Exhibit 99.1

 

 

Taylor Capital Group reports net income

of $388,000 for the first quarter of 2011

Lower provision and nonperforming asset expense drive results

CHICAGO, IL – April 28, 2011 – Taylor Capital Group, Inc. (the “Company”) (NASDAQ: TAYC), the parent company of Cole Taylor Bank (the “Bank”), today reported results for the first quarter of 2011.

Net income for the first quarter of 2011 was $388,000, compared to a net loss of $45.6 million for the fourth quarter of 2010. Net loss applicable to common stockholders was $2.1 million, or $0.12 per diluted share, for the first quarter of 2011, compared to net loss applicable to common stockholders of $48.1 million, or $2.76 per diluted share, for the fourth quarter of 2010.

“We are pleased to report net income for the quarter, largely due to a significant reduction in the provision for loan losses and lower nonperforming asset expense,” said Mark A. Hoppe, President and Chief Executive Officer of Taylor Capital Group. “A key indicator of our improving asset quality is the level of commercial criticized and classified loans, which were down from December 31, 2010 by approximately $26 million to $278 million at March 31, 2011. Moreover, commercial criticized and classified loans are down approximately $175 million from their peak at June 30, 2009, and at their lowest level since December 31, 2007. We are encouraged by this trend, despite the slight increase in nonperforming loans this quarter. Although slow economic growth in the Chicago area may continue to have an unpredictable impact on asset quality, we are pleased with the improvements this quarter.”

Hoppe continued, “Our pre-tax, pre-provision earnings from core operations were down as mortgage revenue dropped in the face of rising interest rates, compounded by uncertainty surrounding future broker and mortgage loan officer compensation due to regulatory changes brought on by Dodd-Frank. We continue to invest in Cole Taylor Mortgage as we build a complete national platform and achieve appropriate scale. This unit diversifies our revenue streams and complements our other lines of business. In our commercial banking and asset based lending businesses, loan originations have slowed as we continue to focus on pricing discipline and solid underwriting, and on shifting our loan mix further toward middle-market commercial loans.”

FIRST QUARTER 2011 HIGHLIGHTS

Significant reductions in provision and commercial criticized and classified loans, despite slight increase in nonperforming loans

 

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Provision for loan losses was $10.2 million for the first quarter of 2011, down from $59.9 million for the fourth quarter of 2010.

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At March 31, 2011, commercial criticized and classified loans(1) totaled $277.9 million, down from $303.9 million at December 31, 2010.

 

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Nonperforming loans were $168.2 million and 5.93% of total loans at March 31, 2011, up from $159.7 million and 5.16% of total loans at December 31, 2010.

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At March 31, 2011, the allowance for loan losses was $115.0 million, compared to $124.6 million at December 31, 2010.

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The allowance for loan losses as a percent of nonperforming loans was 68.35% at March 31, 2011, compared to 77.98% at December 31, 2010.

Pre-tax, pre-provision earnings from core operations down due to lower mortgage results and reduced net interest income

 

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Pre-tax, pre-provision earnings from core operations(2) totaled $13.8 million for the first quarter of 2011, down from $16.9 million for the fourth quarter of 2010.

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Revenue(3) was $39.1 million for the first quarter of 2011, down from $44.6 million for the fourth quarter of 2010.

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Net interest margin decreased five basis points to 3.07% for the first quarter of 2011 from 3.12% for the fourth quarter of 2010.

Company completed its previously disclosed $25 million capital raise

 

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At March 31, 2011, the Company’s Total Risk Based Capital ratio was 14.24%, up from 12.98% at December 31, 2010, and at its highest level since the Company went public in 2002.

FIRST QUARTER 2011 PERFORMANCE OVERVIEW

Results of Operations

Net Income and Net Income Applicable to Common Stockholders

Net income for the first quarter of 2011 was $388,000, compared to a net loss of $45.6 million for the fourth quarter of 2010. Net loss applicable to common stockholders was $2.1 million, or $0.12 per diluted share, for the first quarter of 2011 as compared to a net loss applicable to common stockholders of $48.1 million, or $2.76 per diluted share, for the fourth quarter of 2010.

Income before income taxes was $282,000 for the first quarter of 2011, compared to a loss before income taxes of $45.3 million in the fourth quarter of 2010. The improvement from the fourth quarter of 2010 to the first quarter of 2011 was primarily due to a $55.7 million decrease in credit costs (provision for loan losses plus nonperforming asset expense), partially offset by a $7.0 million decrease in gains on the sales of investment securities and a $3.1 million decrease in pre-tax, pre-provision earnings from core operations.

Pre-tax, Pre-provision Earnings from Core Operations

Pre-tax, pre-provision earnings from core operations totaled $13.8 million for the first quarter of 2011, compared to $16.9 million for the fourth quarter of 2010. The decrease from the fourth quarter of 2010 to the first quarter of 2011 was due to lower mortgage origination revenue and net interest income, offset by a reduction in salaries and benefits.

Cole Taylor Mortgage’s loan fundings were down in the first quarter of 2011 to $257.8 million from $493.5 million in the fourth quarter of 2010 as the rising interest rate environment slowed refinance activity even further over last quarter. In the face of lower volumes and tighter margins, this unit posted a decrease in mortgage origination revenue from $5.8 million in the fourth quarter of 2010 to $1.5 million in the first quarter of 2011.

 

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Cole Taylor Commercial Banking and Cole Taylor Business Capital, the Bank’s asset based lending group, both had modest results for the first quarter of 2011. Results from these business units were impacted in the first quarter of 2011 as slow economic expansion in Chicago challenged loan growth compared to the fourth quarter of 2010, compounded by the Company’s focus on resisting downward competitive pricing pressure and maintaining high credit standards. Total commercial and industrial loans, including commercial owner-occupied real estate loans, were essentially flat from December 31, 2010 to March 31, 2011.

Revenue

Revenue was $39.1 million for the first quarter of 2011, compared to $44.6 million in the fourth quarter of 2010. The decrease was due to reductions in net interest income and mortgage origination revenue.

Net interest income was $32.2 million for the first quarter of 2011, compared to $33.6 million for the fourth quarter of 2010. The net interest margin was down five basis points, from 3.12% for the fourth quarter of 2010 to 3.07% for the first quarter of 2011. The reductions in both net interest income and the net interest margin were due to lower average total loan balances, including average loans held for sale which are mortgage originations pending sale, as well as increased nonaccrual loans and related interest reversals in the first quarter of 2011. The lower average total loan balances resulted in lower short-term funding needs, which helped drive an eight basis point decrease in yield on interest bearing liabilities. However, this reduction in funding costs was not enough to offset the decrease in yield on interest earning assets.

Noninterest income for the first quarter of 2011 was $6.9 million, compared to $18.0 million for the fourth quarter of 2010. The decrease was due to a reduction of $7.0 million in gains from the sales of investment securities, as well as a $4.3 million decrease in mortgage origination revenue.

Noninterest Expense

Noninterest expense was $28.6 million for the first quarter of 2011, compared to $37.0 million for the fourth quarter of 2010. The decrease was primarily due to a reduction in nonperforming asset expense of $6.0 million as a result of lower write-downs on other real estate and repossessed assets in the first quarter of 2011. In addition, salaries and employee benefits decreased $1.7 million due to a reduction in sales commissions and other incentives in the first quarter of 2011 compared to the fourth quarter of 2010, largely due to lower mortgage originations.

Credit Quality

Loan Portfolio Performance and Credit Quality

Credit quality showed signs of improvement. The watch list of commercial criticized and classified loans decreased $26.0 million, and there were significant reductions in the provision for loan losses and nonperforming asset expense from the first quarter of 2011 as compared to the fourth quarter of 2010. These results indicated continued progress as challenged credits moved though the remediation process to resolution, while at the same time the migration of new credits to criticized and classified status slowed.

Despite this progress, nonaccrual loans increased to $168.2 million at March 31, 2011, compared to $159.7 million at December 31, 2010. This increase was due to higher commercial real estate secured nonaccrual loans at March 31, 2011 as compared to December 31, 2010. The increase of $33.9 million was largely comprised of loans to three clients already on the watch list of criticized and classified loans. Partially offsetting this increase was a decrease of $13.9 million in commercial and industrial nonaccrual loans, as well as reductions in residential construction and land nonaccrual loans and commercial construction and land nonaccrual loans.

 

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The portfolio of loans to banks and bank holding companies declined from $92.9 million at December 31, 2010 to $86.0 million at March 31, 2011, as a result of charge-offs and pay downs. There were no migrations to nonaccrual status in this portfolio during the first quarter of 2011.

Other real estate and repossessed assets increased to $38.2 million at March 31, 2011, compared to $31.5 million at December 31, 2010. The increase was largely the result of additions to other real estate and repossessed assets as the foreclosure process was completed for several properties.

Nonperforming assets were $206.4 million at March 31, 2011, compared to $191.2 million at December 31, 2010. Nonperforming assets to total assets were 4.81% at March 31, 2011, compared to 4.26% at December 31, 2010.

Loans contractually past due 30 through 89 days and still accruing were $28.3 million at March 31, 2011, compared to $11.9 million at December 31, 2010. The increase was largely the result of three commercial and real estate related loans that were less than 60 days past due at March 31, 2011.

Commercial criticized and classified loans were $277.9 million at March 31, 2011, compared to $303.9 million at December 31, 2010. This decrease was largely the result of charge-offs, pay downs, and transfers to other real estate owned during the first quarter of 2011, partially offset by new loans being placed on criticized and classified status. Commercial criticized and classified loans were down approximately $175 million from their peak of $453.1 million at June 30, 2009, and were at their lowest levels since December 31, 2007 when commercial criticized and classified loans were $247.8 million.

Provision and Allowance for Loan Losses

The provision for loan losses was $10.2 million for the first quarter of 2011, down significantly from $59.9 million for the fourth quarter of 2010 due to lower reserve requirements. A substantial part of the higher provision for loan losses taken in the fourth quarter of 2010 was due to deterioration in the portfolio of loans to banks and bank holding companies.

The allowance for loan losses was $115.0 million at March 31, 2011, compared to $124.6 million at December 31, 2010. The allowance for loan losses as a percent of nonperforming loans was 68.35% at March 31, 2011, compared to 77.98% at December 31, 2010.

Credit Quality Performance Summary

 

(in thousands)		3/31/2011				12/31/2010				Change 12/31/2010 To 3/31/2011
Nonperforming loans			$168,210				$159,740				$8,470
Nonperforming assets			$206,375				$191,230				$15,145
Nonperforming loans to total loans			5.93%				5.16%				0.77%
Allowance to nonperforming loans			68.35%				77.98%				-9.63%
Commercial criticized and classified loans			$277,896				$303,923				($26,027	)

 

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Balance Sheet

Assets

Total assets at March 31, 2011 were $4.29 billion, compared to $4.48 billion at December 31, 2010.

Investment securities were $1.31 billion at March 31, 2011, compared to $1.25 billion at December 31, 2010. Loans held for sale were $52.9 million at March 31, 2011, compared to $259.0 million at December 31, 2010. The decrease resulted from significantly lower origination activity at Cole Taylor Mortgage in the first quarter of 2011.

Loans, net of allowance for loan losses, at March 31, 2011 were $2.67 billion, compared to $2.71 billion at December 31, 2010. Loan growth slowed in the first quarter of 2011, which contributed to a reduction in total loan balances, as did resolutions of nonperforming loans from pay downs and charge-offs.

Liabilities and Stockholders’ Equity

Total liabilities at March 31, 2011 were $4.06 billion, compared to $4.28 billion at December 31, 2010.

Total deposits were $3.08 billion at March 31, 2011, compared to $3.03 billion at December 31, 2010. The largest increases in deposits were in-market money market accounts and CDARS time deposits, as well as out-of-market certificates of deposit. Offsetting the increase in total deposits was a $245.0 million decrease in notes payable and other advances due to a decrease in Federal Home Loan Bank advances resulting from lower short-term funding needs.

Total stockholders’ equity increased from $208.8 million at December 31, 2010 to $229.0 million at March 31, 2011, largely due to the completion of the previously disclosed $25 million capital raise, which was partially offset by the net loss applicable to common stockholders in the first quarter of 2011.

Capital

At March 31, 2011, the Company’s Tier I Risk Based Capital ratio was 10.26%, while its Total Risk Based Capital ratio was 14.24% and its Tier I Capital to Average Assets leverage ratio was 7.72%.

All the Company’s ratios exceed the regulatory requirements for well-capitalized banks of 6.00% for Tier I Risk Based Capital, 10.00% for Total Risk Based Capital and 5.00% for Tier I Capital to Average Assets.

Conference Call and Slide Presentation

The Company will host a webcast and conference call on Thursday, April 28, 2011, at 11:00 am Central Time (12:00 pm Eastern Time) to discuss the first quarter of 2011 results and other matters. To access the call, please dial
1-866-788-0547, and enter the passcode 84217500. To access streaming audio, please go to www.taylorcapitalgroup.com.

The Company will also provide a slide presentation, which management will speak to during the discussion. A copy of the presentation will be available for download prior to the start of the call at www.taylorcapitalgroup.com. The presentation will not be webcast live. If you have any trouble obtaining a copy of the presentation, please call Investor Relations at (847) 653-7166.

Accompanying Financial Statements and Tables

This press release is accompanied by the following unaudited financial information:

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Condensed Consolidated Balance Sheets

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Consolidated Statements of Operations

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Summary of Key Quarterly Financial Data

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Summary of Key Period-End Financial Data

 

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Composition of Loan Portfolio

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Credit Quality

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Loan Portfolio and Held for Sale Aging

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Funding Liabilities

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Reconciliation of U.S. GAAP Financial Measures

About Taylor Capital Group, Inc. (NASDAQ: TAYC)

Taylor Capital Group, Inc. is a $4.3 billion bank holding company for Cole Taylor Bank, a Chicago-based commercial bank specializing in serving the banking needs of closely held businesses and the people who own and manage them. Cole Taylor is a member of the FDIC and an Equal Housing Lender.

Endnotes:

(1) Commercial criticized and classified loans (special mention, substandard, and nonaccrual loans) in commercial & industrial, commercial real estate, residential construction and land, and commercial construction and land federal collateral codes. Excludes consumer loans.

(2) Schedules reconciling earnings in accordance with U.S. generally accepted accounting principles (“GAAP”) to the non-GAAP measurement of pre-tax, pre-provision earnings from core operations and revenue are provided in the attached tables.

(3) Defined as net interest income plus noninterest income less gains on the sales of investment securities.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release includes forward-looking statements that reflect our current expectations and projections about our future results, performance, prospects and opportunities. We have tried to identify these forward-looking statements by using words including “may,” “might,” “contemplate,” “plan,” “prudent,” “potential,” “should,” “will,” “expect,” “anticipate,” “believe,” “intend,” “could” and “estimate” and similar expressions. These forward-looking statements are based on information currently available to us and are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities in 2011 and beyond to differ materially from those expressed in, or implied by, these forward-looking statements. These risks, uncertainties and other factors include, without limitation: the risk that our regulators could require us to maintain regulatory capital in excess of the levels needed to be considered well capitalized; the risk that our allowance for loan losses may prove insufficient to absorb probable losses in our loan portfolio; possible volatility in loan charge-offs and recoveries between periods; negative developments and further disruption in the credit and lending markets impacting our business and the businesses of our customers, as well as other banks and lending institutions with which we have commercial relationships; the continued decline in residential real estate sales volume and the likely potential for continuing illiquidity in the real estate market, including within the Chicago metropolitan area; the risks associated with the high volume of loans secured by commercial real estate in our portfolio; the uncertainties in estimating the fair value of developed real estate and undeveloped land in light of declining demand for such assets and continuing illiquidity in the real estate market; the risks associated with the planned growth of our new mortgage unit, including the expansion into new geographic markets; lending concentration risks; the risks associated with attracting and retaining experienced and qualified personnel, including our senior management and other key personnel in our core business lines; uncertainty in estimating the fair value of loans held for sale and the possibility that we will not be able to dispose of these assets on terms acceptable to us; security risks relating to our internet banking activities that could damage our reputation and our business; the potential impact of certain operational risks, including, but not limited to, data processing system failures and errors and customer or employee fraud; the risks associated with implementing our business strategy and managing our growth effectively, including our ability to preserve and access sufficient capital to execute on our strategy; the effect on our profitability if interest rates fluctuate, as well as the effect of our customers’ changing use of our deposit products; the ability to use net operating loss carryforwards to reduce future tax payments if an ownership change of the Company is deemed to have occurred for tax purposes; the possibility that our wholesale funding sources may prove insufficient to replace deposits at maturity and support our growth; continuation of volatility in the capital markets; the effectiveness of our hedging transactions and their impact on our future results of operations; the conditions of the local economy in

 

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which we operate and continued weakness in the local economy; changes in general economic and capital market conditions, interest rates, our debt credit ratings, deposit flows, loan demand, loan syndication opportunities and competition; regulatory restrictions and liquidity constraints at the holding company level that could impair our ability to pay dividends or interest on our outstanding securities; significant restrictions on our operations as a result of our participation in the TARP CPP; the impact of changes in legislation, including the Dodd-Frank Act, or regulatory and accounting principles, policies or guidelines affecting our business, including those relating to capital requirements; and other economic, competitive, governmental, regulatory and technological factors impacting our operations.

For further information about these and other risks, uncertainties and factors, please review the disclosure included in the section captioned “Risk Factors” in our December 31, 2010 Annual Report on Form 10-K filed with the SEC on March 22, 2011. You should not place undue reliance on any forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements or risk factors, whether as a result of new information, future events, changed circumstances or any other reason after the date of this press release.

 

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CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

		(Unaudited) Mar. 31, 2011				Dec. 31, 2010
ASSETS
Cash and cash equivalents			$79,303				$81,329
Investment securities			1,305,486				1,254,477
Loans held for sale			52,872				259,020
Loans, net of allowance for loan losses of $114,966 and $124,568 at March 31, 2011 and December 31, 2010, respectively			2,668,921				2,710,770
Premises, leasehold improvements and equipment, net			15,536				15,890
Investment in Federal Home Loan Bank and Federal Reserve Bank stock			40,346				40,032
Other real estate and repossessed assets, net			38,165				31,490
Other assets			86,061				90,846
Total assets			$4,286,690				$4,483,854
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing			$617,107				$633,300
Interest-bearing			2,459,750				2,393,606
Total deposits			3,076,857				3,026,906
Other borrowings			490,974				511,008
Accrued interest, taxes and other liabilities			54,183				56,697
Notes payable and other advances			260,000				505,000
Junior subordinated debentures			86,607				86,607
Subordinated notes, net			89,030				88,835
Total liabilities			4,057,651				4,275,053
Stockholders’ equity:
Preferred stock, Series B			100,792				100,389
Preferred stock, Series C			31,912				31,912
Preferred stock, Series D			4				4
Preferred stock, Series E			5,588				5,588
Preferred stock, Series G			2				—
Common stock			215				192
Surplus			337,804				312,693
Accumulated deficit			(191,971)				(189,895)
Accumulated other comprehensive income, net			(25,722)				(22,497)
Treasury stock			(29,585)				(29,585)
Total stockholders’ equity			229,039				208,801
Total liabilities and stockholders’ equity			$4,286,690				$4,483,854

 

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CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except per share data)

 

		For the Three Months Ended
		Mar. 31, 2011				Dec. 31, 2010				Mar. 31, 2010
Interest income:
Interest and fees on loans			$35,365				$38,607				$38,211
Interest and dividends on investment securities:
Taxable			11,452				10,500				13,446
Tax-exempt			775				855				1,229
Interest on cash equivalents			3				5				1
Total interest income			47,595				49,967				52,887
Interest expense:
Deposits			8,624				9,402				12,442
Other borrowings			1,809				1,797				2,285
Notes payable and other advances			1,043				1,291				1,624
Junior subordinated debentures			1,443				1,449				1,438
Subordinated notes			2,489				2,466				1,631
Total interest expense			15,408				16,405				19,420
Net interest income			32,187				33,562				33,467
Provision for loan losses			10,241				59,923				21,130
Net interest income (loss) after provision for loan losses			21,946				(26,361)				12,337
Noninterest income:
Service charges			2,890				2,861				2,857
Mortgage origination revenue			1,517				5,758				303
Gain (loss) on disposition of bulk purchased mortgage loans			28				19				(2,022)
Gains on sales of investment securities			-				6,997				1,433
Other derivative income			753				669				209
Other noninterest income			1,697				1,705				1,594
Total noninterest income			6,885				18,009				4,374
Noninterest expense:
Salaries and employee benefits			14,689				16,408				11,613
Occupancy of premises, furniture and equipment			2,890				2,637				2,554
Nonperforming asset expense			3,277				9,259				4,938
FDIC assessment			1,948				1,877				2,213
Legal fees, net			794				1,195				819
Other noninterest expense			4,951				5,595				5,015
Total noninterest expense			28,549				36,971				27,152
Income (loss) before income taxes			282				(45,323)				(10,441)
Income tax expense (benefit)			(106)				284				306
Net income (loss)			388				(45,607)				(10,747)
Preferred dividends and discounts			(2,464)				(2,448)				(2,887)
Net loss applicable to common stockholders			$(2,076)				$(48,055)				$(13,634)
Basic loss per common share			$(0.12)				$(2.76)				$(1.30)
Diluted loss per common share			(0.12)				(2.76)				(1.30)
Weighted-average shares outstanding			17,440,617				17,427,676				10,515,668
Weighted-average diluted shares outstanding			17,440,617				17,427,676				10,515,668

 

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SUMMARY OF KEY QUARTERLY FINANCIAL DATA

(dollars in thousands)

Unaudited

 

		2011				2010
		First Quarter				Fourth Quarter				Third Quarter				Second Quarter				First Quarter
Condensed Income Data:
Net interest income		$	32,187			$	33,562			$	34,367			$	34,678			$	33,467
Provision for loan losses			10,241				59,923				18,128				43,946				21,130
Total noninterest income			6,885				18,009				44,142				6,158				4,374
Total noninterest expense			28,549				36,971				26,646				27,467				27,152
Income (loss) before income taxes			282				(45,323)				33,735				(30,577)				(10,441)
Income tax expense (benefit)			(106)				284				321				306				306
Net income (loss)			388				(45,607)				33,414				(30,883)				(10,747)
Preferred dividends and discounts			(2,464)				(2,448)				(2,671)				(1,693)				(2,887)
Implied non-cash preferred dividends			-				-				-				(15,756)				-
Net income (loss) applicable to common stockholders		$	(2,076)			$	(48,055)			$	30,743			$	(48,332)			$	(13,634)
Non-GAAP Measures of Performance (1)
Revenue		$	39,072			$	44,574			$	45,705			$	40,694			$	36,408
Pre-tax, pre-provision earnings from core operations			13,800				16,862				20,597				17,282				14,194
Per Share Data:
Basic earnings (loss) per common share		$	(0.12)			$	(2.76)			$	1.68			$	(3.35)			$	(1.30)
Diluted earnings (loss) per common share			(0.12)				(2.76)				1.57				(3.35)				(1.30)
Book value per common share			4.50				3.97				8.03				8.26				8.54
Weighted average shares-basic			17,440,617				17,427,676				17,742,119				14,408,469				10,515,668
Weighted average shares-diluted			17,440,617				17,427,676				20,740,215				14,408,469				10,515,668
Shares outstanding-end of period			20,184,809				17,877,708				18,286,842				18,312,772				11,076,197
Performance Ratios (annualized):
Return (loss) on average assets			0.04%				(4.08)%				3.01%				(2.70)%				(0.96)%
Return (loss) on average equity			0.75%				(64.86)%				46.65%				(45.86)%				(16.25)%
Efficiency ratio (2)			73.07%				82.94%				58.30%				67.50%				74.58%
Average Balance Sheet Data (3):
Total assets		$	4,389,583			$	4,474,270			$	4,447,421			$	4,573,030			$	4,479,495
Investments			1,355,827				1,273,452				1,269,634				1,431,291				1,351,711
Cash equivalents			1,109				1,598				1,191				656				294
Loans			2,933,939				3,063,780				3,018,084				3,034,630				3,022,833
Total interest-earning assets			4,290,875				4,338,830				4,288,909				4,466,577				4,374,838
Interest-bearing deposits			2,460,937				2,374,297				2,389,226				2,470,356				2,312,650
Borrowings			1,057,337				1,151,370				1,101,125				1,205,590				1,245,568
Total interest-bearing liabilities			3,518,274				3,525,667				3,490,351				3,675,946				3,558,218
Noninterest-bearing deposits			612,032				617,158				602,903				584,246				606,604
Total stockholders’ equity			206,476				281,251				286,478				269,356				264,588
Tax Equivalent Net Interest Margin:
Net interest income as stated		$	32,187			$	33,562			$	34,367			$	34,678			$	33,467
Add:  Tax equivalent adjust.- investment (4)			417				460				618				653				662
Tax equivalent adjust. - loans (4)			24				25				25				25				25
Tax equivalent net interest income		$	32,628			$	34,047			$	35,010			$	35,356			$	34,154
Net interest margin without tax adjust.			3.03%				3.08%				3.19%				3.11%				3.09%
Net interest margin - tax equivalent (4)			3.07%				3.12%				3.25%				3.17%				3.15%
Yield on earning assets without tax adjust.			4.48%				4.58%				4.82%				4.82%				4.88%
Yield on earning assets - tax equivalent (4)			4.52%				4.62%				4.88%				4.88%				4.95%
Yield on interest-bearing liabilities			1.77%				1.85%				2.00%				2.07%				2.21%
Net interest spread - without tax adjust.			2.71%				2.73%				2.82%				2.74%				2.67%
Net interest spread - tax equivalent (4)			2.75%				2.77%				2.88%				2.81%				2.74%

Footnotes:

(1)	Refer to Reconciliation of U.S. GAAP Financial Measures for a reconciliation to GAAP.

(2)	Efficiency ratio is determined by dividing noninterest expense by an amount equal to net interest income plus noninterest income, adjusted for gains or losses from investment securities.

(3)	Average balances are daily averages.

(4)	Adjustment reflects tax-exempt interest income on an equivalent before-tax basis assuming a tax rate of 35.0%.

 

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SUMMARY OF KEY PERIOD-END FINANCIAL DATA

(dollars in thousands)

Unaudited

 

		Mar. 31, 2011				Dec. 31, 2010				Sept. 30, 2010				June 30, 2010				Mar. 31, 2010
Condensed Balance Sheet Data:
Investment securities		$	1,305,486			$	1,254,477			$	1,172,600			$	1,430,419			$	1,408,240
Loans			2,836,759				3,094,358				3,032,939				3,037,664				3,006,771
Allowance for loan losses			114,966				124,568				94,138				100,500				100,151
Total assets			4,286,690				4,483,854				4,658,815				4,585,230				4,514,180
Total deposits			3,076,857				3,026,906				2,972,668				3,042,966				2,957,720
Total borrowings			926,611				1,191,450				1,169,009				1,203,934				1,250,830
Total stockholders’ equity			229,039				208,801				278,741				282,755				253,800
Asset Quality Ratios:
Nonperforming loans		$	168,210			$	159,740			$	118,419			$	154,378			$	141,190
Nonperforming assets			206,375				191,230				157,482				182,547				168,545
Allowance for loan losses to total loans     (excluding loans held for sale)			4.13%				4.39%				3.25%				3.40%				3.36%
Allowance for loan losses to nonperforming loans			68.35%				77.98%				79.50%				65.10%				70.93%
Nonperforming assets to total loans plus     repossessed property			7.18%				6.12%				5.13%				5.95%				5.55%
Capital Ratios (Taylor Capital Group, Inc.):
Total Capital (to Risk Weighted Assets)			14.24%				12.98%				14.15%				13.20%				12.34%
Tier I Capital (to Risk Weighted Assets)			10.26%				8.93%				10.39%				9.34%				9.29%
Leverage (to average assets)			7.72%				6.89%				8.04%				7.02%				7.07%

 

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COMPOSITION OF LOAN PORTFOLIO (unaudited)

(dollars in thousands)

The following table presents the composition of the Company’s loan portfolio as of the dates indicated:

 

		March 31, 2011								December 31, 2010								March 31, 2010
Loans:		Balance				Percent of Gross Loans				Balance				Percent of Gross Loans				Balance				Percent of Gross Loans
Commercial and industrial			$1,348,173				48.4%				$1,351,862				47.7%				$1,263,210				42.4%
Commercial real estate secured			1,095,681				39.4				1,120,361				39.5				1,180,988				39.7
Residential construction & land			87,180				3.1				104,036				3.7				206,727				6.9
Commercial construction & land			105,033				3.8				106,423				3.8				142,845				4.8
Total commercial loans			2,636,067				94.7				2,682,682				94.7				2,793,770				93.8
Consumer-oriented loans			147,821				5.3				152,657				5.3				184,513				6.2
Gross loans			2,783,888				100.0%				2,835,339				100.0%				2,978,283				100.0%
Less: Unearned discount			(1)								(1)								(4)
Total loans			2,783,887								2,835,338								2,978,279
Less: Loan loss allowance			(114,966)								(124,568)								(100,151)
Net loans			$2,668,921								$2,710,770								$2,878,128
Loans Held for Sale			$52,872								$259,020								$28,492

The following tables provide details of the Company’s commercial real estate and residential construction and land portfolios:

 

		March 31, 2011								December 31, 2010								March 31, 2010
Commercial real estate secured*:		Balance				Percent of Total				Balance				Percent of Total				Balance				Percent of Total
Commercial non-owner occupied:
Retail strip centers or malls			$188,971				17.2%				$198,527				17.7%				$211,933				17.8%
Office/mixed use property			114,209				10.4				116,726				10.4				144,818				12.3
Commercial properties			149,030				13.6				147,920				13.2				145,889				12.4
Specialized – other			80,808				7.4				82,332				7.4				97,721				8.3
Other commercial properties			41,355				3.8				43,595				3.9				55,521				4.7
Subtotal commercial non-owner occupied			574,373				52.4				589,100				52.6				655,882				55.5
Commercial owner-occupied			406,703				37.1				411,519				36.7				378,666				32.1
Multi-family properties			114,605				10.5				119,742				10.7				146,440				12.4
Total commercial real estate secured			$1,095,681				100.0%				$1,120,361				100.0%				$1,180,988				100.0%
Residential construction & land:
Residential construction			$64,730				74.2%				$80,685				77.6%				$167,728				81.1%
Land			22,450				25.8				23,351				22.4				38,999				18.9
Total residential construction and land			$87,180				100.0%				$104,036				100.0%				$206,727				100.0%

* As a result of our recent core system conversion, we identified certain sub-codings within our loan system that changed the characterization of certain commercial real estate non-owner occupied loans to owner occupied real estate. Although there was no impact to the calculation of the total commercial real estate loans, we have adjusted the table above to reflect the revised classifications for all periods presented.

 

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CREDIT QUALITY (unaudited)

(dollars in thousands)

 

		At or for the Three Months Ended
		Mar. 31, 2011				Dec. 31, 2010				Mar. 31, 2010
Nonperforming Assets:
Loans contractually past due 90 days or more but still accruing interest			$54				$55				$58
Nonaccrual loans:
Commercial and industrial			57,500				71,438				25,310
Commercial real estate secured			76,134				42,221				34,863
Residential construction and land			13,599				20,660				57,320
Commercial construction and land			6,311				12,734				14,171
All other loan types			14,612				12,632				9,468
Total nonaccrual loans			168,156				159,685				141,132
Total nonperforming loans			168,210				159,740				141,190
Other real estate owned and repossessed assets			38,165				31,490				27,355
Total nonperforming assets			$206,375				$191,230				$168,545
Other Credit Quality Information:
Loans contractually past due 30 through 89 days and still accruing			$28,341				$11,948				$13,186
Commercial criticized and classified loans (1)			277,896				303,923				368,241
Performing restructured loans			19,741				29,786				1,247
Recorded balance of impaired loans			178,592				181,081				132,911
Allowance for loan losses related to impaired loans			47,144				59,857				24,312
Allowance for Loan Losses Summary:
Allowance at beginning of period			$124,568				$94,138				$106,185
Charge-offs, net of recoveries:
Commercial and commercial real estate			(10,736)				(27,945)				(8,439)
Real estate – construction and land			(8,692)				(639)				(17,605)
Total consumer-oriented loans			(415)				(910)				(1,120)
Total net charge-offs			(19,843)				(29,494)				(27,164)
Provision for loan losses			10,241				59,924				21,130
Allowance at end of period			$114,966				$124,568				$100,151
Key Credit Ratios:
Nonperforming loans to total loans			5.93%				5.16%				4.70%
Nonperforming assets to total loans plus repossessed property			7.18%				6.12%				5.55%
Nonperforming assets to total assets			4.81%				4.26%				3.73%
Annualized net charge-offs to average total loans			2.71%				3.85%				3.59%
Allowance to total loans at end of period (excluding loans held for sale)			4.13%				4.39%				3.36%
Allowance to nonperforming loans			68.35%				77.98%				70.93%
30 – 89 days past due to total loans			0.87%				0.39%				0.44%

(1) Commercial criticized and classified loans (special mention, substandard and nonaccrual loans) in commercial & industrial, commercial real estate, residential construction and land and commercial construction and land federal collateral codes. Excludes consumer loans.

 

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LOAN PORTFOLIO AND HELD FOR SALE AGING (unaudited)

(dollars in thousands)

 

		As of March 31, 2011
		30-89 Days Past Due				>90 Days Past Due and Still Accruing				Nonaccrual				Current				Total Loans				% of Total Loans				Allowance for Loan Loss Allocation
Commercial and industrial			$5,188				$ —				$57,500				$1,285,485				$1,348,173				48%				$56,688
Commercial real estate secured:
Commercial non-owner occupied:
Retail strip centers or malls			—				—				16,374				172,597				188,971				7%				8,412
Office/mixed use property			1,115				—				4,413				108,681				114,209				4%				3,670
Commercial properties			6,251				—				10,304				132,475				149,030				5%				6,1955
Specialized – other			3,369				—				3,133				74,306				80,808				3%				1,548
Other commercial properties			1,305				—				—				40,050				41,355				2%				805
Subtotal commercial non-owner occupied			12,040				—				34,224				528,109				574,373				21%				20,630
Commercial owner-occupied			—				—				17,959				388,744				406,703				14%				8,511
Multi-family properties			239				1				23,951				90,414				114,605				4%				6,606
Total commercial real estate secured			12,279				1				76,134				1,007,267				1,095,681				39%				35,747
Residential construction & land:
Residential construction			3,530				—				12,643				48,557				64,730				2%				9,745
Land			125				—				956				21,369				22,450				1%				3,194
Total residential construction and land			3,655				—				13,599				69,926				87,180				3%				12,939
Commercial construction and land			—				—				6,311				98,722				105,033				4%				4,081
Total commercial loans			21,122				1				153,544				2,461,400				2,636,067				94%				109,455
Consumer loans			7,219				53				14,612				178,808				200,692				6%				5,511
Total loans			$28,341				$54				$168,156				$2,640,208				$2,836,759				100%				$114,966

 

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FUNDING LIABILITIES (unaudited)

(dollars in thousands)

The following table presents the distribution of the Company’s average deposit account balances for the periods indicated:

 

		For the Quarter Ended
		March 31, 2011								December 31, 2010								March 31, 2010
		Average Balance				Percent of Deposits				Average Balance				Percent of Deposits				Average Balance				Percent of Deposits
In-market deposits:
Noninterest-bearing deposits			$612,032				19.9%				$617,158				20.6%				$606,604				20.8%
NOW accounts			240,928				7.9				268,446				9.0				243,649				8.3
Savings deposits			38,094				1.2				40,120				1.3				41,050				1.4
Money market accounts			601,702				19.6				579,990				19.4				457,534				15.7
Customer certificates of deposit			713,423				23.2				725,383				24.3				779,963				26.7
CDARS time deposits			202,491				6.6				145,808				4.9				124,558				4.3
Public time deposits			78,774				2.6				63,324				2.1				74,376				2.6
Total in-market deposits			2,487,444				81.0				2,440,229				81.6				2,327,734				79.8
Out-of-market deposits:
Brokered money market deposits			5,616				0.2				6,028				0.2				7,033				0.2
Out-of-local-market certificates of deposit			114,714				3.7				94,856				3.2				85,822				2.9
Brokered certificates of deposit			465,195				15.1				450,342				15.0				498,665				17.1
Total out-of-market deposits			585,525				19.0				551,226				18.4				591,520				20.2
Total deposits			$3,072,969				100.0%				$2,991,455				100.0%				$2,919,254				100.0%

The following table sets forth the period end balances of total deposits as of each of the dates indicated below, as well as categorizes the Company’s deposits as “in-market” and “out-of-market” deposits:

 

		Mar. 31, 2011				Dec. 31, 2010				Mar. 31, 2010
In-market deposits:
Noninterest-bearing deposits			$617,107				$633,300				$587,402
NOW accounts			239,067				248,662				227,981
Savings accounts			38,040				37,992				40,903
Money market accounts			606,620				583,365				483,209
Customer certificates of deposit			704,234				715,030				784,108
CDARS time deposits			202,458				182,879				163,025
Public time deposits			78,160				70,697				75,170
Total in-market deposits			2,485,686				2,471,925				2,361,798
Out-of-market deposits:
Brokered money market deposits			5,520				5,832				6,739
Out-of-local-market certificates of deposit			122,808				99,313				105,384
Brokered certificates of deposit			462,843				449,836				483,799
Total out-of-market deposits			591,171				554,981				595,922
Total deposits			$3,076,857				$3,026,906				$2,957,720

 

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RECONCILIATION OF U.S. GAAP FINANCIAL MEASURES (unaudited)

(dollars in thousands)

The following, as of the dates indicated, reconciles the income (loss) before income taxes to pre-tax, pre-provision earnings from core operations.

 

		For the Three Months Ended
		Mar. 31, 2011				Dec. 31, 2010				Sept. 30, 2010				June 30, 2010				Mar. 31, 2010
Income (loss) before income taxes			$282				$(45,323)				$33,735				$(30,577)				$(10,441)
Add back (subtract):
Provision for loan losses			10,241				59,923				18,128				43,946				21,130
Nonperforming asset expense			3,277				9,259				1,538				4,055				4,938
Gains on sales of investment securities			—				(6,997)				(32,804)				(142)				(1,433)
Pre-tax, pre-provision earnings from core operations			$13,800				$16,862				$20,597				$17,282				$14,194

The following, as of the dates indicated, details the components of revenue.

 

		For the Three Months Ended
		Mar. 31, 2011				Dec. 31, 2010				Sept. 30, 2010				June 30, 2010				Mar. 31, 2010
Net interest income		$	32,187			$	33,562			$	34,367			$	34,678			$	33,467
Noninterest income			6,885				18,009				44,142				6,158				4,374
Subtract:
Gains on sales of investment securities			—				(6,997)				(32,804)				(142)				(1,433)
Revenue		$	39,072			$	44,574			$	45,705			$	40,694			$	36,408

The Company’s accounting and reporting policies conform to U.S. generally accepted accounting principles (“GAAP”) and general practice within the banking industry. Management uses certain non-GAAP financial measures to evaluate the Company’s financial performance and has provided the non-GAAP measures of pre-tax, pre-provision earnings from core operations and of revenue. In the pre-tax, pre-provision earnings non-GAAP financial measure, the provision of loan losses, nonperforming asset expense and certain non-recurring items, such as gains and losses on investment securities, are excluded from the determination of operating results. The non-GAAP measure of revenue is calculated as the sum of net interest income and noninterest income less investment securities gains and losses. Management believes that these measures are useful because they provide a more comparable basis for evaluating financial performance from core operations period to period.

 

16