##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2006

Commission File No. 0-50034



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TAYLOR CAPITAL GROUP, INC.

(Exact name of registrant as specified in its
charter)



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|                                                              |  |                                       
|------------------------------------------------------------- |  | --------------------------------------
|Delaware                                                      |  | 36-4108550                            
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. EmployerIdentification Number)

9550 West Higgins Road

Rosemont, IL 60018

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

(847) 653-7978

(Registrants telephone number, including area code)



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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 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).    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 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 April 27, 2006, there were 11,026,179 shares of Common Stock, $0.01 par value,
outstanding.



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

INDEX



|                              |  |                                                                                                                            |  |     
|----------------------------- |  | -------------------------------------------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                                                            |  | Page
|PART I. FINANCIAL INFORMATION |  |                                                                                                                           
|                              |  |                                                                                                                           
|Item 1.                       |  | Financial Statements                                                                                                       |  |     
|                              |  |                                                                                                                           
|                              |  | Consolidated Balance Sheets (unaudited) -March 31, 2006 and December 31, 2005                                              |  | 1   
|                              |  |                                                                                                                           
|                              |  | Consolidated Statements of Income (unaudited) -For the three months ended March 31, 2006 and 2005                          |  | 2   
|                              |  |                                                                                                                           
|                              |  | Consolidated Statements of Changes in Stockholders Equity (unaudited) -For the three months ended March 31, 2006 and 2005 |  | 3   
|                              |  |                                                                                                                           
|                              |  | Consolidated Statements of Cash Flows (unaudited) -For the three months ended March 31, 2006 and 2005                      |  | 4   
|                              |  |                                                                                                                           
|                              |  | Notes to Consolidated Financial Statements (unaudited)                                                                     |  | 6   
|                              |  |                                                                                                                           
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                      |  | 16  
|                              |  |                                                                                                                           
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                                 |  | 40  
|                              |  |                                                                                                                           
|Item 4.                       |  | Controls and Procedures                                                                                                    |  | 40  
|                              | 
|PART II.
OTHER INFORMATION    |  |                                                                                                                           
|                              |  |                                                                                                                           
|Item 1.                       |  | Legal Proceedings                                                                                                          |  | 41  
|                              |  |                                                                                                                           
|Item 1A.                      |  | Risk Factors                                                                                                               |  | 41  
|                              |  |                                                                                                                           
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                |  | 41  
|                              |  |                                                                                                                           
|Item 3.                       |  | Defaults Upon Senior Securities                                                                                            |  | 41  
|                              |  |                                                                                                                           
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                                        |  | 41  
|                              |  |                                                                                                                           
|Item 5.                       |  | Other Information                                                                                                          |  | 41  
|                              |  |                                                                                                                           
|Item 6.                       |  | Exhibits                                                                                                                   |  | 41  
|                              |  |                                                                                                                           
|                              |  | Signatures                                                                                                                 |  | 44  



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS (unaudited)

(dollars in thousands, except share and per share data)



|                                                                                                                                                                                                                                                              |  |                |           |   |                   |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | --------- | - | ----------------- | - | --------- | -
|                                                                                                                                                                                                                                                              |  | March 31, 2006 |           |   | December 31, 2005 |  
|ASSETS                                                                                                                                                                                                                                                        |  |                |           |   |                   |   |           |  
|Cash and cash equivalents:                                                                                                                                                                                                                                    |  |                |           |   |                   |   |           |  
|Cash and due from banks                                                                                                                                                                                                                                       |  | $              | 68,161    |   |                   | $ | 57,171    |  
|Federal funds sold                                                                                                                                                                                                                                            |  |                | 900       |   |                   |   | 1,900     |  
|Short-term investments                                                                                                                                                                                                                                        |  |                | 3,649     |   |                   |   | 101,994   |  
|                                                                                                                                                                                                                                                              |  |                |           |   |                   |   |           |  
|Total cash and cash equivalents                                                                                                                                                                                                                               |  |                | 72,710    |   |                   |   | 161,065   |  
|Investment securities:                                                                                                                                                                                                                                        |  |                |           |   |                   |   |           |  
|Available-for-sale, at fair value                                                                                                                                                                                                                             |  |                | 703,902   |   |                   |   | 656,478   |  
|Held-to-maturity, at amortized cost (fair value of $275 at March 31, 2006 and December 31, 2005, respectively)                                                                                                                                                |  |                | 275       |   |                   |   | 275       |  
|Loans, net of allowance for loan losses of $36,686 and $37,481 at March 31, 2006 and December 31, 2005, respectively                                                                                                                                          |  |                | 2,355,140 |   |                   |   | 2,347,450 |  
|Premises, leasehold improvements and equipment, net                                                                                                                                                                                                           |  |                | 14,977    |   |                   |   | 15,105    |  
|Investments in Federal Home Loan Bank and Federal Reserve Bank stock, at cost                                                                                                                                                                                 |  |                | 12,946    |   |                   |   | 12,946    |  
|Other real estate and repossessed assets, net                                                                                                                                                                                                                 |  |                | 214       |   |                   |   | 1,139     |  
|Goodwill                                                                                                                                                                                                                                                      |  |                | 23,237    |   |                   |   | 23,237    |  
|Other assets                                                                                                                                                                                                                                                  |  |                | 67,603    |   |                   |   | 62,977    |  
|                                                                                                                                                                                                                                                              |  |                |           |   |                   |   |           |  
|Total assets                                                                                                                                                                                                                                                  |  | $              | 3,251,004 |   |                   | $ | 3,280,672 |  
|                                                                                                                                                                                                                                                              |  |                |           |   |                   |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                                                          |  |                |           |   |                   |   |           |  
|Deposits:                                                                                                                                                                                                                                                     |  |                |           |   |                   |   |           |  
|Noninterest-bearing                                                                                                                                                                                                                                           |  | $              | 401,187   |   |                   | $ | 464,289   |  
|Interest-bearing                                                                                                                                                                                                                                              |  |                | 2,091,867 |   |                   |   | 2,079,355 |  
|                                                                                                                                                                                                                                                              |  |                |           |   |                   |   |           |  
|Total deposits                                                                                                                                                                                                                                                |  |                | 2,493,054 |   |                   |   | 2,543,644 |  
|Other borrowings                                                                                                                                                                                                                                              |  |                | 308,723   |   |                   |   | 298,426   |  
|Accrued interest, taxes and other liabilities                                                                                                                                                                                                                 |  |                | 61,609    |   |                   |   | 56,646    |  
|Notes payable and FHLB advances                                                                                                                                                                                                                               |  |                | 75,000    |   |                   |   | 75,000    |  
|Junior subordinated debentures                                                                                                                                                                                                                                |  |                | 87,638    |   |                   |   | 87,638    |  
|                                                                                                                                                                                                                                                              |  |                |           |   |                   |   |           |  
|Total liabilities                                                                                                                                                                                                                                             |  |                | 3,026,024 |   |                   |   | 3,061,354 |  
|                                                                                                                                                                                                                                                              |  |                |           |   |                   |   |           |  
|Stockholders equity:                                                                                                                                                                                                                                         |  |                |           |   |                   |   |           |  
|Preferred stock, $.01 par value, 5,000,000 shares authorized, no shares outstanding                                                                                                                                                                           |  |                |          |   |                   |   |          |  
|Common stock, $.01 par value; 18,000,000 shares authorized; 11,327,501 and 11,296,836 shares issued at March 31, 2006 and
December 31, 2005, respectively; 11,004,494 and 10,973,829 shares outstanding at March 31, 2006 and December 31, 2005, respectively |  |                | 113       |   |                   |   | 113       |  
|Surplus                                                                                                                                                                                                                                                       |  |                | 190,559   |   |                   |   | 191,816   |  
|Unearned compensationstock grants                                                                                                                                                                                                                            |  |                |          |   |                   |   | (2,322    | )
|Retained earnings                                                                                                                                                                                                                                             |  |                | 54,186    |   |                   |   | 45,988    |  
|Accumulated other comprehensive loss                                                                                                                                                                                                                          |  |                | (12,821   | ) |                   |   | (9,220    | )
|Treasury stock, at cost, 323,007 shares                                                                                                                                                                                                                       |  |                | (7,057    | ) |                   |   | (7,057    | )
|                                                                                                                                                                                                                                                              |  |                |           |   |                   |   |           |  
|Total stockholders equity                                                                                                                                                                                                                                    |  |                | 224,980   |   |                   |   | 219,318   |  
|                                                                                                                                                                                                                                                              |  |                |           |   |                   |   |           |  
|Total liabilities and stockholders equity                                                                                                                                                                                                                    |  | $              | 3,251,004 |   |                   | $ | 3,280,672 |  
|                                                                                                                                                                                                                                                              |  |                |           |   |                   |   |           |  

See accompanying notes to consolidated financial statements



1



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(dollars in thousands, except per share data)



|                                                    |  |                                     |        |      |   |        |  
|--------------------------------------------------- |  | ----------------------------------- | ------ | ---- | - | ------ | -
|                                                    |  | For the Three Months EndedMarch 31, |       
|                                                    |  | 2006                                |        | 2005 |  
|Interest income:                                    |  |                                     |        |      |   |        |  
|Interest and fees on loans                          |  | $                                   | 43,772 |      | $ | 33,927 |  
|Interest and dividends on investment securities:    |  |                                     |        |      |   |        |  
|Taxable                                             |  |                                     | 5,933  |      |   | 4,995  |  
|Tax-exempt                                          |  |                                     | 1,301  |      |   | 481    |  
|Interest on cash equivalents                        |  |                                     | 449    |      |   | 109    |  
|                                                    |  |                                     |        |      |   |        |  
|Total interest income                               |  |                                     | 51,455 |      |   | 39,512 |  
|                                                    |  |                                     |        |      |   |        |  
|Interest expense:                                   |  |                                     |        |      |   |        |  
|Deposits                                            |  |                                     | 18,165 |      |   | 9,983  |  
|Other borrowings                                    |  |                                     | 2,508  |      |   | 975    |  
|Notes payable and FHLB advances                     |  |                                     | 855    |      |   | 1,002  |  
|Junior subordinated debentures                      |  |                                     | 1,908  |      |   | 1,705  |  
|                                                    |  |                                     |        |      |   |        |  
|Total interest expense                              |  |                                     | 23,436 |      |   | 13,665 |  
|                                                    |  |                                     |        |      |   |        |  
|Net interest income                                 |  |                                     | 28,019 |      |   | 25,847 |  
|Provision for loan losses                           |  |                                     | 900    |      |   | 1,834  |  
|                                                    |  |                                     |        |      |   |        |  
|Net interest income after provision for loan losses |  |                                     | 27,119 |      |   | 24,013 |  
|                                                    |  |                                     |        |      |   |        |  
|Noninterest income:                                 |  |                                     |        |      |   |        |  
|Service charges                                     |  |                                     | 1,880  |      |   | 2,407  |  
|Trust and investment management fees                |  |                                     | 931    |      |   | 1,184  |  
|Gain on sale of land trusts                         |  |                                     |       |      |   | 2,000  |  
|Gain on sale of branch                              |  |                                     |       |      |   | 1,572  |  
|Gain on sale of investment securities, net          |  |                                     |       |      |   | 127    |  
|Loan syndication fees                               |  |                                     | 500    |      |   | 700    |  
|Other derivative income (expense)                   |  |                                     | 582    |      |   | (1,353 | )
|Other noninterest income                            |  |                                     | 597    |      |   | 265    |  
|                                                    |  |                                     |        |      |   |        |  
|Total noninterest income                            |  |                                     | 4,490  |      |   | 6,902  |  
|                                                    |  |                                     |        |      |   |        |  
|Noninterest expense:                                |  |                                     |        |      |   |        |  
|Salaries and employee benefits                      |  |                                     | 10,335 |      |   | 10,000 |  
|Occupancy of premises                               |  |                                     | 2,015  |      |   | 1,725  |  
|Furniture and equipment                             |  |                                     | 992    |      |   | 884    |  
|Computer processing                                 |  |                                     | 416    |      |   | 433    |  
|Corporate insurance                                 |  |                                     | 306    |      |   | 370    |  
|Legal fees, net                                     |  |                                     | 239    |      |   | 172    |  
|Advertising and public relations                    |  |                                     | 136    |      |   | 109    |  
|Other noninterest expense                           |  |                                     | 3,347  |      |   | 3,047  |  
|                                                    |  |                                     |        |      |   |        |  
|Total noninterest expense                           |  |                                     | 17,786 |      |   | 16,740 |  
|                                                    |  |                                     |        |      |   |        |  
|Income before income taxes                          |  |                                     | 13,823 |      |   | 14,175 |  
|Income taxes                                        |  |                                     | 4,965  |      |   | 5,636  |  
|                                                    |  |                                     |        |      |   |        |  
|Net income                                          |  | $                                   | 8,858  |      | $ | 8,539  |  
|                                                    |  |                                     |        |      |   |        |  
|Basic earnings per common share                     |  | $                                   | 0.81   |      | $ | 0.88   |  
|Diluted earnings per common share                   |  |                                     | 0.80   |      |   | 0.87   |  

See accompanying notes to consolidated financial statements



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (unaudited)

(dollars in thousands, except per share data)



|                                                                                                                    |  |                                                  |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |        |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------ | - | ----------- | - | ------- |  | - | ---------------------------------- | - |  | ----------------- | ------ | - | ------------------------------------ | - | ------ | ------------- |  | - | ------- | - |  | - | ------ | - |  | - | ------- | -
|                                                                                                                    |  | Series A
9%NoncumulativePerpetualPreferred Stock |   | CommonStock |   | Surplus |  |   | UnearnedCompensation -Stock Grants |   |  | Retained Earnings |        |   | Accumulated Other Comprehensive Loss |   |        | TreasuryStock |  |   | Total   |  
|Balance at December 31, 2005                                                                                        |  | $                                                |  |             | $ | 113     |  | $ | 191,816                            |   |  | $                 | (2,322 | ) |                                      | $ | 45,988 |               |  | $ | (9,220  | ) |  | $ | (7,057 | ) |  | $ | 219,318 |  
|Adoption of FAS 123R                                                                                                |  |                                                  |  |             |   |        |  |   | (2,322                             | ) |  |                   | 2,322  |   |                                      |   |       |               |  |   |        |   |  |   |       |   |  |   |        |  
|Amortization of stock based compensation awards                                                                     |  |                                                  |  |             |   |        |  |   | 413                                |   |  |                   |       |   |                                      |   |       |               |  |   |        |   |  |   |       |   |  |   | 413     |  
|Exercise of stock options                                                                                           |  |                                                  |  |             |   |        |  |   | 442                                |   |  |                   |       |   |                                      |   |       |               |  |   |        |   |  |   |       |   |  |   | 442     |  
|Tax benefit on stock options exercised and stock awards                                                             |  |                                                  |  |             |   |        |  |   | 210                                |   |  |                   |       |   |                                      |   |       |               |  |   |        |   |  |   |       |   |  |   | 210     |  
|Comprehensive income:                                                                                               |  |                                                  |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |        |   |  |   |         |  
|Net income                                                                                                          |  |                                                  |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   | 8,858  |               |  |   |        |   |  |   |       |   |  |   | 8,858   |  
|Change in unrealized loss on available-for-sale investment securities, net of income taxes                          |  |                                                  |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   |       |               |  |   | (3,249  | ) |  |   |       |   |  |   | (3,249  | )
|Change in unrealized loss from cash flow hedging instruments, net of income taxes                                   |  |                                                  |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   |       |               |  |   | (309    | ) |  |   |       |   |  |   | (309    | )
|Changes in deferred gain from termination of cash flow hedging instruments, net of income taxes                     |  |                                                  |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   |       |               |  |   | (43     | ) |  |   |       |   |  |   | (43     | )
|                                                                                                                    |  |                                                  |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |        |   |  |   |         |  
|Total comprehensive income                                                                                          |  |                                                  |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |        |   |  |   | 5,257   |  
|Common stock dividends $0.06 per share                                                                             |  |                                                  |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   | (660   | )             |  |   |        |   |  |   |       |   |  |   | (660    | )
|                                                                                                                    |  |                                                  |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |        |   |  |   |         |  
|Balance at March 31, 2006                                                                                           |  | $                                                |  |             | $ | 113     |  | $ | 190,559                            |   |  | $                 |       |   |                                      | $ | 54,186 |               |  | $ | (12,821 | ) |  | $ | (7,057 | ) |  | $ | 224,980 |  
|                                                                                                                    |  |                                                  |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |        |   |  |   |         |  
|Balance at December 31, 2004                                                                                        |  |                                                  |  |             | $ | 100     |  | $ | 147,682                            |   |  | $                 | (1,383 | ) |                                      | $ | 16,698 |               |  | $ | (467    | ) |  | $ | (7,057 | ) |  | $ | 155,573 |  
|Issuance of stock grants                                                                                            |  |                                                  |  |             |   |        |  |   | 571                                |   |  |                   | (571   | ) |                                      |   |       |               |  |   |        |   |  |   |       |   |  |   |        |  
|Amortization of stock grants                                                                                        |  |                                                  |  |             |   |        |  |   |                                   |   |  |                   | 172    |   |                                      |   |       |               |  |   |        |   |  |   |       |   |  |   | 172     |  
|Exercise of stock options                                                                                           |  |                                                  |  |             |   |        |  |   | 142                                |   |  |                   |       |   |                                      |   |       |               |  |   |        |   |  |   |       |   |  |   | 142     |  
|Tax benefit on stock options exercised and stock awards                                                             |  |                                                  |  |             |   |        |  |   | 34                                 |   |  |                   |       |   |                                      |   |       |               |  |   |        |   |  |   |       |   |  |   | 34      |  
|Comprehensive income:                                                                                               |  |                                                  |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |        |   |  |   |         |  
|Net income                                                                                                          |  |                                                  |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   | 8,539  |               |  |   |        |   |  |   |       |   |  |   | 8,539   |  
|Change in unrealized loss on available-for-sale investment securities, net of reclassification, net of income taxes |  |                                                  |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   |       |               |  |   | (4,946  | ) |  |   |       |   |  |   | (4,946  | )
|Change in unrealized loss from cash flow hedging instruments, net of income taxes                                   |  |                                                  |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   |       |               |  |   | (498    | ) |  |   |       |   |  |   | (498    | )
|Changes in deferred gain from termination of cash flow hedging instruments, net of income taxes                     |  |                                                  |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   |       |               |  |   | (43     | ) |  |   |       |   |  |   | (43     | )
|                                                                                                                    |  |                                                  |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |        |   |  |   |         |  
|Total comprehensive income                                                                                          |  |                                                  |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |        |   |  |   | 3,052   |  
|                                                                                                                    |  |                                                  |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |        |   |  |   |         |  
|Common stock dividends $0.06 per share                                                                             |  |                                                  |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   | (581   | )             |  |   |        |   |  |   |       |   |  |   | (581    | )
|                                                                                                                    |  |                                                  |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |        |   |  |   |         |  
|Balance at March 31, 2005                                                                                           |  | $                                                |  |             | $ | 100     |  | $ | 148,429                            |   |  | $                 | (1,782 | ) |                                      | $ | 24,656 |               |  | $ | (5,954  | ) |  | $ | (7,057 | ) |  | $ | 158,392 |  
|                                                                                                                    |  |                                                  |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |        |   |  |   |         |  

See accompanying notes to consolidated financial statements



3



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(dollars in thousands)



|                                                                                  |  |                                      |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                                  |  | For the Three Months Ended
March 31, |        
|                                                                                  |  | 2006                                 |         |   | 2005 |  
|Cash flows from operating activities:                                             |  |                                      |         |   |      |   |         |  
|Net income                                                                        |  | $                                    | 8,858   |   |      | $ | 8,539   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                      |         |   |      |   |         |  
|Other derivative (income) expense                                                 |  |                                      | (582    | ) |      |   | 1,576   |  
|Amortization of premiums and discounts, net                                       |  |                                      | 360     |   |      |   | 508     |  
|Gain on sale of available-for-sale securities, net                                |  |                                      |        |   |      |   | (127    | )
|Deferred loan fee amortization                                                    |  |                                      | (1,421  | ) |      |   | (1,099  | )
|Provision for loan losses                                                         |  |                                      | 900     |   |      |   | 1,834   |  
|Depreciation and amortization                                                     |  |                                      | 903     |   |      |   | 779     |  
|Deferred income taxes                                                             |  |                                      | (1,693  | ) |      |   | (2,450  | )
|Loss on sale of other real estate                                                 |  |                                      | 10      |   |      |   |        |  
|Gain on sale of land trusts                                                       |  |                                      |        |   |      |   | (2,000  | )
|Gain on sale of branch                                                            |  |                                      |        |   |      |   | (1,572  | )
|Tax benefit on stock options exercised and stock awards                           |  |                                      | (156    | ) |      |   |        |  
|Other, net                                                                        |  |                                      | (232    | ) |      |   | (320    | )
|Changes in other assets and liabilities:                                          |  |                                      |         |   |      |   |         |  
|Accrued interest receivable                                                       |  |                                      | (576    | ) |      |   | (1,251  | )
|Other assets                                                                      |  |                                      | (135    | ) |      |   | 1,135   |  
|Accrued interest, taxes and other liabilities                                     |  |                                      | 2,956   |   |      |   | (711    | )
|                                                                                  |  |                                      |         |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                                      | 9,192   |   |      |   | 4,841   |  
|                                                                                  |  |                                      |         |   |      |   |         |  
|Cash flows from investing activities:                                             |  |                                      |         |   |      |   |         |  
|Purchases of available-for-sale securities                                        |  |                                      | (64,226 | ) |      |   | (20,182 | )
|Proceeds from principal payments and maturities of available-for-sale securities  |  |                                      | 11,445  |   |      |   | 13,112  |  
|Proceeds from sale of available-for-sale securities                               |  |                                      |        |   |      |   | 2,725   |  
|Net increase in loans                                                             |  |                                      | (7,169  | ) |      |   | (48,535 | )
|Net additions to premises, leasehold improvements and equipment                   |  |                                      | (775    | ) |      |   | (33     | )
|Net cash paid on sale of branch                                                   |  |                                      |        |   |      |   | (10,853 | )
|Proceeds from sale of land trusts                                                 |  |                                      |        |   |      |   | 2,050   |  
|Proceeds from sales of other real estate                                          |  |                                      | 915     |   |      |   | 1       |  
|                                                                                  |  |                                      |         |   |      |   |         |  
|Net cash used in investing activities                                             |  |                                      | (59,810 | ) |      |   | (61,715 | )
|                                                                                  |  |                                      |         |   |      |   |         |  
|Cash flows from financing activities:                                             |  |                                      |         |   |      |   |         |  
|Net increase (decrease) in deposits                                               |  |                                      | (47,974 | ) |      |   | 86,751  |  
|Net increase (decrease) in short-term borrowings                                  |  |                                      | 10,297  |   |      |   | (14,681 | )
|Proceeds from exercise of employee stock options                                  |  |                                      | 442     |   |      |   | 142     |  
|Tax benefit on stock options exercised and stock awards                           |  |                                      | 156     |   |      |   |        |  
|Dividends paid                                                                    |  |                                      | (658    | ) |      |   | (579    | )
|                                                                                  |  |                                      |         |   |      |   |         |  
|Net cash provided (used) by financing activities                                  |  |                                      | (37,737 | ) |      |   | 71,633  |  
|                                                                                  |  |                                      |         |   |      |   |         |  
|Net increase (decrease) in cash and cash equivalents                              |  |                                      | (88,355 | ) |      |   | 14,759  |  
|Cash and cash equivalents, beginning of period                                    |  |                                      | 161,065 |   |      |   | 79,250  |  
|                                                                                  |  |                                      |         |   |      |   |         |  
|Cash and cash equivalents, end of period                                          |  | $                                    | 72,710  |   |      | $ | 94,009  |  
|                                                                                  |  |                                      |         |   |      |   |         |  

Consolidated Statements of Cash Flows continued on the next page

See accompanying notes to consolidated financial statements



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS  (unaudited) (Continued)

(dollars in
thousands)



|                                                                              |  |                                      |        |   |      |   |        |  
|----------------------------------------------------------------------------- |  | ------------------------------------ | ------ | - | ---- | - | ------ | -
|                                                                              |  | For the Three Months Ended
March 31, |       
|                                                                              |  | 2006                                 |        |   | 2005 |  
|Supplemental disclosure of cash flow information:                             |  |                                      |        |   |      |   |        |  
|Cash paid during the period for:                                              |  |                                      |        |   |      |   |        |  
|Interest                                                                      |  | $                                    | 23,306 |   |      | $ | 12,557 |  
|Income taxes                                                                  |  |                                      | 322    |   |      |   | 476    |  
|Supplemental disclosures of noncash investing and financing activities:       |  |                                      |        |   |      |   |        |  
|Change in fair value of available-for-sale investments securities, net of tax |  | $                                    | (3,249 | ) |      | $ | (4,946 | )

See accompanying notes to consolidated financial statements



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1. Basis of Presentation:

These consolidated
financial statements contain unaudited information as of March 31, 2006 and for the three month periods ended March 31, 2006 and 2005. The unaudited interim financial statements have been prepared pursuant to the rules and regulations for
reporting on Form 10-Q. Accordingly, certain disclosures required by accounting principles generally accepted in the United States of America are not included herein. In managements opinion, these unaudited financial statements include all
adjustments, necessary for a fair presentation of the information when read in conjunction with the Companys audited consolidated financial statements and the related notes. The income statement data for the three month period ended
March 31, 2006 are not necessarily indicative of the results that the Company may achieve for the full year.

Amounts in the prior
years consolidated financial statements are reclassified whenever necessary to conform to the current years presentation.

2.
Investment Securities:

The amortized cost and estimated fair values of investment securities at March 31, 2006 and
December 31, 2005 were as follows:



|                                    |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|----------------------------------- |  | -------------- | ------- | -------------------- | - | --------------------- |  | - | ------------------- | - |  | - | -------
|                                    |  | March 31, 2006
|                                    |  | AmortizedCost  |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFair Value
|                                    |  | (in thousands)
|Available-for-sale:                 |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|U.S. government agency securities   |  | $              | 203,584 |                      | $ |                      |  | $ | (4,151              | ) |  | $ | 199,433
|Collateralized mortgage obligations |  |                | 182,927 |                      |   | 50                    |  |   | (6,233              | ) |  |   | 176,744
|Mortgage-backed securities          |  |                | 207,335 |                      |   | 84                    |  |   | (6,592              | ) |  |   | 200,827
|State and municipal obligations     |  |                | 127,670 |                      |   | 1,165                 |  |   | (1,937              | ) |  |   | 126,898
|                                    |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|Total available-for-sale            |  |                | 721,516 |                      |   | 1,299                 |  |   | (18,913             | ) |  |   | 703,902
|                                    |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|Held-to-maturity:                   |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|Other debt securities               |  |                | 275     |                      |   |                      |  |   |                    |   |  |   | 275    
|                                    |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|Total held-to-maturity              |  |                | 275     |                      |   |                      |  |   |                    |   |  |   | 275    
|                                    |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|Total                               |  | $              | 721,791 |                      | $ | 1,299                 |  | $ | (18,913             | ) |  | $ | 704,177
|                                    |  |                |         |                      |   |                       |  |   |                     |   |  |   |        



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##### Table of Contents

|                                    |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|----------------------------------- |  | ----------------- | ------- | -------------------- | - | --------------------- |  | - | ------------------- | - |  | - | -------
|                                    |  | December 31, 2005
|                                    |  | AmortizedCost     |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFair Value
|                                    |  | (in thousands)   
|Available-for-sale:                 |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|U.S. government agency securities   |  | $                 | 203,753 |                      | $ |                      |  | $ | (3,396              | ) |  | $ | 200,357
|Collateralized mortgage obligations |  |                   | 187,368 |                      |   | 92                    |  |   | (4,360              | ) |  |   | 183,100
|Mortgage-backed securities          |  |                   | 166,592 |                      |   | 136                   |  |   | (4,830              | ) |  |   | 161,898
|State and municipal obligations     |  |                   | 111,380 |                      |   | 1,357                 |  |   | (1,614              | ) |  |   | 111,123
|                                    |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Total available-for-sale            |  |                   | 669,093 |                      |   | 1,585                 |  |   | (14,200             | ) |  |   | 656,478
|                                    |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Held-to-maturity:                   |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Other debt securities               |  |                   | 275     |                      |   |                      |  |   |                    |   |  |   | 275    
|                                    |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Total held-to-maturity              |  |                   | 275     |                      |   |                      |  |   |                    |   |  |   | 275    
|                                    |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Total                               |  | $                 | 669,368 |                      | $ | 1,585                 |  | $ | (14,200             | ) |  | $ | 656,753
|                                    |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        

3. Loans:

Loans classified by type at March 31, 2006 and December 31, 2005 were as follows:



|                                      |  |                |           |   |                   |   |           |  
|------------------------------------- |  | -------------- | --------- | - | ----------------- | - | --------- | -
|                                      |  | March 31,2006  |           |   | December 31, 2005 |  
|                                      |  | (in thousands) |          
|Commercial and industrial             |  | $              | 645,226   |   |                   | $ | 665,023   |  
|Commercial real estate secured        |  |                | 802,273   |   |                   |   | 793,965   |  
|Real estate-construction              |  |                | 715,541   |   |                   |   | 684,737   |  
|Residential real estate mortgages     |  |                | 65,793    |   |                   |   | 63,789    |  
|Home equity loans and lines of credit |  |                | 146,682   |   |                   |   | 161,058   |  
|Consumer                              |  |                | 14,340    |   |                   |   | 14,972    |  
|Other loans                           |  |                | 2,063     |   |                   |   | 1,497     |  
|                                      |  |                |           |   |                   |   |           |  
|Gross loans                           |  |                | 2,391,918 |   |                   |   | 2,385,041 |  
|Less: Unearned discount               |  |                | (92       | ) |                   |   | (110      | )
|                                      |  |                |           |   |                   |   |           |  
|Total loans                           |  |                | 2,391,826 |   |                   |   | 2,384,931 |  
|Less: Allowance for loan losses       |  |                | (36,686   | ) |                   |   | (37,481   | )
|                                      |  |                |           |   |                   |   |           |  
|Loans, net                            |  | $              | 2,355,140 |   |                   | $ | 2,347,450 |  
|                                      |  |                |           |   |                   |   |           |  

Nonaccrual and impaired loans at March 31, 2006 were $18.2 million and $38.0 million,
respectively, as compared to $10.8 million and $35.8 million at December 31, 2005, respectively.



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4. Interest-Bearing Deposits:

Interest-bearing deposits at March 31, 2006 and December 31, 2005 were as follows:



|                                              |  |                |           |                   |   |          
|--------------------------------------------- |  | -------------- | --------- | ----------------- | - | ---------
|                                              |  | March 31,2006  |           | December 31, 2005
|                                              |  | (in thousands)
|NOW accounts                                  |  | $              | 95,376    |                   | $ | 104,269  
|Savings accounts                              |  |                | 70,318    |                   |   | 73,173   
|Money market deposits                         |  |                | 683,000   |                   |   | 645,523  
|Time deposits:                                |  |                |           |                   |   |          
|Certificates of deposit of less than $100,000 |  |                | 192,056   |                   |   | 206,951  
|Certificates of deposit of $100,000 or more   |  |                | 357,912   |                   |   | 342,842  
|Out-of-local-market certificates of deposit   |  |                | 123,198   |                   |   | 131,116  
|Brokered certificates of deposit              |  |                | 493,856   |                   |   | 505,802  
|Public time deposits                          |  |                | 76,151    |                   |   | 69,679   
|                                              |  |                |           |                   |   |          
|Total time deposits                           |  |                | 1,243,173 |                   |   | 1,256,390
|                                              |  |                |           |                   |   |          
|Total                                         |  | $              | 2,091,867 |                   | $ | 2,079,355
|                                              |  |                |           |                   |   |          

Brokered CDs are carried net of the related broker placement fees and fair value adjustments
related to those brokered CDs accounted for as fair value hedges. The broker placement fees are amortized to the maturity date of the related brokered CDs. The amortization is included in deposit interest expense. The composition of brokered CDs at
March 31, 2006 and December 31, 2005 was as follows:



|                                  |  |                |         |   |                  |   |         |  
|--------------------------------- |  | -------------- | ------- | - | ---------------- | - | ------- | -
|                                  |  | March 31,2006  |         |   | December 31,2005 |  
|                                  |  | (in thousands) |        
|Par value of brokered CDs         |  | $              | 498,595 |   |                  | $ | 508,435 |  
|Unamortized broker placement fees |  |                | (2,510  | ) |                  |   | (3,084  | )
|Fair value adjustment             |  |                | (2,229  | ) |                  |   | 451     |  
|                                  |  |                |         |   |                  |   |         |  
|Total                             |  | $              | 493,856 |   |                  | $ | 505,802 |  
|                                  |  |                |         |   |                  |   |         |  

5. Other Borrowings:

Other borrowings at March 31, 2006 and December 31, 2005 consisted of the following:



|                                                |  |                |         |              |   |        
|----------------------------------------------- |  | -------------- | ------- | ------------ | - | -------
|                                                |  | March 31,2006  |         | Dec. 31,2005
|                                                |  | (in thousands)
|Securities sold under agreements to repurchase: |  |                |         |              |   |        
|Overnight                                       |  | $              | 156,431 |              | $ | 150,746
|Term                                            |  |                | 100,000 |              |   | 100,000
|Federal funds purchased                         |  |                | 52,277  |              |   | 47,567 
|U.S. Treasury tax and loan note option          |  |                | 15      |              |   | 113    
|                                                |  |                |         |              |   |        
|Total                                           |  | $              | 308,723 |              | $ | 298,426
|                                                |  |                |         |              |   |        



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##### Table of Contents

6. Other Comprehensive Income/(Loss):

The following table presents other comprehensive income (loss) for the periods indicated:



|                                                                                               |  |                                          |        |   |                                          |   |           |  |   |                 |   |  |           |        |           |  |   |       |  |   |        |  
|---------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ------ | - | ---------------------------------------- | - | --------- |  | - | --------------- | - |  | --------- | ------ | --------- |  | - | ----- |  | - | ------ | -
|                                                                                               |  | For the Three Months EndedMarch 31, 2006 |        |   | For the Three Months EndedMarch 31, 2005 |  
|                                                                                               |  | Before Tax Amount                        |        |   | TaxEffect                                |   | Net ofTax |  |   | BeforeTaxAmount |   |  | TaxEffect |        | Net ofTax | 
|                                                                                               |  | (in thousands)                           |       
|Unrealized loss from securities:                                                               |  |                                          |        |   |                                          |   |           |  |   |                 |   |  |           |        |           |  |   |       |  |   |        |  
|Change in unrealized loss on available-for-sale securities                                     |  | $                                        | (4,999 | ) |                                          | $ | 1,750     |  | $ | (3,249          | ) |  | $         | (7,482 | )         |  | $ | 2,619 |  | $ | (4,863 | )
|Less: reclassification adjustment for gains included in net income                             |  |                                          |       |   |                                          |   |          |  |   |                |   |  |           | (127   | )         |  |   | 44    |  |   | (83    | )
|                                                                                               |  |                                          |        |   |                                          |   |           |  |   |                 |   |  |           |        |           |  |   |       |  |   |        |  
|Change in unrealized loss on available-for-sale securities, net of reclassification adjustment |  |                                          | (4,999 | ) |                                          |   | 1,750     |  |   | (3,249          | ) |  |           | (7,609 | )         |  |   | 2,663 |  |   | (4,946 | )
|Change in net unrealized loss from cash flow hedging instruments                               |  |                                          | (477   | ) |                                          |   | 168       |  |   | (309            | ) |  |           | (766   | )         |  |   | 268   |  |   | (498   | )
|Change in deferred gain from termination of cash flow hedging instruments                      |  |                                          | (66    | ) |                                          |   | 23        |  |   | (43             | ) |  |           | (66    | )         |  |   | 23    |  |   | (43    | )
|                                                                                               |  |                                          |        |   |                                          |   |           |  |   |                 |   |  |           |        |           |  |   |       |  |   |        |  
|Other comprehensive loss                                                                       |  | $                                        | (5,542 | ) |                                          | $ | 1,941     |  | $ | (3,601          | ) |  | $         | (8,441 | )         |  | $ | 2,954 |  | $ | (5,487 | )
|                                                                                               |  |                                          |        |   |                                          |   |           |  |   |                 |   |  |           |        |           |  |   |       |  |   |        |  

7. Earnings per Share:

The following table sets forth the computation of basic and diluted earnings per common share. For the three month periods ended March 31, 2006 and 2005, stock options outstanding to purchase 111,459 common
shares and 1,000 common shares, respectively, were not included in the computation of diluted earnings per share because the effect would have been antidilutive.



|                                                           |  |                                      |            |      |   |          
|---------------------------------------------------------- |  | ------------------------------------ | ---------- | ---- | - | ---------
|                                                           |  | For the Three Months Ended March 31,
|(dollars in thousands, except share and per share amounts) |  | 2006                                 |            | 2005
|Net income                                                 |  | $                                    | 8,858      |      | $ | 8,539    
|                                                           |  |                                      |            |      |   |          
|Weighted average common shares outstanding                 |  |                                      | 10,874,419 |      |   | 9,663,676
|Dilutive effect of common stock equivalents                |  |                                      | 198,598    |      |   | 169,299  
|                                                           |  |                                      |            |      |   |          
|Diluted weighted average common shares outstanding         |  |                                      | 11,073,017 |      |   | 9,832,975
|                                                           |  |                                      |            |      |   |          
|Basic earnings per common share                            |  | $                                    | 0.81       |      | $ | 0.88     
|Diluted earnings per common share                          |  |                                      | 0.80       |      |   | 0.87     
|                                                           |  |                                      |            |      |   |          



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##### Table of Contents

8. Stock-Based Compensation:

On January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, (SFAS 123R) which requires the measurement and
recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options. SFAS 123R supersedes the Companys previous accounting under Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees (APB 25) which was applied to periods prior to 2006. In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 (SAB
107) relating to SFAS 123R. The Company has applied the provisions of SAB 107 in its adoption of SFAS 123R.

The Company adopted SFAS
123R using the modified prospective transition method. Under the modified prospective transition method, the Companys Consolidated Financial Statements as of and for the three months ended March 31, 2006 reflect the impact of SFAS 123R,
however, prior periods have not been restated to reflect, and do not include, the impact of SFAS 123R. Prior to the adoption of SFAS 123R, the Company accounted for stock-based awards to employees and directors using the intrinsic value method in
accordance with APB 25 as allowed under Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123). Under the intrinsic value method, no stock-based compensation expense had
been recognized in the Companys Consolidated Statements of Income for stock options granted to employees and directors because the exercise price of the Companys stock options equaled the fair market value of the underlying stock at the
date of grant.

The Companys Incentive Compensation Plan (the Plan) allows for the granting of stock options and stock
awards. Under the Plan, the Company has only issued nonqualified stock options and restricted stock to employees and directors. As of January 1, 2006, 329,215 shares of Company common stock were available for future grants under the Plan. The
Company uses newly issued shares of common stock for grants of restricted stock or the exercise of stock options.

Stock-based compensation
expense recognized under SFAS 123R for the three months ended March 31, 2006 was $412,000 ($162,000 income tax benefit). Included in this expense was $213,000 ($84,000 income tax benefit) related to stock options and $199,000 ($78,000 income
tax benefit) related to grants of restricted stock. In comparison, during the three month period ended March 31, 2005, the Company recorded $172,000 ($68,000 income tax benefit) of expense related to the grants of restricted stock. In addition,
had the Company not applied the intrinsic value method of accounting for stock options during the first quarter of 2005, the Company would have had $273,000 ($107,000 income tax benefit) of compensation expense related to stock options.



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##### Table of Contents

The following table illustrates the effect on net income and earnings per share as if SFAS 123R had been
applied to all outstanding share-based payment awards for the periods indicated. The amounts reported for 2005 are as if the provisions of SFAS 123R had been applied and the amounts reported for 2006 are as reported on the Consolidated Statement of
Income:



|                                                                                                                                          |  |                                      |       |   |              |   |       |  
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ----- | - | ------------ | - | ----- | -
|                                                                                                                                          |  | For the Three Months Ended
March 31, |      
|(dollars in thousand, except per share amounts)                                                                                           |  | AsReported2006                       |       |   | Proforma2005 |  
|Net income as reported                                                                                                                    |  | $                                    | 8,858 |   |              | $ | 8,539 |  
|Add: Stock-based compensation, net of tax, included in the determination of net income, as reported                                       |  |                                      | 250   |   |              |   | 104   |  
|Deduct: Stock-based compensation, net of tax, that would have been reported if the fair value based method had been applied to all
awards |  |                                      | (250  | ) |              |   | (270  | )
|                                                                                                                                          |  |                                      |       |   |              |   |       |  
|Net income                                                                                                                                |  | $                                    | 8,858 |   |              | $ | 8,373 |  
|                                                                                                                                          |  |                                      |       |   |              |   |       |  
|Basic earnings per common share                                                                                                           |  |                                      |       |   |              |   |       |  
|As reported                                                                                                                               |  | $                                    | 0.81  |   |              | $ | 0.88  |  
|Pro forma                                                                                                                                 |  |                                      | 0.81  |   |              |   | 0.87  |  
|                                                                                                                                          |  |                                     
|Diluted earnings per common share                                                                                                         |  |                                      |       |   |              |   |       |  
|As reported                                                                                                                               |  | $                                    | 0.80  |   |              | $ | 0.87  |  
|Pro forma                                                                                                                                 |  |                                      | 0.80  |   |              |   | 0.85  |  

Stock Options:

SFAS 123R requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the
portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Companys Consolidated Statements of Income. The Company recognized compensation costs for these awards over the
requisite service period for the entire award on a straight-line basis. Stock-based compensation expense recognized in the Companys Consolidated Statements of Income for the first quarter of 2006 included compensation expense for share-based
payment awards granted prior to, but not yet vested as of January 1, 2006 based on the grant date fair value estimated in accordance with the pro forma provisions of SFAS 123 and compensation expense for the share-based payment awards granted
subsequent to January 1, 2006 based on the grant date fair value estimated in accordance with the provisions of SFAS 123R. As stock-based compensation expense recognized in the Consolidated Statements of Income for the first quarter of fiscal
2006 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ
from those estimates. In the Companys pro forma information required under SFAS 123 for the periods prior to fiscal 2006, the Company accounted for forfeitures as they occurred.

Stock options are granted with an exercise price equal to the fair market value of the common stock on the date of grant. The stock options that were
granted prior to 2006 vest over a five year period (vesting at 20% per year) and expire 10 years following the grant date. The



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stock options that were granted in 2006 vest over a four year period (vesting at 25% per year) and expire eight
years following grant date. In either case, upon death, disability, retirement or change of control of the Company (as defined) vesting may be accelerated to 100%.

The following is a summary of stock option activity for the three month period ended March 31, 2006:



|                               |  |         |   |  |                               |       |                                                  |     |                               |   |       
|------------------------------ |  | ------- | - |  | ----------------------------- | ----- | ------------------------------------------------ | --- | ----------------------------- | - | ------
|                               |  | Shares  |   |  | Weighted-AverageExercisePrice |       | Weighted-AverageRemainingContractualTerm inYears |     | AggregateIntrinsicValue($000)
|Outstanding at January 1, 2006 |  | 765,088 |   |  | $                             | 23.30 |                                                  |     |                               |   |       
|Granted                        |  | 114,122 |   |  |                               | 37.51 |                                                  |     |                               |   |       
|Exercised                      |  | (21,007 | ) |  |                               | 21.07 |                                                  |     |                               |   |       
|Forfeited or expired           |  | (9,663  | ) |  |                               | 30.08 |                                                  |     |                               |   |       
|                               |  |         |   |  |                               |       |                                                  |     |                               |   |       
|Outstanding at March 31, 2006  |  | 848,540 |   |  | $                             | 25.18 |                                                  | 6.8 |                               | $ | 11,888
|                               |  |         |   |  |                               |       |                                                  |     |                               |   |       
|Exercisable at March 31, 2006  |  | 438,086 |   |  | $                             | 21.40 |                                                  | 5.8 |                               | $ | 7,793 
|                               |  |         |   |  |                               |       |                                                  |     |                               |   |       

In connection with stock options exercised during the first quarter of 2006, the Company received
$442,000 of cash from the settlement of the options on the exercised awards. In addition, the Company received a $156,000 tax benefit from these exercises. Participants in the stock option plans realized an intrinsic value of $400,000 and $68,000
from the exercise of these options during the first quarter of 2006 and 2005, respectively. As of March 31, 2006, the total compensation cost related to nonvested stock options that has not yet been recognized totaled $3.2 million and the
weighted average period which these costs are expected to be recognized over is approximately 3.2 years.

Restricted
Stock Plan:

Under its plan, the Company can grant restricted stock awards that vest upon completion of future service requirements or
specified performance criteria. The fair value of these awards is equal to the market price at the date of grant. The Company recognizes stock-based compensation expense for these awards over the vesting period based upon the number of awards
ultimately expected to vest. Restricted stock awards based upon completion of future service requirements vests 50% at the end of year three, 75% at the end of year four and 100% at the end of year five or upon death, disability, retirement or
change of control (as defined) of the Company. If a participant terminates employment prior to the end of the continuous service period, the unearned portion of the stock award is forfeited. The Company may also issue awards that vest upon
satisfaction of specified performance criteria. For these types of awards, the final measure of compensation cost is based upon the number of shares that ultimately vest considering the performance criteria.

In conjunction with the adoption of SFAS 123R, the Company changed its method of attributing the value of restricted stock to compensation expense for
awards in 2006. Prior to 2006, the Company recognized compensation cost for restricted stock over the service period of



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each separately vesting portion of the award, in effect treating each vesting portion as a separate award. For grants in
2006, compensation costs are recognized straight line over the vesting period for the entire award.

The following table provides
information regarding nonvested restricted stock:



|                             |  |         |   |  |                                      |      
|---------------------------- |  | ------- | - |  | ------------------------------------ | -----
|Nonvested Restricted Stock   |  | Shares  |   |  | Weighted-AverageGrant-DateFair Value
|Nonvested at January 1, 2006 |  | 113,908 |   |  | $                                    | 29.42
|Granted                      |  | 15,347  |   |  |                                      | 37.51
|Vested                       |  | (6,900  | ) |  |                                      | 19.64
|Forfeited                    |  | (5,689  | ) |  |                                      | 32.53
|                             |  |         |   |  |                                      |      
|Nonvested at March 31, 2006  |  | 116,666 |   |  | $                                    | 30.91
|                             |  |         |   |  |                                      |      

In the first quarter of 2006, the Company received a $54,000 tax benefit from the vesting of
restricted stock awards. The fair value of restricted stock awards that vested during the first quarter of 2006 was $273,000, while no awards vested during the first quarter of 2005. As of March 31, 2006, the total compensation cost related to
nonvested restricted stock that has not yet been recognized totaled $2.5 million and the weighted average period which these costs are expected to be recognized over is approximately 3.5 years.

Valuation Information:

The Company uses the modified
Black-Scholes option-pricing model (Black-Scholes model) for determining the fair value stock options issued to employees and directors. The determination of the fair value of share-based payment awards using the Black-Scholes model is
impacted by the Companys stock price on the date of grant as well as several assumptions used as inputs into the model. The significant assumptions include the risk-free interest rate at grant date, expected stock price volatility, expected
dividend payout, and expected option life.

The risk-free interest rate assumption is based upon observed interest rates for the expected
term of the Companys stock options. For the 2006 grant, the expected volatility input into the model takes into account the historical volatility of the Company stock over the period that it has been publicly trade and the historical
volatility over the expected term of the option of a peer group. The expected volatility for grants prior to 2006 was based upon estimates of volatility of Company stock considering that prior to October 2002 the stock was not publicly traded. The
expected dividend yield assumption is based upon the Companys historical dividend payout. For options granted in 2006, the Company used the methodology used in SAB 107 in determining the expected life of the awards. This methodology takes into
account the vesting periods and the contractual term of the award. For grants prior to 2006, the expected life was estimated considering that exercise behaviors were impacted by the limited history of public trading of the Companys stock.



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The following are the significant assumptions used to determine the fair value of stock option awards,
using a modified Black-Scholes option pricing model, for each of the periods indicated:



|                                      |  |                                    |       |   |      |   |       |  
|------------------------------------- |  | ---------------------------------- | ----- | - | ---- | - | ----- | -
|                                      |  | For the ThreeMonths EndedMarch 31, |      
|                                      |  | 2006                               |       |   | 2005 |  
|Grant date fair value per share       |  | $                                  | 11.76 |   |      | $ | 9.12  |  
|Significant assumptions:              |  |                                    |       |   |      |   |       |  
|Risk-free interest rate at grant date |  |                                    | 4.40  | % |      |   | 4.23  | %
|Expected stock price volatility       |  |                                    | 27.50 | % |      |   | 19.47 | %
|Expected dividend payout              |  |                                    | 0.64  | % |      |   | 0.77  | %
|Expected option life, in years        |  |                                    | 5.25  |   |      |   | 7.00  |  

9. Derivative Financial Instruments:

The Company uses derivative financial instruments, including interest rate exchange contracts (swaps) and interest rate floor agreements (floors), to
assist in interest rate risk management.

As of March 31, 2006, the Company had $330.0 million notional amount of swaps (CD
swaps) to hedge the interest rate risk inherent in certain of its brokered certificates of deposits (brokered CDs). The CD swaps are used to convert the fixed rate paid on the brokered CDs to a variable rate based upon 3-month
LIBOR. The Company designated $328.5 million of these CD swaps as fair value hedges. As fair value hedges, the net cash settlements from the designated swaps are reported as part of net interest income. In addition, the Company recognizes in current
earnings the change in fair value of both the interest rate swap and related hedged brokered CDs, in noninterest income. The fair value of the CD swaps is reported on the Consolidated Balance Sheets in accrued interest, taxes and other liabilities
and the change in fair value of the related hedged brokered CD is reported as an adjustment to the carrying value of the brokered CDs. Total hedge ineffectiveness during the first quarter of 2006 was $7,000.

The following table sets forth the activity in the notional amounts and fair value of the CD swaps during the first three months of 2006:



|                             |  |                |         |   |                   |   |        |             |  |      |         |  |      |              |  |    
|---------------------------- |  | -------------- | ------- | - | ----------------- | - | ------ | ----------- |  | ---- | ------- |  | ---- | ------------ |  | ---
|                             |  | CD Swaps       |         |   | Weighted Averages
|                             |  | NotionalAmount |         |   | FairValue         |   |        | ReceiveRate |  |      | PayRate |  |      | Life inYears
|                             |  | (in thousands) |         |   |                   |   |        |             |  |      |        
|Balance at December 31, 2005 |  | $              | 320,000 |   |                   | $ | (7,140 | )           |  | 4.09 | %       |  | 4.30 | %            |  | 4.8
|Additions                    |  |                | 20,000  |   |                   |   |        |             |  |      |         |  |      |              |  |    
|Maturities                   |  |                | (10,000 | ) |                   |   |        |             |  |      |         |  |      |              |  |    
|                             |  |                |         |   |                   |   |        |             |  |      |         |  |      |              |  |    
|Balance at March 31, 2006    |  | $              | 330,000 |   |                   | $ | (9,209 | )           |  | 4.20 | %       |  | 4.72 | %            |  | 4.5
|                             |  |                |         |   |                   |   |        |             |  |      |         |  |      |              |  |    

The Company is also party to a $50.0 million notional amount interest rate swap, under which the
Company receives a fixed interest rate of 6.04% and pays a floating rate based upon the prime-lending rate. This contract is accounted for as a cash flow hedge and the fair value of the swap is recorded as an asset or liability with the
corresponding gain or loss recorded in other comprehensive income in stockholders equity, net of tax. The fair value of the interest rate swap as of March 31, 2006 was a liability of $1.5 million.



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The Company is also party to $200.0 million notional amount prime rate interest rate floors at 5.50% and
6.25%. These contracts are accounted for as cash flow hedges and the fair value of the floors is recorded as an asset or liability with the corresponding gain or loss recorded in other comprehensive income in stockholders equity, net of tax.
The fair value of the floors as of March 31, 2006 was an asset of $358,000.



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

Introduction

We are a bank holding company headquartered in Rosemont, Illinois, a suburb of Chicago. We derive substantially all of our revenue from
our wholly-owned subsidiary, Cole Taylor Bank. We provide a range of banking services to our customers, with a primary focus on serving closely-held businesses in the Chicago metropolitan area and the people who own and manage them.

The following discussion and analysis presents our consolidated financial condition and results of operations as of and for the dates and periods
indicated. This discussion should be read in conjunction with our consolidated financial statements and the notes thereto appearing elsewhere in this document. In addition to the historical information provided below, we have made certain estimates
and forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these estimates and forward-looking statements as a result of certain factors, including those discussed in
the section captioned Risk Factors in our 2005 Annual Report on Form 10-K filed with the SEC on March 13, 2006.

Application of
Critical Accounting Policies

Our accounting and reporting policies conform to accounting principles generally accepted in the United
States of America and general reporting practices within the financial services industry. Our accounting policies are described in the section captioned Notes to Consolidated Financial StatementsSummary of Significant Accounting and
Reporting Policies in our 2005 Annual Report on Form 10-K.

The preparation of financial statements in conformity with these
accounting principles requires management to make estimates, assumptions and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates, assumptions and judgments are based on
information available to us as of the date of the consolidated financial statements and, accordingly, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statements.
Certain accounting policies inherently have greater reliance on the use of estimates, assumptions and judgments and as such, have a greater possibility of producing results that could be materially different than originally reported. We consider
these policies to be critical accounting policies. The estimates, assumptions and judgments made by us are based upon historical experience or other factors that we believe to be reasonable under the circumstances.

The following accounting policies materially affect our reported earnings and financial condition and require significant estimates, assumptions and
judgments.



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Allowance for Loan Losses

We have established an allowance for loan losses to provide for loans in our portfolio that may not be repaid in their entirety. The allowance is based on our regular, quarterly assessments of the probable estimated
losses inherent in the loan portfolio. Our methodology for measuring the appropriate level of the allowance relies on several key elements, which include a general allowance computed by applying loss factors to categories of loans outstanding in the
portfolio, specific allowances for identified problem loans and portfolio segments, and the unallocated allowance. We maintain the allowance for loan losses at a level considered adequate to absorb probable losses inherent in our portfolio as of the
balance sheet date. In evaluating the adequacy of our allowance for loan losses, we consider numerous quantitative factors including historical charge-off experience, growth of our loan portfolio, changes in the composition of our loan portfolio and
the volume of delinquent and criticized loans. In addition, we use information about specific borrower situations, including their financial position, work-out plans and estimated collateral values under various liquidation scenarios to estimate the
risk and amount of loss for those borrowers. Finally, we also consider many qualitative factors including general and economic business conditions, duration of the current business cycle, the impact of competition on our underwriting terms, current
general market collateral valuations, trends apparent in any of the factors we take into account and other matters, which are by nature more subjective and fluid. The significant uncertainties surrounding our portfolio of borrowers abilities
to successfully execute their business models through changing economic environments and competitive challenges as well as management and other changes greatly complicate the estimate of the risk of loss and amount of loss on any loan. Because of
the degree of uncertainty and susceptibility of these factors to change, actual losses may vary from current estimates.

As a business
bank, our loan portfolio is comprised primarily of commercial loans to businesses, which are inherently larger in amount than loans to individual consumers. The individually larger commercial loans can cause greater volatility in reported credit
quality performance measures, such as total impaired or nonperforming loans. Our current credit risk rating and loss estimate with respect to a single material loan can have a material impact on our reported impaired loans and related loss exposure
estimates. We review our estimates on a quarterly basis and, as we identify changes in estimates, the allowance for loan losses is adjusted through the recording of a provision for loan losses.

Goodwill Impairment

We have goodwill of $23.2
million that we recognized in connection with our 1997 acquisition of the Bank. We test this goodwill annually on July 1 for impairment, or whenever events or significant changes in circumstances indicate that the carrying value may not be
recoverable. We tested goodwill for impairment as of July 1, 2005 and we determined that no impairment charge was necessary. The evaluation for impairment includes comparing the estimated fair market value of the Bank to our carrying value for
the Bank. Because there is not a readily observable market value for the Bank, the estimation of the fair market value is based on the market price of our common stock adjusted for the junior subordinated debentures and the notes payable at the
holding company.



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Income Taxes

At times, we apply different tax treatment for selected transactions for tax return purposes than for income tax financial reporting purposes. The different positions result from the varying application of statutes,
rules, regulations, and interpretations, and our accruals for income taxes include reserves for these differences in position. Our estimate of the value of these reserves contains assumptions based upon our past experience and judgments about
potential actions by taxing authorities, and we believe that the level of these reserves is reasonable. A reserve is utilized or reversed once the applicable statute of limitations has expired or the matter is otherwise resolved. It is likely that
the ultimate resolution of these matters may be greater or less than the amounts we have accrued.

Derivative Financial Instruments

We use derivative financial instruments (derivatives), including interest rate exchange and floor agreements, to assist in our
interest rate risk management. In accordance with SFAS 133, all derivatives are measured and reported at fair value on our consolidated balance sheet as either an asset or a liability. For derivatives that are designated and qualify as a fair value
hedge, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the effective portion of the hedged risk, are recognized in current earnings during the period of the change in the fair values. For
derivatives that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods
during which the hedged transaction affects earnings. For all hedging relationships, derivative gains and losses that are not effective in hedging the changes in fair value or expected cash flows of the hedged item are recognized immediately in
current earnings during the period of the change. Similarly, the changes in the fair value of derivatives that do not qualify for hedge accounting under SFAS 133 are also reported currently in earnings.

At the inception of the hedge and quarterly thereafter, a formal assessment is performed to determine whether changes in the fair values or cash flows of
the derivatives have been highly effective in offsetting the changes in the fair values or cash flows of the hedged item and whether they are expected to be highly effective in the future. If it is determined that the derivative is not highly
effective as a hedge, hedge accounting is discontinued for the period. Once hedge accounting is terminated, all changes in fair value of the derivative flow through the consolidated statements of income in other noninterest income, which results in
greater volatility in our earnings.

The estimates of fair values of our derivatives are calculated using independent valuation models to
estimate mid-market valuations. The fair values produced by these proprietary valuation models are in part theoretical and therefore can vary between derivative dealers and are not necessarily reflective of the actual price at which the contract
could be traded. Small changes in assumptions can result in significant changes in valuation. The risks inherent in the determination of the fair value of a derivative may result in income statement volatility.



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RESULTS OF OPERATIONS

Overview

We recorded net income for the quarter ended
March 31, 2006 of $8.9 million, an increase of $319,000, or 3.7%, from the first quarter of 2005 net income of $8.5 million. The benefits from higher net interest income and a lower provision for loan losses in 2006 were largely offset by lower
noninterest income and higher operating expenses. Gains on the sale of land trusts and a banking center in the first quarter of 2005 totaling $3.7 million were partially offset by the impact of the changes in fair values on our CD swap hedges. We
had other derivative expense of $1.4 million in the first quarter of 2005, compared to income of $582,000 in the first quarter of 2006.

Net income per diluted common share was $0.80 for the first quarter of 2006 as compared to $0.87 for the first quarter of 2005. The decline in the earnings per share, despite the increase in net income, was primarily due to an increase in
our outstanding shares resulting from our public offering of 1.15 million shares of common stock in the third quarter of 2005.

Net Interest Income

Net interest income is the difference between total interest income and fees earned on interest-earning assets, including investment
securities and loans, and total interest expense paid on interest-bearing liabilities, including deposits and other borrowed funds. Net interest income is our principal source of earnings. The amount of net interest income is affected by changes in
the volume and mix of earning assets and interest-bearing liabilities, the level of rates earned or paid on those assets and liabilities and the amount of loan fees earned.

Quarter Ended March 31, 2006 as Compared to the Quarter Ended March 31, 2005:

The
following table presents for the periods indicated, a summary of the changes in interest earned and interest paid resulting from changes in volume, rates and reporting period. Interest income is measured on a tax-equivalent basis using a 35% rate.



|                                   |  |                                                                                   |       |      |   |       |     |  |   |       
|---------------------------------- |  | --------------------------------------------------------------------------------- | ----- | ---- | - | ----- | --- |  | - | ------
|                                   |  | Quarter ended March 31, 2006
overQuarter ended March 31, 2005 INCREASE/(DECREASE)
|                                   |  | VOLUME                                                                            |       | RATE |   |       | NET
|                                   |  | (in thousands)                                                                   
|INTEREST EARNED ON:                |  |                                                                                   |       |      |   |       |     |  |   |       
|Investment securities (1)          |  | $                                                                                 | 2,050 |      | $ | 150   |     |  | $ | 2,200 
|Cash equivalents                   |  |                                                                                   | 199   |      |   | 141   |     |  |   | 340   
|Loans (1)                          |  |                                                                                   | 2,792 |      |   | 7,103 |     |  |   | 9,895 
|                                   |  |                                                                                   |       |      |   |       |     |  |   |       
|Total interest-earning assets      |  |                                                                                   |       |      |   |       |     |  |   | 12,435
|                                   |  |                                                                                   |       |      |   |       |     |  |   |       
|INTEREST PAID ON:                  |  |                                                                                   |       |      |   |       |     |  |   |       
|Interest-bearing deposits          |  |                                                                                   | 1,419 |      |   | 6,763 |     |  |   | 8,182 
|Total borrowings                   |  |                                                                                   | 143   |      |   | 1,446 |     |  |   | 1,589 
|                                   |  |                                                                                   |       |      |   |       |     |  |   |       
|Total interest-bearing liabilities |  |                                                                                   |       |      |   |       |     |  |   | 9,771 
|                                   |  |                                                                                   |       |      |   |       |     |  |   |       
|Net interest income                |  | $                                                                                 | 3,224 |      | $ | (560  | )   |  | $ | 2,664 
|                                   |  |                                                                                   |       |      |   |       |     |  |   |       

---

|(1) | Adjusted to reflect tax-exempt interest income on an equivalent before-tax basis assuming an income tax rate of 35%.
|--- | --------------------------------------------------------------------------------------------------------------------



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Net interest income was $28.0 million during the first quarter of 2006, a $2.2 million, or 8.4%, increase
over the $25.8 million of net interest income during the first quarter a year ago. With an adjustment for tax-exempt income, our consolidated net interest income for the first quarter of 2006 was $28.8 million as compared to $26.1 million during the
same quarter in 2005. Net interest income during the first quarter of 2006 increased as a result of increased interest-earning assets, partially offset by a decline in net interest margin.

The volume of interest-earning assets was a key driver of the increased net interest income earned. Average interest-earning assets increased $345.5
million, or 12.5%, to $3.11 billion for the first quarter of 2006 compared to $2.76 billion for the first quarter in 2005. Average total loans increased $170.7 million, or 7.8%, and average investment securities increased $152.4 million. Average
commercial loans increased $220.2 million, or 11.5%, from the first quarter of 2005 to the first quarter of 2006, while consumer oriented loans declined $49.6 million.

The increase in average interest earning assets between the first quarters of 2006 and 2005 was funded approximately equally with in-market customer deposits and out-of-market funding sources. Between the two
quarterly periods, average brokered and out-of-local-market certificates of deposits increased $66.5 million and repurchase agreements with broker/dealers increased $100.0 million. Local customer deposits increased $160.2 million, driven primarily
by increased average money market accounts. Deposits in lower rate products, including noninterest-bearing demand deposits, NOW and savings accounts, declined, while balances in promotional money market accounts and certificates of deposit
increased.

The net interest margin, which is determined by dividing taxable equivalent net interest income by average interest-earning
assets, was 3.75% during the first quarter of 2006 compared to 3.83% during the same quarter a year ago, a decrease of 8 basis points. The margin was negatively impacted by the cost and mix of our funding for the quarter ended March 31, 2006.
These non-GAAP tax equivalent measures are discussed more fully below.

The net interest spread, which is determined by subtracting the
yield on interest-earning assets from the cost of interest-bearing liabilities, decreased 29 basis points to 3.05% during the first quarter of 2006 from 3.34% during the first quarter of 2005. The yield on our interest-earning assets increased 97
basis points to 6.80% during the first quarter of 2006 from 5.83% during the same quarter in 2005. The cost of our interest-bearing liabilities increased 126 basis points to 3.75% during the first quarter of 2006 from 2.49% during the same quarter
in 2005. The rise in short-term market interest rates over the last 20 months, including fed funds and LIBOR, produced an increase in both our yield on earning assets and the cost of our interest-bearing liabilities.

We use certain interest rate exchange agreements, or swaps, to convert fixed rate brokered CDs to a variable rate. Net cash settlements on swaps that
qualify for hedge accounting are reported in interest expense and those settlements that do not qualify for hedge accounting are reported in noninterest income. During the first quarter of 2006, these swaps qualified for hedge accounting and the net
cash settlements, which totaled $306,000, are reported in interest expense. Our CD swaps did not qualify for hedge accounting in the first quarter of 2005 and, therefore, net cash settlements of $223,000 were reported in noninterest income.

In our 2005 Annual Report, we reported that we expected downward pressure on our net interest margin and that if we executed our balance
sheet growth and funding mix plans effectively, we expected our net interest margin to decline marginally. During the first quarter of 2006, we did not meet our balance sheet growth and funding mix plans and the competitive market place continued to
drive up the rates paid on deposits and decrease the yield received on loans. Our current internal modeling indicates an increasingly challenging margin management environment. We believe remaining committed to and executing our strategy offers the
best opportunity to minimize margin compression. See the section of this discussion and analysis captioned Quantitative and Qualitative Disclosure About Market Risks for further discussion on the impact of interest rates.



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Tax Equivalent Adjustments to Yields and Margins

As part of our evaluation of net interest income, we review our consolidated average balances, our yield on average interest-earning assets, and the costs
of average interest-bearing liabilities. Such yields and costs are derived by dividing annualized income or expense by the average balance of assets or liabilities. Because management reviews net interest income on a taxable equivalent basis, the
analysis contains certain non-GAAP financial measures. In these non-GAAP financial measures, investment interest income, loan interest income, total interest income, and net interest income are adjusted to reflect tax-exempt interest income on an
equivalent before-tax basis assuming a tax rate of 35%. This assumed rate may differ from our actual effective income tax rate. In addition, the earning asset yield, net interest margin, and the net interest rate spread are adjusted to a fully
taxable equivalent basis. We believe that these measures and ratios present a more meaningful measure of the performance of interest-earning assets because they provide a better basis for comparison of net interest income regardless of the mix of
taxable and tax-exempt instruments.

The following table reconciles the tax equivalent net interest income to net interest income as
reported on the consolidated statements of income. In addition, the earning asset yield, net interest margin and net interest spread are shown with and without the tax equivalent adjustment.



|                                               |  |                                     |        |   |      |   |        |  
|---------------------------------------------- |  | ----------------------------------- | ------ | - | ---- | - | ------ | -
|                                               |  | For the Three MonthsEnded March 31, |       
|                                               |  | 2006                                |        |   | 2005 |  
|                                               |  | (dollars in thousands)              |       
|Net interest income as stated                  |  | $                                   | 28,019 |   |      | $ | 25,847 |  
|Tax equivalent adjustment-investments          |  |                                     | 701    |   |      |   | 259    |  
|Tax equivalent adjustment-loans                |  |                                     | 89     |   |      |   | 39     |  
|                                               |  |                                     |        |   |      |   |        |  
|Tax equivalent net interest income             |  | $                                   | 28,809 |   |      | $ | 26,145 |  
|                                               |  |                                     |        |   |      |   |        |  
|Yield on earning assets without tax adjustment |  |                                     | 6.70   | % |      |   | 5.79   | %
|Yield on earning assets - tax equivalent       |  |                                     | 6.80   | % |      |   | 5.83   | %
|                                               |  |                                    
|Net interest margin without tax adjustment     |  |                                     | 3.65   | % |      |   | 3.79   | %
|Net interest margin - tax equivalent           |  |                                     | 3.75   | % |      |   | 3.83   | %
|                                               |  |                                    
|Net interest spread without tax adjustment     |  |                                     | 2.95   | % |      |   | 3.30   | %
|Net interest spread - tax equivalent           |  |                                     | 3.05   | % |      |   | 3.34   | %

The following tables present, for the periods indicated, certain information relating to our
consolidated average balances and reflect our yield on average interest-earning assets and costs of average interest-bearing liabilities. The table contains certain non-GAAP financial measures to adjust tax-exempt interest income on an equivalent
before-tax basis assuming a tax rate of 35%.



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|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|---------------------------------------------- |  | ------------------------------------ | --------- | - | -------- | - | ---------------- |  | ---- | -------------- |  | - | --------- | - | ---------------- | - | ------ |  | ---- | -
|                                               |  | For the Three Months Ended March 31, |          
|                                               |  | 2006                                 |           |   | 2005     |  
|                                               |  | AVERAGEBALANCE                       |           |   | INTEREST |   | YIELD/RATE(%)(6) |  |      | AVERAGEBALANCE |  |   | INTEREST  |   | YIELD/RATE(%)(6) |  
|                                               |  | (dollars in thousands)               |          
|INTEREST-EARNING ASSETS:                       |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Investment securities (1):                     |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Taxable                                        |  | $                                    | 575,613   |   |          | $ | 5,933            |  | 4.12 | %              |  | $ | 506,068   |   |                  | $ | 4,995  |  | 3.95 | %
|Tax-exempt (tax equivalent) (2)                |  |                                      | 124,613   |   |          |   | 2,002            |  | 6.43 |                |  |   | 41,790    |   |                  |   | 740    |  | 7.08 |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Total investment securities                    |  |                                      | 700,226   |   |          |   | 7,935            |  | 4.53 |                |  |   | 547,858   |   |                  |   | 5,735  |  | 4.19 |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Cash Equivalents                               |  |                                      | 41,013    |   |          |   | 449              |  | 4.38 |                |  |   | 18,516    |   |                  |   | 109    |  | 2.35 |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Loans (2) (3):                                 |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Commercial and commercial real estate          |  |                                      | 2,132,170 |   |          |   | 39,549           |  | 7.42 |                |  |   | 1,911,926 |   |                  |   | 29,656 |  | 6.20 |  
|Residential real estate mortgages              |  |                                      | 62,840    |   |          |   | 840              |  | 5.35 |                |  |   | 64,147    |   |                  |   | 854    |  | 5.32 |  
|Home equity and consumer                       |  |                                      | 171,416   |   |          |   | 3,051            |  | 7.22 |                |  |   | 219,688   |   |                  |   | 2,991  |  | 5.52 |  
|Fees on loans                                  |  |                                      |           |   |          |   | 421              |  |      |                |  |   |           |   |                  |   | 465    |  |      |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Net loans (tax equivalent) (2)                 |  |                                      | 2,366,426 |   |          |   | 43,861           |  | 7.51 |                |  |   | 2,195,761 |   |                  |   | 33,966 |  | 6.27 |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Total interest-earning assets (2)              |  |                                      | 3,107,665 |   |          |   | 52,245           |  | 6.80 |                |  |   | 2,762,135 |   |                  |   | 39,810 |  | 5.83 |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Allowance for loan losses                      |  |                                      | (37,719   | ) |          |   |                  |  |      |                |  |   | (38,561   | ) |                  |   |        |  |      |  
|                                               |  |                                      |           |   |          |  
|NON-EARNING ASSETS:                            |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Cash and due from banks                        |  |                                      | 63,051    |   |          |   |                  |  |      |                |  |   | 65,162    |   |                  |   |        |  |      |  
|Accrued interest and other assets              |  |                                      | 88,917    |   |          |   |                  |  |      |                |  |   | 85,779    |   |                  |   |        |  |      |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|TOTAL ASSETS                                   |  | $                                    | 3,221,914 |   |          |   |                  |  |      |                |  | $ | 2,874,515 |   |                  |   |        |  |      |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|INTEREST-BEARING LIABILITIES:                  |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Interest-bearing deposits:                     |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Interest-bearing demand deposits               |  | $                                    | 758,681   |   |          |   | 5,445            |  | 2.91 |                |  | $ | 573,276   |   |                  |   | 1,790  |  | 1.27 |  
|Savings deposits                               |  |                                      | 71,990    |   |          |   | 51               |  | 0.28 |                |  |   | 82,540    |   |                  |   | 60     |  | 0.29 |  
|Time deposits                                  |  |                                      | 1,249,115 |   |          |   | 12,669           |  | 4.11 |                |  |   | 1,156,777 |   |                  |   | 8,133  |  | 2.85 |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Total interest-bearing deposits                |  |                                      | 2,079,786 |   |          |   | 18,165           |  | 3.54 |                |  |   | 1,812,593 |   |                  |   | 9,983  |  | 2.23 |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Other borrowings                               |  |                                      | 287,991   |   |          |   | 2,508            |  | 3.48 |                |  |   | 234,702   |   |                  |   | 975    |  | 1.66 |  
|Notes payable and FHLB advances                |  |                                      | 75,000    |   |          |   | 855              |  | 4.56 |                |  |   | 85,500    |   |                  |   | 1,002  |  | 4.69 |  
|Junior subordinated debentures                 |  |                                      | 87,638    |   |          |   | 1,908            |  | 8.71 |                |  |   | 87,638    |   |                  |   | 1,705  |  | 7.78 |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Total interest-bearing liabilities             |  |                                      | 2,530,415 |   |          |   | 23,436           |  | 3.75 |                |  |   | 2,220,433 |   |                  |   | 13,665 |  | 2.49 |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|NONINTEREST-BEARING LIABILITIES:               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Noninterest-bearing deposits                   |  |                                      | 407,466   |   |          |   |                  |  |      |                |  |   | 447,904   |   |                  |   |        |  |      |  
|Accrued interest, taxes, and other liabilities |  |                                      | 62,696    |   |          |   |                  |  |      |                |  |   | 48,295    |   |                  |   |        |  |      |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Total noninterest-bearing liabilities          |  |                                      | 470,162   |   |          |   |                  |  |      |                |  |   | 496,199   |   |                  |   |        |  |      |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|STOCKHOLDERS EQUITY                           |  |                                      | 221,337   |   |          |   |                  |  |      |                |  |   | 157,883   |   |                  |   |        |  |      |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY     |  | $                                    | 3,221,914 |   |          |   |                  |  |      |                |  | $ | 2,874,515 |   |                  |   |        |  |      |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Net interest income (tax equivalent) (2)       |  |                                      |           |   |          | $ | 28,809           |  |      |                |  |   |           |   |                  | $ | 26,145 |  |      |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Net interest spread (tax equivalent) (2) (4)   |  |                                      |           |   |          |   |                  |  | 3.05 | %              |  |   |           |   |                  |   |        |  | 3.34 | %
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Net interest margin (tax equivalent) (2) (5)   |  |                                      |           |   |          |   |                  |  | 3.75 | %              |  |   |           |   |                  |   |        |  | 3.83 | %
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  

---

|(1) | Investment securities average balances are based on amortized cost.
|--- | -------------------------------------------------------------------

|(2) | Adjusted to reflect tax-exempt interest income on an equivalent before-tax basis assuming an income tax rate of 35%.
|--- | --------------------------------------------------------------------------------------------------------------------

|(3) | Nonaccrual loans are included in the above stated average balances.
|--- | -------------------------------------------------------------------

|(4) | Net interest spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Net interest margin is determined by dividing taxable equivalent net interest income by average interest-earning assets.
|--- | ------------------------------------------------------------------------------------------------------------------------

|(6) | Yield/Rates are annualized.
|--- | ---------------------------



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Noninterest Income

The following table presents, for the periods indicated, our major categories of noninterest income:



|                                           |  |                           |       |              |   |        |  
|------------------------------------------ |  | ------------------------- | ----- | ------------ | - | ------ | -
|                                           |  | For the ThreeMonths Ended |      
|                                           |  | Mar. 31,2006              |       | Mar. 31,2005 |  
|                                           |  | (in thousands)            |      
|Service charges                            |  | $                         | 1,880 |              | $ | 2,407  |  
|Trust services                             |  |                           | 464   |              |   | 848    |  
|Investment management services             |  |                           | 467   |              |   | 336    |  
|Loan syndication fees                      |  |                           | 500   |              |   | 700    |  
|Other noninterest income                   |  |                           | 597   |              |   | 265    |  
|                                           |  |                           |       |              |   |        |  
|                                           |  |                           | 3,908 |              |   | 4,556  |  
|                                           |  |                          
|Gain on sale of land trusts                |  |                           |      |              |   | 2,000  |  
|Gain on sale of branch                     |  |                           |      |              |   | 1,572  |  
|Gain on sale of investment securities, net |  |                           |      |              |   | 127    |  
|                                           |  |                           |       |              |   |        |  
|                                           |  |                           |      |              |   | 3,699  |  
|                                           |  |                          
|Other derivative income (expense)          |  |                           | 582   |              |   | (1,353 | )
|                                           |  |                           |       |              |   |        |  
|Total noninterest income                   |  | $                         | 4,490 |              | $ | 6,902  |  
|                                           |  |                           |       |              |   |        |  

Total noninterest income was $4.5 million during the first quarter of 2006 compared to $6.9
million during the same quarter a year ago. Noninterest income in 2005 included $3.6 million in gains from the sales of our land trust operations and our Broadview, Illinois branch. Other derivative expense was $1.4 million in the first quarter of
2005, compared to income of $582,000 in the first quarter of 2006. In addition, lower deposit service charges and trust fees reduced noninterest income in 2006.

Deposit service charges were $1.9 million during the first quarter of 2006, $527,000, or 21.9%, less than the deposit service charges of $2.4 million during the same quarter a year ago. The decrease in service charge
revenue during 2006 related primarily to commercial services charges and was largely caused by the increase in the earnings credit rate given to customers on their collected account balances to offset gross activity charges. Our earnings credit rate
increased 122 basis points, almost doubling in comparison to the first quarter of 2005. We believe our efforts to increase deposit service charge income in future periods will continue to be challenged by possible increases in the earnings credit
rate, competitive pricing pressures for cash management services and the decline in the volume of paper checks clearing the banking system as a whole.

Trust service fees declined $384,000, or 45.3%, to $464,000 during the first quarter of 2006 from $848,000 million during the first quarter of 2005. Beginning April 1, 2005, our trust fees did not include land
trust fees because our land trust operations were sold on March 31, 2005,



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resulting in a gain of $2.0 million. In addition, in the third quarter of 2005, we entered into a strategic alliance with
a company that provides tax-deferred exchange services whereby all four of our deferred exchange professionals became employees of that company and we became the primary financial custodian for that company in the Midwest region. Land trust and
exchange fee income included in trust fees totaled $466,000 for the first quarter of 2005.

Investment management services consist
primarily of asset management consulting services. Investment management fees increased $131,000, or 39.0%, to $467,000 during the first quarter of 2006 compared to $336,000 during the same quarter a year ago. The market value of assets under
management was $433.1 million at March 31, 2006 as compared to $313.6 million at March 31, 2005.

In January 2005, we recorded a
$1.6 million gain in connection with the sale of our Broadview, Illinois branch. In addition to selling the land and building, we sold approximately $19.7 million of deposit balances and $5.3 million of loans associated with the branch.

We received $500,000 of loan syndication fees during the first quarter of 2006 as compared to $700,000 during the first quarter 2005. We earn these
fees through the syndication of commercial real estate development loans for our customers. While professional real estate developers have for years been a significant part of our commercial banking business, our activity in loan syndication has
been intermittent and can fluctuate from quarter to quarter. We continue to anticipate 2006 fees to approximate 2004 and 2003 levels.

We
use certain interest rate exchange agreements, or swaps, to convert fixed rate brokered CDs to a variable rate. Other derivative income during the first quarter of 2006 is principally the result of changes in the fair value of the derivatives due to
the passage of time, which is excluded from our assessment of hedge effectiveness. Total hedge ineffectiveness during the first quarter of 2006 was $7,000.

Our CD swaps did not qualify for hedge accounting during the first quarter of 2005 and therefore, other derivative expense is comprised of the total change in the fair value of the CD swaps, net of cash settlements of
$223,000.



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Other noninterest income includes fees received from the issuance of standby letters of credit, fees for
non-customer usage of our automated teller machines, gains (losses) from equity or partnership investments, changes in the market value of the assets in our employees deferred compensation plans, and other miscellaneous sources of revenues.
The increase in other noninterest income during the first quarter of 2006 as compared to the first quarter of 2005 was affected by the $162,000 increase in the market value of assets in employee deferred compensation plans as well as a $208,000
decline in the quarterly estimated loss for low-income housing partnership investments.

Noninterest Expense

The following table presents for the periods indicated the major categories of noninterest expense:



|                                                  |  |                            |        |   |               |   |        |  
|------------------------------------------------- |  | -------------------------- | ------ | - | ------------- | - | ------ | -
|                                                  |  | For the Three Months Ended |       
|                                                  |  | Mar. 31,2006               |        |   | Mar. 31, 2005 |  
|                                                  |  | (in thousands)             |       
|Salaries and employee benefits:                   |  |                            |        |   |               |   |        |  
|Salaries, employment taxes, and medical insurance |  | $                          | 8,390  |   |               | $ | 7,897  |  
|Incentives, commissions, and retirement benefits  |  |                            | 1,945  |   |               |   | 2,103  |  
|                                                  |  |                            |        |   |               |   |        |  
|Total salaries and employee benefits              |  |                            | 10,335 |   |               |   | 10,000 |  
|Occupancy of premises, furniture and equipment    |  |                            | 3,007  |   |               |   | 2,609  |  
|Computer processing                               |  |                            | 416    |   |               |   | 433    |  
|Corporate insurance                               |  |                            | 306    |   |               |   | 370    |  
|Legal fees, net                                   |  |                            | 239    |   |               |   | 172    |  
|Advertising and public relations                  |  |                            | 136    |   |               |   | 109    |  
|Other noninterest expense                         |  |                            | 3,347  |   |               |   | 3,047  |  
|                                                  |  |                            |        |   |               |   |        |  
|Total noninterest expense                         |  | $                          | 17,786 |   |               | $ | 16,740 |  
|                                                  |  |                            |        |   |               |   |        |  
|Efficiency Ratio                                  |  |                            | 54.71  | % |               |   | 51.32  | %
|                                                  |  |                            |        |   |               |   |        |  

Noninterest expense increased $1.0 million, or 6.2%, to $17.8 million during the first quarter of
2006 from $16.7 million during the same period in 2005.

For the first quarter of 2006, salaries and benefits increased $335,000, or 3.4%,
compared to the first quarter of 2005. FTE remained largely unchanged from the prior year with 420 employees at March 31, 2006. Included in salaries and benefits was $213,000 of stock option expense recognized in connection with our
implementation of the new stock option accounting under FAS 123R. Annual merit increases and an increase in the market value of assets in the employee deferred compensation plans also increased salary expense in the first quarter of 2006 compared to
the first quarter of 2005.

On January 1, 2006, we adopted SFAS 123R which requires us to record compensation expense for all
stock-based compensation awards, including of both restricted stock and stock



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##### Table of Contents

options issued to employees and directors. Prior to 2006, we did not record compensation expense associated with stock
options. Because of the adoption of SFAS 123R, for the three months ended March 31, 2006 we recorded stock-based compensation expense of $412,000 which was comprised of $213,000 related to stock options and $199,000 related to grants of
restricted stock. In comparison, during the three month period ended March 31, 2005, stock based compensation totaled $172,000 and consisted only of expense related to the grants of restricted stock. See Stock-Based Compensation
included in the Notes to the Consolidated Financial Statements for further information regarding the adoption of SFAS 123R.

Occupancy of
premises and furniture and equipment expense was $3.0 million for the first quarter of 2006, an increase of $398,000, or 15.2%, as compared to $2.6 million of expense in the first quarter of 2005. Real estate taxes increased $148,000 in the first
quarter 2006, the majority of which related to revised assessments on our leased corporate center. Depreciation and amortization increased $123,000, driven in part by the opening of our Orland Park facility and the remodeling of our Wheeling
facility.

Legal fees relate to collection activities, loan documentation, contract and compliance matters, securities law compliance and
other costs associated with being a publicly-traded company. Legal fees are reported net of reimbursements received from borrowers. Legal fees in the first quarter of 2005 included a $330,000 reimbursement of legal fees to the Bank from a legal
action we instituted in 1999.

Advertising and public relations expense was $136,000 during the first quarter of 2006 as compared to
$109,000 during the same quarter in 2005. Beginning in April 2006, we began to increase our advertising and marketing activities to enhance recognition of the Banks brand and its offering of products and services. We expect our advertising
expenses to increase in subsequent quarters and currently expect advertising expense of approximately $1.0 million for the full year in 2006, as compared to $574,000 for 2005.

Other noninterest expense principally includes certain professional fees, FDIC insurance, outside services, operating losses and other operating expenses
such as telephone, postage, office supplies, and printing. Other noninterest expense was $3.3 million during the first quarter of 2006 compared to $3.0 million during the first quarter of 2005. An increase in consulting and other professional
services mainly produced the increase between the two quarters.

Our efficiency ratio increased to 54.71% in the first quarter 2006 as
compared to 51.32% in the first quarter of 2005. The lower efficiency ratio in 2005 was primarily caused by the gains on the sales of the land trusts and the branch.



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Income Taxes

We recorded income tax expense of $5.0 million during the first quarter of 2006, resulting in an effective income tax rate of 35.9%. In comparison, the effective income tax rate for the first quarter of 2005 was 39.8%. The lower effective
tax rate in 2006 resulted primarily from the increased tax-exempt municipal securities portfolio.

FINANCIAL CONDITION

Overview

Total assets were $3.25 billion at
March 31, 2006, a decrease of $29.7 million from total assets of $3.28 billion at December 31, 2005. A decrease in short-term investments of $98.3 million caused the decline. Total investment securities increased $47.7 million and total
loans increased $6.9 million. Total deposits decreased by $50.6 million to $2.49 billion at March 31, 2006 compared to $2.54 billion at December 31, 2005, while total other borrowings increased by $10.3 million. Total stockholders
equity at March 31, 2006 was $225.0 million compared to $219.3 million at December 31, 2005.

Cash and Cash Equivalents

Period-end cash and cash equivalents were $72.7 million at March 31, 2006 compared to $161.1 million at December 31, 2005. Included in cash
equivalents at December 31, 2005, were $100.0 million of securities purchased under agreements to resell on January 3, 2006, to accommodate a large, short-term deposit.

Investment Securities

Investment securities totaled $704.2 million at March 31, 2006 compared
to $656.8 million at December 31, 2005, an increase of $47.4 million, or 7.2%. During the first quarter of 2006 we purchased $16.3 million in tax-exempt municipal securities completing the interest rate risk management strategy initiated in
September 2005 to reduce potential exposure to declining interest rates. In addition, we purchased $47.9 million of mortgage-related securities for liquidity risk management associated with certain large customer deposits. These purchases were
partially offset by $11.4 million in repayments and maturities of securities and a $5.0 million increase in the unrealized loss. The weighted average life of the investment portfolio at March 31, 2006 was approximately 5 years.

At March 31, 2006, the net unrealized loss on the available for sale securities totaled $17.6 million. We believe that the unrealized losses arose
from increased market interest rates, not credit deterioration, and that no other than temporary impairment exists. We have the intent and believe we have the ability to hold all of these securities for the time necessary to recover the amortized
cost.



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Loans

Total loans at March 31, 2006 were relatively unchanged as compared to December 31, 2005 as the increase in total commercial loans of $19.3 million was largely offset by the decrease in consumer oriented loans of $12.4 million.
The increase in total commercial loans resulted primarily from growth in real estate construction and commercial real estate secured loans.

The composition of our loan portfolio as of March 31, 2006 and December 31, 2005 was as follows:



|                               |  |                        |           |                         |                   |   |        |   |                         |  |     |  
|------------------------------ |  | ---------------------- | --------- | ----------------------- | ----------------- | - | ------ | - | ----------------------- |  | --- | -
|                               |  | March 31, 2006         |           |                         | December 31, 2005 |  
|                               |  | Amount                 |           | Percentageof GrossLoans |                   |   | Amount |   | Percentageof GrossLoans | 
|                               |  | (dollars in thousands) |          
|Commercial real estate secured |  | $                      | 802,273   |                         | 34                | % |        | $ | 793,965                 |  | 33  | %
|Real estate - construction     |  |                        | 715,541   |                         | 30                |   |        |   | 684,737                 |  | 29  |  
|Commercial and industrial      |  |                        | 645,226   |                         | 27                |   |        |   | 665,023                 |  | 28  |  
|Consumer-oriented loans        |  |                        | 228,878   |                         | 9                 |   |        |   | 241,316                 |  | 10  |  
|                               |  |                        |           |                         |                   |   |        |   |                         |  |     |  
|Gross loans                    |  | $                      | 2,391,918 |                         | 100               | % |        | $ | 2,385,041               |  | 100 | %
|                               |  |                        |           |                         |                   |   |        |   |                         |  |     |  

Our commercial real estate secured loans increased $8.3 million, or 1.0%, to $802.3 million at
March 31, 2006, as compared to $794.0 million at December 31, 2005. Loans secured by non-owner occupied commercial property increased while the financing of owner-occupied commercial real estate and residential income property declined. As
of March 31, 2006, the composition of our commercial real estate secured portfolio was approximately as follows:



|                                     |  |                                                |   |  |                          |  
|------------------------------------ |  | ---------------------------------------------- | - |  | ------------------------ | -
|                                     |  | Percentage ofTotalCommercialReal EstateSecured |   |  | Percentage ofGross Loans |  
|Commercial properties:               |  |                                                |   |  |                          |  
|Non-owner occupied                   |  | 59                                             | % |  | 20                       | %
|Owner occupied                       |  | 25                                             | % |  | 9                        | %
|                                     |  |                                                |   |  |                          |  
|Subtotal                             |  | 84                                             | % |  | 29                       | %
|Residential income property          |  | 16                                             | % |  | 5                        | %
|                                     |  |                                                |   |  |                          |  
|Total commercial real estate secured |  | 100                                            | % |  | 34                       | %
|                                     |  |                                                |   |  |                          |  



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Our real estate - construction loans increased by $30.8 million, or 4.5%, to $715.5 million at
March 31, 2006, as compared to $684.7 million at December 31, 2005. As of March 31, 2006, the composition of our real estateconstruction portfolio was approximately as follows:



|                                 |  |                                     |   |  |                          |  
|-------------------------------- |  | ----------------------------------- | - |  | ------------------------ | -
|                                 |  | Percentage ofTotalConstructionLoans |   |  | Percentage ofGross Loans |  
|Residential properties:          |  |                                     |   |  |                          |  
|Single family                    |  | 25                                  | % |  | 8                        | %
|Multifamily                      |  | 18                                  | % |  | 5                        | %
|Condominiums                     |  | 26                                  | % |  | 8                        | %
|                                 |  |                                     |   |  |                          |  
|Subtotal                         |  | 69                                  | % |  | 21                       | %
|Commercial property              |  | 13                                  | % |  | 4                        | %
|Land and land development        |  | 18                                  | % |  | 5                        | %
|                                 |  |                                     |   |  |                          |  
|Total real estate  construction |  | 100                                 | % |  | 30                       | %
|                                 |  |                                     |   |  |                          |  

Our commercial and industrial (C&I) loans decreased by $19.8 million, or 3.0%, to $645.2
million at March 31, 2006, as compared to $665.0 million at December 31, 2005.

In our 2005 Annual Report, we reported that we
expected our 2006 growth rate in total commercial loans to reflect historical growth rates and that we plan to focus on originating C&I loans in 2006. While we did not grow our C&I loan portfolio during the first quarter of 2006, we remain
committed to our strategy and are working to recruit additional talent to our commercial banking team, enhance our products for business customers to address their current and emerging needs and rolling out our branding program to the marketplace in
support of our active calling programs.

Total consumer-oriented loans, which include residential real estate mortgages, home equity loans
and lines of credit, and other consumer loans, decreased $12.4 million, to $228.9 million at March 31, 2006. A significant portion of the consumer-oriented loan portfolio includes loans we originated through brokers in prior years, a practice
we discontinued in 2001 and 2002. As expected, the broker-related loan portfolios have declined from $41.2 million at December 31, 2005 to $36.5 million at March 31, 2006.



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Loan Quality and Nonperforming Assets

The following table sets forth the amounts of nonperforming assets as of the dates indicated:



|                                                                         |  |                |        |   |              |   |        |              |  |   |        |  
|------------------------------------------------------------------------ |  | -------------- | ------ | - | ------------ | - | ------ | ------------ |  | - | ------ | -
|                                                                         |  | Mar. 31,2006   |        |   | Dec. 31,2005 |   |        | Mar. 31,2005 | 
|                                                                         |  | (in thousands) |       
|Loans contractually past due 90 days or more but still accruing interest |  | $              | 2,691  |   |              | $ | 2,615  |              |  | $ | 4,117  |  
|Nonaccrual loans                                                         |  |                | 18,237 |   |              |   | 10,834 |              |  |   | 11,120 |  
|                                                                         |  |                |        |   |              |   |        |              |  |   |        |  
|Total nonperforming loans                                                |  |                | 20,928 |   |              |   | 13,449 |              |  |   | 15,237 |  
|Other real estate owned                                                  |  |                | 214    |   |              |   | 1,139  |              |  |   | 46     |  
|Other repossessed assets                                                 |  |                |       |   |              |   |       |              |  |   | 11     |  
|                                                                         |  |                |        |   |              |   |        |              |  |   |        |  
|Total nonperforming assets                                               |  | $              | 21,142 |   |              | $ | 14,588 |              |  | $ | 15,294 |  
|                                                                         |  |                |        |   |              |   |        |              |  |   |        |  
|Restructured loans not included in nonperforming assets                  |  |                |       |   |              |   |       |              |  | $ | 2,768  |  
|Impaired loans                                                           |  | $              | 38,011 |   |              | $ | 35,764 |              |  | $ | 19,835 |  
|                                                                         |  |                |       
|Nonperforming loans to total loans                                       |  |                | 0.87   | % |              |   | 0.56   | %            |  |   | 0.68   | %
|Nonperforming assets to total loans plus repossessed property            |  |                | 0.88   | % |              |   | 0.61   | %            |  |   | 0.68   | %
|Nonperforming assets to total assets                                     |  |                | 0.65   | % |              |   | 0.44   | %            |  |   | 0.52   | %

Nonperforming assets increased to $21.1 million at March 31, 2006, compared to $14.6 million
at December 31, 2005 and $15.3 million at March 31, 2005. The ratio of nonperforming loans as a percentage of total loans was 0.87% at March 31, 2006 compared to 0.56% at December 31, 2005 and 0.68% at March 31, 2006. The
increase in nonaccrual loans at March 31, 2006 resulted largely from a single C&I loan in the amount of $7.1 million that is secured by inventory and accounts receivable. This loan was also included in impaired loans and had a specific
allowance attributed to it at March 31, 2006.

Impaired loans include all nonaccrual loans as well as accruing loans judged to have higher
risk of noncompliance with the present contractual repayment schedule for both interest and principal. While impaired loans exhibit weaknesses that may inhibit repayment in compliance with the original note terms, the measurement of impairment may
not always result in an allowance for loan loss for every impaired loan. Total impaired loans were $38.0 million at March 31, 2006 compared to $35.8 million at December 31, 2005 and $19.8 million at March 31, 2005. Certain homogenous
loans, including residential mortgage and consumer loans, are collectively evaluated for impairment and therefore are excluded from impaired loans.

Allowance for Loan Losses

We have established an allowance for loan losses to provide for loans in our portfolio that may
not be repaid in their entirety. The allowance is based on our regular, quarterly assessments



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of the probable estimated losses inherent in the loan portfolio. Our methodology for measuring the appropriate level of
the allowance includes identifying problem loans, estimating the amount of probable loss related to those loans, estimating probable losses from specific portfolio segments and evaluating the impact to our loan portfolio of a number of economic and
qualitative factors. Although management believes that the allowance for loan losses is adequate to absorb probable losses on existing loans that may become uncollectible at this point in time, there can be no assurance that our allowance will prove
sufficient to cover actual loan losses in the future.

The following table shows an analysis of our allowance for loan losses and other
related data:



|                                                  |  |                                  |           |   |      |   |           |  
|------------------------------------------------- |  | -------------------------------- | --------- | - | ---- | - | --------- | -
|                                                  |  | For Three Months Ended March 31, |          
|                                                  |  | 2006                             |           |   | 2005 |  
|                                                  |  | (dollars in thousands)           |          
|Average total loans                               |  | $                                | 2,366,426 |   |      | $ | 2,195,761 |  
|                                                  |  |                                  |           |   |      |   |           |  
|Total loans at end of period                      |  | $                                | 2,391,826 |   |      | $ | 2,255,867 |  
|                                                  |  |                                  |           |   |      |   |           |  
|Allowance for loan losses:                        |  |                                  |           |   |      |   |           |  
|Allowance at beginning of period                  |  | $                                | 37,481    |   |      | $ | 37,484    |  
|Total charge-offs                                 |  |                                  | (2,185    | ) |      |   | (501      | )
|Total recoveries                                  |  |                                  | 490       |   |      |   | 445       |  
|                                                  |  |                                  |           |   |      |   |           |  
|Net charge-offs                                   |  |                                  | (1,695    | ) |      |   | (56       | )
|Provision for loan losses                         |  |                                  | 900       |   |      |   | 1,834     |  
|                                                  |  |                                  |           |   |      |   |           |  
|Allowance at end of period                        |  | $                                | 36,686    |   |      | $ | 39,262    |  
|                                                  |  |                                  |           |   |      |   |           |  
|Annualized net charge-offs to average total loans |  |                                  | 0.29      | % |      |   | 0.01      | %
|Allowance to total loans at end of period         |  |                                  | 1.53      | % |      |   | 1.74      | %
|Allowance to nonperforming loans                  |  |                                  | 175.30    | % |      |   | 257.68    | %

Net charge-offs during the first quarter of 2006 were $1.7 million, or an annualized 0.29% of
average loans. A partial charge off on one C&I loan comprised $1.4 million of our net charge-offs in the first quarter of 2006. In comparison, net charge-offs during the first quarter of 2005 were $56,000 representing an annualized 0.01% of
average loans. As a business bank, our loan portfolio is comprised primarily of commercial loans to businesses, which are typically larger in amount than loans to individual consumers and generally are viewed as having more risk of default than
residential real estate loans or other secured consumer loans. The individually larger commercial loans can cause greater volatility in reported credit quality performance measures, such as total impaired or nonperforming loans. For example, our
current credit risk rating and loss estimate with respect to a single material loan can have a sizable impact on our reported impaired loans and related loss exposure estimates. We review our estimates on a quarterly basis and, if necessary, adjust
the allowance for loan losses through the recording of a provision for loan losses.

Our allowance for loan losses was $36.7 million at
March 31 2006, or 1.53% of end-of-period loans and 175.30% of nonperforming loans. We believe that the overall credit quality of our portfolio supports that the reserve as a percentage of total loans should be lower today than in prior years.
At March 31, 2005, the allowance for loan losses was $39.3 million, which represented 1.74% of end-of-period loans and 257.68% of nonperforming loans.



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Provision for Loan Losses

We determine a provision for loan losses that we consider sufficient to maintain an allowance covering probable losses inherent in our portfolio as of the balance sheet date. Our provision for loan losses was $900,000
for the first quarter of 2006 and $1.8 million for the first quarter of 2005. In comparison, the average provision for loan losses over the last five quarters was $1.3 million and ranged from zero to $2.8 million. Our loan loss provision is
determined based upon an extensive analysis of our portfolio which incorporates the historical loss experience within separate segments of the loan portfolio as well as our estimates with respect to specific identified troubled credits. The lower
allowance for loan losses in relation to total loans in 2006 was influenced by the lower average annual net charge offs over the last two years. We expect the level of our provisioning in the future will reflect the interplay of our expected loan
growth with the overall quality of the loan portfolio, including our experience with identified troubled credits. If the overall credit performance of our loan portfolio is similar and our loan portfolio continues to grow, we would expect our
allowance as a percentage of total loans to decline through the end of 2006. The provision for loan losses in any individual accounting period is not an indicator of provisioning in subsequent reporting periods.

Deposits

Deposits totaled $2.49 billion at
March 31, 2006, down $50.6 million from year-end 2005 and up $141.7 million from March 31, 2005. Total in-market deposits decreased $30.7 million from December 31, 2005 to March 31, 2006. From December 31, 2005 to
March 31, 2006, balances in non-interest bearing deposits and lower rate NOW, savings and money-market accounts declined, while balances in higher rate money market accounts increased. The increase in money market accounts was primarily a
result of increased tax-deferred exchange deposits which increased $38.7 million during the quarter to $286.6 million at March 31, 2006.

The following table sets forth, for the periods indicated, the distribution of our average deposit account balances and average cost of funds in each category of deposits:



|                                            |  |                                          |           |                    |                                          |   |      |      |   |                |   |                    |  |       |      |  |      |  
|------------------------------------------- |  | ---------------------------------------- | --------- | ------------------ | ---------------------------------------- | - | ---- | ---- | - | -------------- | - | ------------------ |  | ----- | ---- |  | ---- | -
|                                            |  | For the Three Months EndedMarch 31, 2006 |           |                    | For the Three Months EndedMarch 31, 2005 |  
|                                            |  | AverageBalance                           |           | Percent OfDeposits |                                          |   | Rate |      |   | AverageBalance |   | Percent OfDeposits |  |       | Rate | 
|                                            |  | (dollars in thousands)                   |          
|Noninterest-bearing demand deposits         |  | $                                        | 407,466   |                    | 16.4                                     | % |      |     | % |                | $ | 447,904            |  | 19.8  | %    |  |     | %
|NOW accounts                                |  |                                          | 104,849   |                    | 4.2                                      |   |      | 0.54 |   |                |   | 125,973            |  | 5.6   |      |  | 0.47 |  
|Money market accounts                       |  |                                          | 653,832   |                    | 26.3                                     |   |      | 3.29 |   |                |   | 447,303            |  | 19.8  |      |  | 1.49 |  
|Savings deposits                            |  |                                          | 71,990    |                    | 2.9                                      |   |      | 0.29 |   |                |   | 82,540             |  | 3.7   |      |  | 0.29 |  
|Time deposits:                              |  |                                          |           |                    |                                          |   |      |      |   |                |   |                    |  |       |      |  |      |  
|Certificates of deposit                     |  |                                          | 547,449   |                    | 22.0                                     |   |      | 3.76 |   |                |   | 521,129            |  | 23.1  |      |  | 2.70 |  
|Out-of-local-market certificates of deposit |  |                                          | 126,158   |                    | 5.1                                      |   |      | 4.21 |   |                |   | 132,026            |  | 5.8   |      |  | 2.88 |  
|Brokered certificates of deposit            |  |                                          | 505,394   |                    | 20.3                                     |   |      | 4.49 |   |                |   | 432,992            |  | 19.1  |      |  | 3.09 |  
|Public Funds                                |  |                                          | 70,114    |                    | 2.8                                      |   |      | 3.97 |   |                |   | 70,630             |  | 3.1   |      |  | 2.45 |  
|                                            |  |                                          |           |                    |                                          |   |      |      |   |                |   |                    |  |       |      |  |      |  
|Total time deposits                         |  |                                          | 1,249,115 |                    | 50.2                                     |   |      | 4.11 |   |                |   | 1,156,777          |  | 51.1  |      |  | 2.85 |  
|                                            |  |                                          |           |                    |                                          |   |      |      |   |                |   |                    |  |       |      |  |      |  
|Total deposits                              |  | $                                        | 2,487,252 |                    | 100.0                                    | % |      |      |   |                | $ | 2,260,497          |  | 100.0 | %    |  |      |  
|                                            |  |                                          |           |                    |                                          |   |      |      |   |                |   |                    |  |       |      |  |      |  



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Average deposits increased $226.8 million, or 10.0%, to $2.49 billion for the first quarter of 2006, as
compared to the first quarter of 2005. The majority of the increase in deposits was obtained from increased money market account balances. Money market account balances increased from 19.8% of total deposits in the first quarter of 2005 to 26.3% in
the first quarter of 2006, primarily in high-rate promotional money market accounts and tax-deferred exchange deposits. In addition, average brokered and out-of-local-market certificates of deposit increased $66.5 million to $631.6 million for the
first quarter of 2006 in comparison to the same period in 2005. Average noninterest-bearing demand deposits, NOW accounts and savings deposits decreased $72.1 million, or 11.0%, to $584.3 million for the first quarter of 2006 in comparison to the
same period a year ago.

Other Borrowings and Liabilities

Other borrowings include federal funds purchased, securities sold under agreements to repurchase and U.S. Treasury tax and loan note option accounts. Period-end, short-term borrowings increased $10.3 million to $308.7
million at March 31, 2006, as compared to $298.4 million at December 31, 2005.

FHLB advances totaled $75.0 million at both
March 31, 2006 and December 31, 2005. We had no outstanding balance under our revolving credit facility at March 31, 2006.

At both March 31, 2006 and December 31, 2005, we had $87.6 million of junior subordinated debentures issued to our wholly owned subsidiaries, TAYC Capital Trust I and TAYC Capital Trust II, who used proceeds from the issuance of
trust preferred securities to purchase our junior subordinated debentures.



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CAPITAL RESOURCES

At March 31, 2006 and December 31, 2005, both the Company and Cole Taylor Bank were considered well capitalized under capital guidelines for bank holding companies and banks. The Companys
and Cole Taylor Banks capital ratios were as follows for the dates indicated:



|                                         |  |                        |         |       |                             |   |        |                                                              |          |  |       |        |  |       |          |  |        |  
|---------------------------------------- |  | ---------------------- | ------- | ----- | --------------------------- | - | ------ | ------------------------------------------------------------ | -------- |  | ----- | ------ |  | ----- | -------- |  | ------ | -
|                                         |  | ACTUAL                 |         |       | FOR CAPITALADEQUACYPURPOSES |   |        | TO BE WELLCAPITALIZED UNDERPROMPTCORRECTIVE ACTIONPROVISIONS |         
|                                         |  | AMOUNT                 |         | RATIO |                             |   | AMOUNT |                                                              | RATIO    |  |       | AMOUNT |  | RATIO |         
|                                         |  | (dollars in thousands) |        
|As of March 31, 2006:                    |  |                        |         |       |                             |   |        |                                                              |          |  |       |        |  |       |          |  |        |  
|Total Capital (to Risk Weighted Assets)  |  |                        |         |       |                             |   |        |                                                              |          |  |       |        |  |       |          |  |        |  
|Taylor Capital Group, Inc.               |  | $                      | 333,614 |       | 12.26                       | % |        | $                                                            | >217,711 |  | >8.00 | %      |  | $     | >272,139 |  | >10.00 | %
|Cole Taylor Bank                         |  |                        | 311,403 |       | 11.47                       |   |        |                                                              | >217,218 |  | >8.00 |        |  |       | >271,522 |  | >10.00 |  
|Tier I Capital (to Risk Weighted Assets) |  |                        |         |       |                             |   |        |                                                              |          |  |       |        |  |       |          |  |        |  
|Taylor Capital Group, Inc.               |  |                        | 293,831 |       | 10.80                       |   |        |                                                              | >108,856 |  | >4.00 |        |  |       | >163,283 |  | >6.00  |  
|Cole Taylor Bank                         |  |                        | 277,429 |       | 10.22                       |   |        |                                                              | >108,609 |  | >4.00 |        |  |       | >162,913 |  | >6.00  |  
|Leverage (to average assets)             |  |                        |         |       |                             |   |        |                                                              |          |  |       |        |  |       |          |  |        |  
|Taylor Capital Group, Inc.               |  |                        | 293,831 |       | 9.19                        |   |        |                                                              | >127,947 |  | >4.00 |        |  |       | >159,934 |  | >5.00  |  
|Cole Taylor Bank                         |  |                        | 277,429 |       | 8.70                        |   |        |                                                              | >127,613 |  | >4.00 |        |  |       | >159,516 |  | >5.00  |  
|                                         |  |                        |         |       |                             |  
|As of December 31, 2005:                 |  |                        |         |       |                             |   |        |                                                              |          |  |       |        |  |       |          |  |        |  
|Total Capital (to Risk Weighted Assets)  |  |                        |         |       |                             |   |        |                                                              |          |  |       |        |  |       |          |  |        |  
|Taylor Capital Group, Inc.               |  | $                      | 324,050 |       | 12.02                       | % |        | $                                                            | >215,693 |  | >8.00 | %      |  | $     | >269,617 |  | >10.00 | %
|Cole Taylor Bank                         |  |                        | 300,510 |       | 11.16                       |   |        |                                                              | >215,325 |  | >8.00 |        |  |       | >269,156 |  | >10.00 |  
|Tier I Capital (to Risk Weighted Assets) |  |                        |         |       |                             |   |        |                                                              |          |  |       |        |  |       |          |  |        |  
|Taylor Capital Group, Inc.               |  |                        | 281,480 |       | 10.44                       |   |        |                                                              | >107,847 |  | >4.00 |        |  |       | >161,770 |  | >6.00  |  
|Cole Taylor Bank                         |  |                        | 266,818 |       | 9.91                        |   |        |                                                              | >107,662 |  | >4.00 |        |  |       | >161,494 |  | >6.00  |  
|Leverage (to average assets)             |  |                        |         |       |                             |   |        |                                                              |          |  |       |        |  |       |          |  |        |  
|Taylor Capital Group, Inc.               |  |                        | 281,480 |       | 8.90                        |   |        |                                                              | >126,475 |  | >4.00 |        |  |       | >158,094 |  | >5.00  |  
|Cole Taylor Bank                         |  |                        | 266,818 |       | 8.46                        |   |        |                                                              | >126,182 |  | >4.00 |        |  |       | >157,727 |  | >5.00  |  

During the first quarter of 2006, Cole Taylor Banks capital ratios increased as the increase
in regulatory capital exceeded the increase in risk-weighted and average assets. Cole Taylor Banks net income of $10.9 million created the increase in regulatory capital at the bank. Cole Taylor Bank is subject to dividend restrictions
established by regulatory authorities. The dividends, as of March 31, 2006, that Cole Taylor Bank could declare and pay to the Company, without the approval of regulatory authorities, amounted to approximately $65.3 million.

During the first quarter of 2006, the Companys regulatory capital increased from the retention of earnings. Regulatory capital ratios increased
because the increase in capital exceeded the increase in risk-weighted and average assets. During the first quarter of 2006, we declared common stock dividends of $0.06 per share, totaling $660,000.

LIQUIDITY

During the first quarter of 2006, total
cash and cash equivalents declined $88.4 million, as a result of the maturity of a $100.0 million reverse securities repurchase agreement. Total deposits and borrowings declined $40.3 million. While total loans were relatively unchanged as compared
to year end 2005, we purchased $47.9 million of mortgage-related securities for liquidity risk



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management purposes. In connection with our liquidity risk management, we evaluate and closely monitor significant
customer deposit balances for stability and average life. In order to maintain sufficient liquidity to meet all of our loan and deposit customers withdrawal and funding demands, we routinely measure and monitor the volume of our liquid assets
and available funding sources. Additional sources of liquidity for Cole Taylor Bank include Federal Home Loan Bank advances, the Federal Reserve Banks Borrower-in-Custody Program, federal funds borrowing lines from larger correspondent banks
and pre-approved repurchase agreement availability with major brokers and banks.

At the holding company level, cash and cash equivalents
totaled $30.3 million at March 31, 2006 as compared to $34.5 million at December 31, 2005. Additional sources of holding company liquidity during the first quarter of 2006 were the receipt of $442,000 from the exercise of stock options.
During the first quarter of 2006, the holding company paid interest on the junior subordinated debentures of $1.9 million and dividends to common stockholders of $658,000. Cash used for holding company operations during the first quarter of 2006
also included the payment of salaries, year-end bonuses, and legal fees. The Company, as of March 31, 2006, had a $20.0 million revolving line of credit that has not been drawn upon.

Off-Balance Sheet Arrangements

Off-balance sheet
arrangements include commitments to extend credit and financial guarantees. Commitments to extend credit and financial guarantees are used to meet the financial needs of our customers.

At March 31, 2006, we had $925 million of undrawn commitments to extend credit and $117 million of financial and performance standby letters of
credit. We expect most of these letters of credit to expire undrawn and we expect no significant loss from our obligation under financial guarantees.

Derivative Financial Instruments

At March 31, 2006, we had $330.0 million of notional amount interest rate exchange
contracts related to certain brokered certificates of deposit. Under these CD swaps, we receive a fixed interest rate equal to the rate paid on the brokered CDs and pay a variable interest rate based upon 3-month LIBOR. During the first quarter of
2006, we entered into additional interest rate exchange agreements with a notional amount totaling of $20.0 million related to newly issued brokered certificates of deposit. These CD swaps qualify as fair value hedges under SFAS 133 and therefore we
reported the net cash settlements as interest expense and the difference between the change in fair values of the CD swaps and the hedged CDs as noninterest income.

Subsequent to March 31, 2006, we noted that our exposure to falling interest rates had been largely eliminated. This change in the projected re-pricing behavior of our balance sheet provided the opportunity to
re-evaluate our existing portfolio of derivative instruments. On May 4, 2006, we terminated all of our interest rate swaps and acquired a zero-cost interest rate collars (simultaneous floor and caps). These changes to our portfolio of derivative
instruments maintains our current interest rate risk profile. The termination of our $380.0 million notional amount of interest rate swaps is not expected to materially impact earnings because they are carried on our balance sheet at fair value.

For additional information concerning the accounting treatment for our derivative instruments, please see Application of
Critical Accounting Policies  Derivative Financial Instruments and Note 9 to our consolidated financial statements in this Form 10-Q.



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QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

Interest rate risk is the most significant market risk affecting us. Other types of market risk, such as foreign currency risk and commodity price risk,
do not arise in the normal course of our business activities. Interest rate risk can be defined as the exposure to a movement in interest rates that could have an adverse effect on our net interest income or the market value of our financial
instruments. The ongoing monitoring and management of this risk is an important component of our asset and liability management process, which is governed by policies established by the Board of Directors and carried out by Cole Taylor Banks
Asset/Liability Management Committee, or ALCO. ALCOs objectives are to manage, to the degree prudently possible, our exposure to interest rate risk over both the one year planning cycle and the longer term strategic horizon and, at the same
time, to provide a stable and steadily increasing flow of net interest income. Interest rate risk management activities include establishing guidelines for tenor and repricing characteristics of new business flow, the maturity ladder of wholesale
funding and investment security purchase and sale strategies, as well as the use of derivative financial instruments.

We have used various
interest rate contracts, including swaps and floors, to manage interest rate and market risk. These contracts are designated as hedges of specific existing assets and liabilities. Our asset and liability management and investment policies do not
allow the use of derivative financial instruments for trading purposes.

Our primary measurement of interest rate risk is earnings at risk,
which is determined through computerized simulation modeling. The primary simulation model assumes a static balance sheet, a parallel interest rate rising or declining ramp and uses the balances, rates, maturities and repricing characteristics of
all of our existing assets and liabilities, including derivative instruments. These models are built with the sole objective of measuring the volatility of the embedded interest rate risk as of the balance sheet date and, as such, do not provide for
growth or changes in balance sheet composition. Projected net interest income is computed by the model assuming market rates remain unchanged and compares those results to other interest rate scenarios with changes in the magnitude, timing, and
relationship between various interest rates. The impact of embedded options in products such as callable agencies and mortgage-backed securities, real estate mortgage loans, and callable borrowings are also considered. Changes in net interest income
in the rising and declining rate scenarios are then measured against the net interest income in the rates unchanged scenario. ALCO utilizes the results of the model to quantify the estimated exposure of our net interest income to sustained interest
rate changes.

Our modeling of the March 31, 2006 balance sheet, using the market interest rates in effect at period-end (the
rates unchanged scenario), indicated increased pressure on our net interest margin in future periods as many of our interest-bearing liabilities will reprice to current rates as they mature or reprice.



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The following table indicates the estimated impact on net interest income for the 12 months following the
indicated dates, assuming a gradual shift up or down in market rates reflecting a parallel change in rates across the entire yield curve:



|                                 |  |                                      |      |   |                      |       |    |              |   |        |                  |  |       |   
|-------------------------------- |  | ------------------------------------ | ---- | - | -------------------- | ----- | -- | ------------ | - | ------ | ---------------- |  | ----- | --
|                                 |  | Change in Future Net Interest Income |     
|                                 |  | At March 31, 2006                    |      |   | At December 31, 2005 |      
|                                 |  | (dollars in thousands)               |     
|Change in interest rates         |  | DollarChange                         |      |   | PercentageChange     |       |    | DollarChange |   |        | PercentageChange | 
|+200 basis points over one year  |  | $                                    | 774  |   |                      | 0.72  | %  |              | $ | 395    |                  |  | 0.36  | % 
|- 200 basis points over one year |  |                                      | (899 | ) |                      | (0.83 | )% |              |   | (3,026 | )                |  | (2.75 | )%

Our simulation modeling at March 31, 2006 indicated that net interest income would remain largely
unchanged under either a rising or falling interest rate environment. Net interest income for year one in a 200 basis points rising or falling rate scenarios was calculated to be 0.72% higher or 0.83% lower, respectively, than the net interest
income in the rates unchanged scenario.

Subsequent to March 31, 2006, we noted that our exposure to falling interest rates had
been largely eliminated in comparison to December 31, 2005. This change in the projected re-pricing behavior of our balance sheet provided the opportunity to re-evaluate our existing portfolio of derivative instruments. On May 4, 2006 we terminated
all of our interest rate swaps and acquired a zero-cost interest rate collars (simultaneous floor and caps). These changes to our portfolio of derivative instruments maintains our current interest rate risk profile. The termination of our $380.0
million notional amount of interest rate swaps is not expected to materially impact earnings because they are carried on our balance sheet at fair value.

NEW ACCOUNTING PRONOUNCEMENTS

On January 1, 2006, we adopted SFAS 123, Share-Based Payment (SFAS
123R). This Statement revises the previously issued SFAS 123 and supersedes APB Opinion 25. SFAS 123R eliminated the intrinsic value method that we had previously used use to account for the granting of employee stock options. We adopted SFAS
123R using the modified prospective method, recording compensation expense for all awards granted after the date of adoption and for the unvested portion of previously granted awards that remain outstanding at the date of adoption. The adoption of
SFAS 123R did not have a material effect on the results of operations or the statement of condition. See Note 8 of our Notes to the Consolidated Financial Statement for further details.

In February 2006, FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments  an amendment of FASB Statements
No. 133 and 140 (SFAS 155). SFAS 155 permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and
principal-only strips are not subject to the requirements of Statement 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial
instruments that contain an embedded derivative requiring bifurcation, and clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives. SFAS 155 also amends Statement 140 to eliminate the prohibition on a
qualifying special purpose entity from holding a derivative financial



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instrument that pertains to a beneficial interest other than another derivative financial instrument. FAS 155 is
effective for all financial instruments acquired or issued after the beginning of an entitys first fiscal year that begins after September 15, 2006. We do not believe that the adoption of SFAS 155 will have a material effect on the
results of operations or the statement of condition.

In March 2006, FASB issued SFAS No. 156 Accounting for Servicing of
Financial Assets an amendment of FASB Statement No. 140 (SFAS 156), which amends the guidance in SFAS No. 140. SFAS No. 156 requires that an entity separately recognize a servicing asset or a servicing
liability when it undertakes an obligation to service a financial asset under a servicing contract in certain situations, and to initially record such servicing assets or servicing liabilities at fair value, if practicable. SFAS No. 156 also
allows an entity to measure its servicing assets and servicing liabilities subsequently using either the amortization method, which existed under SFAS No. 140, or the fair value measurement method. SFAS No. 156 will be effective for the
Company in the fiscal year beginning January 1, 2007. We do not expect the adoption of SFAS No. 156 will have a material impact on its financial condition, results of operations or cash flows.

Quarterly Financial Information

The following table
sets forth unaudited financial data regarding our operations for each of the last eight quarters. This information, in the opinion of management, includes all adjustments necessary to present fairly our results of operations for such periods,
consisting only of normal recurring adjustments for the periods indicated. The operating results for any quarter are not necessarily indicative of results for any future period.



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|                                                  |  |                                       |         |                    |   |         |                    |  |         |        |         |  |   |         |  |   |         |   |         |   |        |   |  |   |        |  |   |        |  
|------------------------------------------------- |  | ------------------------------------- | ------- | ------------------ | - | ------- | ------------------ |  | ------- | ------ | ------- |  | - | ------- |  | - | ------- | - | ------- | - | ------ | - |  | - | ------ |  | - | ------ | -
|                                                  |  | 2006QuarterEnded Mar. 31              |         | 2005 Quarter Ended |   |         | 2004 Quarter Ended | 
|                                                  |  |                                       | Dec. 31 |                    |   | Sep. 30 |                    |  | Jun. 30 |        | Mar. 31 |  |   | Dec. 31 |  |   | Sep. 30 |   | Jun. 30 |  
|                                                  |  | (in thousands, except per share data) |        
|Interest income                                   |  | $                                     | 51,455  |                    | $ | 49,873  |                    |  | $       | 45,682 |         |  | $ | 42,742  |  | $ | 39,512  |   |         | $ | 37,002 |   |  | $ | 34,972 |  | $ | 32,869 |  
|Interest expense                                  |  |                                       | 23,436  |                    |   | 21,177  |                    |  |         | 18,202 |         |  |   | 16,158  |  |   | 13,665  |   |         |   | 12,341 |   |  |   | 11,262 |  |   | 10,033 |  
|                                                  |  |                                       |         |                    |   |         |                    |  |         |        |         |  |   |         |  |   |         |   |         |   |        |   |  |   |        |  |   |        |  
|Net interest income                               |  |                                       | 28,019  |                    |   | 28,696  |                    |  |         | 27,480 |         |  |   | 26,584  |  |   | 25,847  |   |         |   | 24,661 |   |  |   | 23,710 |  |   | 22,836 |  
|Provision for loan losses                         |  |                                       | 900     |                    |   | 2,772   |                    |  |         |       |         |  |   | 917     |  |   | 1,834   |   |         |   | 1,833  |   |  |   | 2,750  |  |   | 2,750  |  
|Noninterest income                                |  |                                       | 3,908   |                    |   | 4,386   |                    |  |         | 4,473  |         |  |   | 3,954   |  |   | 8,128   |   |         |   | 5,923  |   |  |   | 4,280  |  |   | 4,304  |  
|Net cash settlements on CD swaps                  |  |                                       |        |                    |   | 22      |                    |  |         | 198    |         |  |   | 241     |  |   | 223     |   |         |   | 517    |   |  |   | 707    |  |   | 735    |  
|Change in fair value of CD swaps                  |  |                                       | 582     |                    |   | (1,583  | )                  |  |         | (2,549 | )       |  |   | 1,821   |  |   | (1,576  | ) |         |   | (279   | ) |  |   | 1,940  |  |   | (2,592 | )
|Gain (loss) on sale of investment securities, net |  |                                       |        |                    |   |        |                    |  |         |       |         |  |   |        |  |   | 127     |   |         |   | (201   | ) |  |   | 345    |  |   |       |  
|Noninterest expense                               |  |                                       | 17,786  |                    |   | 17,594  |                    |  |         | 17,797 |         |  |   | 17,524  |  |   | 16,740  |   |         |   | 18,164 |   |  |   | 16,310 |  |   | 18,416 |  
|                                                  |  |                                       |         |                    |   |         |                    |  |         |        |         |  |   |         |  |   |         |   |         |   |        |   |  |   |        |  |   |        |  
|Income before income taxes                        |  |                                       | 13,823  |                    |   | 11,155  |                    |  |         | 11,805 |         |  |   | 14,159  |  |   | 14,175  |   |         |   | 10,624 |   |  |   | 11,922 |  |   | 4,117  |  
|Income taxes                                      |  |                                       | 4,965   |                    |   | 4,137   |                    |  |         | 4,408  |         |  |   | 5,342   |  |   | 5,636   |   |         |   | 3,462  |   |  |   | 3,864  |  |   | 1,338  |  
|                                                  |  |                                       |         |                    |   |         |                    |  |         |        |         |  |   |         |  |   |         |   |         |   |        |   |  |   |        |  |   |        |  
|Net income                                        |  | $                                     | 8,858   |                    | $ | 7,018   |                    |  | $       | 7,397  |         |  | $ | 8,817   |  | $ | 8,539   |   |         | $ | 7,162  |   |  | $ | 8,058  |  | $ | 2,779  |  
|                                                  |  |                                       |         |                    |   |         |                    |  |         |        |         |  |   |         |  |   |         |   |         |   |        |   |  |   |        |  |   |        |  
|Earnings per share:                               |  |                                       |         |                    |   |         |                    |  |         |        |         |  |   |         |  |   |         |   |         |   |        |   |  |   |        |  |   |        |  
|Basic                                             |  | $                                     | 0.81    |                    | $ | 0.65    |                    |  | $       | 0.73   |         |  | $ | 0.92    |  | $ | 0.88    |   |         | $ | 0.75   |   |  | $ | 0.84   |  | $ | 0.19   |  
|Diluted                                           |  |                                       | 0.80    |                    |   | 0.63    |                    |  |         | 0.71   |         |  |   | 0.90    |  |   | 0.87    |   |         |   | 0.73   |   |  |   | 0.84   |  |   | 0.18   |  
|                                                  |  |                                       |         |                    |   |         |                    |  |         |        |         |  |   |         |  |   |         |   |         |   |        |   |  |   |        |  |   |        |  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under Management Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this
quarterly report on Form 10-Q constitute forward-looking statements. We have tried to identify these forward-looking statements by using words including may, 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 2006 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 effect on our profitability if interest rates fluctuate as well as the effect of our customers changing use of our deposit products; the possibility that our wholesale funding sources may prove insufficient to
replace deposits at maturity and support our growth; 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; the
effectiveness of our hedging transactions and their impact on our future results of operations; the risks associated with implementing our business strategy and managing our growth effectively; changes in general economic conditions, interest rates,
deposit flows, loan demand, including loan syndication opportunities, competition, legislation or regulatory and accounting principles, policies or guidelines, as well as 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 sections captioned Risk Factors in our 2005 Annual Report on Form 10-K. You should not place undue reliance on any forward-looking statements.



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Except as otherwise required by federal securities laws, 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 quarterly report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information contained in the
section of this quarterly report on Form 10-Q captioned Managements Discussion and Analysis of Financial Condition and Results of OperationsQuantitative and Qualitative Disclosure About Market Risks is incorporated herein by
reference.

Item 4. Controls and Procedures

We maintain a system of disclosure controls and procedures, as such term
is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosures.

We have 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 of March 31, 2006. Based upon their evaluation
and subject to the foregoing, the Chief Executive Officer and Chief Financial Officer concluded that such controls and procedures were effective as of the end of the period covered by this report, in all material respects, to ensure that required
information will be disclosed on a timely basis in our reports filed under the Exchange Act.

In designing and evaluating the disclosure
controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was
required to apply their judgment in evaluating the cost-benefit relationship of possible controls and procedures. We believe that our disclosure controls and procedures provide reasonable assurance.

There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2006, that have materially
affected, or are reasonably likely to materially affect our internal control over financial reporting.



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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

We are from time to time a party to litigation arising in the normal course
of business. As of the date of this Quarterly Report on Form 10-Q, management knows of no threatened or pending legal actions against us that are likely to have a material adverse effect on our business, financial condition or results of operations.

Item 1A. Risk Factors.

There have been no material changes in our risk factors from those disclosed in
our 2005 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

EXHIBIT INDEX



|              |  |                                                                                                                                                                                                                                          
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Exhibits                                                                                                                                                                                                                  
|3.1           |  | Second Amended and Restated Certificate of Incorporation of Taylor Capital Group, Inc. (incorporated by reference from Exhibit 3.1 of the Companys Current Report on Form 8-K filed
September 20, 2005).                                
|              | 
|3.2           |  | Form of Second Amended and Restated Bylaws of Taylor Capital Group, Inc. (incorporated by reference from Exhibit 3.4 of the Companys Quarterly Report on Form 10-Q for the quarter ended
June 30, 2005).                                
|              | 
|3.3           |  | Certificate of Elimination of 9% Noncumulative Perpetual Preferred Stock, Series A, of Registrant (incorporated by reference to Exhibit 3.2 of the Registration Statement on Form S-3 filed
July 25, 2005 (Registration No. 333-126864)).



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|              |  |                                                                                                                                                                                                                                                                                                                                                                              
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Exhibits                                                                                                                                                                                                                                                                                                                                                      
|4.1           |  | Form of certificate representing Taylor Capital Group, Inc. Common Stock (incorporated by reference from Exhibit 4.3 of the Amended Registration Statement on Form S-1 filed October 10, 2002
(Registration No. 333-89158)).                                                                                                                                                 
|              | 
|4.2           |  | Indenture between Taylor Capital Group, Inc. and LaSalle Bank National Association, as trustee (incorporated by reference from Exhibit 4.4 of the Amended Registration Statement on Form S-1 filed
October 10, 2002 (Registration No. 333-89158)).                                                                                                                           
|              | 
|4.3           |  | Form of Junior Subordinated Debenture due 2032 (incorporated by reference from Exhibit 4.5 of the Amended Registration Statement on Form S-1 filed October 10, 2002 (Registration No.
333-89158)).                                                                                                                                                                           
|              | 
|4.4           |  | Certificate of Trust of TAYC Capital Trust I (incorporated by reference from Exhibit 4.6 of the Amended Registration Statement on Form S-1 filed October 10, 2002 (Registration No.
333-89158)).                                                                                                                                                                             
|              | 
|4.5           |  | Amended and Restated Trust Agreement of TAYC Capital Trust I (incorporated by reference from Exhibit 4.8 of the Amended Registration Statement on Form S-1 filed October 10, 2002 (Registration
No. 333-89158)).                                                                                                                                                             
|              | 
|4.6           |  | Preferred Securities Guarantee Agreement (incorporated by reference from Exhibit 4.9 of the Amended Registration Statement on Form S-1 filed October 10, 2002 (Registration No.
333-89158)).                                                                                                                                                                                 
|              | 
|4.7           |  | Agreement as to Expenses and Liabilities by and between Taylor Capital Group, Inc. and TAYC Capital Trust I (incorporated by reference from Exhibit 4.10 of the Amended Registration Statement on
Form S-1 filed October 10, 2002 (Registration No. 333-89158)).                                                                                                             
|              | 
|4.8           |  | Certificate representing TAYC Capital Trust I Trust Preferred Security (incorporated by reference from Exhibit 4.11 of the Amended Registration Statement on Form S-1 filed October 10, 2002
(Registration No. 333-89158)).                                                                                                                                                  
|              | 
|4.9           |  | Certificate of Trust of TAYC Capital Trust II (incorporated by reference from Exhibit 4.12 of the Companys Quarterly Report on Form 10-Q for the quarter ending June 30,
2004).                                                                                                                                                                                             
|              | 
|4.10          |  | Amended and Restated Declaration of Trust by and among Wilmington Trust Company, as Delaware and Institutional Trustee, Taylor Capital Group, Inc., as Sponsor, Jeffrey W. Taylor, Bruce W. Taylor
and Robin Van Castle, as Administrators (incorporated by reference from Exhibit 4.13 of the Companys Quarterly Report on Form 10-Q for the quarter ending June 30, 2004).
|              | 
|4.11          |  | Indenture between Taylor Capital Group, Inc. and Wilmington Trust Company, as trustee (incorporated by reference from Exhibit 4.14 of the Companys Quarterly Report on Form 10-Q for the
quarter ending June 30, 2004).                                                                                                                                                     
|              | 
|4.12          |  | Guarantee Agreement by and between Taylor Capital Group, Inc. and Wilmington Trust Company (incorporated by reference from Exhibit 4.15 of the Companys Quarterly Report on Form 10-Q for
the quarter ending June 30, 2004).                                                                                                                                                
|              | 
|4.13          |  | Certificate representing Floating Rate Capital Securities of TAYC Capital Trust II (incorporated by reference from Exhibit 4.16 of the Companys Quarterly Report on Form 10-Q for the
quarter ending June 30, 2004).                                                                                                                                                        
|              | 
|4.14          |  | Certificate representing Floating Rate Common Securities of TAYC Capital Trust II (incorporated by reference from Exhibit 4.17 of the Companys Quarterly Report on Form 10-Q for the quarter
ending June 30, 2004).                                                                                                                                                         



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|              |  |                                                                                                                                                                                                            
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Exhibits                                                                                                                                                                                    
|4.15          |  | Floating Rate Junior Subordinated Deferrable Interest Debenture due 2034 (incorporated by reference from Exhibit 4.18 of the Companys Quarterly Report on Form 10-Q for the quarter ending
June 30, 2004).
|              | 
|4.16          |  | Form of Registration Rights Agreement (incorporated by reference to Exhibit 4.16 of the Registration Statement on Form S-3 filed August 5, 2005 (Registration No. 333-126864)).                            
|              | 
|31.1          |  | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Security Exchange Act of 1934.                                                                                               
|              | 
|31.2          |  | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Security Exchange Act of 1934.                                                                                               
|              | 
|32.1          |  | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                         



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SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                  |  |                                             
|----------------- |  | --------------------------------------------
|                  |  | TAYLOR CAPITAL GROUP, INC.                  
|                  | 
|Date: May 5, 2006 |  |                                             
|                  | 
|                  |  | /s/ DANIEL C. STEVENS                       
|                  |  | Daniel C. Stevens                           
|                  |  | Chief Financial Officer                     
|                  |  | (Principal Financial and Accounting Officer)
|                  | 
|                  |  | /s/ JEFFREY W. TAYLOR                       
|                  |  | Jeffrey W. Taylor                           
|                  |  | Chairman and Chief Executive Officer        
|                  |  | (Principal Executive Officer)               



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