulting from:
Tax-exempt income		(3,072	)		(3,274	)		(2,290	)
Bank owned life insurance		(500	)		(307	)		(178	)
Zone academy bond credits		(250	)		(252	)		(251	)
State income taxes		2,059			1,271			589
Other		(44	)		(58	)		471
Provision for income taxes	$	15,217		$	10,503		$	7,309

F-26

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The net deferred tax liability is included in other liabilities in the consolidated balance sheet as of December 31, 2005 and 2004. Deferred tax assets and liabilities result from temporary differences between the carrying amounts of assets and liabilities in the financial statements and their related tax bases. The components of the net deferred tax balances as of December 31, 2005 and 2004 are as follows (in thousands):

	2005			2004
Gross deferred tax assets—
Allowance for loan losses	$	10,794		$	7,021
Leasehold improvements		277			537
Deferred compensation		307			—
Interest rate swap fair value adjustment		632			788
Amortization of restricted stock		1,280			651
Other(1)		718			449
Gross deferred tax assets, net of valuation allowance		14,008			9,446
Gross deferred tax liabilities—
Federal Home Loan Bank stock dividends		(9,445	)		(11,919	)
Unrealized gain on securities available for sale		(4,623	)		(4,417	)
Goodwill amortization		(1,263	)		(949	)
Acquisition of Intangible assets (The PrivateBank-Michigan)		(1,188	)		—
Other		(1,341	)		(1,833	)
Gross deferred tax liabilities		(17,860	)		(19,118	)
Net deferred tax liabilities	$	(3,852	)	$	(9,672	)

(1) There was no remaining alternative minimum tax credit carryforward as of December 31, 2005. As of December 31, 2004, Other tax assets includes an alternative minimum tax credit carryforward in the amount of $160,232. These credits do not expire.

NOTE 9—DEPOSITS AND FUNDS BORROWED

The maturity distribution of time deposits of $100,000 or greater and a summary of all funds borrowed and outstanding and the rate in effect on such borrowings (including brokered deposits) at December 31, 2005 and 2004 is presented in the table below (in thousands):

Time Deposits $100,000 and greater:	12/31/05		12/31/04
Three months or less	$	313,167	$	206,390
Over three through six months		235,231		104,899
Over six through twelve months		231,103		130,239
Over twelve months		307,722		246,766
Total	$	1,087,223	$	688,294

F-27

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Funds Borrowed:	Current Rate		Maturity	12/31/05
Long Term Funds Borrowed	5.37	%	12/31/2016	$	5,000
Subordinated note	5.05	%	12/22/2010		4,985
FHLB fixed advance	4.61	%	9/20/2010		5,000
FHLB fixed advance	4.21	%	9/1/2010		6,900
FHLB fixed advance	4.64	%	3/8/2010		5,000
FHLB fixed advance	4.25	%	12/28/2009		11,500
FHLB fixed advance	3.87	%	12/23/2009		1,080
FHLB fixed advance	4.07	%	3/20/2009		5,000
FHLB fixed advance	3.80	%	1/25/2009		1,600
FHLB fixed advance	3.89	%	11/17/2008		5,000
FHLB fixed advance	3.67	%	9/29/2008		25,000
FHLB fixed advance	5.29	%	6/23/2008		4,000
FHLB fixed advance	3.95	%	5/5/2008		3,000
FHLB advance	3.97	%	12/13/2007		2,000
FHLB fixed advance	4.88	%	11/15/2007		4,000
FHLB fixed advance	5.08	%	10/24/2007		5,000
FHLB fixed advance	2.71	%	7/7/2007		5,000
FHLB fixed advance	3.92	%	2/9/2007		3,000
FHLB prepayable LIBOR fixed advance	4.35	%	1/31/2007		10,000
FHLB fixed advance	3.41	%	1/25/2007		1,500
FHLB fixed advance	3.97	%	1/5/2007		4,640
FHLB fixed advance	3.97	%	1/5/2007		3,825
Total Long Term Funds Borrowed				$	122,029
Short Term Funds Borrowed
Line of credit	5.12	%	12/1/2006	$	8,250
FHLB fixed advance	3.26	%	11/16/2006		1,000
FHLB fixed advance	2.87	%	11/14/2006		25,000
FHLB fixed advance	3.93	%	9/1/2006		3,999
FHLB fixed advance	4.30	%	8/18/2006		5,000
FHLB fixed advance	4.19	%	8/11/2006		28,535
FHLB fixed advance	2.43	%	7/17/2006		1,000
FHLB fixed advance	2.21	%	6/26/2006		5,000
FHLB fixed advance	3.04	%	6/23/2006		2,850
FHLB fixed advance	4.73	%	5/30/2006		5,000
FHLB fixed advance	3.72	%	3/31/2006		5,000
FHLB prepayable LIBOR fixed advance	4.54	%	3/6/2006		25,000
FHLB advance	3.97	%	3/6/2006		3,000
FHLB fixed advance	2.97	%	1/25/2006		4,700
FHLB fixed advance	2.12	%	1/17/2006		2,000
FHLB fixed advance	3.28	%	1/13/2006		1,000
FHLB fixed advance	2.28	%	1/3/2006		10,000
Fed funds purchased	4.25	%	daily		30,000
Demand repurchase agreements(1)	2.25	%	daily		8,616
Total Short Term Funds Borrowed				$	174,950
Total funds borrowed				$	296,980
Additional information for short term borrowings:
Average balance outstanding				$	221,469
Maximum amount outstanding at any month-end during the year					259,643
Balance outstanding at end of year					174,950
Weighted average interest rate during year					3.08	%
Weighted average interest rate at end of year					3.50

(1) Demand repurchase agreements are a form of retail repurchase agreements offered to certain clients of The PrivateBank – Chicago and The PrivateBank – St. Louis. Funds are swept each business day from the client’s demand deposit account. These amounts are not deposits and are not insured, but are secured by a pool of securities pledged specifically for this purpose.

F-28

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Funds Borrowed:	Current Rate		Maturity	12/31/04
Long Term Funds Borrowed
FHLB fixed advance	3.87	%	12/23/2009	$	1,080
FHLB fixed advance	4.25	%	12/28/2009		11,500
FHLB fixed advance	3.67	%	9/29/2008		25,000
FHLB fixed advance*	2.61	%	12/13/2007		2,000
FHLB prepayable LIBOR fixed advance	2.58	%	12/8/2006		25,000
FHLB fixed advance	3.26	%	11/16/2006		1,000
FHLB fixed advance	2.87	%	11/14/2006		25,000
FHLB fixed advance	2.43	%	7/17/2006		1,000
FHLB fixed advance	3.04	%	6/23/2006		2,850
FHLB fixed advance	2.12	%	1/17/2006		2,000
FHLB fixed advance	2.28	%	1/3/2006		10,000
Total Long Term Funds Borrowed				$	106,430
Short Term Funds Borrowed
FHLB fixed advance	2.83	%	11/8/2005	$	2,000
FHLB fixed advance	2.31	%	11/7/2005		2,000
FHLB fixed advance	2.52	%	10/25/2005		2,000
FHLB fixed advance(2)	6.50	%	10/24/2005		25,366
FHLB fixed advance	2.40	%	9/6/2005		5,000
FHLB fixed advance	1.69	%	8/17/2005		25,000
FHLB fixed advance	1.83	%	7/15/2005		3,000
FHLB fixed advance	1.91	%	6/15/2005		7,000
FHLB fixed advance	1.96	%	6/15/2005		25,000
FHLB fixed advance	1.95	%	5/9/2005		2,000
FHLB fixed advance	1.55	%	1/31/2005		25,000
FHLB fixed advance	1.45	%	1/13/2005		1,000
FHLB fixed advance	1.59	%	12/15/2004		—
FHLB fixed advance	1.56	%	12/13/2004		—
FHLB fixed advance	1.56	%	11/16/2004		—
FHLB fixed advance	1.74	%	11/8/2004		—
FHLB fixed advance	1.57	%	10/25/2004		—
FHLB fixed advance(1)	4.16	%	9/4/2004		—
FHLB fixed advance	1.61	%	1/13/2004
FHLB Open line of credit	2.47	%	Daily		18,500
Fed funds purchased	2.40	%	Daily		160,000
Demand repurchase agreements(3)	0.90	%	Daily		5,223
Total Short Term Funds Borrowed				$	308,089
Total funds borrowed				$	414,519
Additional information for short term borrowings:
Average balance outstanding				$	194,888
Maximum amount outstanding at any month-end during the year					322,189
Balance outstanding at end of year					308,089
Weighted average interest rate during year					1.62	%
Weighted average interest rate at end of year					2.54

(1) The Company had the right to cancel this advance after one year and did so on September 4, 2004.

(2) This FHLB advance is subject to a fair value hedge utilizing an interest rate swap with a fair value of $2.0 million in 2004 and 2003. The contractual par amount on the advance is $25.0 million.

(3) Demand repurchase agreements are a form of retail repurchase agreements offered to certain clients of The PrivateBank – Chicago and The PrivateBank – St. Louis. Funds are swept each business day from the client’s demand deposit account. These amounts are not deposits and are not insured, but are secured by a pool of securities pledged specifically for this purpose.

F-29

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The scheduled maturities of time deposits (including brokered deposits) as of December 31, 2005, for the years 2006 through 2010 and thereafter, are as follows (in thousands):

For year ending December 31,
2006	$	839,190
2007		133,123
2008		37,739
2009		36,326
2010 and thereafter		119,239
Total	$	1,165,617

On September 29, 2005, the Company entered into a $65.0 million credit facility with LaSalle. The new credit facility replaces an existing $40.0 million revolving credit facility that was originally entered into in February 2000 with LaSalle.

The $65.0 million credit facility is comprised of a $40.0 million senior debt facility and $25.0 million of subordinated debt. The senior debt facility is comprised of a $250,000 term loan with a maturity of December 31, 2016, and a revolving loan with a maturity of December 1, 2005, which was extended to December 31, 2006 during the fourth quarter 2005. The subordinated debt matures on December 31, 2016. The interest rate on the senior debt facility resets quarterly, and is based on, at the Company’s option, either the lender’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%. LaSalle has made $25.0 million available on the subordinated debt facility. 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 December 31, 2005, the Company had $8.25 million outstanding on the senior debt facility and $5.0 million of subordinated debt outstanding. The $25.0 million subordinated debt component of the facility qualifies as Tier 2 capital. The credit facility is used for general corporate and other working capital purposes. The Company expects to further draw down on the facilities over the next year to support continued balance sheet growth.

NOTE 10—LONG TERM DEBT—TRUST PREFERRED SECURITIES

As of December 31, 2005 the Company owned 100% of the common securities of three trusts, PrivateBancorp Statutory Trust II, Bloomfield Hills Statutory Trust I and PrivateBancorp Statutory Trust III. PrivateBancorp Statutory Trust II and PrivateBancorp Statutory Trust III were established as wholly-owned subsidiaries of the Company in June 2005 and December 2005, respectively. Bloomfield Hills Statutory Trust I was acquired as part of the acquisition of BHB on June 20, 2005. The Trusts were formed for purposes of issuing trust preferred securities to third-party investors and investing the proceeds from the issuance of the trust preferred securities and common securities solely in junior subordinated debentures (“Debentures”) issued by the Company or BHB, as the case may be, with the same maturities and interest rates as the trust preferred securities. The Debentures are the sole assets of the Trusts.

On June 20, 2005, the Company issued $50.0 million in fixed/floating rate trust preferred securities through PrivateBancorp Statutory Trust II, a newly created business trust subsidiary. The trust preferred securities will pay interest quarterly at a fixed rate of 6.00% until September 2010 and then

F-30

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

subsequently pay interest quarterly at a floating rate equal to 3 month LIBOR plus 1.71%. The trust preferred securities mature in September 2035 and are callable at par at the option of the Company in whole or in part after year five, on any interest payment date. In connection with the acquisition of BHB, the Company acquired $8.0 million in floating rate trust preferred securities. The trust preferred securities and related junior subordinated debentures pay interest quarterly at a rate equal to three month LIBOR plus 2.65%. The trust preferred securities have a maturity date of June 17, 2034 and are callable beginning June 17, 2009.

On December 5, 2005, the Company issued $40.0 million of trust preferred securities. These securities mature in December 2035 but are redeemable at par at our option after five years. The trust preferred securities pay quarterly distributions at a rate of 6.10% until December 2010 and thereafter at a rate equal to the three-month LIBOR rate plus 1.50%. A portion of the proceeds was used to fund the redemption, on December 31, 2005 of $20.0 million of previously outstanding 9.50% trust preferred securities that were originally issued in 2001. As a result of this redemption, the Company incurred a pre-tax charge of approximately $980,000.

The Trusts are reported in the Company’s consolidated financial statements as unconsolidated subsidiaries. Accordingly, the Debentures, which include the Company’s ownership interest in the Trusts, are reflected as “Long-term debt—trust preferred securities” and the common securities are included in “Available-for-sale securities.”

The following table is a summary of the Company’s Long-term debt—trust preferred securities as of December 31, 2005. The Debentures represent the aggregate liquidation amount issued.

Long-term debt—Trust Preferred Securities (dollars in thousands)

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

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

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

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

F-31

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company’s aggregate principal amount of outstanding trust preferred securities at December 31, 2005 is $98.0 million. As of December 31, 2005, $76.0 million of the trust preferred securities is eligible for treatment as Tier I capital as allowed by the Federal Reserve. On February 28, 2005, the Federal Reserve issued a final rule that retains Tier 1 capital treatment for trust preferred securities but with stricter limits. Under the rule, after a five-year transition period, the aggregate amount of the trust preferred securities and certain other capital elements will retain their current limit of 25% of Tier 1 capital elements, net of goodwill less any associated deferred tax liability. The amount of trust preferred securities and certain other capital elements in excess of the limit could be included in Tier 2 capital, subject to restrictions. Applying the final rule at December 31, 2005, the Company would still be considered well-capitalized under regulatory capital guidelines.

NOTE 11—EMPLOYEE SAVINGS AND INCENTIVE PLANS

a. Savings and Retirement Plan

The Company maintains The PrivateBancorp, Inc. Savings and Retirement Plan (the “Plan”) pursuant to Section 401(k) of the Internal Revenue Code, whereby eligible employees may contribute a percentage of compensation, but not in excess of the maximum amount allowed under the Code. The banks can make discretionary contributions to the Plan as determined and approved by the bank’s board of directors. Total discretionary contributions to the Plan amounted to $526,989, $365,180, and $304,178 in 2005, 2004 and 2003, respectively.

b. Stock Options

The Company has stock options outstanding (split-adjusted) under its Stock Incentive Plan and the Incentive Compensation Plan approved by shareholders in 2005 of 607,515 and 932,835 and in 2004 of 790,535 and 655,050 shares, respectively for each plan. For the options that have been granted under each of the plans, the option price is not less than the fair market value on the date of grant. All options have a term of 10 years. Options are first exercisable beginning at least two years following the date of grant.

At December 31, 2005, the Incentive Compensation Plan had 601,380 shares available to be granted under the Plan either pursuant to the granting of stock options, as restricted stock awards or as deferred stock units. No shares remain available for grant under the Stock Incentive Plan.

Since 1992, the Company has compensated non-employee directors with annual option grants. The option price of the director options is fair market value on the date of grant, and the exercise period is 10 years from the date of grant.

F-32

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the status of the Company’s stock option agreements and stock option program as of December 31, 2005 and 2004, adjusted to reflect our 2-for-1 stock split effective May 31, 2004, and changes during the years then ended:

	2005					2004
	Weighted Average					Weighted Average
	Shares			Exercise Price		Shares			Exercise Price
Outstanding at beginning of year		1,445,585		$	12.65		1,735,934		$	7.38
Granted		336,700			32.04		307,650			27.39
Exercised		(202,985	)		5.76		(579,999	)		4.70
Forfeited		(38,950	)		18.26		(18,000	)		17.23
Outstanding at end of year		1,540,350		$	17.65		1,445,585		$	12.65
Options exercisable at year-end		881,975					805,285
Weighted average fair value of options granted during the year	$	12.07				$	11.96

The range of exercise prices was $3.13 to $37.56 and the weighted average remaining contractual life was 6.7 years for stock options outstanding as of December 31, 2005.

The following table presents the range of exercise prices for the stock option grants outstanding at December 31, 2005.

Exercise Price Range	Stock Options Outstanding	Weighted Average Remaining Contractual Life
$  3.13 - $7.50	607,515	3.9
$17.23 - $29.31	542,135	7.9
$30.59 - $37.56	390,700	9.3
Total stock options outstanding	1,540,350	6.7

c. Restricted Stock

In 2005 and 2004, the Company awarded 150,300 and 128,500 restricted shares, respectively, as follows:

Grant Date	Shares Granted	Price
2005:
January 2005	1,500	$	30.98
February 2005	1,500	$	33.08
March 2005	4,500	$	31.27
April 2005	86,900	$	30.59
June 2005	47,100	$	34.28-34.55
July 2005	4,000	$	37.56
September 2005	1,500	$	33.01
October 2005	3,300	$	33.98

F-33

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Grant Date	Shares Granted	Price
2004:
February 2004	8,000	$	24.98
March 2004	4,000	$	26.27
April 2004	69,600	$	26.89
May 2004	600	$	28.40
June 2004	11,500	$	26.85-$27.27
August 2004	9,500	$	28.56-$29.31
September 2004	4,000	$	30.85
October 2004	1,500	$	32.95
December 2004	19,800	$	33.45-$33.10

Restricted shares carry voting and dividend rights. Sale of the shares is restricted prior to vesting. Subject to continued employment, vesting occurs five years from the date of grant. Shares issued under the plan are recorded at their fair market value on the date of grant with a corresponding charge to deferred compensation. The deferred compensation, a component of stockholders’ equity, is being amortized as compensation expense on a straight-line basis over the vesting period. Included in salaries and employee benefits in the consolidated statements of income is compensation expense for restricted shares of $1,944,530, $1,075,188 and $356,852 for 2005, 2004 and 2003, respectively. During 2005, 2,000 restricted shares were forfeited due to departures of employees prior to the completion of the vesting period, compared to 20,400 shares during 2004.

d. Deferred Compensation Plan

The Company established a deferred compensation plan on April 24, 2003 as part of its Incentive Compensation Plan that was approved by shareholders. The purpose of the Company’s Deferred Compensation Plan is to further the Company’s ability to attract and retain high quality executives and non-employee directors. The Plan also furthers the retention of stock ownership of participants by facilitating deferral of gains resulting from the exercise of nonqualified stock options or the receipt of shares pursuant to awards under the Company’s Stock Incentive Plan and the Incentive Compensation Plan, and conversion of cash compensation into deferred stock units representing the right to receive, on a one-for-one basis, shares of Company Common Stock. The Deferred Compensation Plan permits the deferral of base compensation, bonus compensation, and/or cash and the receipt of shares of Common Stock pursuant to exercises of non-qualified stock options and pursuant to other awards under the Company’s Incentive Compensation Plan. The Deferred Compensation Plan is structured as a “nonqualified plan” under applicable IRS and Department of Labor guidelines. At December 31, 2005 and 2004, 12,269 and 7,767 deferred stock units, respectively, were recorded in the plan.

NOTE 12—RELATED-PARTY TRANSACTIONS

An analysis of loans made to directors and executive officers of the Company and the banks follows:

Balance, December 31, 2004	$	20,041,904
Additions		9,447,934
Collections		(10,675,137	)
Balance, December 31, 2005	$	18,814,701

F-34

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Directors and executive officers of the Company and the banks were clients of and had transactions with the banks in the ordinary course of business during the period presented above and additional transactions may be expected in the future. In management’s opinion, all outstanding loans, commitments and deposit relationships included in such transactions were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with others, and did not involve more than a normal risk of collectability or other unfavorable features.

The Company is the general partner in a partnership for investment purposes. Through a contractual arrangement, The PrivateBank – Chicago’s wealth management department maintains the partnership’s records and earns an administrative fee from the partnership.

During 2005, The PrivateBank – Chicago paid Worknet, an information technology firm of which director William Castellano is chairman and CEO, $10,275 for services rendered, compared to $9,750 in 2004.

During 2005 and 2004, The PrivateBank – Chicago incurred professional fees for services provided by the law firm Spitzer, Addis, Susman & Enders in the amount of approximately $7,309, and $124,732, respectively. Michael Susman, who is one of the Company’s directors, is a partner of that firm.

During 2005 and 2004, the Company paid $124,375 and $80,535, respectively, to the law firm of Neal, Gerber & Eisenberg, for legal services. Phillip Kayman, one of the Company’s directors, is a partner at Neal, Gerber & Eisenberg.

Mr. Mandell’s daughter-in-law is employed by The PrivateBank – Chicago as a Managing Director. In 2005, she was paid an aggregate salary and bonus of $151,000, granted options to purchase 1,700 shares of the Company’s common stock at an exercise price of $30.59 per share and awarded 900 shares of restricted stock. In 2004, she was paid an aggregate salary and bonus of $145,000, granted options to purchase 1,600 shares of the Company’s common stock at an exercise price of $26.89 per share and awarded 800 shares of restricted stock. Mr. Goldstein’s son-in-law is employed as a Managing Director of Lodestar, a subsidiary of The PrivateBank – Chicago. He received an aggregate salary and bonus of $ 230,560 in 2005 and $209,240 in 2004.

NOTE 13—DERIVATIVE FINANCIAL INSTRUMENTS AND FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

Derivative Financial Instruments

The Company enters into certain derivative financial instruments as part of its strategy to manage its exposure to market risk. Market risk is the possibility that, due to changes in interest rates or other economic conditions, the Company’s net interest income will be adversely affected. The Company entered into an interest rate swap agreement on November 23, 2001 in order to hedge a 6.5% fixed-rate $25.0 million FHLB advance which matured on October 23, 2005. An interest rate swap is an agreement in which two parties agree to exchange, at specified intervals, interest payment streams calculated on an agreed-upon notional principal amount with at least one stream based on a specified floating rate index. The Company paid $1.9 million in order to swap the interest on a 6.5% fixed-rate for a 90-day LIBOR-based rate. The difference was amortized to interest expense over the debt’s term outstanding.

F-35

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As the swap qualified as a fair value hedge, changes in the fair value of the interest rate swap and the changes in the fair value of the advance from the date of designation were recorded through income. During 2005, the hedged transaction matured.

In the third quarter of 2002, the Company entered into a $25.0 million swap in order to protect a portion of the municipal investment security portfolio appreciation should rates rise. The Company swapped the 10-year rate for three-month LIBOR to act as an economic hedge of a portion of the available-for-sale municipal securities in the portfolio. At December 31, 2005, the market value of the interest rate swap associated with this economic hedge was recorded in other liabilities at its fair value of $203,596.

In December 2005, the Company entered into an interest rate swap agreement in order to hedge a fixed rate $20.0 million brokered deposit. We have agreed to receive a 4.6% fixed rate in exchange for payment of three month LIBOR minus 12.5 basis points which matures on June 28, 2006. Because the swap qualifies as a fair value hedge, changes in the fair value of the interest rate swap and the changes in the fair value of the brokered deposit from the date of designation are recorded through income. At December 31, 2005, the fair value of the interest rate swap was $3,050 and is recorded in other assets on the consolidated balance sheet.

The Company does not enter into derivatives for purely speculative purposes. However, certain derivatives have not been designated as SFAS No. 133 hedge relationships. These derivatives include commitments to fund certain mortgage loans to be sold into the secondary market and forward commitments for the future delivery of residential mortgage loans. It is the Company’s practice to enter into forward commitments for the future delivery of fixed rate residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates on its commitments to fund the loans as well as on its portfolio of mortgage loans held-for-sale. At December 31, 2005, the Company had approximately $13.8 million of interest rate lock commitments and $13.8 million of forward commitments for the future delivery of residential mortgage loans. The fair values were estimated based on changes in mortgage rates from the date of the commitments.

Credit Risk and Market Risk

By their nature, all financial instruments involve risk, including credit risk for nonperformance by counterparties. The contract or notional amounts of these instruments reflect the extent of involvement we have in particular classes of financial instruments. The maximum potential loss may exceed any amounts recognized in the Consolidated Balance Sheets. However, the Company’s maximum exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and financial guarantees is limited to the amount drawn and outstanding on those instruments.

Exposure to credit risk is controlled through credit approvals, credit limits, obtaining collateral and continuous monitoring procedures and reserves for losses are established when deemed necessary.

All financial instruments inherently expose the holders to market risk, including changes in interest rates. The Company manages its exposure to these market risks through our regular operating and financing activities and, commencing in 2001, when appropriate, through the use of derivative financial instruments.

F-36

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Financial Instruments with Off-Balance-Sheet Risk

The Company has, through its subsidiaries, entered into credit-related instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its clients. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated financial statements.

Credit risk represents the loss that would be recognized at the reporting date if counterparties failed to completely perform as contracted.

Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments, assuming that the amounts are fully advanced and that collateral or other security is of no value. The banks use the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. At December 31, 2005 and 2004, the banks had the following categories of credit-related financial instruments:

	2005		2004
	(in thousands)
Commitments to extend credit	$	987,466	$	581,167
Standby letters of credit		81,855		55,830

Note: all commitments are floating and are shown at contract amount.

Commitments to extend credit are agreements to lend to a client as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The banks evaluate each client’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, upon extension of credit is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the banks to guarantee the performance of a client to a third-party. Those guarantees are primarily issued to support commercial business activities of bank clients. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to clients. The bank holds collateral supporting those commitments for which collateral is deemed necessary. It is the banks’ general policy to require third-party guarantees on all standby letters of credit regardless of the collateral used to secure a standby letter of credit. The majority of our standby letters of credit are secured by cash or other collateral.

The following table summarizes the maturity of standby letters of credit and commitments to extend credit:

	Expiring in:
	Total		2006		2007-2008		2009-2010		2011+
	(in thousands)
Standby letters of credit	$	81,855	$	58,022	$	21,698	$	2,060	$	75
Commitments to extend credit		987,466		596,963		273,464		38,796		78,241
Total	$	1,069,321	$	654,985	$	295,162	$	40,858	$	78,316

F-37

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In addition, at December 31, 2005, the Company had approximately $13.8 million in commitments to fund residential mortgage loans to be sold into the secondary market. These lending commitments are also considered derivatives instruments under the guidelines of SFAS No. 133. The Company also enters into forward contracts for the future delivery of residential mortgage loans at specified interest rates to reduce the interest rate risk associated with commitments to fund loans as well as mortgage loans held for sale. These contracts are also considered derivative instruments under SFAS No. 133 and totaled approximately $13.8 million as of December 31, 2005.

NOTE 14—ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The following presents the carrying value and estimated fair value of the various classes of financial instruments held by the Company and its subsidiaries at December 31, 2005 and 2004. This information is presented solely for compliance with FAS No. 107 “Disclosures about Fair Value of Financial Instruments,” and is subject to change over time based on a variety of factors. Because no active market exists for a significant portion of the financial instruments presented below and the inherent imprecision involved in the estimation process, management does not believe the information presented reflects the amounts that would be received if the Company’s assets and liabilities were sold nor does it represent the fair value of the Company as an entity.

Where possible, the Company has utilized quoted market prices to estimate fair value. Since quoted market prices were not available for a significant portion of the financial instruments, the fair values were approximated using discounted cash flow techniques. Fair value estimates are made at a specific point in time, based on judgments regarding future expected loss experience, current economic conditions, risk conditions, risk characteristics of various financial instruments and other factors. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

	December 31, 2005				December 31, 2004
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
	(in thousands)
Assets—
Cash and cash equivalents	$	61,869	$	61,869	$	50,654	$	50,654
Securities		695,151		695,151		763,985		763,985
Loans held for sale		5,269		5,269		7,200		7,200
Net loans		2,578,679		2,564,185		1,634,377		1,624,314
Accrued interest receivable		16,642		16,642		10,549		10,549
Interest rate swap		576		576		722		722
Bank owned life insurance		40,860		40,860		21,616		21,616
Liabilities—
Deposits with no stated maturity		1,657,765		1,657,765		1,126,179		1,126,179
Time deposits		1,165,617		1,154,532		746,456		739,579
Total deposits	$	2,823,382	$	2,812,297	$	1,872,635	$	1,865,758
Accrued interest payable		8,767		8,767		3,949		3,949
Funds borrowed		296,980		294,948		414,519		412,938
Long-term debt—trust preferred securities		98,000		99,813		20,000		20,635

F-38

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following methods and assumptions were used to estimate the fair value of each class of financial instruments. These assumptions were based on subjective estimates of market conditions and perceived risks of the financial instruments at a certain point in time.

a. Cash and Cash Equivalents, Accrued Interest Receivable and Interest Payable

For these short-term instruments, the carrying value approximates fair value because these instruments are short-term in nature and do not present unanticipated credit concerns.

b. Securities

For securities held to maturity or available for sale, fair values are based on quoted market prices or dealer quotes. If a quoted market price is not available, fair value is estimated using quoted market prices for similar instruments.

c. Loans Held for Sale

Loans held for sale are carried at fair value. Fair value is determined based on quoted market rates or, in the case where a firm commitment has been made to sell the loan, the firm committed price.

d. Net Loans

The fair value of performing loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan. The estimate of maturity is based on the Company’s and the industry’s historical experience with repayments for each loan classification, modified, as required, by an estimate of the effect of current economic and lending conditions.

Fair value for significant nonaccrual (impaired) loans is based on estimated cash flows that are discounted using a rate commensurate with the risk associated with the estimated cash flows. Assumptions regarding credit risk, cash flows and discount rates are determined using available market information and specific borrower information.

e. Interest Rate Swaps

The fair value of interest swaps executed by the Company is determined based on the fair market value as quoted by broker-dealers.

f. Bank-Owned Life Insurance

The fair value of bank-owned life insurance is equal to its cash surrender value.

g. Deposit Liabilities

The fair value of deposits with no stated maturity, such as non-interest-bearing deposits, interest-bearing deposits, savings and money market deposit accounts, is equal to the amount payable on demand as of year-end. The fair value of certificates of deposit and brokered deposits are based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.

F-39

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

h. Funds Borrowed

Rates currently available to the Company and the banks for debt with similar terms and remaining maturities are used to estimate fair value of existing debt.

i. Off-Balance Sheet Financial Instruments

The Company’s commitments to originate loans and unused lines and outstanding letters of credit are primarily at market-based interest rates, and therefore there is no fair value adjustment.

NOTE 15—REGULATORY REQUIREMENTS

The banks are subject to federal and state laws, which restrict the payment of dividends to the Company. Based on these restrictions, at January 1, 2006, The PrivateBank – Chicago could have declared $82,218,397 in dividends without requesting approval of the applicable federal or state regulatory agency. As of January 1, 2006, The PrivateBank – St. Louis could have declared $8,149,133 in dividends without requesting approval of the applicable federal or state regulatory agency. As of January 1, 2006, The PrivateBank – Michigan could have declared $2,410,326 in dividends without requesting approval of the applicable federal or state regulatory agency.

The PrivateBank – Chicago is required to maintain non-interest-bearing cash balances with the Federal Reserve based on the types and amounts of deposits held. During 2005 and 2004, the average balances maintained to meet the requirement were $25,000.

The Company and the banks are subject to various regulatory capital requirements as established by the applicable federal or state banking regulatory authorities. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the banks must meet specific capital guidelines that involve quantitative measures of the banks’ assets, liabilities and certain off-balance sheet items. The quantitative measures for capital adequacy require the Company and the banks to maintain minimum amounts and ratios of total and Tier 1 capital to risk weighted assets and of Tier 1 capital to average assets (leverage). The Company’s and the banks’ capital components, classification, risk weightings and other factors are also subject to qualitative judgments by regulators. Failure to meet minimum capital requirements can initiate certain actions by regulators that, if undertaken, could have a material effect on the Company’s financial statements. Prompt corrective action provisions are not applicable to bank holding companies. Management believes that as of December 31, 2005, the Company and the banks meet all minimum capital adequacy requirements to which they are subject.

The most recent notification from the Federal Deposit Insurance Corporation categorized The PrivateBank – Chicago as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain ratios as set forth in the following table. Management believes that no events or changes in conditions have occurred subsequent to such notification to change the bank’s category.

F-40

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents selected capital information for the Company (Consolidated), The PrivateBank – Chicago and The PrivateBank – St. Louis as of December 31, 2005 and 2004 (dollars in thousands):

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
As of December 31, 2005—
Total risk-based capital—
Consolidated	$	291,796	10.54	%	$	221,577	8.00	%
The PrivateBank – Chicago		212,377	10.39			163,474	8.00		$	204,342	10.00	%
The PrivateBank – St. Louis		38,649	10.79			28,657	8.00			35,821	10.00
The PrivateBank – Michigan		39,588	10.89			29,082	8.00			36,353	10.00
Tier 1 risk-based capital—
Consolidated	$	235,454	8.50		$	110,788	4.00
The PrivateBank – Chicago		191,089	9.35			81,737	4.00		$	122,605	6.00
The PrivateBank – St. Louis		34,845	9.73			14,328	4.00			21,493	6.00
The PrivateBank – Michigan		35,292	9.71			14,541	4.00			21,812	6.00
Tier 1 (leverage) capital—
Consolidated	$	235,454	7.09		$	132,766	4.00
The PrivateBank – Chicago		191,089	7.47			102,384	4.00		$	127,981	5.00
The PrivateBank – St. Louis		34,845	9.81			14,205	4.00			17,756	5.00
The PrivateBank – Michigan		35,292	8.66			16,295	4.00			20,369	5.00
As of December 31, 2004—
Total risk-based capital—
Consolidated	$	203,170	11.29	%	$	143,921	8.00	%
The PrivateBank – Chicago		160,982	10.14			127,012	8.00		$	158,765	10.00	%
The PrivateBank – St. Louis		21,746	10.68			16,291	8.00			20,363	10.00
Tier 1 risk-based capital—
Consolidated	$	184,184	10.24		$	71,961	4.00
The PrivateBank – Chicago		144,159	9.08			63,506	4.00		$	95,259	6.00
The PrivateBank – St. Louis		19,583	9.62			8,145	4.00			12,218	6.00
Tier 1 (leverage) capital—
Consolidated	$	184,184	7.71		$	95,552	4.00
The PrivateBank – Chicago		144,159	6.81			84,724	4.00		$	105,905	5.00
The PrivateBank – St. Louis		19,583	7.47			10,483	4.00			13,104	5.00

NOTE 16—CONTINGENT LIABILITIES

Because of the nature of its activities, the Company is from time to time involved in legal actions that arise in the normal course of business. In the judgment of management, after consultation with legal counsel, none of the litigation to which the Company or its subsidiaries is a defendant is expected to have a material effect, either individually or in the aggregate, on the consolidated financial position, results of operations or cash flows of the Company.

F-41

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 17—PRIVATEBANCORP, INC. (PARENT COMPANY ONLY) CONDENSED FINANCIAL STATEMENTS

CONDENSED BALANCE SHEETS (Parent Company Only)

As of December 31, 2005 and 2004

	2005		2004
	(in thousands)
Assets
Cash and due from banks—bank subsidiaries	$	5,425	$	16,926
Investment in bank subsidiaries		339,346		193,556
Other assets		7,501		5,121
Total assets	$	352,272	$	215,603
Liabilities and Stockholders’ Equity
Funds borrowed	$	13,250	$	—
Long-term debt—trust preferred securities		99,795		20,000
Other liabilities		3,697		1,530
Total liabilities		116,742		21,530
Stockholders’ equity		235,530		194,073
Total liabilities and stockholders’ equity	$	352,272	$	215,603

CONDENSED STATEMENTS OF INCOME (Parent Company Only)

For the Years Ended December 31, 2005, 2004 and 2003

	2005			2004			2003
	(in thousands)
Operating income:
Interest income	$	230		$	343		$	80
Interest expense		4,360			1,957			2,616
Net interest expense		(4,130	)		(1,614	)		(2,536	)
Non interest income:
Other income		200			200			202
Operating expense:
Amortization of deferred compensation		3,169			1,075			375
Other		3,526			3,223			2,850
Total		6,695			4,298			3,225
Loss before income taxes and equity in undistributed net income of bank subsidiaries		(10,625	)		(5,712	)		(5,559	)
Income tax benefit		(3,637	)		(1,999	)		(1,779	)
Loss before equity in undistributed net income of bank subsidiaries		(6,988	)		(3,713	)		(3,780	)
Equity in undistributed net income of bank and nonbank subsidiaries		40,408			30,708			22,849
Net income	$	33,420		$	26,995		$	19,069

The Parent Company Only Statements of Changes in Stockholders’ Equity are the same as the

Consolidated Statements of Changes in Stockholders’ Equity.

F-42

PRIVATEBANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

CONDENSED STATEMENTS OF CASH FLOWS (Parent Company Only)

For the Years Ended December 31, 2005, 2004 and 2003

	2005			2004			2003
	(in thousands)
Cash flows from operating activities:
Net income	$	33,420		$	26,995		$	19,069
Adjustments to reconcile net income to net cash used in operating activities—
Equity in net income of bank subsidiaries		(40,408	)		(30,708	)		(22,849	)
Amortization of deferred compensation		1,945			1,075			375
Decrease (increase) in other assets		905			79			72
(Decrease) increase in other liabilities		(623	)		(592	)		(796	)
Other, net		(103,811	)		(1,461	)		(1,664	)
Total adjustments		(108,572	)		(31,607	)		(24,861	)
Net cash used in operating activities		(75,152	)		(4,612	)		(5,793	)
Cash flows from investing activities:
Net capital investments in bank subsidiaries		(38,350	)		(2,500	)		(4,000	)
Proceeds from bank subsidiary for Lodestar acquisition		—			—			—
Repayment of investment in subsidiaries		—			—			3,538
Purchase of premises		—			—			—
Net cash used in investing activities		(38,350	)		(2,500	)		(462	)
Cash flows from financing activities:
Funds borrowed		127,645			—			5,000
Repayment of funds borrowed		(34,600	)		—			(35,000	)
Proceeds from secondary offering		—			—			58,270
Proceeds from exercise of stock options		13,203			6,672			669
Repayment of loan to executive officer		—			—			—
Acquisition of treasury stock		(521	)		(2,207	)		—
Dividends paid		(3,726	)		(2,424	)		(1,410	)
Net cash provided by financing activities		102,001			2,041			27,529
Net (decrease) increase in cash and cash equivalents		(11,501	)		(5,071	)		21,724
Cash and cash equivalents at beginning of year		16,926			21,997			723
Cash and cash equivalents at end of year	$	5,425		$	16,926		$	21,997
Cash paid during the year for:
Interest	$	3,371		$	1,949		$	2,854
Income taxes	$	21,263		$	3,800		$	1,920

NOTE 18—CAPITAL TRANSACTIONS

On June 20, 2005, the Company acquired The PrivateBank- Michigan as part of its acquisition of BHB. Prior to the close of the acquisition, the Company completed a private placement of $7.6 million of its common stock to investors in that bank’s market area, including certain members of the bank’s management team.

During 2005 and 2004, the Company repurchased 15,328 and 69,301 shares, respectively, of its common stock in connection with the satisfaction of stock option exercises and minimum federal withholding tax requirements on the exercise of stock options by a board member, certain employees and the Chief Executive Officer of the Company and shares repurchased in the open market.

F-43

PRIVATEBANCORP, INC. AND SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA

Selected Quarterly Financial Data (unaudited)

The following are the consolidated results of operations on a quarterly basis:

	2005												2004
	Fourth			Third			Second			First			Fourth			Third			Second			First
	(In thousands except ratios and per share data)
Summary Income Statement
Interest Income
Loans, including fees	$	45,244		$	39,580		$	29,198		$	25,591		$	22,802		$	20,315		$	18,702		$	17,680
Federal funds sold and interest-bearing deposits		207			166			93			34			12			18			4			6
Securities		8,585			9,093			9,428			9,213			9,386			8,436			7,820			7,929
Total interest income		54,036			48,839			38,719			34,838			32,200			28,769			26,526			25,615
Interest expense		26,319			22,575			16,927			14,211			12,028			10,284			9,192			8,064
Net interest income		27,717			26,264			21,792			20,627			20,172			18,485			17,334			17,551
Provision for loan loss		1,690			2,046			1,900			902			1,498			851			724			1,326
Net interest income after provision for loan loss		26,027			24,218			19,892			19,725			18,674			17,634			16,610			16,225
Non-Interest income
Banking, wealth management services and other income		4,916			5,076			4,311			3,805			3,850			3,899			3,472			2,980
Securities (losses) gains, net		(192	)		(249	)		1,045			(105	)		(123	)		1,259			(1,166	)		998
Gains (losses) on swap		252			644			(972	)		479			(11	)		(1,118	)		1,325			(1,066	)
Total non-interest income		4,976			5,471			4,384			4,179			3,716			4,040			3,631			2,912
Non-Interest expense
Salaries and employee benefits		9,969			9,408			7,158			7,018			7,124			6,811			6,057			6,035
Amortization of intangibles		156			156			57			42			42			42			42			42
Occupancy expense		2,012			1,963			1,804			1,738			1,567			1,394			1,350			1,360
Other non-interest expense		5,989			5,029			3,762			3,667			3,299			3,636			3,771			3,102
Total non-interest expense		18,126			16,556			12,781			12,465			12,032			11,883			11,220			10,539
Minority interest expense		76			82			73			76			64			74			65			67
Income before income taxes		12,801			13,051			11,422			11,363			10,294			9,717			8,956			8,531
Provision for income taxes		3,951			4,186			3,523			3,557			2,768			2,654			2,500			2,581
Net income	$	8,850		$	8,865		$	7,899		$	7,806		$	7,526		$	7,063		$	6,456		$	5,950
Key Statistics
Diluted earnings per share		0.41			0.41			0.38			0.37			0.36			0.34			0.31			0.29
Basic earnings per share		0.43			0.43			0.39			0.39			0.38			0.35			0.33			0.31
Return on average total assets		1.04	%		1.09	%		1.18	%		1.24	%		1.24	%		1.23	%		1.20	%		1.17	%
Return on average total equity		15.72	%		15.94	%		15.45	%		15.81	%		15.65	%		15.29	%		14.86	%		13.87	%
Fee income to total revenue		15.07	%		16.20	%		16.89	%		15.98	%		16.03	%		17.41	%		16.69	%		14.51	%
Net interest margin		3.55	%		3.53	%		3.53	%		3.57	%		3.63	%		3.58	%		3.51	%		3.80	%
Yield on average earning assets		6.79	%		6.44	%		6.16	%		5.93	%		5.70	%		5.46	%		5.27	%		5.46	%
Cost of average paying liabilities		3.64	%		3.26	%		2.99	%		2.68	%		2.36	%		2.14	%		2.03	%		1.89	%
Efficiency ratio (TEA)		53.6	%		50.40	%		46.80	%		48.10	%		48.3	%		50.0	%		50.8	%		49.1	%
Common Stock Information
Book value per share	$	11.22		$	10.86		$	10.51		$	9.79		$	9.51		$	9.19		$	8.54		$	8.72
Dividends paid per share		0.045			0.045			0.045			0.045			0.030			0.030			0.030			0.030
Outstanding shares at end of period		20,983,934			20,978,119			20,928,869			20,467,143			20,400,103			20,346,303			20,344,073			19,954,848

F-44

PRIVATEBANCORP, INC. AND SUBSIDIARIES

SUPPLEMENTAL FINANCIAL DATA

Selected Quarterly Financial Data (unaudited)

	2005												2004
	Fourth			Third			Second			First			Fourth			Third			Second			First
	(In thousands except ratios and per share data)
Number of Shares Used to Compute:
Basic earnings per share		20,427,363			20,408,238			20,065,931			19,973,853			19,911,662			19,921,465			19,706,993			19,461,134
Diluted earnings per share		21,410,469			21,373,287			20,971,907			20,998,095			20,976,725			20,947,078			20,708,906			20,614,694
Capital ratios
Total equity to total assets		6.74	%		6.85	%		6.87	%		7.70	%		7.65	%		7.95	%		7.90	%		8.14	%
Total risk-based capital ratio		10.54	%		10.13	%		10.60	%		11.07	%		11.29	%		11.80	%		12.14	%		12.14	%
Tier-1 risk-based capital ratio		8.50	%		8.67	%		9.18	%		10.03	%		10.24	%		10.71	%		11.00	%		11.01	%
Leverage ratio		7.09	%		7.07	%		7.94	%		7.61	%		7.71	%		7.74	%		7.83	%		8.03	%
Selected financial condition
Data (at end of period)
Total securities	$	695,151		$	720,055		$	769,218		$	764,917		$	763,985		$	759,328		$	722,582		$	692,678
Total loans		2,608,067			2,421,725			2,192,542			1,729,882			1,653,363			1,471,083			1,407,586			1,344,707
Total assets		3,494,210			3,325,698			3,202,072			2,601,690			2,535,817			2,352,366			2,199,170			2,139,095
Total deposits		2,823,382			2,572,234			2,407,341			2,003,239			1,872,635			1,808,532			1,673,404			1,622,899
Funds borrowed		296,980			417,664			464,799			340,737			414,519			301,558			306,446			297,537
Total stockholders’ equity		235,530			227,805			219,906			200,372			194,073			187,035			173,669			174,041
Credit quality
Non-performing assets:
Loans delinquent over 90 days		280			744			2,026			1,335			1,438			1,638			644			715
Nonaccrual loans		663			472			1,212			1,448			1,090			797			151			131
Other real estate		393			211			413			—			—			—			—			—
Total non-performing assets	$	1,336		$	1,427		$	3,651		$	2,783		$	2,528		$	2,435		$	795		$	846
Loans charged-off		188			19			328			3			330			831			0			5
Recoveries		(2	)		(705	)		(18	)		(63	)		(67	)		(427	)		(51	)		(108	)
Net charge-offs (recoveries)	$	186		$	(686	)	$	310		$	(60	)	$	263		$	404		$	(51	)	$	(103	)
Provision for loan losses	$	1,690		$	2,046		$	1,900		$	902		$	1,498		$	851		$	724		$	1,326
Key Ratios:
Net charge-offs to average loans		0.03	%		-0.12	%		0.07	%		-0.01	%		0.07	%		0.11	%		-0.01	%		-0.03	%
Total non-performing loans to total loans		0.04	%		0.05	%		0.15	%		0.16	%		0.15	%		0.17	%		0.06	%		0.06	%
Total non-performing assets to total assets		0.04	%		0.04	%		0.11	%		0.11	%		0.10	%		0.10	%		0.04	%		0.04	%
Loan Loss Reserve Summary:
Balance at beginning of period	$	27,884		$	25,152		$	23,562		$	18,986		$	17,751		$	17,304		$	16,529		$	15,100
Provision		1,690			2,046			1,900			902			1,498			851			724			1,326
Net charge-offs (recoveries)		186			(686	)		310			(60	)		263			404			(51	)		(103	)
Ending allowance for loan losses	$	29,388		$	27,884		$	25,152		$	19,948		$	18,986		$	17,751		$	17,304		$	16,529
Net loan charge-offs (recoveries):
Commercial real estate	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Residential real estate		—			—			—			—			—			—			—			—
Commercial		—			(115	)		270			(60	)		184			(314	)		(49	)		(105	)
Personal		186			(571	)		40			0			79			718			(2	)		2
Home equity		—			—			—			—			—			—			—			—
Construction		—			—			—			—			—			—			—			—
Total net loan charge-offs (recoveries)	$	186		$	(686	)	$	310		$	(60	)	$	263		$	404		$	(51	)	$	(103	)

F-45

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

PRIVATEBANCORP, INC.
By:	/s/    RALPH B. MANDELL
	Ralph B. Mandell, Chairman, President and Chief Executive Officer

Date: March 8, 2006

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Ralph B. Mandell and Dennis L. Klaeser, and each of them, the true and lawful attorney-in-fact and agents of the undersigned, with full power of substitution and resubstitution, for and in the name, place and stead of the undersigned, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, and hereby grants to such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully as to all intents and purposes as each of the undersigned might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/    RALPH B. MANDELL         Ralph B. Mandell	Chairman, President, Chief Executive Officer and Director	March 8, 2006
/s/    DENNIS L. KLAESER         Dennis L. Klaeser	Chief Financial Officer	March 8, 2006
/s/    LISA M. O’NEILL         Lisa M. O’Neill	Controller	March 8, 2006
/s/    DONALD L. BEAL         Donald L. Beal	Director	March 8, 2006
/s/    WILLIAM A. CASTELLANO         William A. Castellano	Director	March 8, 2006
/s/    ROBERT F. COLEMAN         Robert F. Coleman	Director	March 8, 2006
/s/    PATRICK F. DALY         Patrick F. Daly	Director	March 8, 2006
/s/    WILLIAM A. GOLDSTEIN         William A. Goldstein	Director	March 8, 2006
/s/    JAMES M. GUYETTE         James M. Guyette	Director	March 8, 2006
/s/    RICHARD C. JENSEN         Richard C. Jensen	Director	March 8, 2006
/s/    PHILIP M. KAYMAN         Philip M. Kayman	Director	March 8, 2006

Signature	Title	Date
/s/    CHERYL MAYBERRY MCKISSACK         Cheryl Mayberry McKissack	Director	March 8, 2006
/s/    THOMAS F. MEAGHER         Thomas F. Meagher	Director	March 8, 2006
/s/    WILLIAM J. PODL         William J. Podl	Director	March 8, 2006
/s/    EDWARD W. RABIN         Edward W. Rabin	Director	March 8, 2006
/s/    WILLIAM R. RYBAK         William R. Rybak	Director	March 8, 2006
/s/    ALEJANDRO SILVA         Alejandro Silva	Director	March 8, 2006
Michael B. Susman	Director	March 8, 2006
/s/    JOHN B. WILLIAMS         John B. Williams	Director	March 8, 2006

EXHIBIT INDEX

EXHIBIT NO.	DESCRIPTION OF EXHIBITS
2.1	Agreement and Plan of Merger by and among PrivateBancorp, Inc., BHB Acquisition Corp., and Bloomfield Hills Bancorp. Inc., dated as of April 14, 2005 (filed as an exhibit to the Company’s Form 8-K filed on April 15, 2005 (File No. 000-75887) and incorporated herein by reference).
3.1	Certificate of amendment of the Amended and Restated Certificate of Incorporation of PrivateBancorp, Inc., as amended (filed as an exhibit to the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2004 (File No. 000-75887) and incorporated herein by reference).
3.2	Amended and Restated Certificate of Incorporation of PrivateBancorp, Inc., as amended (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 000-75887) and incorporated herein by reference).
3.3	Amended and Restated By-laws of PrivateBancorp, Inc. (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2003 (File No. 000-75887) and incorporated herein by reference).
4.1	Certain instruments defining the rights of the holders of long-term debt of the Company and certain of its subsidiaries, none of which authorize a total amount of indebtedness in excess of 10% of the total assets of the Company and its subsidiaries on a consolidated basis, have not been filed as exhibits. The Company hereby agrees to furnish a copy of any of these agreements to the SEC upon request.
10.1	Lease Agreement for banking facility located at Ten North Dearborn, Chicago, Illinois dated January 1, 1992, as amended, by and between General American Life Insurance Company as successor-in-interest to LaSalle National Trust, N.A., as successor trustee to LaSalle National Bank, not personally but as Trustee under Trust Agreement dated November 6, 1985 and known as Trust No. 110519 and The PrivateBank and Trust Company (filed as an exhibit to the Company’s Form S-1 Registration Statement (File No. 333-77147) and incorporated herein by reference).
10.2	Lease Agreement for banking facility located at 1603 West Sixteenth Street, Oak Brook, Illinois dated October 1996 by and between Columbia Lisle Limited Partnership and The PrivateBank and Trust Company (filed as an exhibit to the Company’s Form S-1 Registration Statement (File No. 333-77147) and incorporated herein by reference).
10.3	First Amendment to Lease dated May 31, 2001 by and between Columbia Lisle Limited Partnership and The PrivateBank and Trust Company (filed as an exhibit to the Company’s Form 10-Q for the quarter ended September 30, 2001 and incorporated herein by reference).
10.4	Lease Agreement for banking facility located at 517 Green Bay Road, Wilmette, Illinois dated as of May 2, 1994 by and between Gunnar H. Hedlund, Doris S. Hedlund, Robert P. Hedlund and Gerald A. Hedlund, LaSalle National Trust, N.A., as successor trustee to LaSalle National Bank, not personally but solely as Trustee under Trust Agreement dated December 28, 1972 and known as Trust No. 45197 and The PrivateBank and Trust Company (filed as an exhibit to the Company’s Form S-1 Registration Statement (File No. 333-77147) and incorporated herein by reference).
10.5	First Amendment to lease dated January 1, 2002 by and between Towne Square Realty, L.L.C. and The PrivateBank and Trust Company (filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 000-75887) and incorporated herein by reference).
10.6	Sublease Agreement for banking facility located at 1401 South Brentwood Blvd., St. Louis, Missouri, dated as of December 13, 1999, by and between Union Planters Bank, National Association, St. Louis Brentwood Associates, L.P. and PrivateBancorp, Inc. (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2000 (File No. 000-75887) and incorporated herein by reference).

EXHIBIT NO.	DESCRIPTION OF EXHIBITS
10.7	Lease Agreement for banking facility located at 312 Crescent Place, Geneva, Illinois by and between Shodeen Management Company as agent for the beneficiaries of a land trust with Harris Bank St. Charles, pursuant to Trust Agreement dated March 4, 1994, and known as Trust No. 2321, and The PrivateBank and Trust Company dated January 9, 2001, (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (File No. 000-75887) and incorporated herein by reference).
10.8	Lease Agreement dated August 31, 1995 between 208 South LaSalle Associates, L.P. and Lodestar Financial Services, Inc. (filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 000-75887) and incorporated herein by reference).
10.9	First Amendment to lease dated February 15, 2000 between LaSalle-Adams, L.L.C. and Lodestar Financial Services, Inc. (filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 000-75887) and incorporated herein by reference).
10.10	Second Amendment to lease dated August 12, 2002 between LaSalle-Adams, L.L.C. and Lodestar Investment Counsel, Inc. (filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 000-75887) and incorporated herein by reference).
10.11	Lease agreement for banking facility located at 919 North Michigan Ave., Chicago, Illinois dated July 22, 2004, by and between Palmolive Building Retail LLC and The PrivateBank and Trust Company (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q on the quarter ended September 30, 2004 (File No. 000-75887) and incorporated herein by reference).
10.12	PrivateBancorp, Inc. Amended and Restated Stock Incentive Plan (filed as Appendix A to the Company’s Proxy Statement for its 2000 Annual Meeting of Stockholders (File No. 000-75887) and incorporated herein by reference).*
10.13	PrivateBancorp, Inc. Incentive Compensation Plan (filed as Appendix A to the Company’s Proxy Statement for its 2003 Annual Meeting of Stockholders (File No. 000-75887) and incorporated herein by reference).*
10.14	PrivateBancorp, Inc. Deferred Compensation Plan (filed as an exhibit to the Company’s Form S-8 Registration Statement (File No. 333-104807) and incorporated herein by reference).*
10.15	Employment Agreement by and between Ralph B. Mandell and PrivateBancorp, Inc. dated July 1, 2001 (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 (File No. 000-75887) and incorporated herein by reference).*
10.16	Outsourcing Agreement by and between The PrivateBank and Trust Company and Marshall & Ilsley Corporation, acting through its division M&I Data Services, dated as of April 9, 1999 (filed as an exhibit to the Company’s Form S-1 Registration Statement (File No. 333-77147) and incorporated herein by reference).
10.17	Employment Agreement by and between Richard C. Jensen, PrivateBancorp, Inc. and The PrivateBank – St. Louis dated as of October 1, 2003 (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 (File No. 000-75887) and incorporated herein by reference).*
10.18	Form of Indemnification Agreement by and between PrivateBancorp, Inc. and its directors and executive officers (filed as an exhibit to the Company’s Form S-1 Registration Statement (File No. 333-77147) and incorporated herein by reference).*

EXHIBIT NO.	DESCRIPTION OF EXHIBITS
10.19	Loan Agreement dated as of February 11, 2000, between PrivateBancorp, Inc. and LaSalle Bank National Association (filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (File No. 000-75887) and incorporated herein by reference).
10.20	Amendment No. 1 to Loan Agreement dated as of February 11, 2002 between PrivateBancorp, Inc. and LaSalle Bank National Association (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 (File No. 000-75887) and incorporated herein by reference).
10.21	Amendment No. 2 to Loan Agreement dated as of April 11, 2002 between PrivateBancorp, Inc. and LaSalle Bank National Association (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 (File No. 000-75887) and incorporated herein by reference).
10.22	Amendment No. 3 to Loan Agreement dated as of December 24, 2002 between PrivateBancorp, Inc. and LaSalle Bank National Association (filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 000-75887) and incorporated herein by reference).
10.23	Amendment No. 4 to Loan Agreement dated as of December 1, 2003 between PrivateBancorp, Inc. and LaSalle Bank National Association (filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003 (File No. 000-75887) and incorporated herein by reference).
10.24	Amendment No. 5 to Loan Agreement dated as of December 1, 2004, between PrivateBancorp, Inc. and LaSalle Bank National Association. (filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 000-75887) and incorporated herein by reference).
10.25	Amended and Restated Loan and Subordinated Debenture Purchase Agreement dated as of September 29, 2005 by and between PrivateBancorp, Inc. and LaSalle Bank National Association (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 (File No. 000-75887) and incorporated herein by reference).
10.26	Employment Agreement by and among William Goldstein and Lodestar Investment Counsel LLC, dated as of December 30, 2002 (filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 000-75887) and incorporated herein by reference).*
10.27	Employment Agreement by and among Dennis Klaeser and PrivateBancorp, Inc. dated October 1, 2003 (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 (File No. 000-75887) and incorporated herein by reference).*
10.28	Employment Agreement by and among Hugh H. McLean, PrivateBancorp, Inc. and The PrivateBank and Trust Company dated October 1, 2003 (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 (File No. 000-75887) and incorporated herein by reference).*
10.29	Employment Agreement by and among Gary S. Collins, PrivateBancorp, Inc. and The PrivateBank and Trust Company dated as of October 1, 2003 (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 (File No. 000-75887) and incorporated herein by reference).*

EXHIBIT NO.	DESCRIPTION OF EXHIBITS
10.30	Form of Incentive Stock Option Agreement pursuant to the PrivateBancorp, Inc. Incentive Compensation Plan (filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 000-75887) and incorporated herein by reference).
10.31	Form of Director Stock Option Agreement pursuant to the PrivateBancorp, Inc. Incentive Compensation Plan. (filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 000-75887) and incorporated herein by reference).
10.32	Form of Restricted Stock Award Agreement pursuant to the PrivateBancorp, Inc. Incentive Compensation Plan. (filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 000-75887) and incorporated herein by reference).
10.33	Employment Agreement by and among Wallace L. Head and PrivateBancorp, Inc. dated as of April 6, 2005.(1)*
10.34	Employment Agreement by and among James A. Ruckstaetter, PrivateBancorp, Inc. and The PrivateBank and Trust Company dated as of April 6, 2005.(1)*
10.35	Employment Agreement by and among Jay B. Williams and PrivateBancorp, Inc. dated as of April 6, 2005. (1)*
10.36	Employment Agreement by and among David Provost and PrivateBancorp, Inc. dated as of June 20, 2005 (filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 000-75887) and incorporated herein by reference).*
12.1	Calculation of Ratio of Earnings to Fixed Charges.(1)
21.1	Subsidiaries of the Registrant.(1)
23.1	Consent of Ernst & Young LLP.(1)
24.1	Powers of Attorney (set forth on signature page).
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(1)
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(1)
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(1)

(1) Filed herewith.

* Indicates management contracts or compensatory plans or arrangements required to be filed as an exhibit.

EX-10.33

Exhibit 10.33

EXECUTIVE EMPLOYMENT AGREEMENT

THIS AGREEMENT, made and entered into as of April 6, 2005 (the “Effective Date”), by and among PrivateBancorp, Inc. (hereinafter referred to as “PrivateBancorp” or “Employer”), and Wallace L. Head (hereinafter called the “Executive”).

WITNESSETH THAT:

WHEREAS, the Employer desires to continue to employ the Executive as Chairman and CEO of The PrivateBank Wealth Management, and the Executive desires to continue in such employment;

NOW, THEREFORE, in consideration of the mutual promises herein contained and subject to the conditions precedent set forth herein, the parties agree as follows:

1. Employment and Term.

(a) Employment. PrivateBancorp shall employ, or shall cause a newly-formed wealth management and trust subsidiary to employ, Executive as the Chairman and CEO of The PrivateBank Wealth Management and the Executive shall so serve, for the term set forth in Paragraph 1(b). To the extent the Executive is employed by such subsidiary, references herein to “Employer” shall include the subsidiary.

(b) Term. The Executive’s employment under this Agreement shall commence on the Effective Date and extend through September 30, 2005, subject to the extension of such term as hereinafter provided and subject to earlier termination as provided in Paragraph 7. The term of this Agreement shall automatically be extended for an additional year as of October 1, 2005 and each anniversary date thereof unless, no later than ninety (90) days prior to any such renewal date, either the board of directors of PrivateBancorp (the “Board”), or a duly authorized committee thereof, on behalf of the Employer, or the Executive gives written notice to the other, in accordance with Paragraph 15, that the term of this Agreement shall not be so extended. Notwithstanding anything in this Agreement to the contrary, if at any time during the Executive’s period of employment under this Agreement there is a Change in Control (as defined in Paragraph 7), the term of this Agreement shall automatically extend to a date which is two (2) years from the date of the Change in Control (and shall be further extended pursuant to the foregoing provisions of this Paragraph 1(b), unless written notice to the contrary is given in accordance with this Paragraph 1(b)).

2. Duties and Responsibilities.

(a) The duties and responsibilities of the Executive shall be of an executive nature as shall be required by the Employer in the conduct of its business. The Executive’s powers and authority shall be as prescribed by the by-laws of the Employer, if applicable, and shall include all those presently delegated to the Executive, together with the performance of such other duties and responsibilities as the Chief Executive Officer of the Employer may from time to time assign to the Executive not inconsistent with the Executive’s position(s) with the

Employer. The Executive recognizes, that during the period of the Executive’s employment hereunder, the Executive owes an undivided duty of loyalty to the Employer, and agrees to devote the Executive’s entire business time and attention to the performance of said duties and responsibilities and to use the Executive’s best efforts to promote and develop the business of the Employer. Recognizing and acknowledging that it is essential for the protection and enhancement of the name and business of the Employer and the goodwill pertaining thereto, the Executive shall perform his duties under this Agreement professionally, in accordance with the applicable laws, rules and regulations and such standards, policies and procedures established by the Employer and the industry from time to time, including the Employer’s Corporate Code of Ethics. The Executive will not perform any duties for any other business without the prior written consent of the Employer, but may engage in charitable, civic or community activities, provided that such duties or activities do not materially interfere with the proper performance of the Executive’s duties under this Agreement. During the period of employment, the Executive agrees to serve as a director on the Board of Directors of the Employer and/or the board of directors or managers, as applicable, of any of its subsidiaries and affiliates, as well as to serve as a member of any committee of any said boards, to which the Executive may be elected or appointed.

(b) Notwithstanding that this Agreement provides for the employment of the Executive in the Executive’s capacity as the Chairman and CEO of The PrivateBank Wealth Management of the Employer, nothing herein contained shall assure the Executive of, nor in any manner shall be construed to constitute an agreement by the Employer to the, continued employment of the Executive after the expiration or termination of this Agreement in such capacity or in any other capacity.

3. Base Salary. For services performed by the Executive for the Employer pursuant to this Agreement during the period of employment as provided in Paragraph 1(b) hereof, the Employer shall pay the Executive a base salary at the rate of two hundred thousand dollars ($200,000) per year, payable in substantially equal installments in accordance with the Employer’s regular payroll practices. The Executive’s base salary (with any increases under this Paragraph 3) shall not be subject to reduction without the Executive’s written consent. Any compensation which may be paid to the Executive under any additional compensation or incentive plan of the Employer or which may be otherwise authorized from time to time by the Board (or an appropriate committee thereof) shall be in addition to the base salary to which the Executive shall be entitled under this Agreement. Executive’s base salary shall be subject to review from time to time, and the Employer may (but is not required to) increase the base salary as the Board, in its discretion, may determine.

4. Annual Bonuses. For each fiscal year during the term of employment, the Executive shall be eligible to receive a bonus in the amount, if any, as may be determined from time to time by the Board in its discretion.

5. Equity Incentive Compensation. During the term of employment hereunder, the Executive shall be eligible to participate in the PrivateBancorp, Inc. Incentive Compensation Plan, and in any other equity-based incentive compensation plan or program adopted by the Employer, including (but not by way of limitation) any plan providing for the granting of

2

(a) options to purchase stock, (b) restricted stock or (c) similar equity-based units or interests to officers of the Employer.

6. Other Benefits. In addition to the compensation described in Paragraphs 3, 4 and 5, above, the Executive shall also be entitled to the following:

(a) Participation in Benefit Plans. The Executive shall be entitled to participate in such life insurance, disability, medical, dental, pension, profit sharing and retirement plans and other programs as may be made generally available from time to time by the Employer for the benefit of executives of the Executive’s level or its employees generally.

(b) Vacation. The Executive shall be entitled to such number of days of vacation with pay during each calendar year during the period of employment in accordance with the Employer’s applicable personnel policy as in effect from time to time.

(c) Executive Perquisites. The Employer shall furnish Executive with such perquisites as are provided from time to time by the Employer to its officers generally and are suitable to the Executive’s position, adequate for the performance of the Executive’s duties hereunder, and reasonable in the circumstances. Without limitation of the foregoing, Employer shall pay the cost of Executive’s membership in one downtown club and shall reimburse Executive for the cost of annual country club dues at one country club of which Executive is a member, in each case subject to Employer approval of the club.

(d) Expense Reimbursement. The Employer shall reimburse the Executive for all reasonable expenses incurred by the Executive in performing services hereunder, which are incurred and accounted for in accordance with the Employer’s policies and procedures applicable thereto.

7. Termination. Unless earlier terminated in accordance with the following provisions of this Paragraph 7, the Employer shall continue to employ the Executive and the Executive shall remain employed by the Employer during the entire term of this Agreement as set forth in Paragraph 1(b). Paragraph 8 hereof sets forth certain obligations of the Employer in the event that the Executive’s employment hereunder is terminated. Certain capitalized terms used in this Paragraph 7 and in Paragraph 8 hereof are defined in Paragraph 7(d), below. In the event of termination of the Executive’s employment with the Employer for any reason, or if the Executive is required by the Board, the Executive agrees to resign, and shall automatically be deemed to have resigned, from any offices (including any directorship) the Executive holds with the Employer and/or any of its affiliates effective as of the termination date of the Executive’s employment hereunder, or, if applicable, effective as of a date selected by the Board; provided, however, that the foregoing resignation shall not prejudice or otherwise affect the Executive’s rights and obligations, if any, under this Agreement.

(a) Death or Disability. Except to the extent otherwise provided in Paragraphs 8, 12 and 13 with respect to death benefits and certain post-Date of Termination obligations of the parties, this Agreement shall terminate immediately as of the Date of Termination in the event of the Executive’s death or in the event that the Executive becomes Disabled (as hereinafter defined). The Board shall promptly give the Executive written notice of

3

any such determination of the Executive’s Disability and of any decision of the Board to terminate the Executive’s employment by reason thereof. In the event of Disability, until the Date of Termination, the base salary payable to the Executive under Paragraph 3 hereof shall be reduced dollar-for-dollar by the amount of disability benefits, if any, paid to the Executive in accordance with any disability policy or program of the Employer.

(b) Discharge for Cause. In accordance with the procedures hereinafter set forth, the Board may discharge the Executive from the Executive’s employment hereunder for Cause (as hereinafter defined). Except to the extent otherwise provided in Paragraphs 8, 12 and 13 with respect to certain post-Date of Termination obligations of the parties, this Agreement shall terminate immediately as of the Date of Termination in the event the Executive is discharged for Cause. Any discharge of the Executive for Cause shall be communicated by a Notice of Termination to the Executive given in accordance with Paragraph 15 of this Agreement.

(c) Termination for Other Reasons. The Employer may discharge the Executive without Cause by giving written notice to the Executive in accordance with Paragraph 15. The Executive may resign from the Executive’s employment with or without Good Reason, without liability to the Employer, by giving written notice to the Employer in accordance with Paragraph 15 at least thirty (30) days prior to the Date of Termination; provided, however, that no resignation shall be treated as a resignation for Good Reason unless the written notice thereof is given within sixty (60) days after the occurrence which constitutes “Good Reason” or during the ninety (90) day period described in the final sentence of Paragraph 7(d)(vi); provided, further, that the Employer retains the right after proper notice of the Executive’s voluntary termination to require the Executive to cease the Executive’s employment immediately. Except to the extent otherwise provided in Paragraphs 8, 12 and 13 with respect to certain post-Date of Termination obligations of the parties, this Agreement shall terminate immediately as of the Date of Termination in the event the Executive is discharged without Cause or resigns for any reason or no reason.

(d) Definitions. For purposes of this Agreement, the following capitalized terms shall have the meanings set forth below:

(i) “Accrued Obligations” shall mean, as of the Date of Termination, the sum of (A) the Executive’s base salary under Paragraph 3 through the Date of Termination to the extent not theretofore paid, (B) the amount of any deferred compensation and other cash compensation accrued by the Executive as of the Date of Termination to the extent not theretofore paid, (C) any vacation pay, expense reimbursements and other cash entitlements accrued by the Executive as of the Date of Termination to the extent not theretofore paid, (D) any grants and awards vested or accrued under any equity-based incentive compensation plan or program and (E) all other benefits which have accrued as of the Date of Termination. For the purpose of this Paragraph 7(d)(i), except as provided in the applicable plan, program or policy, amounts shall be deemed to accrue ratably over the period during which they are earned, but no discretionary compensation shall be deemed earned or accrued until it is specifically approved by the Board in accordance with the applicable plan, program or policy.

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(ii) “Cause” shall mean (A) the Executive’s willful and continued (for a period of not less than ten (10) business days after written notice thereof) failure to perform substantially the duties of his employment (other than as a result of physical or mental incapacity, or while on vacation); or (B) the Executive’s willful engaging in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Employer; or (C) the Executive’s conviction of a felony involving moral turpitude, but specifically excluding any conviction based entirely on vicarious liability (with “vicarious liability” meaning liability based on acts of the Employer for which the Executive is charged solely as a result of his offices with the Employer and in which he was not directly involved and did not have prior knowledge of such actions or intended actions); provided, however, that no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Employer; and provided further that no act or omission by the Executive shall constitute Cause hereunder unless the Employer has given detailed written notice thereof to the Executive, and the Executive has failed to remedy such act or omission.

(iii) “Change in Control” shall mean the occurrence of any one of the following events:

(A) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than (i) a trustee or other fiduciary holding securities under an employee benefit plan of PrivateBancorp or any of its subsidiaries, or (ii) a corporation owned directly or indirectly by the stockholders of PrivateBancorp in substantially the same proportions as their ownership of stock of PrivateBancorp, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of PrivateBancorp representing 20% or more of the total voting power of the then outstanding shares of capital stock of PrivateBancorp entitled to vote generally in the election of directors (the “Voting Stock”), provided, however, that the following shall not constitute a change in control: (1) such person becomes a beneficial owner of 20% or more of the Voting Stock as the result of an acquisition of such Voting Stock directly from PrivateBancorp, or (2) such person becomes a beneficial owner of 20% or more of the Voting Stock as a result of the decrease in the number of outstanding shares of Voting Stock caused by the repurchase of shares by PrivateBancorp; provided, further, that in the event a person described in clause (1) or (2) shall thereafter increase (other than in circumstances described in clause (1) or (2)) beneficial ownership of stock representing more than 1% of the Voting Stock, such person shall be deemed to become a beneficial owner of 20% or more of the Voting Stock for purposes of this Paragraph (A), provided such person continues to beneficially own 20% or more of the Voting Stock after such subsequent increase in beneficial ownership, or

(B) During any period of two consecutive years, individuals (the “Incumbent Board”), who at the beginning of such period constitute the

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Board, and any new director, whose election by the Board or nomination for election by PrivateBancorp’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or

(C) Consummation of a reorganization, merger or consolidation or the sale or other disposition of all or substantially all of the assets of PrivateBancorp (a “Business Combination”), in each case, unless (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Voting Stock immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the total voting power represented by the voting securities entitled to vote generally in the election of directors of the corporation resulting from the Business Combination (including, without limitation, a corporation which as a result of the Business Combination owns PrivateBancorp or all or substantially all of PrivateBancorp’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to the Business Combination of the Voting Stock of PrivateBancorp, and (2) at least a majority of the members of the board of directors of the corporation resulting from the Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or action of the Incumbent Board, providing for such Business Combination; or

(D) Approval by the stockholders of PrivateBancorp of a plan of complete liquidation or dissolution of PrivateBancorp.

The Board has final authority to construe and interpret the provisions of the foregoing Paragraphs (A), (B), (C) and (D) and to determine the exact date on which a Change in Control has been deemed to have occurred thereunder.

(iv) “Date of Termination” shall mean (A) in the event of a discharge of the Executive for or without Cause, the date the Executive receives a Notice of Termination, or any later date specified in such Notice of Termination, as the case may be, (B) in the event of a resignation by the Executive, the date specified in the written notice to the Employer, which date shall be no less than thirty (30) days from the date of such written notice (or such earlier date as the Employer may elect in its sole discretion), (C) in the event of the Executive’s death, the date of the Executive’s death, and (D) in the event of termination of the Executive’s employment by reason of Disability pursuant to Paragraph 7(a), the date the Executive receives written notice of such termination.

(v) “Disabled” and “Disability” shall mean that the Executive will be deemed to be disabled upon the earlier of (i) the end of a six (6) consecutive month period, or an aggregate period of nine (9) months out of any consecutive twelve (12) months, during which, by reason of physical or mental injury or disease, the Executive has been unable to perform substantially all of the Executive’s usual and customary duties under this Agreement or (ii) the date that a reputable physician selected

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by the Board, and as to whom the Executive has no reasonable objection, determines in writing that the Executive will, by reason of physical or mental injury or disease, be unable to perform substantially all of the Executive’s usual and customary duties under this Agreement for a period of at least six (6) consecutive months. If any question arises as to whether the Executive is Disabled, upon reasonable request therefore by the Board, the Executive shall submit to a reasonable medical examination for the purpose of determining the existence, nature and extent of any such disability.

(vi) “Good Reason” shall mean the occurrence, other than in connection with a discharge, of any of the following without the Executive’s consent: (A) the Executive is not re-elected or is removed from the positions with the Employer set forth in Paragraph 1(a), other than as a result of the Executive’s election or appointment to positions of equal or superior scope and responsibility; or (B) the Executive shall fail to be vested by the Employer with the power and authority of any of said positions, excluding for this purpose any isolated action not taken in bad faith and which is remedied by the Employer promptly after receipt of written notice thereof given by the Executive in accordance with Paragraph 15; or (C) any failure by the Employer to materially comply with any of the provisions of this Agreement, other than any isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Employer promptly after receipt of written notice thereof given by the Executive in accordance with Paragraph 15; (D) the Employer giving notice to the Executive pursuant to Paragraph 1(b) that the term of this Agreement shall not be extended upon the expiration of the then-current term; or (E) the Employer requiring the Executive to be based at an office or location which is more than 50 miles from the Executive’s office as of the Effective Date or any renewal date of the extended term of this Agreement. In addition, any termination by the Executive during the ninety (90) day period beginning on the first anniversary of the date of a Change in Control shall be deemed to be for “Good Reason.”

(vii) “Notice of Termination” shall mean a written notice which (A) indicates the specific termination provision in this Agreement relied upon, (B) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (C) if the Date of Termination is to be other than the date of receipt of such notice or the date otherwise specified under this Agreement, specifies the termination date.

8. Obligations of the Employer Upon Termination. The following provisions describe the obligations of the Employer to the Executive under this Agreement upon termination of employment. However, except as explicitly provided in this Agreement, nothing in this Agreement shall limit or otherwise adversely affect any rights which the Executive may have under applicable law, under any other agreement with the Employer or any of its affiliates or subsidiaries, or under any compensation or benefit plan, program, policy or practice of the Employer or any of its affiliates or subsidiaries.

(a) Death, Disability, Discharge for Cause, or Resignation without Good Reason. In the event this Agreement terminates pursuant to Paragraph 7(a) by reason of the death or Disability of the Executive, pursuant to Paragraph 7(b) by reason of the discharge of the

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Executive by the Employer for Cause, or pursuant to Paragraph 7(c) by reason of the resignation of the Executive other than for Good Reason, the Employer shall pay to the Executive, or the Executive’s heirs or estate in the event of the Executive’s death, all Accrued Obligations in a lump sum in cash within thirty (30) days after the Date of Termination; provided, however, that any portion of the Accrued Obligations which consists of bonus (including sign-on bonus, if any), deferred compensation, incentive compensation, insurance benefits or other employee benefits shall be determined and paid in accordance with the terms of the relevant plan or policy as applicable to the Executive. In addition, in the event this Agreement terminates pursuant to Paragraph 7(a) by reason of death of the Executive, the Employer shall pay to the Executive’s heirs or estate death benefits in a lump sum amount equal to six (6) months of the Executive’s then-current annual base salary.

(b) Discharge without Cause or Resignation with Good Reason. In the event that this Agreement terminates pursuant to Paragraph 7(c) by reason of the discharge of the Executive by the Employer other than for Cause, death or Disability or by reason of the resignation of the Executive for Good Reason:

(i) The Employer shall pay all Accrued Obligations to the Executive in a lump sum in cash within thirty (30) days after the Date of Termination; provided, however, that any portion of the Accrued Obligations which consists of bonus, deferred compensation, incentive compensation, insurance benefits or other employee benefits shall be determined and paid in accordance with the terms of the relevant plan or policy as applicable to the Executive;

(ii) Within thirty (30) days after the Date of Termination, the Employer shall pay to the Executive a bonus for the year during which termination occurs, calculated as a prorata portion of the Executive’s prior year’s bonus amount (if any) based on the number of days elapsed during the year through the Date of Termination;

(iii) Severance payments equal to one hundred percent (100%) of the sum of (A) the Executive’s then-current annual base salary, plus (B) the average of the sum of the bonus amounts earned by the Executive with respect to the three (3) calendar years (or such fewer number of years as Executive has been employed) immediately preceding the calendar year in which the Executive’s Date of Termination occurs, payable in substantially equal monthly installments for a period of twelve (12) months (the “Severance Period”) in accordance with the Employer’s regular payroll practices; and

(iv) Continuation for the Severance Period of the Executive’s right to maintain COBRA continuation coverage under the applicable plans at premium rates on the same “cost-sharing” basis as the applicable premiums paid for such coverage by active employees as of the Date of Termination.

In the event that upon the expiration of the Severance Period, Executive is not employed or otherwise providing compensated services of any type, and has not done so during the final ninety (90) days of the Severance Period, the Employer may, in its sole discretion (which

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discretion need not be applied in a consistent manner from one executive to another), agree to extend the Severance Period for up to an additional six (6) months (the “Extended Severance Period”). The payments to Executive described in subParagraph (iii) above and the reduced COBRA continuation premium described in subParagraph (iv) above shall continue during the Extended Severance Period, subject to earlier termination effective as of the first day of the month following the date on which the Executive becomes employed or provides compensated services of any type (including self-employment).

The Executive shall provide such information as the Employer may reasonably request to determine Executive’s continued eligibility for the payments and benefits provided by this Paragraph 8(b).

(c) Effect of Change in Control. In the event that a Change in Control occurs and this Agreement thereafter terminates pursuant to Paragraph 7(c) by reason of the discharge of the Executive by the Employer other than for Cause, death or Disability, or by reason of the resignation of the Executive for Good Reason:

(i) The Employer shall pay all Accrued Obligations to the Executive in a lump sum in cash within thirty (30) days after the Date of Termination; provided, however, that any portion of the Accrued Obligations which consists of bonus, deferred compensation, incentive compensation, insurance benefits or other employee benefits shall be determined and paid in accordance with the terms of the relevant plan or policy as applicable to the Executive;

(ii) Within thirty (30) days after the Date of Termination, the Employer shall pay to the Executive a bonus for the year during which termination occurs, calculated as a prorata portion of the Executive’s prior year’s bonus amount (if any) based on the number of days elapsed during the year through the Date of Termination;

(iii) The Employer shall pay the Executive a lump sum payment within thirty (30) days after such termination of employment in the amount of two (2) times the sum of the following:

(A) the amount of the Executive’s annual base salary determined as of the Date of Termination, or the date immediately preceding the date of the Change in Control, whichever is greater; plus

(B) the greater of (A) the Executive’s bonus amount, if any, for the calendar year immediately preceding that in which the Date of Termination occurs, or (B) the average of the sum of the bonus amounts earned by the Executive with respect to the three (3) calendar years (or such fewer number of years as Executive has been employed) immediately preceding the calendar year in which the Executive’s Date of Termination occurs, or if such sum would be greater, with respect to the three (3) calendar years immediately preceding the calendar year of the date of the Change in Control; plus

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(C) the sum of:

(I) the annual value of the contributions that would have been expected to be made or credited by the Employer to, and benefits expected to be accrued under, the qualified and non-qualified employee profit sharing, 401(k), pension and any other benefit plans maintained by the Employer to or for the benefit of the Executive; plus

(II) the annual value of the Other Benefits described in Paragraph 6(a) and (c) above.

For purposes of subParagraph (C)(I) above, the annual value of the contributions and accruals to or under the employee benefit plans shall be determined on the basis of the actual rate of contributions or accruals, as applicable, and the provisions of the plans as in effect during the calendar year immediately preceding the date of the Change in Control, or if the value so determined would be greater, during the calendar year immediately preceding the Date of Termination. The “annual value” of the executive perquisites described in Paragraph 6(c) for purposes of subParagraph (C)(II) above shall be deemed to equal 7.5% of the annual base salary amount applicable under clause (iii)(A) above.

The Executive shall also be entitled to outplacement services for a reasonable period of time as agreed between the Executive and the Employer.

Notwithstanding the foregoing, if a Change in Control occurs and this Agreement is terminated prior to the Change in Control pursuant to Paragraph 7(c) by reason of the discharge of the Executive by the Employer other than for Cause, death or Disability or by reason of the resignation of the Executive for Good Reason, then the Executive shall be deemed for purposes of this Paragraph 8(c) to have so terminated pursuant to Paragraph 7(c) immediately following the date the Change in Control occurs if it is reasonably demonstrated by the Executive that such earlier termination was (i) at the request of a third party who had taken steps reasonably calculated to effect the Change in Control, or (ii) otherwise arose, or the circumstances that precipitated the termination otherwise arose, in connection with or in anticipation of the Change in Control.

(d) Effect on Other Amounts. The payments provided for in this Paragraph 8 shall be in addition to all other sums then payable and owing to the Executive, shall be subject to applicable federal and state income and other withholding taxes and shall be in full settlement and satisfaction of all of the Executive’s claims and demands. Upon such termination of this Agreement, the Employer shall have no rights or obligations under this Agreement, other than its obligations under this Paragraph 8, and the Executive shall have no rights and obligations under this Agreement, other than the Executive’s obligations under Paragraphs 12 and 13 hereof (to the extent applicable); provided, however, termination of this Agreement shall not terminate the obligation of the Executive to pay to the Employer any amounts for which the Executive may be liable to the Employer under any provision of the Sarbanes-Oxley Act of 2002 (including, without limitation, Section 304 of such Act), or any rules and regulations promulgated thereunder, as amended from time to time.

(e) Conditions. Any payments or benefits made or provided pursuant to this Paragraph 8 are subject to the Executive’s:

(i) compliance with the provisions of Paragraphs 12 and 13 hereof (to the extent applicable);

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(ii) delivery to the Employer of an executed Release and Severance Agreement, which shall be substantially in the form attached hereto as Exhibit A, with such changes therein or additions thereto as needed under then applicable law to give effect to its intent and purpose; and

(iii) delivery to the Employer of a resignation from all offices, directorships and fiduciary positions with the Employer, its affiliates and employee benefit plans.

Notwithstanding the due date of any post-employment payments, any amounts due under this Paragraph 8 shall not be due until after the expiration of any revocation period applicable to the Release and Severance Agreement.

9. Certain Additional Payments by the Employer.

(a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Employer to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Paragraph 9) (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, (the “Code”) or if any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, being hereinafter collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.

(b) Subject to the provisions of Paragraph (c), below, all determinations required to be made under this Paragraph 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the independent public accountants then regularly retained by the Employer (the “Accounting Firm”) in consultation with counsel acceptable to Executive, which shall provide detailed supporting calculations both to the Employer and the Executive within fifteen (15) business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Employer. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting a Change in Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder) in consultation with counsel acceptable to Executive. All fees and expenses of the Accounting Firm and such counsel shall be borne solely by the Employer. Any Gross-Up Payment, as determined pursuant to this Paragraph 9, shall be

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paid by the Employer to the Executive within five (5) days of the receipt of the Accounting Firm’s determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive’s applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any good faith determination by the Accounting Firm shall be binding upon the Employer and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Employer should have been made (“Underpayment”), consistent with the calculations required to be made hereunder. In the event that the Employer exhausts its remedies pursuant to Paragraph (c), below, and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Employer to or for the benefit of the Executive.

(c) The Executive shall notify the Employer in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Employer of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than fifteen (15) business days after the Executive is informed in writing of such claim and shall apprise the Employer of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the thirty (30)-day period following the date on which Executive gives such notice to the Employer (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Employer notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:

(i) Give the Employer any information reasonably requested by the Employer relating to such claim,

(ii) Take such action in connection with contesting such claim as the Employer shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Employer,

(iii) Cooperate with the Employer in good faith in order effectively to contest such claim, and

(iv) Permit the Employer to participate in any proceedings relating to such claim;

provided, however, that the Employer shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this Paragraph (c), the Employer shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals,

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proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner; and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Employer shall determine; provided, however, that if the Employer directs the Executive to pay such claim and sue for a refund, the Employer shall advance the amount of such payment to the Executive on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Employer’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(d) If, after the receipt by the Executive of an amount advanced by the Employer pursuant to Paragraph (c), above, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Employer’s complying with the requirements of said Paragraph (c)) promptly pay to the Employer the amount of such refund (together with any interest paid or credited thereon, after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Employer pursuant to said Paragraph (c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Employer does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid; and the amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid.

10. Dispute Resolution. In the event any dispute arises and the parties after good faith efforts are unable to agree as to the calculation of the amounts payable under this Agreement, it shall be settled in accordance with the majority opinion of a committee consisting of an accountant chosen by the Employer, an accountant chosen by the Executive and an independent accountant acceptable to both the Executive and the Employer, as the case may be. The committee’s determination shall be binding and conclusive on the parties hereto. The Employer shall pay all fees and expenses of the dispute resolution.

11. Enforcement. In the event the Employer shall fail to pay any amounts due to the Executive under this Agreement as they come due, the Employer agrees to pay interest on such amounts at a rate equal to the prime rate plus four percent (4%) per annum (as from time to time published in The Wall Street Journal (Midwest Edition)). The Employer agrees that Executive and any successor shall be entitled to recover all costs of successfully enforcing any provision of this Agreement, including reasonable attorneys fees and costs of litigation, if Executive is the prevailing party.

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12. Confidential Information.

The Executive shall not at any time during or following the Executive’s employment with the Employer, directly or indirectly, disclose or use on the Executive’s behalf or another’s behalf, publish or communicate, except in the course of the Executive’s employment and in the pursuit of the business of the Employer or any of its subsidiaries or affiliates, any proprietary information or data of the Employer or any of its subsidiaries or affiliates, which is not generally known to the public or which could not be recreated through public means and which the Employer may reasonably regard as confidential and proprietary. The Executive recognizes and acknowledges that all knowledge and information which the Executive has or may acquire in the course of the Executive’s employment, such as, but not limited to the business, developments, procedures, techniques, activities or services of the Employer or the business affairs and activities of any customer, prospective customer, individual firm or entity doing business with the Employer are its sole valuable property, and shall be held by Executive in confidence and in trust for their sole benefit. All records of every nature and description which come into the Executive’s possession, whether prepared by the Executive, or otherwise, shall remain the sole property of the Employer and upon termination of the Executive’s employment for any reason, said records shall be left with the Employer as part of its property.

13. Non-Competition; Non-Solicitation. The Executive acknowledges that the Employer and its affiliates and subsidiaries by nature of their respective businesses have a legitimate and protectable interest in their clients, customers and employees with whom they have established significant relationships as a result of a substantial investment of time and money, and but for the Executive’s employment hereunder, the Executive would not have had contact with such clients, customers and employees. The Executive agrees that during the period of the Executive’s employment with the Employer and for a period of one (1) year after termination of the Executive’s employment for any reason (the “Non-Compete Period”), the Executive will not (except in the Executive’s capacity as an employee of the Employer) directly or indirectly, for the Executive’s own account, or as an agent, employee, director, owner, partner, or consultant of any corporation, firm, partnership, joint venture, syndicate, sole proprietorship or other entity which has a place of business (whether as a principal, division, subsidiary, affiliate, related entity, or otherwise) located within the Market Area (as hereinafter defined):

(a) engage, directly or indirectly, in any business that provides banking products or services or that otherwise competes in any way with the Employer or any of its subsidiaries or affiliates;

(b) solicit or induce, or attempt to solicit or induce any client or customer of the Employer or any of its subsidiaries or affiliates not to do business with the Employer or any of its subsidiaries or affiliates; or

(c) solicit or induce, or attempt to solicit or induce, any employee or agent of the Employer or any of its subsidiaries or affiliates to terminate his or her relationship with the Employer or any of its subsidiaries or affiliates.

For purposes of this Agreement, “Market Area” shall be an area encompassed within a fifty (50) mile radius surrounding Executive’s office as of the Date of Termination of employment.

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The foregoing provisions shall not be deemed to prohibit (i) the Executive’s ownership, not to exceed five percent (5%) of the outstanding shares, of capital stock of any corporation whose securities are publicly traded on a national or regional securities exchange or in the over-the-counter market or (ii) the Executive serving as a director of other corporations and entities to the extent these directorships do not inhibit the performance of the Executive’s duties hereunder or conflict with the business of the Employer.

14. Remedies.

(a) The Executive acknowledges that the restraints and agreements herein provided are fair and reasonable, that enforcement of the provisions of Paragraphs 12 and 13 will not cause the Executive undue hardship and that said provisions are reasonably necessary and commensurate with the need to protect the Employer and its legitimate and proprietary business interests and property from irreparable harm. The Executive acknowledges and agrees that (a) a breach of any of the covenants and provisions contained in Paragraphs 12 or 13 above, will result in irreparable harm to the business of the Employer, (b) a remedy at law in the form of monetary damages for any breach by the Executive of any of the covenants and provisions contained in Paragraphs 12 and 13 is inadequate, (c) in addition to any remedy at law or equity for such breach, the Employer shall be entitled to institute and maintain appropriate proceedings in equity, including a suit for injunction to enforce the specific performance by Executive of the obligations hereunder and to enjoin Executive from engaging in any activity in violation hereof and (d) the covenants on the Executive’s part contained in Paragraphs 12 and 13, shall be construed as agreements independent of any other provisions in this Agreement, and the existence of any claim, setoff or cause of action by the Executive against the Employer, whether predicated on this Agreement or otherwise, shall not constitute a defense or bar to the specific enforcement by the Employer of said covenants. In the event of a breach or a violation by the Executive of any of the covenants and provisions of this Agreement, the running of the Non-Compete Period (but not of Executive’s obligation thereunder) shall be tolled during the period of the continuance of any actual breach or violation.

(b) The parties hereto agree that the covenants set forth in Paragraphs 12 and 13 are reasonable with respect to their duration, geographical area and scope. If the final judgment of a court of competent jurisdiction declares that any term or provision of Paragraph 12 or 13 is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.

15. Notices. Any notice or other communication required or permitted to be given hereunder shall be determined to have been duly given to any party (a) upon delivery to the address of such party specified below if delivered personally or by courier; (b) upon dispatch if transmitted by telecopy or other means of facsimile, provided a copy thereof is also sent by regular mail or courier; (c) within forty-eight (48) hours after deposit thereof in the U.S. mail, postage prepaid, for delivery as certified mail, return receipt requested; or (d) within twenty-four

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(24) hours after deposit thereof with a reputable overnight courier (charges prepaid), addressed, in any case to the party at the following address(es) or telecopy numbers:

(a) If to Executive, at the address set forth on the signature page hereof.

(b) If to the Employer:

PrivateBancorp, Inc.

Ten North Dearborn Street

Suite 900

Chicago, IL 60602

Attn: Chief Executive Officer

Telecopy No.: (312) 683-7111

with a copy to:

Vedder, Price, Kaufman & Kammholz, P.C.

222 North LaSalle Street

Chicago, Illinois 60601-1003

Attn: Thomas P. Desmond

Telecopy No.: (312) 609-5005

or to such other address(es) or telecopy number(s) as any party may designate by written notice in the aforesaid manner.

16. Indemnification.

(a) In the event that legal action is instituted against the Executive during or after the term hereof by a third party (or parties) based on the performance or nonperformance by the Executive of the Executive’s duties hereunder, the Employer will assume the defense of such action by its attorneys or attorneys selected by the Executive reasonably satisfactory to the Employer and advance the costs and expenses thereof (including reasonable attorneys’ fees) without prejudice to or waiver by the Employer of its rights and remedies against the Executive. In the event that there is a final judgment entered against the Executive in any such litigation, and Executive is obligated, in accordance with its charter, by-laws, or insurance, to reimburse such entities, the Executive shall be liable to the Employer for all such costs and expenses paid or incurred by them in the defense of any such litigation (the “Reimbursement Amount”). The Reimbursement Amount shall be paid by the Executive within thirty (30) days after rendition of the final judgment. The Employer shall be entitled to set off the reimbursement amount against all sums which may be owed or payable by the Employer to the Executive hereunder or otherwise. The parties shall cooperate in the defense of any asserted claim, demand or liability against the Executive or the Employer or its subsidiaries or affiliates. The term “final judgment” as used herein shall be defined to mean the decision of a court of competent jurisdiction, and in the event of an appeal, then the decision of the appellate court, after petition for rehearing has been denied, or the time for filing the same (or the filing of further appeal) has expired.

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(b) The rights to indemnification under this Section 16 shall be in addition to any rights which the Executive may now or hereafter have under the charter or By-laws of the Employer or any of its affiliates or subsidiaries, under any insurance contract maintained by the Employer or any of its affiliates or subsidiaries, or any agreement between the Executive and the Employer or any of its affiliates or subsidiaries.

17. Full Settlement; No Mitigation. The Employer’s obligation to make the payments and provide the benefits provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Employer may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment.

18. Payment in the Event of Death. In the event payment is due and owing by the Employer to the Executive under this Agreement upon the death of the Executive, payment shall be made to such beneficiary as the Executive may designate in writing, or failing such designation, then the executor of the Executive’s estate, in full settlement and satisfaction of all claims and demands on behalf of the Executive, shall be entitled to receive all amounts owing to the Executive at the time of the Executive’s death under this Agreement. Such payments shall be in addition to any other death benefits of the Employer and in full settlement and satisfaction of all severance benefit payments provided for in this Agreement.

19. Entire Understanding. This Agreement constitutes the entire understanding between the parties relating to Executive’s employment hereunder and supersedes and cancels all prior written and oral understandings and agreements with respect to such matters and except for the terms and provisions of any employee benefit or other compensation plans (or any agreements or awards thereunder), referred to in this Agreement, or as otherwise expressly contemplated by this Agreement.

20. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the heirs and representatives of the Executive and the successors and assigns of the Employer. The Employer shall require any successor (whether direct or indirect, by purchase, merger, reorganization, consolidation, acquisition of property or stock, liquidation, or otherwise) to all or a substantial portion of its assets, by agreement in form and substance reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Employer would be required to perform this Agreement if no such succession had taken place. Regardless of whether such an agreement is executed, this Agreement shall be binding upon any successor of the Employer in accordance with the operation of law, and such successor shall be deemed the “Employer” for purposes of this Agreement.

21. Tax Withholding. The Employer shall provide for the withholding of any taxes required to be withheld by federal, state, or local law with respect to any payment in cash, shares of stock and/or other property made by or on behalf of the Employer to or for the benefit of the Executive under this Agreement or otherwise. The Employer may, at its option: (a) withhold

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such taxes from any cash payments owing from the Employer to the Executive, (b) require the Executive to pay to the Employer in cash such amount as may be required to satisfy such withholding obligations and/or (c) make other satisfactory arrangements with the Executive to satisfy such withholding obligations.

22. No Assignment. Except as otherwise expressly provided herein, this Agreement is not assignable by any party and no payment to be made hereunder shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or other charge.

23. Execution in Counterparts. This Agreement may be executed by the parties hereto in two (2) or more counterparts, each of which shall be deemed to be an original, but all such counterparts shall constitute one and the same instrument, and all signatures need not appear on any one counterpart.

24. Jurisdiction and Governing Law. Except as provided in Paragraph 10, jurisdiction over disputes with regard to this Agreement shall be exclusively in the courts of the State of Illinois, and this Agreement shall be construed, interpreted and enforced in accordance with and governed by the laws of the State of Illinois, without regard to the choice of laws provisions of such State.

25. Severability. If any provision of this Agreement shall be adjudged by any court of competent jurisdiction to be invalid or unenforceable for any reason, such judgment shall not affect, impair or invalidate the remainder of this Agreement. Furthermore, if the scope of any restriction or requirement contained in this Agreement is too broad to permit enforcement of such restriction or requirement to its full extent, then such restriction or requirement shall be enforced to the maximum extent permitted by law, and the Executive consents and agrees that any court of competent jurisdiction may so modify such scope in any proceeding brought to enforce such restriction or requirement.

26. Survival. Provisions of this Agreement shall survive the termination of the Executive’s employment with the Employer to the extent provided herein.

27. Waiver. The waiver of any party hereto of a breach of any provision of this Agreement by any other party shall not operate or be construed as a waiver of any subsequent breach.

28. Amendment. No change, alteration or modification hereof may be made except in a writing, signed by each of the parties hereto.

29. Construction. The language used in this Agreement will be deemed to be the language chosen by Employer and the Executive to express their mutual intent and no rule of strict construction shall be applied against any person. Wherever from the context it appears appropriate, each term stated in either the singular of plural shall include the singular and the plural, and the pronouns stated in either the masculine, the feminine or the neuter gender shall include the masculine, feminine or neuter. The headings of the Paragraphs of this Agreement are for reference purposes only and do not define or limit, and shall not be used to interpret or construe the contents of this Agreement.

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30. No Duplication. Notwithstanding anything herein to the contrary, to the extent that any compensation or benefits are paid to or received by the Executive from the Bank, PrivateBancorp or any other subsidiary of PrivateBancorp or the Bank, such compensation or benefits shall be subtracted from any amounts simultaneously due hereunder from PrivateBancorp and/or the Bank, as the case may be.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written.

PRIVATEBANCORP, INC.
By:	/s/ Ralph B. Mandell
Title:	Chairman and Chief Executive Officer
EXECUTIVE
/s/ Wallace L. Head
Name:	Wallace L. Head

Address:

Telecopy No.: 

20

Exhibit A to Employment Agreement

RELEASE AND SEVERANCE AGREEMENT

THIS RELEASE AND SEVERANCE AGREEMENT is made and entered into this ____ day of _________, _____ by and between PrivateBancorp, Inc. and its subsidiaries and affiliates (including, without limitation, The PrivateBank and Trust Company) (collectively, “PBI”) and ______________________________ (hereinafter “EXECUTIVE”).

EXECUTIVE’S employment with PBI terminated on __________, ______; and EXECUTIVE has voluntarily agreed to the terms of this RELEASE AND SEVERANCE AGREEMENT in exchange for severance benefits under the Employment Agreement (“Employment Agreement”) to which EXECUTIVE otherwise would not be entitled.

NOW THEREFORE, in consideration for severance benefits provided under the Employment Agreement, EXECUTIVE on behalf of EXECUTIVE and EXECUTIVE’S spouse, heirs, executors, administrators, children, and assigns does hereby fully release and discharge PBI, its officers, directors, employees, agents, subsidiaries and divisions, benefit plans and their administrators, fiduciaries and insurers, successors, and assigns from any and all claims or demands for wages, back pay, front pay, attorneys’ fees and other sums of money, insurance, benefits, contracts, controversies, agreements, promises, damages, costs, actions or causes of action and liabilities of any kind or character whatsoever, whether known or unknown, from the beginning of time to the date of these presents, relating to EXECUTIVE’S employment or termination of employment from PBI, including but not limited to any claims, actions or causes of action arising under the statutory, common law or other rules, orders or regulations of the United States or any State or political subdivision thereof including the Age Discrimination in Employment Act and the Older Workers Benefit Protection Act.

EXECUTIVE acknowledges that EXECUTIVE’S obligations pursuant to Paragraphs 12 and 13, of the Employment Agreement relating to the use or disclosure of confidential information and non-solicitation of customers and employees shall continue to apply to EXECUTIVE.

This Release and Settlement Agreement supersedes any and all other agreements between EXECUTIVE and PBI except agreements relating to proprietary or confidential information belonging to PBI, and any other agreements, promises or representations relating to severance pay or other terms and conditions of employment are null and void.

This release does not affect EXECUTIVE’S right to any benefits to which EXECUTIVE may be entitled under any employee benefit plan, program or arrangement sponsored or provided by PBI, including but not limited to the Employment Agreement and the plans, programs and arrangements referred to therein.

EXECUTIVE and PBI acknowledge that it is their mutual intent that the Age Discrimination in Employment Act waiver contained herein fully comply with the Older Workers Benefit Protection Act. Accordingly, EXECUTIVE acknowledges and agrees that:

(a) The severance benefits exceed the nature and scope of that to which EXECUTIVE would otherwise have been legally entitled to receive.

A-1

(b) Execution of this Agreement and the Age Discrimination in Employment Act waiver herein is EXECUTIVE’S knowing and voluntary act;

(c) EXECUTIVE has been advised by PBI to consult with EXECUTIVE’S personal attorney regarding the terms of this Agreement, including the aforementioned waiver;

(d) EXECUTIVE has had at least twenty-one (21) calendar days within which to consider this Agreement;

(e) EXECUTIVE has the right to revoke this Agreement in full within seven (7) calendar days of execution and that none of the terms and provisions of this Agreement shall become effective or be enforceable until such revocation period has expired;

(f) EXECUTIVE has read and fully understands the terms of this Agreement; and

(g) Nothing contained in this Agreement purports to release any of EXECUTIVE’S rights or claims under the Age Discrimination in Employment Act that may arise after the date of execution.

IN WITNESS WHEREOF, the parties have executed this Agreement on the date indicated above.

PRIVATEBANCORP, INC., for itself and its Subsidiaries and Affiliates	EXECUTIVE
By:
Its:		[Name]

A-2

EX-10.34

Exhibit 10.34

EXECUTIVE EMPLOYMENT AGREEMENT

THIS AGREEMENT, made and entered into as of April 6, 2005 (the “Effective Date”), by and among PrivateBancorp, Inc. (hereinafter referred to as “PrivateBancorp”), the direct or indirect subsidiary of PrivateBancorp, Inc. set forth on the signature page hereof (the “Subsidiary” and together with PrivateBancorp, hereinafter sometimes referred to as the “Employer”), and James A. Ruckstaetter (hereinafter called the “Executive”).

WITNESSETH THAT:

WHEREAS, the Employer desires to continue to employ the Executive as Managing Director and Chief Credit Officer, and the Executive desires to continue in such employment:

NOW, THEREFORE, in consideration of the mutual promises herein contained and subject to the conditions precedent set forth herein, the parties agree as follows:

31. Employment and Term.

(a) Employment. PrivateBancorp shall cause the Subsidiary to employ, and the Subsidiary shall employ, the Executive as the Managing Director and Chief Credit Officer of the Subsidiary, and the Executive shall so serve, for the term set forth in Paragraph 1(b).

(b) Term. The Executive’s employment under this Agreement shall commence on the Effective Date and extend through September 30, 2005, subject to the extension of such term as hereinafter provided and subject to earlier termination as provided in Paragraph 7. The term of this Agreement shall automatically be extended for an additional year as of October 1, 2005 and each anniversary date thereof unless, no later than ninety (90) days prior to any such renewal date, either the board of directors of PrivateBancorp (the “Board”), or a duly authorized committee thereof, on behalf of the Employer, or the Executive gives written notice to the other, in accordance with Paragraph 15, that the term of this Agreement shall not be so extended. Notwithstanding anything in this Agreement to the contrary, if at any time during the Executive’s period of employment under this Agreement there is a Change in Control (as defined in Paragraph 7), the term of this Agreement shall automatically extend to a date which is two (2) years from the date of the Change in Control (and shall be further extended pursuant to the foregoing provisions of this Paragraph 1(b), unless written notice to the contrary is given in accordance with this Paragraph 1(b)).

32. Duties and Responsibilities.

(a) The duties and responsibilities of the Executive shall be of an executive nature as shall be required by the Employer in the conduct of its business. The Executive’s powers and authority shall be as prescribed by the by-laws of the Employer, if applicable, and shall include all those presently delegated to the Executive, together with the performance of such other duties and responsibilities as the Chief Executive Officer of the Employer may from time to time assign to the Executive not inconsistent with the Executive’s position(s) with the Employer. The Executive recognizes, that during the period of the Executive’s employment

hereunder, the Executive owes an undivided duty of loyalty to the Employer, and agrees to devote the Executive’s entire business time and attention to the performance of said duties and responsibilities and to use the Executive’s best efforts to promote and develop the business of the Employer. Recognizing and acknowledging that it is essential for the protection and enhancement of the name and business of the Employer and the goodwill pertaining thereto, the Executive shall perform his duties under this Agreement professionally, in accordance with the applicable laws, rules and regulations and such standards, policies and procedures established by the Employer and the industry from time to time, including the Employer’s Corporate Code of Ethics. The Executive will not perform any duties for any other business without the prior written consent of the Employer, but may engage in charitable, civic or community activities, provided that such duties or activities do not materially interfere with the proper performance of the Executive’s duties under this Agreement. During the period of employment, the Executive agrees to serve as a director on the Board of Directors of the Employer and/or the board of directors or managers, as applicable, of any of its subsidiaries and affiliates, as well as to serve as a member of any committee of any said boards, to which the Executive may be elected or appointed.

(b) Notwithstanding that this Agreement provides for the employment of the Executive in the Executive’s capacity as the Managing Director and Chief Credit Officer of the Subsidiary, nothing herein contained shall assure the Executive of, nor in any manner shall be construed to constitute an agreement by the Employer to the, continued employment of the Executive after the expiration or termination of this Agreement in such capacity or in any other capacity.

33. Base Salary. For services performed by the Executive for the Employer pursuant to this Agreement during the period of employment as provided in Paragraph 1(b) hereof, the Employer shall pay the Executive a base salary at the rate of One hundred sixty thousand dollars ($160,000) per year, payable in substantially equal installments in accordance with the Employer’s regular payroll practices. The Executive’s base salary (with any increases under this Paragraph 3) shall not be subject to reduction without the Executive’s written consent. Any compensation which may be paid to the Executive under any additional compensation or incentive plan of the Employer or which may be otherwise authorized from time to time by the Board (or an appropriate committee thereof) shall be in addition to the base salary to which the Executive shall be entitled under this Agreement. Executive’s base salary shall be subject to review from time to time, and the Employer may (but is not required to) increase the base salary as the Board, in its discretion, may determine.

34. Annual Bonuses. For each fiscal year during the term of employment, the Executive shall be eligible to receive a bonus in the amount, if any, as may be determined from time to time by the Board in its discretion.

35. Equity Incentive Compensation. During the term of employment hereunder, the Executive shall be eligible to participate in the PrivateBancorp, Inc. Incentive Compensation Plan, and in any other equity-based incentive compensation plan or program adopted by the Employer, including (but not by way of limitation) any plan providing for the granting of (a) options to purchase stock, (b) restricted stock or (c) similar equity-based units or interests to officers of the Employer.

36. Other Benefits. In addition to the compensation described in Paragraphs 3, 4 and 5, above, the Executive shall also be entitled to the following:

(a) Participation in Benefit Plans. The Executive shall be entitled to participate in such life insurance, disability, medical, dental, pension, profit sharing and retirement plans and other programs as may be made generally available from time to time by the Employer for the benefit of executives of the Executive’s level or its employees generally.

(b) Vacation. The Executive shall be entitled to such number of days of vacation with pay during each calendar year during the period of employment in accordance with the Employer’s applicable personnel policy as in effect from time to time.

(c) Executive Perquisites. The Employer shall furnish Executive with such perquisites as are provided from time to time by the Employer to its officers generally and are suitable to the Executive’s position, adequate for the performance of the Executive’s duties hereunder, and reasonable in the circumstances. Without limitation of the foregoing, Employer shall pay the cost of Executive’s membership in one downtown club and shall reimburse Executive for the cost of annual country club dues at one country club of which Executive is a member, in each case subject to Employer approval of the club.

(d) Expense Reimbursement. The Employer shall reimburse the Executive for all reasonable expenses incurred by the Executive in performing services hereunder, which are incurred and accounted for in accordance with the Employer’s policies and procedures applicable thereto.

37. Termination. Unless earlier terminated in accordance with the following provisions of this Paragraph 7, the Employer shall continue to employ the Executive and the Executive shall remain employed by the Employer during the entire term of this Agreement as set forth in Paragraph 1(b). Paragraph 8 hereof sets forth certain obligations of the Employer in the event that the Executive’s employment hereunder is terminated. Certain capitalized terms used in this Paragraph 7 and in Paragraph 8 hereof are defined in Paragraph 7(d), below. In the event of termination of the Executive’s employment with the Employer for any reason, or if the Executive is required by the Board, the Executive agrees to resign, and shall automatically be deemed to have resigned, from any offices (including any directorship) the Executive holds with the Employer and/or any of its affiliates effective as of the termination date of the Executive’s employment hereunder, or, if applicable, effective as of a date selected by the Board; provided, however, that the foregoing resignation shall not prejudice or otherwise affect the Executive’s rights and obligations, if any, under this Agreement.

(a) Death or Disability. Except to the extent otherwise provided in Paragraphs 8, 12 and 13 with respect to death benefits and certain post-Date of Termination obligations of the parties, this Agreement shall terminate immediately as of the Date of Termination in the event of the Executive’s death or in the event that the Executive becomes Disabled (as hereinafter defined). The Board shall promptly give the Executive written notice of any such determination of the Executive’s Disability and of any decision of the Board to terminate the Executive’s employment by reason thereof. In the event of Disability, until the Date of Termination, the base salary payable to the Executive under Paragraph 3 hereof shall be

reduced dollar-for-dollar by the amount of disability benefits, if any, paid to the Executive in accordance with any disability policy or program of the Employer.

(b) Discharge for Cause. In accordance with the procedures hereinafter set forth, the Board may discharge the Executive from the Executive’s employment hereunder for Cause (as hereinafter defined). Except to the extent otherwise provided in Paragraphs 8, 12 and 13 with respect to certain post-Date of Termination obligations of the parties, this Agreement shall terminate immediately as of the Date of Termination in the event the Executive is discharged for Cause. Any discharge of the Executive for Cause shall be communicated by a Notice of Termination to the Executive given in accordance with Paragraph 15 of this Agreement.

(c) Termination for Other Reasons. The Employer may discharge the Executive without Cause by giving written notice to the Executive in accordance with Paragraph 15. The Executive may resign from the Executive’s employment with or without Good Reason, without liability to the Employer, by giving written notice to the Employer in accordance with Paragraph 15 at least thirty (30) days prior to the Date of Termination; provided, however, that no resignation shall be treated as a resignation for Good Reason unless the written notice thereof is given within sixty (60) days after the occurrence which constitutes “Good Reason” or during the ninety (90) day period described in the final sentence of Paragraph 7(d)(vi); provided, further, that the Employer retains the right after proper notice of the Executive’s voluntary termination to require the Executive to cease the Executive’s employment immediately. Except to the extent otherwise provided in Paragraphs 8, 12 and 13 with respect to certain post-Date of Termination obligations of the parties, this Agreement shall terminate immediately as of the Date of Termination in the event the Executive is discharged without Cause or resigns for any reason or no reason.

(d) Definitions. For purposes of this Agreement, the following capitalized terms shall have the meanings set forth below:

(i) “Accrued Obligations” shall mean, as of the Date of Termination, the sum of (A) the Executive’s base salary under Paragraph 3 through the Date of Termination to the extent not theretofore paid, (B) the amount of any deferred compensation and other cash compensation accrued by the Executive as of the Date of Termination to the extent not theretofore paid, (C) any vacation pay, expense reimbursements and other cash entitlements accrued by the Executive as of the Date of Termination to the extent not theretofore paid, (D) any grants and awards vested or accrued under any equity-based incentive compensation plan or program and (E) all other benefits which have accrued as of the Date of Termination. For the purpose of this Paragraph 7(d)(i), except as provided in the applicable plan, program or policy, amounts shall be deemed to accrue ratably over the period during which they are earned, but no discretionary compensation shall be deemed earned or accrued until it is specifically approved by the Board in accordance with the applicable plan, program or policy.

(ii) “Cause” shall mean (A) the Executive’s willful and continued (for a period of not less than ten (10) business days after written notice thereof) failure to perform substantially the duties of his employment (other than as a result of physical or

mental incapacity, or while on vacation); or (B) the Executive’s willful engaging in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Employer; or (C) the Executive’s conviction of a felony involving moral turpitude, but specifically excluding any conviction based entirely on vicarious liability (with “vicarious liability” meaning liability based on acts of the Employer for which the Executive is charged solely as a result of his offices with the Employer and in which he was not directly involved and did not have prior knowledge of such actions or intended actions); provided, however, that no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Employer; and provided further that no act or omission by the Executive shall constitute Cause hereunder unless the Employer has given detailed written notice thereof to the Executive, and the Executive has failed to remedy such act or omission.

(iii) “Change in Control” shall mean the occurrence of any one of the following events:

(A) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than (i) a trustee or other fiduciary holding securities under an employee benefit plan of PrivateBancorp or any of its subsidiaries, or (ii) a corporation owned directly or indirectly by the stockholders of PrivateBancorp in substantially the same proportions as their ownership of stock of PrivateBancorp, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of PrivateBancorp representing 20% or more of the total voting power of the then outstanding shares of capital stock of PrivateBancorp entitled to vote generally in the election of directors (the “Voting Stock”), provided, however, that the following shall not constitute a change in control: (1) such person becomes a beneficial owner of 20% or more of the Voting Stock as the result of an acquisition of such Voting Stock directly from PrivateBancorp, or (2) such person becomes a beneficial owner of 20% or more of the Voting Stock as a result of the decrease in the number of outstanding shares of Voting Stock caused by the repurchase of shares by PrivateBancorp; provided, further, that in the event a person described in clause (1) or (2) shall thereafter increase (other than in circumstances described in clause (1) or (2)) beneficial ownership of stock representing more than 1% of the Voting Stock, such person shall be deemed to become a beneficial owner of 20% or more of the Voting Stock for purposes of this Paragraph (A), provided such person continues to beneficially own 20% or more of the Voting Stock after such subsequent increase in beneficial ownership, or

(B) During any period of two consecutive years, individuals (the “Incumbent Board”), who at the beginning of such period constitute the Board, and any new director, whose election by the Board or nomination for election by PrivateBancorp’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the

beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or

(C) Consummation of a reorganization, merger or consolidation or the sale or other disposition of all or substantially all of the assets of PrivateBancorp (a “Business Combination”), in each case, unless (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Voting Stock immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the total voting power represented by the voting securities entitled to vote generally in the election of directors of the corporation resulting from the Business Combination (including, without limitation, a corporation which as a result of the Business Combination owns PrivateBancorp or all or substantially all of PrivateBancorp’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to the Business Combination of the Voting Stock of PrivateBancorp, and (2) at least a majority of the members of the board of directors of the corporation resulting from the Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or action of the Incumbent Board, providing for such Business Combination; or

(D) Approval by the stockholders of PrivateBancorp of a plan of complete liquidation or dissolution of PrivateBancorp.

The Board has final authority to construe and interpret the provisions of the foregoing Paragraphs (A), (B), (C) and (D) and to determine the exact date on which a Change in Control has been deemed to have occurred thereunder.

(iv) “Date of Termination” shall mean (A) in the event of a discharge of the Executive for or without Cause, the date the Executive receives a Notice of Termination, or any later date specified in such Notice of Termination, as the case may be, (B) in the event of a resignation by the Executive, the date specified in the written notice to the Employer, which date shall be no less than thirty (30) days from the date of such written notice (or such earlier date as the Employer may elect in its sole discretion), (C) in the event of the Executive’s death, the date of the Executive’s death, and (D) in the event of termination of the Executive’s employment by reason of Disability pursuant to Paragraph 7(a), the date the Executive receives written notice of such termination.

(v) “Disabled” and “Disability” shall mean that the Executive will be deemed to be disabled upon the earlier of (i) the end of a six (6) consecutive month period, or an aggregate period of nine (9) months out of any consecutive twelve (12) months, during which, by reason of physical or mental injury or disease, the Executive has been unable to perform substantially all of the Executive’s usual and customary duties under this Agreement or (ii) the date that a reputable physician selected by the Board, and as to whom the Executive has no reasonable objection, determines in writing that the Executive will, by reason of physical or mental injury or disease, be unable to perform substantially all of the Executive’s usual and customary duties under

this Agreement for a period of at least six (6) consecutive months. If any question arises as to whether the Executive is Disabled, upon reasonable request therefore by the Board, the Executive shall submit to a reasonable medical examination for the purpose of determining the existence, nature and extent of any such disability.

(vi) “Good Reason” shall mean the occurrence, other than in connection with a discharge, of any of the following without the Executive’s consent: (A) the Executive is not re-elected or is removed from the positions with the Employer set forth in Paragraph 1(a), other than as a result of the Executive’s election or appointment to positions of equal or superior scope and responsibility; or (B) the Executive shall fail to be vested by the Employer with the power and authority of any of said positions, excluding for this purpose any isolated action not taken in bad faith and which is remedied by the Employer promptly after receipt of written notice thereof given by the Executive in accordance with Paragraph 15; or (C) any failure by the Employer to materially comply with any of the provisions of this Agreement, other than any isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Employer promptly after receipt of written notice thereof given by the Executive in accordance with Paragraph 15; (D) the Employer giving notice to the Executive pursuant to Paragraph 1(b) that the term of this Agreement shall not be extended upon the expiration of the then-current term; or (E) the Employer requiring the Executive to be based at an office or location which is more than 50 miles from the Executive’s office as of the Effective Date or any renewal date of the extended term of this Agreement. In addition, any termination by the Executive during the ninety (90) day period beginning on the first anniversary of the date of a Change in Control shall be deemed to be for “Good Reason.”

(vii) “Notice of Termination” shall mean a written notice which (A) indicates the specific termination provision in this Agreement relied upon, (B) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (C) if the Date of Termination is to be other than the date of receipt of such notice or the date otherwise specified under this Agreement, specifies the termination date.

38. Obligations of the Employer Upon Termination. The following provisions describe the obligations of the Employer to the Executive under this Agreement upon termination of employment. However, except as explicitly provided in this Agreement, nothing in this Agreement shall limit or otherwise adversely affect any rights which the Executive may have under applicable law, under any other agreement with the Employer or any of its affiliates or subsidiaries, or under any compensation or benefit plan, program, policy or practice of the Employer or any of its affiliates or subsidiaries.

(a) Death, Disability, Discharge for Cause, or Resignation without Good Reason. In the event this Agreement terminates pursuant to Paragraph 7(a) by reason of the death or Disability of the Executive, pursuant to Paragraph 7(b) by reason of the discharge of the Executive by the Employer for Cause, or pursuant to Paragraph 7(c) by reason of the resignation of the Executive other than for Good Reason, the Employer shall pay to the Executive, or the Executive’s heirs or estate in the event of the Executive’s death, all Accrued Obligations in a

lump sum in cash within thirty (30) days after the Date of Termination; provided, however, that any portion of the Accrued Obligations which consists of bonus (including sign-on bonus, if any), deferred compensation, incentive compensation, insurance benefits or other employee benefits shall be determined and paid in accordance with the terms of the relevant plan or policy as applicable to the Executive. In addition, in the event this Agreement terminates pursuant to Paragraph 7(a) by reason of death of the Executive, the Employer shall pay to the Executive’s heirs or estate death benefits in a lump sum amount equal to six (6) months of the Executive’s then-current annual base salary.

(b) Discharge without Cause or Resignation with Good Reason. In the event that this Agreement terminates pursuant to Paragraph 7(c) by reason of the discharge of the Executive by the Employer other than for Cause, death or Disability or by reason of the resignation of the Executive for Good Reason:

(i) The Employer shall pay all Accrued Obligations to the Executive in a lump sum in cash within thirty (30) days after the Date of Termination; provided, however, that any portion of the Accrued Obligations which consists of bonus, deferred compensation, incentive compensation, insurance benefits or other employee benefits shall be determined and paid in accordance with the terms of the relevant plan or policy as applicable to the Executive;

(ii) Within thirty (30) days after the Date of Termination, the Employer shall pay to the Executive a bonus for the year during which termination occurs, calculated as a prorata portion of the Executive’s prior year’s bonus amount (if any) based on the number of days elapsed during the year through the Date of Termination;

(iii) Severance payments equal to one hundred percent (100%) of the sum of (A) the Executive’s then-current annual base salary, plus (B) the average of the sum of the bonus amounts earned by the Executive with respect to the three (3) calendar years (or such fewer number of years as Executive has been employed) immediately preceding the calendar year in which the Executive’s Date of Termination occurs, payable in substantially equal monthly installments for a period of twelve (12) months (the “Severance Period”) in accordance with the Employer’s regular payroll practices; and

(iv) Continuation for the Severance Period of the Executive’s right to maintain COBRA continuation coverage under the applicable plans at premium rates on the same “cost-sharing” basis as the applicable premiums paid for such coverage by active employees as of the Date of Termination.

In the event that upon the expiration of the Severance Period, Executive is not employed or otherwise providing compensated services of any type, and has not done so during the final ninety (90) days of the Severance Period, the Employer may, in its sole discretion (which discretion need not be applied in a consistent manner from one executive to another), agree to extend the Severance Period for up to an additional six (6) months (the “Extended Severance Period”). The payments to Executive described in subParagraph (iii) above and the reduced

COBRA continuation premium described in subParagraph (iv) above shall continue during the Extended Severance Period, subject to earlier termination effective as of the first day of the month following the date on which the Executive becomes employed or provides compensated services of any type (including self-employment).

The Executive shall provide such information as the Employer may reasonably request to determine Executive’s continued eligibility for the payments and benefits provided by this Paragraph 8(b).

(c) Effect of Change in Control. In the event that a Change in Control occurs and this Agreement thereafter terminates pursuant to Paragraph 7(c) by reason of the discharge of the Executive by the Employer other than for Cause, death or Disability, or by reason of the resignation of the Executive for Good Reason:

(i) The Employer shall pay all Accrued Obligations to the Executive in a lump sum in cash within thirty (30) days after the Date of Termination; provided, however, that any portion of the Accrued Obligations which consists of bonus, deferred compensation, incentive compensation, insurance benefits or other employee benefits shall be determined and paid in accordance with the terms of the relevant plan or policy as applicable to the Executive;

(ii) Within thirty (30) days after the Date of Termination, the Employer shall pay to the Executive a bonus for the year during which termination occurs, calculated as a prorata portion of the Executive’s prior year’s bonus amount (if any) based on the number of days elapsed during the year through the Date of Termination;

(iii) The Employer shall pay the Executive a lump sum payment within thirty (30) days after such termination of employment in the amount of two (2) times the sum of the following:

(A) the amount of the Executive’s annual base salary determined as of the Date of Termination, or the date immediately preceding the date of the Change in Control, whichever is greater; plus

(B) the greater of (A) the Executive’s bonus amount, if any, for the calendar year immediately preceding that in which the Date of Termination occurs, or (B) the average of the sum of the bonus amounts earned by the Executive with respect to the three (3) calendar years (or such fewer number of years as Executive has been employed) immediately preceding the calendar year in which the Executive’s Date of Termination occurs, or if such sum would be greater, with respect to the three (3) calendar years immediately preceding the calendar year of the date of the Change in Control; plus

(C) the sum of:

(I) the annual value of the contributions that would have been expected to be made or credited by the Employer to, and

benefits expected to be accrued under, the qualified and non-qualified employee profit sharing, 401(k), pension and any other benefit plans maintained by the Employer to or for the benefit of the Executive; plus

(II) the annual value of the Other Benefits described in Paragraph 6(a) and (c) above.

For purposes of subParagraph (C)(I) above, the annual value of the contributions and accruals to or under the employee benefit plans shall be determined on the basis of the actual rate of contributions or accruals, as applicable, and the provisions of the plans as in effect during the calendar year immediately preceding the date of the Change in Control, or if the value so determined would be greater, during the calendar year immediately preceding the Date of Termination. The “annual value” of the executive perquisites described in Paragraph 6(c) for purposes of subParagraph (C)(II) above shall be deemed to equal 7.5% of the annual base salary amount applicable under clause (iii)(A) above.

The Executive shall also be entitled to outplacement services for a reasonable period of time as agreed between the Executive and the Employer.

Notwithstanding the foregoing, if a Change in Control occurs and this Agreement is terminated prior to the Change in Control pursuant to Paragraph 7(c) by reason of the discharge of the Executive by the Employer other than for Cause, death or Disability or by reason of the resignation of the Executive for Good Reason, then the Executive shall be deemed for purposes of this Paragraph 8(c) to have so terminated pursuant to Paragraph 7(c) immediately following the date the Change in Control occurs if it is reasonably demonstrated by the Executive that such earlier termination was (i) at the request of a third party who had taken steps reasonably calculated to effect the Change in Control, or (ii) otherwise arose, or the circumstances that precipitated the termination otherwise arose, in connection with or in anticipation of the Change in Control.

(d) Effect on Other Amounts. The payments provided for in this Paragraph 8 shall be in addition to all other sums then payable and owing to the Executive, shall be subject to applicable federal and state income and other withholding taxes and shall be in full settlement and satisfaction of all of the Executive’s claims and demands. Upon such termination of this Agreement, the Employer shall have no rights or obligations under this Agreement, other than its obligations under this Paragraph 8, and the Executive shall have no rights and obligations under this Agreement, other than the Executive’s obligations under Paragraphs 12 and 13 hereof (to the extent applicable); provided, however, termination of this Agreement shall not terminate the obligation of the Executive to pay to the Employer any amounts for which the Executive may be liable to the Employer under any provision of the Sarbanes-Oxley Act of 2002 (including, without limitation, Section 304 of such Act), or any rules and regulations promulgated thereunder, as amended from time to time.

(e) Conditions. Any payments or benefits made or provided pursuant to this Paragraph 8 are subject to the Executive’s:

(i) compliance with the provisions of Paragraphs 12 and 13 hereof (to the extent applicable);

(ii) delivery to the Employer of an executed Release and Severance Agreement, which shall be substantially in the form attached hereto as Exhibit A, with such changes therein or additions thereto as needed under then applicable law to give effect to its intent and purpose; and

(iii) delivery to the Employer of a resignation from all offices, directorships and fiduciary positions with the Employer, its affiliates and employee benefit plans.

Notwithstanding the due date of any post-employment payments, any amounts due under this Paragraph 8 shall not be due until after the expiration of any revocation period applicable to the Release and Severance Agreement.

39. Certain Additional Payments by the Employer.

(a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Employer to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Paragraph 9) (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, (the “Code”) or if any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, being hereinafter collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.

(b) Subject to the provisions of Paragraph (c), below, all determinations required to be made under this Paragraph 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the independent public accountants then regularly retained by the Employer (the “Accounting Firm”) in consultation with counsel acceptable to Executive, which shall provide detailed supporting calculations both to the Employer and the Executive within fifteen (15) business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Employer. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting a Change in Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder) in consultation with counsel acceptable to Executive. All fees and expenses of the Accounting Firm and such counsel shall be borne solely by the Employer. Any Gross-Up Payment, as determined pursuant to this Paragraph 9, shall be

paid by the Employer to the Executive within five (5) days of the receipt of the Accounting Firm’s determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive’s applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any good faith determination by the Accounting Firm shall be binding upon the Employer and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Employer should have been made (“Underpayment”), consistent with the calculations required to be made hereunder. In the event that the Employer exhausts its remedies pursuant to Paragraph (c), below, and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Employer to or for the benefit of the Executive.

(c) The Executive shall notify the Employer in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Employer of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than fifteen (15) business days after the Executive is informed in writing of such claim and shall apprise the Employer of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the thirty (30)-day period following the date on which Executive gives such notice to the Employer (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Employer notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:

(i) Give the Employer any information reasonably requested by the Employer relating to such claim,

(ii) Take such action in connection with contesting such claim as the Employer shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Employer,

(iii) Cooperate with the Employer in good faith in order effectively to contest such claim, and

(iv) Permit the Employer to participate in any proceedings relating to such claim;

provided, however, that the Employer shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this Paragraph (c), the Employer shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals,

proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner; and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Employer shall determine; provided, however, that if the Employer directs the Executive to pay such claim and sue for a refund, the Employer shall advance the amount of such payment to the Executive on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Employer’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(d) If, after the receipt by the Executive of an amount advanced by the Employer pursuant to Paragraph (c), above, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Employer’s complying with the requirements of said Paragraph (c)) promptly pay to the Employer the amount of such refund (together with any interest paid or credited thereon, after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Employer pursuant to said Paragraph (c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Employer does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid; and the amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid.

40. Dispute Resolution. In the event any dispute arises and the parties after good faith efforts are unable to agree as to the calculation of the amounts payable under this Agreement, it shall be settled in accordance with the majority opinion of a committee consisting of an accountant chosen by the Employer, an accountant chosen by the Executive and an independent accountant acceptable to both the Executive and the Employer, as the case may be. The committee’s determination shall be binding and conclusive on the parties hereto. The Employer shall pay all fees and expenses of the dispute resolution.

41. Enforcement. In the event the Employer shall fail to pay any amounts due to the Executive under this Agreement as they come due, the Employer agrees to pay interest on such amounts at a rate equal to the prime rate plus four percent (4%) per annum (as from time to time published in The Wall Street Journal (Midwest Edition)). The Employer agrees that Executive and any successor shall be entitled to recover all costs of successfully enforcing any provision of this Agreement, including reasonable attorneys fees and costs of litigation, if Executive is the prevailing party.

42. Confidential Information.

The Executive shall not at any time during or following the Executive’s employment with the Employer, directly or indirectly, disclose or use on the Executive’s behalf or another’s behalf, publish or communicate, except in the course of the Executive’s employment and in the pursuit of the business of the Employer or any of its subsidiaries or affiliates, any proprietary information or data of the Employer or any of its subsidiaries or affiliates, which is not generally known to the public or which could not be recreated through public means and which the Employer may reasonably regard as confidential and proprietary. The Executive recognizes and acknowledges that all knowledge and information which the Executive has or may acquire in the course of the Executive’s employment, such as, but not limited to the business, developments, procedures, techniques, activities or services of the Employer or the business affairs and activities of any customer, prospective customer, individual firm or entity doing business with the Employer are its sole valuable property, and shall be held by Executive in confidence and in trust for their sole benefit. All records of every nature and description which come into the Executive’s possession, whether prepared by the Executive, or otherwise, shall remain the sole property of the Employer and upon termination of the Executive’s employment for any reason, said records shall be left with the Employer as part of its property.

43. Non-Competition; Non-Solicitation. The Executive acknowledges that the Employer and its affiliates and subsidiaries by nature of their respective businesses have a legitimate and protectable interest in their clients, customers and employees with whom they have established significant relationships as a result of a substantial investment of time and money, and but for the Executive’s employment hereunder, the Executive would not have had contact with such clients, customers and employees. The Executive agrees that during the period of the Executive’s employment with the Employer and for a period of one (1) year after termination of the Executive’s employment for any reason (the “Non-Compete Period”), the Executive will not (except in the Executive’s capacity as an employee of the Employer) directly or indirectly, for the Executive’s own account, or as an agent, employee, director, owner, partner, or consultant of any corporation, firm, partnership, joint venture, syndicate, sole proprietorship or other entity which has a place of business (whether as a principal, division, subsidiary, affiliate, related entity, or otherwise) located within the Market Area (as hereinafter defined):

(a) engage, directly or indirectly, in any business that provides banking products or services or that otherwise competes in any way with the Employer or any of its subsidiaries or affiliates;

(b) solicit or induce, or attempt to solicit or induce any client or customer of the Employer or any of its subsidiaries or affiliates not to do business with the Employer or any of its subsidiaries or affiliates; or

(c) solicit or induce, or attempt to solicit or induce, any employee or agent of the Employer or any of its subsidiaries or affiliates to terminate his or her relationship with the Employer or any of its subsidiaries or affiliates.

For purposes of this Agreement, “Market Area” shall be an area encompassed within a fifty (50) mile radius surrounding Executive’s office as of the Date of Termination of employment.

The foregoing provisions shall not be deemed to prohibit (i) the Executive’s ownership, not to exceed five percent (5%) of the outstanding shares, of capital stock of any corporation whose securities are publicly traded on a national or regional securities exchange or in the over-the-counter market or (ii) the Executive serving as a director of other corporations and entities to the extent these directorships do not inhibit the performance of the Executive’s duties hereunder or conflict with the business of the Employer.

44. Remedies.

(a) The Executive acknowledges that the restraints and agreements herein provided are fair and reasonable, that enforcement of the provisions of Paragraphs 12 and 13 will not cause the Executive undue hardship and that said provisions are reasonably necessary and commensurate with the need to protect the Employer and its legitimate and proprietary business interests and property from irreparable harm. The Executive acknowledges and agrees that (a) a breach of any of the covenants and provisions contained in Paragraphs 12 or 13 above, will result in irreparable harm to the business of the Employer, (b) a remedy at law in the form of monetary damages for any breach by the Executive of any of the covenants and provisions contained in Paragraphs 12 and 13 is inadequate, (c) in addition to any remedy at law or equity for such breach, the Employer shall be entitled to institute and maintain appropriate proceedings in equity, including a suit for injunction to enforce the specific performance by Executive of the obligations hereunder and to enjoin Executive from engaging in any activity in violation hereof and (d) the covenants on the Executive’s part contained in Paragraphs 12 and 13, shall be construed as agreements independent of any other provisions in this Agreement, and the existence of any claim, setoff or cause of action by the Executive against the Employer, whether predicated on this Agreement or otherwise, shall not constitute a defense or bar to the specific enforcement by the Employer of said covenants. In the event of a breach or a violation by the Executive of any of the covenants and provisions of this Agreement, the running of the Non-Compete Period (but not of Executive’s obligation thereunder) shall be tolled during the period of the continuance of any actual breach or violation.

(b) The parties hereto agree that the covenants set forth in Paragraphs 12 and 13 are reasonable with respect to their duration, geographical area and scope. If the final judgment of a court of competent jurisdiction declares that any term or provision of Paragraph 12 or 13 is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.

45. Notices. Any notice or other communication required or permitted to be given hereunder shall be determined to have been duly given to any party (a) upon delivery to the address of such party specified below if delivered personally or by courier; (b) upon dispatch if transmitted by telecopy or other means of facsimile, provided a copy thereof is also sent by regular mail or courier; (c) within forty-eight (48) hours after deposit thereof in the U.S. mail, postage prepaid, for delivery as certified mail, return receipt requested; or (d) within twenty-four

(24) hours after deposit thereof with a reputable overnight courier (charges prepaid), addressed, in any case to the party at the following address(es) or telecopy numbers:

(a) If to Executive, at the address set forth on the signature page hereof.

(b) If to the Employer:

PrivateBancorp, Inc.

The PrivateBank and Trust Company

Ten North Dearborn Street

Suite 900

Chicago, IL 60602

Attn: Chief Executive Officer

Telecopy No.: (312) 683-7111

with a copy to:

Vedder, Price, Kaufman & Kammholz, P.C.

222 North LaSalle Street

Chicago, Illinois 60601-1003

Attn: Thomas P. Desmond

Telecopy No.: (312) 609-5005

or to such other address(es) or telecopy number(s) as any party may designate by written notice in the aforesaid manner.

46. Indemnification.

(a) In the event that legal action is instituted against the Executive during or after the term hereof by a third party (or parties) based on the performance or nonperformance by the Executive of the Executive’s duties hereunder, the Employer will assume the defense of such action by its attorneys or attorneys selected by the Executive reasonably satisfactory to the Employer and advance the costs and expenses thereof (including reasonable attorneys’ fees) without prejudice to or waiver by the Employer of its rights and remedies against the Executive. In the event that there is a final judgment entered against the Executive in any such litigation, and Executive is obligated, in accordance with its charter, by-laws, or insurance, to reimburse such entities, the Executive shall be liable to the Employer for all such costs and expenses paid or incurred by them in the defense of any such litigation (the “Reimbursement Amount”). The Reimbursement Amount shall be paid by the Executive within thirty (30) days after rendition of the final judgment. The Employer shall be entitled to set off the reimbursement amount against all sums which may be owed or payable by the Employer to the Executive hereunder or otherwise. The parties shall cooperate in the defense of any asserted claim, demand or liability against the Executive or the Employer or its subsidiaries or affiliates. The term “final judgment” as used herein shall be defined to mean the decision of a court of competent jurisdiction, and in the event of an appeal, then the decision of the appellate court, after petition for rehearing has been denied, or the time for filing the same (or the filing of further appeal) has expired.

(b) The rights to indemnification under this Section 16 shall be in addition to any rights which the Executive may now or hereafter have under the charter or By-laws of the Employer or any of its affiliates or subsidiaries, under any insurance contract maintained by the Employer or any of its affiliates or subsidiaries, or any agreement between the Executive and the Employer or any of its affiliates or subsidiaries.

47. Full Settlement; No Mitigation. The Employer’s obligation to make the payments and provide the benefits provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Employer may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment.

48. Payment in the Event of Death. In the event payment is due and owing by the Employer to the Executive under this Agreement upon the death of the Executive, payment shall be made to such beneficiary as the Executive may designate in writing, or failing such designation, then the executor of the Executive’s estate, in full settlement and satisfaction of all claims and demands on behalf of the Executive, shall be entitled to receive all amounts owing to the Executive at the time of the Executive’s death under this Agreement. Such payments shall be in addition to any other death benefits of the Employer and in full settlement and satisfaction of all severance benefit payments provided for in this Agreement.

49. Entire Understanding. This Agreement constitutes the entire understanding between the parties relating to Executive’s employment hereunder and supersedes and cancels all prior written and oral understandings and agreements with respect to such matters and except for the terms and provisions of any employee benefit or other compensation plans (or any agreements or awards thereunder), referred to in this Agreement, or as otherwise expressly contemplated by this Agreement.

50. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the heirs and representatives of the Executive and the successors and assigns of the Employer. The Employer shall require any successor (whether direct or indirect, by purchase, merger, reorganization, consolidation, acquisition of property or stock, liquidation, or otherwise) to all or a substantial portion of its assets, by agreement in form and substance reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Employer would be required to perform this Agreement if no such succession had taken place. Regardless of whether such an agreement is executed, this Agreement shall be binding upon any successor of the Employer in accordance with the operation of law, and such successor shall be deemed the “Employer” for purposes of this Agreement.

51. Tax Withholding. The Employer shall provide for the withholding of any taxes required to be withheld by federal, state, or local law with respect to any payment in cash, shares of stock and/or other property made by or on behalf of the Employer to or for the benefit of the Executive under this Agreement or otherwise. The Employer may, at its option: (a) withhold

such taxes from any cash payments owing from the Employer to the Executive, (b) require the Executive to pay to the Employer in cash such amount as may be required to satisfy such withholding obligations and/or (c) make other satisfactory arrangements with the Executive to satisfy such withholding obligations.

52. No Assignment. Except as otherwise expressly provided herein, this Agreement is not assignable by any party and no payment to be made hereunder shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or other charge.

53. Execution in Counterparts. This Agreement may be executed by the parties hereto in two (2) or more counterparts, each of which shall be deemed to be an original, but all such counterparts shall constitute one and the same instrument, and all signatures need not appear on any one counterpart.

54. Jurisdiction and Governing Law. Except as provided in Paragraph 10, jurisdiction over disputes with regard to this Agreement shall be exclusively in the courts of the State of Illinois, and this Agreement shall be construed, interpreted and enforced in accordance with and governed by the laws of the State of Illinois, without regard to the choice of laws provisions of such State.

55. Severability. If any provision of this Agreement shall be adjudged by any court of competent jurisdiction to be invalid or unenforceable for any reason, such judgment shall not affect, impair or invalidate the remainder of this Agreement. Furthermore, if the scope of any restriction or requirement contained in this Agreement is too broad to permit enforcement of such restriction or requirement to its full extent, then such restriction or requirement shall be enforced to the maximum extent permitted by law, and the Executive consents and agrees that any court of competent jurisdiction may so modify such scope in any proceeding brought to enforce such restriction or requirement.

56. Survival. Provisions of this Agreement shall survive the termination of the Executive’s employment with the Employer to the extent provided herein.

57. Waiver. The waiver of any party hereto of a breach of any provision of this Agreement by any other party shall not operate or be construed as a waiver of any subsequent breach.

58. Amendment. No change, alteration or modification hereof may be made except in a writing, signed by each of the parties hereto.

59. Construction. The language used in this Agreement will be deemed to be the language chosen by Employer and the Executive to express their mutual intent and no rule of strict construction shall be applied against any person. Wherever from the context it appears appropriate, each term stated in either the singular of plural shall include the singular and the plural, and the pronouns stated in either the masculine, the feminine or the neuter gender shall include the masculine, feminine or neuter. The headings of the Paragraphs of this Agreement are for reference purposes only and do not define or limit, and shall not be used to interpret or construe the contents of this Agreement.

60. No Duplication. Notwithstanding anything herein to the contrary, to the extent that any compensation or benefits are paid to or received by the Executive from the Bank, PrivateBancorp or any other subsidiary of PrivateBancorp or the Bank, such compensation or benefits shall be subtracted from any amounts simultaneously due hereunder from PrivateBancorp and/or the Bank, as the case may be.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written.

PRIVATEBANCORP, INC.

By: /s/ Ralph B. Mandell

Title: Chairman and Chief Executive Officer

The PrivateBank and Trust Company
By:	/s/ Ralph B. Mandell

Title: Chairman and Chief Executive Officer

EXECUTIVE
/s/ James A. Ruckstaetter
Name:	James A. Ruckstaetter

Address:

Telecopy No.:

Exhibit A to Employment Agreement

RELEASE AND SEVERANCE AGREEMENT

THIS RELEASE AND SEVERANCE AGREEMENT is made and entered into this ____ day of _________, _____ by and between PrivateBancorp, Inc. and its subsidiaries and affiliates (including, without limitation, The PrivateBank and Trust Company) (collectively, “PBI”) and ______________________________ (hereinafter “EXECUTIVE”).

EXECUTIVE’S employment with PBI terminated on __________, ______; and EXECUTIVE has voluntarily agreed to the terms of this RELEASE AND SEVERANCE AGREEMENT in exchange for severance benefits under the Employment Agreement (“Employment Agreement”) to which EXECUTIVE otherwise would not be entitled.

NOW THEREFORE, in consideration for severance benefits provided under the Employment Agreement, EXECUTIVE on behalf of EXECUTIVE and EXECUTIVE’S spouse, heirs, executors, administrators, children, and assigns does hereby fully release and discharge PBI, its officers, directors, employees, agents, subsidiaries and divisions, benefit plans and their administrators, fiduciaries and insurers, successors, and assigns from any and all claims or demands for wages, back pay, front pay, attorneys’ fees and other sums of money, insurance, benefits, contracts, controversies, agreements, promises, damages, costs, actions or causes of action and liabilities of any kind or character whatsoever, whether known or unknown, from the beginning of time to the date of these presents, relating to EXECUTIVE’S employment or termination of employment from PBI, including but not limited to any claims, actions or causes of action arising under the statutory, common law or other rules, orders or regulations of the United States or any State or political subdivision thereof including the Age Discrimination in Employment Act and the Older Workers Benefit Protection Act.

EXECUTIVE acknowledges that EXECUTIVE’S obligations pursuant to Paragraphs 12 and 13, of the Employment Agreement relating to the use or disclosure of confidential information and non-solicitation of customers and employees shall continue to apply to EXECUTIVE.

This Release and Settlement Agreement supersedes any and all other agreements between EXECUTIVE and PBI except agreements relating to proprietary or confidential information belonging to PBI, and any other agreements, promises or representations relating to severance pay or other terms and conditions of employment are null and void.

This release does not affect EXECUTIVE’S right to any benefits to which EXECUTIVE may be entitled under any employee benefit plan, program or arrangement sponsored or provided by PBI, including but not limited to the Employment Agreement and the plans, programs and arrangements referred to therein.

EXECUTIVE and PBI acknowledge that it is their mutual intent that the Age Discrimination in Employment Act waiver contained herein fully comply with the Older Workers Benefit Protection Act. Accordingly, EXECUTIVE acknowledges and agrees that:

(a) The severance benefits exceed the nature and scope of that to which EXECUTIVE would otherwise have been legally entitled to receive.

A-1

(b) Execution of this Agreement and the Age Discrimination in Employment Act waiver herein is EXECUTIVE’S knowing and voluntary act;

(c) EXECUTIVE has been advised by PBI to consult with EXECUTIVE’S personal attorney regarding the terms of this Agreement, including the aforementioned waiver;

(d) EXECUTIVE has had at least twenty-one (21) calendar days within which to consider this Agreement;

(e) EXECUTIVE has the right to revoke this Agreement in full within seven (7) calendar days of execution and that none of the terms and provisions of this Agreement shall become effective or be enforceable until such revocation period has expired;

(f) EXECUTIVE has read and fully understands the terms of this Agreement; and

(g) Nothing contained in this Agreement purports to release any of EXECUTIVE’S rights or claims under the Age Discrimination in Employment Act that may arise after the date of execution.

IN WITNESS WHEREOF, the parties have executed this Agreement on the date indicated above.

PRIVATEBANCORP, INC., for itself and its Subsidiaries and Affiliates	EXECUTIVE
By:
Its:		[Name]

A-2

EX-10.35

Exhibit 10.35

EXECUTIVE EMPLOYMENT AGREEMENT

THIS AGREEMENT, made and entered into as of April 6, 2005 (the “Effective Date”), by and among PrivateBancorp, Inc. (hereinafter referred to as “PrivateBancorp” or “Employer”), and Jay B. Williams (hereinafter called the “Executive”).

WITNESSETH THAT:

WHEREAS, the Employer desires to continue to employ the Executive as Chairman and CEO of The PrivateBank – Wisconsin, and the Executive desires to continue in such employment;

NOW, THEREFORE, in consideration of the mutual promises herein contained and subject to the conditions precedent set forth herein, the parties agree as follows:

61. Employment and Term.

(a) Employment. PrivateBancorp shall employ, or shall cause its subsidiary, The Private Bank (St. Louis), to employ the Executive as the Chairman and CEO of The PrivateBank – Wisconsin, and the Executive shall so serve, for the term set forth in Paragraph 1(b). To the extent the Executive is employed by such subsidiary, references herein to “Employer” shall include the subsidiary.

(b) Term. The Executive’s employment under this Agreement shall commence on the Effective Date and extend through September 30, 2005, subject to the extension of such term as hereinafter provided and subject to earlier termination as provided in Paragraph 7. The term of this Agreement shall automatically be extended for an additional year as of October 1, 2005 and each anniversary date thereof unless, no later than ninety (90) days prior to any such renewal date, either the board of directors of PrivateBancorp (the “Board”), or a duly authorized committee thereof, on behalf of the Employer, or the Executive gives written notice to the other, in accordance with Paragraph 15, that the term of this Agreement shall not be so extended. Notwithstanding anything in this Agreement to the contrary, if at any time during the Executive’s period of employment under this Agreement there is a Change in Control (as defined in Paragraph 7), the term of this Agreement shall automatically extend to a date which is two (2) years from the date of the Change in Control (and shall be further extended pursuant to the foregoing provisions of this Paragraph 1(b), unless written notice to the contrary is given in accordance with this Paragraph 1(b)).

62. Duties and Responsibilities.

(a) The duties and responsibilities of the Executive shall be of an executive nature as shall be required by the Employer in the conduct of its business. The Executive’s powers and authority shall be as prescribed by the by-laws of the Employer, if applicable, and shall include all those presently delegated to the Executive, together with the performance of such other duties and responsibilities as the Chief Executive Officer of the Employer may from time to time assign to the Executive not inconsistent with the Executive’s position(s) with the

Employer. The Executive recognizes, that during the period of the Executive’s employment hereunder, the Executive owes an undivided duty of loyalty to the Employer, and agrees to devote the Executive’s entire business time and attention to the performance of said duties and responsibilities and to use the Executive’s best efforts to promote and develop the business of the Employer. Recognizing and acknowledging that it is essential for the protection and enhancement of the name and business of the Employer and the goodwill pertaining thereto, the Executive shall perform his duties under this Agreement professionally, in accordance with the applicable laws, rules and regulations and such standards, policies and procedures established by the Employer and the industry from time to time, including the Employer’s Corporate Code of Ethics. The Executive will not perform any duties for any other business without the prior written consent of the Employer, but may engage in charitable, civic or community activities, provided that such duties or activities do not materially interfere with the proper performance of the Executive’s duties under this Agreement. During the period of employment, the Executive agrees to serve as a director on the Board of Directors of the Employer and/or the board of directors or managers, as applicable, of any of its subsidiaries and affiliates, as well as to serve as a member of any committee of any said boards, to which the Executive may be elected or appointed.

(b) Notwithstanding that this Agreement provides for the employment of the Executive in the Executive’s capacity as the Chairman and CEO of The PrivateBank – Wisconsin of the Employer, nothing herein contained shall assure the Executive of, nor in any manner shall be construed to constitute an agreement by the Employer to the, continued employment of the Executive after the expiration or termination of this Agreement in such capacity or in any other capacity.

63. Base Salary. For services performed by the Executive for the Employer pursuant to this Agreement during the period of employment as provided in Paragraph 1(b) hereof, the Employer shall pay the Executive a base salary at the rate of one hundred sixty thousand dollars ($160,000) per year, payable in substantially equal installments in accordance with the Employer’s regular payroll practices. The Executive’s base salary (with any increases under this Paragraph 3) shall not be subject to reduction without the Executive’s written consent. Any compensation which may be paid to the Executive under any additional compensation or incentive plan of the Employer or which may be otherwise authorized from time to time by the Board (or an appropriate committee thereof) shall be in addition to the base salary to which the Executive shall be entitled under this Agreement. Executive’s base salary shall be subject to review from time to time, and the Employer may (but is not required to) increase the base salary as the Board, in its discretion, may determine.

64. Annual Bonuses. For each fiscal year during the term of employment, the Executive shall be eligible to receive a bonus in the amount, if any, as may be determined from time to time by the Board in its discretion.

65. Equity Incentive Compensation. During the term of employment hereunder, the Executive shall be eligible to participate in the PrivateBancorp, Inc. Incentive Compensation Plan, and in any other equity-based incentive compensation plan or program adopted by the Employer, including (but not by way of limitation) any plan providing for the granting of

(a) options to purchase stock, (b) restricted stock or (c) similar equity-based units or interests to officers of the Employer.

66. Other Benefits. In addition to the compensation described in Paragraphs 3, 4 and 5, above, the Executive shall also be entitled to the following:

(a) Participation in Benefit Plans. The Executive shall be entitled to participate in such life insurance, disability, medical, dental, pension, profit sharing and retirement plans and other programs as may be made generally available from time to time by the Employer for the benefit of executives of the Executive’s level or its employees generally.

(b) Vacation. The Executive shall be entitled to such number of days of vacation with pay during each calendar year during the period of employment in accordance with the Employer’s applicable personnel policy as in effect from time to time.

(c) Executive Perquisites. The Employer shall furnish Executive with such perquisites as are provided from time to time by the Employer to its officers generally and are suitable to the Executive’s position, adequate for the performance of the Executive’s duties hereunder, and reasonable in the circumstances. Without limitation of the foregoing, Employer shall pay the cost of Executive’s membership in one downtown club and shall reimburse Executive for the cost of annual country club dues at one country club of which Executive is a member, in each case subject to Employer approval of the club.

(d) Expense Reimbursement. The Employer shall reimburse the Executive for all reasonable expenses incurred by the Executive in performing services hereunder, which are incurred and accounted for in accordance with the Employer’s policies and procedures applicable thereto.

67. Termination. Unless earlier terminated in accordance with the following provisions of this Paragraph 7, the Employer shall continue to employ the Executive and the Executive shall remain employed by the Employer during the entire term of this Agreement as set forth in Paragraph 1(b). Paragraph 8 hereof sets forth certain obligations of the Employer in the event that the Executive’s employment hereunder is terminated. Certain capitalized terms used in this Paragraph 7 and in Paragraph 8 hereof are defined in Paragraph 7(d), below. In the event of termination of the Executive’s employment with the Employer for any reason, or if the Executive is required by the Board, the Executive agrees to resign, and shall automatically be deemed to have resigned, from any offices (including any directorship) the Executive holds with the Employer and/or any of its affiliates effective as of the termination date of the Executive’s employment hereunder, or, if applicable, effective as of a date selected by the Board; provided, however, that the foregoing resignation shall not prejudice or otherwise affect the Executive’s rights and obligations, if any, under this Agreement.

(a) Death or Disability. Except to the extent otherwise provided in Paragraphs 8, 12 and 13 with respect to death benefits and certain post-Date of Termination obligations of the parties, this Agreement shall terminate immediately as of the Date of Termination in the event of the Executive’s death or in the event that the Executive becomes Disabled (as hereinafter defined). The Board shall promptly give the Executive written notice of

any such determination of the Executive’s Disability and of any decision of the Board to terminate the Executive’s employment by reason thereof. In the event of Disability, until the Date of Termination, the base salary payable to the Executive under Paragraph 3 hereof shall be reduced dollar-for-dollar by the amount of disability benefits, if any, paid to the Executive in accordance with any disability policy or program of the Employer.

(b) Discharge for Cause. In accordance with the procedures hereinafter set forth, the Board may discharge the Executive from the Executive’s employment hereunder for Cause (as hereinafter defined). Except to the extent otherwise provided in Paragraphs 8, 12 and 13 with respect to certain post-Date of Termination obligations of the parties, this Agreement shall terminate immediately as of the Date of Termination in the event the Executive is discharged for Cause. Any discharge of the Executive for Cause shall be communicated by a Notice of Termination to the Executive given in accordance with Paragraph 15 of this Agreement.

(c) Termination for Other Reasons. The Employer may discharge the Executive without Cause by giving written notice to the Executive in accordance with Paragraph 15. The Executive may resign from the Executive’s employment with or without Good Reason, without liability to the Employer, by giving written notice to the Employer in accordance with Paragraph 15 at least thirty (30) days prior to the Date of Termination; provided, however, that no resignation shall be treated as a resignation for Good Reason unless the written notice thereof is given within sixty (60) days after the occurrence which constitutes “Good Reason” or during the ninety (90) day period described in the final sentence of Paragraph 7(d)(vi); provided, further, that the Employer retains the right after proper notice of the Executive’s voluntary termination to require the Executive to cease the Executive’s employment immediately. Except to the extent otherwise provided in Paragraphs 8, 12 and 13 with respect to certain post-Date of Termination obligations of the parties, this Agreement shall terminate immediately as of the Date of Termination in the event the Executive is discharged without Cause or resigns for any reason or no reason.

(d) Definitions. For purposes of this Agreement, the following capitalized terms shall have the meanings set forth below:

(i) “Accrued Obligations” shall mean, as of the Date of Termination, the sum of (A) the Executive’s base salary under Paragraph 3 through the Date of Termination to the extent not theretofore paid, (B) the amount of any deferred compensation and other cash compensation accrued by the Executive as of the Date of Termination to the extent not theretofore paid, (C) any vacation pay, expense reimbursements and other cash entitlements accrued by the Executive as of the Date of Termination to the extent not theretofore paid, (D) any grants and awards vested or accrued under any equity-based incentive compensation plan or program and (E) all other benefits which have accrued as of the Date of Termination. For the purpose of this Paragraph 7(d)(i), except as provided in the applicable plan, program or policy, amounts shall be deemed to accrue ratably over the period during which they are earned, but no discretionary compensation shall be deemed earned or accrued until it is specifically approved by the Board in accordance with the applicable plan, program or policy.

(ii) “Cause” shall mean (A) the Executive’s willful and continued (for a period of not less than ten (10) business days after written notice thereof) failure to perform substantially the duties of his employment (other than as a result of physical or mental incapacity, or while on vacation); or (B) the Executive’s willful engaging in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Employer; or (C) the Executive’s conviction of a felony involving moral turpitude, but specifically excluding any conviction based entirely on vicarious liability (with “vicarious liability” meaning liability based on acts of the Employer for which the Executive is charged solely as a result of his offices with the Employer and in which he was not directly involved and did not have prior knowledge of such actions or intended actions); provided, however, that no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Employer; and provided further that no act or omission by the Executive shall constitute Cause hereunder unless the Employer has given detailed written notice thereof to the Executive, and the Executive has failed to remedy such act or omission.

(iii) “Change in Control” shall mean the occurrence of any one of the following events:

(A) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than (i) a trustee or other fiduciary holding securities under an employee benefit plan of PrivateBancorp or any of its subsidiaries, or (ii) a corporation owned directly or indirectly by the stockholders of PrivateBancorp in substantially the same proportions as their ownership of stock of PrivateBancorp, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of PrivateBancorp representing 20% or more of the total voting power of the then outstanding shares of capital stock of PrivateBancorp entitled to vote generally in the election of directors (the “Voting Stock”), provided, however, that the following shall not constitute a change in control: (1) such person becomes a beneficial owner of 20% or more of the Voting Stock as the result of an acquisition of such Voting Stock directly from PrivateBancorp, or (2) such person becomes a beneficial owner of 20% or more of the Voting Stock as a result of the decrease in the number of outstanding shares of Voting Stock caused by the repurchase of shares by PrivateBancorp; provided, further, that in the event a person described in clause (1) or (2) shall thereafter increase (other than in circumstances described in clause (1) or (2)) beneficial ownership of stock representing more than 1% of the Voting Stock, such person shall be deemed to become a beneficial owner of 20% or more of the Voting Stock for purposes of this Paragraph (A), provided such person continues to beneficially own 20% or more of the Voting Stock after such subsequent increase in beneficial ownership, or

(B) During any period of two consecutive years, individuals (the “Incumbent Board”), who at the beginning of such period constitute the

Board, and any new director, whose election by the Board or nomination for election by PrivateBancorp’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or

(C) Consummation of a reorganization, merger or consolidation or the sale or other disposition of all or substantially all of the assets of PrivateBancorp (a “Business Combination”), in each case, unless (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Voting Stock immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the total voting power represented by the voting securities entitled to vote generally in the election of directors of the corporation resulting from the Business Combination (including, without limitation, a corporation which as a result of the Business Combination owns PrivateBancorp or all or substantially all of PrivateBancorp’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to the Business Combination of the Voting Stock of PrivateBancorp, and (2) at least a majority of the members of the board of directors of the corporation resulting from the Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or action of the Incumbent Board, providing for such Business Combination; or

(D) Approval by the stockholders of PrivateBancorp of a plan of complete liquidation or dissolution of PrivateBancorp.

The Board has final authority to construe and interpret the provisions of the foregoing Paragraphs (A), (B), (C) and (D) and to determine the exact date on which a Change in Control has been deemed to have occurred thereunder.

(iv) “Date of Termination” shall mean (A) in the event of a discharge of the Executive for or without Cause, the date the Executive receives a Notice of Termination, or any later date specified in such Notice of Termination, as the case may be, (B) in the event of a resignation by the Executive, the date specified in the written notice to the Employer, which date shall be no less than thirty (30) days from the date of such written notice (or such earlier date as the Employer may elect in its sole discretion), (C) in the event of the Executive’s death, the date of the Executive’s death, and (D) in the event of termination of the Executive’s employment by reason of Disability pursuant to Paragraph 7(a), the date the Executive receives written notice of such termination.

(v) “Disabled” and “Disability” shall mean that the Executive will be deemed to be disabled upon the earlier of (i) the end of a six (6) consecutive month period, or an aggregate period of nine (9) months out of any consecutive twelve (12) months, during which, by reason of physical or mental injury or disease, the Executive has been unable to perform substantially all of the Executive’s usual and customary duties under this Agreement or (ii) the date that a reputable physician selected

by the Board, and as to whom the Executive has no reasonable objection, determines in writing that the Executive will, by reason of physical or mental injury or disease, be unable to perform substantially all of the Executive’s usual and customary duties under this Agreement for a period of at least six (6) consecutive months. If any question arises as to whether the Executive is Disabled, upon reasonable request therefore by the Board, the Executive shall submit to a reasonable medical examination for the purpose of determining the existence, nature and extent of any such disability.

(vi) “Good Reason” shall mean the occurrence, other than in connection with a discharge, of any of the following without the Executive’s consent: (A) the Executive is not re-elected or is removed from the positions with the Employer set forth in Paragraph 1(a), other than as a result of the Executive’s election or appointment to positions of equal or superior scope and responsibility; or (B) the Executive shall fail to be vested by the Employer with the power and authority of any of said positions, excluding for this purpose any isolated action not taken in bad faith and which is remedied by the Employer promptly after receipt of written notice thereof given by the Executive in accordance with Paragraph 15; or (C) any failure by the Employer to materially comply with any of the provisions of this Agreement, other than any isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Employer promptly after receipt of written notice thereof given by the Executive in accordance with Paragraph 15; (D) the Employer giving notice to the Executive pursuant to Paragraph 1(b) that the term of this Agreement shall not be extended upon the expiration of the then-current term; or (E) the Employer requiring the Executive to be based at an office or location which is more than 50 miles from the Executive’s office as of the Effective Date or any renewal date of the extended term of this Agreement. In addition, any termination by the Executive during the ninety (90) day period beginning on the first anniversary of the date of a Change in Control shall be deemed to be for “Good Reason.”

(vii) “Notice of Termination” shall mean a written notice which (A) indicates the specific termination provision in this Agreement relied upon, (B) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (C) if the Date of Termination is to be other than the date of receipt of such notice or the date otherwise specified under this Agreement, specifies the termination date.

68. Obligations of the Employer Upon Termination. The following provisions describe the obligations of the Employer to the Executive under this Agreement upon termination of employment. However, except as explicitly provided in this Agreement, nothing in this Agreement shall limit or otherwise adversely affect any rights which the Executive may have under applicable law, under any other agreement with the Employer or any of its affiliates or subsidiaries, or under any compensation or benefit plan, program, policy or practice of the Employer or any of its affiliates or subsidiaries.

(a) Death, Disability, Discharge for Cause, or Resignation without Good Reason. In the event this Agreement terminates pursuant to Paragraph 7(a) by reason of the death or Disability of the Executive, pursuant to Paragraph 7(b) by reason of the discharge of the

Executive by the Employer for Cause, or pursuant to Paragraph 7(c) by reason of the resignation of the Executive other than for Good Reason, the Employer shall pay to the Executive, or the Executive’s heirs or estate in the event of the Executive’s death, all Accrued Obligations in a lump sum in cash within thirty (30) days after the Date of Termination; provided, however, that any portion of the Accrued Obligations which consists of bonus (including sign-on bonus, if any), deferred compensation, incentive compensation, insurance benefits or other employee benefits shall be determined and paid in accordance with the terms of the relevant plan or policy as applicable to the Executive. In addition, in the event this Agreement terminates pursuant to Paragraph 7(a) by reason of death of the Executive, the Employer shall pay to the Executive’s heirs or estate death benefits in a lump sum amount equal to six (6) months of the Executive’s then-current annual base salary.

(b) Discharge without Cause or Resignation with Good Reason. In the event that this Agreement terminates pursuant to Paragraph 7(c) by reason of the discharge of the Executive by the Employer other than for Cause, death or Disability or by reason of the resignation of the Executive for Good Reason:

(i) The Employer shall pay all Accrued Obligations to the Executive in a lump sum in cash within thirty (30) days after the Date of Termination; provided, however, that any portion of the Accrued Obligations which consists of bonus, deferred compensation, incentive compensation, insurance benefits or other employee benefits shall be determined and paid in accordance with the terms of the relevant plan or policy as applicable to the Executive;

(ii) Within thirty (30) days after the Date of Termination, the Employer shall pay to the Executive a bonus for the year during which termination occurs, calculated as a prorata portion of the Executive’s prior year’s bonus amount (if any) based on the number of days elapsed during the year through the Date of Termination;

(iii) Severance payments equal to one hundred percent (100%) of the sum of (A) the Executive’s then-current annual base salary, plus (B) the average of the sum of the bonus amounts earned by the Executive with respect to the three (3) calendar years (or such fewer number of years as Executive has been employed) immediately preceding the calendar year in which the Executive’s Date of Termination occurs, payable in substantially equal monthly installments for a period of twelve (12) months (the “Severance Period”) in accordance with the Employer’s regular payroll practices; and

(iv) Continuation for the Severance Period of the Executive’s right to maintain COBRA continuation coverage under the applicable plans at premium rates on the same “cost-sharing” basis as the applicable premiums paid for such coverage by active employees as of the Date of Termination.

In the event that upon the expiration of the Severance Period, Executive is not employed or otherwise providing compensated services of any type, and has not done so during the final ninety (90) days of the Severance Period, the Employer may, in its sole discretion (which

discretion need not be applied in a consistent manner from one executive to another), agree to extend the Severance Period for up to an additional six (6) months (the “Extended Severance Period”). The payments to Executive described in subParagraph (iii) above and the reduced COBRA continuation premium described in subParagraph (iv) above shall continue during the Extended Severance Period, subject to earlier termination effective as of the first day of the month following the date on which the Executive becomes employed or provides compensated services of any type (including self-employment).

The Executive shall provide such information as the Employer may reasonably request to determine Executive’s continued eligibility for the payments and benefits provided by this Paragraph 8(b).

(c) Effect of Change in Control. In the event that a Change in Control occurs and this Agreement thereafter terminates pursuant to Paragraph 7(c) by reason of the discharge of the Executive by the Employer other than for Cause, death or Disability, or by reason of the resignation of the Executive for Good Reason:

(i) The Employer shall pay all Accrued Obligations to the Executive in a lump sum in cash within thirty (30) days after the Date of Termination; provided, however, that any portion of the Accrued Obligations which consists of bonus, deferred compensation, incentive compensation, insurance benefits or other employee benefits shall be determined and paid in accordance with the terms of the relevant plan or policy as applicable to the Executive;

(ii) Within thirty (30) days after the Date of Termination, the Employer shall pay to the Executive a bonus for the year during which termination occurs, calculated as a prorata portion of the Executive’s prior year’s bonus amount (if any) based on the number of days elapsed during the year through the Date of Termination;

(iii) The Employer shall pay the Executive a lump sum payment within thirty (30) days after such termination of employment in the amount of two (2) times the sum of the following:

(A) the amount of the Executive’s annual base salary determined as of the Date of Termination, or the date immediately preceding the date of the Change in Control, whichever is greater; plus

(B) the greater of (A) the Executive’s bonus amount, if any, for the calendar year immediately preceding that in which the Date of Termination occurs, or (B) the average of the sum of the bonus amounts earned by the Executive with respect to the three (3) calendar years (or such fewer number of years as Executive has been employed) immediately preceding the calendar year in which the Executive’s Date of Termination occurs, or if such sum would be greater, with respect to the three (3) calendar years immediately preceding the calendar year of the date of the Change in Control; plus

(C) the sum of:

(I) the annual value of the contributions that would have been expected to be made or credited by the Employer to, and benefits expected to be accrued under, the qualified and non-qualified employee profit sharing, 401(k), pension and any other benefit plans maintained by the Employer to or for the benefit of the Executive; plus

(II) the annual value of the Other Benefits described in Paragraph 6(a) and (c) above.

For purposes of subParagraph (C)(I) above, the annual value of the contributions and accruals to or under the employee benefit plans shall be determined on the basis of the actual rate of contributions or accruals, as applicable, and the provisions of the plans as in effect during the calendar year immediately preceding the date of the Change in Control, or if the value so determined would be greater, during the calendar year immediately preceding the Date of Termination. The “annual value” of the executive perquisites described in Paragraph 6(c) for purposes of subParagraph (C)(II) above shall be deemed to equal 7.5% of the annual base salary amount applicable under clause (iii)(A) above.

The Executive shall also be entitled to outplacement services for a reasonable period of time as agreed between the Executive and the Employer.

Notwithstanding the foregoing, if a Change in Control occurs and this Agreement is terminated prior to the Change in Control pursuant to Paragraph 7(c) by reason of the discharge of the Executive by the Employer other than for Cause, death or Disability or by reason of the resignation of the Executive for Good Reason, then the Executive shall be deemed for purposes of this Paragraph 8(c) to have so terminated pursuant to Paragraph 7(c) immediately following the date the Change in Control occurs if it is reasonably demonstrated by the Executive that such earlier termination was (i) at the request of a third party who had taken steps reasonably calculated to effect the Change in Control, or (ii) otherwise arose, or the circumstances that precipitated the termination otherwise arose, in connection with or in anticipation of the Change in Control.

(d) Effect on Other Amounts. The payments provided for in this Paragraph 8 shall be in addition to all other sums then payable and owing to the Executive, shall be subject to applicable federal and state income and other withholding taxes and shall be in full settlement and satisfaction of all of the Executive’s claims and demands. Upon such termination of this Agreement, the Employer shall have no rights or obligations under this Agreement, other than its obligations under this Paragraph 8, and the Executive shall have no rights and obligations under this Agreement, other than the Executive’s obligations under Paragraphs 12 and 13 hereof (to the extent applicable); provided, however, termination of this Agreement shall not terminate the obligation of the Executive to pay to the Employer any amounts for which the Executive may be liable to the Employer under any provision of the Sarbanes-Oxley Act of 2002 (including, without limitation, Section 304 of such Act), or any rules and regulations promulgated thereunder, as amended from time to time.

(e) Conditions. Any payments or benefits made or provided pursuant to this Paragraph 8 are subject to the Executive’s:

(i) compliance with the provisions of Paragraphs 12 and 13 hereof (to the extent applicable);

(ii) delivery to the Employer of an executed Release and Severance Agreement, which shall be substantially in the form attached hereto as Exhibit A, with such changes therein or additions thereto as needed under then applicable law to give effect to its intent and purpose; and

(iii) delivery to the Employer of a resignation from all offices, directorships and fiduciary positions with the Employer, its affiliates and employee benefit plans.

Notwithstanding the due date of any post-employment payments, any amounts due under this Paragraph 8 shall not be due until after the expiration of any revocation period applicable to the Release and Severance Agreement.

69. Certain Additional Payments by the Employer.

(a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Employer to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Paragraph 9) (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, (the “Code”) or if any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, being hereinafter collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.

(b) Subject to the provisions of Paragraph (c), below, all determinations required to be made under this Paragraph 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the independent public accountants then regularly retained by the Employer (the “Accounting Firm”) in consultation with counsel acceptable to Executive, which shall provide detailed supporting calculations both to the Employer and the Executive within fifteen (15) business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Employer. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting a Change in Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder) in consultation with counsel acceptable to Executive. All fees and expenses of the Accounting Firm and such counsel shall be borne solely by the Employer. Any Gross-Up Payment, as determined pursuant to this Paragraph 9, shall be

paid by the Employer to the Executive within five (5) days of the receipt of the Accounting Firm’s determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive’s applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any good faith determination by the Accounting Firm shall be binding upon the Employer and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Employer should have been made (“Underpayment”), consistent with the calculations required to be made hereunder. In the event that the Employer exhausts its remedies pursuant to Paragraph (c), below, and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Employer to or for the benefit of the Executive.

(c) The Executive shall notify the Employer in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Employer of a Gross-Up Payment. Such notification shall be given as soon as practicable but no later than fifteen (15) business days after the Executive is informed in writing of such claim and shall apprise the Employer of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the thirty (30)-day period following the date on which Executive gives such notice to the Employer (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Employer notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:

(i) Give the Employer any information reasonably requested by the Employer relating to such claim,

(ii) Take such action in connection with contesting such claim as the Employer shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Employer,

(iii) Cooperate with the Employer in good faith in order effectively to contest such claim, and

(iv) Permit the Employer to participate in any proceedings relating to such claim;

provided, however, that the Employer shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this Paragraph (c), the Employer shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals,

proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner; and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Employer shall determine; provided, however, that if the Employer directs the Executive to pay such claim and sue for a refund, the Employer shall advance the amount of such payment to the Executive on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Employer’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(d) If, after the receipt by the Executive of an amount advanced by the Employer pursuant to Paragraph (c), above, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Employer’s complying with the requirements of said Paragraph (c)) promptly pay to the Employer the amount of such refund (together with any interest paid or credited thereon, after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Employer pursuant to said Paragraph (c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Employer does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid; and the amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid.

70. Dispute Resolution. In the event any dispute arises and the parties after good faith efforts are unable to agree as to the calculation of the amounts payable under this Agreement, it shall be settled in accordance with the majority opinion of a committee consisting of an accountant chosen by the Employer, an accountant chosen by the Executive and an independent accountant acceptable to both the Executive and the Employer, as the case may be. The committee’s determination shall be binding and conclusive on the parties hereto. The Employer shall pay all fees and expenses of the dispute resolution.

71. Enforcement. In the event the Employer shall fail to pay any amounts due to the Executive under this Agreement as they come due, the Employer agrees to pay interest on such amounts at a rate equal to the prime rate plus four percent (4%) per annum (as from time to time published in The Wall Street Journal (Midwest Edition)). The Employer agrees that Executive and any successor shall be entitled to recover all costs of successfully enforcing any provision of this Agreement, including reasonable attorneys fees and costs of litigation, if Executive is the prevailing party.

72. Confidential Information.

The Executive shall not at any time during or following the Executive’s employment with the Employer, directly or indirectly, disclose or use on the Executive’s behalf or another’s behalf, publish or communicate, except in the course of the Executive’s employment and in the pursuit of the business of the Employer or any of its subsidiaries or affiliates, any proprietary information or data of the Employer or any of its subsidiaries or affiliates, which is not generally known to the public or which could not be recreated through public means and which the Employer may reasonably regard as confidential and proprietary. The Executive recognizes and acknowledges that all knowledge and information which the Executive has or may acquire in the course of the Executive’s employment, such as, but not limited to the business, developments, procedures, techniques, activities or services of the Employer or the business affairs and activities of any customer, prospective customer, individual firm or entity doing business with the Employer are its sole valuable property, and shall be held by Executive in confidence and in trust for their sole benefit. All records of every nature and description which come into the Executive’s possession, whether prepared by the Executive, or otherwise, shall remain the sole property of the Employer and upon termination of the Executive’s employment for any reason, said records shall be left with the Employer as part of its property.

73. Non-Competition; Non-Solicitation. The Executive acknowledges that the Employer and its affiliates and subsidiaries by nature of their respective businesses have a legitimate and protectable interest in their clients, customers and employees with whom they have established significant relationships as a result of a substantial investment of time and money, and but for the Executive’s employment hereunder, the Executive would not have had contact with such clients, customers and employees. The Executive agrees that during the period of the Executive’s employment with the Employer and for a period of one (1) year after termination of the Executive’s employment for any reason (the “Non-Compete Period”), the Executive will not (except in the Executive’s capacity as an employee of the Employer) directly or indirectly, for the Executive’s own account, or as an agent, employee, director, owner, partner, or consultant of any corporation, firm, partnership, joint venture, syndicate, sole proprietorship or other entity which has a place of business (whether as a principal, division, subsidiary, affiliate, related entity, or otherwise) located within the Market Area (as hereinafter defined):

(a) engage, directly or indirectly, in any business that provides banking products or services or that otherwise competes in any way with the Employer or any of its subsidiaries or affiliates;

(b) solicit or induce, or attempt to solicit or induce any client or customer of the Employer or any of its subsidiaries or affiliates not to do business with the Employer or any of its subsidiaries or affiliates; or

(c) solicit or induce, or attempt to solicit or induce, any employee or agent of the Employer or any of its subsidiaries or affiliates to terminate his or her relationship with the Employer or any of its subsidiaries or affiliates.

For purposes of this Agreement, “Market Area” shall be an area encompassed within a fifty (50) mile radius surrounding Executive’s office as of the Date of Termination of employment.

The foregoing provisions shall not be deemed to prohibit (i) the Executive’s ownership, not to exceed five percent (5%) of the outstanding shares, of capital stock of any corporation whose securities are publicly traded on a national or regional securities exchange or in the over-the-counter market or (ii) the Executive serving as a director of other corporations and entities to the extent these directorships do not inhibit the performance of the Executive’s duties hereunder or conflict with the business of the Employer.

74. Remedies.

(a) The Executive acknowledges that the restraints and agreements herein provided are fair and reasonable, that enforcement of the provisions of Paragraphs 12 and 13 will not cause the Executive undue hardship and that said provisions are reasonably necessary and commensurate with the need to protect the Employer and its legitimate and proprietary business interests and property from irreparable harm. The Executive acknowledges and agrees that (a) a breach of any of the covenants and provisions contained in Paragraphs 12 or 13 above, will result in irreparable harm to the business of the Employer, (b) a remedy at law in the form of monetary damages for any breach by the Executive of any of the covenants and provisions contained in Paragraphs 12 and 13 is inadequate, (c) in addition to any remedy at law or equity for such breach, the Employer shall be entitled to institute and maintain appropriate proceedings in equity, including a suit for injunction to enforce the specific performance by Executive of the obligations hereunder and to enjoin Executive from engaging in any activity in violation hereof and (d) the covenants on the Executive’s part contained in Paragraphs 12 and 13, shall be construed as agreements independent of any other provisions in this Agreement, and the existence of any claim, setoff or cause of action by the Executive against the Employer, whether predicated on this Agreement or otherwise, shall not constitute a defense or bar to the specific enforcement by the Employer of said covenants. In the event of a breach or a violation by the Executive of any of the covenants and provisions of this Agreement, the running of the Non-Compete Period (but not of Executive’s obligation thereunder) shall be tolled during the period of the continuance of any actual breach or violation.

(b) The parties hereto agree that the covenants set forth in Paragraphs 12 and 13 are reasonable with respect to their duration, geographical area and scope. If the final judgment of a court of competent jurisdiction declares that any term or provision of Paragraph 12 or 13 is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.

75. Notices. Any notice or other communication required or permitted to be given hereunder shall be determined to have been duly given to any party (a) upon delivery to the address of such party specified below if delivered personally or by courier; (b) upon dispatch if transmitted by telecopy or other means of facsimile, provided a copy thereof is also sent by regular mail or courier; (c) within forty-eight (48) hours after deposit thereof in the U.S. mail, postage prepaid, for delivery as certified mail, return receipt requested; or (d) within twenty-four

(24) hours after deposit thereof with a reputable overnight courier (charges prepaid), addressed, in any case to the party at the following address(es) or telecopy numbers:

(a) If to Executive, at the address set forth on the signature page hereof.

(b) If to the Employer:

PrivateBancorp, Inc.

Ten North Dearborn Street

Suite 900

Chicago, IL 60602

Attn: Chief Executive Officer

Telecopy No.: (312) 683-7111

with a copy to:

Vedder, Price, Kaufman & Kammholz, P.C.

222 North LaSalle Street

Chicago, Illinois 60601-1003

Attn: Thomas P. Desmond

Telecopy No.: (312) 609-5005

or to such other address(es) or telecopy number(s) as any party may designate by written notice in the aforesaid manner.

76. Indemnification.

(a) In the event that legal action is instituted against the Executive during or after the term hereof by a third party (or parties) based on the performance or nonperformance by the Executive of the Executive’s duties hereunder, the Employer will assume the defense of such action by its attorneys or attorneys selected by the Executive reasonably satisfactory to the Employer and advance the costs and expenses thereof (including reasonable attorneys’ fees) without prejudice to or waiver by the Employer of its rights and remedies against the Executive. In the event that there is a final judgment entered against the Executive in any such litigation, and Executive is obligated, in accordance with its charter, by-laws, or insurance, to reimburse such entities, the Executive shall be liable to the Employer for all such costs and expenses paid or incurred by them in the defense of any such litigation (the “Reimbursement Amount”). The Reimbursement Amount shall be paid by the Executive within thirty (30) days after rendition of the final judgment. The Employer shall be entitled to set off the reimbursement amount against all sums which may be owed or payable by the Employer to the Executive hereunder or otherwise. The parties shall cooperate in the defense of any asserted claim, demand or liability against the Executive or the Employer or its subsidiaries or affiliates. The term “final judgment” as used herein shall be defined to mean the decision of a court of competent jurisdiction, and in the event of an appeal, then the decision of the appellate court, after petition for rehearing has been denied, or the time for filing the same (or the filing of further appeal) has expired.

(b) The rights to indemnification under this Section 16 shall be in addition to any rights which the Executive may now or hereafter have under the charter or By-laws of the Employer or any of its affiliates or subsidiaries, under any insurance contract maintained by the Employer or any of its affiliates or subsidiaries, or any agreement between the Executive and the Employer or any of its affiliates or subsidiaries.

77. Full Settlement; No Mitigation. The Employer’s obligation to make the payments and provide the benefits provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Employer may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment.

78. Payment in the Event of Death. In the event payment is due and owing by the Employer to the Executive under this Agreement upon the death of the Executive, payment shall be made to such beneficiary as the Executive may designate in writing, or failing such designation, then the executor of the Executive’s estate, in full settlement and satisfaction of all claims and demands on behalf of the Executive, shall be entitled to receive all amounts owing to the Executive at the time of the Executive’s death under this Agreement. Such payments shall be in addition to any other death benefits of the Employer and in full settlement and satisfaction of all severance benefit payments provided for in this Agreement.

79. Entire Understanding. This Agreement constitutes the entire understanding between the parties relating to Executive’s employment hereunder and supersedes and cancels all prior written and oral understandings and agreements with respect to such matters and except for the terms and provisions of any employee benefit or other compensation plans (or any agreements or awards thereunder), referred to in this Agreement, or as otherwise expressly contemplated by this Agreement.

80. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the heirs and representatives of the Executive and the successors and assigns of the Employer. The Employer shall require any successor (whether direct or indirect, by purchase, merger, reorganization, consolidation, acquisition of property or stock, liquidation, or otherwise) to all or a substantial portion of its assets, by agreement in form and substance reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Employer would be required to perform this Agreement if no such succession had taken place. Regardless of whether such an agreement is executed, this Agreement shall be binding upon any successor of the Employer in accordance with the operation of law, and such successor shall be deemed the “Employer” for purposes of this Agreement.

81. Tax Withholding. The Employer shall provide for the withholding of any taxes required to be withheld by federal, state, or local law with respect to any payment in cash, shares of stock and/or other property made by or on behalf of the Employer to or for the benefit of the Executive under this Agreement or otherwise. The Employer may, at its option: (a) withhold

such taxes from any cash payments owing from the Employer to the Executive, (b) require the Executive to pay to the Employer in cash such amount as may be required to satisfy such withholding obligations and/or (c) make other satisfactory arrangements with the Executive to satisfy such withholding obligations.

82. No Assignment. Except as otherwise expressly provided herein, this Agreement is not assignable by any party and no payment to be made hereunder shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or other charge.

83. Execution in Counterparts. This Agreement may be executed by the parties hereto in two (2) or more counterparts, each of which shall be deemed to be an original, but all such counterparts shall constitute one and the same instrument, and all signatures need not appear on any one counterpart.

84. Jurisdiction and Governing Law. Except as provided in Paragraph 10, jurisdiction over disputes with regard to this Agreement shall be exclusively in the courts of the State of Illinois, and this Agreement shall be construed, interpreted and enforced in accordance with and governed by the laws of the State of Illinois, without regard to the choice of laws provisions of such State.

85. Severability. If any provision of this Agreement shall be adjudged by any court of competent jurisdiction to be invalid or unenforceable for any reason, such judgment shall not affect, impair or invalidate the remainder of this Agreement. Furthermore, if the scope of any restriction or requirement contained in this Agreement is too broad to permit enforcement of such restriction or requirement to its full extent, then such restriction or requirement shall be enforced to the maximum extent permitted by law, and the Executive consents and agrees that any court of competent jurisdiction may so modify such scope in any proceeding brought to enforce such restriction or requirement.

86. Survival. Provisions of this Agreement shall survive the termination of the Executive’s employment with the Employer to the extent provided herein.

87. Waiver. The waiver of any party hereto of a breach of any provision of this Agreement by any other party shall not operate or be construed as a waiver of any subsequent breach.

88. Amendment. No change, alteration or modification hereof may be made except in a writing, signed by each of the parties hereto.

89. Construction. The language used in this Agreement will be deemed to be the language chosen by Employer and the Executive to express their mutual intent and no rule of strict construction shall be applied against any person. Wherever from the context it appears appropriate, each term stated in either the singular of plural shall include the singular and the plural, and the pronouns stated in either the masculine, the feminine or the neuter gender shall include the masculine, feminine or neuter. The headings of the Paragraphs of this Agreement are for reference purposes only and do not define or limit, and shall not be used to interpret or construe the contents of this Agreement.

90. No Duplication. Notwithstanding anything herein to the contrary, to the extent that any compensation or benefits are paid to or received by the Executive from the Bank, PrivateBancorp or any other subsidiary of PrivateBancorp or the Bank, such compensation or benefits shall be subtracted from any amounts simultaneously due hereunder from PrivateBancorp and/or the Bank, as the case may be.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written.

PRIVATEBANCORP, INC.
By:	/s/ Ralph B. Mandell
Title:	Chairman and Chief Executive Officer
EXECUTIVE
/s/ Jay B. Williams
Name:	Jay B. Williams

Address:

Telecopy No.:

Exhibit A to Employment Agreement

RELEASE AND SEVERANCE AGREEMENT

THIS RELEASE AND SEVERANCE AGREEMENT is made and entered into this ____ day of _________, _____ by and between PrivateBancorp, Inc. and its subsidiaries and affiliates (including, without limitation, The PrivateBank and Trust Company) (collectively, “PBI”) and ______________________________ (hereinafter “EXECUTIVE”).

EXECUTIVE’S employment with PBI terminated on __________, ______; and EXECUTIVE has voluntarily agreed to the terms of this RELEASE AND SEVERANCE AGREEMENT in exchange for severance benefits under the Employment Agreement (“Employment Agreement”) to which EXECUTIVE otherwise would not be entitled.

NOW THEREFORE, in consideration for severance benefits provided under the Employment Agreement, EXECUTIVE on behalf of EXECUTIVE and EXECUTIVE’S spouse, heirs, executors, administrators, children, and assigns does hereby fully release and discharge PBI, its officers, directors, employees, agents, subsidiaries and divisions, benefit plans and their administrators, fiduciaries and insurers, successors, and assigns from any and all claims or demands for wages, back pay, front pay, attorneys’ fees and other sums of money, insurance, benefits, contracts, controversies, agreements, promises, damages, costs, actions or causes of action and liabilities of any kind or character whatsoever, whether known or unknown, from the beginning of time to the date of these presents, relating to EXECUTIVE’S employment or termination of employment from PBI, including but not limited to any claims, actions or causes of action arising under the statutory, common law or other rules, orders or regulations of the United States or any State or political subdivision thereof including the Age Discrimination in Employment Act and the Older Workers Benefit Protection Act.

EXECUTIVE acknowledges that EXECUTIVE’S obligations pursuant to Paragraphs 12 and 13, of the Employment Agreement relating to the use or disclosure of confidential information and non-solicitation of customers and employees shall continue to apply to EXECUTIVE.

This Release and Settlement Agreement supersedes any and all other agreements between EXECUTIVE and PBI except agreements relating to proprietary or confidential information belonging to PBI, and any other agreements, promises or representations relating to severance pay or other terms and conditions of employment are null and void.

This release does not affect EXECUTIVE’S right to any benefits to which EXECUTIVE may be entitled under any employee benefit plan, program or arrangement sponsored or provided by PBI, including but not limited to the Employment Agreement and the plans, programs and arrangements referred to therein.

EXECUTIVE and PBI acknowledge that it is their mutual intent that the Age Discrimination in Employment Act waiver contained herein fully comply with the Older Workers Benefit Protection Act. Accordingly, EXECUTIVE acknowledges and agrees that:

(a) The severance benefits exceed the nature and scope of that to which EXECUTIVE would otherwise have been legally entitled to receive.

A-1

(b) Execution of this Agreement and the Age Discrimination in Employment Act waiver herein is EXECUTIVE’S knowing and voluntary act;

(c) EXECUTIVE has been advised by PBI to consult with EXECUTIVE’S personal attorney regarding the terms of this Agreement, including the aforementioned waiver;

(d) EXECUTIVE has had at least twenty-one (21) calendar days within which to consider this Agreement;

(e) EXECUTIVE has the right to revoke this Agreement in full within seven (7) calendar days of execution and that none of the terms and provisions of this Agreement shall become effective or be enforceable until such revocation period has expired;

(f) EXECUTIVE has read and fully understands the terms of this Agreement; and

(g) Nothing contained in this Agreement purports to release any of EXECUTIVE’S rights or claims under the Age Discrimination in Employment Act that may arise after the date of execution.

IN WITNESS WHEREOF, the parties have executed this Agreement on the date indicated above.

PRIVATEBANCORP, INC., for itself and its Subsidiaries and Affiliates	EXECUTIVE
By:
Its:		[Name]

A-2

EX-12.1

Exhibit 12.1

PrivateBancorp, Inc.

Calculation of Ratio of Earnings to Fixed Charges

(Dollars in thousands)

	Year Ended December 31,
	2005			2004			2003			2002			2001
Including Interest on Deposits
Earnings:
Earnings before income taxes	$	48,637		$	37,498		$	26,571		$	14,277		$	8,251
Fixed charges from below		80,032			39,568			30,354			31,241			37,637
Earnings	$	128,669		$	77,066		$	56,925		$	45,518		$	45,888
Fixed charges:
Interest expense	$	80,032		$	39,568		$	30,354		$	31,241		$	37,637
Interest portion of fixed rentals(1)		—			—			—			—			—
Total interest expense	$	80,032		$	39,568		$	30,354		$	31,241		$	37,637
Ratio of Earnings to Fixed Charges		1.61	x		1.95	x		1.88	x		1.46	x		1.22	x
Excluding Interest on Deposits
Earnings:
Earnings before income taxes	$	48,637		$	37,498		$	26,571		$	14,277		$	8,251
Fixed charges from below		17,383			8,598			6,442			7,264			8,058
Earnings	$	66,020		$	46,096		$	33,013		$	21,541		$	16,309
Fixed charges:
Interest expense excluding interest on deposits	$	17,383		$	8,598		$	6,442		$	7,264		$	8,058
Interest portion of fixed rentals(1)		—			—			—			—			—
Total Interest expense	$	17,383		$	8,598		$	6,442		$	7,264		$	8,058
Ratio of Earnings to Fixed Charges		3.80	x		5.36	x		5.12	x		2.97	x		2.02	x

(1) The Company is not a party to any capital leases; therefore, this item is not applicable. All leases are operating leases.

EX-21.1

EXHIBIT 21.1

LIST OF SUBSIDIARIES

The following is a list of the direct and indirect subsidiaries of PrivateBancorp, Inc. as of December 31, 2005:

Subsidiary	Jurisdiction of Incorporation or Organization
The PrivateBank and Trust Company	Illinois
Lodestar Investment Counsel, LLC (a subsidiary of The PrivateBank and Trust Company)	Delaware
The PrivateBank	Federal
PrivateBancorp Statutory Trust II	Delaware
Private Investment Limited Partnership I	Illinois
The PrivateBank Mortgage Company, LLC	Illinois
PrivateBancorp Statutory Trust III	Connecticut
The PrivateBank – Michigan	Michigan
Bloomfield Hills Statutory Trust I	Delaware
TrustCo, Company	Missouri

EX-23.1

EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP

We consent to the incorporation by reference in the following documents of our report dated March 2, 2006, with respect to the consolidated financial statements of PrivateBancorp, Inc., PrivateBancorp, Inc. management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of PrivateBancorp, Inc., included in the Annual Report (Form 10-K) for the year ended December 31, 2005:

• Registration Statement (Form S-8 No. 333-124427) pertaining to the PrivateBancorp, Inc. Incentive Compensation Plan

• Registration Statement (Form S-8 No. 333-104807) pertaining to the PrivateBancorp, Inc. Incentive Compensation Plan and the PrivateBancorp, Inc. Deferred Compensation Plan

• Registration Statement (Form S-8 No. 333-43830) pertaining to the PrivateBancorp, Inc. Amended and Restated Stock Incentive Plan and the PrivateBancorp, Inc. Savings and Retirement Plan (formerly known as The PrivateBank and Trust Company Savings and Retirement Plan)

• Registration Statement (Form S-8 No. 333-88289) pertaining to the PrivateBancorp, Inc. Amended and Restated Stock Incentive Plan

/s/    ERNST & YOUNG LLP

Chicago, Illinois

March 8, 2006

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Ralph B. Mandell, Chairman, President and Chief Executive Officer of PrivateBancorp, Inc., certify that:

1. I have reviewed this annual report on Form 10-K of PrivateBancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

d) disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 8, 2006

/s/    RALPH B. MANDELL        

Ralph B. Mandell

Chairman, President and Chief Executive Officer

PrivateBancorp, Inc.

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Dennis L. Klaeser, Chief Financial Officer of PrivateBancorp, Inc., certify that:

1. I have reviewed this annual report on Form 10-K of PrivateBancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

d) disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 8, 2006

/s/    DENNIS L. KLAESER        

Dennis L. Klaeser

Chief Financial Officer

PrivateBancorp, Inc.

EX-32.1

Exhibit 32.1

The following certification is provided by the undersigned Chief Executive Officer and Chief Financial Officer of PrivateBancorp, Inc. On the basis of such officer’s knowledge and belief for the sole purpose of complying with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

CERTIFICATION

In connection with the Annual Report of PrivateBancorp, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2005 as filed with the Securities and Exchange Commission on March 8, 2006 (the “Report”), the undersigned, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/    RALPH B. MANDELL
Name:	Ralph B. Mandell
Title:	Chairman, President and Chief Executive Officer
Date:	March 8, 2006

By:	/s/    DENNIS L. KLAESER
Name:	Dennis L. Klaeser
Title:	Chief Financial Officer
Date:	March 8, 2006

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission upon request. This certification accompanies the Report and shall not be treated as having been filed as part of the Report.