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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q





QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended March 31, 2008

Commission File No. 0-50034





TAYLOR CAPITAL GROUP, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Delaware                                                       |  | 36-4108550                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)

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)





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 May 5, 2008, there were 10,922,687 shares of Common Stock, $0.01 par value, outstanding.









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TAYLOR CAPITAL GROUP, INC.

INDEX



|                              |  |                                                                                                                             |  |     
|----------------------------- |  | --------------------------------------------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                                                             |  | Page
|PART I. FINANCIAL INFORMATION |  |                                                                                                                            
|                              |  |                                                                                                                            
|Item 1.                       |  | Financial Statements                                                                                                        |  |     
|                              |  |                                                                                                                            
|                              |  | Consolidated Balance Sheets (unaudited) - March 31, 2008 and December 31, 2007                                              |  | 1   
|                              |  |                                                                                                                            
|                              |  | Consolidated Statements of Operations (unaudited) - For the three months ended March 31, 2008 and 2007                      |  | 2   
|                              |  |                                                                                                                            
|                              |  | Consolidated Statements of Changes in Stockholders Equity (unaudited) - For the three months ended March 31, 2008 and 2007 |  | 3   
|                              |  |                                                                                                                            
|                              |  | Consolidated Statements of Cash Flows (unaudited) - For the three months ended March 31, 2008 and 2007                      |  | 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                                                                  |  | 43  
|                              |  |                                                                                                                            
|Item 4.                       |  | Controls and Procedures                                                                                                     |  | 44  
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                            
|                              |  |                                                                                                                            
|Item 1.                       |  | Legal Proceedings                                                                                                           |  | 45  
|                              |  |                                                                                                                            
|Item 1A.                      |  | Risk Factors                                                                                                                |  | 45  
|                              |  |                                                                                                                            
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                 |  | 45  
|                              |  |                                                                                                                            
|Item 3.                       |  | Defaults Upon Senior Securities                                                                                             |  | 45  
|                              |  |                                                                                                                            
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                                         |  | 45  
|                              |  |                                                                                                                            
|Item 5.                       |  | Other Information                                                                                                           |  | 45  
|                              |  |                                                                                                                            
|Item 6.                       |  | Exhibits                                                                                                                    |  | 45  
|                              |  |                                                                                                                            
|                              |  | Signatures                                                                                                                  |  | 48  



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TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS (unaudited)

(dollars in thousands, except per share data)



|                                                                                                                                                                                                                                                              |  |               |           |   |                  |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                                                                                                                                              |  | March 31,2008 |           |   | December 31,2007 |  
|ASSETS                                                                                                                                                                                                                                                        |  |               |           |   |                  |   |           |  
|Cash and cash equivalents:                                                                                                                                                                                                                                    |  |               |           |   |                  |   |           |  
|Cash and due from banks                                                                                                                                                                                                                                       |  | $             | 77,175    |   |                  | $ | 74,353    |  
|Federal funds sold                                                                                                                                                                                                                                            |  |               | 36,700    |   |                  |   | 4,550     |  
|Short-term investments                                                                                                                                                                                                                                        |  |               | 175       |   |                  |   | 4,658     |  
|                                                                                                                                                                                                                                                              |  |               |           |   |                  |   |           |  
|Total cash and cash equivalents                                                                                                                                                                                                                               |  |               | 114,050   |   |                  |   | 83,561    |  
|Investment securities:                                                                                                                                                                                                                                        |  |               |           |   |                  |   |           |  
|Available-for-sale, at fair value                                                                                                                                                                                                                             |  |               | 858,835   |   |                  |   | 892,346   |  
|Held-to-maturity, at amortized cost (fair value of $25 at March 31, 2008 and December 31, 2007)                                                                                                                                                               |  |               | 25        |   |                  |   | 25        |  
|Loans, net of allowance for loan losses of $64,193 and $54,681 at March 31, 2008 and December 31, 2007, respectively                                                                                                                                          |  |               | 2,448,000 |   |                  |   | 2,478,652 |  
|Premises, leasehold improvements and equipment, net                                                                                                                                                                                                           |  |               | 16,057    |   |                  |   | 16,109    |  
|Investments in Federal Home Loan Bank and Federal Reserve Bank stock, at cost                                                                                                                                                                                 |  |               | 15,310    |   |                  |   | 15,310    |  
|Other real estate and repossessed assets, net                                                                                                                                                                                                                 |  |               | 5,073     |   |                  |   | 2,606     |  
|Other assets                                                                                                                                                                                                                                                  |  |               | 63,130    |   |                  |   | 67,854    |  
|                                                                                                                                                                                                                                                              |  |               |           |   |                  |   |           |  
|Total assets                                                                                                                                                                                                                                                  |  | $             | 3,520,480 |   |                  | $ | 3,556,463 |  
|                                                                                                                                                                                                                                                              |  |               |           |   |                  |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                                                          |  |               |           |   |                  |   |           |  
|Deposits:                                                                                                                                                                                                                                                     |  |               |           |   |                  |   |           |  
|Noninterest-bearing                                                                                                                                                                                                                                           |  | $             | 400,244   |   |                  | $ | 471,770   |  
|Interest-bearing                                                                                                                                                                                                                                              |  |               | 2,305,274 |   |                  |   | 2,108,422 |  
|                                                                                                                                                                                                                                                              |  |               |           |   |                  |   |           |  
|Total deposits                                                                                                                                                                                                                                                |  |               | 2,705,518 |   |                  |   | 2,580,192 |  
|Other borrowings                                                                                                                                                                                                                                              |  |               | 324,501   |   |                  |   | 389,054   |  
|Accrued interest, taxes and other liabilities                                                                                                                                                                                                                 |  |               | 42,769    |   |                  |   | 41,354    |  
|FHLB advances                                                                                                                                                                                                                                                 |  |               | 105,000   |   |                  |   | 205,000   |  
|Junior subordinated debentures                                                                                                                                                                                                                                |  |               | 86,607    |   |                  |   | 86,607    |  
|                                                                                                                                                                                                                                                              |  |               |           |   |                  |   |           |  
|Total liabilities                                                                                                                                                                                                                                             |  |               | 3,264,395 |   |                  |   | 3,302,207 |  
|                                                                                                                                                                                                                                                              |  |               |           |   |                  |   |           |  
|Stockholders equity:                                                                                                                                                                                                                                         |  |               |           |   |                  |   |           |  
|Preferred stock, $.01 par value, 5,000,000 shares authorized, no shares issued and outstanding                                                                                                                                                                |  |               |          |   |                  |   |          |  
|Common stock, $.01 par value; 18,000,000 shares authorized; 11,753,003 and 11,504,662 shares issued at March 31, 2008 and
December 31, 2007, respectively; 10,800,335 and 10,551,994 shares outstanding at March 31, 2008 and December 31, 2007, respectively |  |               | 117       |   |                  |   | 115       |  
|Surplus                                                                                                                                                                                                                                                       |  |               | 197,718   |   |                  |   | 197,214   |  
|Retained earnings                                                                                                                                                                                                                                             |  |               | 70,224    |   |                  |   | 75,145    |  
|Accumulated other comprehensive income, net                                                                                                                                                                                                                   |  |               | 12,662    |   |                  |   | 6,418     |  
|Treasury stock, at cost, 952,668 shares at March 31, 2008 and December 31, 2007                                                                                                                                                                               |  |               | (24,636   | ) |                  |   | (24,636   | )
|                                                                                                                                                                                                                                                              |  |               |           |   |                  |   |           |  
|Total stockholders equity                                                                                                                                                                                                                                    |  |               | 256,085   |   |                  |   | 254,256   |  
|                                                                                                                                                                                                                                                              |  |               |           |   |                  |   |           |  
|Total liabilities and stockholders equity                                                                                                                                                                                                                    |  | $             | 3,520,480 |   |                  | $ | 3,556,463 |  
|                                                                                                                                                                                                                                                              |  |               |           |   |                  |   |           |  

See accompanying notes to consolidated financial statements (unaudited)



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TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(dollars in thousands, except per share data)



|                                                    |  |                                     |        |   |      |   |       
|--------------------------------------------------- |  | ----------------------------------- | ------ | - | ---- | - | ------
|                                                    |  | For the Three MonthsEnded
March 31,
|                                                    |  | 2008                                |        |   | 2007
|Interest income:                                    |  |                                     |        |   |      |   |       
|Interest and fees on loans                          |  | $                                   | 41,229 |   |      | $ | 48,180
|Interest and dividends on investment securities:    |  |                                     |        |   |      |   |       
|Taxable                                             |  |                                     | 9,401  |   |      |   | 5,775 
|Tax-exempt                                          |  |                                     | 1,482  |   |      |   | 1,530 
|Interest on cash equivalents                        |  |                                     | 542    |   |      |   | 521   
|                                                    |  |                                     |        |   |      |   |       
|Total interest income                               |  |                                     | 52,654 |   |      |   | 56,006
|                                                    |  |                                     |        |   |      |   |       
|Interest expense:                                   |  |                                     |        |   |      |   |       
|Deposits                                            |  |                                     | 21,973 |   |      |   | 23,724
|Other borrowings                                    |  |                                     | 2,735  |   |      |   | 2,799 
|FHLB advances                                       |  |                                     | 1,574  |   |      |   | 1,064 
|Junior subordinated debentures                      |  |                                     | 1,898  |   |      |   | 1,964 
|                                                    |  |                                     |        |   |      |   |       
|Total interest expense                              |  |                                     | 28,180 |   |      |   | 29,551
|                                                    |  |                                     |        |   |      |   |       
|Net interest income                                 |  |                                     | 24,474 |   |      |   | 26,455
|Provision for loan losses                           |  |                                     | 11,750 |   |      |   | 3,600 
|                                                    |  |                                     |        |   |      |   |       
|Net interest income after provision for loan losses |  |                                     | 12,724 |   |      |   | 22,855
|                                                    |  |                                     |        |   |      |   |       
|Noninterest income:                                 |  |                                     |        |   |      |   |       
|Service charges                                     |  |                                     | 2,166  |   |      |   | 1,810 
|Trust and investment management fees                |  |                                     | 807    |   |      |   | 952   
|Loan syndication fees                               |  |                                     | 116    |   |      |   |      
|Other derivative income                             |  |                                     | 887    |   |      |   | 24    
|Other noninterest income                            |  |                                     | 126    |   |      |   | 476   
|                                                    |  |                                     |        |   |      |   |       
|Total noninterest income                            |  |                                     | 4,102  |   |      |   | 3,262 
|                                                    |  |                                     |        |   |      |   |       
|Noninterest expense:                                |  |                                     |        |   |      |   |       
|Salaries and employee benefits                      |  |                                     | 11,703 |   |      |   | 9,614 
|Occupancy of premises                               |  |                                     | 1,947  |   |      |   | 1,886 
|Furniture and equipment                             |  |                                     | 818    |   |      |   | 874   
|Non-performing asset expense                        |  |                                     | 1,008  |   |      |   | 291   
|Early extinguishment of debt                        |  |                                     | 810    |   |      |   |      
|Other professional services                         |  |                                     | 646    |   |      |   | 681   
|Legal fees, net                                     |  |                                     | 585    |   |      |   | 807   
|FDIC assessment                                     |  |                                     | 526    |   |      |   | 81    
|Other noninterest expense                           |  |                                     | 3,773  |   |      |   | 3,828 
|                                                    |  |                                     |        |   |      |   |       
|Total noninterest expense                           |  |                                     | 21,816 |   |      |   | 18,062
|                                                    |  |                                     |        |   |      |   |       
|Income (loss) before income taxes                   |  |                                     | (4,990 | ) |      |   | 8,055 
|Income tax expense (benefit)                        |  |                                     | (1,150 | ) |      |   | 2,733 
|                                                    |  |                                     |        |   |      |   |       
|Net income (loss)                                   |  | $                                   | (3,840 | ) |      | $ | 5,322 
|                                                    |  |                                     |        |   |      |   |       
|Basic earnings (loss) per common share              |  | $                                   | (0.37  | ) |      | $ | 0.48  
|Diluted earnings (loss) per common share            |  |                                     | (0.37  | ) |      |   | 0.48  

See accompanying notes to consolidated financial statements (unaudited)



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TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (unaudited)

(dollars in thousands, except per share data)



|                                                                                                            |  |                |   |             |   |         |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |         |  
|----------------------------------------------------------------------------------------------------------- |  | -------------- | - | ----------- | - | ------- |  | - | ---------------- | - |  | ----------------------------------- | ------ | - | ------------- | - | ------ | ----- |  | - | ------- | - |  | - | ------- | -
|                                                                                                            |  | PreferredStock |   | CommonStock |   | Surplus |  |   | RetainedEarnings |   |  | AccumulatedOtherComprehensiveIncome |        |   | TreasuryStock |   |        | Total | 
|Balance at December 31, 2007                                                                                |  | $              |  |             | $ | 115     |  | $ | 197,214          |   |  | $                                   | 75,145 |   |               | $ | 6,418  |       |  | $ | (24,636 | ) |  | $ | 254,256 |  
|Amortization of stock based compensation awards                                                             |  |                |  |             |   |        |  |   | 513              |   |  |                                     |       |   |               |   |       |       |  |   |        |   |  |   | 513     |  
|Issuance of stock grants                                                                                    |  |                |  |             |   | 2       |  |   | (2               | ) |  |                                     |       |   |               |   |       |       |  |   |        |   |  |   |        |  
|Exercise of stock options                                                                                   |  |                |  |             |   |        |  |   | 30               |   |  |                                     |       |   |               |   |       |       |  |   |        |   |  |   | 30      |  
|Tax benefit on stock options exercised and stock awards                                                     |  |                |  |             |   |        |  |   | (37              | ) |  |                                     |       |   |               |   |       |       |  |   |        |   |  |   | (37     | )
|Comprehensive income:                                                                                       |  |                |   |             |   |         |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |         |  
|Net loss                                                                                                    |  |                |  |             |   |        |  |   |                 |   |  |                                     | (3,840 | ) |               |   |       |       |  |   |        |   |  |   | (3,840  | )
|Change in unrealized gains on available-for-sale investment securities, net of income taxes                 |  |                |  |             |   |        |  |   |                 |   |  |                                     |       |   |               |   | 5,533  |       |  |   |        |   |  |   | 5,533   |  
|Change in unrealized gains and losses from cash flow hedging instruments, net of income taxes               |  |                |  |             |   |        |  |   |                 |   |  |                                     |       |   |               |   | 1,046  |       |  |   |        |   |  |   | 1,046   |  
|Changes in deferred gains and losses from termination of cash flow hedging instruments, net of income taxes |  |                |  |             |   |        |  |   |                 |   |  |                                     |       |   |               |   | (335   | )     |  |   |        |   |  |   | (335    | )
|                                                                                                            |  |                |   |             |   |         |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |         |  
|Total comprehensive income                                                                                  |  |                |   |             |   |         |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   | 2,404   |  
|                                                                                                            |  |                |   |             |   |         |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |         |  
|Common stock dividends $0.10 per share                                                                     |  |                |  |             |   |        |  |   |                 |   |  |                                     | (1,081 | ) |               |   |       |       |  |   |        |   |  |   | (1,081  | )
|                                                                                                            |  |                |   |             |   |         |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |         |  
|Balance at March 31, 2008                                                                                   |  | $              |  |             | $ | 117     |  | $ | 197,718          |   |  | $                                   | 70,224 |   |               | $ | 12,662 |       |  | $ | (24,636 | ) |  | $ | 256,085 |  
|                                                                                                            |  |                |   |             |   |         |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |         |  
|Balance at December 31, 2006                                                                                |  | $              |  |             | $ | 115     |  | $ | 194,687          |   |  | $                                   | 89,045 |   |               | $ | (5,598 | )     |  | $ | (7,057  | ) |  | $ | 271,192 |  
|Amortization of stock based compensation awards                                                             |  |                |  |             |   |        |  |   | 339              |   |  |                                     |       |   |               |   |       |       |  |   |        |   |  |   | 339     |  
|Exercise of stock options                                                                                   |  |                |  |             |   |        |  |   | 146              |   |  |                                     |       |   |               |   |       |       |  |   |        |   |  |   | 146     |  
|Tax benefit on stock options exercised and stock awards                                                     |  |                |  |             |   |        |  |   | 75               |   |  |                                     |       |   |               |   |       |       |  |   |        |   |  |   | 75      |  
|Comprehensive income:                                                                                       |  |                |   |             |   |         |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |         |  
|Net income                                                                                                  |  |                |  |             |   |        |  |   |                 |   |  |                                     | 5,322  |   |               |   |       |       |  |   |        |   |  |   | 5,322   |  
|Change in unrealized loss on available-for-sale investment securities, net of income taxes                  |  |                |  |             |   |        |  |   |                 |   |  |                                     |       |   |               |   | 1,784  |       |  |   |        |   |  |   | 1,784   |  
|Change in unrealized gains and losses from cash flow hedging instruments, net of income taxes               |  |                |  |             |   |        |  |   |                 |   |  |                                     |       |   |               |   | 337    |       |  |   |        |   |  |   | 337     |  
|Changes in deferred gains and losses from termination of cash flow hedging instruments, net of income taxes |  |                |  |             |   |        |  |   |                 |   |  |                                     |       |   |               |   | 136    |       |  |   |        |   |  |   | 136     |  
|                                                                                                            |  |                |   |             |   |         |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |         |  
|Total comprehensive income                                                                                  |  |                |   |             |   |         |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   | 7,579   |  
|                                                                                                            |  |                |   |             |   |         |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |         |  
|Common stock dividends $0.10 per share                                                                     |  |                |  |             |   |        |  |   |                 |   |  |                                     | (1,113 | ) |               |   |       |       |  |   |        |   |  |   | (1,113  | )
|                                                                                                            |  |                |   |             |   |         |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |         |  
|Balance at March 31, 2007                                                                                   |  | $              |  |             | $ | 115     |  | $ | 195,247          |   |  | $                                   | 93,254 |   |               | $ | (3,341 | )     |  | $ | (7,057  | ) |  | $ | 278,218 |  
|                                                                                                            |  |                |   |             |   |         |  |   |                  |   |  |                                     |        |   |               |   |        |       |  |   |         |   |  |   |         |  

See accompanying notes to consolidated financial statements (unaudited)



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 EndedMarch 31, |         
|                                                                                         |  | 2008                                |          |   | 2007 |  
|Cash flows from operating activities:                                                    |  |                                     |          |   |      |   |          |  
|Net income (loss)                                                                        |  | $                                   | (3,840   | ) |      | $ | 5,322    |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                                     |          |   |      |   |          |  
|Other derivative income                                                                  |  |                                     | (887     | ) |      |   | (24      | )
|Amortization of premiums and discounts, net                                              |  |                                     | (233     | ) |      |   | 25       |  
|Deferred loan fee amortization                                                           |  |                                     | (537     | ) |      |   | (1,009   | )
|Provision for loan losses                                                                |  |                                     | 11,750   |   |      |   | 3,600    |  
|Depreciation and amortization                                                            |  |                                     | 850      |   |      |   | 842      |  
|Deferred income taxes                                                                    |  |                                     | (3,619   | ) |      |   | (636     | )
|Losses on other real estate                                                              |  |                                     | 807      |   |      |   | 14       |  
|Tax benefit on stock options exercised or stock awards                                   |  |                                     | (37      | ) |      |   | 75       |  
|Excess tax benefit on stock options exercised and stock awards                           |  |                                     | 37       |   |      |   | (47      | )
|Cash received on termination of derivative instruments                                   |  |                                     | 3,934    |   |      |   |         |  
|Other, net                                                                               |  |                                     | 68       |   |      |   | 894      |  
|Changes in other assets and liabilities:                                                 |  |                                     |          |   |      |   |          |  
|Accrued interest receivable                                                              |  |                                     | 1,204    |   |      |   | (768     | )
|Other assets                                                                             |  |                                     | 1,644    |   |      |   | (697     | )
|Accrued interest, taxes and other liabilities                                            |  |                                     | 1,228    |   |      |   | 984      |  
|                                                                                         |  |                                     |          |   |      |   |          |  
|Net cash provided by operating activities                                                |  |                                     | 12,369   |   |      |   | 8,575    |  
|                                                                                         |  |                                     |          |   |      |   |          |  
|Cash flows from investing activities:                                                    |  |                                     |          |   |      |   |          |  
|Proceeds from principal payments and maturities of available-for-sale securities         |  |                                     | 42,890   |   |      |   | 43,867   |  
|Net (increase) decrease in loans                                                         |  |                                     | 16,165   |   |      |   | (2,600   | )
|Net additions to premises, leasehold improvements and equipment                          |  |                                     | (798     | ) |      |   | (302     | )
|Net proceeds from sales of other real estate                                             |  |                                     |         |   |      |   | 47       |  
|                                                                                         |  |                                     |          |   |      |   |          |  
|Net cash provided by investing activities                                                |  |                                     | 58,257   |   |      |   | 41,012   |  
|                                                                                         |  |                                     |          |   |      |   |          |  
|Cash flows from financing activities:                                                    |  |                                     |          |   |      |   |          |  
|Net increase (decrease) in deposits                                                      |  |                                     | 125,478  |   |      |   | (147,925 | )
|Net increase (decrease) in other borrowings                                              |  |                                     | (64,553  | ) |      |   | 13,515   |  
|Repayments of notes payable and FHLB advances                                            |  |                                     | (150,000 | ) |      |   |         |  
|Proceeds from notes payable and FHLB advances                                            |  |                                     | 50,000   |   |      |   |         |  
|Proceeds from exercise of employee stock options                                         |  |                                     | 30       |   |      |   | 146      |  
|Excess tax benefit on stock options exercised and stock awards                           |  |                                     | (37      | ) |      |   | 47       |  
|Dividends paid                                                                           |  |                                     | (1,055   | ) |      |   | (1,113   | )
|                                                                                         |  |                                     |          |   |      |   |          |  
|Net cash used in financing activities                                                    |  |                                     | (40,137  | ) |      |   | (135,330 | )
|                                                                                         |  |                                     |          |   |      |   |          |  
|Net increase (decrease) in cash and cash equivalents                                     |  |                                     | 30,489   |   |      |   | (85,743  | )
|Cash and cash equivalents, beginning of period                                           |  |                                     | 83,561   |   |      |   | 134,920  |  
|                                                                                         |  |                                     |          |   |      |   |          |  
|Cash and cash equivalents, end of period                                                 |  | $                                   | 114,050  |   |      | $ | 49,177   |  
|                                                                                         |  |                                     |          |   |      |   |          |  

Consolidated Statements of Cash Flows continued on the next page

See accompanying notes to consolidated financial statements (unaudited)



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TAYLOR CAPITAL GROUP, INC.

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

(dollars in
thousands)



|                                                                              |  |                                     |        |      |   |       
|----------------------------------------------------------------------------- |  | ----------------------------------- | ------ | ---- | - | ------
|                                                                              |  | For the Three Months EndedMarch 31,
|                                                                              |  | 2008                                |        | 2007
|Supplemental disclosure of cash flow information:                             |  |                                     |        |      |   |       
|Cash paid during the period for:                                              |  |                                     |        |      |   |       
|Interest                                                                      |  | $                                   | 27,739 |      | $ | 28,968
|Income taxes                                                                  |  |                                     | 295    |      |   | 1,350 
|Supplemental disclosures of noncash investing and financing activities:       |  |                                     |        |      |   |       
|Change in fair value of available-for-sale investments securities, net of tax |  | $                                   | 5,533  |      | $ | 1,784 
|Loans transferred to other real estate                                        |  |                                     | 3,274  |      |   |      

See accompanying notes to consolidated financial statements (unaudited)



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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, 2008 and for the three month periods ended March 31, 2008 and 2007. 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 statement of operations data for the three month period ended
March 31, 2008 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, 2008 and December 31, 2007
were as follows:



|                                            |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|------------------------------------------- |  | -------------- | ------- | -------------------- | - | --------------------- |  | - | ------------------- | - |  | - | -------
|                                            |  | March 31, 2008
|                                            |  | AmortizedCost  |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFair Value
|                                            |  | (in thousands)
|Available-for-sale:                         |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|U.S. government sponsored agency securities |  | $              | 84,968  |                      | $ | 1,463                 |  | $ |                    |   |  | $ | 86,431 
|Collateralized mortgage obligations         |  |                | 164,380 |                      |   | 1,515                 |  |   | (883                | ) |  |   | 165,012
|Mortgage-backed securities                  |  |                | 455,687 |                      |   | 9,971                 |  |   | (1,488              | ) |  |   | 464,170
|State and municipal obligations             |  |                | 141,284 |                      |   | 2,126                 |  |   | (188                | ) |  |   | 143,222
|                                            |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|Total available-for-sale                    |  |                | 846,319 |                      |   | 15,075                |  |   | (2,559              | ) |  |   | 858,835
|                                            |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|Held-to-maturity:                           |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|Other debt securities                       |  |                | 25      |                      |   |                      |  |   |                    |   |  |   | 25     
|                                            |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|Total held-to-maturity                      |  |                | 25      |                      |   |                      |  |   |                    |   |  |   | 25     
|                                            |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|Total                                       |  | $              | 846,344 |                      | $ | 15,075                |  | $ | (2,559              | ) |  | $ | 858,860
|                                            |  |                |         |                      |   |                       |  |   |                     |   |  |   |        



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|                                            |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|------------------------------------------- |  | ----------------- | ------- | -------------------- | - | --------------------- |  | - | ------------------- | - |  | - | -------
|                                            |  | December 31, 2007
|                                            |  | AmortizedCost     |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFair Value
|                                            |  | (in thousands)   
|Available-for-sale:                         |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|U.S. government sponsored agency securities |  | $                 | 105,720 |                      | $ | 629                   |  | $ | (44                 | ) |  | $ | 106,305
|Collateralized mortgage obligations         |  |                   | 167,509 |                      |   | 691                   |  |   | (2,623              | ) |  |   | 165,577
|Mortgage-backed securities                  |  |                   | 472,477 |                      |   | 5,655                 |  |   | (2,008              | ) |  |   | 476,124
|State and municipal obligations             |  |                   | 143,271 |                      |   | 1,304                 |  |   | (235                | ) |  |   | 144,340
|                                            |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Total available-for-sale                    |  |                   | 888,977 |                      |   | 8,279                 |  |   | (4,910              | ) |  |   | 892,346
|                                            |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Held-to-maturity:                           |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Other debt securities                       |  |                   | 25      |                      |   |                      |  |   |                    |   |  |   | 25     
|                                            |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Total held-to-maturity                      |  |                   | 25      |                      |   |                      |  |   |                    |   |  |   | 25     
|                                            |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Total                                       |  | $                 | 889,002 |                      | $ | 8,279                 |  | $ | (4,910              | ) |  | $ | 892,371
|                                            |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        

3. Loans:

Loans classified by type at March 31, 2008 and December 31, 2007 were as follows:



|                                      |  |                |           |   |                  |   |            |  
|------------------------------------- |  | -------------- | --------- | - | ---------------- | - | ---------- | -
|                                      |  | March 31,2008  |           |   | December 31,2007 |  
|                                      |  | (in thousands) |          
|Commercial and industrial             |  | $              | 879,322   |   |                  | $ | 850,196    |  
|Commercial real estate secured        |  |                | 857,394   |   |                  |   | 839,629    |  
|Real estate-construction              |  |                | 610,164   |   |                  |   | 671,678    |  
|Residential real estate mortgages     |  |                | 58,693    |   |                  |   | 60,195     |  
|Home equity loans and lines of credit |  |                | 94,546    |   |                  |   | 99,696     |  
|Consumer                              |  |                | 10,196    |   |                  |   | 10,551     |  
|Other loans                           |  |                | 1,906     |   |                  |   | 1,421      |  
|                                      |  |                |           |   |                  |   |            |  
|Gross loans                           |  |                | 2,512,221 |   |                  |   | 2 ,533,366 |  
|Less: Unearned discount               |  |                | (28       | ) |                  |   | (33        | )
|                                      |  |                |           |   |                  |   |            |  
|Total loans                           |  |                | 2,512,193 |   |                  |   | 2,533,333  |  
|Less: Allowance for loan losses       |  |                | (64,193   | ) |                  |   | (54,681    | )
|                                      |  |                |           |   |                  |   |            |  
|Loans, net                            |  | $              | 2,448,000 |   |                  | $ | 2,478,652  |  
|                                      |  |                |           |   |                  |   |            |  

Information about our nonaccrual and impaired loans and the related allowance for loan losses for
impaired loans is as follows:



|                                                    |  |                |         |                  |   |       
|--------------------------------------------------- |  | -------------- | ------- | ---------------- | - | ------
|                                                    |  | March 31,2008  |         | December 31,2007
|                                                    |  | (in thousands)
|Nonaccrual loans                                    |  | $              | 95,239  |                  | $ | 71,412
|Recorded balance of impaired loans                  |  |                | 128,147 |                  |   | 90,972
|Allowance for loan losses related to impaired loans |  |                | 16,581  |                  |   | 9,375 



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4. Interest-Bearing Deposits:

Interest-bearing deposits at March 31, 2008 and December 31, 2007 were as follows:



|                                              |  |                |           |                  |   |          
|--------------------------------------------- |  | -------------- | --------- | ---------------- | - | ---------
|                                              |  | March 31,2008  |           | December 31,2007
|                                              |  | (in thousands)
|NOW accounts                                  |  | $              | 68,624    |                  | $ | 76,572   
|Savings accounts                              |  |                | 48,126    |                  |   | 49,386   
|Money market deposits                         |  |                | 742,825   |                  |   | 763,336  
|Time deposits:                                |  |                |           |                  |   |          
|Certificates of deposit of less than $100,000 |  |                | 251,207   |                  |   | 229,474  
|Certificates of deposit of $100,000 or more   |  |                | 362,968   |                  |   | 313,969  
|Out-of-local-market certificates of deposit   |  |                | 158,593   |                  |   | 117,159  
|Brokered certificates of deposit              |  |                | 597,839   |                  |   | 505,631  
|Public time deposits                          |  |                | 75,092    |                  |   | 52,895   
|                                              |  |                |           |                  |   |          
|Total time deposits                           |  |                | 1,445,699 |                  |   | 1,219,128
|                                              |  |                |           |                  |   |          
|Total                                         |  | $              | 2,305,274 |                  | $ | 2,108,422
|                                              |  |                |           |                  |   |          

Brokered CDs are carried net of the related broker placement fees and fair value adjustments at
the date those brokered CDs were no longer accounted for as fair value hedges. The broker placement fees and fair value adjustment are amortized to the maturity date of the related brokered CDs. The amortization is included in deposit interest
expense. During the first quarter of 2008, the Company called $70 million of brokered CDs before their stated maturity that were at rates higher than current market rates,. These brokered CDs were replaced with other CDs at lower interest rates. In
connection with these early redemptions, the Company recorded an $810,000 expense to write-off the unamortized broker placement fees and fair value adjustments on these CDs. The expense is reported as early extinguishment of debt and included in
noninterest expense on the statement of operations. The composition of brokered CDs at March 31, 2008 and December 31, 2007 was as follows:



|                                  |  |                |         |   |                  |   |         |  
|--------------------------------- |  | -------------- | ------- | - | ---------------- | - | ------- | -
|                                  |  | March 31,2008  |         |   | December 31,2007 |  
|                                  |  | (in thousands) |        
|Par value of brokered CDs         |  | $              | 601,921 |   |                  | $ | 509,561 |  
|Unamortized broker placement fees |  |                | (2,495  | ) |                  |   | (1,733  | )
|Fair value adjustment             |  |                | (1,587  | ) |                  |   | (2,197  | )
|                                  |  |                |         |   |                  |   |         |  
|Total                             |  | $              | 597,839 |   |                  | $ | 505,631 |  
|                                  |  |                |         |   |                  |   |         |  



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##### Table of Contents

5. Other Borrowings:

Other borrowings at March 31, 2008 and December 31, 2007 consisted of the following:



|                                                |  |                        |         |                     |                   |   |                |   |                     |  |      |  
|----------------------------------------------- |  | ---------------------- | ------- | ------------------- | ----------------- | - | -------------- | - | ------------------- |  | ---- | -
|                                                |  | March 31, 2008         |         |                     | December 31, 2007 |  
|                                                |  | AmountBorrowed         |         | WeightedAverageRate |                   |   | AmountBorrowed |   | WeightedAverageRate | 
|                                                |  | (dollars in thousands) |        
|Securities sold under agreements to repurchase: |  |                        |         |                     |                   |   |                |   |                     |  |      |  
|Overnight                                       |  | $                      | 108,656 |                     | 0.99              | % |                | $ | 125,461             |  | 2.67 | %
|Term                                            |  |                        | 200,000 |                     | 4.05              |   |                |   | 200,000             |  | 4.05 |  
|Federal funds purchased                         |  |                        | 15,720  |                     | 2.00              |   |                |   | 23,468              |  | 4.00 |  
|U.S. Treasury tax and loan note option          |  |                        | 125     |                     | 1.87              |   |                |   | 40,125              |  | 4.25 |  
|                                                |  |                        |         |                     |                   |   |                |   |                     |  |      |  
|Total                                           |  | $                      | 324,501 |                     | 2.93              | % |                | $ | 389,054             |  | 3.62 | %
|                                                |  |                        |         |                     |                   |   |                |   |                     |  |      |  

6. FHLB Advances:

FHLB advances at March 31, 2008 and December 31, 2007 were $105.0 million and $205.0 million, respectively. An advance in the amount of $100.0 million matured in January 2008 and was not renewed. At
March 31, 2008 and December 31, 2007, the Company had additional borrowing capacity at the FHLB of $176.2 million and $87.6 million, respectively.

7. Other Comprehensive Income:

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



|                                                                                     |  |                                          |        |   |                                          |   |        |           |  |   |                 |   |           |   |       |           |   |        |   |  |   |      
|------------------------------------------------------------------------------------ |  | ---------------------------------------- | ------ | - | ---------------------------------------- | - | ------ | --------- |  | - | --------------- | - | --------- | - | ----- | --------- | - | ------ | - |  | - | -----
|                                                                                     |  | For the Three Months EndedMarch 31, 2008 |        |   | For the Three Months EndedMarch 31, 2007
|                                                                                     |  | BeforeTaxAmount                          |        |   | TaxEffect                                |   |        | Net ofTax |  |   | BeforeTaxAmount |   | TaxEffect |   |       | Net ofTax
|                                                                                     |  | (in thousands)                          
|Change in unrealized gain on available-for-sale securities                           |  | $                                        | 9,146  |   |                                          | $ | (3,613 | )         |  | $ | 5,533           |   |           | $ | 2,930 |           | $ | (1,146 | ) |  | $ | 1,784
|Change in net unrealized gain from cash flow hedging instruments                     |  |                                          | 1,724  |   |                                          |   | (678   | )         |  |   | 1,046           |   |           |   | 548   |           |   | (211   | ) |  |   | 337  
|Change in net deferred gain/(loss) from termination of cash flow hedging instruments |  |                                          | (528   | ) |                                          |   | 193    |           |  |   | (335            | ) |           |   | 210   |           |   | (74    | ) |  |   | 136  
|                                                                                     |  |                                          |        |   |                                          |   |        |           |  |   |                 |   |           |   |       |           |   |        |   |  |   |      
|Other comprehensive income/(loss)                                                    |  | $                                        | 10,342 |   |                                          | $ | (4,098 | )         |  | $ | 6,244           |   |           | $ | 3,688 |           | $ | (1,431 | ) |  | $ | 2,257
|                                                                                     |  |                                          |        |   |                                          |   |        |           |  |   |                 |   |           |   |       |           |   |        |   |  |   |      



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##### Table of Contents

8. Earnings Per Share:

The following table sets forth the computation of basic and diluted earnings (loss) per common share for the periods indicated. Due to the net loss for the three month periods ended March 31, 2008, all 753,664
stock options outstanding were considered antidilutive. For the three month period ended March 31, 2007, stock options outstanding to purchase 196,166 common shares were not included in the computation of diluted earnings per share because the
effect would have been antidilutive.



|                                                   |  |                                                  |            |   |      |   |           
|-------------------------------------------------- |  | ------------------------------------------------ | ---------- | - | ---- | - | ----------
|                                                   |  | For the Three MonthsEnded
March 31              
|                                                   |  | 2008                                             |            |   | 2007
|                                                   |  | (dollars in thousands, except per share amounts)
|Net income (loss)                                  |  | $                                                | (3,840     | ) |      | $ | 5,322     
|                                                   |  |                                                  |            |   |      |   |           
|Weighted average common shares outstanding         |  |                                                  | 10,438,634 |   |      |   | 11,012,124
|Dilutive effect of common stock equivalents        |  |                                                  |           |   |      |   | 150,645   
|                                                   |  |                                                  |            |   |      |   |           
|Diluted weighted average common shares outstanding |  |                                                  | 10,438,634 |   |      |   | 11,162,769
|                                                   |  |                                                  |            |   |      |   |           
|Basic earnings (loss) per common share             |  | $                                                | (0.37      | ) |      | $ | 0.48      
|Diluted earnings (loss) per common share           |  |                                                  | (0.37      | ) |      |   | 0.48      
|                                                   |  |                                                  |            |   |      |   |           

9. Stock-Based Compensation:

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.

Stock options are granted with an
exercise price equal to the last reported sales price of the common stock on the date of grant. The Company uses the Black-Scholes option-pricing model to determine the fair value of stock options issued to employees and directors. The stock options
granted during the first quarter of 2008 had a weighted average grant date fair value of $5.61 per share. The weighted average assumptions used in the determination of the grant date fair value included a risk-free interest rate of 2.93%, an
expected stock price volatility of 33.00%, an expected dividend payout of 2.00%, and an expected option life of 5.25 years. The stock options granted in the first quarter of 2008 vest over a four-year term (vesting 25% per year) and expire
eight years following the grant date. Compensation expense associated with stock options is recognized over the vesting period, or until the employee or director becomes retirement eligible if that time period is shorter.



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##### Table of Contents

The following is a summary of stock option activity for the three month period ended March 31, 2008:



|                               |  |         |   |  |                               |      
|------------------------------ |  | ------- | - |  | ----------------------------- | -----
|                               |  | Shares  |   |  | Weighted-AverageExercisePrice
|Outstanding at January 1, 2008 |  | 744,986 |   |  | $                             | 26.17
|Granted                        |  | 50,000  |   |  |                               | 19.99
|Exercised                      |  | (1,800  | ) |  |                               | 16.67
|Forfeited                      |  | (35,372 | ) |  |                               | 32.27
|Expired                        |  | (4,150  | ) |  |                               | 21.06
|                               |  |         |   |  |                               |      
|Outstanding at March 31, 2008  |  | 753,664 |   |  | $                             | 25.53
|                               |  |         |   |  |                               |      
|Exercisable at March 31, 2008  |  | 518,165 |   |  | $                             | 24.06
|                               |  |         |   |  |                               |      

During the first quarter of 2008, the Company granted restricted stock awards that vest upon
completion of future service requirements. The fair value of these awards is equal to the last reported sales price of the Companys common stock on 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.

The following table provides information regarding
nonvested restricted stock for the three month period ended March 31, 2008:



|                             |  |         |   |  |                                      |      
|---------------------------- |  | ------- | - |  | ------------------------------------ | -----
|Nonvested Restricted Stock   |  | Shares  |   |  | Weighted-AverageGrant-Date FairValue
|Nonvested at January 1, 2008 |  | 115,979 |   |  | $                                    | 33.37
|Granted                      |  | 251,918 |   |  |                                      | 17.05
|Vested                       |  | (5,813  | ) |  |                                      | 30.72
|Forfeited                    |  | (5,377  | ) |  |                                      | 30.88
|                             |  |         |   |  |                                      |      
|Nonvested at March 31, 2008  |  | 356,707 |   |  | $                                    | 21.93
|                             |  |         |   |  |                                      |      

10. Derivative Financial Instruments:

At times, the Company uses derivative financial instruments, including interest rate exchange contracts (swaps) and interest rate floor and collar
agreements, to assist in interest rate risk management. At March 31, 2008, the Companys only derivative instruments were interest rate exchange agreements related to customer transactions.



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##### Table of Contents

The following table describes the derivative instruments outstanding at March 31, 2008 (dollars in
thousands):



|                                              |  |                |        |              |                          |          |          |           |   |      |  
|--------------------------------------------- |  | -------------- | ------ | ------------ | ------------------------ | -------- | -------- | --------- | - | ---- | -
|Product                                       |  | NotionalAmount |        | Strike Rates |                          | Maturity |          | FairValue |  
|Non-hedging derivative instruments:           |  |                |        |              |                          |          |          |           |   |      |  
|Interest Rate Swappay fixed/receive variable |  | $              | 5,546  |              | Pay 6.10% Receive 4.369% |          | 8/1/2015 |           | $ | (330 | )
|Interest Rate Swapreceive fixed/pay variable |  |                | 5,546  |              | Receive 6.10% Pay 4.369% |          | 8/1/2015 |           |   | 374  |  
|                                              |  |                |        |              |                          |          |          |           |   |      |  
|Total                                         |  | $              | 11,092 |              |                          |          |          |           |   |      |  
|                                              |  |                |        |              |                          |          |          |           |   |      |  

As an accommodation to a customer, the Company maintains a $5.9 million amortizing notional amount
interest rate swap. Under this agreement, the Company receives a fixed interest rate and pays interest at a variable rate. At the same time that the Company entered into this interest rate swap agreement, in order to offset the exposure, the Company
entered into an interest rate swap agreement with a different counterparty with offsetting terms. Under this swap agreement, the Company pays a fixed rate and receives interest based upon a variable rate. Changes in the fair value of each of the
agreements, as well as any net cash settlements, are recognized in noninterest income as other derivative income or expense.

During March
2008, the Company terminated two interest rate floor agreements with notional amounts totaling $200.0 million. One of these floor agreements, with a notional amount of $100.0 million, was not designated as an accounting hedge. During the first
quarter of 2008, other derivative income, reported in noninterest income, included $843,000 of income from changes in the fair value from this non-designated floor agreement.

The second floor agreement, with a notional amount of $100.0 million, was designated as a cash flow hedge. Upon termination, $1.1 million of unrealized
gains that had been accumulated in other comprehensive income, which consisted of the increase in fair value since inception less the cumulative amortization of the floor premium, will be amortized to loan interest income over what would have been
the remaining life of the floor agreement. This floor agreement was scheduled to mature in July 2010.

11. Fair Value:

On January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements, (SFAS 157) and SFAS No. 159,
The Fair Value Option for Financial Assets and Financial Liabilities, (SFAS 159). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands
disclosure related to the use of fair value measures in financial statements. SFAS 157 establishes a fair value hierarchy from observable market data as the highest level to fair value based on an entitys own fair value assumptions as the
lowest level. In February 2008, the Financial Accounting Standards Board issued Financial Accounting Standards Board Staff Position No. 157-2, Effective Date of FASB Statement No. 157, (FSP 157-2). FSP 157-2 delays
the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually), to fiscal years beginning after November 15, 2008. In



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accordance with FSP 157-2, the Company will delay application of SFAS 157 for non-financial assets, such as the Companys other real estate owned
assets, and non-financial liabilities. The impact of the adoption of SFAS 157 was not material.

SFAS 159 provides companies with an option
to report selected financial assets and liabilities at fair value. The objective of SFAS 159 is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related
assets and liabilities differently without having to apply complex hedge accounting. SFAS 159 was effective for the Company on January 1, 2008, however, the Company did not elect the fair value option for any financial assets or liabilities as
of that date.

Fair Value Measurement

In accordance with SFAS No. 157, the Company groups financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the
assumptions used to determine fair value. These levels are:

Level 1  Quoted prices for identical assets or liabilities in active
markets that the entity has the ability to access as of the measurement date.

Level 2  Significant other observable inputs other than
Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.

Level 3  Significant unobservable inputs that reflect an entitys own assumptions about the assumptions that market participants would use in
pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate fair values:

Available-for-sale investment securities: For these securities, the Company obtains fair value measurements from an independent pricing service.
The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the
bonds terms and conditions, among other things. The Company has determined that these valuations are classified in Level 2 of the fair value hierarchy.

Assets held in employee deferred compensation plans: Assets held in employee deferred compensation plans are recorded at fair value and included in other assets on the Companys consolidated
balance sheets. The assets associated with these plans are invested in mutual funds and classified as Level 1 as the fair value measurement is based upon available quoted prices. The Company also records a liability included in accrued
interest, taxes and other liabilities on its consolidated balance sheets for the amount due to employees related to these plans.



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Derivatives:The Company has determined that its derivative valuations in their entirety are
classified in Level 2 of the fair value hierarchy. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis
reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, and implied volatilities. To comply with the provisions of SFAS No. 157, the Company
incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterpartys nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts
for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Loans:The Company does not record loans at their fair value on a recurring basis. However, the Company will evaluate certain loans for impairment
when it is probable the payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement. Once a loan has been determined to be impaired, it is measured to establish the amount of the impairment, if
any, based on the present value of expected future cash flows discounted at the loans effective interest rate, except that collateral-dependent loans may be measured for impairment based on the fair value of the collateral, less cost to sell.
If the measure of the impaired loan is less than the recorded investment in the loan, a valuation allowance is recognized. At March 31, 2008, a significant portion of the Companys total impaired loans were evaluated based on the fair
value of the collateral. In accordance with SFAS 157, only impaired loans for which an allowance for loan loss has been established based on the fair value of collateral require classification in the fair value hierarchy. As a result, a portion, but
not all, of the Companys impaired loans are classified in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or an estimate of fair value from an independent third-party real estate
professional, the Company classifies the impaired loan as nonrecurring Level 2 in the fair value hierarchy. When an independent valuation is not available or there is no observable market price and fair value is based upon Managements
assessment of liquidation of collateral, the Company classifies the impaired loan as nonrecurring Level 3 in the fair value hierarchy.



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Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below.



|                                                    |  |                 |         |                                       |   |                                           |  |                                        |         |  |   |  
|--------------------------------------------------- |  | --------------- | ------- | ------------------------------------- | - | ----------------------------------------- |  | -------------------------------------- | ------- |  | - | -
|                                                    |  | Total FairValue |         | QuotedPrices inActiveMarkets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level
3)
|                                                    |  | (in thousands) 
|Assets:                                             |  |                 |         |                                       |   |                                           |  |                                        |         |  |   |  
|Available for sale securities                       |  | $               | 858,835 |                                       | $ |                                          |  | $                                      | 858,835 |  | $ | 
|Assets held in employee deferred compensation plans |  |                 | 5,274   |                                       |   | 5,274                                     |  |                                        |        |  |   | 
|Derivative instruments                              |  |                 | 374     |                                       |   |                                          |  |                                        | 374     |  |   | 
|Liabilities:                                        |  |                 |         |                                       |   |                                           |  |                                        |         |  |   |  
|Derivative Instruments                              |  |                 | 330     |                                       |   |                                          |  |                                        | 330     |  |   | 

Assets Measured on a Nonrecurring Basis

Assets measured at fair value on a nonrecurring basis are summarized below. The Company may be required, from time to time, to measure certain other
financial assets at fair value on a nonrecurring basis. These assets generally consist of loans considered impaired that may require periodic adjustment to the lower of cost or fair value.



|        |  |                 |        |                                       |   |                                           |  |                                        |        |  |   |      
|------- |  | --------------- | ------ | ------------------------------------- | - | ----------------------------------------- |  | -------------------------------------- | ------ |  | - | -----
|        |  | Total FairValue |        | QuotedPrices inActiveMarkets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level
3)
|        |  | (in thousands) 
|Assets: |  |                 |        |                                       |   |                                           |  |                                        |        |  |   |      
|Loans   |  | $               | 84,634 |                                       | $ |                                          |  | $                                      | 78,687 |  | $ | 5,947



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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 2007 Annual Report on Form 10-K filed with the SEC on March 13, 2008.

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 2007 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 an 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. Our estimates of risk of loss and amount of loss on any loan are complicated
by the significant uncertainties surrounding not only our borrowers probability of default, but also the fair value of the underlying collateral. The current illiquidity in the real estate market has increased the uncertainty with respect to
real estate values. Because of the degree of uncertainty and the sensitivity of valuations to the underlying assumptions regarding holding period until sale and the collateral liquidation method, our actual losses may vary from our current
estimates.

As a business bank, our loan portfolio is comprised primarily of commercial loans to businesses. These loans are inherently
larger in amount than loans to individual consumers and therefore have higher potential losses on an individual loan basis. 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 sizable loan can have a material impact on our reported impaired loans and related loss exposure estimates. Because our loan
portfolio contains a significant number of commercial loans with relatively large balances, the deterioration of any one or a few of these loans can cause a significant increase in uncollectible loans and, therefore, our allowance for loan losses.
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.

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



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level of these reserves is reasonable. We initially recognize the financial statement effects of a tax position when it is more likely than not, based on the
technical merits, that the position will be sustained upon examinations. Subsequently, the reserves are then utilized or reversed when we determine the more likely than not threshold is no longer met, once the statute of limitations has expired, or
the tax matter is effectively settled. However, because reserve balances are estimates that are subject to uncertainties, 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 and collar agreements, to assist in our interest rate risk management. We also use derivatives to accommodate individual customer needs. In accordance with
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities (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 or are not designated as an accounting hedge 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 operations 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 market-based valuations. The valuations are determined using widely accepted valuation techniques,
including discounted cash flow analysis on the expected cash flow of each derivative. This analysis reflects the contractual terms of the derivative and uses observable market-based inputs, including interest rate curves and implied volatilities. In
addition, the fair value also incorporates a credit valuation adjustment to reflect the risk of nonperformance by both us and our counterparties in the fair value measurement. The resulting 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 derivative 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 volatility in our statement of operations.



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RESULTS OF OPERATIONS

Overview

For the first quarter of 2008, we reported a net loss of $3.8 million, or ($0.37) per diluted share outstanding,
compared to net income of $5.3 million, or $0.48 per diluted share, in the first quarter of 2007. The decline in earnings between the two periods resulted from an $8.2 million increase in the provision for loan losses and a $3.8 million, or 20.8%,
increase in noninterest expense. A decrease in net interest income also contributed to the decline in earnings. Earnings in recent quarters have been negatively impacted by the downturn in the residential real estate market, which has impacted our
provision for loan losses, nonperforming loans, other real estate owned, and collection and workout expenses.

Our noninterest expense
during the first quarter of 2008 was impacted by our recently implemented growth strategy. Since the beginning of the year, we hired 30 new employees, nearly doubling the size of our commercial banking unit. The new hires include a new Bank
president, an executive vice president of Commercial Banking, six new group senior vice presidents in the commercial banking group, and a new chief credit officer, among others. Noninterest expense during the first quarter of 2008 included
approximately $1.1 million of additional salary and severance costs associated with the new hires and replacement of existing positions.

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, 2008 as Compared to the Quarter Ended March 31, 2007

Net interest
income was $24.5 million for the first quarter of 2008, a decrease of $2.0 million, or 7.5%, from $26.5 million of net interest income in the first quarter of 2007. With an adjustment for tax-exempt income, our consolidated net interest income for
the first quarter of 2008 was $25.3 million, compared to $27.3 million for the same quarter a year ago. This non-GAAP presentation is discussed further below. Net interest income for the first quarter of 2008 was lower due to a decline in net
interest margin.



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Our net interest margin, which is determined by dividing taxable equivalent net interest income by
average interest-earning assets, was 2.95% for the first quarter of 2008, compared to 3.47% for the same quarter a year ago, a decrease of 52 basis points. Our net interest margin decline in the first quarter of 2008 was due to the decrease in our
loan yields which outpaced the reductions in our funding costs. Our loan yield decreased 118 basis points from 7.86% for the first quarter of 2007 to 6.68% for the first quarter of 2008 primarily due to the recent declines in the prime lending rate
which was 300 basis points lower at March 31, 2008 compared to March 31, 2007. Approximately 55% of our loan portfolio is based upon a floating or variable rate. In addition, the impact of higher nonaccrual loans, also contributed to the lower loan
yield.

For the first quarter of 2008, our funding cost was 4.00%, compared to 4.61% during the first quarter of 2007, a decrease of 61
basis points. In response to the decline in asset yields, we have lowered the pricing on certain customer deposits. However, because term deposits generally take longer to reprice to current market rates than floating and variable rate assets, the
overall decline in the cost of funds lags the decrease in total earning asset yield.

Our interest rate risk simulation modeling of the
March 31, 2008 balance sheet, using market interest rates in effect at that time, indicated that our net interest margin would likely decline in the next six months if there were no further declines in market rates. If market rates were to
continue to decline, we would expect further compression of our net interest margin as some of our non-maturity deposits have or would have reached their implied floors. See the section of this discussion and analysis captioned Quantitative
and Qualitative Disclosure About Market Risks for further discussion of the impact of changes in interest rates on our results of operations.

Average interest-earning assets during the first quarter of 2008 were $3.43 billion, an increase of $251.8 million, or 7.9%, as compared to the same quarter in 2007. Most of the increase in average interest-earning assets was produced by a
$221.8 million, or 33.7%, increase in average investment securities. During the second half of 2007, we purchased $314 million of investment securities, primarily mortgage-related securities, in a strategy designed to reduce the impact to our net
interest income from declining interest rates. Average loans outstanding were relatively unchanged at $2.49 billion during both the first quarter of 2008 and 2007, as a small increase in average commercial loans was mostly offset by lower mortgage
and consumer loans.



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Rate vs. Volume Analysis of Net Interest Income

The following table presents, for the periods indicated, a summary of the changes in interest earned and interest paid resulting from changes in volume
and rates for the major components of interest-earning assets and interest-bearing liabilities on a tax-equivalent basis using a tax rate of 35%.



|                                   |  |                                                                                |       |   |      |   |        |        |  |     |     |  |   |        |  
|---------------------------------- |  | ------------------------------------------------------------------------------ | ----- | - | ---- | - | ------ | ------ |  | --- | --- |  | - | ------ | -
|                                   |  | Quarter Ended Mar. 31, 2008 OverQuarter Ended Mar. 31, 2007INCREASE/(DECREASE) |      
|                                   |  | VOLUME                                                                         |       |   | RATE |   |        | DAY(1) |  | NET |    
|                                   |  | (in thousands)                                                                 |      
|INTEREST EARNED ON:                |  |                                                                                |       |   |      |   |        |        |  |     |     |  |   |        |  
|Investment securities              |  | $                                                                              | 2,739 |   |      | $ | 813    |        |  | $   |    |  | $ | 3,552  |  
|Cash equivalents                   |  |                                                                                | 301   |   |      |   | (286   | )      |  |     | 6   |  |   | 21     |  
|Loans                              |  |                                                                                | (37   | ) |      |   | (7,475 | )      |  |     | 536 |  |   | (6,976 | )
|                                   |  |                                                                                |       |   |      |   |        |        |  |     |     |  |   |        |  
|Total interest-earning assets      |  |                                                                                |       |   |      |   |        |        |  |     |     |  |   | (3,403 | )
|                                   |  |                                                                                |       |   |      |   |        |        |  |     |     |  |   |        |  
|INTEREST PAID ON:                  |  |                                                                                |       |   |      |   |        |        |  |     |     |  |   |        |  
|Interest-bearing deposits          |  |                                                                                | 1,400 |   |      |   | (3,415 | )      |  |     | 264 |  |   | (1,751 | )
|Total borrowings                   |  |                                                                                | 1,400 |   |      |   | (1,085 | )      |  |     | 65  |  |   | 380    |  
|Total interest-bearing liabilities |  |                                                                                |       |   |      |   |        |        |  |     |     |  |   | (1,371 | )
|                                   |  |                                                                                |       |   |      |   |        |        |  |     |     |  |   |        |  
|Net interest income                |  | $                                                                              | 1,781 |   |      | $ | (4,026 | )      |  | $   | 213 |  | $ | (2,032 | )
|                                   |  |                                                                                |       |   |      |   |        |        |  |     |     |  |   |        |  



|(1) | The quarter ended March 31, 2008 had 91 days compared to 90 days in the quarter ended March 31, 2007.
|--- | -----------------------------------------------------------------------------------------------------

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 tax-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 a tax-equivalent 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.



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The following table reconciles the tax-equivalent net interest income to net interest income as reported
on the consolidated statements of operations. 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, |       
|                                               |  | 2008                                |        |   | 2007 |  
|                                               |  | (dollars in thousands)              |       
|Net interest income as stated                  |  | $                                   | 24,474 |   |      | $ | 26,455 |  
|Tax equivalent adjustment-investments          |  |                                     | 798    |   |      |   | 824    |  
|Tax equivalent adjustment-loans                |  |                                     | 33     |   |      |   | 58     |  
|                                               |  |                                     |        |   |      |   |        |  
|Tax equivalent net interest income             |  | $                                   | 25,305 |   |      | $ | 27,337 |  
|                                               |  |                                     |        |   |      |   |        |  
|Yield on earning assets without tax adjustment |  |                                     | 6.15   | % |      |   | 7.11   | %
|Yield on earning assetstax equivalent         |  |                                     | 6.25   | % |      |   | 7.23   | %
|                                               |  |                                    
|Net interest margin without tax adjustment     |  |                                     | 2.86   | % |      |   | 3.36   | %
|Net interest margintax equivalent             |  |                                     | 2.95   | % |      |   | 3.47   | %
|                                               |  |                                    
|Net interest spread without tax adjustment     |  |                                     | 2.15   | % |      |   | 2.50   | %
|Net interest spreadtax equivalent             |  |                                     | 2.25   | % |      |   | 2.62   | %

The following table presents, 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 a tax-equivalent
basis assuming a tax rate of 35%.



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|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|---------------------------------------------- |  | ------------------------------------ | --------- | - | -------- | - | ---------------- |  | ---- | -------------- |  | - | --------- | - | ---------------- | - | ------ |  | ---- | -
|                                               |  | For the Three Months Ended March 31, |          
|                                               |  | 2008                                 |           |   | 2007     |  
|                                               |  | AVERAGEBALANCE                       |           |   | INTEREST |   | YIELD/RATE(%)(6) |  |      | AVERAGEBALANCE |  |   | INTEREST  |   | YIELD/RATE(%)(6) |  
|                                               |  | (dollars in thousands)               |          
|INTEREST-EARNING ASSETS:                       |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Investment securities (1):                     |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Taxable                                        |  | $                                    | 738,270   |   |          | $ | 9,401            |  | 5.09 | %              |  | $ | 511,240   |   |                  | $ | 5,775  |  | 4.52 | %
|Tax-exempt (tax equivalent) (2)                |  |                                      | 142,339   |   |          |   | 2,280            |  | 6.41 |                |  |   | 147,565   |   |                  |   | 2,354  |  | 6.38 |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Total investment securities                    |  |                                      | 880,609   |   |          |   | 11,681           |  | 5.31 |                |  |   | 658,805   |   |                  |   | 8,129  |  | 4.94 |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Cash Equivalents                               |  |                                      | 71,756    |   |          |   | 542              |  | 2.99 |                |  |   | 39,922    |   |                  |   | 521    |  | 5.23 |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Loans (2) (3):                                 |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Commercial and commercial real estate          |  |                                      | 2,314,740 |   |          |   | 37,780           |  | 6.46 |                |  |   | 2,299,106 |   |                  |   | 44,540 |  | 7.75 |  
|Residential real estate mortgages              |  |                                      | 60,532    |   |          |   | 893              |  | 5.90 |                |  |   | 61,969    |   |                  |   | 872    |  | 5.63 |  
|Home equity and consumer                       |  |                                      | 109,756   |   |          |   | 1,764            |  | 6.46 |                |  |   | 125,809   |   |                  |   | 2,410  |  | 7.77 |  
|Fees on loans                                  |  |                                      |           |   |          |   | 825              |  |      |                |  |   |           |   |                  |   | 416    |  |      |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Net loans (tax equivalent) (2)                 |  |                                      | 2,485,028 |   |          |   | 41,262           |  | 6.68 |                |  |   | 2,486,884 |   |                  |   | 48,238 |  | 7.86 |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Total interest-earning assets (2)              |  |                                      | 3,437,393 |   |          |   | 53,485           |  | 6.25 |                |  |   | 3,185,611 |   |                  |   | 56,888 |  | 7.23 |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|NON-EARNING ASSETS:                            |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Allowance for loan losses                      |  |                                      | (55,742   | ) |          |   |                  |  |      |                |  |   | (37,835   | ) |                  |   |        |  |      |  
|Cash and due from banks                        |  |                                      | 53,573    |   |          |   |                  |  |      |                |  |   | 61,144    |   |                  |   |        |  |      |  
|Accrued interest and other assets              |  |                                      | 89,880    |   |          |   |                  |  |      |                |  |   | 87,954    |   |                  |   |        |  |      |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|TOTAL ASSETS                                   |  | $                                    | 3,525,104 |   |          |   |                  |  |      |                |  | $ | 3,296,874 |   |                  |   |        |  |      |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|INTEREST-BEARING LIABILITIES:                  |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Interest-bearing deposits:                     |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Interest-bearing demand deposits               |  | $                                    | 857,202   |   |          |   | 5,442            |  | 2.55 |                |  | $ | 921,325   |   |                  |   | 9,265  |  | 4.08 |  
|Savings deposits                               |  |                                      | 48,955    |   |          |   | 24               |  | 0.20 |                |  |   | 58,204    |   |                  |   | 40     |  | 0.28 |  
|Time deposits                                  |  |                                      | 1,366,343 |   |          |   | 16,507           |  | 4.86 |                |  |   | 1,195,387 |   |                  |   | 14,419 |  | 4.89 |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Total interest-bearing deposits                |  |                                      | 2,272,500 |   |          |   | 21,973           |  | 3.89 |                |  |   | 2,174,916 |   |                  |   | 23,724 |  | 4.42 |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Other borrowings                               |  |                                      | 334,281   |   |          |   | 2,735            |  | 3.24 |                |  |   | 257,810   |   |                  |   | 2,799  |  | 4.34 |  
|FHLB advances                                  |  |                                      | 139,066   |   |          |   | 1,574            |  | 4.48 |                |  |   | 80,000    |   |                  |   | 1,064  |  | 5.32 |  
|Junior subordinated debentures                 |  |                                      | 86,607    |   |          |   | 1,898            |  | 8.77 |                |  |   | 86,607    |   |                  |   | 1,964  |  | 9.07 |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Total interest-bearing liabilities             |  |                                      | 2,832,454 |   |          |   | 28,180           |  | 4.00 |                |  |   | 2,599,333 |   |                  |   | 29,551 |  | 4.61 |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|NONINTEREST-BEARING LIABILITIES:               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Noninterest-bearing deposits                   |  |                                      | 392,315   |   |          |   |                  |  |      |                |  |   | 381,670   |   |                  |   |        |  |      |  
|Accrued interest, taxes, and other liabilities |  |                                      | 42,633    |   |          |   |                  |  |      |                |  |   | 43,111    |   |                  |   |        |  |      |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Total noninterest-bearing liabilities          |  |                                      | 434,948   |   |          |   |                  |  |      |                |  |   | 424,781   |   |                  |   |        |  |      |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|STOCKHOLDERS EQUITY                           |  |                                      | 257,702   |   |          |   |                  |  |      |                |  |   | 272,760   |   |                  |   |        |  |      |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY     |  | $                                    | 3,525,104 |   |          |   |                  |  |      |                |  | $ | 3,296,874 |   |                  |   |        |  |      |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Net interest income (tax equivalent) (2)       |  |                                      |           |   |          | $ | 25,305           |  |      |                |  |   |           |   |                  | $ | 27,337 |  |      |  
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Net interest spread (tax equivalent) (2) (4)   |  |                                      |           |   |          |   |                  |  | 2.25 | %              |  |   |           |   |                  |   |        |  | 2.62 | %
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Net interest margin (tax equivalent) (2) (5)   |  |                                      |           |   |          |   |                  |  | 2.95 | %              |  |   |           |   |                  |   |        |  | 3.47 | %
|                                               |  |                                      |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  



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

|(2) | Calculations are computed on a tax-equivalent basis using a 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 tax-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 Three Months Ended
|                           |  | Mar. 31,2008               |       | Mar. 31,2007
|                           |  | (in thousands)            
|Service charges            |  | $                          | 2,166 |              | $ | 1,810
|Trust services             |  |                            | 491   |              |   | 486  
|Investment management fees |  |                            | 316   |              |   | 466  
|Loan syndication fees      |  |                            | 116   |              |   |     
|Other noninterest income   |  |                            | 126   |              |   | 476  
|                           |  |                            |       |              |   |      
|                           |  |                            | 3,215 |              |   | 3,238
|Other derivative income    |  |                            | 887   |              |   | 24   
|                           |  |                            |       |              |   |      
|Total noninterest income   |  | $                          | 4,102 |              | $ | 3,262
|                           |  |                            |       |              |   |      

Total noninterest income was $4.1 million during the first quarter of 2008, an increase of
$840,000, or 25.8%, as compared to the $3.3 million of noninterest income for the first quarter of 2007. An $863,000 increase in other derivative income, higher service charges of $356,000 and $116,000 of loan syndication fees during the first
quarter of 2008 combined to produce the increase. Lower investment management fees and other noninterest income partly offset these increases.

Service charges, principally derived from deposit accounts, were $2.2 million during the first quarter of 2008, compared to $1.8 million during the same quarter in 2007, an increase of $356,000, or 19.7%. The increase in service charge
revenue in 2008 was primarily caused by a lower earnings credit rate given to customers on their collected account balances and a 6% increase in gross activity fees. Our earnings credit rate was approximately 190 basis points lower on average during
the first quarter of 2008 as compared to the same quarter in 2007.

Investment management fees were $316,000 in first quarter of 2008, as
compared to $466,000 during the same quarter a year ago, a decrease of $150,000, or 32.2%. The lower fee income was primarily a result of reduced assets under management.

Syndication fees totaled $116,000 during the first quarter of 2008. Loan syndication fees are an opportunistic revenue source that has been largely dependent on the level of activity in the real estate development
market as well as our balance sheet and credit risk management.

Other derivative income in the first quarter of 2008 was $887,000,
compared to $24,000 in the first quarter of 2007. Other derivative income during 2008 and 2007 was derived from changes in the fair value, as well as net cash settlements, of our non-hedged derivative instruments. The higher income in 2008 was
primarily due to the increase in the fair value of our interest rate floor agreement caused by the recent reductions in the prime lending rate. We terminated this floor agreement in March 2008, and subsequent to this termination, only the changes in
the fair value of the customer-related interest rate swap agreements, which are not designated as accounting hedges, were recorded in other derivative income.



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Other noninterest income includes fees from 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 items. Other noninterest income was $126,000 for
the first quarter of 2008, compared to $476,000 for the same quarter a year ago, a decrease of $350,000. Most of the decrease was caused by a $380,000 change in the fair value of assets held in our employees deferred compensation plans.

Noninterest Expense

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



|                                                  |  |                            |        |   |              |   |        |  
|------------------------------------------------- |  | -------------------------- | ------ | - | ------------ | - | ------ | -
|                                                  |  | For the Three Months Ended |       
|                                                  |  | Mar. 31,2008               |        |   | Mar. 31,2007 |  
|                                                  |  | (dollars in thousands)     |       
|Salaries and employee benefits:                   |  |                            |        |   |              |   |        |  
|Salaries, employment taxes, and medical insurance |  | $                          | 8,345  |   |              | $ | 8,106  |  
|Sign-on bonuses and severance                     |  |                            | 1,370  |   |              |   | 105    |  
|Incentives, commissions, and retirement benefits  |  |                            | 1,988  |   |              |   | 1,403  |  
|                                                  |  |                            |        |   |              |   |        |  
|Total salaries and employee benefits              |  |                            | 11,703 |   |              |   | 9,614  |  
|Occupancy of premises, furniture and equipment    |  |                            | 2,765  |   |              |   | 2,760  |  
|Nonperforming asset expense                       |  |                            | 1,008  |   |              |   | 291    |  
|Early extinguishment of debt                      |  |                            | 810    |   |              |   |       |  
|Other professional services                       |  |                            | 646    |   |              |   | 681    |  
|Legal fees, net                                   |  |                            | 585    |   |              |   | 807    |  
|FDIC assessment                                   |  |                            | 526    |   |              |   | 81     |  
|Other noninterest expense                         |  |                            | 3,773  |   |              |   | 3,828  |  
|                                                  |  |                            |        |   |              |   |        |  
|Total noninterest expense                         |  | $                          | 21,816 |   |              | $ | 18,062 |  
|                                                  |  |                            |        |   |              |   |        |  
|Efficiency Ratio                                  |  |                            | 76.34  | % |              |   | 60.78  | %
|                                                  |  |                            |        |   |              |   |        |  

Noninterest expense during the first quarter of 2008 increased $3.8 million, or 20.8%, to $21.8
million, as compared to $18.1 million during the same quarter in 2007. The higher level of noninterest expense was caused by a $2.1 million increase in salaries and employee benefits, $810,000 from early extinguishment of debt, higher nonperforming
asset expense of $717,000, and higher FDIC insurance premiums of $445,000.

Total salaries and employee benefits expense during the first
quarter of 2008 increased $2.1 million, or 21.7%, to $11.7 million, as compared to $9.6 million during the same quarter a year ago. An increase in base salaries, higher sign-on bonuses and severance, and higher incentives combined to produce the
increase in total expense. As part of our growth initiative, we hired 30 individuals during 2008, adding to the number of relationship managers and adding to or replacing our existing credit administration staff.



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Our growth strategy has impacted salaries and benefit expense through higher base salaries, the offering of cash sign-on bonuses and stock based awards to
attract the new employees, and severance. Only approximately half of our new hires to date were in place by the end of the first quarter, therefore we expect additional one-time expenses for sign-on bonuses in the second quarter of 2008 and
additional base salary and equity grant compensation expense in future quarters.

Total salaries, employment taxes, and medical insurance
expenses were $8.3 million during the first quarter of 2008, compared to $8.1 million during the first quarter of 2007. An increase in base salaries, partly offset by a $380,000 decrease in the market value of assets held by our employees
deferred compensation plan, mostly produced the increase. Total full-time equivalent employees were 419 at March 31, 2008 compared to 418 and 413 at December 31, 2007 and March 31, 2007, respectively.

We had $1.4 million of sign-on bonuses and severance expense in the first quarter of 2008 compared to $105,000 in the first quarter of 2007. The increase
was attributed to our growth strategy and we expect additional one-time sign on bonuses for the new hires who started employment in the second quarter. Incentives, commissions, and retirement benefits increased $585,000 during the first quarter of
2008, primarily due to increased incentive accruals and stock based compensation awards.

Nonperforming asset expenses totaled $1.0 million
during the first quarter of 2008, compared to $291,000 during the same quarter of 2007. Additional provision for losses to reduce our carrying value for two properties held in other real estate owned, produced the increase in expense. We expect that
our nonperforming asset expense may increase in future periods depending on the level of nonperforming assets and other real estate owned and additional costs in connection with construction management and marketing associated with residential
development loans. The costs incurred depend on the degree of our involvement in the property management during the work-out period.

We
incurred $810,000 of expense for the early redemption of approximately $70 million of above market rate brokered certificates of deposits. The unamortized issuance costs and fair value adjustments on these deposits were written off at the time of
redemption. We have additional brokered CDs that are callable at our option throughout 2008, many of which have interest rates above current market rates. Therefore, we expect to continue to incur early debt extinguishment expense in future
quarters.

Legal fees were $585,000 in the first quarter of 2008, compared to $807,000 in the same quarter in 2007. Legal fees in the first
quarter of 2007 included nonrecurring cost related to the reorganization of our wealth management business and certain other matters.

FDIC
insurance premiums were $526,000 and $81,000 during the first quarters of 2008 and 2007, respectively. The Bank is required to pay deposit insurance premium assessments to the Federal Deposit Insurance Corporation (FDIC) Deposit
Insurance Fund based upon a risk classification system. Beginning in 2007, the FDIC increased the rates paid for deposit insurance, but, at the same time, allowed eligible insured institutions to share in an one-time assessment credit for
institutions in existence at



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##### Table of Contents

December 31, 1996 that had paid deposit insurance assessments prior to that date. The Bank received a one-time credit and utilized the credit during
2007 and the first quarter of 2008 to offset its deposit insurance assessment. The Bank fully utilized the credit during the first quarter of 2008, and, therefore, FDIC insurance premiums have increased. We expect deposit insurance premiums for the
full year 2008 to be approximately $2.2 million higher than for the full year 2007.

Other noninterest expense principally includes
external audit and tax services, business development and entertainment expenses, computer software license fees, and other operating expenses such as telephone, postage, office supplies and printing. Other noninterest expense was $3.8 million in
the first quarter of 2008, or slightly less than other noninterest expense in the same quarter in 2007.

An efficiency ratio is calculated
by dividing total noninterest expense by total revenues (net interest income and noninterest income). Generally, the lower the efficiency ratio the more efficient the entity is operating. Our efficiency ratio was 76.34% in the first quarter of 2008,
compared to 60.78% in the first quarter in 2007. The higher level of noninterest expense and the lower net interest income produced the higher ratio in 2008.

Income Taxes

We recorded an income tax benefit of $1.2 million in the first quarter of 2008, resulting in an effective
income tax rate of 23.1%. During the first quarter of 2007, we recorded income tax expense of $2.7 million, resulting in an effective income tax rate of 33.9%. Our effective income tax rate was lower in the first quarter of 2008 than the first
quarter of 2007 primarily as a result of the reduced 2008 pre-tax income which caused the impact of our permanent differences, such as tax exempt securities, to be greater.



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##### Table of Contents

FINANCIAL CONDITION

Overview

Total assets decreased $36.0 million, or 1.0%, to $3.52 billion at March 31, 2008 from total assets of $3.56
billion at December 31, 2007. Investment securities decreased $33.5 million to $858.9 million and total loans decreased $21.1 million to $2.51 billion from December 31, 2007 to March 31, 2008. These decreases were partially offset by
an increase in cash and cash equivalents of $30.5 million. Total deposits increased by $125.3 million, or 4.9%, to $2.71 billion at March 31, 2008, compared to $2.58 billion at December 31, 2007. In addition, during the first three months
of 2008, other borrowings decreased by $64.6 million and FHLB advances decreased by $100.0 million. Total stockholders equity at March 31, 2008 was $256.1 million, compared to $254.3 million at December 31, 2007.

Cash and Cash Equivalents

Period-end cash and cash
equivalents were $114.1 million at March 31, 2008, compared to $83.6 million at December 31, 2007. The Bank maintained additional liquidity during the first three months of 2008 to support possible asset growth opportunities and customer
deposit withdrawals.

Investment Securities

Investment securities totaled $858.9 million at March 31, 2008, compared to $892.4 million at December 31, 2007, a decrease of $33.5 million, or 3.8%. Cash flows from maturies and payments on investment securities were not
reinvested in the securities portfolio. The overall weighted average life of our investment portfolio at March 31, 2008 was approximately 4.9 years, compared to approximately 5.4 years at December 31, 2007.

At March 31, 2008, the net unrealized gain on the available for sale securities totaled $12.5 million, compared to a net unrealized gain of $3.4
million from December 31, 2007. At March 31, 2008, we had gross unrealized losses of $2.6 million, primarily in the mortgage-related securities portfolio. We believe that none of these unrealized losses represented other-than-temporary
impairments of our investment portfolio. We have both the intent and ability to hold all of these securities for the time necessary to recover the amortized cost.



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##### Table of Contents

The following table shows the composition of our mortgage-related securities as of March 31, 2008 by
type of issuer.



|                                                          |  |                     |         |            |   |         |  |                     |         |      |   |         |  |   |         |  |   |        
|--------------------------------------------------------- |  | ------------------- | ------- | ---------- | - | ------- |  | ------------------- | ------- | ---- | - | ------- |  | - | ------- |  | - | -------
|                                                          |  | Amortized Cost      |         | Fair Value
|                                                          |  | Pass ThruSecurities |         | CMOs       |   | Total   |  | Pass ThruSecurities |         | CMOs |   | Total  
|                                                          |  | (in thousands)     
|Government and government sponsored-enterprise securities |  | $                   | 440,095 |            | $ | 136,081 |  | $                   | 576,176 |      | $ | 449,601 |  | $ | 137,281 |  | $ | 586,882
|Private Issuers                                           |  |                     | 15,592  |            |   | 28,299  |  |                     | 43,891  |      |   | 14,569  |  |   | 27,731  |  |   | 42,300 
|                                                          |  |                     |         |            |   |         |  |                     |         |      |   |         |  |   |         |  |   |        
|                                                          |  | $                   | 455,687 |            | $ | 164,380 |  | $                   | 620,067 |      | $ | 464,170 |  | $ | 165,012 |  | $ | 629,182
|                                                          |  |                     |         |            |   |         |  |                     |         |      |   |         |  |   |         |  |   |        

On October 10, 2007, the Federal Home Loan Bank of Chicago (FHLBC) filed a Form
8-K in which it reported that the FHLBC had entered into a consensual cease and desist order with its regulator. Under the terms of the order, capital stock repurchases, redemptions of FHLBC stock and dividend declarations are subject to prior
written approval from FHLBCs regulator. The FHLBC did not pay dividends during the third and fourth quarter of 2007 and announced in April 2008 that dividend payments are unlikely at least through 2008. At March 31, 2008, we held, at
cost, $10.25 million of FHLBC stock, all of which we believe we will ultimately be able to recover.

Loans

Total loans decreased $21.1 million to $2.51 billion at March 31, 2008, from total loans of $2.53 billion at December 31, 2007. Commercial
loans, which includes commercial and industrial (C&I), commercial real estate secured, and real estate-construction loans, decreased $14.6 million, or 0.6%, while consumer-oriented loans declined $6.5 million. The decline in total
commercial loans was due to a $61.5 million, or 9.2%, decrease in real estateconstruction loans. This decrease was partly offset by a $29.1 million, or 3.4%, increase in C&I loans and a $17.8 million, or 2.1%, increase in commercial real
estate loans.

The composition of our loan portfolio as of March 31, 2008 and December 31, 2007 was as follows:



|                               |  |                        |           |                         |                   |   |        |   |                         |  |     |  
|------------------------------ |  | ---------------------- | --------- | ----------------------- | ----------------- | - | ------ | - | ----------------------- |  | --- | -
|                               |  | March 31, 2008         |           |                         | December 31, 2007 |  
|                               |  | Amount                 |           | Percentageof GrossLoans |                   |   | Amount |   | Percentageof GrossLoans | 
|                               |  | (dollars in thousands) |          
|Commercial and industrial      |  | $                      | 879,322   |                         | 35                | % |        | $ | 850,196                 |  | 34  | %
|Commercial real estate secured |  |                        | 857,394   |                         | 34                |   |        |   | 839,629                 |  | 33  |  
|Real estateconstruction       |  |                        | 610,164   |                         | 24                |   |        |   | 671,678                 |  | 26  |  
|Consumer-oriented loans        |  |                        | 165,341   |                         | 7                 |   |        |   | 171,863                 |  | 7   |  
|                               |  |                        |           |                         |                   |   |        |   |                         |  |     |  
|Gross loans                    |  | $                      | 2,512,221 |                         | 100               | % |        | $ | 2,533,366               |  | 100 | %
|                               |  |                        |           |                         |                   |   |        |   |                         |  |     |  



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Total C&I loans increased $29.1 million, or 3.4%, to $879.3 million at March 31, 2008, as
compared to $850.2 million at December 31, 2007 and now account for 35.0% of our total loan portfolio. C&I loans include all loans for commercial purposes (other than real estate construction) that are either unsecured or secured by
collateral other than commercial real estate. These loans are generally made to operating companies in a variety of businesses, excluding commercial real estate investment. We believe the growth in our C&I portfolio demonstrates the progress of
our strategy to expand our business with operating companies.

Our commercial real estate secured loans increased $17.8 million, or 2.1%,
to $857.4 million at March 31, 2008, as compared to $839.6 million at December 31, 2007. Most of the increase was due to an increase in loans secured by non-owner occupied commercial property, partly offset by a decline in loans secured by
owner-occupied commercial property. The composition of our commercial real estate secured portfolio was approximately as follows as of the dates indicated:



|                                     |  |                                                |   |  |                          |   |  |                                                |   |  |                          |  
|------------------------------------ |  | ---------------------------------------------- | - |  | ------------------------ | - |  | ---------------------------------------------- | - |  | ------------------------ | -
|                                     |  | March 31, 2008                                 |   |  | December 31, 2007        |  
|                                     |  | Percentage ofTotalCommercialReal EstateSecured |   |  | Percentage ofGross Loans |   |  | Percentage ofTotalCommercialReal EstateSecured |   |  | Percentage ofGross Loans |  
|Commercial properties:               |  |                                                |   |  |                          |   |  |                                                |   |  |                          |  
|Non-owner occupied                   |  | 62                                             | % |  | 21                       | % |  | 59                                             | % |  | 20                       | %
|Owner occupied                       |  | 23                                             |   |  | 8                        |   |  | 25                                             |   |  | 8                        |  
|                                     |  |                                                |   |  |                          |   |  |                                                |   |  |                          |  
|Subtotal                             |  | 85                                             |   |  | 29                       |   |  | 84                                             |   |  | 28                       |  
|Residential income properties        |  | 15                                             |   |  | 5                        |   |  | 16                                             |   |  | 5                        |  
|                                     |  |                                                |   |  |                          |   |  |                                                |   |  |                          |  
|Total commercial real estate secured |  | 100                                            | % |  | 34                       | % |  | 100                                            | % |  | 33                       | %
|                                     |  |                                                |   |  |                          |   |  |                                                |   |  |                          |  

Real estate-construction loans consist primarily of loans to professional real estate developers
for the construction of single-family homes, town-homes, condominium conversions and commercial property. Our real estate-construction loans decreased by $61.5 million, or 9.2%, to $610.2 million at March 31, 2008, as compared to $671.7 million
at December 31, 2007. The downturn in the real estate construction market has caused this portfolio to decrease in 2008 and 2007. We expect that the slowing residential real estate market will continue to impact the amount of loans in this
portion of our commercial loan portfolio as declining home sales has reduced the demand for both new homes and the development of residential lots and vacant land. The composition of our real estate-construction portfolio was approximately as
follows as of the dates indicated:



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|                                                  |  |                                     |   |  |                          |   |  |                                     |   |  |                          |  
|------------------------------------------------- |  | ----------------------------------- | - |  | ------------------------ | - |  | ----------------------------------- | - |  | ------------------------ | -
|                                                  |  | March 31, 2008                      |   |  | December 31, 2007        |  
|                                                  |  | Percentage ofTotalConstructionLoans |   |  | Percentage ofGross Loans |   |  | Percentage ofTotalConstructionLoans |   |  | Percentage ofGross Loans |  
|Residential properties:                           |  |                                     |   |  |                          |   |  |                                     |   |  |                          |  
|Single family                                     |  | 29                                  | % |  | 7                        | % |  | 29                                  | % |  | 8                        | %
|Multifamily, including townhomes and condominiums |  | 30                                  |   |  | 7                        |   |  | 31                                  |   |  | 8                        |  
|                                                  |  |                                     |   |  |                          |   |  |                                     |   |  |                          |  
|Subtotal                                          |  | 59                                  |   |  | 14                       |   |  | 60                                  |   |  | 16                       |  
|Commercial properties                             |  | 14                                  |   |  | 3                        |   |  | 17                                  |   |  | 4                        |  
|Land and land development                         |  | 27                                  |   |  | 7                        |   |  | 23                                  |   |  | 6                        |  
|                                                  |  |                                     |   |  |                          |   |  |                                     |   |  |                          |  
|Total real estate-construction                    |  | 100                                 | % |  | 24                       | % |  | 100                                 | % |  | 26                       | %
|                                                  |  |                                     |   |  |                          |   |  |                                     |   |  |                          |  

Total consumer-oriented loans, which include residential real estate mortgages, home equity loans
and lines of credit, and other consumer loans, decreased $6.5 million, or 3.8%, to $165.3 million at March 31, 2008. Residential real estate loans decreased $1.5 million, or 2.5%, to $58.7 million. Home equity loans and lines of credit declined
$5.2 million, or 5.2%, to $94.5 million. The portion of home equity loans and lines of credit that was originally sourced through brokers totaled $15.4 million at March 31, 2008.

Loan Quality and Nonperforming Assets

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



|                                                                         |  |                        |         |   |              |   |        |              |  |   |        |  
|------------------------------------------------------------------------ |  | ---------------------- | ------- | - | ------------ | - | ------ | ------------ |  | - | ------ | -
|                                                                         |  | Mar. 31,2008           |         |   | Dec. 31,2007 |   |        | Mar. 31,2007 | 
|                                                                         |  | (dollars in thousands) |        
|Loans contractually past due 90 days or more but still accruing interest |  | $                      | 4,263   |   |              | $ | 4,253  |              |  | $ | 2,577  |  
|Nonaccrual loans                                                         |  |                        |         |   |              |   |        |              |  |   |        |  
|Commercial and industrial                                                |  |                        | 10,689  |   |              |   | 5,069  |              |  |   | 4,896  |  
|Commercial real estate secured                                           |  |                        | 5,874   |   |              |   | 10,935 |              |  |   | 2,041  |  
|Real estate  construction                                               |  |                        | 75,389  |   |              |   | 52,412 |              |  |   | 14,696 |  
|All other loan types                                                     |  |                        | 3,287   |   |              |   | 2,996  |              |  |   | 3,018  |  
|                                                                         |  |                        |         |   |              |   |        |              |  |   |        |  
|Total nonaccrual                                                         |  |                        | 95,239  |   |              |   | 71,412 |              |  |   | 24,651 |  
|                                                                         |  |                        |         |   |              |   |        |              |  |   |        |  
|Total nonperforming loans                                                |  |                        | 99,502  |   |              |   | 75,665 |              |  |   | 27,228 |  
|Other real estate owned                                                  |  |                        | 5,066   |   |              |   | 2,599  |              |  |   | 351    |  
|Other repossessed assets                                                 |  |                        | 7       |   |              |   | 7      |              |  |   |       |  
|                                                                         |  |                        |         |   |              |   |        |              |  |   |        |  
|Total nonperforming assets                                               |  | $                      | 104,575 |   |              | $ | 78,271 |              |  | $ | 27,579 |  
|                                                                         |  |                        |         |   |              |   |        |              |  |   |        |  
|Nonperforming loans to total loans                                       |  |                        | 3.96    | % |              |   | 2.99   | %            |  |   | 1.09   | %
|Nonperforming assets to total loans plus repossessed property            |  |                        | 4.15    | % |              |   | 3.09   | %            |  |   | 1.10   | %
|Nonperforming assets to total assets                                     |  |                        | 2.97    | % |              |   | 2.20   | %            |  |   | 0.85   | %

Nonperforming assets were $104.6 million, or 2.97% of total assets on March 31, 2008,
compared to $78.3 million, or 2.20% of total assets on December 31, 2007, and $27.6 million, or 0.85% of total assets on March 31, 2007. The majority of the increase in nonperforming assets from December 31, 2007 to March 31,
2008 related to a single borrower with five loans totaling $26.7



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million relating to residential development. Nonperforming real estateconstruction loans accounted for 79.2% of all nonaccrual loans at March 31,
2008. In addition, the increase in other real estate owned was primarily due to the transfer during the quarter of an existing nonaccrual loan related to a residential housing development.

The following table present data related to nonaccrual loans by dollar amount as of the dated indicated:



|                                 |  |                        |  |                   |  |        |        |                   |    |               |    |        |   |       
|-------------------------------- |  | ---------------------- |  | ----------------- |  | ------ | ------ | ----------------- | -- | ------------- | -- | ------ | - | ------
|                                 |  | March 31, 2008         |  | December 31, 2007
|                                 |  | NumberofBorrowers      |  | NumberofLoans     |  | Amount |        | NumberofBorrowers |    | NumberofLoans |    | Amount
|Nonaccrual loans by dollar range |  | (dollars in thousands)
|$15.0 million or more            |  | 2                      |  | 6                 |  | $      | 45,899 |                   | 1  |               | 1  |        | $ | 19,083
|$10.0 million to $14.9 million   |  | 1                      |  | 4                 |  |        | 14,122 |                   | 2  |               | 5  |        |   | 26,333
|$5.0 million to $9.9 million     |  | 1                      |  | 3                 |  |        | 9,634  |                   |   |               |   |        |   |      
|$1.0 million to $4.9 million     |  | 8                      |  | 18                |  |        | 16,720 |                   | 8  |               | 15 |        |   | 19,235
|Under $1.0 million               |  | 58                     |  | 61                |  |        | 8,864  |                   | 56 |               | 58 |        |   | 6,761 
|                                 |  |                        |  |                   |  |        |        |                   |    |               |    |        |   |       
|Total nonaccrual loans           |  | 70                     |  | 92                |  | $      | 95,239 |                   | 67 |               | 79 |        | $ | 71,412
|                                 |  |                        |  |                   |  |        |        |                   |    |               |    |        |   |       

The residential housing market did not show improvement during the first quarter of 2008, placing
continued financial stress on customers, particularly those engaged in residential development. This downturn in the residential housing market has reduced demand and market prices for developed residential lots and vacant land as well as homes.
Where there is reduced demand for new homes, certain residential developers may be required to hold their properties for longer periods of time or sell their properties at reduced prices, which can lead to greater holding costs and lower or deferred
cash inflows. These factors may result in higher credit risk for the lender. In addition, we believe the recent turmoil in the sub-prime lending market has caused tightened credit standards throughout the mortgage industry and has taken some
potential home buyers out of the market. We viewed the increase in our nonperforming loans as an indicator of increased credit risk in our loan portfolio and incorporated those trends into our evaluation of the adequacy of the allowance for loan
losses. A continued downturn in the residential real estate market in 2008 could result in additional defaults by our real estate developers.

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.



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Information about our impaired loans and the related allowance for loan losses for impaired loans is as
follows:



|                                                    |  |                |         |              |   |              |  |   |       
|--------------------------------------------------- |  | -------------- | ------- | ------------ | - | ------------ |  | - | ------
|                                                    |  | Mar. 31,2008   |         | Dec. 31,2007 |   | Mar. 31,2007
|                                                    |  | (in thousands)
|Recorded balance of impaired loans                  |  | $              | 128,147 |              | $ | 90,972       |  | $ | 30,659
|Allowance for loan losses related to impaired loans |  |                | 16,581  |              |   | 9,375        |  |   | 2,573 

Impaired loans at March 31, 2008 increased $37.2 million, or 40.9%, compared with
December 31, 2007, and the allowance for loan losses related to impaired loans increased $7.2 million from year-end 2007. Similar to nonaccrual loans, the increase in impaired loans was due to the addition of one borrower with five loans
totaling $26.7 million.

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 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.



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The following table includes an analysis of our allowance for loan losses and other related data for the
periods indicated:



|                                                     |  |                                 |           |   |      |   |           |  
|---------------------------------------------------- |  | ------------------------------- | --------- | - | ---- | - | --------- | -
|                                                     |  | For Three Months EndedMarch 31, |          
|                                                     |  | 2008                            |           |   | 2007 |  
|                                                     |  | (dollars in thousands)          |          
|Average total loans                                  |  | $                               | 2,485,028 |   |      | $ | 2,486,884 |  
|                                                     |  |                                 |           |   |      |   |           |  
|Total loans at end of period                         |  | $                               | 2,512,193 |   |      | $ | 2,501,508 |  
|                                                     |  |                                 |           |   |      |   |           |  
|Allowance for loan losses:                           |  |                                 |           |   |      |   |           |  
|Allowance at beginning of period                     |  | $                               | 54,681    |   |      | $ | 37,516    |  
|Net (charge-offs) recoveries:                        |  |                                 |           |   |      |   |           |  
|Commercial and commercial real estate                |  |                                 | (164      | ) |      |   | (1,311    | )
|Real estate  construction                           |  |                                 | (1,687    | ) |      |   | (1,054    | )
|Residential real estate mortgages and consumer loans |  |                                 | (387      | ) |      |   | (421      | )
|                                                     |  |                                 |           |   |      |   |           |  
|Total net charge-offs                                |  |                                 | (2,238    | ) |      |   | (2,786    | )
|Provision for loan losses                            |  |                                 | 11,750    |   |      |   | 3,600     |  
|                                                     |  |                                 |           |   |      |   |           |  
|Allowance at end of period                           |  | $                               | 64,193    |   |      | $ | 38,330    |  
|                                                     |  |                                 |           |   |      |   |           |  
|Annualized net charge-offs to average total loans    |  |                                 | 0.36      | % |      |   | 0.45      | %
|Allowance to total loans at end of period            |  |                                 | 2.56      | % |      |   | 1.53      | %
|Allowance to nonperforming loans                     |  |                                 | 64.51     | % |      |   | 140.77    | %

Our allowance for loan losses was $64.2 million at March 31, 2008, or 2.56% of end-of-period
loans and 64.51% of nonperforming loans. At March 31, 2007, the allowance for loan losses was $38.3 million, which represented 1.53% of end-of-period loans and 140.77% of nonperforming loans. Net charge-offs during the first quarter of 2008
were $2.2 million, or 0.36% of average loans on an annualized basis. In comparison, net charge-offs during the first quarter of 2007 were $2.8 million, or 0.45% of average loans on an annualized basis.

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 $11.8 million for the first quarter of 2008, compared to $3.6
million for the first quarter of 2007. The continued weak economic environment surrounding residential development primarily produced the increase in the provision for loan losses. The continued high level of nonperforming loans, impaired loans and
the amount of performing loans that have been assessed by us as having higher credit risk, and therefore receiving heightened monitoring, all factored into the increase of our provision for loan losses in 2008 as compared to 2007. Our provision for
loan losses in any individual accounting period is not an indicator of provisioning in subsequent reporting periods.

Deposits

Total deposit balances at March 31, 2008 increased $125.3 million from year-end 2007, mostly as a result of increased out-of-market deposits. During
the first quarter of 2008, total in-market deposits declined $31.0 million, or 1.6%. Non-interest-bearing deposits declined $71.5 million, primarily due to a seasonal decline in corporate trust deposits of $60.9 million. In addition money
market accounts declined $43.2 million, while



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customer certificates of deposit and public time deposits increased $70.7 million and $22.2 million, respectively. Total out-of-market deposits increased by
$156.3 million, or 23.0%, from year-end 2007. Brokered money market deposits, out-of-local-market certificates of deposit and brokered certificates of deposit increased $22.7 million, $41.4 million and $92.2 million, respectively from
December 31, 2007. Increased out-of-market deposits were used in large part to reduce FHLB advances collateralized by investment securities and other borrowings.

The following table sets forth the period end balances of total deposits as of each of the dates indicated below, as well as categorizes our deposits as in-market and out-of-market deposits:



|                                            |  |                |           |              |   |          
|------------------------------------------- |  | -------------- | --------- | ------------ | - | ---------
|                                            |  | Mar. 31,2008   |           | Dec. 31,2007
|                                            |  | (in thousands)
|In-market deposits:                         |  |                |           |              |   |          
|Non-interest bearing deposits               |  | $              | 400,244   |              | $ | 471,770  
|NOW accounts                                |  |                | 68,624    |              |   | 76,572   
|Savings accounts                            |  |                | 48,126    |              |   | 49,386   
|Money market accounts                       |  |                | 664,614   |              |   | 707,829  
|Customer certificates of deposit            |  |                | 614,175   |              |   | 543,443  
|Public time deposits                        |  |                | 75,092    |              |   | 52,895   
|                                            |  |                |           |              |   |          
|Total in-market deposits                    |  |                | 1,870,875 |              |   | 1,901,895
|Out-of-market deposits:                     |  |                |           |              |   |          
|Brokered money market deposits              |  |                | 78,211    |              |   | 55,507   
|Out-of-local-market certificates of deposit |  |                | 158,593   |              |   | 117,159  
|Brokered certificates of deposit            |  |                | 597,839   |              |   | 505,631  
|                                            |  |                |           |              |   |          
|Total out-of-market deposits                |  |                | 834,643   |              |   | 678,297  
|                                            |  |                |           |              |   |          
|Total deposits                              |  | $              | 2,705,518 |              | $ | 2,580,192
|                                            |  |                |           |              |   |          

Average deposits for the first three months of 2008 increased $108.2 million to $2.66 billion,
compared to $2.56 billion for the first three months of 2007. Total time deposits increased $171.0 million, with brokered certificates of deposit accounting for $92.0 million of that increase. Money market deposits decreased $56.1 million, in both
higher-rate market-priced money market accounts and low-cost money market accounts. In addition, deposits in lower rate products, such as NOW and savings accounts, declined from 2007 to 2008.



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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, 2008 |           |                    | For the Three Months EndedMarch 31, 2007 |  
|                                            |  | AverageBalance                           |           | Percent OfDeposits |                                          |   | Rate |      |   | AverageBalance |   | Percent OfDeposits |  |       | Rate | 
|                                            |  | (dollars in thousands)                   |          
|Noninterest-bearing demand deposits         |  | $                                        | 392,315   |                    | 14.7                                     | % |      |     | % |                | $ | 381,670            |  | 14.9  | %    |  |     | %
|NOW accounts                                |  |                                          | 75,232    |                    | 2.8                                      |   |      | 0.53 |   |                |   | 83,245             |  | 3.2   |      |  | 0.67 |  
|Money market accounts                       |  |                                          | 781,970   |                    | 29.4                                     |   |      | 2.75 |   |                |   | 838,080            |  | 32.8  |      |  | 4.42 |  
|Savings deposits                            |  |                                          | 48,955    |                    | 1.8                                      |   |      | 0.20 |   |                |   | 58,204             |  | 2.3   |      |  | 0.28 |  
|Time deposits:                              |  |                                          |           |                    |                                          |   |      |      |   |                |   |                    |  |       |      |  |      |  
|Certificates of deposit                     |  |                                          | 556,328   |                    | 20.9                                     |   |      | 4.71 |   |                |   | 519,062            |  | 20.3  |      |  | 4.67 |  
|Out-of-local-market certificates of deposit |  |                                          | 142,278   |                    | 5.3                                      |   |      | 5.09 |   |                |   | 103,969            |  | 4.1   |      |  | 5.40 |  
|Brokered certificates of deposit            |  |                                          | 599,629   |                    | 22.5                                     |   |      | 5.00 |   |                |   | 507,862            |  | 19.9  |      |  | 4.97 |  
|Public Funds                                |  |                                          | 68,108    |                    | 2.6                                      |   |      | 4.25 |   |                |   | 64,494             |  | 2.5   |      |  | 5.16 |  
|                                            |  |                                          |           |                    |                                          |   |      |      |   |                |   |                    |  |       |      |  |      |  
|Total time deposits                         |  |                                          | 1,366,343 |                    | 51.3                                     |   |      | 4.86 |   |                |   | 1,195,387          |  | 46.8  |      |  | 4.89 |  
|                                            |  |                                          |           |                    |                                          |   |      |      |   |                |   |                    |  |       |      |  |      |  
|Total deposits                              |  | $                                        | 2,664,815 |                    | 100.0                                    | % |      |      |   |                | $ | 2,556,586          |  | 100.0 | %    |  |      |  
|                                            |  |                                          |           |                    |                                          |   |      |      |   |                |   |                    |  |       |      |  |      |  

Other Borrowings and Liabilities

Other borrowings include securities sold under agreements to repurchase, federal funds purchased and U.S. Treasury tax and loan note option
(TT&L note) borrowings. Period-end other borrowings decreased $64.6 million to $324.5 million at March 31, 2008, as compared to $389.1 million at December 31, 2007. A $40.0 million decrease in borrowings under the TT&L
note program produced the majority of the decrease.

Borrowings from the FHLBC decreased $100.0 million during the first three months of
2008 to $105.0 million at March 31, 2008, as a $100.0 million advance that matured in January 2008 was not renewed.

At March 31,
2008, we had $45.4 million of junior subordinated debentures issued to TAYC Capital Trust I, our wholly-owned statutory trust, that are currently callable at par, at our option. We continue to review alternatives available to us to refinance or
repay the 9.75% fixed-rate trust preferred securities and the related junior subordinated debentures. Unamortized issuance costs relating to these debentures were $2.5 million on March 31, 2008. Unamortized issuance costs would be recognized as
noninterest expense if the debentures were called by us.

CAPITAL RESOURCES

At March 31, 2008 and December 31, 2007, 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 as of the dates indicated:



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|                                         |  |                        |  |       |                             |  |           |                                                              |       |   |  |           |  |        |  
|---------------------------------------- |  | ---------------------- |  | ----- | --------------------------- |  | --------- | ------------------------------------------------------------ | ----- | - |  | --------- |  | ------ | -
|                                         |  | ACTUAL                 |  |       | FOR CAPITALADEQUACYPURPOSES |  |           | TO BE WELLCAPITALIZED UNDERPROMPTCORRECTIVE ACTIONPROVISIONS |      
|                                         |  | AMOUNT                 |  | RATIO |                             |  | AMOUNT    |                                                              | RATIO |   |  | AMOUNT    |  | RATIO  |  
|                                         |  | (dollars in thousands) | 
|As of March 31, 2008:                    |  |                        |  |       |                             |  |           |                                                              |       |   |  |           |  |        |  
|Total Capital (to Risk Weighted Assets)  |  |                        |  |       |                             |  |           |                                                              |       |   |  |           |  |        |  
|Taylor Capital Group, Inc.               |  | $363,663               |  | 12.67 | %                           |  | >$229,699 |                                                              | >8.00 | % |  | >$287,124 |  | >10.00 | %
|Cole Taylor Bank                         |  | 341,580                |  | 11.92 |                             |  | >229,154  |                                                              | >8.00 |   |  | >286,443  |  | >10.00 |  
|Tier I Capital (to Risk Weighted Assets) |  |                        |  |       |                             |  |           |                                                              |       |   |  |           |  |        |  
|Taylor Capital Group, Inc.               |  | 324,564                |  | 11.30 |                             |  | >114,850  |                                                              | >4.00 |   |  | >172,274  |  | >6.00  |  
|Cole Taylor Bank                         |  | 305,424                |  | 10.66 |                             |  | >114,577  |                                                              | >4.00 |   |  | >171,866  |  | >6.00  |  
|Leverage (to average assets)             |  |                        |  |       |                             |  |           |                                                              |       |   |  |           |  |        |  
|Taylor Capital Group, Inc.               |  | 324,564                |  | 9.21  |                             |  | >141,004  |                                                              | >4.00 |   |  | >176,255  |  | >5.00  |  
|Cole Taylor Bank                         |  | 305,424                |  | 8.69  |                             |  | >140,642  |                                                              | >4.00 |   |  | >175,802  |  | >5.00  |  
|                                         |  |                        |  |       |                             | 
|As of December 31, 2007:                 |  |                        |  |       |                             |  |           |                                                              |       |   |  |           |  |        |  
|Total Capital (to Risk Weighted Assets)  |  |                        |  |       |                             |  |           |                                                              |       |   |  |           |  |        |  
|Taylor Capital Group, Inc.               |  | $368,188               |  | 12.74 | %                           |  | >$231,175 |                                                              | >8.00 | % |  | >$288,968 |  | >10.00 | %
|Cole Taylor Bank                         |  | 342,607                |  | 11.88 |                             |  | >230,677  |                                                              | >8.00 |   |  | >288,346  |  | >10.00 |  
|Tier I Capital (to Risk Weighted Assets) |  |                        |  |       |                             |  |           |                                                              |       |   |  |           |  |        |  
|Taylor Capital Group, Inc.               |  | 330,451                |  | 11.44 |                             |  | >115,587  |                                                              | >4.00 |   |  | >173,381  |  | >6.00  |  
|Cole Taylor Bank                         |  | 306,333                |  | 10.62 |                             |  | >115,339  |                                                              | >4.00 |   |  | >173,008  |  | >6.00  |  
|Leverage (to average assets)             |  |                        |  |       |                             |  |           |                                                              |       |   |  |           |  |        |  
|Taylor Capital Group, Inc.               |  | 330,451                |  | 9.40  |                             |  | >140,567  |                                                              | >4.00 |   |  | >175,709  |  | >5.00  |  
|Cole Taylor Bank                         |  | 306,333                |  | 8.74  |                             |  | >140,232  |                                                              | >4.00 |   |  | >175,290  |  | >5.00  |  

The Banks ratios of total capital and Tier I capital to risk weighted assets increased at
March 31, 2008 compared with December 31, 2007, as the decrease in risk weighted assets was greater than the decline in regulatory capital. However, an increase in average assets caused the Banks leverage ratio to decrease. The Bank
is subject to dividend restrictions established by regulatory authorities. The dividends that Cole Taylor Bank could declare and pay to the Company, as of March 31, 2008, without the approval of regulatory authorities, amounted to approximately
$11.0 million. The Bank did not pay any dividends to the Company during the first three months of 2008.

The Companys total capital
levels decreased at March 31, 2008 compared with December 31, 2007 as a result of the net loss and dividends paid to common shareholders during the quarter. During the first quarter of 2008, we declared common stock dividends of $0.10 per
share, totaling $1.1 million.

LIQUIDITY

Our liquidity increased during the first three months of 2008, as collateralized borrowings were replaced with brokered certificates of deposit. FHLB advances totaling $100.0 million and TT&L note borrowings totaling $40.1 million, both
of which were collateralized by investment securities, were not renewed at maturity. Cash flow from principal payments and maturities of investment securities were retained in cash equivalents. Loans decreased $16.2 million.



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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 $17.9 million at March 31, 2008, as compared to $22.0 million at December 31, 2007. Cash outflows during the first three months of 2008 included $1.9 million of interest paid on our junior subordinated debentures and $1.1 million
of dividends paid to our common shareholders. The Company had a $20.0 million revolving line of credit that had not been drawn upon as of March 31, 2008.

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,
2008, we had $980 million of undrawn commitments to extend credit and $84 million of financial and performance standby letters of credit. In comparison, at December 31, 2007, we had $962 million of undrawn commitments to extend credit and $97
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

The following table
describes the derivative instruments outstanding at March 31, 2008 (dollars in thousands):



|                                              |  |                |        |              |                          |          |          |           |   |      |  
|--------------------------------------------- |  | -------------- | ------ | ------------ | ------------------------ | -------- | -------- | --------- | - | ---- | -
|Product                                       |  | NotionalAmount |        | Strike Rates |                          | Maturity |          | FairValue |  
|Non-hedging derivative instruments:           |  |                |        |              |                          |          |          |           |   |      |  
|Interest Rate Swappay fixed/receive variable |  | $              | 5,546  |              | Pay 6.10% Receive 4.369% |          | 8/1/2015 |           | $ | (330 | )
|Interest Rate Swapreceive fixed/pay variable |  |                | 5,546  |              | Receive 6.10% Pay 4.369% |          | 8/1/2015 |           |   | 374  |  
|                                              |  |                |        |              |                          |          |          |           |   |      |  
|Total                                         |  | $              | 11,092 |              |                          |          |          |           |   |      |  
|                                              |  |                |        |              |                          |          |          |           |   |      |  

At March 31, 2008, our only derivative instruments were interest rate exchange agreements
related to customer transactions. During 2007, as an accommodation to a customer, we entered into a $5.9 million amortizing notional amount interest rate swap. At the same time, in order to offset our exposure, we entered into an amortizing notional
amount interest rate swap with a different counterparty with offsetting terms. These derivative instruments are not designated as accounting hedges and changes in fair value of these instruments, as well as any net cash settlements, are recognized
in noninterest income as other derivative income or expense.



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During March 2008, we terminated two interest rate floor agreements with a notional amount of $200.0
million. One of the floor agreements, with a notional amount of $100.0 million, was not designated as an accounting hedge. During the first quarter of 2008, other derivative income, reported in noninterest income, included $843,000 of income from
changes in the fair value from this non-designated floor agreement. The other floor agreement, with a notional amount of $100.0 million was designated as a cash flow hedge. Upon termination, $1.1 million of unrealized gains that had been accumulated
in other comprehensive income, which consisted of the increase in fair value since inception less the cumulative amortization of the floor premium, will be amortized over what would have been the remaining life of the floor agreement. This floor was
scheduled to mature in July 2010.

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

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, floors and collars, 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.



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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 simulation modeling of the March 31, 2008 balance sheet, using the market interest rates in
effect at period-end (the rates unchanged scenario), indicated that our net interest margin would likely decline in future periods if market interest rates remain unchanged. Additional factors, such as nonaccrual loan volume and the
continued repricing of our term interest-bearing liabilities would also be expected to depress our net interest margin. Additional critical factors affecting our net interest margin that are not specifically measured as part of interest rate risk
are the impact of competition on loan and deposit pricing as well as changes in our balance sheet such as the mix of our funding.

The
following table indicates the estimated change in future net interest income from the rates unchanged simulation 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 Incomefrom Rates Unchanged
Simulation |       
|                                 |  | At March 31, 2008                                                   |        |   | At December 31, 2007 |      
|                                 |  | (dollars in thousands)                                              |       
|Change in interest rates         |  | DollarChange                                                        |        |   | PercentageChange     |       |    | DollarChange |   |        | PercentageChange | 
|+200 basis points over one year  |  | $                                                                   | 3,886  |   |                      | 3.76  | %  |              | $ | 2,433  |                  |  | 2.36  | % 
|- 200 basis points over one year |  |                                                                     | (1,812 | ) |                      | (1.75 | )% |              |   | (1,926 | )                |  | (1.87 | )%

Our simulation modeling at March 31, 2008 indicated that future net interest income in a
rising rate environment would be higher than that projected in a rates unchanged environment. Net interest income in year one in a 200 basis point rising rate scenario was calculated to be $3.9 million, or 3.8%, higher than net interest income in a
rates unchanged scenario. That opportunity for increased net interest income would be diminished, however, if market forces negatively impacted our loan and deposit pricing and our funding mix were to change.

Conversely, our simulation modeling of a falling interest rate environment indicated that future net interest income would be lower than that projected
in the rates unchanged environment. Our net interest income in year one in a 200 basis point falling rate scenario was calculated to be $1.8 million, or 1.8%, lower than in a rates unchanged scenario.

Computation of the prospective effects of hypothetical interest rate changes are based on numerous assumptions, including, among other factors, relative
levels of market interest rates, product pricing, reinvestment strategies and customer behavior



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influencing loan and security prepayments and deposit decay and should not be relied upon as indicative of actual results. Further, the computations do not
contemplate any actions that we may take in response to changes in interest rates. We cannot assure you that our actual net interest income would increase or decrease by the amounts computed by the simulations.

NEW ACCOUNTING PRONOUNCEMENTS

In March 2008, FASB
issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS 161). SFAS 161 will amend SFAS 133 and requires qualitative disclosures about how and why an entity uses derivative instruments,
how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and how derivative instruments and the related hedged items affect an entitys financial position, financial performance, and
cash flows. SFAS 161 will be effective for fiscal years beginning after November 15, 2008. While we have not completed our evaluation of SFAS 161, the adoption in 2009 is not expected to have a material impact on our consolidated financial
statements.

In December 2007, FASB issued SFAS No. 160, Noncontrolling Interests in Financial Statements (SFAS
160). SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary, formerly referred to as minority interest, and provides guidance on accounting for changes in the parents ownership interest
in a subsidiary. In addition, SFAS 160 establishes standards of accounting for the deconsolidation of a subsidiary due to loss of control. SFAS 160 will be effective for fiscal years beginning on or after December 15, 2008 and early adoption is
prohibited. While we have not completed our evaluation of this Statement, the adoption of SFAS 160 in 2009 is not expected to have a material impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007) Business Combinations (SFAS 141R). This statement revises and
replaces SFAS No. 141 (Business Combinations), which was issued in June 2001. SFAS 141R establishes principles and requirements for how an acquirer in a business combination should recognize and measure in its financial statements
the identifiable assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree, recognize and measure goodwill acquired, and determine what information to disclose to enable the users of the financial statements to evaluate
the nature and financial effects of the business combination. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after
December 15, 2008.

In February 2007, FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities (SFAS 159).SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value. The objective of SFAS 159 is to improve financial reporting by providing entities
with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting. This Statement also establishes presentation and disclosure
requirements designed to facilitate comparisons between companies that choose



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different measurement attributes for similar types of assets and liabilities. The Statement was effective for financial statements issued for fiscal years
beginning after November 15, 2007. We adopted SFAS 159 on January 1, 2008 and did not elect the fair value option for any financial assets or liabilities as of that date.

The FASB issued SFAS No. 157, Fair Value Measurements, (SFAS 157) in September 2006. SFAS 157 defines fair value,
establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosure related to the use of fair value measures in financial statements. This Statement applies under other accounting pronouncements that
require or permit fair value measurements, and does not expand the use of fair value measures in financial statements, but standardizes its definition and guidance in generally accepted accounting principles. The Statement emphasizes that fair value
is a market-based measurement, and not an entity-specific measurement, based on an exchange transaction between market participants in which an entity sells an asset or transfers a liability. SFAS 157 also establishes a fair value hierarchy from
observable market data as the highest level to fair value based on an entitys own fair value assumptions as the lowest level. The Statement was effective for financial statements issued for fiscal years beginning after November 15, 2007.
The adoption of SFAS 157 on January 1, 2008 did not have a material impact on our consolidated financial statements.

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.



|                                  |  |                                       |        |   |                    |   |                    |         |  |         |        |  |         |        |         |  |   |         |  |   |         |   |  |   |        |   |  |   |        |  
|--------------------------------- |  | ------------------------------------- | ------ | - | ------------------ | - | ------------------ | ------- |  | ------- | ------ |  | ------- | ------ | ------- |  | - | ------- |  | - | ------- | - |  | - | ------ | - |  | - | ------ | -
|                                  |  | 2008QuarterEnded                      |        |   | 2007 Quarter Ended |   | 2006 Quarter Ended |        
|                                  |  | Mar. 31                               |        |   | Dec. 31            |   |                    | Sep. 30 |  | Jun. 30 |        |  | Mar. 31 |        | Dec. 31 |  |   | Sep. 30 |  |   | Jun. 30 |  
|                                  |  | (in thousands, except per share data) |       
|Interest income                   |  | $                                     | 52,654 |   |                    | $ | 56,879             |         |  | $       | 57,483 |  | $       | 56,691 |         |  | $ | 56,006  |  | $ | 57,599  |   |  | $ | 57,393 |   |  | $ | 54,553 |  
|Interest expense                  |  |                                       | 28,180 |   |                    |   | 31,392             |         |  |         | 31,176 |  |         | 30,235 |         |  |   | 29,551  |  |   | 29,970  |   |  |   | 29,305 |   |  |   | 27,097 |  
|                                  |  |                                       |        |   |                    |   |                    |         |  |         |        |  |         |        |         |  |   |         |  |   |         |   |  |   |        |   |  |   |        |  
|Net interest income               |  |                                       | 24,474 |   |                    |   | 25,487             |         |  |         | 26,307 |  |         | 26,456 |         |  |   | 26,455  |  |   | 27,629  |   |  |   | 28,088 |   |  |   | 27,456 |  
|Provision for loan losses         |  |                                       | 11,750 |   |                    |   | 23,000             |         |  |         | 3,400  |  |         | 1,900  |         |  |   | 3,600   |  |   | 900     |   |  |   | 2,100  |   |  |   | 2,100  |  
|Noninterest income                |  |                                       | 3,215  |   |                    |   | 3,612              |         |  |         | 5,404  |  |         | 4,065  |         |  |   | 3,238   |  |   | 4,745   |   |  |   | 3,666  |   |  |   | 3,452  |  
|Other derivative income (expense) |  |                                       | 887    |   |                    |   | 270                |         |  |         | 159    |  |         | (61    | )       |  |   | 24      |  |   | (42     | ) |  |   | 59     |   |  |   | (105   | )
|Noninterest expense               |  |                                       | 21,816 |   |                    |   | 17,515             |         |  |         | 18,059 |  |         | 17,652 |         |  |   | 18,062  |  |   | 18,707  |   |  |   | 18,167 |   |  |   | 18,599 |  
|Goodwill impairment               |  |                                       |       |   |                    |   | 23,237             |         |  |         |       |  |         |       |         |  |   |        |  |   |        |   |  |   |       |   |  |   |       |  
|                                  |  |                                       |        |   |                    |   |                    |         |  |         |        |  |         |        |         |  |   |         |  |   |         |   |  |   |        |   |  |   |        |  
|Income (loss) before income taxes |  |                                       | (4,990 | ) |                    |   | (34,383            | )       |  |         | 10,411 |  |         | 10,908 |         |  |   | 8,055   |  |   | 12,725  |   |  |   | 11,546 |   |  |   | 10,104 |  
|Income taxes (benefit)            |  |                                       | (1,150 | ) |                    |   | (5,118             | )       |  |         | 3,190  |  |         | 3,756  |         |  |   | 2,733   |  |   | 618     |   |  |   | (7,347 | ) |  |   | 3,799  |  
|                                  |  |                                       |        |   |                    |   |                    |         |  |         |        |  |         |        |         |  |   |         |  |   |         |   |  |   |        |   |  |   |        |  
|Net income (loss)                 |  | $                                     | (3,840 | ) |                    | $ | (29,265            | )       |  | $       | 7,221  |  | $       | 7,152  |         |  | $ | 5,322   |  | $ | 12,107  |   |  | $ | 18,893 |   |  | $ | 6,305  |  
|                                  |  |                                       |        |   |                    |   |                    |         |  |         |        |  |         |        |         |  |   |         |  |   |         |   |  |   |        |   |  |   |        |  
|Earnings (loss) per share:        |  |                                       |        |   |                    |   |                    |         |  |         |        |  |         |        |         |  |   |         |  |   |         |   |  |   |        |   |  |   |        |  
|Basic                             |  | $                                     | (0.37  | ) |                    | $ | (2.78              | )       |  | $       | 0.68   |  | $       | 0.65   |         |  | $ | 0.48    |  | $ | 1.10    |   |  | $ | 1.72   |   |  | $ | 0.58   |  
|Diluted                           |  |                                       | (0.37  | ) |                    |   | (2.78              | )       |  |         | 0.67   |  |         | 0.65   |         |  |   | 0.48    |  |   | 1.09    |   |  |   | 1.70   |   |  |   | 0.57   |  
|                                  |  |                                       |        |   |                    |   |                    |         |  |         |        |  |         |        |         |  |   |         |  |   |         |   |  |   |        |   |  |   |        |  



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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 2008 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
decline in residential real estate sales volume and the likely potential for continuing illiquidity in the real estate market, including within the Chicago metropolitan area; the risks associated with the high concentration of commercial real estate
loans in our portfolio; the uncertainties in estimating the fair value of developed real estate and undeveloped land in light of declining demand for such assets and continuing illiquidity in the real estate market; the risks associated with
management changes, employee turnover and our commercial banking growth initiatives; 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 and capital market conditions, interest rates, our debt credit ratings, 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 December 31, 2007 Annual Report on
Form 10-K filed with the SEC on March 13, 2008. You should not place undue reliance on any forward-looking statements. 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.



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|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,
2008. 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 of achieving our
control objectives.

There were no changes in our internal control over financial reporting that occurred during the quarter ended
March 31, 2008, 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 2007 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



|               |  |                                                                                                                                                                                                                                          
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | 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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|               |  |                                                                                                                                                                                                                                                                                                                                                                              
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | 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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##### Table of Contents

|               |  |                                                                                                                                                                                                            
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | 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)).                            
|               | 
|10.54          |  | Agreement and Release among Taylor Capital Group, Inc., Cole Taylor Bank, and Mark Garrigus                                                                                                                
|               | 
|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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##### Table of Contents

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 9, 2008 |  |                                             
|                  | 
|                  |  | /s/ BRUCE W. TAYLOR                         
|                  |  | Bruce W. Taylor                             
|                  |  | Chairman and Chief Executive Officer        
|                  |  | (Principal Executive Officer)               
|                  | 
|                  |  | /s/ ROBIN VANCASTLE                         
|                  |  | Robin VanCastle                             
|                  |  | Chief Financial Officer                     
|                  |  | (Principal Financial and Accounting Officer)



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