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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended September 30, 2003



Commission File No. 0-50034



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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)



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x    No ̈



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



Indicate the number of
outstanding shares of each of the issuers classes of common stock, as of the latest practicable date: At November 5, 2003, there were 9,458,411 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) - September 30, 2003 and December 31, 2002                                             |  | 1   
|                              |  | Consolidated Statements of Income (unaudited) - For the three and nine months ended September 30, 2003 and 2002                |  | 2   
|                              |  | Consolidated Statements of Changes in Stockholders Equity (unaudited) - For the nine months ended September 30, 2003 and 2002 |  | 3   
|                              |  | Statements of Cash Flows (unaudited) - For the nine months ended September 30, 2003 and 2002                                   |  | 4   
|                              |  | Notes to Consolidated Financial Statements (unaudited)                                                                         |  | 6   
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                          |  | 13  
|Item 3.                       |  | Quantitative and Qualitative Disclosure About Market Risks                                                                     |  | 37  
|Item 4.                       |  | Controls and Procedures                                                                                                        |  | 37  
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                               
|                              |  |                                                                                                                               
|Item 1.                       |  | Legal Proceedings                                                                                                              |  | 38  
|Item 2.                       |  | Changes in Securities and Use of Proceeds                                                                                      |  | 38  
|Item 3.                       |  | Defaults Upon Senior Securities                                                                                                |  | 38  
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                                            |  | 38  
|Item 5.                       |  | Other Information                                                                                                              |  | 38  
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                                                               |  | 38  
|                              |  |                                                                                                                               
|                              |  | Signatures                                                                                                                     |  | 40  





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TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands, except share and per share data)



|                                                                                                                                                                                                                                                                  |  | September 30,2003 |           |   | December 31,2002 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | --------- | - | ---------------- | -
|ASSETS                                                                                                                                                                                                                                                            |  |                   |           |   |                  |  
|Cash and cash equivalents:                                                                                                                                                                                                                                        |  |                   |           |   |                  |  
|Cash and due from banks                                                                                                                                                                                                                                           |  | $                 | 77,408    |   |                  | $
|Short-term investments                                                                                                                                                                                                                                            |  |                   | 52        |   |                  |  
|Federal funds sold                                                                                                                                                                                                                                                |  |                   | 57,700    |   |                  |  
|                                                                                                                                                                                                                                                                  |  |                   |           |   |                  |  
|Total cash and cash equivalents                                                                                                                                                                                                                                   |  |                   | 135,160   |   |                  |  
|Investment securities:                                                                                                                                                                                                                                            |  |                   |           |   |                  |  
|Available-for-sale, at fair value                                                                                                                                                                                                                                 |  |                   | 497,549   |   |                  |  
|Held-to-maturity, at amortized cost (fair value of $571 and $884 at September 30, 2003 and December 31, 2002,
respectively)                                                                                                                                       |  |                   | 525       |   |                  |  
|Loans, net of allowance for loan losses of $34,502 and $34,073 at September 30, 2003 and December 31, 2002,
respectively                                                                                                                                          |  |                   | 1,856,281 |   |                  |  
|Premises, leasehold improvements and equipment, net                                                                                                                                                                                                               |  |                   | 21,439    |   |                  |  
|Investment in Federal Home Loan Bank and Federal Reserve Bank stock, at cost                                                                                                                                                                                      |  |                   | 11,924    |   |                  |  
|Other real estate and repossessed assets, net                                                                                                                                                                                                                     |  |                   | 918       |   |                  |  
|Goodwill, net of amortization of $11,696 at September 30, 2003 and December 31, 2002                                                                                                                                                                              |  |                   | 23,354    |   |                  |  
|Other intangible assets, net of amortization of $989 and $700 at September 30, 2003 and December 31, 2002,
respectively                                                                                                                                           |  |                   | 149       |   |                  |  
|Other assets                                                                                                                                                                                                                                                      |  |                   | 47,736    |   |                  |  
|                                                                                                                                                                                                                                                                  |  |                   |           |   |                  |  
|Total assets                                                                                                                                                                                                                                                      |  | $                 | 2,595,035 |   |                  | $
|                                                                                                                                                                                                                                                                  |  |                   |           |   |                  |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                                                              |  |                   |           |   |                  |  
|Deposits:                                                                                                                                                                                                                                                         |  |                   |           |   |                  |  
|Noninterest-bearing                                                                                                                                                                                                                                               |  | $                 | 440,757   |   |                  | $
|Interest-bearing                                                                                                                                                                                                                                                  |  |                   | 1,584,692 |   |                  |  
|                                                                                                                                                                                                                                                                  |  |                   |           |   |                  |  
|Total deposits                                                                                                                                                                                                                                                    |  |                   | 2,025,449 |   |                  |  
|Short-term borrowings                                                                                                                                                                                                                                             |  |                   | 198,645   |   |                  |  
|Accrued interest, taxes and other liabilities                                                                                                                                                                                                                     |  |                   | 37,452    |   |                  |  
|Notes payable and FHLB advances                                                                                                                                                                                                                                   |  |                   | 110,500   |   |                  |  
|Guaranteed preferred beneficial interest in the Companys junior subordinated debentures                                                                                                                                                                          |  |                   | 45,000    |   |                  |  
|                                                                                                                                                                                                                                                                  |  |                   |           |   |                  |  
|Total liabilities                                                                                                                                                                                                                                                 |  |                   | 2,417,046 |   |                  |  
|                                                                                                                                                                                                                                                                  |  |                   |           |   |                  |  
|Stockholders equity:                                                                                                                                                                                                                                             |  |                   |           |   |                  |  
|Preferred stock, $.01 par value, 5,000,000 shares authorized, Series A 9% noncumulative perpetual, 1,530,000 shares issued and
outstanding, $25 stated and redemption value                                                                                       |  |                   | 38,250    |   |                  |  
|Common stock, $.01 par value; 25,000,000 shares authorized; 9,780,818 and 9,733,667 shares issued at September 30, 2003 and
December 31, 2002, respectively; 9,457,811 and 9,410,660 shares outstanding at September 30, 2003 and December 31, 2002, respectively |  |                   | 98        |   |                  |  
|Surplus                                                                                                                                                                                                                                                           |  |                   | 143,257   |   |                  |  
|Unearned compensation  stock grants                                                                                                                                                                                                                              |  |                   | (986      | ) |                  |  
|Retained deficit                                                                                                                                                                                                                                                  |  |                   | (3,167    | ) |                  |  
|Accumulated other comprehensive income                                                                                                                                                                                                                            |  |                   | 7,594     |   |                  |  
|Treasury stock, at cost, 323,007 shares at September 30, 2003 and December 31, 2002                                                                                                                                                                               |  |                   | (7,057    | ) |                  |  
|                                                                                                                                                                                                                                                                  |  |                   |           |   |                  |  
|Total stockholders equity                                                                                                                                                                                                                                        |  |                   | 177,989   |   |                  |  
|                                                                                                                                                                                                                                                                  |  |                   |           |   |                  |  
|Total liabilities and stockholders equity                                                                                                                                                                                                                        |  | $                 | 2,595,035 |   |                  | $
|                                                                                                                                                                                                                                                                  |  |                   |           |   |                  |  



See accompanying notes
to consolidated financial statements



1



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(in thousands, except per share data)



|                                                                                         |  | For the Three Months EndedSeptember 30, |        |   | For the Nine Months EndedSeptember 30, |  
|---------------------------------------------------------------------------------------- |  | --------------------------------------- | ------ | - | -------------------------------------- | -
|                                                                                         |  | 2003                                    |        |   | 2002                                   |  
|Interest income:                                                                         |  |                                         |        |   |                                        |  
|Interest and fees on loans                                                               |  | $                                       | 28,752 |   |                                        | $
|Interest and dividends on investment securities:                                         |  |                                         |        |   |                                        |  
|Taxable                                                                                  |  |                                         | 5,102  |   |                                        |  
|Tax-exempt                                                                               |  |                                         | 571    |   |                                        |  
|Interest on cash equivalents                                                             |  |                                         | 151    |   |                                        |  
|                                                                                         |  |                                         |        |   |                                        |  
|Total interest income                                                                    |  |                                         | 34,576 |   |                                        |  
|                                                                                         |  |                                         |        |   |                                        |  
|Interest expense:                                                                        |  |                                         |        |   |                                        |  
|Deposits                                                                                 |  |                                         | 7,021  |   |                                        |  
|Short-term borrowings                                                                    |  |                                         | 433    |   |                                        |  
|Notes payable and FHLB advances                                                          |  |                                         | 1,148  |   |                                        |  
|Guaranteed preferred beneficial interest in the Companys junior subordinated debentures |  |                                         | 1,254  |   |                                        |  
|                                                                                         |  |                                         |        |   |                                        |  
|Total interest expense                                                                   |  |                                         | 9,856  |   |                                        |  
|                                                                                         |  |                                         |        |   |                                        |  
|Net interest income                                                                      |  |                                         | 24,720 |   |                                        |  
|Provision for loan losses                                                                |  |                                         | 2,700  |   |                                        |  
|                                                                                         |  |                                         |        |   |                                        |  
|Net interest income after provision for loan losses                                      |  |                                         | 22,020 |   |                                        |  
|                                                                                         |  |                                         |        |   |                                        |  
|Noninterest income:                                                                      |  |                                         |        |   |                                        |  
|Service charges                                                                          |  |                                         | 3,129  |   |                                        |  
|Trust and investment management fees                                                     |  |                                         | 1,319  |   |                                        |  
|Gain on sale of investment securities, net                                               |  |                                         |       |   |                                        |  
|Other noninterest income                                                                 |  |                                         | 142    |   |                                        |  
|                                                                                         |  |                                         |        |   |                                        |  
|Total noninterest income                                                                 |  |                                         | 4,590  |   |                                        |  
|                                                                                         |  |                                         |        |   |                                        |  
|Noninterest expense:                                                                     |  |                                         |        |   |                                        |  
|Salaries and employee benefits                                                           |  |                                         | 10,205 |   |                                        |  
|Occupancy of premises                                                                    |  |                                         | 1,912  |   |                                        |  
|Furniture and equipment                                                                  |  |                                         | 895    |   |                                        |  
|Legal fees, net                                                                          |  |                                         | 569    |   |                                        |  
|Advertising and public relations                                                         |  |                                         | 484    |   |                                        |  
|Corporate insurance                                                                      |  |                                         | 782    |   |                                        |  
|Computer processing                                                                      |  |                                         | 494    |   |                                        |  
|Other intangible assets amortization                                                     |  |                                         | 96     |   |                                        |  
|Litigation settlement charge                                                             |  |                                         |       |   |                                        |  
|Other noninterest expense                                                                |  |                                         | 3,568  |   |                                        |  
|                                                                                         |  |                                         |        |   |                                        |  
|Total noninterest expense                                                                |  |                                         | 19,005 |   |                                        |  
|                                                                                         |  |                                         |        |   |                                        |  
|Income (loss) before income taxes                                                        |  |                                         | 7,605  |   |                                        |  
|Income taxes                                                                             |  |                                         | 2,013  |   |                                        |  
|                                                                                         |  |                                         |        |   |                                        |  
|Net income (loss)                                                                        |  | $                                       | 5,592  |   |                                        | $
|                                                                                         |  |                                         |        |   |                                        |  
|Preferred dividend requirements                                                          |  |                                         | (861   | ) |                                        |  
|                                                                                         |  |                                         |        |   |                                        |  
|Net income (loss) applicable to common stockholders                                      |  | $                                       | 4,731  |   |                                        | $
|                                                                                         |  |                                         |        |   |                                        |  
|Basic earnings (loss) per common share                                                   |  | $                                       | 0.50   |   |                                        | $
|Diluted earnings (loss) per common share                                                 |  |                                         | 0.50   |   |                                        |  
|                                                                                         |  |                                         |        |   |                                        |  



See accompanying notes
to consolidated financial statements



2



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TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (unaudited)

(in thousands, except per share data)



|                                                                                                                                |  | Series A 9%NoncumulativePerpetualPreferredStock |        | CommonStock |   | Surplus |  |   | UnearnedCompensation -Stock Grants |   |  | RetainedEarnings(Deficit) |        |   | AccumulatedOtherComprehensiveIncome |   |         | TreasuryStock |  |   | Total  |  
|------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------- | ------ | ----------- | - | ------- |  | - | ---------------------------------- | - |  | ------------------------- | ------ | - | ----------------------------------- | - | ------- | ------------- |  | - | ------ | -
|Balance at December 31, 2002                                                                                                    |  | $                                               | 38,250 |             | $ | 97      |  | $ | 142,008                            |   |  | $                         | (1,088 | ) |                                     | $ | (15,140 | )             |  | $ | 11,667 |  
|Issuance of stock grants                                                                                                        |  |                                                 |       |             |   |        |  |   | 321                                |   |  |                           | (321   | ) |                                     |   |        |               |  |   |       |  
|Forfeiture of stock grants                                                                                                      |  |                                                 |       |             |   |        |  |   | (129                               | ) |  |                           | 60     |   |                                     |   |        |               |  |   |       |  
|Amortization of stock grants                                                                                                    |  |                                                 |       |             |   |        |  |   |                                   |   |  |                           | 363    |   |                                     |   |        |               |  |   |       |  
|Exercise of stock options                                                                                                       |  |                                                 |       |             |   | 1       |  |   | 984                                |   |  |                           |       |   |                                     |   |        |               |  |   |       |  
|Tax benefit on stock options exercised and stock awards                                                                         |  |                                                 |       |             |   |        |  |   | 73                                 |   |  |                           |       |   |                                     |   |        |               |  |   |       |  
|Comprehensive income:                                                                                                           |  |                                                 |        |             |   |         |  |   |                                    |   |  |                           |        |   |                                     |   |         |               |  |   |        |  
|Net income                                                                                                                      |  |                                                 |       |             |   |        |  |   |                                   |   |  |                           |       |   |                                     |   | 16,256  |               |  |   |       |  
|Change in unrealized gains on available-for-sale investment securities, net of income taxes                                     |  |                                                 |       |             |   |        |  |   |                                   |   |  |                           |       |   |                                     |   |        |               |  |   | (6,039 | )
|Changes in unrealized gains from cash flow hedging instruments, net of income taxes                                             |  |                                                 |       |             |   |        |  |   |                                   |   |  |                           |       |   |                                     |   |        |               |  |   | 1,966  |  
|                                                                                                                                |  |                                                 |        |             |   |         |  |   |                                    |   |  |                           |        |   |                                     |   |         |               |  |   |        |  
|Total comprehensive income                                                                                                      |  |                                                 |        |             |   |         |  |   |                                    |   |  |                           |        |   |                                     |   |         |               |  |   |        |  
|                                                                                                                                |  |                                                 |        |             |   |         |  |   |                                    |   |  |                           |        |   |                                     |   |         |               |  |   |        |  
|Dividends:                                                                                                                      |  |                                                 |        |             |   |         |  |   |                                    |   |  |                           |        |   |                                     |   |         |               |  |   |        |  
|Preferred  $1.6875 per share                                                                                                   |  |                                                 |       |             |   |        |  |   |                                   |   |  |                           |       |   |                                     |   | (2,582  | )             |  |   |       |  
|Common  $0.18 per share                                                                                                        |  |                                                 |       |             |   |        |  |   |                                   |   |  |                           |       |   |                                     |   | (1,701  | )             |  |   |       |  
|                                                                                                                                |  |                                                 |        |             |   |         |  |   |                                    |   |  |                           |        |   |                                     |   |         |               |  |   |        |  
|Balance at September 30, 2003                                                                                                   |  | $                                               | 38,250 |             | $ | 98      |  | $ | 143,257                            |   |  | $                         | (986   | ) |                                     | $ | (3,167  | )             |  | $ | 7,594  |  
|                                                                                                                                |  |                                                 |        |             |   |         |  |   |                                    |   |  |                           |        |   |                                     |   |         |               |  |   |        |  
|                                                                                                                                |  |                                                 |        |             |   |         |  |  
|Balance at December 31, 2001                                                                                                    |  | $                                               | 38,250 |             | $ | 71      |  | $ | 102,253                            |   |  | $                         | (655   | ) |                                     | $ | 31,511  |               |  | $ | 4,826  |  
|Issuance of stock grants                                                                                                        |  |                                                 |       |             |   |        |  |   | 950                                |   |  |                           | (950   | ) |                                     |   |        |               |  |   |       |  
|Forfeiture of stock grants                                                                                                      |  |                                                 |       |             |   |        |  |   | (113                               | ) |  |                           | 24     |   |                                     |   |        |               |  |   |       |  
|Amortization of stock grants                                                                                                    |  |                                                 |       |             |   |        |  |   |                                   |   |  |                           | 323    |   |                                     |   |        |               |  |   |       |  
|Exercise of stock options                                                                                                       |  |                                                 |       |             |   |        |  |   | 331                                |   |  |                           |       |   |                                     |   |        |               |  |   |       |  
|Tax benefit on stock options exercised and stock awards                                                                         |  |                                                 |       |             |   |        |  |   | 54                                 |   |  |                           |       |   |                                     |   |        |               |  |   |       |  
|Purchase of treasury stock                                                                                                      |  |                                                 |       |             |   |        |  |   |                                   |   |  |                           |       |   |                                     |   |        |               |  |   |       |  
|Comprehensive income:                                                                                                           |  |                                                 |        |             |   |         |  |   |                                    |   |  |                           |        |   |                                     |   |         |               |  |   |        |  
|Net loss                                                                                                                        |  |                                                 |       |             |   |        |  |   |                                   |   |  |                           |       |   |                                     |   | (45,330 | )             |  |   |       |  
|Change in unrealized gains on available-for-sale investment securities, net of reclassification adjustment, net of income
taxes |  |                                                 |       |             |   |        |  |   |                                   |   |  |                           |       |   |                                     |   |        |               |  |   | 6,599  |  
|                                                                                                                                |  |                                                 |        |             |   |         |  |   |                                    |   |  |                           |        |   |                                     |   |         |               |  |   |        |  
|Total comprehensive loss                                                                                                        |  |                                                 |        |             |   |         |  |   |                                    |   |  |                           |        |   |                                     |   |         |               |  |   |        |  
|                                                                                                                                |  |                                                 |        |             |   |         |  |   |                                    |   |  |                           |        |   |                                     |   |         |               |  |   |        |  
|Dividends:                                                                                                                      |  |                                                 |        |             |   |         |  |   |                                    |   |  |                           |        |   |                                     |   |         |               |  |   |        |  
|Preferred  $1.6875 per share                                                                                                   |  |                                                 |       |             |   |        |  |   |                                   |   |  |                           |       |   |                                     |   | (2,582  | )             |  |   |       |  
|Common  $0.18 per share                                                                                                        |  |                                                 |       |             |   |        |  |   |                                   |   |  |                           |       |   |                                     |   | (1,229  | )             |  |   |       |  
|                                                                                                                                |  |                                                 |        |             |   |         |  |   |                                    |   |  |                           |        |   |                                     |   |         |               |  |   |        |  
|Balance at September 30, 2002                                                                                                   |  | $                                               | 38,250 |             | $ | 71      |  | $ | 103,475                            |   |  | $                         | (1,258 | ) |                                     | $ | (17,630 | )             |  | $ | 11,425 |  
|                                                                                                                                |  |                                                 |        |             |   |         |  |   |                                    |   |  |                           |        |   |                                     |   |         |               |  |   |        |  



See accompanying notes
to consolidated financial statements



3



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)



|                                                                                         |  | For the Nine Months EndedSeptember 30, |         
|---------------------------------------------------------------------------------------- |  | -------------------------------------- | --------
|                                                                                         |  | 2003                                   |         
|Cash flows from operating activities:                                                    |  |                                        |         
|Net income (loss)                                                                        |  | $                                      | 16,256  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                                        |         
|Accrued litigation settlement charge                                                     |  |                                        |        
|Investment securities gains, net                                                         |  |                                        |        
|Amortization of premiums and discounts, net                                              |  |                                        | 647     
|Deferred loan fee amortization                                                           |  |                                        | (1,560  
|Provision for loan losses                                                                |  |                                        | 6,533   
|Loss on sales of loans originated for sale                                               |  |                                        |        
|Proceeds from sales of loans originated for sale                                         |  |                                        |        
|Depreciation and amortization                                                            |  |                                        | 2,717   
|Amortization of intangible assets                                                        |  |                                        | 289     
|Deferred income taxes                                                                    |  |                                        | (3,020  
|(Gain) loss on sales of other real estate                                                |  |                                        | (79     
|Gain on sale of credit card loans                                                        |  |                                        | (140    
|Gain on sale of trust business                                                           |  |                                        |        
|Other, net                                                                               |  |                                        | (84     
|Changes in other assets and liabilities:                                                 |  |                                        |         
|Accrued interest receivable                                                              |  |                                        | (660    
|Other assets                                                                             |  |                                        | 1,727   
|Accrued interest, taxes and other liabilities                                            |  |                                        | 5,335   
|                                                                                         |  |                                        |         
|Net cash provided by operating activities                                                |  |                                        | 27,961  
|                                                                                         |  |                                        |         
|Cash flows from investing activities:                                                    |  |                                        |         
|Purchases of available-for-sale securities                                               |  |                                        | (212,117
|Proceeds from principal payments and maturities of available-for-sale securities         |  |                                        | 205,412 
|Proceeds from principal payments and maturities of held-to-maturity securities           |  |                                        | 300     
|Proceeds from sales of available-for-sale securities                                     |  |                                        |        
|Net increase in loans                                                                    |  |                                        | (18,256 
|Sale of credit card loans                                                                |  |                                        | 1,259   
|Net additions to premises, leasehold improvements and equipment                          |  |                                        | (5,066  
|Proceeds from sales of other real estate                                                 |  |                                        | 1,069   
|                                                                                         |  |                                        |         
|Net cash used in investing activities                                                    |  |                                        | (27,399 
|                                                                                         |  |                                        |         
|Cash flows from financing activities:                                                    |  |                                        |         
|Net increase in deposits                                                                 |  |                                        | 61,700  
|Net decrease in short-term borrowings                                                    |  |                                        | (16,715 
|Proceeds from notes payable and FHLB advances                                            |  |                                        | 15,000  
|Repayments of notes payable and FHLB advances                                            |  |                                        | (15,000 
|Proceeds from exercise of employee stock options                                         |  |                                        | 985     
|Purchase of treasury stock                                                               |  |                                        |        
|Dividends paid                                                                           |  |                                        | (4,281  
|                                                                                         |  |                                        |         
|Net cash provided by financing activities                                                |  |                                        | 41,689  
|                                                                                         |  |                                        |         
|Net increase in cash and cash equivalents                                                |  |                                        | 42,251  
|Cash and cash equivalents, beginning of period                                           |  |                                        | 92,909  
|                                                                                         |  |                                        |         
|Cash and cash equivalents, end of period                                                 |  | $                                      | 135,160 
|                                                                                         |  |                                        |         



Consolidated Statements
of Cash Flows continued on next page

See accompanying notes to consolidated financial statements



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

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

(in thousands)



|                                                                              |  | For the Nine Months EndedSeptember 30,
|----------------------------------------------------------------------------- |  | --------------------------------------
|                                                                              |  | 2003                                  
|Supplemental disclosure of cash flow information:                             |  |                                       
|Cash paid during the period for:                                              |  |                                       
|Interest                                                                      |  | $                                     
|Income taxes                                                                  |  |                                       
|                                                                              |  |                                       
|Supplemental disclosures of noncash investing and financing activities:       |  |                                       
|Other comprehensive income (loss), net of tax                                 |  | $                                     
|Tax benefit associated with exercise of common stock options and stock grants |  |                                       



See accompanying notes
to consolidated financial statements



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



1. Basis of Presentation:



These financial statements contain unaudited information as of September 30, 2003 and for
the three and nine month periods ended September 30, 2003 and 2002. 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, consisting only of normal recurring adjustments, necessary
for a fair presentation of the information when read in conjunction with the Companys audited financial statements and the related notes. The income statement data for the three and nine month periods ended September 30, 2003 are not
necessarily indicative of the results that the Company may achieve for the full year.



Amounts in the prior years 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 September 30, 2003 and December 31, 2002 were as follows:



|                                    |  | September 30, 2003
|----------------------------------- |  | ------------------
|                                    |  | AmortizedCost     
|                                    |  | (in thousands)    
|Available-for-sale:                 |  |                   
|U.S. government agency securities   |  | $                 
|Collateralized mortgage obligations |  |                   
|Mortgage-backed securities          |  |                   
|State and municipal obligations     |  |                   
|                                    |  |                   
|Total available-for-sale            |  |                   
|                                    |  |                   
|Held-to-maturity:                   |  |                   
|Other debt securities               |  |                   
|                                    |  |                   
|Total held-to-maturity              |  |                   
|                                    |  |                   
|Total                               |  | $                 
|                                    |  |                   



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TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)



|                                    |  | December 31, 2002
|----------------------------------- |  | -----------------
|                                    |  | AmortizedCost    
|                                    |  | (in thousands)   
|Available-for-sale:                 |  |                  
|U.S. government agency securities   |  | $                
|Collateralized mortgage obligations |  |                  
|Mortgage-backed securities          |  |                  
|State and municipal obligations     |  |                  
|                                    |  |                  
|Total available-for-sale            |  |                  
|                                    |  |                  
|Held-to-maturity:                   |  |                  
|Other debt securities               |  |                  
|                                    |  |                  
|Total held-to-maturity              |  |                  
|                                    |  |                  
|Total                               |  | $                
|                                    |  |                  



There were no gains or losses realized
on the sale of available-for-sale investment securities during the nine months ended September 30, 2003. During the nine month period ended September 30, 2002, gross gains totaling $2.1 million were realized on the sale of available-for-sale
investment securities, while no losses were realized.



Investment securities do
not include the Banks investment in Federal Home Loan Bank (FHLB), and Federal Reserve Bank stock of $11.9 million and $11.0 million at September 30, 2003 and December 31, 2002, respectively. These investments are required for
membership and are carried at cost.



3.
Loans:



Loans classified by type at September 30, 2003 and December 31,
2002 were as follows:



|                                      |  | Sept. 30,2003  |           |   | Dec. 31,2002 |  
|------------------------------------- |  | -------------- | --------- | - | ------------ | -
|                                      |  | (in thousands) |          
|Commercial and industrial             |  | $              | 564,772   |   |              | $
|Commercial real estate                |  |                | 603,236   |   |              |  
|Real estate-construction              |  |                | 330,782   |   |              |  
|Residential real estate mortgages     |  |                | 94,432    |   |              |  
|Home equity loans and lines of credit |  |                | 269,697   |   |              |  
|Consumer                              |  |                | 26,303    |   |              |  
|Other loans                           |  |                | 1,919     |   |              |  
|                                      |  |                |           |   |              |  
|Gross loans                           |  |                | 1,891,141 |   |              |  
|Less: Unearned discount               |  |                | (358      | ) |              |  
|                                      |  |                |           |   |              |  
|Total loans                           |  |                | 1,890,783 |   |              |  
|Less: Allowance for loan losses       |  |                | (34,502   | ) |              |  
|                                      |  |                |           |   |              |  
|Loans, net                            |  | $              | 1,856,281 |   |              | $
|                                      |  |                |           |   |              |  



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)



Nonaccrual and impaired loans at September 30, 2003 were $14.3 million and $31.2 million, respectively, as compared
to $12.1 million and $16.9 million at December 31, 2002, respectively.



4. Goodwill and Intangible Assets



As
of September 30, 2003, the Company had $23.4 million of goodwill, created from the 1997 acquisition of the Bank, which as of January 1, 2002 was no longer subject to amortization. The goodwill was tested for impairment as of July 1, 2003, and no
impairment charge was determined to be necessary. Goodwill will continue to be tested annually for impairment, and if at any time impairment exists, an impairment loss will be recorded. No additions, disposals, or impairment charges were recorded to
goodwill during the first nine months of 2003.



At September 30, 2003, the
Company also had $149,000 of other intangible assets that relate to the purchase of lines of trust business. The gross carrying amount totaled $1.1 million as of September 30, 2003 with accumulated amortization of $989,000. Amortization expense for
these intangible assets was $289,000 during the first nine months of 2003. The estimated amortization expense for these assets is expected to be $81,000 for the period of October 1, 2003 to December 31, 2003 and $13,000 annually for the years ended
December 31, 2004, 2005, 2006, and 2007.



5.
Interest-Bearing Deposits:



Interest-bearing deposits at September 30,
2003 and December 31, 2002 were as follows:



|                                 |  | Sept. 30,2003  |           | Dec. 31,2002
|-------------------------------- |  | -------------- | --------- | ------------
|                                 |  | (in thousands)
|NOW accounts                     |  | $              | 142,678   |             
|Savings accounts                 |  |                | 90,336    |             
|Money market deposits            |  |                | 416,765   |             
|Certificates of deposit          |  |                | 578,707   |             
|Public time deposits             |  |                | 60,190    |             
|Brokered certificates of deposit |  |                | 296,016   |             
|                                 |  |                |           |             
|Total                            |  | $              | 1,584,692 |             
|                                 |  |                |           |             



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)



6. Notes Payable and FHLB Advances:



Notes payable and FHLB advances at September 30, 2003 and December 31, 2002 consisted of the
following:



|                                                                                                                                                                                                                                      |  | Sept. 30,2003  |         | Dec. 31,2002
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | ------------
|                                                                                                                                                                                                                                      |  | (in thousands)
|Taylor Capital Group, Inc.:                                                                                                                                                                                                           |  |                |         |             
|Subordinated Debt  interest, at the Companys election, at prime rate plus 2.50% or LIBOR plus 2.75%; interest rates at
September 30, 2003 and December 31, 2002 were 3.89% and 4.17%, respectively; matures on November 27, 2009    |  | $              | 10,000  |             
|Term Loan  interest, at the Companys election, at the prime rate or LIBOR plus 1.15%, with a minimum interest rate of
3.50%; interest rate was 3.50% at both September 30, 2003 and December 31, 2002; matures on November 27, 2009 |  |                | 500     |             
|Revolving Credit Facility  $11.5 million maximum available; interest, at the Companys election, at the prime rate or
LIBOR plus 1.15%, with a minimum interest rate of 3.50%; matures November 27, 2003                             |  |                |        |             
|                                                                                                                                                                                                                                      |  |                |         |             
|Total notes payable                                                                                                                                                                                                                   |  |                | 10,500  |             
|                                                                                                                                                                                                                                      |  |               
|Cole Taylor Bank:                                                                                                                                                                                                                     |  |                |         |             
|FHLB advance  4.30%, due January 8, 2011, callable after January 8, 2002                                                                                                                                                             |  |                | 25,000  |             
|FHLB advance  4.55%, due January 8, 2011, callable after January 8, 2003                                                                                                                                                             |  |                | 25,000  |             
|FHLB advance  4.83%, due February 1, 2011, callable after January 8, 2004                                                                                                                                                            |  |                | 25,000  |             
|FHLB advance  3.94%, due November 23, 2004                                                                                                                                                                                           |  |                | 10,000  |             
|FHLB advance  1.50%, due January 29, 2004                                                                                                                                                                                            |  |                | 15,000  |             
|FHLB advance  2.66%, due January 29, 2003                                                                                                                                                                                            |  |                |        |             
|                                                                                                                                                                                                                                      |  |                |         |             
|Total FHLB advances                                                                                                                                                                                                                   |  |                | 100,000 |             
|                                                                                                                                                                                                                                      |  |                |         |             
|Total notes payable and FHLB advances                                                                                                                                                                                                 |  | $              | 110,500 |             
|                                                                                                                                                                                                                                      |  |                |         |             



The notes payable require compliance
with certain defined financial covenants. As of September 30, 2003, the Company is in compliance with these covenants.



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)



7. Comprehensive Income:



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



|                                                                   |  | BeforeTaxAmount        |        |   | TaxEffect |   |        | Net ofTax | 
|------------------------------------------------------------------ |  | ---------------------- | ------ | - | --------- | - | ------ | --------- | 
|                                                                   |  | (dollars in thousands) |       
|For the Nine Months Ended September 30, 2003:                      |  |                        |        |   |           |   |        |           | 
|Unrealized gain from securities:                                   |  |                        |        |   |           |   |        |           | 
|Change in unrealized gains on available-for-sale securities        |  | $                      | (9,289 | ) |           | $ | 3,250  |           | 
|Changes in unrealized gains from cash flow hedging instruments     |  |                        | 3,025  |   |           |   | (1,059 | )         | 
|                                                                   |  |                        |        |   |           |   |        |           | 
|Other comprehensive loss, net of tax                               |  | $                      | (6,264 | ) |           | $ | 2,191  |           | 
|                                                                   |  |                        |        |   |           |   |        |           | 
|                                                                   |  |                        |       
|For the Nine Months Ended September 30, 2002:                      |  |                        |        |   |           |   |        |           | 
|Unrealized gain from securities:                                   |  |                        |        |   |           |   |        |           | 
|Change in unrealized gains on available-for-sale securities        |  | $                      | 12,228 |   |           | $ | (4,280 | )         | 
|Less: reclassification adjustment for gains included in net income |  |                        | (2,076 | ) |           |   | 727    |           | 
|                                                                   |  |                        |        |   |           |   |        |           | 
|Other comprehensive income, net of tax                             |  | $                      | 10,152 |   |           | $ | (3,553 | )         | 
|                                                                   |  |                        |        |   |           |   |        |           | 



8.
Earnings per Share



The following table sets forth the computation of
basic and diluted earnings per common share. Stock options are the only common stock equivalents. Before the initial public offering in October 2002, the Companys common stock was not publicly traded. The estimated market value of the common
shares before the initial public offering was based upon semiannual independent third party appraisals prepared in connection with the employee benefit plans.



Stock options outstanding to purchase 122,970 common shares for the nine months ended September 30, 2003 were not included in the computation of diluted earnings per
share because the effect would have been antidilutive. All stock options were included in the computation of diluted earnings per share for the third quarter of 2003. Stock options outstanding to purchase 504,454 common shares were not included in
the computation of diluted earnings per share for the third quarter of 2002 because the effect would have been antidilutive. Because of the net loss during the nine month period ending September 30, 2002, there is no dilutive effect of stock options
for diluted earnings per share.



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)



|                                                   |  | For the Three Months EndedSeptember 30,            |           |   | For the Nine Months EndedSeptember 30, |  
|-------------------------------------------------- |  | -------------------------------------------------- | --------- | - | -------------------------------------- | -
|                                                   |  | 2003                                               |           |   | 2002                                   |  
|                                                   |  | (in thousands, except share and per share amounts) |          
|Net income (loss)                                  |  | $                                                  | 5,592     |   |                                        | $
|Less preferred dividend requirements               |  |                                                    | (861      | ) |                                        |  
|                                                   |  |                                                    |           |   |                                        |  
|Net income (loss) available to common stockholders |  | $                                                  | 4,731     |   |                                        | $
|                                                   |  |                                                    |           |   |                                        |  
|Weighted average common shares outstanding         |  |                                                    | 9,454,466 |   |                                        |  
|Dilutive effect of stock options                   |  |                                                    | 90,922    |   |                                        |  
|                                                   |  |                                                    |           |   |                                        |  
|Diluted weighted average common shares outstanding |  |                                                    | 9,545,388 |   |                                        |  
|                                                   |  |                                                    |           |   |                                        |  
|Basic earnings (loss) per common share             |  | $                                                  | 0.50      |   |                                        | $
|Diluted earnings (loss) per common share           |  |                                                    | 0.50      |   |                                        |  
|                                                   |  |                                                    |           |   |                                        |  



9.
Stock-based Compensation



The Company accounts for the stock-based
compensation plans under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. For the stock option program, no compensation cost is recognized in connection with the granting of stock options with an
exercise price equal to the fair market value of the stock on the date of the grant. For the restricted stock program, the Company uses the fixed method of accounting and records compensation expense, over the vesting period of the grant, based upon
the fair market value of the stock at the date of grant. In accordance with the disclosure requirements of Statement of Financial Accounting Standard, or SFAS, No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148,
Accounting for Stock-Based CompensationTransition and DisclosureAn amendment of FASB Statement No. 123, the following table provides the pro forma effect on net income and earnings per share if the fair value method of
accounting for stock-based compensation had been used for all awards:



|                                                                                                                                          |  | For the ThreeMonths EndedSeptember 30, |       |   | For the NineMonths EndedSeptember 30, |  
|----------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------- | ----- | - | ------------------------------------- | -
|(in thousand, except per share amounts)                                                                                                   |  | 2003                                   |       |   | 2002                                  |  
|Net income (loss) as reported                                                                                                             |  | $                                      | 5,592 |   |                                       | $
|Add: Stock-based compensation, net of tax, included in the determination of net income, as reported                                       |  |                                        | 30    |   |                                       |  
|Deduct: Stock-based compensation, net of tax, that would have been reported if the fair value based method had been applied to all
awards |  |                                        | (142  | ) |                                       |  
|                                                                                                                                          |  |                                        |       |   |                                       |  
|Pro forma net income (loss)                                                                                                               |  | $                                      | 5,480 |   |                                       | $
|                                                                                                                                          |  |                                        |       |   |                                       |  
|Basic earnings (loss) per common share                                                                                                    |  |                                        |       |   |                                       |  
|As reported                                                                                                                               |  | $                                      | 0.50  |   |                                       | $
|Pro forma                                                                                                                                 |  |                                        | 0.49  |   |                                       |  
|Diluted earnings (loss) per common share                                                                                                  |  |                                        |       |   |                                       |  
|As reported                                                                                                                               |  | $                                      | 0.50  |   |                                       | $
|Pro forma                                                                                                                                 |  |                                        | 0.48  |   |                                       |  



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)



10. Derivative Financial Instruments



The Company uses derivative financial instruments to assist in interest rate risk
management. At both September 30, 2003 and December 31, 2002, the only derivative financial instruments outstanding were interest rate exchange agreements.



The following table sets forth the activity in the notional amounts of derivative financial instruments during the first nine months of 2003.



|(in thousands)               |  | FairValueHedge |        | Cash FlowHedge |   | Total  
|---------------------------- |  | -------------- | ------ | -------------- | - | -------
|Balance at Dec. 31, 2002     |  | $              | 25,000 |                | $ |       
|Additions                    |  |                | 25,000 |                |   | 200,000
|Terminations                 |  |                |       |                |   |       
|Maturities                   |  |                |       |                |   |       
|                             |  |                |        |                |   |        
|Balance at Sept. 30, 2003    |  | $              | 50,000 |                | $ | 200,000
|                             |  |                |        |                |   |        
|Fair value at Sept. 30, 2003 |  | $              | 83     |                | $ | 3,025  
|                             |  |                |        |                |   |        



Below is summary information regarding
the derivative financial instruments outstanding at September 30, 2003.



|                 |  | NotionalAmount(in thousands) |             | Weighted Averages |      | Hedged Item
|---------------- |  | ---------------------------- | ----------- | ----------------- | ---- | -----------
|                 |  |                              | ReceiveRate |                   |      | Pay Rate   
|Fair Value Hedge |  | $                            | 50,000      |                   | 3.06 | %          
|Cash Flow Hedge  |  |                              | 200,000     |                   | 6.14 | %          
|                 |  |                              |             |                   |      |            
|Total            |  | $                            | 250,000     |                   | 5.52 | %          
|                 |  |                              |             |                   |      |            



In the fair value hedges, the Company
receives a fixed rate and pays a variable rate based upon LIBOR to hedge changes in the fair value of $50.0 million of brokered certificates of deposit. In the cash flow hedges, the Company receives a fixed rate and pays a variable rate based upon
the prime lending rate to hedge the variability of interest receipts on $200.0 million of variable rate commercial loans. In October 2003, the interest rate swaps designated as cash flow hedges of interest receipts on variable rate commercial loans
were terminated with the original counter-parties. The resulting gain on termination, which totaled $1.4 million, will be recognized as an adjustment to interest income over the remaining term of the original swaps.



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS



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



We are a bank holding company headquartered in Rosemont, Illinois, a suburb of Chicago. We derive virtually all of our revenue from our
commercial bank subsidiary, Cole Taylor Bank. We provide a range of products and services to our commercial and consumer customers and currently operate 10 branches throughout the Chicago metropolitan area.



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 Form 10-Q and our December 31, 2002
Annual Report on Form 10-K which contain audited financial statements of Taylor Capital Group, Inc. as of December 31, 2002 and 2001 and for each of the years in the three-year period ended December 31, 2002.



OVERVIEW



We recorded net income for the quarter ended September 30, 2003 of $5.6 million, or $0.50 per diluted common share, compared to $8.9 million
for the third quarter during 2002, or $1.17 per diluted common share. Net income during the third quarter of 2002 included a $2.6 million adjustment to reduce the litigation settlement charge relating to our acquisition of Cole Taylor Bank from the
estimated amount to the amount actually paid. Excluding the $2.6 million adjustment to the litigation settlement charge, net income in third quarter of 2002 would have been $6.3 million, or $0.79 per diluted common share. Net income during the third
quarter of 2003 was $688,000, or 11.0%, lower than pro forma net income during the third quarter of 2002.



For the nine months ended September 30, 2003, net income was $16.3 million, or $1.44 per diluted common share, compared to a net loss of $45.3 million, or $7.01 per common share, during the same nine-month period in
2002. Excluding the $61.9 million litigation settlement charge in 2002, we would have recorded net income for the first nine months of 2002 of $16.6 million or $2.04 per diluted common share. In comparison, year-to-date 2003 net income would have
decreased by $314,000, or 1.9%, as compared to 2002 pro forma net income.



For
both the quarterly and year-to-date periods, the lower level in net income in 2003, as compared to pro forma 2002 net income, was caused by lower net interest income and noninterest income. The decline in diluted earnings per share during both the
quarterly and year-to-date comparisons was a result of both the lower net income and the increase in the number of common shares outstanding. In October 2002, we issued 2,587,500 additional shares in our initial public offering.



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



Management uses certain non-GAAP financial measures and ratios to evaluate the Companys performance.
Specifically, management reviews net income and the related earnings per share amounts excluding the $61.9 million litigation settlement charge. We believe that excluding this non-recurring charge from both net income and earnings per share presents
a more suitable comparison of our period-to-period results because of the extraordinary nature of the litigation that led to the settlement charge and the likelihood that such events will not reoccur. The following table reconciles net income as
reported under generally accepted accounting principles, or GAAP, on the consolidated statements of income to the non-GAAP pro forma net income.



|                                  |  | For The Three Months Ended September 30, |       |      | For The Nine Months Ended September 30, |       
|--------------------------------- |  | ---------------------------------------- | ----- | ---- | --------------------------------------- | ------
|                                  |  | 2003                                     |       | 2002 |                                         |       
|                                  |  | (dollars in thousands)                   |      
|Net income (loss) - as stated     |  | $                                        | 5,592 |      | $                                       | 8,889 
|Add (subtract) back:              |  |                                          |       |      |                                         |       
|Litigation settlement charge      |  |                                          |      |      |                                         | (2,609
|                                  |  |                                          |       |      |                                         |       
|Pro forma net income              |  | $                                        | 5,592 |      | $                                       | 6,280 
|                                  |  |                                          |       |      |                                         |       
|Earnings (loss) per common share: |  |                                          |       |      |                                         |       
|Basic - as stated                 |  | $                                        | 0.50  |      | $                                       | 1.18  
|Diluted - as stated               |  |                                          | 0.50  |      |                                         | 1.17  
|                                  |  |                                          |       |     
|Basic - pro forma                 |  | $                                        | 0.50  |      | $                                       | 0.80  
|Diluted - pro forma               |  |                                          | 0.50  |      |                                         | 0.79  



Total assets were $2.60 billion at
September 30, 2003, an increase of $59.6 million, or 2.4%, over total assets at December 31, 2002. At September 30, 2003, total loans were $1.89 billion, an increase of $11.3 million, or 0.6%, as compared to December 31, 2002. Total deposits were
$2.03 billion at September 30, 2003, an increase of $61.7 million, or 3.1%, from the $1.96 billion of deposits at year-end 2002. Stockholders equity was $178.0 million at September 30, 2003 compared to $168.7 million at December 31, 2002.



RESULTS OF OPERATIONS



Net Interest Income



Net interest income is the difference between total interest income 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 and the level of rates earned or paid on those assets and liabilities.



14



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



Three Months Ended September 30, 2003 as Compared to the Three Months Ended September 30, 2002. Net interest
income was $24.7 million during the third quarter of 2003 compared to $26.0 million during the same quarter in 2002, a decrease of $1.3 million or 4.9%. With an adjustment for tax-exempt income, our consolidated net interest income for the third
quarter of 2003 was $25.1 million as compared to $26.4 million during the same quarter a year ago, a decrease of $1.3 million, or 5.1%. Our net interest income has declined because of compression in our net interest margin, despite an increase in
average interest-earning assets.



The net interest margin, which is determined
by dividing taxable equivalent net interest income by average interest-earning assets, was 4.04% during the third quarter of 2003 compared to 4.50% during the same quarter in 2002. The continued low interest rate environment has had a negative
impact on our net interest margin and therefore, net interest income. The volume of our interest-earnings assets that have repriced lower has exceeded the volume of our interest-bearing liabilities that have repriced. The low interest rates have
caused the yield on our interest-earning assets to decline as we reinvest cash flows from loan and securities repayments at lower interest rates. The yield on interest-earning assets declined 78 basis points from 6.40% during the third quarter of
2002 to 5.62% during the third quarter of 2003. While the yield on our interest-earning assets has continued to decline, the cost of our interest-bearing liabilities has not declined as much. We believe this has occurred because many of our
interest-bearing liability rates may have already reached their lowest likely levels based on current market-rate pricing. The cost of interest-bearing liabilities declined 40 basis points from 2.38% during the third quarter of 2002 to 1.98% during
the third quarter of 2003. In addition, the $45.0 million of 9.75% junior subordinated debentures that we issued in October 2002 caused the tax equivalent net interest margin to decline approximately 20 basis points.



The larger decline in the earning asset yield as compared to the cost of interest-bearing
liabilities also caused the tax equivalent net interest spread, which is the difference between the weighted average yield on interest-earning assets and the rate paid on interest-bearing liabilities, to decrease. The tax equivalent net interest
spread was 3.64% in the third quarter of 2003 as compared to 4.02% during the same quarter a year ago.



Average interest-earning assets were $2.47 billion during the third quarter of 2003 compared to $2.34 billion during the same quarter in 2002, an increase of $134.3 million, or 5.7%. The higher volume of
interest-earning assets during the third quarter of 2003 was produced by higher average loan balances, which increased $87.9 million, or 4.9%, to $1.90 billion, and cash equivalent balances, which increased $34.5 million to $62.5 million during the
third quarter of 2003. Higher average commercial and commercial real estate loans produced most of the loan growth, as these average loan balances grew by $182.8 million, or 14.0%, to $1.49 billion in the third quarter of 2003 as compared to $1.30
billion in the same quarter in 2002. As anticipated, average loan balances in the residential mortgage, home equity and consumer portfolios declined. While average balances have increased, the yield on the loan portfolio has continued to decline.
The yield on loans declined 62 basis points between the two quarterly periods to 6.02% during the third quarter of 2003 as compared to 6.64% during the same quarter a year ago. Most of the asset growth was funded with interest-bearing deposit
balances, with time deposit balances accounting for most of the increase. Time deposit balances increased to $961.0 million



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



during the third quarter of 2003 compared to $837.6 million during the third quarter in 2002, with higher average brokered certificates of deposit producing
most of the increase.



Nine Months Ended September 30, 2003 as Compared to
the Nine Months Ended September 30, 2002. Net interest income was $73.2 million for the nine months ended September 30, 2003 compared to $76.4 million during the same period in 2002, a decrease of $3.1 million or 4.1%. With an adjustment for
tax-exempt income, our consolidated net interest income for the first nine months of 2003 was $74.3 million as compared to $77.7 million during the same period in 2002, a decrease of $3.4 million, or 4.3%. As with the quarterly comparison, net
interest income declined because of compression in our net interest margin, despite an increase in average interest-earning assets.



The tax equivalent net interest margin was 4.06% during the first nine months of 2003 compared to 4.50% during the same nine month period in 2002. As with the quarterly
comparison, the continued low interest rate environment has negatively impacted our net interest margin. Our interest-earning asset yield declined 71 basis points to 5.75% during the first nine months of 2003 from 6.46% during the same period in
2002. However, the cost of interest-bearing liabilities declined only 33 basis points from 2.43% during the first nine months of 2002 to 2.10% during the same nine month period in 2003. The $45.0 million of 9.75% junior subordinated debentures
caused approximately 20 basis points of the decline in the net interest margin. The tax equivalent net interest spread was 3.65% during the year-to-date 2003 period as compared to 4.03% during the same period in 2002.



Average interest-earning assets during the first nine months of 2003 totaled $2.45 billion,
an increase of $142.5 million, or 6.2%, as compared to average interest-earning assets of $2.31 billion during the same period in 2002. The growth in the loan portfolio accounted for most of the increase in average interest earning assets. Average
loan balances were $1.90 billion during the first three quarters of 2003 compared to $1.78 billion during the same period in 2002. As with the quarterly comparison, higher average commercial and commercial real estate loans produced most of the loan
growth. These average loan balances grew by 13.0%, or $166.4 million, to $1.45 billion for the first nine months of 2003 as compared to the same period in 2002. Between the two year-to-date periods, the yield on loans declined 64 basis points to
6.05% during 2003 as compared to 6.69% during the first nine months of 2002. The asset growth was funded with interest-bearing deposit balances, with time deposit balances accounting for most of the increase. Average time deposit balances increased
to $939.7 million during the first nine months of 2003 compared to $779.9 million during the same period in 2002. Higher average brokered certificates of deposit produced most of the increase.



If the current low interest rate environment continues, we would expect it to have a negative
impact on our net interest margin and, therefore, our net interest income. We also would expect the current low interest rate environment to place continued downward pressure on our earning assets yields, with only modest relief in our cost of
funding. See the section captioned Quantitative and Qualitative Disclosure about Market Risks  for further discussion on the impact of interest rates.



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



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



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



|                                               |  | For the Three MonthsEnded September 30, |        |   | For the Nine MonthsEnded September 30, |  
|---------------------------------------------- |  | --------------------------------------- | ------ | - | -------------------------------------- | -
|                                               |  | 2003                                    |        |   | 2002                                   |  
|                                               |  | (dollars in thousands)                  |       
|Net interest income as stated                  |  | $                                       | 24,720 |   |                                        | $
|Tax equivalent adjustment-investments          |  |                                         | 312    |   |                                        |  
|Tax equivalent adjustment-loans                |  |                                         | 43     |   |                                        |  
|                                               |  |                                         |        |   |                                        |  
|Tax equivalent net interest income             |  | $                                       | 25,075 |   |                                        | $
|                                               |  |                                         |        |   |                                        |  
|Yield on earning assets without tax adjustment |  |                                         | 5.56   | % |                                        |  
|Yield on earning assets - tax equivalent       |  |                                         | 5.62   | % |                                        |  
|Net interest margin without tax adjustment     |  |                                         | 3.98   | % |                                        |  
|Net interest margin - tax equivalent           |  |                                         | 4.04   | % |                                        |  
|Net interest spread - without tax adjustment   |  |                                         | 3.58   | % |                                        |  
|Net interest spread - tax equivalent           |  |                                         | 3.64   | % |                                        |  



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



|                                            |  | For Three Months Ended September 30, |          
|------------------------------------------- |  | ------------------------------------ | ---------
|                                            |  | 2003                                 |          
|                                            |  | AVERAGEBALANCE                       |          
|                                            |  | (in thousands)                       |          
|INTEREST-EARNING ASSETS:                    |  |                                      |          
|Investment securities(1):                   |  |                                      |          
|Taxable                                     |  | $                                    | 460,528  
|Tax-exempt (tax equivalent)(2)              |  |                                      | 48,892   
|                                            |  |                                      |          
|Total investment securities                 |  |                                      | 509,420  
|                                            |  |                                      |          
|Cash Equivalents                            |  |                                      | 62,522   
|                                            |  |                                      |          
|Loans(2) (3):                               |  |                                      |          
|Commercial and commercial real estate       |  |                                      | 1,487,213
|Residential real estate mortgages           |  |                                      | 101,349  
|Home equity and consumer                    |  |                                      | 309,942  
|Fees on loans                               |  |                                      |          
|                                            |  |                                      |          
|Net loans (tax equivalent)(2)               |  |                                      | 1,898,504
|                                            |  |                                      |          
|Total interest-earning assets(2)            |  |                                      | 2,470,446
|                                            |  |                                      |          
|Allowance for loan losses                   |  |                                      | (35,184  
|NON-EARNING ASSETS:                         |  |                                      |          
|Cash and due from banks                     |  |                                      | 58,578   
|Accrued interest and other assets           |  |                                      | 95,178   
|                                            |  |                                      |          
|TOTAL ASSETS                                |  | $                                    | 2,589,018
|                                            |  |                                      |          
|INTEREST-BEARING LIABILITIES:               |  |                                      |          
|Interest-bearing deposits:                  |  |                                      |          
|Interest-bearing demand deposits            |  | $                                    | 559,607  
|Savings deposits                            |  |                                      | 91,683   
|Time deposits                               |  |                                      | 961,031  
|                                            |  |                                      |          
|Total interest-bearing deposits             |  |                                      | 1,612,321
|                                            |  |                                      |          
|Short-term borrowings                       |  |                                      | 205,804  
|Notes payable and FHLB advances             |  |                                      | 110,500  
|Trust preferred securities                  |  |                                      | 45,000   
|                                            |  |                                      |          
|Total interest-bearing liabilities          |  |                                      | 1,973,625
|                                            |  |                                      |          
|NONINTEREST-BEARING LIABILITIES:            |  |                                      |          
|Noninterest-bearing deposits                |  |                                      | 405,001  
|Accrued interest and other liabilities      |  |                                      | 38,950   
|                                            |  |                                      |          
|Total noninterest-bearing liabilities       |  |                                      | 443,951  
|                                            |  |                                      |          
|STOCKHOLDERS EQUITY                        |  |                                      | 171,442  
|                                            |  |                                      |          
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY  |  | $                                    | 2,589,018
|                                            |  |                                      |          
|Net interest income (tax equivalent)(2)     |  |                                      |          
|                                            |  |                                      |          
|Net interest spread (tax equivalent)(2) (4) |  |                                      |          
|                                            |  |                                      |          
|Net interest margin (tax equivalent)(2) (5) |  |                                      |          
|                                            |  |                                      |          

---

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

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

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

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

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

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



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



|                                            |  | For Nine Months Ended September 30, |          
|------------------------------------------- |  | ----------------------------------- | ---------
|                                            |  | 2003                                |          
|                                            |  | AVERAGEBALANCE                      |          
|                                            |  | (in thousands)                      |          
|INTEREST-EARNING ASSETS:                    |  |                                     |          
|Investment securities(1):                   |  |                                     |          
|Taxable                                     |  | $                                   | 457,927  
|Tax-exempt (tax equivalent)(2)              |  |                                     | 49,801   
|                                            |  |                                     |          
|Total investment securities                 |  |                                     | 507,728  
|                                            |  |                                     |          
|Cash Equivalents                            |  |                                     | 43,188   
|                                            |  |                                     |          
|Loans(2) (3):                               |  |                                     |          
|Commercial and commercial real estate       |  |                                     | 1,445,901
|Residential real estate mortgages           |  |                                     | 110,429  
|Home equity and consumer                    |  |                                     | 340,349  
|Fees on loans                               |  |                                     |          
|                                            |  |                                     |          
|Net loans (tax equivalent)(2)               |  |                                     | 1,896,679
|                                            |  |                                     |          
|Total interest-earning assets(2)            |  |                                     | 2,447,595
|                                            |  |                                     |          
|Allowance for loan losses                   |  |                                     | (35,353  
|NON-EARNING ASSETS:                         |  |                                     |          
|Cash and due from banks                     |  |                                     | 59,417   
|Accrued interest and other assets           |  |                                     | 98,168   
|                                            |  |                                     |          
|TOTAL ASSETS                                |  | $                                   | 2,569,827
|                                            |  |                                     |          
|INTEREST-BEARING LIABILITIES:               |  |                                     |          
|Interest-bearing deposits:                  |  |                                     |          
|Interest-bearing demand deposits            |  | $                                   | 563,707  
|Savings deposits                            |  |                                     | 91,023   
|Time deposits                               |  |                                     | 939,685  
|                                            |  |                                     |          
|Total interest-bearing deposits             |  |                                     | 1,594,415
|                                            |  |                                     |          
|Short-term borrowings                       |  |                                     | 224,675  
|Notes payable and FHLB advances             |  |                                     | 114,342  
|Trust preferred securities                  |  |                                     | 45,000   
|                                            |  |                                     |          
|Total interest-bearing liabilities          |  |                                     | 1,978,432
|                                            |  |                                     |          
|NONINTEREST-BEARING LIABILITIES:            |  |                                     |          
|Noninterest-bearing deposits                |  |                                     | 382,542  
|Accrued interest and other liabilities      |  |                                     | 37,751   
|                                            |  |                                     |          
|Total noninterest-bearing liabilities       |  |                                     | 420,293  
|                                            |  |                                     |          
|STOCKHOLDERS EQUITY                        |  |                                     | 171,102  
|                                            |  |                                     |          
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY  |  | $                                   | 2,569,827
|                                            |  |                                     |          
|Net interest income (tax equivalent)(2)     |  |                                     |          
|                                            |  |                                     |          
|Net interest spread (tax equivalent)(2) (4) |  |                                     |          
|                                            |  |                                     |          
|Net interest margin (tax equivalent)(2) (5) |  |                                     |          
|                                            |  |                                     |          

---

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

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

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

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

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

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



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



Noninterest Income



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



|                                           |  | For Three MonthsEnded September 30, |       | For Nine MonthsEnded September 30,
|------------------------------------------ |  | ----------------------------------- | ----- | ----------------------------------
|                                           |  | 2003                                |       |                                   
|                                           |  | (in thousands)                     
|Service charges                            |  | $                                   | 3,129 |                                   
|Trust and investment management fees       |  |                                     | 1,319 |                                   
|Mortgage-banking activities                |  |                                     | (390  | )                                 
|Gain on sale of trust assets               |  |                                     |      |                                   
|Gain on sale of investment securities, net |  |                                     |      |                                   
|Other noninterest income                   |  |                                     | 532   |                                   
|                                           |  |                                     |       |                                   
|Total noninterest income                   |  | $                                   | 4,590 |                                   
|                                           |  |                                     |       |                                   



Our noninterest income was $4.6
million during the third quarter of 2003 compared to $7.1 million during the third quarter of 2002. On a year-to-date basis, noninterest income was $14.1 million during the first nine months of 2003 compared to $17.5 million during the same period
in 2002. Noninterest income during the third quarter of 2002 included a $2.1 million gain on the sale of investment securities and a $400,000 gain on the sale of trust assets. In addition, a decline in revenues from trust operations and losses
related to mortgage-banking activities also contributed to the lower level of noninterest income during both the quarterly and year-to-date periods in 2003. A slight increase in service charges, primarily on deposit accounts, in the year-to-date
2003 period partly offset these declines. Our noninterest income has been, and will continue to be, impacted by our exit from certain trust lines of business during 2002 and mortgage-banking activities during 2001.



Service charges, principally on deposit accounts, were $3.1 million during the third quarter
of 2003, unchanged from the same quarter in 2002. For the nine month period ended September 30, 2003, service charges were $9.4 million, an increase of $238,000, or 2.6%, from the same period a year ago. The increase in the year-to-date comparison
was primarily a result of a continued decline in the earnings credit rate. The earnings credit rate determines the amount of credit attributed to customers for their collected deposit balances. This credit is available to offset account activity
service charges incurred. Lower earnings credit rates, other things being equal, therefore mean more activity charges are paid through this service charge category. The average earnings credit rate during the first nine months of 2003 was
approximately 73 basis points lower than the same period in 2002.



Trust fees
and investment management fees were $1.3 million during the third quarter of 2003 compared to $1.5 million during the third quarter in 2002, a decrease of $154,000 or 10.5%. For the year-to-date period, trust fees and investment management fees
declined to $3.5 million during 2003 from $4.3 million during the same nine month period in 2002, a decrease of



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



$781,000, or 18.2%. Trust revenues have declined as a result of our exit from fiduciary personal and employee benefit trust services in late 2002. During the
third quarter of 2002, we sold a portion of our personal trust and employee benefit trust services and recorded a gain of $400,000. We continue to provide corporate trust, land trust and tax deferred exchange trust services. We also generate fees
from our wealth management services, including financial planning, insurance, and asset management services.



We incurred losses related to our mortgage-banking activities of $390,000 during the third quarter of 2003 and $408,000 during the first nine months of 2003. The losses resulted from indemnification agreements on
loans sold in prior periods. As of September 30, 2003, we had approximately $1.9 million of loans that we had sold in prior periods for which we had agreed to indemnify a third party for losses that may result from underwriting or documentation
deficiencies. The losses recorded in 2003 include actual indemnification losses incurred to date as well as our estimate of future losses from sold loans still outstanding and subject to such indemnification agreements.



During the third quarter of 2002, we sold approximately $80 million of U.S. government agency
securities at a gain of $2.1 million and reinvested the proceeds in U.S. government agency securities with longer maturities to extend the duration of the investment portfolio.



Noninterest Expense



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



|                                                |  | For Three MonthsEnded September 30, |        |   | For Nine MonthsEnded September 30,
|----------------------------------------------- |  | ----------------------------------- | ------ | - | ----------------------------------
|                                                |  | 2003                                |        |   | 2002                              
|                                                |  | (in thousands)                     
|Salaries and employee benefits                  |  | $                                   | 10,205 |   |                                   
|Occupancy of premises                           |  |                                     | 1,912  |   |                                   
|Furniture and equipment                         |  |                                     | 895    |   |                                   
|Holding company legal fees, net                 |  |                                     | 161    |   |                                   
|Bank legal fees, net                            |  |                                     | 408    |   |                                   
|Advertising and public relations                |  |                                     | 484    |   |                                   
|Corporate insurance                             |  |                                     | 782    |   |                                   
|Computer processing                             |  |                                     | 494    |   |                                   
|Consulting                                      |  |                                     | 324    |   |                                   
|Other real estate and repossessed asset expense |  |                                     | (47    | ) |                                   
|Other intangible amortization                   |  |                                     | 96     |   |                                   
|Litigation settlement charge                    |  |                                     |       |   |                                   
|Other noninterest expense                       |  |                                     | 3,291  |   |                                   
|                                                |  |                                     |        |   |                                   
|Total noninterest expense                       |  | $                                   | 19,005 |   |                                   
|                                                |  |                                     |        |   |                                   



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



Noninterest expense was $19.0 million during the third quarter of 2003 compared to $18.0 million during the third
quarter of 2002. For the nine months ended September 30, 2003, noninterest expense was $56.7 million, compared to $122.1 million during the same nine month period in 2002.



Salaries and employee benefits expense was $10.2 million during the third quarter of 2003, an increase of $260,000, or 2.6%, from the third
quarter in 2002. An increase in base salaries and incentive compensation and higher costs related to the employee medical plans produced the majority of the increase in expense. In the year-to-date periods, salaries and employee benefits expense
declined $1.3 million, or 3.9%, to $31.6 million during 2003 from $32.9 million during 2002. The decrease in 2003 was primarily due to $1.7 million of severance included during the second quarter of 2002 related to the decision to exit some trust
lines of business and other executive level changes at the Bank. Our average number of full-time equivalent employees was 518 during the first nine months of 2003 compared to 533 during the same period in 2002. While the average number of full-time
equivalent employees did decline as a result of the decisions to exit fiduciary trust and mortgage-banking, we have increased the number of banking professionals in our core business lines and increased staffing levels in some support areas.



Expense relating to occupancy of premises increased during both the third
quarter of 2003 and the first nine months of 2003 when compared to the same periods in 2002. Occupancy of premises expense was $1.9 million during the third quarter of 2003 compared to $1.7 million in the same quarter in 2002, while year-to-date
expense was $5.3 million during 2003 compared to $4.9 million in the same period in 2002. An increase in depreciation expense and repairs and maintenance contributed to the higher level of costs in 2003. In addition, in September 2003 we began to
incur operating expenses related to our new corporate center, including rent expense, utilities, maintenance, and depreciation.



In October 2003, we completed the transition of our corporate, operational, and administrative departments, that were previously located in three different branch
facilities, into the centrally located corporate center. Our corporate center is a 108,000 square foot leased facility located in Rosemont, Illinois, a suburb of Chicago. The lease on the facility began in September 2003 and expires in August of
2014.



In the fourth quarter of 2003, we expect to report significant
nonrecurring costs in connection with our October 2003 abandonment of the administrative office space at our leased Wheeling facility. We are currently negotiating a possible lease termination agreement for this facility. If we successfully
negotiate the lease termination, we estimate that a nonrecurring charge of approximately $3.7 million would be recorded in the fourth quarter of 2003 for the lease termination costs and associated leasehold improvements and furniture abandonment.
Otherwise, in the fourth quarter of 2003 we will recognize a charge to reflect the abandonment of certain space at the facility based upon remaining lease rentals reduced by estimated sublease rentals that could reasonably be obtained from the
property. We anticipate this liability would be less than $3.7 million, although we likely would recognize additional expenses over the remaining life of the lease. See the section captioned Financial ConditionNon-earning Assets
for additional details.



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



In the fourth quarter of 2003, we expect to offer for sale or lease our Burbank facility. Currently, no loss is
expected from the sale or lease of the Burbank property.



Our Jackson banking
facility will be closed in the fourth quarter of 2003. The lease on the facility was scheduled to expire in the first quarter of 2004. The remaining lease payments will be expensed in the fourth quarter of 2003.



Furniture and equipment expense was $895,000 during the third quarter of 2003, an increase of
$104,000 compared to the expense of $791,000 during the same quarter in 2002. Higher depreciation and repairs and maintenance, partly related to the new corporate center, produced the increase in expense. For the nine month period ended September
30, 2003, furniture and equipment expense was $2.5 million compared to $2.7 million during the same period in 2002, a decrease of $189,000. Lower depreciation expense produced most of the decrease, as certain technology and computer equipment that
was placed in service for year 2000 readiness became fully depreciated during 2002.



Holding company legal fees during 2003 consist primarily of costs for general corporate matters, including securities law compliance and other costs associated with being a publicly-traded company. During 2002 and prior years, holding
company legal fees included costs related to the defense and settlement of litigation concerning our 1997 acquisition of the Bank. Holding company legal fees were $161,000 during the third quarter of 2003 compared to $400,000 during the same quarter
in 2002. For the year-to-date 2003 period, we reported a net reimbursement of holding company legal fees of $1.2 million compared to an expense of $1.4 million during the same period in 2002. Portions of our defense costs related to the litigation,
which were recorded as expenses in previous periods, had been submitted to insurance carriers for reimbursement. During the first quarter of 2003, we received a $2.1 million reimbursement of such legal costs. No such reimbursements were received in
2002. We do not expect to receive any further reimbursements of holding company legal fees related to the litigation.



Bank legal fees relate to collection activities as well as general corporate and compliance matters. Legal fees were $408,000 during the third quarter of 2003 compared to
$767,000 during the same quarter last year, while in the year-to-date periods, legal fees declined to $1.5 million during 2003 compared to $1.6 million in the same period in 2002. The higher legal fees in the third quarter of 2002 related primarily
to contract and compliance matters with respect to certain new third-party service providers.



Advertising and public relations expense increased during the first nine months of 2003 as compared to the same period in 2002. Advertising and public relations expense for the first nine months of 2003 was $2.6
million compared to $1.4 million in the same period in 2002. Our advertising expense increased in 2003 as a result of a new media campaign to increase the Banks visibility in the business community. This campaign includes television
commercials, which began airing in 2003, and print advertising. While the advertising campaign increased advertising and public relations expense significantly during the first half of 2003, we did not maintain the same level of expenditures during
the third quarter of 2003. As a result, advertising and public relations expense in the third quarter of 2003 was relatively unchanged from the



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



expense during the same quarter in 2002. We currently do not plan to increase advertising expense in the fourth quarter of 2003 from the level of expense in
the third quarter. The cost of producing the television commercials was capitalized in 2002 and is being amortized beginning in 2003 over three years, the expected time horizon over which the commercials will be aired. The amortization expense in
the third quarter and the first nine months of 2003 was approximately $63,000 and $193,000, respectively. At September 30, 2003, the balance of capitalized advertising costs totaled $566,000.



Corporate insurance premiums increased to $782,000 during the third quarter of 2003 compared
to $308,000 during the same quarter in 2002. Corporate insurance expense was $2.3 million during the first nine months of 2003 compared to $856,000 during the same period a year ago. The increase was associated with market-driven costs, including
those of becoming a publicly-traded company.



Reported noninterest expense in
2002 reflects a $61.9 million charge related to our settlement of litigation concerning our 1997 acquisition of the Bank. The amount of the settlement was based, in part, on the anticipated initial public offering price of our common stock, and a
charge of $64.5 million was recorded in the second quarter of 2002 when we were first able to conclude that the execution of the settlement agreements was probable. The settlement was funded with a portion of the net proceeds from the concurrent
offerings of common stock and trust preferred securities completed in October 2002. After completion of the initial public offering in October 2002, we paid $61.9 million in full satisfaction of our settlement agreements and an adjustment of $2.6
million was recorded in the third quarter of 2002 to reduce the previously estimated amount of the litigation settlement charge to $61.9 million.



Other noninterest expense principally includes certain professional fees, FDIC insurance, corporate insurance, outside services, operations losses and other operating
expenses such as telephone, postage, office supplies and printing. The decrease in other noninterest expense in both the third quarter and the first nine months of 2003, as compared to the same periods in 2002, primarily resulted from an $856,000
charge recorded in the third quarter of 2002 related to the termination of a revenue sharing agreement associated with the trust business acquired in October 2000 and lower reserves established related to interest receivable carried in connection
with our indirect manufactured housing loan portfolio.



Income Taxes



We recorded income tax expense of $2.0 million for the third quarter
of 2003, resulting in an effective income tax rate of 26%. In comparison, we recorded income tax expense of $3.8 million for the third quarter of 2002, resulting in an effective income tax rate of 30%. The lower effective tax rate in 2003 was a
result of the recognition of an income tax benefit of $750,000 relating to expenses deducted on a prior years tax return for which the statute of limitations has expired. We expect to recognize an additional tax benefit of $250,000 in the
fourth quarter of 2003.



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



We recorded income tax expense of $7.8 million for the nine months ended September 30, 2003, resulting in an
effective income tax rate of 33%. In comparison, despite a net loss in 2002, we recorded income tax expense of $9.6 million for the nine months ended September 30, 2002. We did not recognize any income tax benefit for financial reporting purposes
with respect to the litigation settlement charge in 2002.



While we have not
recognized any income tax benefit for financial reporting purposes with respect to the litigation settlement charge during 2002, we did deduct a portion of the settlement on our 2002 tax return that was filed in September 2003. We will record the
income tax benefit on our financial statements when we determine that it is probable that the position taken on our tax return will be sustained by the taxing authorities.



FINANCIAL CONDITION



Overview



Our total assets were $2.60 billion at September 30, 2003 compared to $2.54 billion at year-end 2002. An increase in cash and cash equivalents accounted for most of the growth in total assets. Total loans increased
$11.3 million to $1.89 billion at September 30, 2003, compared to $1.88 billion at December 31, 2002. Total deposits increased to $2.03 billion at September 30, 2003 compared to $1.96 billion at December 31, 2002. Total stockholders equity at
September 30, 2003 was $178.0 million compared to $168.7 million at December 31, 2002.



For the first nine months of 2003, average interest-earning assets increased $142.5 million, or 6.2%, to total $2.45 billion, as compared to $2.31 billion during the same period of 2002. Loan growth was the primary contributor to the higher
level of interest-earning assets.



Cash and Cash Equivalents



Period-end cash and cash equivalents increased to $135.2 million at
September 30, 2003 compared to $92.9 million at December 31, 2002. Cash equivalents, consisting of short-term, interest-bearing investments, increased during the third quarter of 2003 as anticipated loan fundings were lower than expected.



Interest-Earning Assets



Total investment securities were essentially unchanged at $498.1 million at September 30,
2003 compared to $501.6 million at year-end 2002. During the first nine months of 2003, we reinvested the repayments we received from our investment portfolio and purchased approximately $212 million of investment securities, generally
mortgage-related securities.



Period-end total loan balances increased $11.3
million, or 0.6%, to $1.89 billion at September 30, 2003 compared to $1.88 billion at December 31, 2002. Our commercial loan portfolio



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



increased $110.2 million, or 7.9%, during the first nine months of 2003. Growth in commercial real estate produced most of the increase as this portion of
the portfolio increased $119.2 million during the first nine months of 2003 to $603.2 million at September 30, 2003. As anticipated, our loan portfolios of real estate mortgages and indirectly-originated consumer loans have declined as we
discontinued the origination of these loans sourced through brokers. The portfolio of loans extended to consumers, whether as a mortgage, line of credit or other purpose, approximated 21% of the total loan portfolio at September 30, 2003 compared to
26% at December 31, 2002.



Loan Quality and Nonperforming Assets



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



|                                                                         |  | Sept. 30,2003  |        |   | Dec. 31,2002 |  
|------------------------------------------------------------------------ |  | -------------- | ------ | - | ------------ | -
|                                                                         |  | (in thousands) |       
|Loans contractually past due 90 days or more but still accruing interest |  | $              | 4,958  |   |              | $
|Nonaccrual loans                                                         |  |                | 14,271 |   |              |  
|Troubled debt restructurings (not included above)                        |  |                | 175    |   |              |  
|                                                                         |  |                |        |   |              |  
|Total nonperforming loans                                                |  |                | 19,404 |   |              |  
|Other real estate owned                                                  |  |                | 897    |   |              |  
|Other repossessed assets                                                 |  |                | 21     |   |              |  
|                                                                         |  |                |        |   |              |  
|Total nonperforming assets                                               |  | $              | 20,322 |   |              | $
|                                                                         |  |                |        |   |              |  
|Nonperforming loans to total loans                                       |  |                | 1.03   | % |              |  
|Nonperforming assets to total loans plus repossessed property            |  |                | 1.07   | % |              |  
|Nonperforming assets to total assets                                     |  |                | 0.78   | % |              |  



The level of nonperforming loans
increased to $19.4 million at September 30, 2003, or 1.03% of total loans, from $18.3 million, or 0.97% of total loans, at December 31, 2002. Higher nonaccrual loans produced the increase. Nonaccrual loans increased $2.1 million from December 31,
2002, to $14.3 million at September 31, 2003, primarily in our portfolio of home equity loans and lines of credit loans. Total nonperforming assets were $20.3 million at September 30, 2003 compared to $18.9 million at December 31, 2002.



Impaired loans were $31.2 million at September 30, 2003 compared to $16.9 million at
December 31, 2002. A loan is considered impaired, based on current information and events, if it is probable that we will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan
agreement. Impaired loans have increased $14.3 million primarily as a result of the inclusion of two significant loans. In addition, we continue to monitor closely our $17.8 million of loans to consumers secured by manufactured homes.



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



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. Although management believes that the allowance for loan losses is adequate to absorb probable losses on existing loans that
may become uncollectable, there can be no assurance that our allowance will prove to be sufficient to cover actual loan losses in the future. In addition, various regulatory agencies, as an integral part of their examination process, periodically
review the adequacy of our allowance for loan losses. Such agencies may require us to make additional provisions to the allowance based upon their judgment about information available to them at the time of their examinations.



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



|                                                  |  | For Three MonthsEnded September 30, |           |   | For Nine MonthsEnded September 30, |  
|------------------------------------------------- |  | ----------------------------------- | --------- | - | ---------------------------------- | -
|                                                  |  | 2003                                |           |   | 2002                               |  
|                                                  |  | (in thousands)                      |          
|Average total loans                               |  | $                                   | 1,898,504 |   |                                    | $
|                                                  |  |                                     |           |   |                                    |  
|Total loans at end of period                      |  | $                                   | 1,890,783 |   |                                    | $
|                                                  |  |                                     |           |   |                                    |  
|Allowance for loan losses:                        |  |                                     |           |   |                                    |  
|Allowance at beginning of period                  |  | $                                   | 36,157    |   |                                    | $
|Total charge-offs                                 |  |                                     | (4,740    | ) |                                    |  
|Total recoveries                                  |  |                                     | 385       |   |                                    |  
|                                                  |  |                                     |           |   |                                    |  
|Net charge-offs                                   |  |                                     | (4,355    | ) |                                    |  
|Provision for loan losses                         |  |                                     | 2,700     |   |                                    |  
|                                                  |  |                                     |           |   |                                    |  
|Allowance at end of period                        |  | $                                   | 34,502    |   |                                    | $
|                                                  |  |                                     |           |   |                                    |  
|Annualized net charge-offs to average total loans |  |                                     | 0.92      | % |                                    |  
|Allowance to total loans at end of period         |  |                                     | 1.82      | % |                                    |  
|Allowance to nonperforming loans                  |  |                                     | 177.81    | % |                                    |  



Net charge-offs for the third quarter
of 2003 were $4.4 million, or 0.92%, of average loans, while on a year-to-date basis, net charge-offs in 2003 were $6.1 million, or 0.43%, of average loans. In comparison, net charge-offs during the third quarter and the first nine months of 2002
were $1.1 million and $4.2 million, respectively, representing 0.24% and 0.32% of average loans, respectively. As a business bank, our loan portfolio is inherently more concentrated than the portfolios of banks with more of a consumer focus. Losses
on individually larger commercial loans, which comprise over 75% of our total loan portfolio, can be larger in amount and more uneven in timing than consumer loans. As a result, the amount of our net charge-offs in any one quarter should not be
viewed as indicative of charge-off amounts in subsequent periods.



Our
allowance for loan losses was $34.5 million at September 30, 2003, or 1.82% of end-of-period loan balances and 177.81% of non-performing loans. At December 31, 2002, the allowance for loan losses was $34.1 million, which represented 1.81% of
end-of-period loan



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



balances and 186.62% of non-performing loans. At September 30, 2002, the allowance for loan losses was $34.3 million, which represented 1.86% of
end-of-period loan balances and 211.43% of non-performing loans.



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 during the third quarter of 2003 was $2.7 million, a $225,000, or 9.1%,
increase from the $2.5 million provision during the same quarter in 2002. The increased provision during the third quarter of 2003 was primarily attributable to higher net charge-offs during the period. In the year-to-date period, the 2003 provision
for loan losses was $6.5 million, $892,000, or 12.0%, less than the $7.4 million provision for loan losses in the same nine month period in 2002. Our loan loss provision is determined based upon an analysis of our portfolio performed on a quarterly
basis, with ongoing monitoring by our Credit Policy Committee and Credit Administration function.



Non-earning Assets



Premises,
leasehold improvements and equipment, net of accumulated depreciation and amortization, totaled $21.4 million at September 30, 2003 compared to $19.1 million at December 31, 2002. During September and October 2003, we transitioned our corporate,
operational, and administrative departments to our new corporate center, a 108,000 square feet leased office space in Rosemont, Illinois, a suburb of Chicago. The increase in premises, leasehold improvements, and equipment is associated with the
leasehold improvements and new furniture and equipment at this new facility.



We are continuing to evaluate and execute options for disposing of or reducing space at our existing facilities including:



| |  | The sale of our existing Ashland facility, to be followed by the construction of a smaller facility near the same location.
| | - | ---------------------------------------------------------------------------------------------------------------------------



| |  | The closing of our leased Jackson facility, just prior to the lease expiration date.
| | - | ------------------------------------------------------------------------------------



| |  | The termination of our total building lease at our Wheeling facility, followed by a lease of space on the ground floor for the existing customer banking center; or the sublease of
the vacated second and third floors.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The sale of our Burbank facility, followed by a lease of space on the ground and fourth floors for the existing customer service areas; or the lease of the vacated second and third
floors.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



While we expect that banking centers serving customers
will continue to be located at the Wheeling and Burbank facilities, administrative functions that occupied two floors of each of these buildings were moved to the new centralized corporate center in October 2003. As a result,



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



in the fourth quarter of 2003, we expect to report significant nonrecurring costs in connection with our abandonment of the administrative space at our
leased Wheeling facility. We are currently negotiating a possible lease termination agreement for the Wheeling facility. If we successfully negotiate the lease termination, we estimate that a nonrecurring charge of approximately $3.7 million would
be recorded in the fourth quarter of 2003 for the lease termination costs and associated leasehold improvements and furniture abandonment. Currently, no loss is expected from the sale or lease of the Burbank property.



Funding Liabilities



Total deposits were $2.03 billion at September 30, 2003, an increase of $61.7 million, or
3.1%, as compared to $1.96 billion at year-end 2002. In the first nine months of 2003, noninterest-bearing accounts increased $40.1 million while interest-bearing deposit accounts increased by $21.6 million. The majority of the increase in period
end noninterest bearing deposits is viewed to be seasonal. Most of the increase in interest-bearing deposits occurred in time deposits. Brokered CDs increased $46.4 million to $296.0 million at September 30, 2003 from $249.6 million at year-end
2002. Certificates of deposit from our customers increased $29.7 million during the first nine months of 2003 to $488.4 million at September 30, 2003. The growth in local customer certificates of deposit was largely due to a special promotion in the
second quarter of 2003. These increases in time deposits were partly offset by a $45.3 million decline in money market account balances from December 31, 2002 to September 30, 2003. The decline in these balances primarily related to a large-deposit
commercial customer.



Average deposit balances for the first nine months of
2003 increased $116.9 million, or 6.3%, as compared to the same year-to-date period in 2002. We relied more on brokered certificates of deposits as these average balances increased $127.0 million between the two periods to $297.4 million during
2003. In addition, our out-of-market certificates of deposit average balances increased by $34.0 million between the two periods. A decrease in funding from a large commercial customer, primarily in a money market account, contributed to our
increased utilization of wholesale funding. Average money market account balances decreased $66.7 million for the first nine months of 2003 to $429.1 million, as compared to the same nine month period in 2002.



To the extent that core customer deposits are insufficient to meet our funding needs, we
typically seek additional funding from other sources, as we have in 2003. These alternate sources are generally more expensive than our core customer deposits and the increased use of these sources of funds has negatively impacted, and may continue
to negatively impact, our net interest income. Furthermore, the cost and availability of these funds may be factors in our evaluation of opportunities to grow our loan portfolio.



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



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 Nine Months EndedSeptember 30, 2003 |           |                    | For the Nine Months EndedSeptember 30, 2002 |  
|----------------------------------- |  | ------------------------------------------- | --------- | ------------------ | ------------------------------------------- | -
|                                    |  | AverageBalance                              |           | Percent OfDeposits |                                             |  
|                                    |  | (dollars in thousands)                      |          
|Noninterest-bearing demand deposits |  | $                                           | 382,542   |                    | 19.36                                       | %
|Interest-bearing demand deposits    |  |                                             | 563,707   |                    | 28.51                                       |  
|Savings deposits                    |  |                                             | 91,023    |                    | 4.60                                        |  
|Time deposits:                      |  |                                             |           |                    |                                             |  
|Certificates of deposit             |  |                                             | 569,127   |                    | 28.79                                       |  
|Brokered certificates of deposit    |  |                                             | 297,397   |                    | 15.04                                       |  
|Public Funds                        |  |                                             | 73,161    |                    | 3.70                                        |  
|                                    |  |                                             |           |                    |                                             |  
|Total time deposits                 |  |                                             | 939,685   |                    | 47.53                                       |  
|                                    |  |                                             |           |                    |                                             |  
|Total deposits                      |  | $                                           | 1,976,957 |                    | 100.00                                      | %
|                                    |  |                                             |           |                    |                                             |  



Our short-term borrowings include
federal funds purchased, securities sold under agreements to repurchase and U.S. Treasury tax and loan note option accounts. Period-end, short-term borrowings decreased $16.7 million to $198.6 million at September 30, 2003 as compared to $215.4
million at December 31, 2002. Securities sold under agreements to repurchase declined $24.5 million to $151.0 million at September 30, 2003 as existing customers moved funds between deposit products. The U.S. Treasury tax and loan option account
increased $14.2 million at period end, while the average balance remained relatively unchanged. Average short-term borrowings for the first nine months 2003 decreased by $8.6 million to $224.7 million when compared to the same period in 2002. The
decline was primarily in securities sold under agreements to repurchase.



Our
notes payable and FHLB advances consist of our revolving and term debt and the Banks FHLB advances. Borrowings from the FHLB totaled $100.0 million at both September 30, 2003 and December 31, 2002. Also, at September 30, 2003 and December 31,
2002, we had aggregate borrowings of $10.5 million outstanding under our $10.0 million subordinated debt agreement and $500,000 term loan. We have an $11.5 million revolving credit facility that has not yet been drawn upon.



CAPITAL RESOURCES



We monitor compliance with bank regulatory capital requirements, focusing primarily on the risk-based capital guidelines. Under the
risk-based method of capital measurement, the ratio computed is dependent on the amount and composition of assets recorded on the balance sheet and the amount and composition of off-balance sheet items, in addition to the level of capital.
Generally, Tier I capital includes common stockholders equity and our noncumulative perpetual preferred stock less goodwill. The trust preferred securities also qualify as Tier I capital up to certain limits. Total capital represents Tier I
capital plus the allowance for loan loss, subject to certain limits, our subordinated loan, and the portion of any trust preferred securities not includable in Tier I capital.



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



At both September 30, 2003 and December 31, 2002, the holding company was considered well capitalized
under capital guidelines for bank holding companies set by the Federal Reserve.



In addition, at both September 30, 2003 and December 31, 2002, the Bank was considered well capitalized under regulatory capital guidelines.



The Companys and the Banks capital ratios were as follows for the dates indicated:



|                                         |  | ACTUAL                 |  |       | FOR CAPITALADEQUACYPURPOSES |  |             | TO BE WELLCAPITALIZED UNDERPROMPT CORRECTIVEACTION PROVISIONS |      
|---------------------------------------- |  | ---------------------- |  | ----- | --------------------------- |  | ----------- | ------------------------------------------------------------- | -----
|                                         |  | AMOUNT                 |  | RATIO |                             |  | AMOUNT      |                                                               | RATIO
|                                         |  | (dollars in thousands) | 
|As of September 30, 2003:                |  |                        |  |       |                             |  |             |                                                               |      
|Total Capital (to Risk Weighted Assets)  |  |                        |  |       |                             |  |             |                                                               |      
|Taylor Capital Group, Inc.               |  | $229,049               |  | 10.58 | %                           |  | >$173,225   |                                                               | >8.00
|Cole Taylor Bank                         |  | 232,844                |  | 10.78 |                             |  | >  172,829  |                                                               | >8.00
|Tier I Capital (to Risk Weighted Assets) |  |                        |  |       |                             |  |             |                                                               |      
|Taylor Capital Group, Inc.               |  | 191,891                |  | 8.86  |                             |  | >    86,613 |                                                               | >4.00
|Cole Taylor Bank                         |  | 205,747                |  | 9.52  |                             |  | >    86,415 |                                                               | >4.00
|Leverage (to average assets)             |  |                        |  |       |                             |  |             |                                                               |      
|Taylor Capital Group, Inc.               |  | 191,891                |  | 7.48  |                             |  | >  102,621  |                                                               | >4.00
|Cole Taylor Bank                         |  | 205,747                |  | 8.04  |                             |  | >  102,480  |                                                               | >4.00
|                                         |  |                        |  |       |                             | 
|As of December 31, 2002:                 |  |                        |  |       |                             |  |             |                                                               |      
|Total Capital (to Risk Weighted Assets)  |  |                        |  |       |                             |  |             |                                                               |      
|Taylor Capital Group, Inc.               |  | $213,555               |  | 10.61 | %                           |  | >$161,089   |                                                               | >8.00
|Cole Taylor Bank                         |  | 210,180                |  | 10.47 |                             |  | >  160,547  |                                                               | >8.00
|Tier I Capital (to Risk Weighted Assets) |  |                        |  |       |                             |  |             |                                                               |      
|Taylor Capital Group, Inc.               |  | 177,700                |  | 8.82  |                             |  | >    80,545 |                                                               | >4.00
|Cole Taylor Bank                         |  | 184,984                |  | 9.22  |                             |  | >    80,273 |                                                               | >4.00
|Leverage (to average assets)             |  |                        |  |       |                             |  |             |                                                               |      
|Taylor Capital Group, Inc.               |  | 177,700                |  | 7.21  |                             |  | >    98,625 |                                                               | >4.00
|Cole Taylor Bank                         |  | 184,984                |  | 7.52  |                             |  | >    98,406 |                                                               | >4.00



During the first nine months of 2003,
we declared preferred stock dividends of $1.6875 per share, totaling $2.6 million, and common stock dividends of $0.18 per share, totaling $1.7 million.



The covenants in our senior notes payable agreement restrict the amount of dividends that the Company can pay to shareholders and the amount of dividends that the Bank
can pay to the Company. Beginning with the 2003 calendar year, the Company is restricted from paying annual cash dividends to shareholders during a calendar year in excess of 25% of that years annual net income, while the Bank is restricted
from paying annual cash dividends in a calendar year to the Company in excess of 60% of that years annual net income.



The Bank is also subject to dividend restrictions set forth by regulatory authorities. Under such restrictions, the Bank may not, without prior approval of regulatory
authorities, declare dividends in excess of the sum of the current years earnings (as defined) plus the retained earnings (as defined) from the prior two years. The dividends, as of September 30, 2003, that the Bank could declare and pay to
the Company, without the approval of regulatory authorities, amounted to



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



approximately $42.0 million. However, payment of such dividends is also subject to the Bank remaining in compliance with all applicable capital ratios.



LIQUIDITY



From December 31, 2002 to September 30, 2003, our cash and cash equivalent balances
increased $42.3 million to $135.2 million. Significant sources of funds included $205.7 million of proceeds from principal repayments and maturities of investment securities, $61.7 million increase in deposits and $28.0 million in cash provided from
operating activities. The increase in deposits was largely in time deposits, as funding from brokered certificates of deposits increased by $71.6 million, and customer certificates of deposits increased by $42.0 million. These increases were
partially offset by a decrease in other interest-bearing deposit balances, primarily money market account balances. We manage the liquidity risk associated with wholesale funding by using predominantly longer term products.



Uses of funds included the purchase of $212.1 million of investment securities, a net
increase in loans of $18.3 million, and reduced short-term borrowings of $16.7 million. During the nine month period ended September 30, 2003, we purchased $212.1 million of available-for-sale investment securities to reinvest the large repayments
received from the investment portfolio.



At the holding company level, we
maintained the same level of borrowings at September 30, 2003 as we had outstanding at December 31, 2002. We also have an $11.5 million revolving credit facility, which has not yet been drawn upon.



We maintain borrowing lines at both the Bank and holding company level to meet our expected
commitments.



Off-Balance Sheet Arrangements



Off-balance sheet arrangements include commitments to extend credit, financial guarantees,
and derivative financial instruments. Commitments to extend credit and financial guarantees are used to meet the financial needs of our customers. Derivative financial instruments are used to manage interest rate risk.



At September 30, 2003, we had $829.1 million of commitments to extend credit and $100.8
million of financial and performance standby letters of credit. In comparison, at December 31, 2002, we had $841.2 million of commitments to extend credit and $58.0 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.



At September 30, 2003, our only derivative financial instruments were interest-rate exchange contracts. An interest-rate exchange contract, or swap, is an agreement in
which two parties agree to exchange, at specified intervals, interest payment streams calculated on an agreed-upon



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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



notional principal amount with at least one stream based on a specified floating-rate index. Our objective in holding interest-rate swaps is interest rate
risk management.



During the first nine months of 2003, we entered into
interest rate exchange contracts with notional amounts totaling $225 million. These swaps were designated to hedge either the fair values of brokered certificates of deposit or the interest receipts on variable rate commercial loans.



Under the terms of the swaps relating to the brokered certificates of deposit, we receive a
fixed interest rate over the term of the agreement and pay a variable interest rate based upon LIBOR. The swaps are callable by the counterparty and the brokered certificates are callable at our option. These swaps, which are accounted for as fair
value hedges, satisfied the criteria to use the short-cut method of accounting for changes in fair value. The short-cut method allows us to assume, over the life of the swap and brokered certificates of deposit, that there is no
ineffectiveness in the hedging relationship and that changes in the fair value of the derivative perfectly offset changes in the fair value of the hedged liability, resulting in no volatility in earnings.



Under the terms of the swaps relating to interest receipts from variable rate commercial
loans, we received a fixed interest rate and paid a floating rate based upon the prime-lending rate. These swaps, which were accounted for as cash flow hedges, have been highly effective. At September 30, 2003, the fair value of the interest rate
swaps was $3.0 million and was recorded as an asset with the corresponding gain recorded in other comprehensive income in stockholders equity, net of tax.



In October 2003, the interest rate swaps relating to interest receipts on variable rate commercial loans were sold back to the issuer. The gain resulting from the
termination, which totaled $1.4 million, will be recognized as an adjustment to interest income over the remaining term of the swaps.



We also have contractual obligations under operating leases for certain of our banking facilities. During the first quarter of 2003, we signed an operating lease for
108,000 square feet of office and operational space for our corporate center in Rosemont, Illinois. We began to occupy the facility and incur rent expense in September 2003. The lease expires in August of 2014. Our obligation to make future payments
under this operating lease is $534,000 during 2004, $657,000 during 2005, $676,000 during 2006, $697,000 during 2007, and $13.2 million during 2008 through 2014.



QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS



Interest rate risk is one of the most significant risks affecting us. 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. Our objectives are to manage, to the degree prudently possible, our exposure to interest rate risk over both a one year
planning



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



cycle and a 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 derivative financial
instruments.



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 and rates in effect at the model date excluding
the swaps sold in early October 2003. Our most recent modeling reflected the market and portfolio interest rates in effect at September 30, 2003. Net interest income is computed by the model assuming interest rates unchanged and compares those
results to other interest rate scenarios with changes in the magnitude, timing and relationship between various interest rates. We model changes in the shape (steepness) of the yield curve, other parallel shifts in the yield, such as a 400 basis
point increase in interest rates, and balance sheet growth scenarios.



As
predicted by our December 31, 2002 and June 30, 2003 simulations, the net interest margin has declined. Our September 30, 2003 modeling indicates that even if market interest rates were to remain unchanged from September 30, 2003, our earning asset
yields would decline more than our liability rates, resulting in a reduced net interest margin.



Our simulation modeling also indicates that net interest income would be under further downward pressure if rates continued to fall, reflecting an exposure to declining market rates. At September 30, 2003, net
interest income at risk for year one in the falling rate scenario was calculated at $3.4 million, or 3.61%, lower than the net interest income in the rates unchanged scenario. Conversely, net interest income for year one in the rising rate scenario
was calculated to be $3.7 million, or 3.96%, higher than the net interest income in the rates unchanged scenario at September 30, 2003. These exposures were within the Banks policy guidelines of 10%. The direction of our one-year exposure to
rising and declining interest rates at September 30, 2003 was generally consistent with our exposure at December 31, 2002.



Computation of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including, among other factors, relative levels of market
interest rates, loan and security prepayments, deposit decay and pricing and reinvestment strategies and should not be relied upon as indicative of actual results. Further, the computations do not contemplate any actions 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.



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



The following table indicates the estimated impact on net interest income in year one under various parallel ramp
interest rate scenarios at September 30, 2003 and December 31, 2002:



|                                 |  | Change in Future Net Interest Income |       
|-------------------------------- |  | ------------------------------------ | ------
|                                 |  | At September 30,2003                 |       
|                                 |  | (dollars in thousands)               |       
|Change in interest rates         |  | DollarChange                         |       
|+200 basis points over one year  |  | $                                    | 3,749 
|- 75 basis points over one year  |  |                                      | (3,414
|- 100 basis points over one year |  |                                      |      



LITIGATION



We are from time to time a party to litigation arising in the normal course of business.
Management knows of no threatened or pending legal actions against us that are likely to have a material adverse impact on our business, financial condition, liquidity or operating results.



NEW ACCOUNTING PRONOUNCEMENTS



In January 2003, the Financial Accounting Standards Board, or FASB, issued Interpretation
No. 46, Consolidation of Variable Interest Entities which provides new accounting guidance on when to consolidate a variable interest entity. A variable interest entity exists when either the total equity investment at risk is not
sufficient to permit the entity to finance its activities by itself, or the equity investors lack one of three characteristics associated with owning a controlling financial interest. Those characteristics include the direct or indirect ability to
make decisions about an entitys activities through voting rights or similar rights, the obligation to absorb the expected loss of an entity if they occur, and the right to receive the expected residual return of the entity if they occur. On
October 9, 2003, the FASB deferred the effective date for applying some provisions of this interpretation until the fourth quarter of 2003. We do not expect that the adoption of this Interpretation will have any significant impact on our
consolidated financial statements.



In April 2003, the FASB issued SFAS No.
149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. This Statement amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for
hedging activities. This Statement is effective for contracts entered into or modified after September 30, 2003 and for hedging relationships designated after September 30, 2003. We do not expect that the adoption of this Statement will have any
significant impact on our consolidated financial statements.



In May 2003, the
FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This Statement would require that certain financial instruments with characteristics of both liabilities and
equity be classified on the consolidated balance sheets as liabilities. The Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. The adoption of this Statement did not have any significant impact on our consolidated financial statements.



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



QUARTERLY FINANCIAL INFORMATION



The following table sets forth unaudited financial data regarding our operations for 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.



|                                  |  | 2003 Quarter Ended     |        | 2002 Quarter Ended |   | 2001QuarterEnded
|--------------------------------- |  | ---------------------- | ------ | ------------------ | - | ----------------
|                                  |  | Sep. 30                |        | Jun. 30            |   | Mar. 31         
|                                  |  | (dollars in thousands)
|Interest income                   |  | $                      | 34,576 |                    | $ | 34,873          
|Interest expense                  |  |                        | 9,856  |                    |   | 10,567          
|                                  |  |                        |        |                    |   |                 
|Net interest income               |  |                        | 24,720 |                    |   | 24,306          
|Provision for loan losses         |  |                        | 2,700  |                    |   | 1,533           
|Noninterest income                |  |                        | 4,590  |                    |   | 4,977           
|Securities gains, net             |  |                        |       |                    |   |                
|Litigation settlement charge      |  |                        |       |                    |   |                
|Noninterest expense               |  |                        | 19,005 |                    |   | 19,223          
|                                  |  |                        |        |                    |   |                 
|Income (loss) before income taxes |  |                        | 7,605  |                    |   | 8,527           
|Income taxes                      |  |                        | 2,013  |                    |   | 2,988           
|                                  |  |                        |        |                    |   |                 
|Net income (loss)                 |  | $                      | 5,592  |                    | $ | 5,539           
|                                  |  |                        |        |                    |   |                 
|Earnings (loss) per common share: |  |                        |        |                    |   |                 
|Basic                             |  | $                      | 0.50   |                    | $ | 0.50            
|Diluted                           |  |                        | 0.50   |                    |   | 0.49            
|                                  |  |                        |        |                    |   |                 



CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS



This quarterly report includes forward-looking
statements that reflect our current expectations and projections about our future results, performance, prospects and opportunities. We have tried to identify these forward-looking statements by using words such as 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 2003 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 historically low interest rates continue or if interest rates fluctuate as well as the effect of any imbalances in the interest
rate sensitivities of our assets and liabilities; 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 potential losses in our loan portfolio; possible volatility in loan charge-offs and recoveries from quarter to quarter; 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; the risks



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TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



associated with our reliance on third party professionals who provide certain financial services to our customers; changes in general economic conditions,
interest rates, deposit flows, loan demand, 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 our December 31, 2002 Annual Report on Form 10-K under the caption Risk Factors.



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 captioned Managements Discussion and AnalysisQuantitative and Qualitative Disclosure About Market Risks
is incorporated herein by reference.



|Item 4. |  | Controls and Procedures
|------- |  | -----------------------



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



We have carried out an evaluation under the supervision and with the participation of the
Companys management, including the Companys Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. 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.



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TAYLOR CAPITAL GROUP, INC.



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, 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 2. |  | Changes in 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 and Reports on Form 8-K
|------- |  | --------------------------------



|a) | We have filed the following exhibits with this quarterly report:
|-- | ----------------------------------------------------------------



|Exhibit Number |  | Exhibit                                                                                                                                                                                                                             
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               | 
|3.1            |  | Amended and Restated Certificate of Incorporation of Taylor Capital Group, Inc. (incorporated by reference from Exhibit 3.1 of the Amended Registration Statement on Form S-1 filed
October 10, 2002 (Registration No. 333-89158)). 
|               | 
|3.2            |  | Amended and Restated By-laws of Taylor Capital Group, Inc. (incorporated by reference from Exhibit 3.2 of the Amended Registration Statement on Form S-1 filed October 10, 2002
(Registration No. 333-89158)).                      
|               | 
|4.1            |  | Certificate representing the Series A 9% Noncumulative Perpetual Preferred Stock (incorporated by reference from Exhibit 4.2 of the Amended Registration Statement on Form S-1
filed October 10, 2002 (Registration No. 333-89158)).
|               | 
|4.2            |  | 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)).                



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TAYLOR CAPITAL GROUP, INC.



|Exhibit Number |  | Exhibit                                                                                                                                                                                                                                                         
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               | 
|4.3            |  | 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)).              
|               | 
|4.4            |  | 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)).                                                                      
|               | 
|4.5            |  | 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)).                                                                
|               | 
|4.6            |  | 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)).                                                
|               | 
|4.7            |  | 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)).                                                                    
|               | 
|4.8            |  | 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)).
|               | 
|4.9            |  | 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)).                                     
|               | 
|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.                                                                              



|b) | Reports on Form 8-K.
|-- | --------------------



| | 1) | On July 23, 2003, a Report on Form 8-K was furnished in conjunction with the Companys quarterly earnings release for the quarter ended June 30, 2003.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------



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TAYLOR CAPITAL GROUP, INC.



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: November 13, 2003 |  |  |  | /s/    J. CHRISTOPHER ALSTRIN                                                              
|                        |  |  | 
|                        |  |  |  | J. Christopher Alstrin Chief Financial Officer (Principal Financial and Accounting Officer)

| |  | 
| |  | 
| |  | 
| |  | 
| |  | 



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