TAYLOR CAPITAL GROUP INC - 10-Q Quarterly Report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2003

Commission File No. 0-50034

TAYLOR CAPITAL GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware

36-4108550

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

350 East Dundee Road, Suite 300

Wheeling, Illinois 60090

(Address, including zip code, of principal executive offices)

(847) 537-0020

(Registrant’s telephone number, including area code)

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of outstanding shares of each of the issuer’s classes of common stock, as of the latest practicable date: At August 1, 2003, there were 9,453,226 shares of Common Stock, $0.01 par value, outstanding.

TAYLOR CAPITAL GROUP, INC.

INDEX

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets (unaudited)—June 30, 2003 and December 31, 2002	1

	Consolidated Statements of Income (unaudited)—For the three and six months ended June 30, 2003 and 2002	2

	Consolidated Statements of Changes in Stockholders’ Equity (unaudited)—For the six months ended June 30, 2003 and 2002	3

	Statements of Cash Flows (unaudited)—For the six months ended June 30, 2003 and 2002	4

	Notes to Consolidated Financial Statements (unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosure About Market Risks	37

Item 4.	Controls and Procedures	37

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	38

Item 2.	Changes in Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	38

Item 4.	Submission of Matters to a Vote of Security Holders	38

Item 5.	Other Information	39

Item 6.	Exhibits and Reports on Form 8-K	39

	Signatures	41

TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands, except share and per share data)

	June 30, 2003			December 31, 2002
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	86,723		$	65,858
Short-term investments		5,355			7,051
Federal funds sold		78,500			20,000

Total cash and cash equivalents		170,578			92,909
Investment securities:
Available-for-sale, at fair value		496,341			500,781
Held-to-maturity, at amortized cost (fair value of $878 and $884 at June 30, 2003 and December 31, 2002, respectively)		825			825
Loans, net of allowance for loan losses of $36,157 and $34,073 at June 30, 2003 and December 31, 2002, respectively		1,869,705			1,845,401
Premises, leasehold improvements and equipment, net		20,010			19,090
Investment in Federal Home Loan Bank and Federal Reserve Bank stock, at cost		11,813			10,958
Other real estate and repossessed assets, net		1,582			625
Goodwill, net of amortization of $11,696 at June 30, 2003 and December 31, 2002		23,354			23,354
Other intangible assets, net of amortization of $893 and $700 at June 30, 2003 and December 31, 2002, respectively		245			438
Other assets		45,113			41,080

Total assets	$	2,639,566		$	2,535,461

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	412,957		$	400,650
Interest-bearing		1,633,619			1,563,099

Total deposits		2,046,576			1,963,749
Short-term borrowings		226,634			215,360
Accrued interest, taxes and other liabilities		35,339			32,115
Notes payable and FHLB advances		110,500			110,500
Guaranteed preferred beneficial interest in the Company’s junior subordinated debentures		45,000			45,000

Total liabilities		2,464,049			2,366,724

Stockholders’ equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized, Series A 9% noncumulative perpetual, 1,530,000 shares issued and outstanding, $25 stated and redemption value		38,250			38,250
Common stock, $.01 par value; 25,000,000 shares authorized; 9,773,013 and 9,733,667 shares issued at June 30, 2003 and December 31, 2002, respectively; 9,450,006 and 9,410,660 shares outstanding at June 30, 2003 and December 31, 2002, respectively		98			97
Surplus		142,833			142,008
Unearned compensation—stock grants		(1,054	)		(1,088	)
Retained deficit		(7,331	)		(15,140	)
Accumulated other comprehensive income		9,778			11,667
Treasury stock, at cost, 323,007 shares at June 30, 2003 and December 31, 2002		(7,057	)		(7,057	)

Total stockholders’ equity		175,517			168,737

Total liabilities and stockholders’ equity	$	2,639,566		$	2,535,461

See accompanying notes to consolidated financial statements

TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(in thousands, except per share data)

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2003		2002			2003			2002
Interest income:
Interest and fees on loans	$	28,596	$	29,620		$	56,924		$	58,757
Interest and dividends on investment securities:
Taxable		5,574		6,362			11,356			12,485
Tax-exempt		586		703			1,183			1,463
Interest on cash equivalents		117		90			197			184

Total interest income		34,873		36,775			69,660			72,889

Interest expense:
Deposits		7,472		8,978			15,080			18,155
Short-term borrowings		673		914			1,262			1,868
Notes payable and FHLB advances		1,123		1,294			2,324			2,517
Guaranteed preferred beneficial interest in the Company’s junior subordinated debentures		1,299		—			2,509			—

Total interest expense		10,567		11,186			21,175			22,540

Net interest income		24,306		25,589			48,485			50,349
Provision for loan losses		1,533		2,475			3,833			4,950

Net interest income after provision for loan losses		22,773		23,114			44,652			45,399

Noninterest income:
Service charges		3,135		3,109			6,283			6,046
Trust and investment management fees		1,120		1,279			2,183			2,810
Gain on sale of investment securities, net		—		—			—			8
Other noninterest income		722		980			1,046			1,444

Total noninterest income		4,977		5,368			9,512			10,308

Noninterest expense:
Salaries and employee benefits		10,598		12,266			21,437			22,971
Occupancy of premises		1,773		1,502			3,356			3,167
Furniture and equipment		765		888			1,572			1,865
Legal fees, net		739		1,126			(277	)		1,846
Advertising and public relations		752		428			2,082			885
Corporate insurance		728		304			1,561			548
Computer processing		515		601			1,013			1,154
Other intangible assets amortization		97		66			193			132
Litigation settlement charge		—		64,509			—			64,509
Other noninterest expense		3,256		3,613			6,736			7,027

Total noninterest expense		19,223		85,303			37,673			104,104

Income (loss) before income taxes		8,527		(56,821	)		16,491			(48,397	)
Income taxes		2,988		2,651			5,827

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