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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q





QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended
September 30, 2009

Commission File No. 0-50034





TAYLOR CAPITAL GROUP, INC.

(Exact name of
registrant as specified in its charter)







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

9550 West Higgins Road

Rosemont, IL 60018

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

(847) 653-7978

(Registrants telephone number, including area code)





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

Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈  No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |   |  |                                              |  |  |  |                           |  |  
|----------------------- |  | - |  | -------------------------------------------- |  |  |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  |                                              |  |  |  | Accelerated filer         |  |  ̈
|                        |  |   |  |                                              | 
|Non-accelerated filer   |  |  ̈ |  | (Do not check if smaller reporting company.) |  |  |  | Smaller reporting company |  | x

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

Indicate the number of outstanding shares of each of the issuers classes of common stock, as of the latest practicable date: At November 6, 2009,
there were 11,078,011 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, 2009 and December 31, 2008                                             |  | 1   
|                              |  |                                                                                                                               
|                              |  | Consolidated Statements of Operations (unaudited) - For the three and nine months ended September 30, 2009 and 2008            |  | 2   
|                              |  |                                                                                                                               
|                              |  | Consolidated Statements of Changes in Stockholders Equity (unaudited) - For the nine months ended September 30, 2009 and 2008 |  | 3   
|                              |  |                                                                                                                               
|                              |  | Consolidated Statements of Cash Flows (unaudited) - For the nine months ended September 30, 2009 and 2008                      |  | 4   
|                              |  |                                                                                                                               
|                              |  | Notes to Consolidated Financial Statements (unaudited)                                                                         |  | 6   
|                              |  |                                                                                                                               
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                          |  | 28  
|                              |  |                                                                                                                               
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                                     |  | 71  
|                              |  |                                                                                                                               
|Item 4.                       |  | Controls and Procedures                                                                                                        |  | 71  
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                               
|                              |  |                                                                                                                               
|Item 1.                       |  | Legal Proceedings                                                                                                              |  | 72  
|                              |  |                                                                                                                               
|Item 1A.                      |  | Risk Factors                                                                                                                   |  | 72  
|                              |  |                                                                                                                               
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                    |  | 72  
|                              |  |                                                                                                                               
|Item 3.                       |  | Defaults Upon Senior Securities                                                                                                |  | 72  
|                              |  |                                                                                                                               
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                                            |  | 72  
|                              |  |                                                                                                                               
|Item 5.                       |  | Other Information                                                                                                              |  | 72  
|                              |  |                                                                                                                               
|Item 6.                       |  | Exhibits                                                                                                                       |  | 73  
|                              |  |                                                                                                                               
|                              |  | Signatures                                                                                                                     |  | 75  



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TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS (unaudited)

(dollars in thousands, except per share data)



|                                                                                                                                                                                                                                                                                                                  |  |                   |           |   |                  |   |           |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                                                                                                                                                                                                  |  | September 30,2009 |           |   | December 31,2008 |  
|ASSETS                                                                                                                                                                                                                                                                                                            |  |                   |           |   |                  |   |           |  
|Cash and cash equivalents:                                                                                                                                                                                                                                                                                        |  |                   |           |   |                  |   |           |  
|Cash and due from banks                                                                                                                                                                                                                                                                                           |  | $                 | 47,484    |   |                  | $ | 52,762    |  
|Federal funds sold                                                                                                                                                                                                                                                                                                |  |                   |          |   |                  |   | 200       |  
|Short-term investments                                                                                                                                                                                                                                                                                            |  |                   | 49        |   |                  |   | 50        |  
|                                                                                                                                                                                                                                                                                                                  |  |                   |           |   |                  |   |           |  
|Total cash and cash equivalents                                                                                                                                                                                                                                                                                   |  |                   | 47,533    |   |                  |   | 53,012    |  
|Investment securities:                                                                                                                                                                                                                                                                                            |  |                   |           |   |                  |   |           |  
|Available-for-sale, at fair value                                                                                                                                                                                                                                                                                 |  |                   | 1,306,098 |   |                  |   | 1,094,569 |  
|Held-to-maturity, at amortized cost (fair value of $25 at December 31, 2008)                                                                                                                                                                                                                                      |  |                   |          |   |                  |   | 25        |  
|Loans held for sale, at lower of cost or market                                                                                                                                                                                                                                                                   |  |                   | 102,765   |   |                  |   |          |  
|Loans, net of allowance for loan losses of $107,132 and $128,548 at September 30, 2009 and December 31, 2008,
respectively                                                                                                                                                                                        |  |                   | 2,904,357 |   |                  |   | 3,104,713 |  
|Premises, leasehold improvements and equipment, net                                                                                                                                                                                                                                                               |  |                   | 15,742    |   |                  |   | 17,124    |  
|Investments in Federal Home Loan Bank and Federal Reserve Bank stock, at cost                                                                                                                                                                                                                                     |  |                   | 35,741    |   |                  |   | 29,630    |  
|Other real estate and repossessed assets, net                                                                                                                                                                                                                                                                     |  |                   | 20,313    |   |                  |   | 13,179    |  
|Other assets                                                                                                                                                                                                                                                                                                      |  |                   | 52,532    |   |                  |   | 76,637    |  
|                                                                                                                                                                                                                                                                                                                  |  |                   |           |   |                  |   |           |  
|Total assets                                                                                                                                                                                                                                                                                                      |  | $                 | 4,485,081 |   |                  | $ | 4,388,889 |  
|                                                                                                                                                                                                                                                                                                                  |  |                   |           |   |                  |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                                                                                                              |  |                   |           |   |                  |   |           |  
|Deposits:                                                                                                                                                                                                                                                                                                         |  |                   |           |   |                  |   |           |  
|Noninterest-bearing                                                                                                                                                                                                                                                                                               |  | $                 | 615,590   |   |                  | $ | 470,990   |  
|Interest-bearing                                                                                                                                                                                                                                                                                                  |  |                   | 2,437,139 |   |                  |   | 2,660,056 |  
|                                                                                                                                                                                                                                                                                                                  |  |                   |           |   |                  |   |           |  
|Total deposits                                                                                                                                                                                                                                                                                                    |  |                   | 3,052,729 |   |                  |   | 3,131,046 |  
|Other borrowings                                                                                                                                                                                                                                                                                                  |  |                   | 327,692   |   |                  |   | 275,560   |  
|Accrued interest, taxes and other liabilities                                                                                                                                                                                                                                                                     |  |                   | 56,440    |   |                  |   | 71,286    |  
|Notes payable and other advances                                                                                                                                                                                                                                                                                  |  |                   | 617,000   |   |                  |   | 462,000   |  
|Junior subordinated debentures                                                                                                                                                                                                                                                                                    |  |                   | 86,607    |   |                  |   | 86,607    |  
|Subordinated notes, net                                                                                                                                                                                                                                                                                           |  |                   | 55,593    |   |                  |   | 55,303    |  
|                                                                                                                                                                                                                                                                                                                  |  |                   |           |   |                  |   |           |  
|Total liabilities                                                                                                                                                                                                                                                                                                 |  |                   | 4,196,061 |   |                  |   | 4,081,802 |  
|                                                                                                                                                                                                                                                                                                                  |  |                   |           |   |                  |   |           |  
|Stockholders equity:                                                                                                                                                                                                                                                                                             |  |                   |           |   |                  |   |           |  
|Preferred stock, $.01 par value, 10,000,000 shares authorized at September 30, 2009 and December 31,
2008:                                                                                                                                                                                                        |  |                   |           |   |                  |   |           |  
|Series A, 8% non-cumulative convertible perpetual, 2,400,000 shares issued and outstanding at September 30, 2009 and
December 31, 2008, $25.00 liquidation value                                                                                                                                                  |  |                   | 60,000    |   |                  |   | 60,000    |  
|Series B, 5% fixed rate cumulative perpetual, 104,823 shares issued and outstanding at September 30, 2009 and
December 31, 2008, $1,000 liquidation value                                                                                                                                                         |  |                   | 98,474    |   |                  |   | 97,314    |  
|Common stock, $.01 par value; 45,000,000 shares authorized at September 30, 2009 and December 31, 2008; 12,030,679 and
12,068,604 shares issued at September 30, 2009 and December 31, 2008, respectively; 11,078,011 and 11,115,936 shares outstanding at September 30, 2009 and December 31, 2008, respectively |  |                   | 120       |   |                  |   | 121       |  
|Surplus                                                                                                                                                                                                                                                                                                           |  |                   | 225,951   |   |                  |   | 224,872   |  
|Accumulated deficit                                                                                                                                                                                                                                                                                               |  |                   | (104,708  | ) |                  |   | (69,294   | )
|Accumulated other comprehensive income, net                                                                                                                                                                                                                                                                       |  |                   | 33,819    |   |                  |   | 18,710    |  
|Treasury stock, at cost, 952,668 shares at September 30, 2009 and December 31, 2008                                                                                                                                                                                                                               |  |                   | (24,636   | ) |                  |   | (24,636   | )
|                                                                                                                                                                                                                                                                                                                  |  |                   |           |   |                  |   |           |  
|Total stockholders equity                                                                                                                                                                                                                                                                                        |  |                   | 289,020   |   |                  |   | 307,087   |  
|                                                                                                                                                                                                                                                                                                                  |  |                   |           |   |                  |   |           |  
|Total liabilities and stockholders equity                                                                                                                                                                                                                                                                        |  | $                 | 4,485,081 |   |                  | $ | 4,388,889 |  
|                                                                                                                                                                                                                                                                                                                  |  |                   |           |   |                  |   |           |  

See accompanying notes to consolidated financial statements (unaudited)



1



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TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(dollars in thousands, except per share data)



|                                                           |  |                                         |        |   |                                        |   |         |      |  |   |         |   |  |   |          |  
|---------------------------------------------------------- |  | --------------------------------------- | ------ | - | -------------------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | -------- | -
|                                                           |  | For the Three MonthsEnded September 30, |        |   | For the Nine MonthsEnded September 30, |  
|                                                           |  | 2009                                    |        |   | 2008                                   |   |         | 2009 |  |   | 2008    |  
|Interest income:                                           |  |                                         |        |   |                                        |   |         |      |  |   |         |   |  |   |          |  
|Interest and fees on loans                                 |  | $                                       | 40,749 |   |                                        | $ | 40,069  |      |  | $ | 119,668 |   |  | $ | 117,047  |  
|Interest and dividends on investment securities:           |  |                                         |        |   |                                        |   |         |      |  |   |         |   |  |   |          |  
|Taxable                                                    |  |                                         | 13,921 |   |                                        |   | 8,664   |      |  |   | 42,179  |   |  |   | 27,019   |  
|Tax-exempt                                                 |  |                                         | 1,360  |   |                                        |   | 1,449   |      |  |   | 4,203   |   |  |   | 4,387    |  
|Interest on cash equivalents                               |  |                                         | 3      |   |                                        |   | 582     |      |  |   | 15      |   |  |   | 1,371    |  
|                                                           |  |                                         |        |   |                                        |   |         |      |  |   |         |   |  |   |          |  
|Total interest income                                      |  |                                         | 56,033 |   |                                        |   | 50,764  |      |  |   | 166,065 |   |  |   | 149,824  |  
|                                                           |  |                                         |        |   |                                        |   |         |      |  |   |         |   |  |   |          |  
|Interest expense:                                          |  |                                         |        |   |                                        |   |         |      |  |   |         |   |  |   |          |  
|Deposits                                                   |  |                                         | 16,629 |   |                                        |   | 23,456  |      |  |   | 54,911  |   |  |   | 65,035   |  
|Other borrowings                                           |  |                                         | 2,210  |   |                                        |   | 2,364   |      |  |   | 6,618   |   |  |   | 7,454    |  
|Notes payable and other advances                           |  |                                         | 1,718  |   |                                        |   | 1,298   |      |  |   | 4,956   |   |  |   | 4,045    |  
|Junior subordinated debentures                             |  |                                         | 1,477  |   |                                        |   | 1,715   |      |  |   | 4,618   |   |  |   | 5,320    |  
|Subordinated notes                                         |  |                                         | 1,624  |   |                                        |   | 33      |      |  |   | 4,861   |   |  |   | 33       |  
|                                                           |  |                                         |        |   |                                        |   |         |      |  |   |         |   |  |   |          |  
|Total interest expense                                     |  |                                         | 23,658 |   |                                        |   | 28,866  |      |  |   | 75,964  |   |  |   | 81,887   |  
|                                                           |  |                                         |        |   |                                        |   |         |      |  |   |         |   |  |   |          |  
|Net interest income                                        |  |                                         | 32,375 |   |                                        |   | 21,898  |      |  |   | 90,101  |   |  |   | 67,937   |  
|Provision for loan losses                                  |  |                                         | 15,539 |   |                                        |   | 52,700  |      |  |   | 70,609  |   |  |   | 113,805  |  
|                                                           |  |                                         |        |   |                                        |   |         |      |  |   |         |   |  |   |          |  
|Net interest income (loss) after provision for loan losses |  |                                         | 16,836 |   |                                        |   | (30,802 | )    |  |   | 19,492  |   |  |   | (45,868  | )
|                                                           |  |                                         |        |   |                                        |   |         |      |  |   |         |   |  |   |          |  
|Noninterest income:                                        |  |                                         |        |   |                                        |   |         |      |  |   |         |   |  |   |          |  
|Service charges                                            |  |                                         | 2,892  |   |                                        |   | 2,256   |      |  |   | 8,481   |   |  |   | 6,677    |  
|Trust and investment management fees                       |  |                                         | 332    |   |                                        |   | 894     |      |  |   | 1,341   |   |  |   | 2,736    |  
|Mortgage banking, net                                      |  |                                         | (1,351 | ) |                                        |   |        |      |  |   | (1,305  | ) |  |   | 23       |  
|Gains on investment securities                             |  |                                         | 378    |   |                                        |   |        |      |  |   | 8,637   |   |  |   |         |  
|Other derivative income                                    |  |                                         | 108    |   |                                        |   | 154     |      |  |   | 1,380   |   |  |   | 1,106    |  
|Other noninterest income                                   |  |                                         | 1,017  |   |                                        |   | (84     | )    |  |   | 2,322   |   |  |   | 810      |  
|                                                           |  |                                         |        |   |                                        |   |         |      |  |   |         |   |  |   |          |  
|Total noninterest income                                   |  |                                         | 3,376  |   |                                        |   | 3,220   |      |  |   | 20,856  |   |  |   | 11,352   |  
|                                                           |  |                                         |        |   |                                        |   |         |      |  |   |         |   |  |   |          |  
|Noninterest expense:                                       |  |                                         |        |   |                                        |   |         |      |  |   |         |   |  |   |          |  
|Salaries and employee benefits                             |  |                                         | 10,440 |   |                                        |   | 14,948  |      |  |   | 31,976  |   |  |   | 37,747   |  
|Occupancy of premises                                      |  |                                         | 2,017  |   |                                        |   | 1,943   |      |  |   | 6,079   |   |  |   | 5,773    |  
|Furniture and equipment                                    |  |                                         | 531    |   |                                        |   | 830     |      |  |   | 1,625   |   |  |   | 2,498    |  
|FDIC assessment                                            |  |                                         | 2,314  |   |                                        |   | 779     |      |  |   | 8,213   |   |  |   | 1,891    |  
|Legal fees, net                                            |  |                                         | 1,430  |   |                                        |   | 1,841   |      |  |   | 4,225   |   |  |   | 3,195    |  
|Non-performing asset expense                               |  |                                         | 2,295  |   |                                        |   | 1,398   |      |  |   | 3,273   |   |  |   | 4,877    |  
|Early extinguishment of debt                               |  |                                         |       |   |                                        |   | 412     |      |  |   | 527     |   |  |   | 1,606    |  
|Other noninterest expense                                  |  |                                         | 3,489  |   |                                        |   | 5,150   |      |  |   | 11,470  |   |  |   | 14,153   |  
|                                                           |  |                                         |        |   |                                        |   |         |      |  |   |         |   |  |   |          |  
|Total noninterest expense                                  |  |                                         | 22,516 |   |                                        |   | 27,301  |      |  |   | 67,388  |   |  |   | 71,740   |  
|                                                           |  |                                         |        |   |                                        |   |         |      |  |   |         |   |  |   |          |  
|Loss before income taxes                                   |  |                                         | (2,304 | ) |                                        |   | (54,883 | )    |  |   | (27,040 | ) |  |   | (106,256 | )
|Income tax expense                                         |  |                                         | 144    |   |                                        |   | 25,653  |      |  |   | 1,481   |   |  |   | 3,436    |  
|                                                           |  |                                         |        |   |                                        |   |         |      |  |   |         |   |  |   |          |  
|Net loss                                                   |  |                                         | (2,448 | ) |                                        |   | (80,536 | )    |  |   | (28,521 | ) |  |   | (109,692 | )
|Preferred dividends and discounts                          |  |                                         | (2,873 | ) |                                        |   |        |      |  |   | (8,603  | ) |  |   |         |  
|Implied non-cash preferred dividends                       |  |                                         |       |   |                                        |   | (16,680 | )    |  |   |        |   |  |   | (16,680  | )
|                                                           |  |                                         |        |   |                                        |   |         |      |  |   |         |   |  |   |          |  
|Net loss applicable to common shareholders                 |  | $                                       | (5,321 | ) |                                        | $ | (97,216 | )    |  | $ | (37,124 | ) |  | $ | (126,372 | )
|                                                           |  |                                         |        |   |                                        |   |         |      |  |   |         |   |  |   |          |  
|Basic loss per common share                                |  | $                                       | (0.51  | ) |                                        | $ | (9.30   | )    |  | $ | (3.54   | ) |  | $ | (12.10   | )
|Diluted loss per common share                              |  |                                         | (0.51  | ) |                                        |   | (9.30   | )    |  |   | (3.54   | ) |  |   | (12.10   | )

See accompanying notes to consolidated financial statements (unaudited)



2



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (unaudited)

(dollars in thousands, except per share data)



|                                                                                                                            |  |                         |         |   |                         |   |             |  |   |         |   |  |                                      |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |          |  
|--------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ----------------------- | - | ----------- |  | - | ------- | - |  | ------------------------------------ | ------- | - | ----------------------------------- | - | -------- | ------------- |  | - | ------ | - |  | - | ------- | - |  | - | -------- | -
|                                                                                                                            |  | PreferredStock,Series
A |         |   | PreferredStock,Series
B |   | CommonStock |  |   | Surplus |   |  | RetainedEarnings(AccumulatedDeficit) |         |   | AccumulatedOtherComprehensiveIncome |   |          | TreasuryStock |  |   | Total  |  
|Balance at December 31, 2008                                                                                                |  | $                       | 60,000  |   |                         | $ | 97,314      |  | $ | 121     |   |  | $                                    | 224,872 |   |                                     | $ | (69,294  | )             |  | $ | 18,710 |   |  | $ | (24,636 | ) |  | $ | 307,087  |  
|Adoption of FSP FAS115-2 and 124-2, effective April 1, 2009                                                                 |  |                         |        |   |                         |   |            |  |   |        |   |  |                                      |        |   |                                     |   | 1,710    |               |  |   | (1,033 | ) |  |   |        |   |  |   | 677      |  
|Preferred stock issuance cost, Series B                                                                                     |  |                         |        |   |                         |   |            |  |   |        |   |  |                                      | (27     | ) |                                     |   |         |               |  |   |       |   |  |   |        |   |  |   | (27      | )
|Amortization of stock based compensation awards                                                                             |  |                         |        |   |                         |   |            |  |   | (1      | ) |  |                                      | 1,628   |   |                                     |   |         |               |  |   |       |   |  |   |        |   |  |   | 1,627    |  
|Tax benefit on stock awards                                                                                                 |  |                         |        |   |                         |   |            |  |   |        |   |  |                                      | (522    | ) |                                     |   |         |               |  |   |       |   |  |   |        |   |  |   | (522     | )
|Comprehensive loss:                                                                                                         |  |                         |         |   |                         |   |             |  |   |         |   |  |                                      |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |          |  
|Net loss                                                                                                                    |  |                         |        |   |                         |   |            |  |   |        |   |  |                                      |        |   |                                     |   | (28,521  | )             |  |   |       |   |  |   |        |   |  |   | (28,521  | )
|Change in unrealized gains on available-for-sale investment securities, net of income taxes and reclassification
adjustment |  |                         |        |   |                         |   |            |  |   |        |   |  |                                      |        |   |                                     |   |         |               |  |   | 19,232 |   |  |   |        |   |  |   | 19,232   |  
|Changes in deferred gain from termination of cash flow hedging instruments, net of income taxes                             |  |                         |        |   |                         |   |            |  |   |        |   |  |                                      |        |   |                                     |   |         |               |  |   | (3,090 | ) |  |   |        |   |  |   | (3,090   | )
|                                                                                                                            |  |                         |         |   |                         |   |             |  |   |         |   |  |                                      |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |          |  
|Total comprehensive loss                                                                                                    |  |                         |         |   |                         |   |             |  |   |         |   |  |                                      |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   | (12,379  | )
|                                                                                                                            |  |                         |         |   |                         |   |             |  |   |         |   |  |                                      |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |          |  
|Preferred stock dividends declared, Series A-$1.50 per share                                                                |  |                         |        |   |                         |   |            |  |   |        |   |  |                                      |        |   |                                     |   | (3,600   | )             |  |   |       |   |  |   |        |   |  |   | (3,600   | )
|Preferred stock dividends accumulated, Series B                                                                             |  |                         |        |   |                         |   | 1,160       |  |   |        |   |  |                                      |        |   |                                     |   | (5,003   | )             |  |   |       |   |  |   |        |   |  |   | (3,843   | )
|                                                                                                                            |  |                         |         |   |                         |   |             |  |   |         |   |  |                                      |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |          |  
|Balance at September 30, 2009                                                                                               |  | $                       | 60,000  |   |                         | $ | 98,474      |  | $ | 120     |   |  | $                                    | 225,951 |   |                                     | $ | (104,708 | )             |  | $ | 33,819 |   |  | $ | (24,636 | ) |  | $ | 289,020  |  
|                                                                                                                            |  |                         |         |   |                         |   |             |  |   |         |   |  |                                      |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |          |  
|Balance at December 31, 2007                                                                                                |  | $                       |        |   |                         | $ |            |  | $ | 115     |   |  | $                                    | 197,214 |   |                                     | $ | 75,145   |               |  | $ | 6,418  |   |  | $ | (24,636 | ) |  | $ | 254,256  |  
|Issuance of preferred stock, net of issuance costs                                                                          |  |                         | 60,000  |   |                         |   |            |  |   |        |   |  |                                      | (3,652  | ) |                                     |   |         |               |  |   |       |   |  |   |        |   |  |   | 56,348   |  
|Discount from preferred stock beneficial conversion feature                                                                 |  |                         | (16,680 | ) |                         |   |            |  |   |        |   |  |                                      | 16,680  |   |                                     |   |         |               |  |   |       |   |  |   |        |   |  |   |         |  
|Implied non-cash preferred dividend for beneficial conversion feature                                                       |  |                         | 16,680  |   |                         |   |            |  |   |        |   |  |                                      |        |   |                                     |   | (16,680  | )             |  |   |       |   |  |   |        |   |  |   |         |  
|Issuance of warrants to purchase common stock, net of issuance costs                                                        |  |                         |        |   |                         |   |            |  |   |        |   |  |                                      | 4,692   |   |                                     |   |         |               |  |   |       |   |  |   |        |   |  |   | 4,692    |  
|Amortization of stock based compensation awards                                                                             |  |                         |        |   |                         |   |            |  |   |        |   |  |                                      | 1,483   |   |                                     |   |         |               |  |   |       |   |  |   |        |   |  |   | 1,483    |  
|Issuance of restricted stock grants                                                                                         |  |                         |        |   |                         |   |            |  |   | 5       |   |  |                                      | (5      | ) |                                     |   |         |               |  |   |       |   |  |   |        |   |  |   |         |  
|Exercise of stock options                                                                                                   |  |                         |        |   |                         |   |            |  |   |        |   |  |                                      | 30      |   |                                     |   |         |               |  |   |       |   |  |   |        |   |  |   | 30       |  
|Tax benefit on stock options exercised and stock awards                                                                     |  |                         |        |   |                         |   |            |  |   |        |   |  |                                      | (183    | ) |                                     |   |         |               |  |   |       |   |  |   |        |   |  |   | (183     | )
|Comprehensive income (loss):                                                                                                |  |                         |         |   |                         |   |             |  |   |         |   |  |                                      |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |          |  
|Net loss                                                                                                                    |  |                         |        |   |                         |   |            |  |   |        |   |  |                                      |        |   |                                     |   | (109,692 | )             |  |   |       |   |  |   |        |   |  |   | (109,692 | )
|Change in unrealized gains and losses on available-for-sale investment securities, net of income taxes                      |  |                         |        |   |                         |   |            |  |   |        |   |  |                                      |        |   |                                     |   |         |               |  |   | (7,905 | ) |  |   |        |   |  |   | (7,905   | )
|Change in unrealized gains and losses from cash flow hedging instruments, net of income taxes                               |  |                         |        |   |                         |   |            |  |   |        |   |  |                                      |        |   |                                     |   |         |               |  |   | 1,393  |   |  |   |        |   |  |   | 1,393    |  
|Changes in deferred gains and losses from termination of cash flow hedging instruments, net of income taxes                 |  |                         |        |   |                         |   |            |  |   |        |   |  |                                      |        |   |                                     |   |         |               |  |   | (760   | ) |  |   |        |   |  |   | (760     | )
|                                                                                                                            |  |                         |         |   |                         |   |             |  |   |         |   |  |                                      |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |          |  
|Total comprehensive loss                                                                                                    |  |                         |         |   |                         |   |             |  |   |         |   |  |                                      |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   | (116,964 | )
|                                                                                                                            |  |                         |         |   |                         |   |             |  |   |         |   |  |                                      |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |          |  
|Common stock dividends$0.10 per share                                                                                      |  |                         |        |   |                         |   |            |  |   |        |   |  |                                      |        |   |                                     |   | (1,081   | )             |  |   |       |   |  |   |        |   |  |   | (1,081   | )
|                                                                                                                            |  |                         |         |   |                         |   |             |  |   |         |   |  |                                      |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |          |  
|Balance at September 30, 2008                                                                                               |  | $                       | 60,000  |   |                         | $ |            |  | $ | 120     |   |  | $                                    | 216,259 |   |                                     | $ | (52,308  | )             |  | $ | (854   | ) |  | $ | (24,636 | ) |  | $ | 198,581  |  
|                                                                                                                            |  |                         |         |   |                         |   |             |  |   |         |   |  |                                      |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |          |  

See accompanying notes to consolidated financial statements (unaudited)



3



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(dollars in thousands)



|                                                                                 |  |                                       |          |   |      |   |          |  
|-------------------------------------------------------------------------------- |  | ------------------------------------- | -------- | - | ---- | - | -------- | -
|                                                                                 |  | For the Nine Months EndedSeptember 30 |         
|                                                                                 |  | 2009                                  |          |   | 2008 |  
|Cash flows from operating activities:                                            |  |                                       |          |   |      |   |          |  
|Net loss                                                                         |  | $                                     | (28,521  | ) |      | $ | (109,692 | )
|Adjustments to reconcile net loss to net cash provided by operating activities:  |  |                                       |          |   |      |   |          |  
|Other derivative income                                                          |  |                                       | (1,380   | ) |      |   | (1,106   | )
|Gains on investment sales                                                        |  |                                       | (8,637   | ) |      |   |         |  
|Amortization of premiums and discounts, net                                      |  |                                       | (70      | ) |      |   | (660     | )
|Deferred loan fee amortization                                                   |  |                                       | (3,495   | ) |      |   | (1,593   | )
|Provision for loan losses                                                        |  |                                       | 70,609   |   |      |   | 113,805  |  
|Loans purchased                                                                  |  |                                       | (76,829  | ) |      |   |         |  
|Proceeds from loan sales                                                         |  |                                       | 2,803    |   |      |   |         |  
|Depreciation and amortization                                                    |  |                                       | 1,779    |   |      |   | 2,443    |  
|Deferred income tax expense                                                      |  |                                       | 5,862    |   |      |   | 17,841   |  
|Losses on other real estate                                                      |  |                                       | 1,243    |   |      |   | 770      |  
|Tax expense on stock options exercised or stock awards                           |  |                                       | (522     | ) |      |   | (183     | )
|Excess tax benefit on stock options exercised and stock awards                   |  |                                       | 403      |   |      |   | 155      |  
|Cash received on termination of derivative instruments                           |  |                                       | 6,630    |   |      |   | 3,934    |  
|Other, net                                                                       |  |                                       | 125      |   |      |   | (1,333   | )
|Changes in other assets and liabilities:                                         |  |                                       |          |   |      |   |          |  
|Accrued interest receivable                                                      |  |                                       | 150      |   |      |   | 1,812    |  
|Other assets                                                                     |  |                                       | 6,117    |   |      |   | (15,378  | )
|Accrued interest, taxes and other liabilities                                    |  |                                       | (14,196  | ) |      |   | 16,859   |  
|                                                                                 |  |                                       |          |   |      |   |          |  
|Net cash (used by) provided by operating activities                              |  |                                       | (37,929  | ) |      |   | 27,674   |  
|                                                                                 |  |                                       |          |   |      |   |          |  
|Cash flows from investing activities:                                            |  |                                       |          |   |      |   |          |  
|Purchases of available-for-sale securities                                       |  |                                       | (708,879 | ) |      |   | (40,044  | )
|Proceeds from principal payments and maturities of available-for-sale securities |  |                                       | 249,924  |   |      |   | 125,280  |  
|Proceeds from principal payments and maturities of held-to-maturity securities   |  |                                       | 25       |   |      |   |         |  
|Proceeds from sales of available-for-sale securities                             |  |                                       | 276,657  |   |      |   |         |  
|Net (increase) decrease in loans                                                 |  |                                       | 86,953   |   |      |   | (598,876 | )
|Net additions to premises, leasehold improvements and equipment                  |  |                                       | (397     | ) |      |   | (3,575   | )
|Net cash paid on sale of branch                                                  |  |                                       |         |   |      |   | (6,444   | )
|Additions to foreclosed property                                                 |  |                                       | (342     | ) |      |   | (810     | )
|Net proceeds from sales of other real estate                                     |  |                                       | 9,515    |   |      |   | 3,281    |  
|                                                                                 |  |                                       |          |   |      |   |          |  
|Net cash used by investing activities                                            |  |                                       | (86,544  | ) |      |   | (521,188 | )
|                                                                                 |  |                                       |          |   |      |   |          |  
|Cash flows from financing activities:                                            |  |                                       |          |   |      |   |          |  
|Net increase (decrease) in deposits                                              |  |                                       | (80,052  | ) |      |   | 649,158  |  
|Net increase (decrease) in other borrowings                                      |  |                                       | 52,132   |   |      |   | (83,824  | )
|Proceeds from notes payable and other advances                                   |  |                                       | 155,000  |   |      |   | 157,000  |  
|Repayments of notes payable and other advances                                   |  |                                       |         |   |      |   | (215,000 | )
|Net proceeds from issuance of subordinated debt                                  |  |                                       |         |   |      |   | 58,908   |  
|Net proceeds from issuance of preferred stock                                    |  |                                       | (27      | ) |      |   | 56,348   |  
|Proceeds from exercise of employee stock options                                 |  |                                       |         |   |      |   | 30       |  
|Excess tax benefit on stock options exercised and stock awards                   |  |                                       | (403     | ) |      |   | (155     | )
|Dividends paid                                                                   |  |                                       | (7,656   | ) |      |   | (2,136   | )
|                                                                                 |  |                                       |          |   |      |   |          |  
|Net cash provided by financing activities                                        |  |                                       | 118,994  |   |      |   | 620,329  |  
|                                                                                 |  |                                       |          |   |      |   |          |  
|Net (decrease) increase in cash and cash equivalents                             |  |                                       | (5,479   | ) |      |   | 126,815  |  
|Cash and cash equivalents, beginning of period                                   |  |                                       | 53,012   |   |      |   | 83,561   |  
|                                                                                 |  |                                       |          |   |      |   |          |  
|Cash and cash equivalents, end of period                                         |  | $                                     | 47,533   |   |      | $ | 210,376  |  
|                                                                                 |  |                                       |          |   |      |   |          |  

Consolidated Statements of Cash Flows continued on the next page

See accompanying notes to consolidated financial statements (unaudited)



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

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

(dollars in thousands)



|                                                                              |  |                                       |         |   |      |   |        |  
|----------------------------------------------------------------------------- |  | ------------------------------------- | ------- | - | ---- | - | ------ | -
|                                                                              |  | For the Nine Months EndedSeptember 30 |        
|                                                                              |  | 2009                                  |         |   | 2008 |  
|Supplemental disclosure of cash flow information:                             |  |                                       |         |   |      |   |        |  
|Cash paid (received) during the period for:                                   |  |                                       |         |   |      |   |        |  
|Interest                                                                      |  | $                                     | 84,580  |   |      | $ | 78,835 |  
|Income taxes                                                                  |  |                                       | (14,969 | ) |      |   | 264    |  
|                                                                              |  |                                      
|Supplemental disclosures of noncash investing and financing activities:       |  |                                       |         |   |      |   |        |  
|Change in fair value of available-for-sale investments securities, net of tax |  | $                                     | 19,232  |   |      | $ | (7,905 | )
|Loans transferred to other real estate and held for sale                      |  |                                       | 46,289  |   |      |   | 4,752  |  

See accompanying notes to consolidated financial statements (unaudited)



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##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1. Basis of Presentation:

These consolidated financial statements
contain unaudited information as of September 30, 2009 and for the three and nine month periods ended September 30, 2009 and September 30, 2008. The unaudited interim financial statements have been prepared pursuant to the rules and
regulations for reporting on Form 10-Q. Accordingly, certain disclosures required by accounting principles generally accepted in the United States of America are not included herein. In managements opinion, these unaudited financial statements
include all adjustments necessary for a fair presentation of the information when read in conjunction with the Companys audited consolidated financial statements and the related notes. The statement of operations data for the three and nine
month periods ended September 30, 2009 is not necessarily indicative of the results that the Company may achieve for the full year.

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

2. Investment Securities:

The amortized cost and estimated fair values of investment securities at September 30, 2009 and December 31, 2008 were as follows:



|                                            |  |                    |           |                      |   |                       |  |   |                     |   |  |   |          
|------------------------------------------- |  | ------------------ | --------- | -------------------- | - | --------------------- |  | - | ------------------- | - |  | - | ---------
|                                            |  | September 30, 2009
|                                            |  | AmortizedCost      |           | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFair Value
|                                            |  | (in thousands)    
|Available-for-sale:                         |  |                    |           |                      |   |                       |  |   |                     |   |  |   |          
|U.S. government sponsored agency securities |  | $                  | 69,985    |                      | $ | 1,648                 |  | $ |                    |   |  | $ | 71,633   
|Mortgage-backed securities:                 |  |                    |           |                      |   |                       |  |   |                     |   |  |   |          
|Residential                                 |  |                    | 781,611   |                      |   | 26,724                |  |   | (4,644              | ) |  |   | 803,691  
|Commercial                                  |  |                    | 160,467   |                      |   | 5,362                 |  |   | (63                 | ) |  |   | 165,766  
|Collateralized mortgage obligations         |  |                    | 109,522   |                      |   | 3,877                 |  |   | (1,444              | ) |  |   | 111,955  
|State and municipal obligations             |  |                    | 128,742   |                      |   | 5,596                 |  |   | (30                 | ) |  |   | 134,308  
|Other debt securities                       |  |                    | 16,785    |                      |   | 1,960                 |  |   |                    |   |  |   | 18,745   
|                                            |  |                    |           |                      |   |                       |  |   |                     |   |  |   |          
|Total available-for-sale 821                |  |                    | 1,267,112 |                      |   | 45,167                |  |   | (6,181              | ) |  |   | 1,306,098
|                                            |  |                    |           |                      |   |                       |  |   |                     |   |  |   |          
|Held-to-maturity:                           |  |                    |           |                      |   |                       |  |   |                     |   |  |   |          
|Other debt securities                       |  |                    |          |                      |   |                      |  |   |                    |   |  |   |         
|                                            |  |                    |           |                      |   |                       |  |   |                     |   |  |   |          
|Total held-to-maturity                      |  |                    |          |                      |   |                      |  |   |                    |   |  |   |         
|                                            |  |                    |           |                      |   |                       |  |   |                     |   |  |   |          
|Total                                       |  | $                  | 1,267,112 |                      | $ | 45,167                |  | $ | (6,181              | ) |  | $ | 1,306,098
|                                            |  |                    |           |                      |   |                       |  |   |                     |   |  |   |          



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##### Table of Contents

|                                            |  |                   |           |                      |   |                       |  |   |                     |   |  |   |          
|------------------------------------------- |  | ----------------- | --------- | -------------------- | - | --------------------- |  | - | ------------------- | - |  | - | ---------
|                                            |  | December 31, 2008
|                                            |  | AmortizedCost     |           | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFair Value
|                                            |  | (in thousands)   
|Available-for-sale:                         |  |                   |           |                      |   |                       |  |   |                     |   |  |   |          
|U.S. government sponsored agency securities |  | $                 | 64,993    |                      | $ | 1,992                 |  | $ |                    |   |  | $ | 66,985   
|Mortgage-backed securities:                 |  |                   |           |                      |   |                       |  |   |                     |   |  |   |          
|Residential                                 |  |                   | 704,684   |                      |   | 22,182                |  |   | (3,933              | ) |  |   | 722,933  
|Commercial                                  |  |                   |          |                      |   |                      |  |   |                    |   |  |   |         
|Collateralized mortgage obligations         |  |                   | 152,198   |                      |   | 2,174                 |  |   | (2,669              | ) |  |   | 151,703  
|State and municipal obligations             |  |                   | 137,958   |                      |   | 1,347                 |  |   | (1,130              | ) |  |   | 138,175  
|Other debt securities                       |  |                   | 14,563    |                      |   | 210                   |  |   |                    |   |  |   | 14,773   
|                                            |  |                   |           |                      |   |                       |  |   |                     |   |  |   |          
|Total available-for-sale                    |  |                   | 1,074,396 |                      |   | 27,905                |  |   | (7,732              | ) |  |   | 1,094,569
|                                            |  |                   |           |                      |   |                       |  |   |                     |   |  |   |          
|Held-to-maturity:                           |  |                   |           |                      |   |                       |  |   |                     |   |  |   |          
|Other debt securities                       |  |                   | 25        |                      |   |                      |  |   |                    |   |  |   | 25       
|                                            |  |                   |           |                      |   |                       |  |   |                     |   |  |   |          
|Total held-to-maturity                      |  |                   | 25        |                      |   |                      |  |   |                    |   |  |   | 25       
|                                            |  |                   |           |                      |   |                       |  |   |                     |   |  |   |          
|Total                                       |  | $                 | 1,074,421 |                      | $ | 27,905                |  | $ | (7,732              | ) |  | $ | 1,094,594
|                                            |  |                   |           |                      |   |                       |  |   |                     |   |  |   |          

As of September 30, 2009, the Company had $1.08 billion of mortgage related
investment securities which consisted of residential and commercial mortgage-backed securities and collateralized mortgage obligations. Residential mortgage-backed securities include securities collateralized by 1-4 family residential mortgage
loans, while commercial mortgage-backed securities include securities collateralized by mortgage loans on multifamily properties. Of the total mortgage related investment securities, $1.05 billion, or 97.5%, were issued by government sponsored
enterprises, such as Ginnie Mae, Fannie Mae, and Freddie Mac, and the remaining $27.5 million were private-label mortgage related securities. Other debt securities at September 30, 2009 includes a $16.5 million investment in a single issuer
trust preferred security issued by a large money center bank, which was sold at a $2.3 million gain in November 2009, and $2.3 million of asset backed securities collateralized by student loans.

The following table shows the contractual maturities of debt securities, categorized by amortized cost and estimated fair value, at
September 30, 2009.



|                                       |  |                |           |                     |   |          
|-------------------------------------- |  | -------------- | --------- | ------------------- | - | ---------
|                                       |  | AmortizedCost  |           | EstimatedFair Value
|                                       |  | (in thousands)
|Available-for-sale:                    |  |                |           |                     |   |          
|Due in one year or less                |  | $              | 1,770     |                     | $ | 1,772    
|Due after one year through five years  |  |                | 74,638    |                     |   | 76,318   
|Due after five years through ten years |  |                | 26,285    |                     |   | 27,511   
|Due after ten years                    |  |                | 112,819   |                     |   | 119,085  
|Collateralized mortgage obligations    |  |                | 109,522   |                     |   | 111,955  
|Residential mortgage-backed securities |  |                | 781,611   |                     |   | 803,691  
|Commercial mortgage-backed securities  |  |                | 160,467   |                     |   | 165,766  
|                                       |  |                |           |                     |   |          
|Total                                  |  | $              | 1,267,112 |                     | $ | 1,306,098
|                                       |  |                |           |                     |   |          

During the third quarter and first nine months of 2009, the Company had gross
realized gains of $388,000 and $8.6 million, respectively, on the sale of available-for-sale investment securities. Gross realized losses totaling $10,000 were realized during the third quarter and during the first nine months of 2009. The Company
did not have any gross realized gains or losses on the sale of investment securities during the third quarter or first nine months of 2008.



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The following table summarizes, for investment securities with unrealized losses as of
September 30, 2009 and December 31, 2008, the amount of the unrealized loss and the related fair value of investment securities with unrealized losses. The unrealized losses have been further segregated by investment securities that have
been in a continuous unrealized loss position for less than twelve months and those that have been in a continuous unrealized loss position for twelve or more months.



|                                                     |  |                                               |        |                  |                     |        |            |       |                  |        |  |            |        |                  |  |   |        |  |   |        |  
|---------------------------------------------------- |  | --------------------------------------------- | ------ | ---------------- | ------------------- | ------ | ---------- | ----- | ---------------- | ------ |  | ---------- | ------ | ---------------- |  | - | ------ |  | - | ------ | -
|                                                     |  | September 30, 2009                            |       
|                                                     |  | Length of Continuous Unrealized Loss Position |       
|                                                     |  | Less than 12 months                           |        |                  | 12 months or longer |        |            | Total |                 
|                                                     |  | Fair Value                                    |        | UnrealizedLosses |                     |        | Fair Value |       | UnrealizedLosses |        |  | Fair Value |        | UnrealizedLosses | 
|                                                     |  | (in thousands)                                |       
|Available-for-sale:                                  |  |                                               |        |                  |                     |        |            |       |                  |        |  |            |        |                  |  |   |        |  |   |        |  
|Mortgage-backed securities:                          |  |                                               |        |                  |                     |        |            |       |                  |        |  |            |        |                  |  |   |        |  |   |        |  
|Residential                                          |  | $                                             | 35,089 |                  |                     | (236   | )          |       | $                | 6,654  |  | $          | (4,408 | )                |  | $ | 41,743 |  | $ | (4,644 | )
|Commercial                                           |  |                                               | 11,507 |                  |                     | (63    | )          |       |                  |       |  |            |       |                  |  |   | 11,507 |  |   | (63    | )
|Collateralized mortgage obligations                  |  |                                               | 7,140  |                  |                     | (80    | )          |       |                  | 13,739 |  |            | (1,364 | )                |  |   | 20,879 |  |   | (1,444 | )
|State and municipal obligations                      |  |                                               |       |                  |                     |       |            |       |                  | 979    |  |            | (30    | )                |  |   | 979    |  |   | (30    | )
|                                                     |  |                                               |        |                  |                     |        |            |       |                  |        |  |            |        |                  |  |   |        |  |   |        |  
|Temporarily impaired securities  Available-for-sale |  | $                                             | 53,736 |                  | $                   | (379   | )          |       | $                | 21,372 |  | $          | (5,802 | )                |  | $ | 75,108 |  | $ | (6,181 | )
|                                                     |  |                                               |        |                  |                     |        |            |       |                  |        |  |            |        |                  |  |   |        |  |   |        |  
|                                                     | 
|                                                     |  | December 31, 2008                             |       
|                                                     |  | Length of Continuous Unrealized Loss Position |       
|                                                     |  | Less than 12 months                           |        |                  | 12 months or longer |        |            | Total |                 
|                                                     |  | Fair Value                                    |        | UnrealizedLosses |                     |        | Fair Value |       | UnrealizedLosses |        |  | Fair Value |        | UnrealizedLosses | 
|                                                     |  | (in thousands)                                |       
|Available-for-sale:                                  |  |                                               |        |                  |                     |        |            |       |                  |        |  |            |        |                  |  |   |        |  |   |        |  
|Mortgage-backed securities:                          |  |                                               |        |                  |                     |        |            |       |                  |        |  |            |        |                  |  |   |        |  |   |        |  
|Residential                                          |  | $                                             | 6,948  |                  | $                   | (2,762 | )          |       | $                | 3,828  |  | $          | (1,171 | )                |  | $ | 10,776 |  | $ | (3,933 | )
|Collateralized mortgage obligations                  |  |                                               | 16,009 |                  |                     | (391   | )          |       |                  | 11,840 |  |            | (2,278 | )                |  |   | 27,849 |  |   | (2,669 | )
|State and municipal obligations                      |  |                                               | 45,312 |                  |                     | (1,084 | )          |       |                  | 2,935  |  |            | (46    | )                |  |   | 48,247 |  |   | (1,130 | )
|                                                     |  |                                               |        |                  |                     |        |            |       |                  |        |  |            |        |                  |  |   |        |  |   |        |  
|Temporarily impaired securities  Available-for-sale |  | $                                             | 68,269 |                  | $                   | (4,237 | )          |       | $                | 18,603 |  | $          | (3,495 | )                |  | $ | 86,872 |  | $ | (7,732 | )
|                                                     |  |                                               |        |                  |                     |        |            |       |                  |        |  |            |        |                  |  |   |        |  |   |        |  

At September 30, 2009, the Company had seven investment securities in an
unrealized loss position for more than 12 months and had a total unrealized loss of $5.8 million. Of the seven securities in an unrealized loss position, two securities were from the Companys state and municipal obligation portfolio and five
securities were from its portfolio of private-label residential mortgage-backed securities and collateralized mortgage obligations.

The total unrealized loss for the two state and municipal securities at September 30, 2009 totaled $30,000, or about 3.0% of the total amortized cost of these securities. In addition to



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severity and duration of loss, the Company considered the current credit rating, changes in ratings, and any credit enhancements in the form of insurance. Since the amount of impairment on each
of these securities was less than 3% of amortized cost, the Company believes the decline in fair value was related to changes in market interest rates and was not credit related.

Of the five private-label residential mortgage related securities that were in an unrealized loss position for more than 12 months, one was
in an unrealized loss position of less than 1% of amortized cost. Because of the small level of impairment, the Company believes the decline in fair value was not credit related. The other four private-label residential mortgage related securities
had a total unrealized loss of $5.8 million. As part of our normal procedures, these securities were subject to further review for other-than-temporary impairment.

For any securities that had been in an unrealized loss position that was greater than 10% and for more than 12 months, additional testing is performed to evaluate other-than-temporary impairment. For the
four private-label securities, we obtained fair value estimates from a separate independent source and performed a cash flow analysis, considering default rates, loss severities based upon the location of the collateral and estimated prepayments.
Each of the private-label mortgage related securities had credit enhancements in the form of different investment tranches which impact how cash flows are distributed. The higher level tranches will receive cash flows first and as a result, the
lower level tranches will absorb the losses, if any, from collateral shortfalls. The Company purchased the private-label securities that were either of the highest or one of the highest investment grades, as rated by nationally recognized credit
rating agencies. The cash flow analysis takes into account the Companys tranche and the current level of support provided by the lower tranches. The Company believes that market illiquidity has impacted the values of these private-label
securities because of the lack of active trading in these securities. None of these securities contain subprime mortgage loans, but do include Alt-A loans, adjustable rate mortgages with initial interest only periods, and loans that are secured by
collateral in geographic areas adversely impacted by the housing downturn. If this analysis shows that the Company does not expect to recover its entire investment, an other-than-temporary impairment charge would be recorded for the amount of the
credit loss. Previously, one of the four securities had other-than-temporary impairment recognized for the amount of the credit loss. The independent cash flow analysis performed at September 30, 2009 indicated that there was no additional
credit loss on this security. For the other three private-label securities reviewed, the independent cash flow analysis showed that the Company expects to recover its entire investment and, therefore, the decline in fair value was not due to credit,
but was most likely caused by illiquidity in the market, and no other-than-temporary impairment charge was recorded.

Effective April 1, 2009, the Company adopted FASB Staff Position FAS No. 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2). FSP FAS 115-2 amends ASC Topic
320 (Investments-Debt & Equity Securities) by modifying the requirements for recognizing other-than-temporary impairment and changes the model used to determine the amount of impairment. Under FSP FAS 115-2, declines in fair value of
investment securities below their amortized cost basis that are deemed to be other-than-temporary are reflected in earnings as a realized loss to the extent the impairment is related to credit loss. The amount of impairment related to other factors
is recognized in other



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comprehensive income. Upon adoption of FSP FAS 115-2, the Company recorded the cumulative effect of initial application as an adjustment to the opening balance of retained earnings with a
corresponding adjustment to accumulated other comprehensive income for one private label mortgage-related security for which other-than-temporary impairment was previously recognized through earnings. The amount of the anticipated credit loss on
this investment security was $488,000 upon adoption and no additional credit loss has been recorded since the adoption of FSP FAS 115-2. The effect of the adoption as of April 1, 2009 is presented in the table below.



|                                                            |  |                              |           |   |             |   |        |                             |  |   |           |  
|----------------------------------------------------------- |  | ---------------------------- | --------- | - | ----------- | - | ------ | --------------------------- |  | - | --------- | -
|                                                            |  | Before Applicationof the FSP |           |   | Adjustments |   |        | After Applicationof the FSP | 
|                                                            |  | (in thousands)               |          
|Investment securities available-for-sale, at amortized cost |  | $                            | 1,292,180 |   |             | $ | 1,710  |                             |  | $ | 1,293,890 |  
|Unrealized gains (losses) on securities                     |  |                              | 29,400    |   |             |   | (1,710 | )                           |  |   | 27,690    |  
|Investment securities available-for-sale, at fair value     |  |                              | 1,321,580 |   |             |   |       |                             |  |   | 1,321,580 |  
|Other assets                                                |  |                              | 74,475    |   |             |   | 677    |                             |  |   | 75,152    |  
|Total assets                                                |  |                              | 4,596,701 |   |             |   | 677    |                             |  |   | 4,597,378 |  
|Accumulated deficit                                         |  |                              | (74,974   | ) |             |   | 1,710  |                             |  |   | (73,264   | )
|Accumulated other comprehensive income, net                 |  |                              | 27,888    |   |             |   | (1,033 | )                           |  |   | 26,855    |  
|Total stockholders equity                                  |  |                              | 311,425   |   |             |   | 677    |                             |  |   | 312,102   |  

Investment securities do not include the Banks investment in Federal Home Loan
Bank of Chicago (FHLBC) and Federal Reserve Bank stock. At September 30, 2009, the Company had a $27.3 million investment in FHLBC stock, compared to $22.5 million at December 31, 2008. These investments are required for
membership and are carried at cost. The Bank must maintain a specified level of investment in FHLBC stock based upon the amount of its outstanding FHLBC borrowings. The stock of the FHLBC is viewed as a long-term asset and its value is based upon
the ultimate recoverability of the par value. In determining the recoverability of this investment, the Company considered the following:



| |  |  | Although the market value of the FHLBC net assets had declined, transactions of stock continued to occur with the FHLBC at par value during 2009.
During the first nine months of 2009, the Company increased its investment in the FHLBC by $4.8 million, largely to support the increased level of borrowings from the FHLBC. In addition, while limited, redemptions of stock by other institutions took
place at par during the year.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The structure of the entire FHLB system, which enables the regulator of the FHLBs to reallocate debt among the members, so each individual FHLB has a
potential obligation to repay the consolidated obligations issued by other FHLB members.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Regulatory changes during 2008 which established a new regulator for the FHLB system that continues to oversee changes to management, management
practices and balance sheet management at the FHLBC.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The liquidity position of the FHLBC was strengthened with the support of the U.S. Treasury, which established a lending facility designed to provide
secured funding on an as-needed basis to housing government sponsored enterprise, such as the FHLBC.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company continues
to monitor this investment for recoverability, but as of September 30, 2009 believed that it would ultimately recover the par value of the FHLBC stock.



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3. Loans:

Loans classified by type at September 30, 2009 and December 31, 2008 were as follows:



|                                      |  |                |           |   |              |   |           |  
|------------------------------------- |  | -------------- | --------- | - | ------------ | - | --------- | -
|Loans:                                |  | Sept. 30,2009  |           |   | Dec. 31,2008 |  
|                                      |  | (in thousands) |          
|Commercial and industrial             |  | $              | 1,292,091 |   |              | $ | 1,485,673 |  
|Commercial real estate secured        |  |                | 1,156,114 |   |              |   | 1,058,930 |  
|Real estate-construction              |  |                | 407,920   |   |              |   | 531,452   |  
|Residential real estate mortgages     |  |                | 58,872    |   |              |   | 53,859    |  
|Home equity loans and lines of credit |  |                | 87,448    |   |              |   | 92,085    |  
|Consumer                              |  |                | 8,256     |   |              |   | 9,163     |  
|Other loans                           |  |                | 796       |   |              |   | 2,115     |  
|                                      |  |                |           |   |              |   |           |  
|Gross loans                           |  |                | 3,011,497 |   |              |   | 3,233,277 |  
|Less: Unearned discount               |  |                | (8        | ) |              |   | (16       | )
|                                      |  |                |           |   |              |   |           |  
|Total loans                           |  |                | 3,011,489 |   |              |   | 3,233,261 |  
|Less: Allowance for loan losses       |  |                | (107,132  | ) |              |   | (128,548  | )
|                                      |  |                |           |   |              |   |           |  
|Net Loans                             |  | $              | 2,904,357 |   |              | $ | 3,104,713 |  
|                                      |  |                |           |   |              |   |           |  
|                                      |  |               
|Loans Held for Sale                   |  | $              | 102,765   |   |              | $ |          |  
|                                      |  |                |           |   |              |   |           |  

The following table sets forth information about our nonaccrual and impaired loans.
Impaired loans include all nonaccrual loans as well as accruing loans judged to have higher risk of noncompliance with the present contractual repayment schedule.



|                                                       |  |                |         |              |   |        
|------------------------------------------------------ |  | -------------- | ------- | ------------ | - | -------
|                                                       |  | Sept. 30,2009  |         | Dec. 31,2008
|                                                       |  | (in thousands)
|Nonaccrual loans                                       |  | $              | 163,830 |              | $ | 200,227
|Restructured loans not included in nonperforming loans |  |                | 4,825   |              |   |       
|Recorded balance of impaired loans:                    |  |                |         |              |   |        
|With related allowance for loan loss                   |  | $              | 121,743 |              | $ | 120,973
|With no related allowance for loan loss                |  |                | 41,243  |              |   | 85,732 
|                                                       |  |                |         |              |   |        
|Total recorded balance of impaired loans               |  | $              | 162,986 |              | $ | 206,705
|                                                       |  |                |         |              |   |        
|Allowance for loan losses related to impaired loans    |  | $              | 35,453  |              | $ | 41,451 
|                                                       |  |                |         |              |   |        



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4. Interest-Bearing Deposits:

Interest-bearing deposits at September 30, 2009 and December 31, 2008 were as follows:



|                                            |  |                   |           |                  |   |          
|------------------------------------------- |  | ----------------- | --------- | ---------------- | - | ---------
|                                            |  | September 30,2009 |           | December 31,2008
|                                            |  | (in thousands)   
|NOW accounts                                |  | $                 | 213,668   |                  | $ | 218,451  
|Savings accounts                            |  |                   | 41,534    |                  |   | 42,275   
|Money market deposits                       |  |                   | 465,847   |                  |   | 394,043  
|Time deposits:                              |  |                   |           |                  |   |          
|Certificates of deposit                     |  |                   | 774,082   |                  |   | 870,183  
|CDARS time deposits                         |  |                   | 145,889   |                  |   | 5,670    
|Out-of-local-market certificates of deposit |  |                   | 95,990    |                  |   | 136,470  
|Brokered certificates of deposit            |  |                   | 622,039   |                  |   | 908,133  
|Public time deposits                        |  |                   | 78,090    |                  |   | 84,831   
|                                            |  |                   |           |                  |   |          
|Total time deposits                         |  |                   | 1,716,090 |                  |   | 2,005,287
|                                            |  |                   |           |                  |   |          
|Total                                       |  | $                 | 2,437,139 |                  | $ | 2,660,056
|                                            |  |                   |           |                  |   |          

At September 30, 2009, time deposits in amount of $100,000 or more totaled
$569.7 million compared to $484.4 million at December 31, 2008.

The Bank participates in the Certificate of Deposit
Account Registry Service network (CDARS), which allows the Bank to accommodate depositors with large cash balances who are seeking the full deposit insurance protection, by placing these funds in CDs issued by other banks in the network.
Through a matching system, the Bank will receive funds back for CDs that it issues for other banks in the network, thus allowing the Bank to retain the full amount of the original deposit.

Brokered CDs are carried net of the related broker placement fees and fair value adjustments at the date those brokered CDs were no longer
accounted for as fair value hedges. The broker placement fees and fair value adjustments totaled $1.7 million and $3.5 million at September 30, 2009 and December 31, 2008, respectively, and are amortized to the maturity date of the related
brokered CDs. The amortization is included in deposit interest expense. Certain brokered CDs had an option that allowed the Company to call the CD before its stated maturity. The Company exercised this option when the prevailing interest rate on the
CD was substantially higher than current market interest rates. When a brokered CD is called, any unamortized broker placement fees and fair value adjustments are written off and included in noninterest expense on the statement of operations. During
the first quarter of 2009, the Company incurred $527,000 of expense associated with $29.0 million of brokered CDs that were called before their stated maturity. In comparison, expense associated with the early extinguishment of brokered CDs totaled
$412,000 and $1.6 million in the third quarter of 2008 and the first nine months of 2008, respectively. As of September 30, 2009, the Company did not have any brokered CDs that could be called before maturity.



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5. Other Borrowings:

Other borrowings at September 30, 2009 and December 31, 2008 consisted of the following:



|                                                |  |                        |         |                      |                   |   |                |   |                      |  |      |  
|----------------------------------------------- |  | ---------------------- | ------- | -------------------- | ----------------- | - | -------------- | - | -------------------- |  | ---- | -
|                                                |  | September 30, 2009     |         |                      | December 31, 2008 |  
|                                                |  | AmountBorrowed         |         | Weighted-AverageRate |                   |   | AmountBorrowed |   | Weighted-AverageRate | 
|                                                |  | (dollars in thousands) |        
|Securities sold under agreements to repurchase: |  |                        |         |                      |                   |   |                |   |                      |  |      |  
|Overnight                                       |  | $                      | 25,115  |                      | 0.17              | % |                | $ | 21,017               |  | 0.18 | %
|Term                                            |  |                        | 200,000 |                      | 4.05              |   |                |   | 200,000              |  | 4.05 |  
|Federal funds purchased                         |  |                        | 100,901 |                      | 0.35              |   |                |   | 54,482               |  | 0.36 |  
|U.S. Treasury tax and loan note option          |  |                        | 1,676   |                      | 0.00              |   |                |   | 61                   |  | 0.00 |  
|                                                |  |                        |         |                      |                   |   |                |   |                      |  |      |  
|Total                                           |  | $                      | 327,692 |                      | 2.60              | % |                | $ | 275,560              |  | 3.03 | %
|                                                |  |                        |         |                      |                   |   |                |   |                      |  |      |  

6. Notes Payable and Other Advances:

Notes Payable and other advances at September 30, 2009 and December 31, 2008 consisted of the following:



|                                                                                                                                                                                                                                                      |  |                |         |              |   |        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | ------------ | - | -------
|                                                                                                                                                                                                                                                      |  | Sept. 30,2009  |         | Dec. 31,2008
|                                                                                                                                                                                                                                                      |  | (in thousands)
|Taylor Capital Group, Inc.:                                                                                                                                                                                                                           |  |                |         |              |   |        
|Revolving Credit Facility  $15.0 million maximum available; interest, at the Companys election, at the prime rate or
LIBOR plus 4.00%, with a minimum interest rate of 5.00%; interest rate at September 30, 2009 was 5.00%; matures March 31, 2010 |  | $              | 12,000  |              | $ | 12,000 
|                                                                                                                                                                                                                                                      |  |                |         |              |   |        
|Total notes payable                                                                                                                                                                                                                                   |  |                | 12,000  |              |   | 12,000 
|                                                                                                                                                                                                                                                      |  |                |         |              |   |        
|Cole Taylor Bank:                                                                                                                                                                                                                                     |  |                |         |              |   |        
|Federal Reserve Bank Term Auction Facility  0.25%, due within 90 days                                                                                                                                                                                |  |                | 400,000 |              |   |       
|FHLB overnight advance, weighted average rate of 0.43% at September 30, 2009 and 0.26% at December 31,
2008                                                                                                                                           |  |                | 70,000  |              |   | 315,000
|FHLB advance  4.83%, due February 1, 2011, callable after January 8, 2004                                                                                                                                                                            |  |                | 25,000  |              |   | 25,000 
|FHLB advance  4.59%, due April 5, 2010, callable after April 4, 2008                                                                                                                                                                                 |  |                | 25,000  |              |   | 25,000 
|FHLB advance  2.29%, due April 7, 2011, callable after April 7, 2009                                                                                                                                                                                 |  |                | 25,000  |              |   | 25,000 
|FHLB advance  2.84%, due July 14, 2011, callable after July 14, 2009                                                                                                                                                                                 |  |                | 17,500  |              |   | 17,500 
|FHLB advance  2.57%, due April 8, 2013, callable after April 7, 2010                                                                                                                                                                                 |  |                | 25,000  |              |   | 25,000 
|FHLB advance  3.26%, due July 15, 2013, callable after July 14, 2010                                                                                                                                                                                 |  |                | 17,500  |              |   | 17,500 
|                                                                                                                                                                                                                                                      |  |                |         |              |   |        
|Total other advances                                                                                                                                                                                                                                  |  |                | 605,000 |              |   | 450,000
|                                                                                                                                                                                                                                                      |  |                |         |              |   |        
|Total notes payable and other advances                                                                                                                                                                                                                |  | $              | 617,000 |              | $ | 462,000
|                                                                                                                                                                                                                                                      |  |                |         |              |   |        

At September 30, 2009 and December 31, 2008, the Company had a $15.0
million revolving credit facility, of which $12.0 million was outstanding at September 30, 2009 and December 31, 2008. The notes payable under the revolver require compliance with certain defined financial covenants. As of
September 30, 2009, the Company was in compliance with all of the covenants.



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At September 30, 2009, the Company also had borrowings under the Federal Reserve
Banks Term Auction Facility of $400.0 million. As of September 30, 2009, the Company had pledged $566.0 million of commercial loans as collateral for these borrowings and had additional maximum borrowing capacity of $147.3 million. The
Company did not have advances from the Federal Reserve Bank at December 31, 2008.

At September 30, 2009, the FHLBC
advances were collateralized by $334.7 million of investment securities and a blanket lien on $82.4 million of qualified first-mortgage residential and home equity loans. Based on the value of collateral pledged at September 30, 2009, the Bank
had additional borrowing capacity at the FHLBC of $209.1 million. In comparison, at December 31, 2008, the FHLBC advances were collateralized by $499.4 million of investment securities and a blanket lien on $155.2 million of qualified
first-mortgage residential and home equity loans.

7. Income Taxes:

Despite a pre-tax loss, the Company recorded income tax expense of $1.5 million for the first nine months of 2009. Because of the
valuation allowance maintained on the deferred tax asset, the Company does not expect to be able to record an income tax benefit during 2009 related to the pre-tax loss incurred.

Income tax expense was different from the amounts computed by applying the federal statutory rate of 35% for the nine month period ended
September 30, 2009 to the loss before income taxes due to the following:



|                                                       |  |                   |        |  
|------------------------------------------------------ |  | ----------------- | ------ | -
|                                                       |  | September 30,2009 |       
|Federal income tax expense (benefit) at statutory rate |  | $                 | (9,464 | )
|Increase (decrease) in income taxes resulting from:    |  |                   |        |  
|Increase in valuation allowance                        |  |                   | 10,062 |  
|Residual tax effect                                    |  |                   | 2,028  |  
|Other, net                                             |  |                   | (1,145 | )
|                                                       |  |                   |        |  
|Total income tax expense                               |  | $                 | 1,481  |  
|                                                       |  |                   |        |  

A current income tax benefit that would normally result from a pre-tax loss was
offset by additional deferred tax expense due to an increase in the valuation allowance. Additional contributing factors to the income tax expense recorded in 2009 primarily relate to the release of the residual tax effects of changes in the
beginning of the year valuation allowance previously allocated to other comprehensive income. These residual tax effects resulted from changes in the deferred tax liability associated with deferred gains on terminated cash flow hedges recorded
in other comprehensive income. The Company expects additional expense of $510,000 during the last three months of 2009 associated with the release of these residual tax effects.

The valuation allowance increased $5.2 million during the first nine months of 2009 to $51.6 million at September 30, 2009 as compared
to $46.4 million at December 31, 2008. The year-to-date increase in the valuation allowance of $5.2 million primarily resulted from an increase in the net deferred tax asset which was partly offset by a reduction related to changes in the
beginning of the year valuation allowance solely attributable to identifiable events recorded



14



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in other comprehensive income, primarily changes in unrealized gains on the available-for-sale investment portfolio, the tax effects of which were therefore allocated to other comprehensive
income. The net deferred tax asset before the valuation allowance, including the tax effect of items recorded in other comprehensive income, increased to $54.1 million at September 30, 2009 as compared to $53.3 million at December 31,
2008. The largest deferred tax asset relates to the allowance for loan losses. After considering the valuation allowance, the net deferred tax asset totaled $2.5 million at September 30, 2009 compared to $6.9 million at December 31, 2008.
The net deferred tax asset in excess of the valuation allowance was supported by remaining carry backs to income taxes paid in prior years and available tax planning strategies.

Generally, the provision for income taxes is determined by applying an estimated annual effective income tax rate to income before income
taxes. The rate is based on the most recent annualized forecast of pretax income, permanent book versus tax differences and tax credits. The Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic
740-270-30-18 (Income Taxes-Interim Reporting-Initial Measurement) provides that, when a reliable estimate of the annual effective tax rate cannot be made, the actual effective tax rate for the year-to-date period may be used. During 2009, the
Company concluded that a reliable estimate of the annual effective tax rate could not be made primarily due to the volatility experienced in its provision for loan losses and the impact of such on its forecasts of pre-tax income or
loss. Accordingly, the Company has determined that the actual effective tax rate for the year-to-date period is the best estimate of the effective tax rate. The Company will re-evaluate the combined federal and state income tax rates each
quarter. Therefore, the current projected effective tax rate for the entire year may change.

8. Other Comprehensive Income:

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



|                                                                                                |  |                                              |        |   |                                              |   |        |           |  |   |                 |   |  |           |        |   |           |   |       |   |  |   |        |  
|----------------------------------------------------------------------------------------------- |  | -------------------------------------------- | ------ | - | -------------------------------------------- | - | ------ | --------- |  | - | --------------- | - |  | --------- | ------ | - | --------- | - | ----- | - |  | - | ------ | -
|                                                                                                |  | For the Three Months EndedSeptember 30, 2009 |        |   | For the Three Months EndedSeptember 30, 2008 |  
|                                                                                                |  | BeforeTaxAmount                              |        |   | TaxEffect                                    |   |        | Net ofTax |  |   | BeforeTaxAmount |   |  | TaxEffect |        |   | Net ofTax |  
|                                                                                                |  | (in thousands)                               |       
|Unrealized gains from securities:                                                               |  |                                              |        |   |                                              |   |        |           |  |   |                 |   |  |           |        |   |           |   |       |   |  |   |        |  
|Change in unrealized gains on available-for-sale securities                                     |  | $                                            | 24,921 |   |                                              | $ | (1,937 | )         |  | $ | 22,984          |   |  | $         | (6,209 | ) |           | $ | 2,453 |   |  | $ | (3,756 | )
|Less: reclassification adjustment for gains included in net loss                                |  |                                              | (378   | ) |                                              |   | 151    |           |  |   | (227            | ) |  |           |       |   |           |   |      |   |  |   |       |  
|                                                                                                |  |                                              |        |   |                                              |   |        |           |  |   |                 |   |  |           |        |   |           |   |       |   |  |   |        |  
|Change in unrealized gains on available-for-sale securities, net of reclassification adjustment |  |                                              | 24,543 |   |                                              |   | (1,786 | )         |  |   | 22,757          |   |  |           | (6,209 | ) |           |   | 2,453 |   |  |   | (3,756 | )
|Change in net unrealized gain from cash flow hedging instruments                                |  |                                              |       |   |                                              |   |       |           |  |   |                |   |  |           | 1,482  |   |           |   | (586  | ) |  |   | 896    |  
|Change in deferred gains and losses from termination of cash flow hedging instruments           |  |                                              | (1,369 | ) |                                              |   | 543    |           |  |   | (826            | ) |  |           | (1,364 | ) |           |   | 538   |   |  |   | (826   | )
|                                                                                                |  |                                              |        |   |                                              |   |        |           |  |   |                 |   |  |           |        |   |           |   |       |   |  |   |        |  
|Other comprehensive income (loss)                                                               |  | $                                            | 23,174 |   |                                              | $ | (1,243 | )         |  | $ | 21,931          |   |  | $         | (6,091 | ) |           | $ | 2,405 |   |  | $ | (3,686 | )
|                                                                                                |  |                                              |        |   |                                              |   |        |           |  |   |                 |   |  |           |        |   |           |   |       |   |  |   |        |  



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|                                                                                                |  |                                             |        |   |                                             |   |        |           |  |   |                 |   |  |           |         |   |           |   |       |   |  |   |        |  
|----------------------------------------------------------------------------------------------- |  | ------------------------------------------- | ------ | - | ------------------------------------------- | - | ------ | --------- |  | - | --------------- | - |  | --------- | ------- | - | --------- | - | ----- | - |  | - | ------ | -
|                                                                                                |  | For the Nine Months EndedSeptember 30, 2009 |        |   | For the Nine Months EndedSeptember 30, 2008 |  
|                                                                                                |  | BeforeTaxAmount                             |        |   | TaxEffect                                   |   |        | Net ofTax |  |   | BeforeTaxAmount |   |  | TaxEffect |         |   | Net ofTax |  
|                                                                                                |  | (in thousands)                              |       
|Unrealized gains from securities:                                                               |  |                                             |        |   |                                             |   |        |           |  |   |                 |   |  |           |         |   |           |   |       |   |  |   |        |  
|Change in unrealized gains on available-for-sale securities                                     |  | $                                           | 29,160 |   |                                             | $ | (4,713 | )         |  | $ | 24,447          |   |  | $         | (13,068 | ) |           | $ | 5,163 |   |  | $ | (7,905 | )
|Less: reclassification adjustment for gains included in net loss                                |  |                                             | (8,637 | ) |                                             |   | 3,422  |           |  |   | (5,215          | ) |  |           |        |   |           |   |      |   |  |   |       |  
|                                                                                                |  |                                             |        |   |                                             |   |        |           |  |   |                 |   |  |           |         |   |           |   |       |   |  |   |        |  
|Change in unrealized gains on available-for-sale securities, net of reclassification adjustment |  |                                             | 20,523 |   |                                             |   | (1,291 | )         |  |   | 19,232          |   |  |           | (13,068 | ) |           |   | 5,163 |   |  |   | (7,905 | )
|Change in net unrealized gain/(loss) from cash flow hedging instruments                         |  |                                             |       |   |                                             |   |       |           |  |   |                |   |  |           | 2,303   |   |           |   | (910  | ) |  |   | 1,393  |  
|Change in net deferred gain/(loss) from termination of cash flow hedging instruments            |  |                                             | (5,118 | ) |                                             |   | 2,028  |           |  |   | (3,090          | ) |  |           | (1,230  | ) |           |   | 470   |   |  |   | (760   | )
|                                                                                                |  |                                             |        |   |                                             |   |        |           |  |   |                 |   |  |           |         |   |           |   |       |   |  |   |        |  
|Other comprehensive income (loss)                                                               |  | $                                           | 15,405 |   |                                             | $ | 737    |           |  | $ | 16,142          |   |  | $         | (11,995 | ) |           | $ | 4,723 |   |  | $ | (7,272 | )
|                                                                                                |  |                                             |        |   |                                             |   |        |           |  |   |                 |   |  |           |         |   |           |   |       |   |  |   |        |  

The tax effects of changes in the beginning of the year deferred tax asset valuation
allowance solely attributable to identifiable events recorded in other comprehensive income, primarily changes in unrealized gains on the available-for-sale investment portfolio, were allocated to other comprehensive income in accordance
with ASC Topic 740 (Income Taxes).

9. Earnings Per Share:

The following table sets forth the computation of basic and diluted loss per common share for the periods indicated. Due to the net loss for
both the three and nine month periods ended September 30, 2009, all common stock equivalents, which consisted of 594,118 options outstanding to purchase shares of common stock, 2,862,647 warrants to purchase shares of common stock, and the
convertible Series A Preferred stock which could be converted into 6,000,000 shares of common stock, were considered antidilutive and not included in the computation of diluted earnings per share. For both the three and nine month periods ended
September 30, 2008, 615,239 options outstanding to purchase shares of common stock were not included in the computation of diluted earnings per share because the effect would have been antidilutive.



|                                                   |  |                                                  |            |   |                                        |   |            |      |  |   |            |   |  |   |            |  
|-------------------------------------------------- |  | ------------------------------------------------ | ---------- | - | -------------------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                   |  | For the Three Months EndedSeptember 30,          |            |   | For the Nine Months EndedSeptember 30, |  
|                                                   |  | 2009                                             |            |   | 2008                                   |   |            | 2009 |  |   | 2008       |  
|                                                   |  | (dollars in thousands, except per share amounts) |           
|Net loss                                           |  | $                                                | (2,448     | ) |                                        | $ | (80,536    | )    |  | $ | (28,521    | ) |  | $ | (109,692   | )
|Preferred dividends and discounts                  |  |                                                  | (2,873     | ) |                                        |   | (16,680    | )    |  |   | (8,603     | ) |  |   | (16,680    | )
|                                                   |  |                                                  |            |   |                                        |   |            |      |  |   |            |   |  |   |            |  
|Net loss available to common stockholders          |  | $                                                | (5,321     | ) |                                        | $ | (97,216    | )    |  | $ | (37,124    | ) |  | $ | (126,372   | )
|                                                   |  |                                                  |            |   |                                        |   |            |      |  |   |            |   |  |   |            |  
|                                                   |  |                                                  |            |  
|Weighted-average common shares outstanding         |  |                                                  | 10,502,844 |   |                                        |   | 10,456,544 |      |  |   | 10,489,165 |   |  |   | 10,447,264 |  
|Dilutive effect of common stock equivalents        |  |                                                  |           |   |                                        |   |           |      |  |   |           |   |  |   |           |  
|                                                   |  |                                                  |            |   |                                        |   |            |      |  |   |            |   |  |   |            |  
|Diluted weighted-average common shares outstanding |  |                                                  | 10,502,844 |   |                                        |   | 10,456,544 |      |  |   | 10,489,165 |   |  |   | 10,447,264 |  
|                                                   |  |                                                  |            |   |                                        |   |            |      |  |   |            |   |  |   |            |  
|Basic loss per common share                        |  | $                                                | (0.51      | ) |                                        | $ | (9.30      | )    |  | $ | (3.54      | ) |  | $ | (12.10     | )
|Diluted loss per common share                      |  |                                                  | (0.51      | ) |                                        |   | (9.30      | )    |  |   | (3.54      | ) |  |   | (12.10     | )
|                                                   |  |                                                  |            |   |                                        |   |            |      |  |   |            |   |  |   |            |  



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10. Stock-Based Compensation:

The Companys Incentive Compensation Plan (the Plan) allows for the granting of stock options and stock awards. Under the
Plan, the Company has only issued nonqualified stock options and restricted stock to employees and directors.

Stock options,
generally, are granted with an exercise price equal to the last reported sales price of the common stock on the Nasdaq Global Select Market on the date of grant. The Company uses the Black-Scholes option-pricing model to determine the fair value of
stock options issued to employees and directors. Compensation expense associated with stock options is recognized over the vesting period, or until the employee or director becomes retirement eligible if that time period is shorter.

The following is a summary of stock option activity for the nine month period ended September 30, 2009:



|                                  |  |          |   |  |                                |      
|--------------------------------- |  | -------- | - |  | ------------------------------ | -----
|                                  |  | Shares   |   |  | Weighted-AverageExercise Price
|Outstanding at January 1, 2009    |  | 716,642  |   |  | $                              | 23.85
|Granted                           |  |         |   |  |                                |     
|Exercised                         |  |         |   |  |                                |     
|Forfeited                         |  | (13,059  | ) |  |                                | 30.64
|Expired                           |  | (109,465 | ) |  |                                | 22.72
|                                  |  |          |   |  |                                |      
|Outstanding at September 30, 2009 |  | 594,118  |   |  |                                | 23.91
|                                  |  |          |   |  |                                |      
|Exercisable at September 30, 2009 |  | 517,471  |   |  |                                | 23.58
|                                  |  |          |   |  |                                |      

As of September 30, 2009, the total compensation cost related to nonvested stock
options that have not yet been recognized totaled $420,000 and the weighted-average period over which these costs are expected to be recognized is approximately 1.7 years.

Generally, the Company grants restricted stock awards that vest upon completion of future service requirements. The fair value of these
awards is equal to the last reported sales price of the Companys common stock on the date of grant. The Company recognizes stock-based compensation expense for these awards over the vesting period based upon the number of awards ultimately
expected to vest.



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The following table provides information regarding nonvested restricted stock for the nine
month period ended September 30, 2009:



|                                |  |         |   |  |                                      |      
|------------------------------- |  | ------- | - |  | ------------------------------------ | -----
|Nonvested Restricted Stock      |  | Shares  |   |  | Weighted-AverageGrant-DateFair Value
|Nonvested at January 1, 2009    |  | 656,181 |   |  | $                                    | 16.21
|Granted                         |  |        |   |  |                                      |     
|Vested                          |  | (44,031 | ) |  |                                      | 28.25
|Forfeited                       |  | (37,846 | ) |  |                                      | 18.92
|                                |  |         |   |  |                                      |      
|Nonvested at September 30, 2009 |  | 574,304 |   |  |                                      | 15.11
|                                |  |         |   |  |                                      |      

As of September 30, 2009, the total compensation cost related to nonvested
restricted stock that has not yet been recognized totaled $6.6 million and the weighted-average period over which these costs are expected to be recognized is approximately 3.3 years.

11. Derivative Financial Instruments:

The Company uses derivative
financial instruments to accommodate customer needs and to assist in interest rate risk management. The Company has used interest rate exchange agreements, or swaps, and interest rate floors and collars to help manage its interest rate risk. At
September 30, 2009, all of the Companys interest rate swap derivatives related to customer loans. In addition, the Company used forward loan sale contracts to manage interest rate risk associated with its loans held for sale. The
following table describes the derivative instruments outstanding at September 30, 2009:



|                                              |  |                                       |  |                |         |                |                            |                  |           |           |   |         |  
|--------------------------------------------- |  | ------------------------------------- |  | -------------- | ------- | -------------- | -------------------------- | ---------------- | --------- | --------- | - | ------- | -
|Product                                       |  | BalanceSheet/IncomeStatement Location |  | NotionalAmount |         | Interest Rates |                            | Wt. Avg.Maturity |           | FairValue |  
|                                              |  | (dollars in thousands)                | 
|Non-hedging derivative instruments:           |  |                                       |  |                |         |                |                            |                  |           |           |   |         |  
|Interest Rate Swappay fixed/receive variable |  | Other Liabilities/Noninterest Income  |  | $              | 187,029 |                | Pay 4.29%Receive 0.508%    |                  | 3.4 yrs   |           | $ | (11,502 | )
|Interest Rate Swapreceive fixed/pay variable |  | Other Assets/NoninterestIncome        |  |                | 187,029 |                | Receive 4.29%Pay
0.508%    |                  | 3.4 yrs   |           |   | 11,575  |  
|Forward loan sale contracts                   |  | Other Liabilities/Noninterest Income  |  |                | 81,200  |                | Wt. Avg.interest rate 5.1% |                  | Oct. 2009 |           |   | (497    | )
|                                              |  |                                       |  |                |         |                |                            |                  |           |           |   |         |  
|Total                                         |  |                                       |  | $              | 455,258 |                |                            |                  |           |           |   |         |  
|                                              |  |                                       |  |                |         |                |                            |                  |           |           |   |         |  

In January 2009, the Company terminated a $100.0 million notional amount interest
rate swap that was not designated as an accounting hedge. The Company discontinued hedge accounting in December 2008 when it determined the hedge would no longer be effective. The unrealized gain of $6.4 million upon de-designation, which had
accumulated in other



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comprehensive income (net of tax), is being amortized to loan interest income over what would have been the life of the hedge. Changes in fair value of the swap from the period that hedge
designations were removed until the swap was sold, in January 2009, were included in other derivative income in noninterest income. Other derivative income during 2009 included a $33,000 loss because of a decrease in fair value until the date the
swap was sold.

12. Fair Value:

On January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements, (SFAS 157) (FASB ASC 820-10). On January 1, 2009, the Company adopted FSP FAS 157-2,
Effective Date of FASB Statement No. 157 (FSP 157-2). In accordance with FSP 157-2, the Company delayed application of SFAS 157 for non-financial assets, such as the Companys other real estate owned assets,
and non-financial liabilities until 2009. The impact of the adoption of SFAS 157 and FSP 157-2 was not material.

On
January 1, 2008, the Company adopted SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, (SFAS 159) (FASB ASC 825-10), however, the Company did not elect the fair value option for any
financial assets or liabilities as of that date, nor for any asset acquired or liability incurred subsequent to January 1, 2008.

Fair
Value Measurement

In accordance with SFAS No. 157 (FASB ASC 820-35), the Company groups financial assets and
financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

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

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

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

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

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



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The Company does not have subprime loans in its mortgage related investment securities
portfolio. As of September 30, 2009, the Company had $1.08 billion of mortgage related investment securities which consisted of mortgage-backed securities and collateralized mortgage obligations. Of the total mortgage related investment
securities, $1.05 billion, or 97.5%, were issued by government sponsored enterprises, such as Ginnie Mae, Fannie Mae, and Freddie Mac. In comparison, of the $874.6 million of mortgage related investment securities at December 31, 2008, $843.9
million, or 96.5%, were issued by government sponsored enterprises. The mortgage related portfolio also includes $27.5 million of private-label mortgage related securities at September 30, 2009 that has received heightened monitoring because
the Company believes the fair values of these securities have been impacted by illiquidity in the market place. While none of these securities contain subprime mortgage loans, the portfolio does include Alt-A loans, adjustable rate mortgages with
initial interest only periods, and loans that are secured by collateral in geographic areas adversely impacted by the housing downturn. While the fair value of these securities has been impacted by market illiquidity, the Company does not modify the
fair value determined by the independent pricing service, but takes additional steps to review for other-than-temporary impairment. See Application of Critical Accounting Policies  Valuation of Investment Securities for additional
details of the evaluation of other-than-temporary impairment.

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

Derivatives:The Company has determined that its interest rate swap derivative
valuations in their entirety are classified in Level 2 of the fair value hierarchy. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis of the expected cash flows of
each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, and implied volatilities. To comply with the provisions of
No. 157 (FASB ASC 820-10), the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterpartys nonperformance risk in the fair value measurements. In adjusting
the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees. The fair
value of forward loan sale contracts are based upon quoted prices for similar assets in active markets and are classified in Level 2 of the hierarchy.



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Loans and Loans Held for Sale:The Company does not record loans or loans held for
sale at their fair value on a recurring basis. The Company evaluates certain loans for impairment when it is probable the payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement. Once a loan
has been determined to be impaired, it is measured to establish the amount of the impairment, if any, based on the present value of expected future cash flows discounted at the loans effective interest rate, except that collateral-dependent
loans may be measured for impairment based on the fair value of the collateral, less cost to sell. If the measure of the impaired loan is less than the recorded investment in the loan, a valuation allowance is recognized. At September 30, 2009,
a portion of the Companys total impaired loans were evaluated based on the fair value of the collateral. In accordance with SFAS 157 (FASB ASC 820-10), only impaired loans for which an allowance for loan loss has been established based on the
fair value of collateral require classification in the fair value hierarchy. As a result, a portion, but not all, of the Companys impaired loans are classified in the fair value hierarchy. When the fair value of the collateral is based on an
observable market price or an estimate of fair value from an independent third-party real estate professional, the Company classifies the impaired loan as nonrecurring Level 2 in the fair value hierarchy. When an independent valuation is not
available or there is no observable market price and fair value is based upon Managements assessment of liquidation of collateral, the Company classifies the impaired loan as nonrecurring Level 3 in the fair value hierarchy.

At September 30, 2009, loans held for sale consists primarily of residential mortgage loans that the Company plans to securitize and
sell to third party investors to the extent it can do so on acceptable terms. Loans held for sale also includes commercial loans that the Company has the intent to sell. Since loans held for sale are recorded on the consolidated balance sheets at
the lower of cost or fair value, these assets are not recorded at fair value on a recurring basis. Only the portion of these loans that are recorded at fair value are classified in the fair value hierarchy. For the residential mortgage loans held
for sale, the fair value is based upon quoted market prices for similar assets in active markets and is also classified in Level 2 of the fair value hierarchy. For the commercial loans held for sale, the fair value is determined based upon the
expected sales price, less cost to sell, provided by an independent third party broker that the Company has contracted with to market these assets and are classified in Level 2 of the fair value hierarchy.

Other Real Estate Owned and Repossessed Assets: The Company does not record other real estate owned (OREO) and
repossessed assets at their fair value on a recurring basis. At foreclosure or obtaining possession of the assets, OREO and repossessed assets are recorded at the lower of the amount of the loan balance or the fair value of the collateral, less
estimated costs to sell. Generally, the fair value of real estate is determined through the use of a current appraisal and the fair value of other repossessed assets is based upon the estimated net proceeds from the sale or disposition of the
underlying collateral. Only assets that are recorded at fair value, less estimated cost to sell, are classified under the fair value hierarchy. When the fair value of the collateral is based upon an observable market price or an estimate of fair
value from an independent third-party real estate professional, the Company classifies the OREO and repossessed asset as nonrecurring Level 2 in the fair value hierarchy. When an independent valuation is not available or there is no observable
market price and fair value is based upon Managements assessment of liquidation of collateral, the Company classifies the other real estate owned and repossessed assets as nonrecurring Level 3 in the fair value hierarchy.



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Assets and Liabilities Measured on a Recurring Basis

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



|                                                    |  |                          |           |                                       |   |                                           |  |                                        |           |  |   |  
|--------------------------------------------------- |  | ------------------------ | --------- | ------------------------------------- | - | ----------------------------------------- |  | -------------------------------------- | --------- |  | - | -
|                                                    |  | As of September 30, 2009
|                                                    |  | Total FairValue          |           | QuotedPrices inActiveMarkets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level 3)
|                                                    |  | (in thousands)          
|Assets:                                             |  |                          |           |                                       |   |                                           |  |                                        |           |  |   |  
|Available for sale securities                       |  | $                        | 1,306,098 |                                       | $ |                                          |  | $                                      | 1,306,098 |  | $ | 
|Assets held in employee deferred compensation plans |  |                          | 3,247     |                                       |   | 3,247                                     |  |                                        |          |  |   | 
|Derivative instruments                              |  |                          | 11,575    |                                       |   |                                           |  |                                        | 11,575    |  |   | 
|                                                    |  |                          |           |                                      
|Liabilities:                                        |  |                          |           |                                       |   |                                           |  |                                        |           |  |   |  
|Derivative instruments                              |  |                          | 11,999    |                                       |   |                                           |  |                                        | 11,999    |  |   | 
|                                                    | 
|                                                    |  | As of December 31, 2008 
|                                                    |  | Total FairValue          |           | QuotedPrices inActiveMarkets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level 3)
|                                                    |  | (in thousands)          
|Assets:                                             |  |                          |           |                                       |   |                                           |  |                                        |           |  |   |  
|Available for sale securities                       |  | $                        | 1,094,569 |                                       | $ |                                          |  | $                                      | 1,094,569 |  | $ | 
|Assets held in employee deferred compensation plans |  |                          | 4,161     |                                       |   | 4,161                                     |  |                                        |          |  |   | 
|Derivative instruments                              |  |                          | 18,578    |                                       |   |                                          |  |                                        | 18,578    |  |   | 
|                                                    |  |                          |           |                                      
|Liabilities:                                        |  |                          |           |                                       |   |                                           |  |                                        |           |  |   |  
|Derivative instruments                              |  |                          | 11,940    |                                       |   |                                          |  |                                        | 11,940    |  |   | 



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Assets Measured on a Nonrecurring Basis

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



|                                         |  |                          |         |                                       |   |                                           |  |                                        |        |  |   |       
|---------------------------------------- |  | ------------------------ | ------- | ------------------------------------- | - | ----------------------------------------- |  | -------------------------------------- | ------ |  | - | ------
|                                         |  | As of September 30, 2009
|                                         |  | Total FairValue          |         | QuotedPrices inActiveMarkets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level 3)
|                                         |  | (in thousands)          
|Assets:                                  |  |                          |         |                                       |   |                                           |  |                                        |        |  |   |       
|Loans and loans held for sale            |  | $                        | 111,751 |                                       | $ |                                          |  | $                                      | 96,671 |  | $ | 15,080
|Other real estate and repossessed assets |  |                          | 17,603  |                                       |   |                                          |  |                                        | 17,603 |  |   |       
|                                         | 
|                                         |  | As of December 31, 2008 
|                                         |  | Total FairValue          |         | QuotedPrices inActiveMarkets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level 3)
|                                         |  | (in thousands)          
|Assets:                                  |  |                          |         |                                       |   |                                           |  |                                        |        |  |   |       
|Loans                                    |  | $                        | 79,522  |                                       | $ |                                          |  | $                                      | 43,624 |  | $ | 35,898
|Other real estate and repossessed assets |  |                          | 11,523  |                                       |   |                                          |  |                                        | 11,523 |  |   |      

All of the assets classified as Level 3 as of September 30, 2009 related to
loans considered impaired and other real estate and repossessed assets and recorded at fair value on a nonrecurring basis. We did not transfer any of these loans measured on a nonrecurring basis to Level 3 from any other level during the period.

At September 30, 2009, the Company had $15.1 million of impaired loans measured at fair value on a nonrecurring basis
and classified in Level 3 in the fair value hierarchy. The carrying value of these impaired loans totaled $21.8 million and was written down to fair value of $15.1 million through a provision for loan loss of $6.7 million which was included in
earnings during the first nine months of 2009.

The methods and assumptions used to determine fair values for each significant
class of financial instruments are presented below:

Cash and Cash Equivalents: The carrying amounts of cash, due from
banks, interest-bearing deposits with banks or other financial institutions, federal funds sold, and securities purchased under agreement to resell with original maturities less than 90 days approximate fair value since their maturities are
short-term.



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Investment Securities:The fair value measurements of investment securities consider
observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, including credit spreads and current
ratings from credit rating agencies and the bonds terms and conditions, among other things.

Loans held for sale:For commercial loans held for sale, the fair value has been determined based upon the estimated net sales price as provided by an independent third party broker who is currently marketing these loans for sale. For the residential mortgage loans
held for sale, the fair value has been determined based upon quoted market prices for similar assets in active markets.

Loans:The fair values of loans have been estimated by the present value of future cash flows, using current rates at which similar loans would be made to borrowers with the same remaining maturities, less a valuation adjustment for
general portfolio risks. However, certain loans are accounted for at fair value when it is probable the payment of interest and principal will not be made in accordance with the contractual terms and impairment exists. In these cases, the fair value
is determined based on the present value of expected future cash flows discounted at the loans effective interest rate, except that collateral-dependent loans may be measured for impairment based on the fair value of the collateral, less cost
to sell.

Investment in FHLB and Federal Reserve Bank Stock:The fair value of these investments in FHLB and Federal
Reserve Bank Stock equals its book value as these stocks can only be sold back to the FHLB, Federal Reserve Bank, or other member banks at their par value per share.

Accrued Interest Receivable:The carrying amount of accrued interest receivable approximates fair value since its maturity is short-term.

Derivative Financial Instruments:The carrying amount and fair value of interest rate swap derivative financial instruments are based
upon independent valuation models, which use widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the
period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective
counterpartys nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit
enhancements, such as collateral postings, thresholds, mutual puts and guarantees. The fair value of the forward loan sales is based upon quoted market prices for similar assets in active markets. On the Companys Consolidated Balance Sheets,
instruments that have a positive fair value are included in other assets and those instruments that have a negative fair value are included in accrued interest, taxes, and other liabilities.



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Other Assets:Financial instruments in other assets consist of assets in the
Companys nonqualified deferred compensation plan, and are carried at fair value based upon quoted market prices.

Deposit Liabilities:Deposit liabilities with stated maturities have been valued at the present value of future cash flows using rates which approximate current market rates for similar instruments; unless this calculation results in
a present value which is less than the book value of the reflected deposit, in which case the book value would be utilized as an estimate of fair value. Fair values of deposits without stated maturities equal the respective amounts due on demand.

Other Borrowings:The carrying amount of overnight securities sold under agreements to repurchase, federal funds
purchased, and the U.S. Treasury tax and loan note option, approximates fair value, as the maturities of these borrowings are short-term. Securities sold under agreements to repurchase with original maturies over one year have been valued at the
present values of future cash flows using rates which approximate current market rates for instruments of like maturities.

Notes Payable and Other Advances:Notes payable and FHLB advances have been valued at the present value of estimated future cash flows using rates which approximate current market rates for instruments of like maturities.

Accrued Interest Payable:The carrying amount of accrued interest payable approximates fair value since its maturity is
short-term.

Junior Subordinated Debentures:The fair value of the fixed rate junior subordinated debentures issued to
TAYC Capital Trust I is computed based upon the publicly quoted market prices of the underlying trust preferred securities issued by the Trust. The fair value of the floating rate junior subordinated debentures issued to TAYC Capital Trust II has
been valued at the present value of estimated future cash flows using current market rates and credit spreads for an instrument with a like maturity.

Subordinated Notes:The subordinated notes issued by the Bank in 2008 have been valued at the present value of estimated future cash flows using current market rates and credit spreads for an
instrument with a like maturity.

Off-Balance Sheet Financial Instruments:The fair value of commercial loan
commitments to extend credit is not material as they are predominantly floating rate, subject to material adverse change clauses, cancelable and not readily marketable. The carrying value and the fair value of standby letters of credit represent the
unamortized portion of the fee paid by the customer. A reserve for unfunded commitments is established if it is probable that a liability has been incurred by the Company under a standby letter of credit or a loan commitment that has not yet been
funded.



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The estimated fair values of the Companys financial instruments are as follows:



|                                                  |  |                    |           |                   |   |               |  |           |           |  |   |          
|------------------------------------------------- |  | ------------------ | --------- | ----------------- | - | ------------- |  | --------- | --------- |  | - | ---------
|                                                  |  | September 30, 2009 |           | December 31, 2008
|                                                  |  | CarryingValue      |           | FairValue         |   | CarryingValue |  | FairValue
|                                                  |  | (in thousands)    
|Financial Assets:                                 |  |                    |           |                   |   |               |  |           |           |  |   |          
|Cash and cash equivalents                         |  | $                  | 47,533    |                   | $ | 47,533        |  | $         | 53,012    |  | $ | 53,012   
|Investments                                       |  |                    | 1,306,098 |                   |   | 1,306,098     |  |           | 1,094,594 |  |   | 1,094,594
|Loans held for sale                               |  |                    | 102,765   |                   |   | 103,554       |  |           |          |  |   |         
|Loans, net of allowance                           |  |                    | 2,904,357 |                   |   | 2,856,432     |  |           | 3,104,713 |  |   | 3,113,565
|Investment in FHLB and Federal Reserve Bank stock |  |                    | 35,741    |                   |   | 35,741        |  |           | 29,630    |  |   | 29,630   
|Accrued interest receivable                       |  |                    | 17,509    |                   |   | 17,509        |  |           | 17,659    |  |   | 17,659   
|Derivative financial instruments                  |  |                    | 11,575    |                   |   | 11,575        |  |           | 18,578    |  |   | 18,578   
|Other assets                                      |  |                    | 3,247     |                   |   | 3,247         |  |           | 4,162     |  |   | 4,162    
|                                                  |  |                    |           |                   |   |               |  |           |           |  |   |          
|Total financial assets                            |  | $                  | 4,428,825 |                   | $ | 4,381,689     |  | $         | 4,322,348 |  | $ | 4,331,200
|                                                  |  |                    |           |                   |   |               |  |           |           |  |   |          
|Financial Liabilities:                            |  |                    |           |                   |   |               |  |           |           |  |   |          
|Deposits without stated maturities                |  | $                  | 1,336,639 |                   | $ | 1,336,639     |  | $         | 1,125,759 |  | $ | 1,125,759
|Deposits with stated maturities                   |  |                    | 1,716,090 |                   |   | 1,751,169     |  |           | 2,005,287 |  |   | 2,053,784
|Other borrowings                                  |  |                    | 327,692   |                   |   | 344,131       |  |           | 275,560   |  |   | 296,744  
|Notes payable and other advances                  |  |                    | 617,000   |                   |   | 621,958       |  |           | 462,000   |  |   | 464,844  
|Accrued interest payable                          |  |                    | 10,566    |                   |   | 10,566        |  |           | 19,631    |  |   | 19,631   
|Derivative financial instruments                  |  |                    | 11,999    |                   |   | 11,999        |  |           | 11,940    |  |   | 11,940   
|Junior subordinated debentures                    |  |                    | 86,607    |                   |   | 45,081        |  |           | 86,607    |  |   | 70,274   
|Subordinated notes                                |  |                    | 55,593    |                   |   | 54,194        |  |           | 55,303    |  |   | 58,956   
|                                                  |  |                    |           |                   |   |               |  |           |           |  |   |          
|Total financial liabilities                       |  | $                  | 4,162,186 |                   | $ | 4,175,737     |  | $         | 4,042,087 |  | $ | 4,101,932
|                                                  |  |                    |           |                   |   |               |  |           |           |  |   |          
|Off-Balance-Sheet Financial Instruments:          |  |                    |           |                   |   |               |  |           |           |  |   |          
|Unfunded commitments to extend credit             |  | $                  | 3,194     |                   | $ | 3,194         |  | $         | 2,917     |  | $ | 2,917    
|Standby letters of credit                         |  |                    | 351       |                   |   | 351           |  |           | 269       |  |   | 269      
|                                                  |  |                    |           |                   |   |               |  |           |           |  |   |          
|Total off-balance-sheet financial instruments     |  | $                  | 3,545     |                   | $ | 3,545         |  | $         | 3,186     |  | $ | 3,186    
|                                                  |  |                    |           |                   |   |               |  |           |           |  |   |          

The remaining balance sheet assets and liabilities of the Company are not considered
financial instruments and have not been valued differently than is required under historical cost accounting. Since assets and liabilities that are not financial instruments are excluded above, the difference between total financial assets and
financial liabilities does not, nor is it intended to, represent the market value of the Company. Furthermore, the estimated fair value information may not be comparable between financial institutions due to the wide range of valuation techniques
permitted, and assumptions necessitated, in the absence of an available trading market.



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13. Subsequent Events:

Events subsequent to the balance sheet date of September 30, 2009 have been evaluated for potential recognition or disclosure in these
financial statements that would provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing the financial statements. The Company has determined that there
was no additional evidence about conditions that existed at the date of the balance sheet or any new nonrecognized subsequent event that would need to be disclosed to keep the financial statements from being misleading through the date these
financial statements were filed.



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

Introduction

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

The following
discussion and analysis presents our consolidated financial condition and results of operations as of and for the dates and periods indicated. This discussion should be read in conjunction with our consolidated financial statements and the notes
thereto appearing elsewhere in this document. In addition to the historical information provided below, we have made certain estimates and forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly
from those anticipated in these estimates and forward-looking statements as a result of certain factors, including those discussed in the section captioned Risk Factors in our 2008 Annual Report on Form 10-K filed with the SEC on
March 11, 2009.

Application of Critical Accounting Policies

Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America and general
reporting practices within the financial services industry. Our accounting policies are described in the section captioned Notes to Consolidated Financial StatementsSummary of Significant Accounting and Reporting Policies in our
2008 Annual Report on Form 10-K.

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

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



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Allowance for Loan Losses

We have established an allowance for loan losses to provide for loans in our portfolio that may not be repaid in their entirety. The
allowance is based on our regular, quarterly assessments of the probable estimated losses inherent in our loan portfolio. Our methodology for measuring the appropriate level of the allowance relies on several key elements, which include a general
allowance computed by applying loss factors to categories of loans outstanding in the portfolio, specific allowances for identified problem loans and portfolio segments, and an unallocated allowance. We maintain our allowance for loan losses at a
level considered adequate to absorb probable losses inherent in our portfolio as of the balance sheet date. In evaluating the adequacy of our allowance for loan losses, we consider numerous quantitative factors, including historical charge-off
experience, growth of our loan portfolio, changes in the composition of our loan portfolio and the volume of delinquent and criticized loans. In addition, we use information about specific borrower situations, including their financial position,
work-out plans and estimated collateral values under various liquidation scenarios to estimate the risk and amount of loss on loans to those borrowers. Finally, we also consider many qualitative factors, including general and economic business
conditions, duration of the current business cycle, the impact of competition on our underwriting terms, current general market collateral valuations, trends apparent in any of the factors we take into account and other matters, which are by nature
more subjective and fluid. Our estimates of risk of loss and amount of loss on any loan are complicated by the uncertainties surrounding not only our borrowers probability of default, but also the fair value of the underlying collateral. The
current illiquidity in the real estate market has increased the uncertainty with respect to real estate values. Because of the degree of uncertainty and the sensitivity of valuations to the underlying assumptions regarding holding period until sale
and the collateral liquidation method, our actual losses may materially vary from our current estimates.

As a business bank,
our loan portfolio is comprised primarily of commercial loans to businesses. These loans are inherently larger in amount than loans to individual consumers and, therefore, have higher potential losses on an individual loan basis. The individually
larger commercial loans can cause greater volatility in our reported credit quality performance measures, such as total impaired or nonperforming loans. Our current credit risk rating and loss estimate with respect to a single sizable loan can have
a material impact on our reported impaired loans and related loss estimates. Because our loan portfolio contains a significant number of commercial loans with relatively large balances, the deterioration of any one or a few of these loans can cause
a significant increase in uncollectible loans and, therefore, our allowance for loan losses. We review our estimates on a quarterly basis and, as we identify changes in estimates, our allowance for loan losses is adjusted through the recording of a
provision for loan losses.

Income Taxes

We have maintained significant net deferred tax assets for deductible temporary differences, the largest of which relates to the allowance for loan losses. For income tax return purposes, only net
charge-offs are deductible, not the provision for loan losses. Under generally accepted accounting principles, a valuation allowance is required to be recognized if it is more



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likely than not that the deferred tax asset will not be realized. The determination of the realizability of the deferred tax assets is highly subjective and dependent upon judgment
concerning managements evaluation of both positive and negative evidence, the forecasts of future income, applicable tax planning strategies, and assessments of the current and future economic and business conditions. We consider both positive
and negative evidence regarding the ultimate realizability of our deferred tax assets. Positive evidence includes the existence of taxes paid in available carry-back years as well as the probability that taxable income will be generated in future
periods, while negative evidence includes a cumulative loss in the current year and prior two years and general business and economic trends. We currently maintain a valuation allowance against significantly all of our deferred tax asset because it
is more likely than not that all of this deferred tax asset will not be realized. This determination was based, largely, on the negative evidence of a cumulative loss in the most recent three year period caused primarily by the significant loan loss
provisions made during recent periods. In addition, general uncertainty surrounding future economic and business conditions have increased the likelihood of volatility in our future earnings.

At times, we apply different tax treatment for selected transactions for tax return purposes than for income tax financial reporting
purposes. The different positions result from the varying application of statutes, rules, regulations, and interpretations, and our accruals for income taxes include reserves for these differences in position. Our estimate of the value of these
reserves contains assumptions based upon our past experience and judgments about potential actions by taxing authorities, and we believe that the level of these reserves is reasonable. We initially recognize the financial statement effects of a tax
position when it is more likely than not, based on the technical merits, that the position will be sustained upon examinations. Subsequently, the reserves are then utilized or reversed when we determine the more likely than not threshold is no
longer met, once the statute of limitations has expired, or the tax matter is effectively settled. However, because reserve balances are estimates that are subject to uncertainties, the ultimate resolution of these matters may be greater or less
than the amounts we have accrued.

Derivative Financial Instruments

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



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

The estimates of
fair values of our interest rate swap, floors, and collar derivatives are calculated using independent valuation models to estimate market-based valuations. The valuations are determined using widely accepted valuation techniques, including
discounted cash flow analysis of the expected cash flow of each derivative. This analysis reflects the contractual terms of the derivative and uses observable market-based inputs, including interest rate curves and implied volatilities. In addition,
the fair value estimate also incorporates a credit valuation adjustment to reflect the risk of nonperformance by both us and our counterparties in the fair value measurement. The resulting fair values produced by these proprietary valuation models
are in part theoretical and, therefore, can vary between derivative dealers and are not necessarily reflective of the actual price at which the derivative contract could be traded. Small changes in assumptions can result in significant changes in
valuation. The risks inherent in the determination of the fair value of a derivative may result in volatility in our statement of operations.

Valuation of Investment Securities

The fair value of our investment portfolio is determined in
accordance with generally accepted accounting principals, which requires that we classify financial assets and liabilities measured at fair value into a three-level fair value hierarchy. The determination of fair value is highly subjective and
requires management to rely on estimates, assumptions, and judgments that can affect amounts reported in our financial statements. We obtain the fair value of investment securities from an independent pricing service. We review the pricing
methodology for each significant class of assets used by this third party pricing service to assess the compliance with accounting standards for fair value measurement and classification in the fair value measurement hierarchy. The fair value
measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, including credit
spreads and current rating from credit rating agencies, and the bonds terms and conditions, among other things. We have determined that these valuations are classified in Level 2 of the fair value hierarchy.

While we use an independent pricing service to obtain the fair values of our investment portfolio, we do employ certain control procedures
to determine the reasonableness of the valuations. We validate the overall reasonableness of the fair values by comparing information obtained from our independent pricing service to other third party valuation sources for selected assets and review
the valuations and any differences in valuations with members of management who have the relevant technical expertise to assess the results. We do not alter the fair values provided by our independent pricing service.



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Our investment portfolio includes $1.08 billion of mortgage related investment securities
which consisted of mortgage-backed securities and collateralized mortgage obligations. We do not have subprime loans in this portfolio. Of the total mortgage related investment securities, $1.05 billion, or 97.5%, were issued by government sponsored
enterprises, such as Ginnie Mae, Fannie Mae, and Freddie Mac. The mortgage related portfolio included $27.5 million of private-label mortgage related securities that has received heightened monitoring because the Company believe the fair values of
these securities have been impacted by illiquidity in the market place because of a lack of active trading in these securities. While none of these securities contain subprime mortgage loans, the portfolio does include Alt-A loans, adjustable rate
mortgages with initial interest only periods, and loans that are secured by collateral in geographic areas adversely impacted by the housing downturn. While the fair value of these securities has been impacted by market illiquidity, the Company does
not modify the fair value determined by the independent pricing but takes additional steps to review for other-than-temporary impairment.

Each quarter we review our investment securities portfolio to determine whether unrealized losses are temporary or other than temporary, based on an evaluation of the creditworthiness of the
issuers/guarantors, as well as the underlying collateral, if applicable. Our analysis includes an evaluation of the type of security, the length of time and extent to which the fair value has been less than the securitys carrying value, the
characteristics of the underlying collateral, the degree of credit support provided by subordinate tranches within the total issuance, independent credit ratings, changes in credit ratings and a cash flow analysis, considering default rates, loss
severities based upon the location of the collateral, and estimated prepayments. Those securities with unrealized losses for more than 12 months and for more than 10% of their carrying value are subjected to further analysis to determine if we
expect to receive all the contractual cash flows.We utilize other independent pricing sources to obtain fair values and perform discounted cash flow analysis for selected securities. When the discounted cash flow analysis we obtain from
those independent pricing sources indicates that we expect all future principal and interest payments would be received in accordance with their original contractual terms, we do not intend to sell the security, and we more-likely-than-not will not
be required to sell the security before recovery, the unrealized loss is deemed temporary. If such analysis shows that we expect not to be able to recover our entire investment, then an other-than-temporary impairment charge would be recorded in
current earnings for the amount of the credit loss. The amount of impairment that related to factors other than the credit loss is recognized in other comprehensive income. Our assessments of creditworthiness and the resultant expected cash flows
are complicated by the significant uncertainties surrounding not only the specific security and its underlying collateral but also the severity of the current overall economic downturn. Our cash flow estimates for mortgage related securities are
based on estimates of mortgage default rates, severity of loss, and prepayments, which are difficult to predict. Changes in assumptions can result in material changes in expected cash flows. Therefore, unrealized losses that we have determined to be
temporary may at a later date be determined to be other-than-temporary and have a material impact on our statement of operations.



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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under Management Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly
Report on Form 10-Q constitute forward-looking statements. We have tried to identify these forward-looking statements by using words including may, might, expect, plan, predict,
potential, should, will, expect, anticipate, believe, intend, could and estimate and similar expressions. These forward-looking statements
are based on information currently available to us and are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities in 2009 and beyond to differ materially from those
expressed in, or implied by, these forward-looking statements. These risks, uncertainties and other factors include, without limitation:



| |  |  | the risk that our allowance for loan losses may prove insufficient to absorb probable losses in our loan portfolio;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | possible volatility in loan charge-offs and recoveries between periods;
| | - |  | -----------------------------------------------------------------------



| |  |  | negative developments and disruptions in the credit and lending markets, including the impact of the ongoing credit crisis on our business and on the
businesses of our customers as well as other banks and lending institutions with which we have commercial relationships;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the decline in residential real estate sales volume and the likely potential for continuing illiquidity in the real estate market, including within the
Chicago metropolitan area;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the risks associated with the high concentration of commercial real estate loans in our portfolio;
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | costs, risks and effects of deficiencies in or impairments of mortgage loans acquired from other financial institutions;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | uncertainty in estimating the fair value of residential mortgage loans held for sale by us based upon quoted market prices;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | the possibility that we will not be able to securitize the residential mortgages held for sale by us on terms acceptable to us;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | the uncertainties in estimating the fair value of developed real estate and undeveloped land in light of declining demand for such assets and
continuing illiquidity in the real estate market;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the risks associated with implementing our business strategy and managing our growth effectively, including our ability to preserve and access
sufficient capital to execute on our strategy;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the risks associated with management changes, employee turnover and our commercial banking growth initiative, including our expansion of our
asset-based lending operations and our entry into new geographical markets;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the effect on our profitability if interest rates fluctuate as well as the effect of our customers changing use of our deposit products;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the possibility that our wholesale funding sources may prove insufficient to replace deposits at maturity and support our growth;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | a continuation of the unprecedented volatility in the capital markets;
| | - |  | ----------------------------------------------------------------------



| |  |  | the effectiveness of our hedging transactions and their impact on our future results of operations;
| | - |  | ---------------------------------------------------------------------------------------------------



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| |  |  | changes in general economic and capital market conditions, interest rates, our debt credit ratings, deposit flows, loan demand, including loan
syndication opportunities and competition;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in legislation or regulatory and accounting principles, policies or guidelines affecting our business; and
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | other economic, competitive, governmental, regulatory and technological factors impacting our operations.
| | - |  | ---------------------------------------------------------------------------------------------------------

For further information about these and other risks, uncertainties and factors, please review the disclosure included in the section captioned Risk
Factors in our December 31, 2008 Annual Report on Form 10-K filed with the SEC on March 11, 2009. You should not place undue reliance on any forward-looking statements. We undertake no obligation to publicly update or revise any
forward-looking statements or risk factors, whether as a result of new information, future events, changed circumstances or any other reason after the date of this press release.

RESULTS OF OPERATIONS

Overview

We reported a net loss applicable to common stockholders of $5.3 million, or $0.51 per diluted common share outstanding, for the third
quarter of 2009, compared to a net loss applicable to common stockholders of $97.2 million, or $9.30 per diluted common share, in the third quarter of 2008. The lower net loss applicable to common stockholders in the third quarter of 2009 was due to
a $37.2 million decrease in the provision for loan losses and $25.5 million decrease in income tax expense, largely due to a $47.3 million non-cash charge recorded in the third quarter of 2008 to establish a valuation allowance against our deferred
tax asset. In addition, in connection with the completion of our private placement of 8% non-cumulative convertible perpetual preferred stock, Series A, in the third quarter of 2008, we recorded a $16.7 million implied non-cash dividend to the
holders of this preferred stock to reflect the beneficial conversion feature, as the market value of our common stock at the date of the stock purchase agreement exceeded the $10.00 conversion price per share. In addition, a $10.5 million increase
in net interest income and a $4.8 million decrease in noninterest expense also contributed to the lower net loss applicable to common stockholders during the third quarter of 2009.

For the first nine months of 2009, we reported a net loss applicable to common stockholders of $37.1 million, or $3.54 per diluted common
share, compared to a net loss applicable to common stockholders of $126.4 million, or $12.10 per diluted share, during the first nine months of 2008. The lower net loss applicable to common stockholders resulted from a $43.2 million decrease in the
provision for loan losses, a $22.2 million increase in net interest income, a $9.5 million increase in noninterest income, and a decrease in noninterest expense of $4.4 million.

Throughout 2009, we have taken additional steps in an effort to improve our operating results by increasing the level of net interest income
and noninterest income while holding the level of noninterest expense relatively flat with prior periods. In both the third quarter and



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year-to-date period ending September 30, 2009, our net interest income increased over the comparable periods in 2008. These increases were due to both higher interest-earning asset volumes
and a declining cost of funds.

We have also focused on improving our loan pricing, including the use of interest rate floors
in new loan originations, and increased the size and duration of our investment portfolio to take advantage of higher yields. On the liability side, we continue to strengthen our liquidity position by obtaining more funding from core customers and
reducing our reliance on more costly brokered deposits. Noninterest income also increased in both the third quarter and year-to-date period in 2009, as an increase in service charge revenue was partly offset by lower trust and investment management
fees. In addition, noninterest expense has decreased in both the three month and year-to-date periods ended September 30, 2009 as compared to the same periods in 2008. Despite the significant increase in deposit insurance premiums, we have
instituted a number of cost control measures to reduce our noninterest expense, such as salaries and benefit costs and certain other overhead expenses.

Net Interest Income

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

Quarter Ended September 30, 2009 Compared to the Quarter Ended September 30, 2008

Net interest income was $32.4 million for the third quarter of 2009, an increase of $10.5 million, or 47.8%, from $21.9 million of net
interest income in the third quarter of 2008. With an adjustment for tax-exempt income, our consolidated net interest income for the third quarter of 2009 was $33.1 million, compared to $22.7 million for the same quarter a year ago. This non-GAAP
presentation is discussed in a following section captioned Tax-Equivalent Adjustments to Yields and Margins. Net interest income for the third quarter of 2009 increased due to higher interest-earning asset levels and an increase in net
interest margin.

Net interest margin is determined by dividing taxable equivalent net interest income by average
interest-earning assets. For the third quarter of 2009, our net interest margin was 2.92%, compared to 2.35% for the same quarter a year ago, an increase of 57 basis points. As market interest rates decreased between the third quarter of 2008 and
the third quarter of 2009, our net interest margin increased in the third quarter of 2009 because the decrease in our cost of funds outpaced the reductions in our earning asset yields. On the asset side, the yield on our interest-earning assets
decreased 31 basis points from 5.32% during the third quarter of 2008 to 5.01% during the third quarter of 2009. Between the third quarter of 2009 and the third quarter of 2008, the yield on our loan portfolio decreased 39 basis points from 5.48% in
the third quarter of 2008 to 5.09% in the third quarter of 2009. Declining interest rates primarily caused the decrease in yield as approximately 64% of our loan portfolio is based upon a floating or variable rate. In addition, the impact of higher
nonaccrual loans also contributed to the lower loan yield.



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Our funding costs declined 93 basis points to 2.61% during the third quarter of 2009 from
3.54% during the same quarter a year ago. The lower funding cost was a result of the decline in market interest rates between the two periods. Our deposit costs have decreased as our term deposits continue to reprice to the lower current market
rates and from the increase in lower-costing core deposits, which has allowed us to reduce our reliance on brokered deposits. Our overall funding cost also declined because we have increased our use of attractively priced short-term funding
opportunities provided by the Federal Home Loan Bank and the Federal Reserve Banks Term Auction Facility.

Our average
interest-earning assets during the third quarter of 2009 were $4.51 billion, an increase of $648.8 million, or 16.8%, as compared to the same quarter in 2008. A $496.5 million, or 59.9%, increase in average investment portfolio and a $271.2 million
or 9.3% increase in average loan balances combined to produce the higher interest-earning assets. The higher average investment securities primarily resulted from the purchase of mortgage-related investment securities during the past twelve months
as we increased the size of the investment portfolio to take advantage of higher yields on longer duration securities. Average loans outstanding increased to $3.18 billion during the third quarter of 2009, compared to $2.91 billion during the third
quarter of 2008. The increase in loans is a result of a growth strategy implemented in 2008 in which we hired a new management team, increased our lending staff, and enhanced certain of our credit support functions.

Our net interest margin has increased in each of the last four quarterly periods as we have taken additional steps to increase our net
interest margin. We have changed the mix of our funding as our core in-market deposits increased, enabling us to reduce our reliance on higher costing brokered deposits. In addition, we have increased the size of our investment securities portfolio,
and we are continuing our attempts to improve our loan pricing, including the use of interest rate floors, in an effort to increase our earning asset yields. See the section of this discussion and analysis captioned Quantitative and
Qualitative Disclosure About Market Risks for further discussion of the impact of changes in interest rates on our results of operations.

Nine Months Ended September 30, 2009 Compared to the Nine Months Ended September 30, 2008

Net
interest income was $90.1 million for the first nine months of 2009, compared to $67.9 million during the same nine month period a year ago, an increase of $22.2 million, or 32.6%. With an adjustment for tax-exempt income, our consolidated net
interest income for the first nine months of 2009 was $92.5 million, compared to $70.4 million for the first nine months of 2008. This non-GAAP presentation is discussed in a following section captioned Tax-Equivalent Adjustments to Yields and
Margins. Net interest income for the first nine months of 2009 benefited from both an $894.1 million increase in average interest-earning assets and a 14 basis point increase in the net interest margin.



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Our net interest margin was 2.76% during the first nine months of 2009 as compared to 2.62%
during the first nine months of 2008. Our net interest margin through September 30, 2009, increased as the interest-bearing funding costs decreased more than the decrease in our earning asset yields. The total earning asset yield during the
first nine months of 2009 was 5.02%, compared to 5.67% during the first nine months of 2008, a decrease of 65 basis points. At the same time, the cost of our interest-bearing liabilities decreased 85 basis points to 2.83% during the first nine
months of 2009, from 3.68% during the first nine months of 2008. On the asset side, as market interest rates decreased our portfolio of variable rate loans also adjusted downward. On the liability side, our cost of funds has decreased with the low
interest rate environment. Our term deposits continue to reprice to current market interest rates, and we have funded asset growth by taking advantage of low cost short-term funding opportunities, primarily from the FHLB and the Federal Reserve
Bank.

Our average interest-earning assets during the first nine months of 2009 were $4.47 billion, an increase of $894.1
million, or 25.0%, as compared to the $3.58 billion of average interest-earning assets during the first nine months of 2008. The growth strategy implemented in 2008 caused the $550.2 million, or 20.7%, increase in average loan balances between the
two year-to-date periods. In addition, the increase in the size of the investment portfolio that occurred during the last twelve months caused average investment securities to increase by $422.1 million, or 49.6%, in the first nine months of 2009 as
compared to the same nine month period a year ago. This increase in investment securities was largely funded with additional short-term borrowings.

Rate vs. Volume Analysis of Net Interest Income

The following table
presents for the periods indicated a summary of the changes in interest earned and interest paid resulting from changes in volume and rates for the major components of interest-earning assets and interest-bearing liabilities on a tax-equivalent
basis using a tax rate of 35.0%.



|                                    |  |                                                                                  |        |   |                                                                                          |   |        |     |  |   |        |   |  |      |        |   |        |   |         |     |  |   |      |   |  |   |         |  
|----------------------------------- |  | -------------------------------------------------------------------------------- | ------ | - | ---------------------------------------------------------------------------------------- | - | ------ | --- |  | - | ------ | - |  | ---- | ------ | - | ------ | - | ------- | --- |  | - | ---- | - |  | - | ------- | -
|                                    |  | Quarter Ended Sept. 30, 2009 OverQuarter Ended Sept. 30,
2008Increase/(Decrease) |        |   | Nine Months Ended Sept. 30, 2009 OverNine Months Ended Sept. 30, 2008Increase/(Decrease) |  
|                                    |  | VOLUME                                                                           |        |   | RATE                                                                                     |   |        | NET |  |   | VOLUME |   |  | RATE |        |   | DAY(1) |   |         | NET | 
|                                    |  | (in thousands)                                                                   |       
|INTEREST EARNED ON:                 |  |                                                                                  |        |   |                                                                                          |   |        |     |  |   |        |   |  |      |        |   |        |   |         |     |  |   |      |   |  |   |         |  
|Investment securities               |  | $                                                                                | 5,789  |   |                                                                                          | $ | (669   | )   |  | $ | 5,120  |   |  | $    | 15,586 |   |        | $ | (710    | )   |  | $ |     |   |  | $ | 14,876  |  
|Cash equivalents                    |  |                                                                                  | (326   | ) |                                                                                          |   | (253   | )   |  |   | (579   | ) |  |      | (874   | ) |        |   | (477    | )   |  |   | (5   | ) |  |   | (1,356  | )
|Loans                               |  |                                                                                  | 3,602  |   |                                                                                          |   | (2,924 | )   |  |   | 678    |   |  |      | 22,385 |   |        |   | (19,344 | )   |  |   | (428 | ) |  |   | 2,613   |  
|                                    |  |                                                                                  |        |   |                                                                                          |   |        |     |  |   |        |   |  |      |        |   |        |   |         |     |  |   |      |   |  |   |         |  
|Total interest-earning assets       |  |                                                                                  |        |   |                                                                                          |   |        |     |  |   | 5,219  |   |  |      |        |   |        |   |         |     |  |   |      |   |  |   | 16,133  |  
|                                    |  |                                                                                  |        |   |                                                                                          |   |        |     |  |   |        |   |  |      |        |   |        |   |         |     |  |   |      |   |  |   |         |  
|                                    |  |                                                                                  |        |   |                                                                                          |   |       
|INTEREST PAID ON:                   |  |                                                                                  |        |   |                                                                                          |   |        |     |  |   |        |   |  |      |        |   |        |   |         |     |  |   |      |   |  |   |         |  
|Interest-bearing deposits           |  |                                                                                  | (1,197 | ) |                                                                                          |   | (5,630 | )   |  |   | (6,827 | ) |  |      | 7,114  |   |        |   | (17,001 | )   |  |   | (237 | ) |  |   | (10,124 | )
|Total borrowings                    |  |                                                                                  | 3,630  |   |                                                                                          |   | (2,011 | )   |  |   | 1,619  |   |  |      | 10,692 |   |        |   | (6,429  | )   |  |   | (62  | ) |  |   | 4,201   |  
|                                    |  |                                                                                  |        |   |                                                                                          |   |        |     |  |   |        |   |  |      |        |   |        |   |         |     |  |   |      |   |  |   |         |  
|Total interest-bearing liabilities  |  |                                                                                  |        |   |                                                                                          |   |        |     |  |   | (5,208 | ) |  |      |        |   |        |   |         |     |  |   |      |   |  |   | (5,923  | )
|                                    |  |                                                                                  |        |   |                                                                                          |   |        |     |  |   |        |   |  |      |        |   |        |   |         |     |  |   |      |   |  |   |         |  
|Net interest income, tax-equivalent |  | $                                                                                | 5,397  |   |                                                                                          | $ | 5,030  |     |  | $ | 10,427 |   |  | $    | 20,085 |   |        | $ | 2,105   |     |  | $ | (134 | ) |  | $ | 22,056  |  
|                                    |  |                                                                                  |        |   |                                                                                          |   |        |     |  |   |        |   |  |      |        |   |        |   |         |     |  |   |      |   |  |   |         |  



|(1) | The nine months ended September 30, 2009 had 273 days compared to 274 days in the nine months ended September 30, 2008.
|--- | -----------------------------------------------------------------------------------------------------------------------



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Tax-Equivalent Adjustments to Yields and Margins

As part of our evaluation of net interest income, we review our consolidated average balances, our yield on average interest-earning assets
and the costs of average interest-bearing liabilities. Such yields and costs are derived by dividing annualized income or expense by the average balance of assets or liabilities. Because management reviews net interest income on a tax-equivalent
basis, the analysis contains certain non-GAAP financial measures. In these non-GAAP financial measures, investment interest income, loan interest income, total interest income and net interest income are adjusted to reflect tax-exempt interest
income on a tax-equivalent basis assuming a tax rate of 35.0%. 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 operations. In addition, the earning asset yield, net interest margin and net interest spread are shown with and without the tax-equivalent adjustment.



|                                               |  |                                         |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  
|---------------------------------------------- |  | --------------------------------------- | ------ | - | -------------------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                               |  | For the Three MonthsEnded September 30, |        |   | For the Nine MonthsEnded September 30, |  
|                                               |  | 2009                                    |        |   | 2008                                   |   |        | 2009 |  |   | 2008   |  
|                                               |  | (dollars in thousands)                  |       
|Net interest income as stated                  |  | $                                       | 32,375 |   |                                        | $ | 21,898 |      |  | $ | 90,101 |   |  | $ | 67,937 |  
|Tax equivalent adjustment-investments          |  |                                         | 732    |   |                                        |   | 780    |      |  |   | 2,263  |   |  |   | 2,363  |  
|Tax equivalent adjustment-loans                |  |                                         | 29     |   |                                        |   | 31     |      |  |   | 86     |   |  |   | 94     |  
|                                               |  |                                         |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  
|Tax equivalent net interest income             |  | $                                       | 33,136 |   |                                        | $ | 22,709 |      |  | $ | 92,450 |   |  | $ | 70,394 |  
|                                               |  |                                         |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  
|                                               |  |                                         |        |  
|Yield on earning assets without tax adjustment |  |                                         | 4.94   | % |                                        |   | 5.24   | %    |  |   | 4.95   | % |  |   | 5.58   | %
|Yield on earning assets - tax equivalent       |  |                                         | 5.01   | % |                                        |   | 5.32   | %    |  |   | 5.02   | % |  |   | 5.67   | %
|                                               |  |                                         |        |  
|Net interest margin without tax adjustment     |  |                                         | 2.86   | % |                                        |   | 2.26   | %    |  |   | 2.69   | % |  |   | 2.53   | %
|Net interest margin - tax equivalent           |  |                                         | 2.92   | % |                                        |   | 2.35   | %    |  |   | 2.76   | % |  |   | 2.62   | %
|                                               |  |                                         |        |  
|Net interest spread without tax adjustment     |  |                                         | 2.34   | % |                                        |   | 1.70   | %    |  |   | 2.12   | % |  |   | 1.90   | %
|Net interest spread - tax equivalent           |  |                                         | 2.40   | % |                                        |   | 1.78   | %    |  |   | 2.19   | % |  |   | 1.99   | %

The following table presents, for the periods indicated, certain information relating
to our consolidated average balances and reflect our yield on average interest-earning assets and costs of average interest-bearing liabilities. The table contains certain non-GAAP financial measures to adjust tax-exempt interest income on a
tax-equivalent basis assuming a tax rate of 35.0%.



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|                                               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|---------------------------------------------- |  | ---------------------------------------- | --------- | - | -------- | - | ---------------- |  | ----- | -------------- |  | - | --------- | - | ---------------- | - | ------ |  | ----- | -
|                                               |  | For the Three Months Ended September 30, |          
|                                               |  | 2009                                     |           |   | 2008     |  
|                                               |  | AVERAGEBALANCE                           |           |   | INTEREST |   | YIELD/RATE(%)(6) |  |       | AVERAGEBALANCE |  |   | INTEREST  |   | YIELD/RATE(%)(6) |  
|                                               |  | (dollars in thousands)                   |          
|INTEREST-EARNING ASSETS:                       |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Investment securities (1):                     |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Taxable                                        |  | $                                        | 1,194,787 |   |          | $ | 13,921           |  | 4.66  | %              |  | $ | 689,074   |   |                  | $ | 8,664  |  | 5.03  | %
|Tax-exempt (tax-equivalent) (2)                |  |                                          | 130,935   |   |          |   | 2 ,092           |  | 6.39  |                |  |   | 140,132   |   |                  |   | 2,229  |  | 6.36  |  
|                                               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Total investment securities                    |  |                                          | 1,325,722 |   |          |   | 16,013           |  | 4.83  |                |  |   | 829,206   |   |                  |   | 10,893 |  | 5.25  |  
|                                               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Cash Equivalents                               |  |                                          | 2,637     |   |          |   | 3                |  | 0.45  |                |  |   | 121,498   |   |                  |   | 582    |  | 1.87  |  
|                                               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|                                               |  |                                          |           |   |          |  
|Loans (2) (3):                                 |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Commercial and commercial real estate          |  |                                          | 2,968,296 |   |          |   | 37,841           |  | 4.99  |                |  |   | 2,751,485 |   |                  |   | 37,661 |  | 5.36  |  
|Residential real estate mortgages              |  |                                          | 109,413   |   |          |   | 1,380            |  | 5.05  |                |  |   | 54,872    |   |                  |   | 781    |  | 5.69  |  
|Home equity and consumer                       |  |                                          | 103,283   |   |          |   | 1,069            |  | 4.11  |                |  |   | 103,442   |   |                  |   | 1,291  |  | 4.97  |  
|Fees on loans                                  |  |                                          |          |   |          |   | 488              |  |       |                |  |   |          |   |                  |   | 367    |  |       |  
|                                               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Net loans (tax-equivalent) (2)                 |  |                                          | 3,180,992 |   |          |   | 40,778           |  | 5.09  |                |  |   | 2,909,799 |   |                  |   | 40,100 |  | 5.48  |  
|                                               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Total interest-earning assets (2)              |  |                                          | 4,509,351 |   |          |   | 56,794           |  | 5.01  |                |  |   | 3,860,503 |   |                  |   | 51,575 |  | 5.32  |  
|                                               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|NON-EARNING ASSETS:                            |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Allowance for loan losses                      |  |                                          | (139,074  | ) |          |   |                  |  |       |                |  |   | (108,041  | ) |                  |   |        |  |       |  
|Cash and due from banks                        |  |                                          | 65,365    |   |          |   |                  |  |       |                |  |   | 60,530    |   |                  |   |        |  |       |  
|Accrued interest and other assets              |  |                                          | 107,549   |   |          |   |                  |  |       |                |  |   | 105,839   |   |                  |   |        |  |       |  
|                                               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|TOTAL ASSETS                                   |  | $                                        | 4,543,191 |   |          |   |                  |  |       |                |  | $ | 3,918,831 |   |                  |   |        |  |       |  
|                                               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|INTEREST-BEARING LIABILITIES:                  |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Interest-bearing deposits:                     |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Interest-bearing demand deposits               |  | $                                        | 640,074   |   |          |   | 1,981            |  | 1.23  |                |  | $ | 722,104   |   |                  |   | 2,824  |  | 1.56  |  
|Savings deposits                               |  |                                          | 41,839    |   |          |   | 10               |  | 0.09  |                |  |   | 43,924    |   |                  |   | 10     |  | 0.09  |  
|Time deposits                                  |  |                                          | 1,845,048 |   |          |   | 14,638           |  | 3.15  |                |  |   | 1,933,260 |   |                  |   | 20,622 |  | 4.24  |  
|                                               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Total interest-bearing deposits                |  |                                          | 2,526,961 |   |          |   | 16,629           |  | 2.61  |                |  |   | 2,699,288 |   |                  |   | 23,456 |  | 3.46  |  
|                                               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Other borrowings                               |  |                                          | 358,507   |   |          |   | 2,210            |  | 2.41  |                |  |   | 309,960   |   |                  |   | 2,364  |  | 2.98  |  
|Notes payable and other advances               |  |                                          | 573,872   |   |          |   | 1,718            |  | 1.17  |                |  |   | 146,238   |   |                  |   | 1,298  |  | 3.47  |  
|Junior subordinated debentures                 |  |                                          | 86,607    |   |          |   | 1,477            |  | 6.82  |                |  |   | 86,607    |   |                  |   | 1,715  |  | 7.93  |  
|Subordinated notes                             |  |                                          | 55,547    |   |          |   | 1,624            |  | 11.69 |                |  |   | 1,200     |   |                  |   | 33     |  | 10.76 |  
|                                               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Total interest-bearing liabilities             |  |                                          | 3,601,494 |   |          |   | 23,658           |  | 2.61  |                |  |   | 3,243,293 |   |                  |   | 28,866 |  | 3.54  |  
|                                               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|NONINTEREST-BEARING LIABILITIES:               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Noninterest-bearing deposits                   |  |                                          | 598,760   |   |          |   |                  |  |       |                |  |   | 404,580   |   |                  |   |        |  |       |  
|Accrued interest, taxes, and other liabilities |  |                                          | 69,433    |   |          |   |                  |  |       |                |  |   | 49,564    |   |                  |   |        |  |       |  
|                                               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Total noninterest-bearing liabilities          |  |                                          | 668,193   |   |          |   |                  |  |       |                |  |   | 454,144   |   |                  |   |        |  |       |  
|                                               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|STOCKHOLDERS EQUITY                           |  |                                          | 273,504   |   |          |   |                  |  |       |                |  |   | 221,394   |   |                  |   |        |  |       |  
|                                               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY     |  | $                                        | 4,543,191 |   |          |   |                  |  |       |                |  | $ | 3,918,831 |   |                  |   |        |  |       |  
|                                               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Net interest income (tax-equivalent) (2)       |  |                                          |           |   |          | $ | 33,136           |  |       |                |  |   |           |   |                  | $ | 22,709 |  |       |  
|                                               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Net interest spread (tax-equivalent) (2) (4)   |  |                                          |           |   |          |   |                  |  | 2.40  | %              |  |   |           |   |                  |   |        |  | 1.78  | %
|                                               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Net interest margin (tax-equivalent) (2) (5)   |  |                                          |           |   |          |   |                  |  | 2.92  | %              |  |   |           |   |                  |   |        |  | 2.35  | %
|                                               |  |                                          |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  



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

|(2) | Calculations are computed on a tax-equivalent basis using a tax rate of 35%.
|--- | ----------------------------------------------------------------------------

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

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

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

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



39



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|                                               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|---------------------------------------------- |  | --------------------------------------- | --------- | - | -------- | - | ---------------- |  | ----- | -------------- |  | - | --------- | - | ---------------- | - | ------- |  | ----- | -
|                                               |  | For the Nine Months Ended September 30, |          
|                                               |  | 2009                                    |           |   | 2008     |  
|                                               |  | AVERAGEBALANCE                          |           |   | INTEREST |   | YIELD/RATE(%)(6) |  |       | AVERAGEBALANCE |  |   | INTEREST  |   | YIELD/RATE(%)(6) |  
|                                               |  | (dollars in thousands)                  |          
|INTEREST-EARNING ASSETS:                       |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|Investment securities (1):                     |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|Taxable                                        |  | $                                       | 1,138,195 |   |          | $ | 42,179           |  | 4.94  | %              |  | $ | 710,142   |   |                  | $ | 27,019  |  | 5.07  | %
|Tax-exempt (tax-equivalent) (2)                |  |                                         | 135,137   |   |          |   | 6,466            |  | 6.38  |                |  |   | 141,070   |   |                  |   | 6,750   |  | 6.38  |  
|                                               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|Total investment securities                    |  |                                         | 1,273,332 |   |          |   | 48,645           |  | 5.09  |                |  |   | 851,212   |   |                  |   | 33,769  |  | 5.29  |  
|                                               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|Cash Equivalents                               |  |                                         | 1,880     |   |          |   | 15               |  | 1.05  |                |  |   | 80,075    |   |                  |   | 1,371   |  | 2.25  |  
|                                               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|                                               |  |                                         |           |   |          |  
|Loans (2) (3):                                 |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|Commercial and commercial real estate          |  |                                         | 3,027,149 |   |          |   | 112,541          |  | 4.90  |                |  |   | 2,487,419 |   |                  |   | 108,689 |  | 5.74  |  
|Residential real estate mortgages              |  |                                         | 72,587    |   |          |   | 2,936            |  | 5.39  |                |  |   | 57,626    |   |                  |   | 2,492   |  | 5.77  |  
|Home equity and consumer                       |  |                                         | 102,476   |   |          |   | 3,235            |  | 4.22  |                |  |   | 106,977   |   |                  |   | 4,520   |  | 5.64  |  
|Fees on loans                                  |  |                                         |          |   |          |   | 1,042            |  |       |                |  |   |          |   |                  |   | 1,440   |  |       |  
|                                               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|Net loans (tax-equivalent) (2)                 |  |                                         | 3,202,212 |   |          |   | 119,754          |  | 5.00  |                |  |   | 2,652,022 |   |                  |   | 117,141 |  | 5.90  |  
|                                               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|Total interest-earning assets (2)              |  |                                         | 4,477,424 |   |          |   | 168,414          |  | 5.02  |                |  |   | 3,583,309 |   |                  |   | 152,281 |  | 5.67  |  
|                                               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|NON-EARNING ASSETS:                            |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|Allowance for loan losses                      |  |                                         | (135,611  | ) |          |   |                  |  |       |                |  |   | (76,917   | ) |                  |   |         |  |       |  
|Cash and due from banks                        |  |                                         | 60,820    |   |          |   |                  |  |       |                |  |   | 56,035    |   |                  |   |         |  |       |  
|Accrued interest and other assets              |  |                                         | 113,772   |   |          |   |                  |  |       |                |  |   | 95,430    |   |                  |   |         |  |       |  
|                                               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|TOTAL ASSETS                                   |  | $                                       | 4,516,405 |   |          |   |                  |  |       |                |  | $ | 3,657,857 |   |                  |   |         |  |       |  
|                                               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|INTEREST-BEARING LIABILITIES:                  |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|Interest-bearing deposits:                     |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|Interest-bearing demand deposits               |  | $                                       | 653,336   |   |          |   | 5,537            |  | 1.13  |                |  | $ | 783,618   |   |                  |   | 11,288  |  | 1.92  |  
|Savings deposits                               |  |                                         | 42,067    |   |          |   | 26               |  | 0.08  |                |  |   | 46,183    |   |                  |   | 50      |  | 0.14  |  
|Time deposits                                  |  |                                         | 1,884,317 |   |          |   | 49,348           |  | 3.50  |                |  |   | 1,599,124 |   |                  |   | 53,697  |  | 4.49  |  
|                                               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|Total interest-bearing deposits                |  |                                         | 2,579,720 |   |          |   | 54,911           |  | 2.85  |                |  |   | 2,428,925 |   |                  |   | 65,035  |  | 3.58  |  
|                                               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|Other borrowings                               |  |                                         | 362,115   |   |          |   | 6,618            |  | 2.41  |                |  |   | 316,896   |   |                  |   | 7,454   |  | 3.09  |  
|Notes payable and other advances               |  |                                         | 500,136   |   |          |   | 4,956            |  | 1.31  |                |  |   | 139,642   |   |                  |   | 4,045   |  | 3.81  |  
|Junior subordinated debentures                 |  |                                         | 86,607    |   |          |   | 4,618            |  | 7.11  |                |  |   | 86,607    |   |                  |   | 5,320   |  | 8.19  |  
|Subordinated notes                             |  |                                         | 55,449    |   |          |   | 4,861            |  | 11.69 |                |  |   | 403       |   |                  |   | 33      |  | 10.76 |  
|                                               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|Total interest-bearing liabilities             |  |                                         | 3,584,027 |   |          |   | 75,964           |  | 2.83  |                |  |   | 2,972,473 |   |                  |   | 81,887  |  | 3.68  |  
|                                               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|NONINTEREST-BEARING LIABILITIES:               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|Noninterest-bearing deposits                   |  |                                         | 565,614   |   |          |   |                  |  |       |                |  |   | 396,774   |   |                  |   |         |  |       |  
|Accrued interest, taxes, and other liabilities |  |                                         | 71,349    |   |          |   |                  |  |       |                |  |   | 45,030    |   |                  |   |         |  |       |  
|                                               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|Total noninterest-bearing liabilities          |  |                                         | 636,963   |   |          |   |                  |  |       |                |  |   | 441,804   |   |                  |   |         |  |       |  
|                                               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|STOCKHOLDERS EQUITY                           |  |                                         | 295,415   |   |          |   |                  |  |       |                |  |   | 243,580   |   |                  |   |         |  |       |  
|                                               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY     |  | $                                       | 4,516,405 |   |          |   |                  |  |       |                |  | $ | 3,657,857 |   |                  |   |         |  |       |  
|                                               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|Net interest income (tax-equivalent) (2)       |  |                                         |           |   |          | $ | 92,450           |  |       |                |  |   |           |   |                  | $ | 70,394  |  |       |  
|                                               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|Net interest spread (tax-equivalent) (2) (4)   |  |                                         |           |   |          |   |                  |  | 2.19  | %              |  |   |           |   |                  |   |         |  | 1.99  | %
|                                               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  
|Net interest margin (tax-equivalent) (2) (5)   |  |                                         |           |   |          |   |                  |  | 2.76  | %              |  |   |           |   |                  |   |         |  | 2.62  | %
|                                               |  |                                         |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |         |  |       |  



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

|(2) | Calculations are computed on a tax-equivalent basis using a tax rate of 35%.
|--- | ----------------------------------------------------------------------------

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

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

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

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



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Noninterest Income

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



|                                     |  |                            |        |   |                           |   |       |               |  |   |               |   |  |   |       
|------------------------------------ |  | -------------------------- | ------ | - | ------------------------- | - | ----- | ------------- |  | - | ------------- | - |  | - | ------
|                                     |  | For the Three Months Ended |        |   | For the Nine Months Ended
|                                     |  | Sept. 30,2009              |        |   | Sept. 30,2008             |   |       | Sept. 30,2009 |  |   | Sept. 30,2008
|Service charges                      |  | $                          | 2,892  |   |                           | $ | 2,256 |               |  | $ | 8,481         |   |  | $ | 6,677 
|Trust and investment management fees |  |                            | 332    |   |                           |   | 894   |               |  |   | 1,341         |   |  |   | 2,736 
|Mortgage banking, net                |  |                            | (1,351 | ) |                           |   |      |               |  |   | (1,305        | ) |  |   | 23    
|Gains on investment sales            |  |                            | 378    |   |                           |   |      |               |  |   | 8,637         |   |  |   |      
|Other derivative income              |  |                            | 108    |   |                           |   | 154   |               |  |   | 1,380         |   |  |   | 1,106 
|Standby letter of credit fees        |  |                            | 591    |   |                           |   | 77    |               |  |   | 1,305         |   |  |   | 254   
|Other noninterest income             |  |                            | 426    |   |                           |   | (161  | )             |  |   | 1,017         |   |  |   | 556   
|                                     |  |                            |        |   |                           |   |       |               |  |   |               |   |  |   |       
|Total noninterest income             |  | $                          | 3,376  |   |                           | $ | 3,220 |               |  | $ | 20,856        |   |  | $ | 11,352
|                                     |  |                            |        |   |                           |   |       |               |  |   |               |   |  |   |       

Quarter Ended September 30, 2009 Compared to the Quarter Ended September 30, 2008

Total noninterest income was $3.4 million during the third quarter of 2009, compared to $3.2 million in the third quarter of
2008, an increase of $156,000, or 4.8%. Increases in service charges, standby letter of credit fees, and gains on investment securities sales were partially offset by a loss in mortgage banking activities and lower trust and investment management
fees.

Service charges, principally from deposit accounts, were $2.9 million during the third quarter of 2009, compared to
$2.3 million during the third quarter in 2008, an increase of $636,000, or 28.2%. The increase in service charge revenue in the quarter was caused by higher gross activity charges, primarily resulting from the success in obtaining commercial banking
clients in connection with the growth strategy implemented in 2008, a decrease in the amount of fee waivers and refunds given to customers, and lower earnings credit rate given to customers on their collected account balances. Our earnings credit
rate was approximately 45 basis points lower on average during the third quarter of 2009 as compared to the third quarter of 2008.

Trust and investment management fees declined to $332,000 in the third quarter of 2009 from $894,000 in the same quarter of 2008. Trust fees declined because of a reduced volume of business and a decrease in the spread income we earn on
invested trust funds. During the second quarter of 2009, we expanded our strategic partnership with the third-party investment management firm that had been providing sub-advisory services to the Banks clients. This third party investment
management firm became the primary investment advisor and assumed all portfolio management responsibilities for our wealth management and retirement services customers going forward.

During the third quarter of 2009, we recorded a $1.4 million loss from mortgage banking activities associated with economic hedges on our
residential mortgage loans held for sale. In order to mitigate interest rate risk associated with these loans held for sale, we entered into



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forward loan sale commitments in the third quarter. The loss resulted from a realized settlement loss on matured forward loan sale commitments and an unrealized $497,000 loss on the unsettled
outstanding forward loan sales.

Gains on the sale of available-for-sale investment securities totaled $378,000 during the
third quarter of 2009. There were no gains in the third quarter of 2008. See Financial Condition  Investment Securities following for further details.

Standby letter of credit fees totaled $591,000 during the third quarter of 2009, compared to $77,000 during the same quarter a year ago. An increase in fees from our expanded asset based lending
operations primarily caused the increase in fee revenue during the quarterly 2009 period.

Other noninterest income includes
fees for non-customer usage of our automated teller machines, gains (losses) from equity or partnership investments, changes in the market value of the assets in our employees deferred compensation plans, and other miscellaneous items. Most of
the increase in other noninterest income during the third quarter of 2009 as compared to the third quarter of 2008 was due to an increase in the market value of assets in our employees deferred compensation plans.

Nine Months Ended September 30, 2009 Compared to the Nine Months Ended September 30, 2008

Total noninterest income was $20.9 million during the first nine months of 2009, compared to $11.4 million in the first nine months of 2008.
Noninterest income was higher during the first nine months of 2009 due to $8.6 million of gains on the sale of investment securities and higher services charges and standby letter of credit fees. These increases were partly offset by lower trust and
investment management fees and the loss on mortgage banking activities

Service charges were $8.5 million during the first
nine months of 2009, as compared to $6.7 million during the first nine months of 2008. An increase in gross activity charges and lower earnings credit rate given to customers on their collected account balances primarily produced the increase.

Trust and investment management fees in first nine months of 2009 decreased $1.4 million to $1.3 million as compared to $2.7
million in the same nine month period in 2008. Trust fees declined because of a reduced volume of business and a decrease in the spread income we earn on invested trust funds, and fewer assets under management caused the decrease in revenues from
investment management services.

Gains on the sale of available-for-sale investment securities were $8.6 million in the first
nine months of 2009, while no gains were recorded in the first nine months of 2008. See Financial Condition  Investment Securities following for further details.

Standby letter of credit fees totaled $1.3 million during the first nine months of 2009, as compared to $254,000 during the first nine
months of 2008 due to higher fees from our expanded asset based lending operations.



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Other noninterest income increased to $1.0 million during the first nine months of 2009 as
compared to $556,000 during the first nine months of 2008 primarily due to an increase in the market value of the assets in our employees deferred compensation plans.

Noninterest Expense

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



|                                                  |  |                            |        |   |                           |   |        |               |  |   |               |   |  |   |        |  
|------------------------------------------------- |  | -------------------------- | ------ | - | ------------------------- | - | ------ | ------------- |  | - | ------------- | - |  | - | ------ | -
|                                                  |  | For the Three Months Ended |        |   | For the Nine Months Ended |  
|                                                  |  | Sept. 30,2009              |        |   | Sept. 30,2008             |   |        | Sept. 30,2009 |  |   | Sept. 30,2008 |  
|                                                  |  | (dollars in thousands)     |       
|Salaries and employee benefits:                   |  |                            |        |   |                           |   |        |               |  |   |               |   |  |   |        |  
|Salaries, employment taxes, and medical insurance |  | $                          | 9,580  |   |                           | $ | 9,413  |               |  | $ | 28,654        |   |  | $ | 27,163 |  
|Sign-on bonuses and severance                     |  |                            | 13     |   |                           |   | 3,079  |               |  |   | 292           |   |  |   | 4,962  |  
|Incentives, commissions, and retirement benefits  |  |                            | 847    |   |                           |   | 2,456  |               |  |   | 3,030         |   |  |   | 5,622  |  
|                                                  |  |                            |        |   |                           |   |        |               |  |   |               |   |  |   |        |  
|Total salaries and employee benefits              |  |                            | 10,440 |   |                           |   | 14,948 |               |  |   | 31,976        |   |  |   | 37,747 |  
|Occupancy of premises, furniture and equipment    |  |                            | 2,548  |   |                           |   | 2,773  |               |  |   | 7,704         |   |  |   | 8,271  |  
|FDIC assessment                                   |  |                            | 2,314  |   |                           |   | 779    |               |  |   | 8,213         |   |  |   | 1,891  |  
|Legal fees, net                                   |  |                            | 1,430  |   |                           |   | 1,841  |               |  |   | 4,225         |   |  |   | 3,195  |  
|Nonperforming asset expense                       |  |                            | 2,295  |   |                           |   | 1,398  |               |  |   | 3,273         |   |  |   | 4,877  |  
|Early extinguishment of debt                      |  |                            |       |   |                           |   | 412    |               |  |   | 527           |   |  |   | 1,606  |  
|Other noninterest expense                         |  |                            | 3,489  |   |                           |   | 5,150  |               |  |   | 11,470        |   |  |   | 14,153 |  
|                                                  |  |                            |        |   |                           |   |        |               |  |   |               |   |  |   |        |  
|Total noninterest expense                         |  | $                          | 22,516 |   |                           | $ | 27,301 |               |  | $ | 67,388        |   |  | $ | 71,740 |  
|                                                  |  |                            |        |   |                           |   |        |               |  |   |               |   |  |   |        |  
|Efficiency Ratio                                  |  |                            | 63.65  | % |                           |   | 108.69 | %             |  |   | 65.86         | % |  |   | 90.48  | %
|                                                  |  |                            |        |   |                           |   |        |               |  |   |               |   |  |   |        |  

Quarter Ended September 30, 2009 Compared to the Quarter Ended September 30, 2008

Noninterest expense decreased $4.8 million, or 17.5%, to $22.5 million in the third quarter of 2009, as compared to $27.3
million during the third quarter of 2008. The lower level of noninterest expense during the third quarter of 2009 was primarily due to a $4.5 million decrease in salaries and benefits and a decrease in legal fees and other noninterest expenses.
These decreases were partly offset by higher Federal Deposit Insurance Corporation (FDIC) insurance assessments and higher nonperforming asset expense.

Total salaries and employee benefits expense during the third quarter of 2009 was $10.4 million compared to $14.9 million during the third quarter of 2008, a decrease of $4.5 million or 30.2%. Most of
this decrease was due to lower sign-on bonuses and severance and a decrease in incentives, commissions, and retirement benefits. In 2008, our total salaries and benefit expense was higher as a result of our growth strategy, in which we hired a new
senior executive team and added new commercial relationship managers. In addition to an increase in base salaries during 2008 we offered cash sign-on bonuses and stock-based awards to attract these new executives and managers. While the additional
hiring throughout 2008 caused an increase in base salaries, we reduced the number of full time equivalent employees by eliminating certain positions at the end of 2008 and the beginning of 2009 to control expenses. The number of full-time equivalent
employees increased from 418 at the December 31, 2007 to 451 at December 31, 2008, but has been reduced to 421 at September 30, 2009.



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Total salaries, employment taxes, and medical insurance expenses were $9.6 million in the
third quarter of 2009 as compared to $9.4 million for the third quarter of 2008. The $167,000, or 1.9%, increase resulted from an increase in the market value of assets held in the employee deferred compensation plan, partly offset by a decrease in
base salaries.

Sign-on bonuses and severance expense totaled $13,000 for the third quarter of 2009 compared to $3.1 million
for the third quarter a year ago. The expense in the third quarter of 2008 resulted from signing bonuses to attract new employees and severance related to change in senior management and certain of our supporting staff.

Incentives, commissions, and retirement benefits decreased to $847,000 during the third quarter of 2009 from $2.5 million during the third
quarter of 2008. The higher expense during 2008 resulted from accruals for our annual cash-based employee incentive programs and guaranteed incentive awards to new employees.

FDIC insurance premiums were $2.3 million in the third quarter of 2009, compared to $779,000 in the same quarter a year ago, an increase of
$1.5 million. A general increase in rates imposed by the FDIC paid by all depository institutions primarily produced the increase in expense between the two quarters. In addition, we have also elected to participate in the FDICs Transaction
Account Guarantee Program, which has and will continue to cause an increase in our insurance premiums.

Legal fees were $1.4
million in the third quarter of 2009, compared to $1.8 million in the same quarter in 2008. The decrease was primarily due to lower legal fees associated with general corporate and employee-related matters, partly offset by higher legal fees
associated with more nonperforming assets and loans in our work-out area.

Nonperforming asset expenses totaled $2.3 during
the third quarter of 2009, compared to $1.4 million during the third quarter of 2008, an increase of $897,000. Higher losses on the disposition of other real estate owned assets during the third quarter of 2009, along with an increase in expense
associated with the higher number of assets currently in our work-out area combined to produce the increase in expense during 2009. We expect that our nonperforming asset expense will continue to be significant in future periods because of the
current high level of nonperforming assets and other real estate owned.

Other noninterest expense principally includes
external audit and tax services, business development and entertainment expenses, computer software license fees, and other operating expenses such as telephone, postage, office supplies and printing. Other noninterest expense was $3.5 million in
the third quarter of 2009, a decrease of $1.7 million as compared to the $5.2 million of expense during the third quarter of 2008. The decline in expense during third quarter of 2009 was largely due to lower advertising, professional fees, business
development, operational losses, lending expenses, and decreases in other overhead expense categories as we focused on controlling these costs in an effort to improve operating results.



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Nine Months Ended September 30, 2009 Compared to the Nine Months Ended September 30, 2008

For the first nine months of 2009, noninterest expense was $67.4 million, a decrease of $4.4 million, or 6.1%, as compared to
$71.7 million of noninterest expense during the first nine months of 2008. Between these year-to-date periods, a decrease in salaries and benefits, nonperforming asset expense, charges for early extinguishment of debt, and other noninterest expense,
were partly offset by an increase in FDIC insurance assessments and legal fees.

For the first nine months of 2009, total
salaries and employee benefits expense totaled $32.0 million, as compared to $37.7 million during the first nine months of 2008, a decrease of $5.8 million, or 15.3%. Similar to the quarterly comparison, the growth strategy initiated in 2008
significantly impacted salaries and benefits expense.

Total salaries, employment taxes, and medical insurance expenses
increased $1.5 million, or 5.5%, to $28.7 million for the first nine months of 2009, as compared to $27.2 million for the first nine months of 2008. Approximately half of the increase during the first nine months of 2009 was due to higher base
salaries associated with our growth strategy, since most of the hiring occurring over the second and third quarters of 2008. The remainder of the increase was caused by an increase in the market value of assets held in employees deferred
compensation plan.

Sign-on bonuses and severance expense was $292,000 in the first nine months of 2009, as compared to $5.0
million for the first nine months of 2008. The higher expense in 2008 was mostly due to signing bonuses to attract new employees and severance related to changes in senior management and certain of our supporting staff.

Incentives, commissions, and retirement benefits also decreased during the first nine months of 2009 to $3.0 million, as compared to $5.6
million during the first nine months of 2008. The lower expense in 2009 was caused by a decrease in employee benefit plan accruals and expense in the first nine months of 2009, including accruals for our cash-based employee incentive program.

Our FDIC insurance premium increased in 2009, compared to 2008 because the FDIC imposed an industry wide special assessment
and a general increase in premiums for all financial institutions, as well as our election to participate in the FDICs Transaction Account Guarantee Program. FDIC assessments were $8.2 million for the first nine months of 2009 compared to $1.9
million during the same nine month period in 2008, an increase of $6.3 million. FDIC insurance premiums in 2009 included an industry-wide special assessment to help recapitalize the FDICs Deposit Insurance Fund, which amounted to $2.1 million
for our Bank.

Legal fees were $4.2 million in the first nine months of 2009, compared to $3.2 million in the first nine
months of 2008. Higher legal fees were incurred due to the increase of assets managed by our work-out group.



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For the first nine months of 2009, nonperforming asset expense was $3.3 million, as compared
to $4.9 million during the first nine months of 2008, a decrease of $1.6 million. The decrease was primarily due to a $2.6 million lower expense in 2009 associated with our liability for unfunded commitments as compared to 2008. This decrease was
partly offset by higher provisions and losses on the disposition of other real estate owned assets.

During the first nine
months of 2009, we incurred $527,000 of expense for the early redemption of approximately $29.0 million of above market rate brokered certificates of deposits, compared to $1.6 million of expense for the early redemption of approximately $151
million of above market rate brokered certificates of deposits in the first nine months of 2008. The unamortized issuance costs and fair value adjustments on these deposits were written off at the time of redemption. As of September 30, 2009,
we do not have any additional brokered CDs that we can call at our option.

For the first nine months of 2009, other
noninterest expense was $11.5 million, compared to $14.2 million during the first nine months of 2008, a decrease of $2.7 million, or 19%. The decline in expense during 2009 was largely due to lower advertising, professional fees, business
development, and decreases in other overhead expense categories as we focused on controlling costs in an effort to improve operating results.

Efficiency Ratio

The efficiency ratio is calculated by dividing total noninterest expense by total revenues
(net interest income and noninterest income, less gains on the sale of investment securities). Generally, a lower efficiency ratio indicates that the entity is operating more efficiently. Our efficiency ratio was 63.65% in the third quarter of 2009
compared to an efficiency ratio of 108.69% during the third quarter of 2008. The lower ratio in 2009 was primarily a result of an increase in total net interest income and lower noninterest expense.

Our efficiency ratio was 65.86% during the first nine months of 2009 compared to an efficiency ratio of 90.48% during the first nine months
of 2008. The lower ratio in 2009 was also produced by the increase in total net interest income and lower noninterest expense.

Income
Taxes

Despite a pre-tax loss, we recorded income tax expense of $144,000 during the third quarter of 2009 and $1.5 million
during the first nine months of 2009. Because of the valuation allowance on our deferred tax asset, we do not expect to be able to record an income tax benefit during 2009 related to the pre-tax loss incurred.

A current income tax benefit that would normally result from a pre-tax loss was offset by additional deferred tax expense due to an increase
in the required valuation allowance. Additional contributing factors to the income tax expense recorded in 2009 primarily include the release of the residual tax effects of changes in the beginning of the year valuation allowance previously
allocated to other comprehensive income. These residual tax effects resulted from changes in the deferred tax liability associated with deferred gains on terminated cash flow



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hedges recorded in other comprehensive income. We expect additional expense of $510,000 during the last three months of 2009 associated with the release of these residual tax effects.

Since the third quarter of 2008, we have maintained a valuation allowance on our deferred tax assets as we have concluded that based upon
the weight of all available evidence, it was more likely than not that not all of the deferred tax asset would be realized. We evaluate the valuation allowance each period taking into account our inventory of deferred tax assets and
liabilities, including those recorded on items included in equity as other comprehensive income, which are recorded net of tax. The valuation allowance increased $5.2 million during the first nine months of 2009 to $51.6 million at
September 30, 2009 as compared to $46.4 million at December 31, 2008. At September 30, 2009, the net deferred tax asset, after considering the $51.6 million valuation allowance, was $2.5 million, which were supported by available tax
planning strategies. See Notes to Consolidated Financial Statements  Income Taxes for additional details.

Similarly, during the third quarter of 2008, we recorded income tax expense of $25.7 million, despite a pre-tax loss of $54.9 million. In addition, for the first nine month of 2008, we reported income tax expense of $3.4 million,
notwithstanding the $106.3 million pre-tax loss during that period. Income tax expense in the third quarter of 2008 included the initial establishment of a $47.3 million valuation allowance against our net deferred tax asset. Excluding the $47.3
million charge for the deferred tax asset valuation allowance during 2008, we recorded income tax benefits in both the quarterly and year-to-date periods in recognition of our ability to carry back the current loss to recover taxes paid in prior
years.



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FINANCIAL CONDITION

Overview

Total assets increased $96.2 million, or 2.2%, to $4.49 billion
at September 30, 2009 from total assets of $4.39 billion at December 31, 2008, primarily as a result of an increase in investment securities. Investment securities totaled $1.31 billion at September 30, 2009, an increase of $211.5
million, or 19.3%, from year-end 2008. Net loans decreased $97.6 million, or 3.1%, to $3.01 billion at September 30, 2009. During the first nine months of 2009, total deposits decreased $78.3 million, or 2.5%, to $3.05 billion at
September 30, 2009. In addition, notes payable and other advances increased $155.0 million during the first nine months of 2009. Total stockholders equity at September 30, 2009 was $289.0 million, compared to $307.1 million at
December 31, 2008, a decrease of $18.1 million, or 5.9%.

Investment Securities

Investment securities totaled $1.31 billion at September 30, 2009, compared to $1.09 billion at December 31, 2008, an increase of
$211.5 million, or 19.3%. During the first nine months of 2009, we increased our investment portfolio in an effort to increase interest-earning assets and enhance our net interest margin by extending the duration of the portfolio. Since year-end
2008, we purchased $708.9 million of investment securities, including $60.0 million of government agency securities and $644.7 million of mortgage-backed securities, primarily issued by government sponsored enterprises. A portion of the securities
purchased were funded with sales of securities and proceeds from principal payments and maturities. We also used additional short-term borrowings to fund these investment securities purchases. During the first nine months of 2009, we sold $276.7
million of investment securities, resulting in a gain of $8.6 million. Most of this gain was in the second quarter when we realized a gain of $7.6 million on the sale of $207 million of mortgage-backed securities that had been experiencing higher
than anticipated prepayments and that were no longer consistent with our asset and liability management strategy. In the third quarter, we realized a gain of $378,000 on the sale of $21.8 million of U.S. government agency securities and municipal
obligations which had short expected maturities. The overall weighted-average life of our investment portfolio at September 30, 2009 was approximately 6.6 years, compared to approximately 6.0 years at December 31, 2008.

As of September 30, 2009, mortgage-related securities comprised approximately 83% of our investment portfolio, of which, over 97% were
securities issued by government and government-sponsored enterprises, such as Ginnie Mae, Fannie Mae, and Freddie Mac. We do not have subprime loans in our mortgage related investment securities portfolio. While none of these securities contain
subprime mortgage loans, the portfolio does include Alt-A loans, adjustable rate mortgages with initial interest only periods, and loans that are secured by collateral in geographic areas adversely impacted by the housing downturn. While the fair
value of these securities has been impacted by market illiquidity, we do not modify the fair value determined by the independent pricing service, but take additional steps to review for other-than-temporary impairment. The following table shows the
composition of our mortgage-related securities as of September 30, 2009 by type of issuer.



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|                                                          |  |                     |         |            |   |         |  |                     |           |      |   |         |  |   |         |  |   |          
|--------------------------------------------------------- |  | ------------------- | ------- | ---------- | - | ------- |  | ------------------- | --------- | ---- | - | ------- |  | - | ------- |  | - | ---------
|                                                          |  | Amortized Cost      |         | Fair Value
|                                                          |  | Pass ThruSecurities |         | CMOs       |   | Total   |  | Pass ThruSecurities |           | CMOs |   | Total  
|                                                          |  | (in thousands)     
|Government and government sponsored-enterprise securities |  | $                   | 931,015 |            | $ | 87,199  |  | $                   | 1,018,214 |      | $ | 962,802 |  | $ | 91,076  |  | $ | 1,053,878
|Private Issuers                                           |  |                     | 11,063  |            |   | 22,323  |  |                     | 33,386    |      |   | 6,655   |  |   | 20,879  |  |   | 27,534   
|                                                          |  |                     |         |            |   |         |  |                     |           |      |   |         |  |   |         |  |   |          
|                                                          |  | $                   | 942,078 |            | $ | 109,522 |  | $                   | 1,051,600 |      | $ | 969,457 |  | $ | 111,955 |  | $ | 1,081,412
|                                                          |  |                     |         |            |   |         |  |                     |           |      |   |         |  |   |         |  |   |          

At September 30, 2009, we had a net unrealized gain of $39.0 million in our
available-for-sale investment portfolio, which was comprised of $45.2 million of gross unrealized gains and $6.2 million of gross unrealized losses. The gross unrealized losses at September 30, 2009 related to 13 investment securities with a
carrying value of $75.1 million. Each quarter we analyze each of these securities to determine if other-than-temporary impairment has occurred. The factors we consider include the magnitude of the unrealized loss in comparison to the securitys
carrying value, the length of time the security has been in an unrealized loss position and the current independent bond rating for the security. Those securities with unrealized losses for more than 12 months and for more than 10% of their carrying
value are analyzed further to determine if it is probable that not all the contractual cash flows will be received. We obtain fair value estimates from additional independent sources and perform cash flow analysis to determine if
other-than-temporary impairment has occurred. Of the 13 securities with gross unrealized losses at September 30, 2009, seven securities have been in a loss position for 12 months or more, including one security for which we have previously
recognized other-than temporary impairment for the amount of the anticipated credit loss. Our analysis as September 30, 2009, indicated that these seven securities did not have other-than-temporary impairment or did not have any additional
other-than-temporary impairment. See Notes to Consolidated Financial Statements  Investment Securities for additional details.

On April 1, 2009, we adopted FASB Staff Position FAS No. 115-2 and 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. This FSP amends ASC Topic 320-10-65
(Investment-Debt & Equity Securities  Overall  Transition & Open Effective Date Information) to provide other-than-temporary impairment guidance and require the retroactive application, as an adjustment through retained
earnings, for any security for which other-than-temporary impairment had been recognized in the consolidated statement of operations for the cumulative effect of applying this FSP with a corresponding adjustment to accumulated other comprehensive
income. See Notes to Consolidated Financial Statements  Investment Securities for additional details. We did not recognize any additional credit loss on this private-label mortgage-related security or any other investment security
in our portfolio since adoption.

As a member of Federal Home Loan Bank (FHLB), we are required to hold FHLB
stock, based on the Banks asset size and the amount of borrowings from the FHLB. In recent quarters, the Bank has increased its use of FHLB advances to support asset growth, and we have



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been required to increase our stock holdings. At September 30, 2009, we held $27.3 million of FHLB stock and maintained $205.0 million of FHLB advances. Currently, we do not have any FHLB
debt securities in our investment portfolio. The FHLB of Chicago is under a formal written agreement with its regulator requiring the regulators prior approval for the payment of dividends or redemptions of capital stock. We have assessed the
ultimate recoverability of our FHLB stock and we believe no impairment has occurred. See Notes to Consolidated Financial Statements  Investment Securities for additional details.

Loans

During the first
nine months of 2009, total portfolio loans decreased $221.8 million, or 6.9%, to $3.01 billion at September 30, 2009. Commercial loans, which includes commercial and industrial (C&I), commercial real estate secured, and real
estate-construction loans, decreased $219.9 million, or 7.1%, while consumer-oriented loans decreased slightly. The decrease in commercial loans during the first nine months of 2009 consisted of a $193.6 million, or 13.0%, decrease in C&I loans,
a $102.6 million, or 29.3%, decrease in residential construction and land loans and a $20.9 million, or 11.5%, decrease in commercial construction and land loans. These decreases were partly offset by a $97.2 million, or 9.2%, increase in commercial
real estate secured loans.

The composition of our loan portfolio as of September 30, 2009 and December 31, 2008 was
as follows:



|                                |  |                        |           |                         |                   |   |        |   |                         |  |     |  
|------------------------------- |  | ---------------------- | --------- | ----------------------- | ----------------- | - | ------ | - | ----------------------- |  | --- | -
|                                |  | September 30, 2009     |           |                         | December 31, 2008 |  
|                                |  | Amount                 |           | Percentageof GrossLoans |                   |   | Amount |   | Percentageof GrossLoans | 
|                                |  | (dollars in thousands) |          
|Commercial and industrial       |  | $                      | 1,292,091 |                         | 43                | % |        | $ | 1,485,673               |  | 46  | %
|Commercial real estate secured  |  |                        | 1,156,114 |                         | 39                |   |        |   | 1,058,930               |  | 33  |  
|Residential construction & land |  |                        | 247,386   |                         | 8                 |   |        |   | 349,998                 |  | 11  |  
|Commercial construction & land  |  |                        | 160,534   |                         | 5                 |   |        |   | 181,454                 |  | 5   |  
|Consumer-oriented loans         |  |                        | 155,372   |                         | 5                 |   |        |   | 157,222                 |  | 5   |  
|                                |  |                        |           |                         |                   |   |        |   |                         |  |     |  
|Gross loans                     |  | $                      | 3,011,497 |                         | 100               | % |        | $ | 3,233,277               |  | 100 | %
|                                |  |                        |           |                         |                   |   |        |   |                         |  |     |  

At September 30, 2009, C&I loans accounted for 43% of the loan portfolio and
totaled $1.29 billion, a decrease of $193.6 million, or 13.0%, compared to $1.49 billion at December 31, 2008. C&I loans include all loans for commercial purposes (other than real estate construction) that are either unsecured or secured by
collateral other than commercial real estate. These loans are generally made to operating companies in a variety of businesses, excluding commercial real estate investment. We continue to actively develop new customer relationships and originate
C&I loans, as part of a larger, strategic realignment of our balance sheet. At the same time, we began to reduce our credit exposure to certain types of customers where we did not feel the risk/return characteristics were consistent with new
opportunities in the market place. This realignment, along with a decline in the usage rates on available lines of credits, has caused a reduction in our C&I loan balances.

Our commercial real estate secured loans increased $97.2 million, or 9.2%, to $1.16 billion at September 30, 2009, as compared to $1.06
billion at December 31, 2008. The increase was



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due to increases in loans secured by both owner and non-owner occupied commercial properties. Approximately 87% of the total commercial real estate secured portfolio are loans secured by owner
and non-owner occupied commercial properties. The remainder of this portfolio consists of loans secured by residential income properties. The following table presents the composition of our commercial real estate portfolio as of the dates indicated:



|                                       |  |                        |           |                                              |                   |   |                          |    |   |         |   |                                              |  |     |                          |  |    |  
|-------------------------------------- |  | ---------------------- | --------- | -------------------------------------------- | ----------------- | - | ------------------------ | -- | - | ------- | - | -------------------------------------------- |  | --- | ------------------------ |  | -- | -
|                                       |  | September 30, 2009     |           |                                              | December 31, 2008 |  
|                                       |  | Balance                |           | Percentage ofTotalCommercialReal EstateLoans |                   |   | Percentage ofGross Loans |    |   | Balance |   | Percentage ofTotalCommercialReal EstateLoans |  |     | Percentage ofGross Loans | 
|                                       |  | (dollars in thousands) |          
|Commercial non-owner occupied:         |  |                        |           |                                             
|Retail strip centers or malls          |  | $                      | 212,011   |                                              | 18                | % |                          | 7  | % |         | $ | 206,637                                      |  | 20  | %                        |  | 6  | %
|Commercial non-owner occupied          |  |                        | 134,785   |                                              | 12                |   |                          | 4  |   |         |   | 130,227                                      |  | 12  |                          |  | 4  |  
|Specialized  other                    |  |                        | 121,983   |                                              | 10                |   |                          | 4  |   |         |   | 92,193                                       |  | 9   |                          |  | 3  |  
|Office                                 |  |                        | 87,629    |                                              | 8                 |   |                          | 3  |   |         |   | 80,592                                       |  | 7   |                          |  | 3  |  
|Mixed use property                     |  |                        | 65,704    |                                              | 6                 |   |                          | 2  |   |         |   | 65,386                                       |  | 6   |                          |  | 2  |  
|Other commercial non-owner occupied    |  |                        | 70,670    |                                              | 6                 |   |                          | 3  |   |         |   | 61,478                                       |  | 6   |                          |  | 2  |  
|                                       |  |                        |           |                                              |                   |   |                          |    |   |         |   |                                              |  |     |                          |  |    |  
|Subtotal commercial non-owner occupied |  |                        | 692,782   |                                              | 60                |   |                          | 23 |   |         |   | 636,513                                      |  | 60  |                          |  | 20 |  
|Commercial owner occupied              |  |                        | 316,124   |                                              | 27                |   |                          | 11 |   |         |   | 270,346                                      |  | 26  |                          |  | 8  |  
|Multi-family properties                |  |                        | 147,208   |                                              | 13                |   |                          | 5  |   |         |   | 152,071                                      |  | 14  |                          |  | 5  |  
|                                       |  |                        |           |                                              |                   |   |                          |    |   |         |   |                                              |  |     |                          |  |    |  
|Total commercial real estate loans     |  | $                      | 1,156,114 |                                              | 100               | % |                          | 39 | % |         | $ | 1,058,930                                    |  | 100 | %                        |  | 33 | %
|                                       |  |                        |           |                                              |                   |   |                          |    |   |         |   |                                              |  |     |                          |  |    |  

Real estate-construction loans consist primarily of loans to professional real estate
developers for the construction of single-family homes, town-homes, condominium conversions and commercial property. The portion of this portfolio related to residential construction and land decreased by $102.6 million, or 29.3%, to $247.4 million
at September 30, 2009, as compared to $350.0 million at December 31, 2008. Because of the slow down in the residential real estate market and reduced real estate valuations, we have been actively trying to reduce our exposure to this
portion of the loan portfolio. The residential real estate construction portfolio accounted for 8% of the total loan portfolio at September 30, 2009, down from 11% of the total loan portfolio at December 31, 2008. Our commercial
construction and land portfolio declined $20.9 million, or 11.5%, to $160.5 million at September 30, 2009, as compared to $181.5 million at December 31, 2008, and comprised 5% of the total loan portfolio.



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The composition of our residential real estate-construction portfolio was as follows as of
the dates indicated:



|                                            |  |                        |         |                                     |                   |   |                          |   |   |         |   |                                     |  |     |                          |  |    |  
|------------------------------------------- |  | ---------------------- | ------- | ----------------------------------- | ----------------- | - | ------------------------ | - | - | ------- | - | ----------------------------------- |  | --- | ------------------------ |  | -- | -
|                                            |  | September 30, 2009     |         |                                     | December 31, 2008 |  
|                                            |  | Balance                |         | Percentage ofTotalConstructionLoans |                   |   | Percentage ofGross Loans |   |   | Balance |   | Percentage ofTotalConstructionLoans |  |     | Percentage ofGross Loans | 
|                                            |  | (dollars in thousands) |        
|Residential properties:                     |  |                        |         |                                     |                   |   |                          |   |   |         |   |                                     |  |     |                          |  |    |  
|Single family attached and detached housing |  | $                      | 57,854  |                                     | 23                | % |                          | 2 | % |         | $ | 105,526                             |  | 30  | %                        |  | 3  | %
|Condo (new & conversions)                   |  |                        | 58,651  |                                     | 24                |   |                          | 2 |   |         |   | 95,705                              |  | 27  |                          |  | 3  |  
|Multi-family                                |  |                        | 57,967  |                                     | 23                |   |                          | 2 |   |         |   | 57,495                              |  | 17  |                          |  | 1  |  
|Completed for sale                          |  |                        | 14,889  |                                     | 6                 |   |                          | * |   |         |   | 16,830                              |  | 5   |                          |  | 1  |  
|                                            |  |                        |         |                                     |                   |   |                          |   |   |         |   |                                     |  |     |                          |  |    |  
|Total residential construction              |  | $                      | 189,361 |                                     | 76                | % |                          | 6 | % |         | $ | 275,556                             |  | 79  | %                        |  | 8  | %
|Land  unimproved & farmland                |  |                        | 41,184  |                                     | 17                |   |                          | 2 |   |         |   | 52,321                              |  | 15  |                          |  | 2  |  
|Land  improved & entitled                  |  |                        | 2,472   |                                     | 1                 |   |                          | * |   |         |   | 3,921                               |  | 1   |                          |  | *  |  
|Land  under development                    |  |                        | 14,369  |                                     | 6                 |   |                          | * |   |         |   | 18,200                              |  | 5   |                          |  | 1  |  
|                                            |  |                        |         |                                     |                   |   |                          |   |   |         |   |                                     |  |     |                          |  |    |  
|Total land                                  |  |                        | 58,025  |                                     | 24                |   |                          | 2 |   |         |   | 74,442                              |  | 21  |                          |  | 3  |  
|                                            |  |                        |         |                                     |                   |   |                          |   |   |         |   |                                     |  |     |                          |  |    |  
|Total residential construction and land     |  | $                      | 247,386 |                                     | 100               | % |                          | 8 | % |         | $ | 349,998                             |  | 100 | %                        |  | 11 | %
|                                            |  |                        |         |                                     |                   |   |                          |   |   |         |   |                                     |  |     |                          |  |    |  



|* | Represents less than 1%
|- | -----------------------

Total
consumer-oriented loans, which include residential real estate mortgages, home equity loans and lines of credit, and other consumer loans, totaled $155.4 million at September 30, 2009. Consumer-oriented loans account for approximately 5% of the
total loan portfolio. At September 30, 2009, the largest categories of consumer-oriented loans were home equity loans and lines of credit, which totaled $87.4 million, and residential real estate mortgage loans, which totaled $58.9 million.

Loans Held for Sale

At September 30, 2009, we had $102.8 million of loans that we currently have an intent to sell, which includes both commercial and residential mortgage loans.

During the third quarter of 2009, in an effort to reduce the level of nonperforming loans, we decided to sell certain of our nonaccrual
loans. In connection with this decision, we completed the sale of a group of loans and also transferred ten additional nonaccrual commercial loans into the held for sale category as we are actively marketing these loans for sale. Upon transfer into
the held for sale category, we recorded a charge-off to reduce the loans to their estimated net fair value. We expect to complete the disposition of these nonaccrual commercial loans currently classified as held for sale during the fourth quarter of
2009.

We also have residential mortgage loans classified as held for sale at September 30, 2009 which we are in the
process of securitizing and selling to third party investors. During the third quarter of 2009, we purchased a participation interest in 20 pools of residential single family mortgages totaling approximately $100 million. These loans were to have
been pooled into pass-through certificates to be issued by a mortgage originator and guaranteed by the Government



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National Mortgage Association, otherwise known as Ginnie Mae, and sold to third party investors. The mortgage originator completed the securitization of a portion of these loans in early August
and we received payment for the sale of these loans. However, the mortgage loan originator was not able to securitize the remaining single family loans because Ginnie Mae removed the originator from its list of eligible issuers, so we took
possession of the underlying collateral and are now working to dispose of those loans.

Loan Quality and Nonperforming Assets

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



|                                                                         |  |                        |         |   |              |   |         |              |  |   |               |   |  |   |         |  
|------------------------------------------------------------------------ |  | ---------------------- | ------- | - | ------------ | - | ------- | ------------ |  | - | ------------- | - |  | - | ------- | -
|                                                                         |  | Sept. 30,2009          |         |   | June 30,2009 |   |         | Dec. 31,2008 |  |   | Sept. 30,2008 |  
|                                                                         |  | (dollars in thousands) |        
|Loans contractually past due 90 days or more but still accruing interest |  | $                      | 12,190  |   |              | $ | 379     |              |  | $ | 153           |   |  | $ | 405     |  
|Nonaccrual loans                                                         |  |                        |         |   |              |   |         |              |  |   |               |   |  |   |         |  
|Commercial and industrial                                                |  |                        | 31,191  |   |              |   | 38,554  |              |  |   | 42,263        |   |  |   | 14,279  |  
|Commercial real estate secured                                           |  |                        | 36,824  |   |              |   | 30,856  |              |  |   | 23,068        |   |  |   | 16,859  |  
|Residential construction & land                                          |  |                        | 78,224  |   |              |   | 101,921 |              |  |   | 114,160       |   |  |   | 143,458 |  
|Commercial construction & land                                           |  |                        | 7,854   |   |              |   | 11,266  |              |  |   | 14,934        |   |  |   | 18,583  |  
|All other loan types                                                     |  |                        | 9,737   |   |              |   | 6,840   |              |  |   | 5,802         |   |  |   | 3,015   |  
|                                                                         |  |                        |         |   |              |   |         |              |  |   |               |   |  |   |         |  
|Total nonaccrual loans                                                   |  |                        | 163,830 |   |              |   | 189,437 |              |  |   | 200,227       |   |  |   | 196,194 |  
|                                                                         |  |                        |         |   |              |   |         |              |  |   |               |   |  |   |         |  
|Total nonperforming loans                                                |  |                        | 176,020 |   |              |   | 189,816 |              |  |   | 200,380       |   |  |   | 196,599 |  
|Other real estate owned                                                  |  |                        | 17,603  |   |              |   | 20,049  |              |  |   | 13,179        |   |  |   | 4,117   |  
|Other repossessed assets                                                 |  |                        | 2,710   |   |              |   | 3,021   |              |  |   |              |   |  |   |        |  
|                                                                         |  |                        |         |   |              |   |         |              |  |   |               |   |  |   |         |  
|Total nonperforming assets                                               |  | $                      | 196,333 |   |              | $ | 212,886 |              |  | $ | 213,559       |   |  | $ | 200,716 |  
|                                                                         |  |                        |         |   |              |   |         |              |  |   |               |   |  |   |         |  
|Restructured loans not included in nonperforming assets                  |  | $                      | 4,825   |   |              | $ | 4,375   |              |  | $ |              |   |  | $ |        |  
|Nonperforming loans to total loans                                       |  |                        | 5.65    | % |              |   | 5.97    | %            |  |   | 6.20          | % |  |   | 6.39    | %
|Nonperforming assets to total loans plus repossessed property            |  |                        | 6.26    | % |              |   | 6.65    | %            |  |   | 6.58          | % |  |   | 6.51    | %
|Nonperforming assets to total assets                                     |  |                        | 4.38    | % |              |   | 4.68    | %            |  |   | 4.87          | % |  |   | 4.93    | %

Nonperforming assets decreased during both the third quarter and first nine months of
2009 and were $196.3 million, or 4.38% of total assets on September 30, 2009. In comparison, nonperforming assets were $212.9 million, or 4.68% of total assets at June 30, 2009, $213.6 million, or 4.87% of total assets on December 31,
2008, and $200.7 million, or 4.93% of total assets on September 30, 2008.

Nonperforming loans:

Loans contractually past due 90 days or more but still accruing interest increased to $12.2 million at September 30, 2009, primarily
due to one commercial loan of $12.1 million. Because of payment activity subsequent to September 30, 2009, this loan is no longer classified as 90 days or more past due.



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Nonaccrual loans decreased to $163.8 million at September 30, 2009, compared to $189.8
million at June 30, 2009, $200.2 million at December 31, 2008 and $196.2 million at September 30, 2008. The decrease in total nonperforming assets during 2009 was largely due to $92.0 million of net charge-offs during the first nine
months of 2009, transfers into other real estate owned, and other resolutions. These decreases were partly offset by new nonaccrual loans.

Residential construction and land loans continue to be the largest category of nonaccrual loans and comprise approximately 47% of all nonaccrual loans at September 30, 2009. Nonperforming residential
construction and land loans totaled $78.2 million at September 30, 2009, as compared to $101.9 million at June 30, 2009 and $114.2 million at December 31, 2008. Because a large share of nonperforming loans and net charge-offs have
come from this portion of our portfolio, we have focused on reducing our exposure in this area. The decrease in these nonaccrual loans was largely due to net charge-offs and the transfer to other real estate owned. We recorded additional net
charge-offs during the third quarter associated with these loans in connection with our loan sale and the transfer of loans to held for sale.

Commercial real estate secured loans was the second largest category of nonperforming loans. This category increased to $36.8 million at September 30, 2009 from $23.1 million at year-end 2008. New
nonaccrual loans, partly offset by charge-offs, produced the increase in this category. Commercial and industrial nonperforming loans decreased $11.0 million during the first nine months of 2009 to $31.2 million from $42.3 million at
December 31, 2008. Net charge-offs and payments or pay downs on these nonperforming loans, partly offset by new nonaccrual loans, primarily produced the decrease.

Other real estate owned and repossessed assets:

Other real estate
owned and repossessed assets increased from $13.2 million at December 31, 2008 to $20.3 million at September 30, 2009. The following table provides a rollforward, for the periods indicated, of other real estate and repossessed assets:



|                                               |  |                                 |        |   |                                |   |       |               |  |   |               |   |  |   |        |  
|---------------------------------------------- |  | ------------------------------- | ------ | - | ------------------------------ | - | ----- | ------------- |  | - | ------------- | - |  | - | ------ | -
|                                               |  | For the Three MonthPeriod Ended |        |   | For the Nine MonthPeriod Ended |  
|                                               |  | Sept. 30,2009                   |        |   | Sept. 30,2008                  |   |       | Sept. 30,2009 |  |   | Sept. 30,2008 |  
|Balance at beginning of period                 |  | $                               | 23,070 |   |                                | $ | 4,280 |               |  | $ | 13,179        |   |  | $ | 2,606  |  
|Transfers from loans                           |  |                                 | 1,621  |   |                                |   | 159   |               |  |   | 17,550        |   |  |   | 4,752  |  
|Additional investment in foreclosed properties |  |                                 |       |   |                                |   | 631   |               |  |   | 342           |   |  |   | 810    |  
|Dispositions                                   |  |                                 | (4,378 | ) |                                |   | (904  | )             |  |   | (9,998        | ) |  |   | (3,195 | )
|Additional impairment                          |  |                                 |       |   |                                |   | (49   | )             |  |   | (760          | ) |  |   | (856   | )
|                                               |  |                                 |        |   |                                |   |       |               |  |   |               |   |  |   |        |  
|Balance at end of period                       |  | $                               | 20,313 |   |                                | $ | 4,117 |               |  | $ | 20,313        |   |  | $ | 4,117  |  
|                                               |  |                                 |        |   |                                |   |       |               |  |   |               |   |  |   |        |  

During the first nine months of 2009, we transferred $17.6 million from loans into
other real estate and repossessed assets. Of this amount, $12.2 million was transferred from our residential and commercial construction portfolio and $3.8 million was from our C&I portfolio. We capitalized costs totaling $342,000 to improve
certain properties to prepare them for sale. In addition, during the first nine months of 2009, we received net proceeds of $9.5 million on the sale of other real estate owned assets that had a carrying value of $10.0 million, resulting in a net



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loss of $484,000, which was included as additional nonperforming asset expense included in noninterest expense. During the third quarter of 2009, we received net proceeds of $3.8 million on the
sale of assets with a carrying value of $4.4 million resulting in a loss of $578,000. We also recorded $760,000 of additional nonperforming asset expense associated with further write-down of certain assets. The level of other real estate owned and
repossessed assets increased during 2009 and we expect that these assets may continue to increase in the future as we work through the elevated level of nonperforming assets.

Impaired loans:

Total impaired loans decreased during both the third quarter and first nine months of 2009. At September 30, 2009, impaired loans totaled $163.0 million compared to $197.7 million at June 30,
2009, $206.7 million at December 31, 2008, and $205.7 million at September 30, 2008. The balance of impaired loans and the related allowance for loan losses for impaired loans is as follows:



|                                             |  |                |         |              |   |              |  |               |         |  |   |        
|-------------------------------------------- |  | -------------- | ------- | ------------ | - | ------------ |  | ------------- | ------- |  | - | -------
|                                             |  | Sept. 30,2009  |         | June 30,2009 |   | Dec. 31,2008 |  | Sept. 30,2008
|                                             |  | (in thousands)
|Impaired loans:                              |  |                |        
|Commercial and industrial                    |  | $              | 33,237  |              | $ | 47,451       |  | $             | 54,543  |  | $ | 26,814 
|Commercial real estate secured               |  |                | 36,824  |              |   | 30,856       |  |               | 23,068  |  |   | 16,859 
|Residential construction and land            |  |                | 84,622  |              |   | 108,102      |  |               | 114,160 |  |   | 143,458
|Commercial construction and land             |  |                | 7,854   |              |   | 11,266       |  |               | 14,934  |  |   | 18,583 
|Consumer-oriented                            |  |                | 449     |              |   |             |  |               |        |  |   |       
|                                             |  |                |         |              |   |              |  |               |         |  |   |        
|Total impaired loans                         |  | $              | 162,986 |              | $ | 197,675      |  | $             | 206,705 |  | $ | 205,714
|                                             |  |                |         |              |   |              |  |               |         |  |   |        
|                                             |  |                |         |             
|Recorded balance of impaired loans:          |  |                |         |              |   |              |  |               |         |  |   |        
|With related allowance for loan losses       |  | $              | 121,743 |              | $ | 168,487      |  | $             | 120,973 |  | $ | 139,242
|With no related allowance for loan losses    |  |                | 41,243  |              |   | 29,188       |  |               | 85,732  |  |   | 66,472 
|                                             |  |                |         |              |   |              |  |               |         |  |   |        
|Total impaired loans                         |  | $              | 162,986 |              | $ | 197,675      |  | $             | 206,705 |  | $ | 205,714
|                                             |  |                |         |              |   |              |  |               |         |  |   |        
|                                             |  |                |         |             
|Allowance for losses on impaired loans:      |  |                |         |              |   |              |  |               |         |  |   |        
|Commercial and industrial                    |  | $              | 7,314   |              | $ | 22,563       |  | $             | 13,431  |  | $ | 3,567  
|Commercial real estate secured               |  |                | 2,930   |              |   | 3,513        |  |               | 2,750   |  |   | 1,246  
|Residential construction and land            |  |                | 24,198  |              |   | 40,497       |  |               | 23,849  |  |   | 38,734 
|Commercial construction and land             |  |                | 1,011   |              |   | 2,390        |  |               | 1,421   |  |   | 4,874  
|Consumer-oriented                            |  |                |        |              |   |             |  |               |        |  |   |       
|                                             |  |                |         |              |   |              |  |               |         |  |   |        
|Total allowance for losses on impaired loans |  | $              | 35,453  |              | $ | 68,963       |  | $             | 41,451  |  | $ | 48,421 
|                                             |  |                |         |              |   |              |  |               |         |  |   |        

Similar to nonperforming loans, the decrease in impaired loans during the third
quarter and first nine months of 2009 primarily resulted from net charge-offs, transfers into other real estate owned, and the payment or resolution of certain assets, partly offset by additions to impaired loans during the period. The allowance for
loan losses related to impaired loans also decreased



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during both the third quarter and the first nine months of 2009 and totaled $35.5 million at September 30, 2009. In comparison, the allowance for loan losses related to impaired loans
totaled $69.0 million at June 30, 2009 and $41.5 million at December 31, 2008. The decrease in the allowance for losses on impaired loans in the third quarter of 2009 was primarily due to net charge-offs during the period and lower
impairment on new impaired loans. Residential construction and land loans comprise over half of all impaired loans and comprised nearly 70% of the allowance for loan losses on impaired loans. In addition, at September 30, 2009, impaired loans
includes the commercial nonaccrual loans currently held for sale and which have no related allowance for loan losses as these loans were charged down to their estimated net fair value upon transfer to held for sale.

As of September 30, 2009, of total impaired loans of $163.0 million, we had $121.7 million that were determined to have impairment and
a related allowance for loan losses of $35.5 million. We also had $41.2 million of impaired loans which the individual analysis did not result in a measure of impairment, and, therefore, no related allowance for loan losses has been provided. Once a
loan has been determined to be impaired, we perform an individual analysis to establish the amount of the related allowance for loan losses, if any, based upon the present value of expected future cash flows discounted at the loans effective
interest rate, except that collateral-dependent loans may be measured for impairment based upon the fair value of the collateral, less cost to sell. Generally, since the majority of our impaired loans are collateral-dependent real estate loans, the
fair value is determined by a current appraisal or independent opinion of value. The individual impairment analysis also takes into account available and reliable borrower guarantees and any cross-collateralization agreements. Certain other loans
are collateralized by business assets, such as equipment, inventory, and accounts receivable. The fair value of these loans is based upon estimates of realizability and collectability. While impaired loans exhibit weaknesses that may inhibit
repayment in compliance with the original note terms, the impairment analysis may not result in a related allowance for loan losses for each individual loan.

Impaired loans include all nonaccrual loans, accruing loans judged to have higher risk of noncompliance with the present contractual repayment schedule for both interest and principal, as well as troubled
debt restructurings. Unless modified in a troubled-debt restructuring, certain homogenous loans, such as residential mortgage and consumer loans, are collectively evaluated for impairment and are, therefore, excluded from impaired loans. As of
September 30, 2009, we had four commercial loans, totaling $8.4 million which were considered to have a higher risk of noncompliance with the present loan terms. Even though these loans were still accruing interest, the loans were reported as
impaired loans. In addition, during the third quarter of 2009, we completed the modification of several consumer-orientated loans, primarily home equity loans, with a remaining total principal balance of $449,000, which were considered troubled-debt
restructurings. These loans are reported as impaired loans and evaluated for impairment. A reconciliation of $163.8 million of nonaccrual and $163.0 million of impaired loans as of September 30, 2009 is presented below:



|                                         |  |                        |         |               |   |        
|---------------------------------------- |  | ---------------------- | ------- | ------------- | - | -------
|                                         |  | NonaccrualLoans        |         | ImpairedLoans
|                                         |  | (dollars in thousands)
|Commercial nonaccrual loans              |  | $                      | 154,093 |               | $ | 154,093
|Commercial loans on accrual but impaired |  |                        | n/a     |               |   | 8,444  
|Consumer-oriented loans                  |  |                        | 9,737   |               |   | 449    
|                                         |  |                        |         |               |   |        
|                                         |  | $                      | 163,830 |               | $ | 162,986
|                                         |  |                        |         |               |   |        

n/a - not applicable



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Potential problem loans:

As part of our standard credit administration process, we risk rate our commercial loan portfolio. As part of this process, loans that are
rated with a higher level of risk are monitored more closely. We do have certain loans internally identified in our loan risk ratings that we have placed on heightened monitoring because of certain weakness which may inhibit the borrowers
ability to perform under the contractual terms of the loan agreement but have not reached the status of a nonaccrual loans. As of September 30, 2009, these potential problem loans totaled $72.6 million, which included $8.4 million of commercial
loans that are current and still accruing interest, but considered impaired. Of the $72.6 million of potential problem loans, $36.3 million were in our real estate  construction portfolio, $30.1 million were in our commercial and industrial
portfolio, and $6.2 million were loans secured by commercial real estate. We do not necessarily expect to realize losses on potential problem loans, but we recognize potential problem loans can carry a higher probability of default and require
additional attention by management.

Allowance for Loan Losses

We have established an allowance for loan losses to provide for loans in our portfolio that may not be repaid in their entirety. The
allowance is based on our regular, quarterly assessments of the probable estimated losses inherent in the loan portfolio. Our methodology for measuring the appropriate level of the allowance includes identifying problem loans, estimating the amount
of probable loss related to those loans, estimating probable losses from specific portfolio segments and evaluating the impact on our loan portfolio of a number of economic and qualitative factors. Although management believes that the allowance for
loan losses is adequate to absorb probable losses on existing loans that may become uncollectible at this point in time, there can be no assurance that our allowance will prove sufficient to cover actual loan losses in the future.



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



|                                                     |  |                        |           |   |                       |   |           |                   |  |   |                   |   |  |   |           |  
|---------------------------------------------------- |  | ---------------------- | --------- | - | --------------------- | - | --------- | ----------------- |  | - | ----------------- | - |  | - | --------- | -
|                                                     |  | For Three Months Ended |           |   | For Nine Months Ended |  
|                                                     |  | September 30,2009      |           |   | September 30,2008     |   |           | September 30,2009 |  |   | September 30,2008 |  
|                                                     |  | (dollars in thousands) |          
|Average total loans                                  |  | $                      | 3,180,992 |   |                       | $ | 2,909,799 |                   |  | $ | 3,202,212         |   |  | $ | 2,652,022 |  
|                                                     |  |                        |           |   |                       |   |           |                   |  |   |                   |   |  |   |           |  
|Total loans at end of period                         |  | $                      | 3,114,254 |   |                       | $ | 3,078,427 |                   |  | $ | 3,114,254         |   |  | $ | 3,078,427 |  
|                                                     |  |                        |           |   |                       |   |           |                   |  |   |                   |   |  |   |           |  
|Allowance for loan losses:                           |  |                        |           |   |                       |   |           |                   |  |   |                   |   |  |   |           |  
|Allowance at beginning of period                     |  | $                      | 132,927   |   |                       | $ | 104,742   |                   |  | $ | 128,548           |   |  | $ | 54,681    |  
|Net (charge-offs) recoveries:                        |  |                        |           |   |                       |   |           |                   |  |   |                   |   |  |   |           |  
|Commercial and commercial real estate                |  |                        | (14,091   | ) |                       |   | (9,941    | )                 |  |   | (41,094           | ) |  |   | (14,295   | )
|Real estateconstruction                             |  |                        | (27,091   | ) |                       |   | (29,583   | )                 |  |   | (50,649           | ) |  |   | (35,508   | )
|Residential real estate mortgages and consumer loans |  |                        | (152      | ) |                       |   | 49        |                   |  |   | (282              | ) |  |   | (716      | )
|                                                     |  |                        |           |   |                       |   |           |                   |  |   |                   |   |  |   |           |  
|Total net charge-offs                                |  |                        | (41,334   | ) |                       |   | (39,475   | )                 |  |   | (92,025           | ) |  |   | (50,519   | )
|Provision for loan losses                            |  |                        | 15,539    |   |                       |   | 52,700    |                   |  |   | 70,609            |   |  |   | 113,805   |  
|                                                     |  |                        |           |   |                       |   |           |                   |  |   |                   |   |  |   |           |  
|Allowance at end of period                           |  | $                      | 107,132   |   |                       | $ | 117,967   |                   |  | $ | 107,132           |   |  | $ | 117,967   |  
|                                                     |  |                        |           |   |                       |   |           |                   |  |   |                   |   |  |   |           |  
|Annualized net charge-offs to average total loans    |  |                        | 5.20      | % |                       |   | 5.43      | %                 |  |   | 3.83              | % |  |   | 2.54      | %
|Allowance to total loans at end of period            |  |                        | 3.44      | % |                       |   | 3.83      | %                 |  |   | 3.44              | % |  |   | 3.83      | %
|Allowance to nonperforming loans                     |  |                        | 60.86     | % |                       |   | 60.00     | %                 |  |   | 60.86             | % |  |   | 60.00     | %

Our allowance for loan losses was $107.1 million at September 30, 2009, or 3.44%
of end-of-period loans and 60.86% of nonperforming loans. At September 30, 2008, the allowance for loan losses was $118.0 million, which represented 3.83% of end-of-period loans and 60.00% of nonperforming loans. The level of net charge-offs
has increased in 2009 as compared to 2008. Net charge-offs during the third quarter of 2009 were $41.3 million, or 5.20% of average loans on an annualized basis, and for the first nine months of 2009, net charge-offs totaled $92.0 million, or 3.83%
of average loans on an annualized basis. In comparison, net charge-offs during the third quarter of 2008 were $39.5 million, or 5.43% of average loans on an annualized basis, and during the first nine months of 2008 net charge-offs were $50.5
million, or 2.54% of average loans on an annualized basis.

Our allowance for loans losses decreased during the third quarter
and first nine months of 2009, as net charge-offs exceeded the provision for loan losses. The level of nonperforming assets began increasing near the end of 2007 and accelerated in 2008, and we increased our provisions for loan losses and the
allowance for loan losses in response to the increase in the number of problem assets. While nonperforming assets during 2009 continue to be at historically elevated levels, the rate of inflows experienced in 2009 was less than the rate experienced
in 2008. We continue to work aggressively at reducing the level of nonperforming assets and the amount of impaired loans. Total nonperforming assets decreased from $213.6 million at December 31, 2008 to $196.3 million at September 30,
2009, while the level of impaired loans decreased to $163.0 million at September 30, 2009, as compared to $197.7 million at June 30, 2009 and $205.7 million at December 30, 2008. However, as we continue to work through our
nonperforming assets and impaired loans, the level of charge-offs has increased in 2009, resulting in an overall decrease in the allowance for loan losses. In addition,



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during the third quarter of 2009, our loan sale and the transfer to held for sale impacted both our allowance for loan losses and the level of net charge-offs. In connection with the sale and
transfer, we charged off $3.2 million more than the specific allocation of the allowance for loan losses we had previously established for these loans. Since we previously had established specific allocations related to these loans, the impact on
the provision for loan losses during the third quarter of 2009 was less than the net charge-offs recorded, resulting in a reduction in our allowance for loan losses. While the loan sale and transfer had the impact of reducing the allowance for loan
losses, these commercial loans held for sale were included in nonperforming and impaired loans at September 30, 2009. We expect to complete the sale during the fourth quarter of 2009.

Provision for Loan Losses

We determine a provision for loan losses that we consider sufficient to maintain an allowance covering probable losses inherent in our portfolio as of the balance sheet date. Our provision for loan losses was $15.5 million for the third
quarter of 2009 and $70.6 million during the first nine months of 2009. In comparison, the provision for loan losses was $52.7 million for the third quarter of 2008 and $113.8 million during the first nine months of 2008. Although the provision for
loan losses in 2009 has been higher than historical levels, the provision was lower than the level experienced in 2008. The provision for loan losses in 2008 was significantly impacted by the rapid rise in nonperforming and impaired loans and the
increase in the severity of the estimated loss associated with these loans. While we experienced weakness in all portions of our loan portfolio, our residential construction and land loans produced the greatest amount of loss. A significant decrease
in housing demand and real estate valuations contributed to these losses. The level of impaired loans and nonperforming assets has decreased in 2009 as we continue to work aggressively to resolve these assets. The provision for loan losses in the
third quarter of 2009 of $15.5 million was also less then the provision of $39.5 million during the second quarter of 2009, primarily due to lower specific allocations on nonaccrual loans and a decrease in the amount of new nonaccrual loans during
the quarter. Our provision for loan losses in any individual accounting period is not an indicator of provisioning in subsequent reporting.

Deposits

Total deposits decreased $78.3 million to $3.05 billion at September 30, 2009 from $3.13 billion
at December 31, 2008. While total deposits decreased, our in-market deposits increased because of our in-market deposit initiative that we began in 2009 designed to increase our core in-market deposits and reduce our reliance on brokered and
out-of-market deposits. During the first nine months of 2009, our total in-market deposits increased $312.9 million, or 15.5%, as compared to December 31, 2008, and the percentage of total in-market deposits to total deposits increased to 76%
at September 30, 2009, up from 64% at December 31, 2008.

Total in-market deposits increased to $2.33 billion at
September 30, 2009 from $2.01 billion at December 31, 2008. Noninterest-bearing deposits increased $144.6 million to $615.6 million at September 30, 2009, primarily due to our efforts to increase our relationship-based



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core deposits. Money market accounts also increased $136.1 million during the first nine months of 2009. In addition, time deposits maintained through the CDARS network increased $140.2 million
during the first nine months of 2009 as we entered this network at the end of 2008 in order to accommodate Bank customers with large cash balances seeking the full deposit insurance protection. These increases were partly offset by lower customer
certificates of deposit, which decreased $96.1 million due to a planned reduction in higher-rate balances.

Total
out-of-market deposits decreased $391.2 million, or 35.0%, to $727.1 million at September 30, 2009 from $1.12 billion at year-end 2008. Higher funding provided by in-market deposits allowed us to reduce reliance on brokered funds. During the
first nine months of 2009, brokered and out-of-market CDs decreased by $286.1 million and $40.5 million, respectively, while brokered money market accounts were also lower by $64.3 million.

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



|                                            |  |                |           |              |   |          
|------------------------------------------- |  | -------------- | --------- | ------------ | - | ---------
|                                            |  | Sept. 30,2009  |           | Dec. 31,2008
|                                            |  | (in thousands)
|In-market deposits:                         |  |                |           |              |   |          
|Noninterest bearing deposits                |  | $              | 615,590   |              | $ | 470,990  
|NOW accounts                                |  |                | 213,668   |              |   | 218,146  
|Savings accounts                            |  |                | 41,534    |              |   | 42,275   
|Money market accounts                       |  |                | 456,795   |              |   | 320,691  
|Customer certificates of deposit            |  |                | 774,082   |              |   | 870,183  
|CDARS time deposits                         |  |                | 145,889   |              |   | 5,670    
|Public time deposits                        |  |                | 78,090    |              |   | 84,831   
|                                            |  |                |           |              |   |          
|Total in-market deposits                    |  |                | 2,325,648 |              |   | 2,012,786
|                                            |  |               
|Out-of-market deposits:                     |  |                |           |              |   |          
|Brokered NOW accounts                       |  |                |          |              |   | 305      
|Brokered money market deposits              |  |                | 9,052     |              |   | 73,352   
|Out-of-local-market certificates of deposit |  |                | 95,990    |              |   | 136,470  
|Brokered certificates of deposit            |  |                | 622,039   |              |   | 908,133  
|                                            |  |                |           |              |   |          
|Total out-of-market deposits                |  |                | 727,081   |              |   | 1,118,260
|                                            |  |                |           |              |   |          
|Total deposits                              |  | $              | 3,052,729 |              | $ | 3,131,046
|                                            |  |                |           |              |   |          

Average deposits for the first nine months of 2009 increased $319.6 million to $3.15
billion, compared to $2.83 billion for the first nine months of 2008. Noninterest bearing demand deposits increased $168.8 million during the first nine months of 2009, largely due to our in-market deposit initiative. Total time deposits increased
$285.2 million during the first nine months of 2009 as compared to the first nine months of 2008. During the first nine months of 2008, we increased our reliance on certificates of deposits, primarily customer and brokered certificates of deposit,
as a source of funds for our significant asset growth. Because of the growth in 2008, average balances were higher in the first nine months of 2009 as compared to 2008. Between the two year-to-date periods, average local-market and brokered
certificates of deposit increased by $177.8 million and $57.3 million, respectively, in the nine month period in 2009 as compared to the same period in 2008. We also began to issue CDARS time deposits at the end of 2008 and average CDARS time
deposits increased by $96.8 million during the first



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nine months of 2009. These increases were offset by a decrease in out-of-local-market certificates of deposit of $47.9 million. In addition, between the two year-to-date periods, NOW accounts
increased by $129.1 million, while money market accounts declined by $259.4 million primarily due to the transfer of a large depositors balances from money market to a NOW account and a reduction in money market balances by another large
depositor during the latter half of 2008.

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, 2009 |           |                    | For the Nine Months EndedSeptember 30, 2008 |  
|                                            |  | AverageBalance                              |           | Percent OfDeposits |                                             |   | Rate |      |   | AverageBalance |   | Percent OfDeposits |  |       | Rate | 
|                                            |  | (dollars in thousands)                      |          
|Noninterest-bearing demand deposits         |  | $                                           | 565,614   |                    | 18.0                                        | % |      |     | % |                | $ | 396,774            |  | 14.0  | %    |  |     | %
|NOW accounts                                |  |                                             | 226,461   |                    | 7.2                                         |   |      | 1.60 |   |                |   | 97,326             |  | 3.4   |      |  | 1.02 |  
|Money market accounts                       |  |                                             | 426,875   |                    | 13.6                                        |   |      | 0.89 |   |                |   | 686,292            |  | 24.3  |      |  | 2.05 |  
|Savings deposits                            |  |                                             | 42,067    |                    | 1.3                                         |   |      | 0.08 |   |                |   | 46,183             |  | 1.6   |      |  | 0.14 |  
|Time deposits:                              |  |                                             |           |                    |                                             |   |      |      |   |                |   |                    |  |       |      |  |      |  
|Certificates of deposit                     |  |                                             | 843,419   |                    | 26.8                                        |   |      | 3.56 |   |                |   | 665,610            |  | 23.6  |      |  | 4.30 |  
|Out-of-local-market certificates of deposit |  |                                             | 111,328   |                    | 3.5                                         |   |      | 3.56 |   |                |   | 159,253            |  | 5.7   |      |  | 4.60 |  
|Brokered certificates of deposit            |  |                                             | 758,812   |                    | 24.1                                        |   |      | 3.80 |   |                |   | 701,529            |  | 24.8  |      |  | 4.71 |  
|CDARS time deposits                         |  |                                             | 96,826    |                    | 3.1                                         |   |      | 1.56 |   |                |   |                   |  |      |      |  |     |  
|Public Funds                                |  |                                             | 73,932    |                    | 2.4                                         |   |      | 2.14 |   |                |   | 72,732             |  | 2.6   |      |  | 3.68 |  
|                                            |  |                                             |           |                    |                                             |   |      |      |   |                |   |                    |  |       |      |  |      |  
|Total time deposits                         |  |                                             | 1,884,317 |                    | 59.9                                        |   |      | 3.50 |   |                |   | 1,599,124          |  | 56.7  |      |  | 4.49 |  
|                                            |  |                                             |           |                    |                                             |   |      |      |   |                |   |                    |  |       |      |  |      |  
|Total deposits                              |  | $                                           | 3,145,334 |                    | 100.0                                       | % |      |      |   |                | $ | 2,825,699          |  | 100.0 | %    |  |      |  
|                                            |  |                                             |           |                    |                                             |   |      |      |   |                |   |                    |  |       |      |  |      |  

Other Borrowings

Other borrowings include securities sold under agreements to repurchase, federal funds purchased and U.S. Treasury tax and loan note option borrowings. Period-end other borrowings increased $52.1 million
to $327.7 million at September 30, 2009, as compared to $275.6 million at December 31, 2008. Most of the increase was a result of higher federal funds purchased which increased by $46.4 million to $100.9 million at September 30, 2009.
All of the Federal fund purchased balances at September 30, 2009 were with our correspondent banking customers who may sell Federal funds in order to manage their excess liquidity.

At September 30, 2009, subject to available collateral, the Bank had pre-approved repurchase agreement lines of $200 million and
pre-approved overnight federal funds borrowing lines of $120 million. In comparison, at December 31, 2008 we had pre-approved repurchase agreement lines of $390 million and pre-approved overnight federal funds borrowing lines of $95 million.
The decrease in our pre-approved repurchased agreement lines during the first nine months of 2009 was primarily due to reduced availability industry-wide as a result of general market conditions.



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Notes Payable and Other Advances

At both September 30, 2009 and December 31, 2008, we had $12.0 million outstanding under our $15.0 million revolving credit
facility. The facility is scheduled to mature on March 31, 2010. The underlying loan agreement requires that the Bank remain well capitalized and the holding company remain adequately capitalized as defined by regulatory guidelines. As of
September 30, 2009, we were in compliance with these covenants.

At September 30, 2009, we had outstanding
borrowings under the Federal Reserve Banks Term Auction Facility of $400.0 million. As of September 30, 2009, we had pledged $566.0 million of commercial loans as collateral for these borrowings and had additional maximum borrowing
capacity of $147.3 million. We had no borrowings outstanding from the Federal Reserve Bank at December 31, 2008.

Borrowings from the FHLBC decreased $155.0 million during the first nine months of 2009 to $245.0 million at September 30, 2009, compared to $450.0 million as of December 31, 2008. We decreased our use of FHLBC advances in recent
periods due to our ability to borrow under the Federal Reserve Banks Term Auction Facility at a more favorable interest rate. At September 30, 2009 and December 31, 2008 the Company had additional borrowing capacity at the FHLBC of
$209.1 million and $146.7 million, respectively.

Junior Subordinated Debentures

At September 30, 2009, we had $45.4 million of 9.75% fixed rate junior subordinated debentures issued to TAYC Capital Trust I, our
wholly-owned statutory trust, which are currently callable at par, at our option. Unamortized issuance costs relating to these debentures were $2.4 million on September 30, 2009. Unamortized issuance costs would be recognized as noninterest
expense if the debentures were called by us.

At September 30, 2009, we also had $41.2 million of junior subordinated
debentures issued to TAYC Capital Trust II, our wholly-owned statutory trust. These junior subordinated debentures pay a variable interest rate based upon the 3 month LIBOR plus 2.68%. We can redeem all or part of the debentures at any time, subject
to regulatory approval, at par.

Subordinated Notes

In September 2008, the Bank issued $60.0 million of eight year, 10% subordinated notes, pre-payable at the Banks option after three years. The notes were issued with detachable warrants to purchase
up to 900,000 shares of our common stock at an exercise price of $10.00 per share. At September 30, 2009, the subordinated notes reported on the Consolidated Balance Sheets totaled $55.6 million, which was net of $4.4 million of unamortized
discount. The discount consists primarily of the fair value allocated to the warrants and was reported as an addition to surplus in the equity portion of the Consolidated Balance Sheets. The discount is being amortized as an additional interest
expense of the subordinated notes, over the remaining contractual life of the notes.



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CAPITAL RESOURCES

At September 30, 2009 and December 31, 2008, both the Company and Cole Taylor Bank were considered well capitalized under capital guidelines for bank holding companies and banks. The
Companys and Cole Taylor Banks capital ratios were as follows as of the dates indicated:



|                                         |  |                        |  |       |                             |  |           |                                                              |       |   |  |           |  |        |  
|---------------------------------------- |  | ---------------------- |  | ----- | --------------------------- |  | --------- | ------------------------------------------------------------ | ----- | - |  | --------- |  | ------ | -
|                                         |  | ACTUAL                 |  |       | FOR CAPITALADEQUACYPURPOSES |  |           | TO BE WELLCAPITALIZED UNDERPROMPTCORRECTIVE ACTIONPROVISIONS |      
|                                         |  | AMOUNT                 |  | RATIO |                             |  | AMOUNT    |                                                              | RATIO |   |  | AMOUNT    |  | RATIO  |  
|                                         |  | (dollars in thousands) | 
|As of September 30, 2009:                |  |                        |  |       |                             |  |           |                                                              |       |   |  |           |  |        |  
|Total Capital (to Risk Weighted Assets)  |  |                        |  |       |                             |  |           |                                                              |       |   |  |           |  |        |  
|Taylor Capital Group, Inc.               |  | $438,628               |  | 12.75 | %                           |  | $275,216  |                                                              | >8.00 | % |  | $344,020  |  | >10.00 | %
|Cole Taylor Bank                         |  | 397,151                |  | 11.56 |                             |  | 274,907   |                                                              | >8.00 |   |  | 343,634   |  | >10.00 |  
|Tier I Capital (to Risk Weighted Assets) |  |                        |  |       |                             |  |           |                                                              |       |   |  |           |  |        |  
|Taylor Capital Group, Inc.               |  | 339,201                |  | 9.86  |                             |  | 137,608   |                                                              | >4.00 |   |  | 206,412   |  | >6.00  |  
|Cole Taylor Bank                         |  | 297,773                |  | 8.67  |                             |  | 137,454   |                                                              | >4.00 |   |  | 206,180   |  | >6.00  |  
|Leverage (to average assets)             |  |                        |  |       |                             |  |           |                                                              |       |   |  |           |  |        |  
|Taylor Capital Group, Inc.               |  | 339,201                |  | 7.47  |                             |  | 181,728   |                                                              | >4.00 |   |  | 227,160   |  | >5.00  |  
|Cole Taylor Bank                         |  | 297,773                |  | 6.56  |                             |  | 181,472   |                                                              | >4.00 |   |  | 226,840   |  | >5.00  |  
|                                         |  |                        |  |       |                             | 
|As of December 31, 2008:                 |  |                        |  |       |                             |  |           |                                                              |       |   |  |           |  |        |  
|Total Capital (to Risk Weighted Assets)  |  |                        |  |       |                             |  |           |                                                              |       |   |  |           |  |        |  
|Taylor Capital Group, Inc.               |  | $474,287               |  | 13.02 | %                           |  | >$291,497 |                                                              | >8.00 | % |  | >$364,371 |  | >10.00 | %
|Cole Taylor Bank                         |  | 404,480                |  | 11.12 |                             |  | >290,864  |                                                              | >8.00 |   |  | >363,580  |  | >10.00 |  
|Tier I Capital (to Risk Weighted Assets) |  |                        |  |       |                             |  |           |                                                              |       |   |  |           |  |        |  
|Taylor Capital Group, Inc.               |  | 372,377                |  | 10.22 |                             |  | >145,748  |                                                              | >4.00 |   |  | >218,622  |  | >6.00  |  
|Cole Taylor Bank                         |  | 302,668                |  | 8.32  |                             |  | >145,432  |                                                              | >4.00 |   |  | >218,148  |  | >6.00  |  
|Leverage (to average assets)             |  |                        |  |       |                             |  |           |                                                              |       |   |  |           |  |        |  
|Taylor Capital Group, Inc.               |  | 372,377                |  | 8.73  |                             |  | >170,682  |                                                              | >4.00 |   |  | >213,352  |  | >5.00  |  
|Cole Taylor Bank                         |  | 302,668                |  | 7.11  |                             |  | >170,285  |                                                              | >4.00 |   |  | >212,857  |  | >5.00  |  

All of our capital ratios declined during the first nine months of 2009 primarily due
to a decrease in regulatory capital caused by our net loss. However, for the total capital and Tier I capital to risk-weighted assets ratios, a decrease in risk-weighted assets partly offset the impact of lower regulatory capital. During the first
nine months of 2009, total risk weighted assets decreased, despite an increase in total assets, because of a shift in the mix of our total asset to lower risk-weighted investment securities from the higher risk-weighted loans. An increase in average
assets and the lower regulatory capital combined to cause a larger decrease in our ratio of Tier I capital to average assets than the total capital and Tier I capital to risk-weighted asset ratios.

The Banks total and Tier I capital to risk-weighted asset ratios increased during the first nine months of 2009 primarily due to the
decrease in risk-weighted assets caused by a shift in the composition of assets towards the lower risk-weighted assets investment balances from the higher risk-weighted loan balances. The Banks regulatory capital declined slightly during the
first nine months of 2009 as the Banks net loss was partly offset by a $15.0 million capital contribution made by us to the Bank. The Banks Tier I capital to average asset ratio declined due to both an increase in average assets and the
decrease in regulatory capital.



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The Bank is subject to dividend restrictions established by regulatory authorities. The Bank
did not pay any dividends to us during the first nine months of 2009 or during all of 2008. Because of the recent net losses, the Bank could not declare and pay dividends to us without the approval of regulatory authorities.

We did not pay a dividend on our common stock during the first three quarters of 2009. We declared a $0.10 per share common dividend during
the first quarter of 2008 totaling $1.1 million. During the first nine months of 2009, we declared each of the quarterly dividends on each of our Series A and Series B Preferred stock, totaling $7.4 million in the aggregate.

Our ability to pay common dividends has been impacted by the recent issuance of preferred stock. The Series B Preferred stock requires the
consent of the U.S. Treasury Department to pay any dividend on our common stock prior to November 21, 2011, unless the Series B Preferred has been redeemed or the Treasury has transferred all of the Series B Preferred to third parties. In
addition, under the terms of the junior subordinated debentures and the Series A Preferred, any deferral of the payment of interest or dividends results in a defined restriction in the payment of common dividends.

LIQUIDITY

We have taken
steps to strengthen our liquidity position during the first nine months of 2009 and reduce our reliance on out-of-market deposit balances. While total deposits decreased during the first nine months of 2009, in-market deposits increased $312.9
million and we reduced our out-of-market deposits by $391.2 million. In addition, we have used attractively priced short-term funding opportunities from the FHLB and Federal Reserve Bank to support asset growth.

During the first nine months of 2009, cash inflows included $276.7 million from the sale of available for sale investment securities, $249.9
million of maturities and repayments of investment securities, increased other borrowings and advances of $207.1 million and reduced loan balances of $87.0 million.

Cash outflows during the nine months included $708.9 million for the purchase of available for sale investment securities, an $80.1 million net decrease in deposit balances and the payment of $7.7 million
in dividends on our Series A and Series B Preferred stock.

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

The Term Auction Facility is a temporary program which will operate at least until January 2010, as the Federal Reserve Bank has indicated that it intends to scale back this facility in response to continued improvements in financial market
conditions. As this program is phased out, we would likely replace this borrowing with additional advances from the FHLBC.



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At the holding company level, cash and cash equivalents totaled $50.9 million at
September 30, 2009, as compared to $76.5 million at December 31, 2008. Cash outflows during the first nine months of 2009 included a $15.0 capital contribution to the Bank, $7.7 million for the payment of dividends on our Series A and
Series B Preferred stock, and $5.5 million of interest paid on our junior subordinated debentures and notes payable. The Company also had $3.0 million of availability under its revolving line of credit.

Off-Balance Sheet Arrangements

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

At September 30, 2009, we had $826 million of undrawn commitments to extend credit and $85 million of financial and performance standby
letters of credit. In comparison, at December 31, 2008, we had $928 million of undrawn commitments to extend credit and $87 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 to the extent not already recognized as a liability on the Companys Consolidated Balance Sheets. At September 30, 2009 and December 31, 2008, a
liability for $3.2 million and $2.9 million, respectively, was established for commitments under standby letters of credit for which we believed funding and loss were probable.

Derivative Financial Instruments

The following table describes the
derivative instruments outstanding at September 30, 2009:



|                                              |  |                        |         |                |                                |                  |           |           |   |         |  
|--------------------------------------------- |  | ---------------------- | ------- | -------------- | ------------------------------ | ---------------- | --------- | --------- | - | ------- | -
|Product                                       |  | NotionalAmount         |         | Interest Rates |                                | Wt. Avg.Maturity |           | FairValue |  
|                                              |  | (dollars in thousands) |        
|Non-hedging derivative instruments:           |  |                        |         |                |                                |                  |           |           |   |         |  
|Interest Rate Swappay fixed/receive variable |  | $                      | 187,029 |                | Pay 4.29%Receive 0.508%        |                  | 3.4yrs    |           | $ | (11,502 | )
|Interest Rate Swapreceive fixed/pay variable |  |                        | 187,029 |                | Receive 4.29%Pay 0.508%        |                  | 3.4yrs    |           |   | 11,575  |  
|Forward loan sale contracts                   |  |                        | 81,200  |                | Weighted AvgInterest Rate 5.1% |                  | Oct. 2009 |           |   | (497    | )
|                                              |  |                        |         |                |                                |                  |           |           |   |         |  
|Total                                         |  | $                      | 455,258 |                |                                |                  |           |           |   |         |  
|                                              |  |                        |         |                |                                |                  |           |           |   |         |  

We use derivative financial instruments to accommodate customer needs and to assist
in interest rate risk management. At September 30, 2009, our only derivative instruments were interest rate exchange agreements related to customer transactions and forward loan sale contracts related to loans held for sale, which are not
designated as hedges.



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In January 2009, we terminated a $100 million notional amount interest rate swap that was
not designated as an accounting hedge at the time of termination. Previously, we had designed this derivative as a cash flow hedge, however, we had discontinued hedge accounting in December 2008 when we determined the hedge would no longer be
effective. The unrealized gain of $6.4 million upon de-designation, which had accumulated in other comprehensive income (net of tax), is being amortized to loan interest income over what would have been the life of the hedge. Changes in fair value
of the swap from the period that the hedge designations were removed until the swap was sold in January 2009 were included in other derivative income in noninterest income. Other derivative income during the first nine months of 2009 included a
$33,000 loss because of a decrease in fair value from December 31, 2008 to the date of the sale.

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

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISKS

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

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

Our primary measurement of interest rate risk is earnings at risk, which is determined through computerized simulation modeling. The primary simulation model assumes a static balance sheet, a parallel
interest rate rising or declining ramp and uses the balances, rates, maturities and repricing characteristics of all of our existing assets and liabilities, including



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derivative instruments. These models are built with the sole objective of measuring the volatility of the embedded interest rate risk as of the balance sheet date and, as such, do not provide for
growth or changes in balance sheet composition. Projected net interest income is computed by the model assuming market rates remain unchanged and compares those results to other interest rate scenarios with changes in the magnitude, timing, and
relationship between various interest rates. The impact of embedded options in products, such as callable agencies and mortgage-backed securities, real estate mortgage loans, and callable borrowings, are also considered. Changes in net interest
income in the rising and declining rate scenarios are then measured against the net interest income in the rates unchanged scenario. ALCO utilizes the results of the model to quantify the estimated exposure of our net interest income to sustained
interest rate changes.

Net interest income for year one in a 200 basis points rising rate scenario was calculated to be
relatively unchanged from the net interest income in the rates unchanged scenario at September 30, 2009, indicating that our interest earning assets would be as sensitive to an increase in market interest rates as our portfolio of interest
bearing liabilities. At December 31, 2008, the projected variance in the rising rate scenario was $6.8 million, or 6.3%, higher than the rates unchanged scenario. These exposures were within our policy guidelines of 10%. No simulation for net
interest income at risk in a falling rate scenario was calculated because of the low level of market interest rates at both September 30, 2009 and December 2008.

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



|                                 |  |                                                                     |     |                  |                      |   |              |   |                  |  |     |  
|-------------------------------- |  | ------------------------------------------------------------------- | --- | ---------------- | -------------------- | - | ------------ | - | ---------------- |  | --- | -
|                                 |  | Change in Future Net Interest Incomefrom Rates Unchanged Simulation |    
|                                 |  | At September 30, 2009                                               |     |                  | At December 31, 2008 |  
|                                 |  | (dollars in thousands)                                              |    
|Change in interest rates         |  | DollarChange                                                        |     | PercentageChange |                      |   | DollarChange |   | PercentageChange | 
|+200 basis points over one year  |  | $                                                                   | 20  |                  | 0.0                  | % |              | $ | 6,805            |  | 6.3 | %
|- 200 basis points over one year |  |                                                                     | N/A |                  | N/A                  |   |              |   | N/A              |  | N/A |  



N/A  Not applicable

Computation of the prospective effects of hypothetical
interest rate changes are based on numerous assumptions, including, among other factors, relative levels of market interest rates, product pricing, reinvestment strategies and customer behavior influencing loan and security prepayments and deposit
decay and should not be relied upon as indicative of actual results. Further, the computations do not contemplate any actions that we may take in response to changes in interest rates. We cannot assure you that our actual net interest income would
increase or decrease by the amounts computed by the simulations.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2009, Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS)
No. 168, The FASB Accounting Standards



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Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162 (SFAS 168). SFAS 168 establishes the FASB Accounting
Standards Codification (ASC) as the only source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by FASB. Rules and interpretive releases of the Securities and Exchange Commission
(SEC) under the authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. This statement is effective for interim and annual periods ending after September 15, 2009. The adoption of SFAS 168
did not have a material financial impact on our consolidated financial statements, however, all future references to authoritative literature will reference the ASC. (FASB ASC 105-10)

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R), Consolidation of Variable Interest
Entities (SFAS 167). SFAS No. 167 amends ASC Topic 810 (Consolidations) by significantly changing how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or
similar rights) should be consolidated. The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the other entitys purpose and design and the reporting entitys ability to
direct the activities of the other entity that most significantly impact the other entitys economic performance. SFAS No. 167 is effective for interim and annual reporting periods that begin after November 15, 2009. We are currently
assessing the impact the adoption of SFAS No. 167 will have on our consolidated financial statements.

In June 2009, the
FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets  an amendment of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SFAS
166). SFAS No. 166 amends ASC Topic 860 (Transfer & Servicing) to improve the relevance and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the
effects of a transfer on its financial position, financial performance, and cash flows; and the transferors continuing involvement, if any, in transferred financial assets. SFAS No. 166 is effective for interim and annual reporting
periods that begin after November 15, 2009. We are currently assessing the impact the adoption of SFAS 166 will have on our consolidated financial statements.

In May 2009, FASB issued SFAS No. 165, Subsequent Events, (SFAS 165). SFAS 165 establishes general standards for and disclosure of events that occur after the balance sheet
date but before financial statements are issued or are available to be issued. This statement is effective for financial statements issued for interim or annual financial periods ending after June 15, 2009. We adopted SFAS 165 on April 1,
2009 and the adoption had no material impact on our consolidated financial statements. (FASB ASC 855-10)

In April 2009, FASB
issued FASB Staff Position FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP FAS 107-1 and APB 28-1). FSP FAS 107-1 and APB 28-1 amends SFAS 107 to require disclosures about fair value
of financial instruments for interim reporting periods as well as in annual financial statements. This FSP is effective for interim reporting periods ending after June 15, 2009. We adopted FSP FAS 107-1 and APB 28-1 as of April 1, 2009 and
the adoption had no material impact on our consolidated financial statements. See Notes to Consolidated Financial Statements  Fair Value for additional details. (FASB ASC 825-10-65)



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In April 2009, FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP FAS 157-4). FSP FAS 157-4 provides additional guidance for estimating fair value (in accordance with
SFAS 157, Fair Value Measurements) when the volume and level of activity for the asset or liability have significantly decreased. This FSP also provides guidance on identifying circumstances that indicate if a transaction is not orderly.
We adopted FSP FAS 157-4 as of April 1, 2009 and the adoption had no material impact on our consolidated financial statements. (FASB ASC 820-10-65)

In April 2009, FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2 and FAS 124-2). FAS FSP 115-2 and FAS 124-2
amends the other-than-temporary impairment guidance currently included in U.S. GAAP for debt securities to improve presentation and disclosure. We adopted FSP FAS 115-2 and FAS 124-2 as of April 1, 2009. Upon adoption, we were required to apply
this FSP to any securities that had previously had other-than-temporary impairment recognized through the Statement of Operations and recognize the cumulative effect of initially applying this FSP as an adjustment to the opening balance of retained
earnings with a corresponding adjustment to accumulated other comprehensive income. See Notes to Consolidated Financial Statements  Investment Securities for additional details on the adoption of this FSP. (FASB ASC 320-10-65)

In June 2008, FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions
Are Participating Securities (FSP EITF 03-6-1). FSP EITF 03-6-1 provides guidance that unvested share-based payment awards that contain nonforfeitable rights to dividends or equivalents shall be included in the computation of EPS
pursuant to the two-class method under FASB Statement 128. We adopted FSP EITF 03-6-1 on January 1, 2009 and the adoption had no impact on our consolidated financial statements. (FASB ASC 260-10)

In June 2008, FASB issued EITF 07-5, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entitys Own
Stock (EITF 07-5). EITF 07-5 clarifies whether certain conversion features of freestanding financial instruments should be accounted for as derivative instruments under the provisions of FASB 133. We adopted EITF 07-5 on
January 1, 2009 and the adoption had no impact on our consolidated financial statements. (FASB ASC 815-40)

In March
2008, FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS 161). SFAS 161 amends SFAS 133 and requires qualitative disclosures about how and why an entity uses derivative
instruments, how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and how derivative instruments and the related hedged items affect an entitys financial position, financial
performance, and cash flows. We adopted SFAS 161 on January 1, 2009 and the adoption did not have a material impact on our consolidated financial statements. (FASB ASC 815-10)



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In December 2007, FASB issued SFAS No. 160, Noncontrolling Interests in Financial
Statements (SFAS 160). SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary, formerly referred to as minority interest, and provides guidance on accounting for changes in the
parents ownership interest in a subsidiary. In addition, SFAS 160 establishes standards of accounting for the deconsolidation of a subsidiary due to loss of control. We adopted SFAS 160 on January 1, 2009 and the adoption did not have a
material impact on our consolidated financial statements. (FASB ASC 810-10)

Quarterly Financial Information

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



|                                                   |  |                                       |        |   |                    |   |         |                |  |   |         |   |  |         |         |   |         |   |         |         |  |   |         |   |  |   |        |   |  |   |         |  
|-------------------------------------------------- |  | ------------------------------------- | ------ | - | ------------------ | - | ------- | -------------- |  | - | ------- | - |  | ------- | ------- | - | ------- | - | ------- | ------- |  | - | ------- | - |  | - | ------ | - |  | - | ------- | -
|                                                   |  | 2009 Quarter Ended                    |        |   | 2008 Quarter Ended |   |         | 2007 Qtr Ended | 
|                                                   |  | Sep. 30                               |        |   | Jun. 30            |   |         | Mar. 31        |  |   | Dec. 31 |   |  | Sep. 30 |         |   | Jun. 30 |   |         | Mar. 31 |  |   | Dec. 31 |  
|                                                   |  | (in thousands, except per share data) |       
|Interest income                                    |  | $                                     | 56,033 |   |                    | $ | 55,715  |                |  | $ | 54,317  |   |  | $       | 54,624  |   |         | $ | 50,764  |         |  | $ | 46,406  |   |  | $ | 52,654 |   |  | $ | 56,879  |  
|Interest expense                                   |  |                                       | 23,658 |   |                    |   | 25,335  |                |  |   | 26,971  |   |  |         | 30,210  |   |         |   | 28,866  |         |  |   | 24,841  |   |  |   | 28,180 |   |  |   | 31,392  |  
|                                                   |  |                                       |        |   |                    |   |         |                |  |   |         |   |  |         |         |   |         |   |         |         |  |   |         |   |  |   |        |   |  |   |         |  
|Net interest income                                |  |                                       | 32,375 |   |                    |   | 30,380  |                |  |   | 27,346  |   |  |         | 24,414  |   |         |   | 21,898  |         |  |   | 21,565  |   |  |   | 24,474 |   |  |   | 25,487  |  
|Provision for loan losses                          |  |                                       | 15,539 |   |                    |   | 39,507  |                |  |   | 15,563  |   |  |         | 30,353  |   |         |   | 52,700  |         |  |   | 49,355  |   |  |   | 11,750 |   |  |   | 23,000  |  
|Noninterest income                                 |  |                                       | 3,376  |   |                    |   | 12,137  |                |  |   | 5,343   |   |  |         | 1,085   |   |         |   | 3,220   |         |  |   | 4,030   |   |  |   | 4,102  |   |  |   | 3,882   |  
|Noninterest expense                                |  |                                       | 22,516 |   |                    |   | 23,707  |                |  |   | 21,165  |   |  |         | 21,630  |   |         |   | 27,301  |         |  |   | 22,623  |   |  |   | 21,816 |   |  |   | 17,515  |  
|Goodwill impairment                                |  |                                       |       |   |                    |   |        |                |  |   |        |   |  |         |        |   |         |   |        |         |  |   |        |   |  |   |       |   |  |   | 23,237  |  
|                                                   |  |                                       |        |   |                    |   |         |                |  |   |         |   |  |         |         |   |         |   |         |         |  |   |         |   |  |   |        |   |  |   |         |  
|Income (loss) before income taxes                  |  |                                       | (2,304 | ) |                    |   | (20,697 | )              |  |   | (4,039  | ) |  |         | (26,484 | ) |         |   | (54,883 | )       |  |   | (46,383 | ) |  |   | (4,990 | ) |  |   | (34,383 | )
|Income taxes (benefit)                             |  |                                       | 144    |   |                    |   | 2,558   |                |  |   | (1,221  | ) |  |         | (11,648 | ) |         |   | 25,653  |         |  |   | (21,067 | ) |  |   | (1,150 | ) |  |   | (5,118  | )
|                                                   |  |                                       |        |   |                    |   |         |                |  |   |         |   |  |         |         |   |         |   |         |         |  |   |         |   |  |   |        |   |  |   |         |  
|Net income (loss)                                  |  |                                       | (2,448 | ) |                    |   | (23,255 | )              |  |   | (2,818  | ) |  |         | (14,836 | ) |         |   | (80,536 | )       |  |   | (25,316 | ) |  |   | (3,840 | ) |  |   | (29,265 | )
|Preferred dividends and discounts                  |  |                                       | (2,873 | ) |                    |   | (2,868  | )              |  |   | (2,862  | ) |  |         | (2,150  | ) |         |   | (16,680 | )       |  |   |        |   |  |   |       |   |  |   |        |  
|                                                   |  |                                       |        |   |                    |   |         |                |  |   |         |   |  |         |         |   |         |   |         |         |  |   |         |   |  |   |        |   |  |   |         |  
|Net income (loss) available to common stockholders |  | $                                     | (5,321 | ) |                    | $ | (26,123 | )              |  | $ | (5,680  | ) |  | $       | (16,986 | ) |         | $ | (97,216 | )       |  | $ | (25,316 | ) |  | $ | (3,840 | ) |  | $ | (29,265 | )
|                                                   |  |                                       |        |   |                    |   |         |                |  |   |         |   |  |         |         |   |         |   |         |         |  |   |         |   |  |   |        |   |  |   |         |  
|Earnings (loss) per share:                         |  |                                       |        |   |                    |   |         |                |  |   |         |   |  |         |         |   |         |   |         |         |  |   |         |   |  |   |        |   |  |   |         |  
|Basic                                              |  | $                                     | (0.51  | ) |                    | $ | (2.49   | )              |  | $ | (0.54   | ) |  | $       | (1.62   | ) |         | $ | (9.30   | )       |  | $ | (2.42   | ) |  | $ | (0.37  | ) |  | $ | (2.78   | )
|Diluted                                            |  |                                       | (0.51  | ) |                    |   | (2.49   | )              |  |   | (0.54   | ) |  |         | (1.62   | ) |         |   | (9.30   | )       |  |   | (2.42   | ) |  |   | (0.37  | ) |  |   | (2.78   | )
|                                                   |  |                                       |        |   |                    |   |         |                |  |   |         |   |  |         |         |   |         |   |         |         |  |   |         |   |  |   |        |   |  |   |         |  



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|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

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



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

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

We have carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design
and operation of our disclosure controls and procedures as of September 30, 2009. Based upon their evaluation and subject to the foregoing, the Chief Executive Officer and Chief Financial Officer concluded that such controls and procedures were
effective as of the end of the period covered by this report, in all material respects, to ensure that required information will be disclosed on a timely basis in our reports filed under the Exchange Act.

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

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2009, that have materially affected, or are reasonably likely to materially
affect our internal control over financial reporting.



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PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------

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



|Item 1A. | Risk Factors.
|-------- | -------------

There have
been no material changes in our risk factors from those disclosed in our 2008 Annual Report on Form 10-K.



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

None.



|Item 3. | Defaults Upon Senior Securities.
|------- | --------------------------------

None.



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

None



|Item 5. | Other Information.
|------- | ------------------

None.



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|Item 6. | Exhibits.
|------- | ---------

EXHIBIT
INDEX



|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                   
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Exhibits                                                                                                                                                                                                                                                                                                                                                                                           
|               | 
|3.1            |  | Form of Third Amended and Restated Certificate of Incorporation of Taylor Capital Group, Inc. (incorporated by reference to Appendix A of the Companys Definitive Proxy
Statement filed September 15, 2008).                                                                                                                                                                                                     
|               | 
|3.2            |  | Form of Third Amended and Restated Bylaws of Taylor Capital Group, Inc. (incorporated by reference to Appendix B of the Companys Definitive Proxy Statement filed September 15,
2008).                                                                                                                                                                                                                           
|               | 
|3.3            |  | Certificate of Designations of Fixed Rate Cumulative Perpetual Preferred Stock, Series B, dated November 19, 2008 (incorporated by reference to Exhibit 3.1 of the Companys
Current Report on Form 8-K filed November 24, 2008).                                                                                                                                                                                 
|               | 
|4              |  | Certain instruments defining the rights of the holders of long-term debt of the Company and certain of its subsidiaries, none of which authorize a total amount of indebtedness in
excess of 10% of the total assets of the Company and its subsidiaries on a consolidated basis, have not been filed as exhibits. The Company hereby agrees to furnish a copy of any of these agreements to the SEC upon request.
|               | 
|4.1            |  | Form of certificate representing Taylor Capital Group, Inc. common stock (incorporated by reference to Exhibit 4.3 of the Companys Amended Registration Statement on Form S-1/A
filed October 1, 2002 (Registration No. 333-89158)).                                                                                                                                                                             
|               | 
|4.2            |  | Loan and Subordinated Debenture Purchase Agreement, dated November 27, 2002, by and between LaSalle Bank National Association and Taylor Capital Group, Inc. (incorporated by
reference to Exhibit 99.1 of the Companys Current Report on Form 8-K filed November 26, 2002).                                                                                                                                     
|               | 
|4.3            |  | First Amendment to Loan and Subordinated Debenture Purchase Agreement, dated as of November 27, 2003, by and between LaSalle Bank National Association and Taylor Capital Group, Inc.
(incorporated by reference to Exhibit 10.74 of the Companys Annual Report on Form 10-K filed March 11, 2004).                                                                                                              
|               | 
|4.4            |  | Second Amendment to Loan and Subordinated Debenture Purchase Agreement, dated June 8, 2004, by and between LaSalle Bank National Association and Taylor Capital Group, Inc.
(incorporated by reference to Exhibit 10.78 of the Companys Quarterly Report on Form 10-Q filed August 6, 2004).                                                                                                                     
|               | 
|4.5            |  | Third Amendment to Loan and Subordinated Debenture Purchase Agreement, dated December 9, 2004, by and between LaSalle Bank National Association and Taylor Capital Group, Inc.
(incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form 8-K filed December 10, 2004).                                                                                                                   
|               | 
|4.6            |  | Fourth Amendment to Loan and Subordinated Debenture Purchase Agreement, dated January 12, 2006, by and between LaSalle Bank National Association and Taylor Capital Group, Inc.
(incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form 8-K filed January 18, 2006).                                                                                                                   
|               | 
|4.7            |  | Fifth Amendment to Loan and Subordinated Debenture Purchase Agreement, dated December 28, 2006, by and between LaSalle Bank National Association and Taylor Capital Group, Inc.
(incorporated by reference to Exhibit 10.46 of the Companys Annual Report on Form 10-K filed March 15, 2007).                                                                                                                    
|               | 
|4.8            |  | Sixth Amendment to Loan and Subordinated Debenture Purchase Agreement, dated January 24, 2008, by and between LaSalle Bank National Association and Taylor Capital Group, Inc.
(incorporated by reference to Exhibit 10.50 of the Companys Annual Report on Form 10-K filed March 31, 2008).                                                                                                                     



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|               |  |                                                                                                                                                                                                                                                                                                                   
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Exhibits                                                                                                                                                                                                                                                                                           
|               | 
|4.9            |  | Seventh Amendment to Loan and Subordinated Debenture Purchase Agreement, dated September 24, 2008, by and between Taylor Capital Group, Inc. and LaSalle Bank National
Association (incorporated by reference to Exhibit 99.2 of the Companys Current Report on Form 8-K filed September 30, 2008).              
|               | 
|4.10           |  | Eighth Amendment to Loan and Subordinated Debenture Purchase Agreement, dated March 2, 2009, by and between Bank of America, N.A. and Taylor Capital Group, Inc. (incorporated by
reference to Exhibit 4.10 of the Companys Quarterly Report on Form 10-Q filed May 14, 2009).                                   
|               | 
|4.11           |  | Ninth Amendment to Loan and Subordinated Debenture Purchase Agreement, dated March 10, 2009, by and between Bank of America, N.A. and Taylor Capital Group, Inc. (incorporated by
reference to Exhibit 4.11 of the Companys Quarterly Report on Form 10-Q filed May 14, 2009).                                   
|               | 
|4.12           |  | Form of Warrant issued by Taylor Capital Group, Inc. to Financial Investments Corporation (incorporated by reference to an exhibit to Exhibit 10.2 of the Companys Current
Report on Form 8-K filed September 5, 2008).                                                                                          
|               | 
|4.13           |  | Form of Registration Rights Agreement by and among Taylor Capital Group, Inc., the parties listed on Exhibit A and Exhibit B attached thereto and Financial Investments Corporation
(incorporated by reference to an exhibit to Exhibit 10.2 of the Companys Current Report on Form 8-K filed September 5, 2008).
|               | 
|4.14           |  | Form of Stock Purchase Warrant issued by Taylor Capital Group, Inc. (incorporated by reference to Appendix F of the Companys Definitive Proxy Statement filed September 15,
2008).                                                                                                                               
|               | 
|4.15           |  | Warrant, dated November 21, 2008, issued by Taylor Capital Group, Inc. (incorporated by reference to Exhibit 4.1 of the Companys Current Report on Form 8-K filed November 24,
2008).                                                                                                                            
|               | 
|31.1           |  | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Security Exchange Act of 1934.                                                                                                                                                                                                      
|               | 
|31.2           |  | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Security Exchange Act of 1934.                                                                                                                                                                                                      
|               | 
|32.1           |  | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                



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SIGNATURES

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



|                        |  |  |  |                                             
|----------------------- |  |  |  | --------------------------------------------
|                        |  |  |  | TAYLOR CAPITAL GROUP, INC.                  
|Date: November 12, 2009 |  |  |  |                                             
|                        |  |  |  | /s/ BRUCE W. TAYLOR                         
|                        |  |  |  | Bruce W. Taylor                             
|                        |  |  |  | Chairman and Chief Executive Officer        
|                        |  |  |  | (Principal Executive Officer)               
|                        |  | 
|                        |  |  |  | /s/ RANDALL T. CONTE                        
|                        |  |  |  | Randall T. Conte                            
|                        |  |  |  | Chief Financial Officer                     
|                        |  |  |  | (Principal Financial and Accounting Officer)



75