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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q





QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

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 (Section 232.405 of this chapter)) 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 May 6, 2010,
there were 11,076,197 shares of Common Stock, $0.01 par value, outstanding.









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TAYLOR CAPITAL GROUP, INC.

INDEX



|                              |  |                                                                                                                             |  |     
|----------------------------- |  | --------------------------------------------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                                                             |  | Page
|PART I. FINANCIAL INFORMATION |  |                                                                                                                            
|                              |  |                                                                                                                            
|Item 1.                       |  | Financial Statements                                                                                                        |  |     
|                              |  |                                                                                                                            
|                              |  | Consolidated Balance Sheets (unaudited) - March 31, 2010 and December 31, 2009                                              |  | 1   
|                              |  |                                                                                                                            
|                              |  | Consolidated Statements of Operations (unaudited) - For the three months ended March 31, 2010 and 2009                      |  | 2   
|                              |  |                                                                                                                            
|                              |  | Consolidated Statements of Changes in Stockholders Equity (unaudited) - For the three months ended March 31, 2010 and 2009 |  | 3   
|                              |  |                                                                                                                            
|                              |  | Consolidated Statements of Cash Flows (unaudited) - For the three months ended March 31, 2010 and 2009                      |  | 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                                                                  |  | 62  
|                              |  |                                                                                                                            
|Item 4.                       |  | Controls and Procedures                                                                                                     |  | 62  
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                            
|                              |  |                                                                                                                            
|Item 1.                       |  | Legal Proceedings                                                                                                           |  | 63  
|                              |  |                                                                                                                            
|Item 1A.                      |  | Risk Factors                                                                                                                |  | 63  
|                              |  |                                                                                                                            
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                 |  | 63  
|                              |  |                                                                                                                            
|Item 3.                       |  | Defaults Upon Senior Securities                                                                                             |  | 63  
|                              |  |                                                                                                                            
|Item 4.                       |  | (Removed and Reserved)                                                                                                      |  | 63  
|                              |  |                                                                                                                            
|Item 5.                       |  | Other Information                                                                                                           |  | 63  
|                              |  |                                                                                                                            
|Item 6.                       |  | Exhibits                                                                                                                    |  | 64  
|                              |  |                                                                                                                            
|                              |  | Signatures                                                                                                                  |  | 65  



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TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS (unaudited)

(dollars in thousands, except per share data)



|                                                                                                                                                                                                                                                               |  |               |           |   |                  |   |           |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                                                                                                                                               |  | March 31,2010 |           |   | December 31,2009 |  
|ASSETS                                                                                                                                                                                                                                                         |  |               |           |   |                  |   |           |  
|Cash and cash equivalents:                                                                                                                                                                                                                                     |  |               |           |   |                  |   |           |  
|Cash and due from banks                                                                                                                                                                                                                                        |  | $             | 38,617    |   |                  | $ | 48,420    |  
|Short-term investments                                                                                                                                                                                                                                         |  |               | 49        |   |                  |   | 49        |  
|                                                                                                                                                                                                                                                               |  |               |           |   |                  |   |           |  
|Total cash and cash equivalents                                                                                                                                                                                                                                |  |               | 38,666    |   |                  |   | 48,469    |  
|Investment securities:                                                                                                                                                                                                                                         |  |               |           |   |                  |   |           |  
|Available-for-sale, at fair value                                                                                                                                                                                                                              |  |               | 1,369,109 |   |                  |   | 1,271,271 |  
|Held-to-maturity (fair value of $39.1 million at March 31, 2010)                                                                                                                                                                                               |  |               | 39,131    |   |                  |   |          |  
|Loans, held for sale ($4.2 million at fair value at March 31, 2010)                                                                                                                                                                                            |  |               | 28,492    |   |                  |   | 81,853    |  
|Loans, net of allowance for loan losses of $100,151 and $106,185 at March 31, 2010 and December 31, 2009, respectively                                                                                                                                         |  |               | 2,878,128 |   |                  |   | 2,847,290 |  
|Premises, leasehold improvements and equipment, net                                                                                                                                                                                                            |  |               | 14,951    |   |                  |   | 15,515    |  
|Investment in Federal Home Loan Bank and Federal Reserve Bank stock, at cost                                                                                                                                                                                   |  |               | 36,484    |   |                  |   | 31,210    |  
|Other real estate and repossessed assets, net                                                                                                                                                                                                                  |  |               | 27,355    |   |                  |   | 26,231    |  
|Other assets                                                                                                                                                                                                                                                   |  |               | 81,864    |   |                  |   | 81,663    |  
|                                                                                                                                                                                                                                                               |  |               |           |   |                  |   |           |  
|Total assets                                                                                                                                                                                                                                                   |  | $             | 4,514,180 |   |                  | $ | 4,403,502 |  
|                                                                                                                                                                                                                                                               |  |               |           |   |                  |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                                                           |  |               |           |   |                  |   |           |  
|Deposits:                                                                                                                                                                                                                                                      |  |               |           |   |                  |   |           |  
|Noninterest-bearing                                                                                                                                                                                                                                            |  | $             | 587,402   |   |                  | $ | 659,146   |  
|Interest-bearing                                                                                                                                                                                                                                               |  |               | 2,370,318 |   |                  |   | 2,317,654 |  
|                                                                                                                                                                                                                                                               |  |               |           |   |                  |   |           |  
|Total deposits                                                                                                                                                                                                                                                 |  |               | 2,957,720 |   |                  |   | 2,976,800 |  
|Other borrowings                                                                                                                                                                                                                                               |  |               | 633,422   |   |                  |   | 337,669   |  
|Accrued interest, taxes and other liabilities                                                                                                                                                                                                                  |  |               | 51,830    |   |                  |   | 60,925    |  
|Notes payable and other advances                                                                                                                                                                                                                               |  |               | 475,000   |   |                  |   | 627,000   |  
|Junior subordinated debentures                                                                                                                                                                                                                                 |  |               | 86,607    |   |                  |   | 86,607    |  
|Subordinated notes, net                                                                                                                                                                                                                                        |  |               | 55,801    |   |                  |   | 55,695    |  
|                                                                                                                                                                                                                                                               |  |               |           |   |                  |   |           |  
|Total liabilities                                                                                                                                                                                                                                              |  |               | 4,260,380 |   |                  |   | 4,144,696 |  
|                                                                                                                                                                                                                                                               |  |               |           |   |                  |   |           |  
|Stockholders equity:                                                                                                                                                                                                                                          |  |               |           |   |                  |   |           |  
|Preferred stock, $0.01 par value, 10,000,000 shares authorized:                                                                                                                                                                                                |  |               |           |   |                  |   |           |  
|Series A, 8% non-cumulative convertible perpetual, 2,400,000 shares issued and outstanding, $25.00 liquidation
value                                                                                                                                           |  |               | 60,000    |   |                  |   | 60,000    |  
|Series B, 5% fixed rate cumulative perpetual, 104,823 shares issued and outstanding, $1,000 liquidation value                                                                                                                                                  |  |               | 99,221    |   |                  |   | 98,844    |  
|Common stock, $0.01 par value; 45,000,000 shares authorized, 12,028,865 and 12,029,375 shares issued at March 31, 2010 and
December 31, 2009, respectively; 11,076,197 and 11,076,707 shares outstanding at March 31, 2010 and December 31, 2009, respectively |  |               | 120       |   |                  |   | 120       |  
|Surplus                                                                                                                                                                                                                                                        |  |               | 227,022   |   |                  |   | 226,398   |  
|Accumulated deficit                                                                                                                                                                                                                                            |  |               | (124,251  | ) |                  |   | (110,617  | )
|Accumulated other comprehensive income, net                                                                                                                                                                                                                    |  |               | 16,324    |   |                  |   | 8,697     |  
|Treasury stock, at cost, 952,668 shares                                                                                                                                                                                                                        |  |               | (24,636   | ) |                  |   | (24,636   | )
|                                                                                                                                                                                                                                                               |  |               |           |   |                  |   |           |  
|Total stockholders equity                                                                                                                                                                                                                                     |  |               | 253,800   |   |                  |   | 258,806   |  
|                                                                                                                                                                                                                                                               |  |               |           |   |                  |   |           |  
|Total liabilities and stockholders equity                                                                                                                                                                                                                     |  | $             | 4,514,180 |   |                  | $ | 4,403,502 |  
|                                                                                                                                                                                                                                                               |  |               |           |   |                  |   |           |  

See accompanying notes to consolidated financial statements (unaudited)



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TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(dollars in thousands, except per share data)



|                                                     |  |                                     |         |   |      |   |        |  
|---------------------------------------------------- |  | ----------------------------------- | ------- | - | ---- | - | ------ | -
|                                                     |  | For the Three MonthsEnded March 31, |        
|                                                     |  | 2010                                |         |   | 2009 |  
|Interest income:                                     |  |                                     |         |   |      |   |        |  
|Interest and fees on loans                           |  | $                                   | 38,211  |   |      | $ | 39,367 |  
|Interest and dividends on investment securities:     |  |                                     |         |   |      |   |        |  
|Taxable                                              |  |                                     | 13,446  |   |      |   | 13,513 |  
|Tax-exempt                                           |  |                                     | 1,229   |   |      |   | 1,427  |  
|Interest on cash equivalents                         |  |                                     | 1       |   |      |   | 10     |  
|                                                     |  |                                     |         |   |      |   |        |  
|Total interest income                                |  |                                     | 52,887  |   |      |   | 54,317 |  
|Interest expense:                                    |  |                                     |         |   |      |   |        |  
|Deposits                                             |  |                                     | 12,442  |   |      |   | 20,059 |  
|Other borrowings                                     |  |                                     | 2,285   |   |      |   | 2,176  |  
|Notes payable and other advances                     |  |                                     | 1,624   |   |      |   | 1,519  |  
|Junior subordinated debentures                       |  |                                     | 1,438   |   |      |   | 1,600  |  
|Subordinated notes                                   |  |                                     | 1,631   |   |      |   | 1,617  |  
|                                                     |  |                                     |         |   |      |   |        |  
|Total interest expense                               |  |                                     | 19,420  |   |      |   | 26,971 |  
|                                                     |  |                                     |         |   |      |   |        |  
|Net interest income                                  |  |                                     | 33,467  |   |      |   | 27,346 |  
|Provision for loan losses                            |  |                                     | 21,130  |   |      |   | 15,563 |  
|                                                     |  |                                     |         |   |      |   |        |  
|Net interest income after provision for loan losses  |  |                                     | 12,337  |   |      |   | 11,783 |  
|                                                     |  |                                     |         |   |      |   |        |  
|Noninterest income:                                  |  |                                     |         |   |      |   |        |  
|Service charges                                      |  |                                     | 2,857   |   |      |   | 2,821  |  
|Trust and investment management fees                 |  |                                     | 347     |   |      |   | 534    |  
|Mortgage origination revenue                         |  |                                     | 303     |   |      |   |       |  
|Loss on disposition of bulk purchased mortgage loans |  |                                     | (2,022  | ) |      |   |       |  
|Gain on sales of investment securities               |  |                                     | 1,433   |   |      |   | 664    |  
|Other derivative income                              |  |                                     | 209     |   |      |   | 1,119  |  
|Other noninterest income                             |  |                                     | 1,247   |   |      |   | 205    |  
|                                                     |  |                                     |         |   |      |   |        |  
|Total noninterest income                             |  |                                     | 4,374   |   |      |   | 5,343  |  
|                                                     |  |                                     |         |   |      |   |        |  
|Noninterest expense:                                 |  |                                     |         |   |      |   |        |  
|Salaries and employee benefits                       |  |                                     | 11,613  |   |      |   | 10,532 |  
|Occupancy of premises                                |  |                                     | 2,042   |   |      |   | 2,049  |  
|Furniture and equipment                              |  |                                     | 512     |   |      |   | 568    |  
|Nonperforming asset expense                          |  |                                     | 4,938   |   |      |   | 754    |  
|FDIC assessment                                      |  |                                     | 2,213   |   |      |   | 1,531  |  
|Legal fees, net                                      |  |                                     | 819     |   |      |   | 1,140  |  
|Early extinguishment of debt                         |  |                                     |        |   |      |   | 527    |  
|Other noninterest expense                            |  |                                     | 5,015   |   |      |   | 4,064  |  
|                                                     |  |                                     |         |   |      |   |        |  
|Total noninterest expense                            |  |                                     | 27,152  |   |      |   | 21,165 |  
|                                                     |  |                                     |         |   |      |   |        |  
|Loss before income taxes                             |  |                                     | (10,441 | ) |      |   | (4,039 | )
|Income tax expense (benefit)                         |  |                                     | 306     |   |      |   | (1,221 | )
|                                                     |  |                                     |         |   |      |   |        |  
|Net loss                                             |  |                                     | (10,747 | ) |      |   | (2,818 | )
|Preferred dividends and discounts                    |  |                                     | (2,887  | ) |      |   | (2,862 | )
|                                                     |  |                                     |         |   |      |   |        |  
|Net loss applicable to common stockholders           |  | $                                   | (13,634 | ) |      | $ | (5,680 | )
|                                                     |  |                                     |         |   |      |   |        |  
|Basic loss per common share                          |  | $                                   | (1.30   | ) |      | $ | (0.54  | )
|Diluted loss per common share                        |  |                                     | (1.30   | ) |      |   | (0.54  | )

See accompanying notes to
consolidated financial statements (unaudited)



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TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (unaudited)

(dollars in thousands, except per share data)



|                                                                                                                               |  |                         |        |                         |   |             |  |         |     |  |                    |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------- | ------ | ----------------------- | - | ----------- |  | ------- | --- |  | ------------------ | ------- | - | ----------------------------------- | - | -------- | ------------- |  | - | ------ | - |  | - | ------- | - |  | - | ------- | -
|                                                                                                                               |  | PreferredStock,Series A |        | PreferredStock,Series B |   | CommonStock |  | Surplus |     |  | AccumulatedDeficit |         |   | AccumulatedOtherComprehensiveIncome |   |          | TreasuryStock |  |   | Total  |  
|Balance at December 31, 2009                                                                                                   |  | $                       | 60,000 |                         | $ | 98,844      |  | $       | 120 |  | $                  | 226,398 |   |                                     | $ | (110,617 | )             |  | $ | 8,697  |   |  | $ | (24,636 | ) |  | $ | 258,806 |  
|Amortization of stock based compensation awards                                                                                |  |                         |       |                         |   |            |  |         |    |  |                    | 624     |   |                                     |   |         |               |  |   |       |   |  |   |        |   |  |   | 624     |  
|Comprehensive loss:                                                                                                            |  |                         |        |                         |   |             |  |         |     |  |                    |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |         |  
|Net loss                                                                                                                       |  |                         |       |                         |   |            |  |         |    |  |                    |        |   |                                     |   | (10,747  | )             |  |   |       |   |  |   |        |   |  |   | (10,747 | )
|Change in unrealized gains on available-for-sale investment securities, net of reclassification adjustment and of income taxes |  |                         |       |                         |   |            |  |         |    |  |                    |        |   |                                     |   |         |               |  |   | 8,653  |   |  |   |        |   |  |   | 8,653   |  
|Change in deferred gains and losses recorded in other comprehensive income, net of income taxes                                |  |                         |       |                         |   |            |  |         |    |  |                    |        |   |                                     |   |         |               |  |   | (1,026 | ) |  |   |        |   |  |   | (1,026  | )
|                                                                                                                               |  |                         |        |                         |   |             |  |         |     |  |                    |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |         |  
|Total comprehensive loss                                                                                                       |  |                         |        |                         |   |             |  |         |     |  |                    |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   | (3,120  | )
|                                                                                                                               |  |                         |        |                         |   |             |  |         |     |  |                    |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |         |  
|Preferred stock dividends declared, Series A-$0.50 per share                                                                   |  |                         |       |                         |   |            |  |         |    |  |                    |        |   |                                     |   | (1,200   | )             |  |   |       |   |  |   |        |   |  |   | (1,200  | )
|Preferred stock dividends accumulated, Series B                                                                                |  |                         |       |                         |   | 377         |  |         |    |  |                    |        |   |                                     |   | (1,687   | )             |  |   |       |   |  |   |        |   |  |   | (1,310  | )
|                                                                                                                               |  |                         |        |                         |   |             |  |         |     |  |                    |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |         |  
|Balance at March 31, 2010                                                                                                      |  | $                       | 60,000 |                         | $ | 99,221      |  | $       | 120 |  | $                  | 227,022 |   |                                     | $ | (124,251 | )             |  | $ | 16,324 |   |  | $ | (24,636 | ) |  | $ | 253,800 |  
|                                                                                                                               |  |                         |        |                         |   |             |  |         |     |  |                    |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |         |  
|Balance at December 31, 2008                                                                                                   |  | $                       | 60,000 |                         | $ | 97,314      |  | $       | 121 |  | $                  | 224,872 |   |                                     | $ | (69,294  | )             |  | $ | 18,710 |   |  | $ | (24,636 | ) |  | $ | 307,087 |  
|Preferred stock issuance cost, Series B                                                                                        |  |                         |       |                         |   |            |  |         |    |  |                    | (27     | ) |                                     |   |         |               |  |   |       |   |  |   |        |   |  |   | (27     | )
|Amortization of stock based compensation awards                                                                                |  |                         |       |                         |   |            |  |         |    |  |                    | 583     |   |                                     |   |         |               |  |   |       |   |  |   |        |   |  |   | 583     |  
|Tax benefit of stock awards                                                                                                    |  |                         |       |                         |   |            |  |         |    |  |                    | (155    | ) |                                     |   |         |               |  |   |       |   |  |   |        |   |  |   | (155    | )
|Comprehensive income:                                                                                                          |  |                         |        |                         |   |             |  |         |     |  |                    |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |         |  
|Net loss                                                                                                                       |  |                         |       |                         |   |            |  |         |    |  |                    |        |   |                                     |   | (2,818   | )             |  |   |       |   |  |   |        |   |  |   | (2,818  | )
|Change in unrealized gains on available-for-sale investment securities, net of income taxes                                    |  |                         |       |                         |   |            |  |         |    |  |                    |        |   |                                     |   |         |               |  |   | 10,450 |   |  |   |        |   |  |   | 10,450  |  
|Change in deferred gain from termination of cash flow hedging instruments, net of income taxes                                 |  |                         |       |                         |   |            |  |         |    |  |                    |        |   |                                     |   |         |               |  |   | (1,272 | ) |  |   |        |   |  |   | (1,272  | )
|                                                                                                                               |  |                         |        |                         |   |             |  |         |     |  |                    |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |         |  
|Total comprehensive income                                                                                                     |  |                         |        |                         |   |             |  |         |     |  |                    |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   | 6,360   |  
|                                                                                                                               |  |                         |        |                         |   |             |  |         |     |  |                    |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |         |  
|Preferred stock dividends declared, Series A-$0.50 per share                                                                   |  |                         |       |                         |   |            |  |         |    |  |                    |        |   |                                     |   | (1,200   | )             |  |   |       |   |  |   |        |   |  |   | (1,200  | )
|Preferred stock dividends accumulated, Series B                                                                                |  |                         |       |                         |   | 439         |  |         |    |  |                    |        |   |                                     |   | (1,662   | )             |  |   |       |   |  |   |        |   |  |   | (1,223  | )
|                                                                                                                               |  |                         |        |                         |   |             |  |         |     |  |                    |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |         |  
|Balance at March 31, 2009                                                                                                      |  | $                       | 60,000 |                         | $ | 97,753      |  | $       | 121 |  | $                  | 225,273 |   |                                     | $ | (74,974  | )             |  | $ | 27,888 |   |  | $ | (24,636 | ) |  | $ | 311,425 |  
|                                                                                                                               |  |                         |        |                         |   |             |  |         |     |  |                    |         |   |                                     |   |          |               |  |   |        |   |  |   |         |   |  |   |         |  

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)

(dollars in thousands)



|                                                                                 |  |                                     |          |   |      |   |          |  
|-------------------------------------------------------------------------------- |  | ----------------------------------- | -------- | - | ---- | - | -------- | -
|                                                                                 |  | For the Three Months EndedMarch 31, |         
|                                                                                 |  | 2010                                |          |   | 2009 |  
|Cash flows from operating activities:                                            |  |                                     |          |   |      |   |          |  
|Net loss                                                                         |  | $                                   | (10,747  | ) |      | $ | (2,818   | )
|Adjustments to reconcile net loss to net cash provided by operating activities:  |  |                                     |          |   |      |   |          |  
|Provision for loan losses                                                        |  |                                     | 21,130   |   |      |   | 15,563   |  
|Other derivative income                                                          |  |                                     | (209     | ) |      |   | (1,119   | )
|Gain on sales of investment securities                                           |  |                                     | (1,433   | ) |      |   | (664     | )
|Amortization of premiums and discounts, net                                      |  |                                     | 634      |   |      |   | (387     | )
|Deferred loan fee amortization                                                   |  |                                     | (1,358   | ) |      |   | (815     | )
|Loans originated for sale                                                        |  |                                     | (7,107   | ) |      |   |         |  
|Proceeds from loan sales                                                         |  |                                     | 10,201   |   |      |   |         |  
|Depreciation and amortization                                                    |  |                                     | 569      |   |      |   | 601      |  
|Deferred income tax benefit                                                      |  |                                     | (1,791   | ) |      |   | (206     | )
|Losses on other real estate                                                      |  |                                     | 4,003    |   |      |   | 661      |  
|Tax benefit on stock options exercised or stock awards                           |  |                                     |         |   |      |   | (155     | )
|Excess tax benefit on stock options exercised and stock awards                   |  |                                     | 98       |   |      |   | 175      |  
|Cash received on termination of derivative instruments                           |  |                                     |         |   |      |   | 6,630    |  
|Other, net                                                                       |  |                                     | 2,847    |   |      |   | 2,630    |  
|Changes in other assets and liabilities:                                         |  |                                     |          |   |      |   |          |  
|Accrued interest receivable                                                      |  |                                     | (1,194   | ) |      |   | (313     | )
|Other assets                                                                     |  |                                     | 1,593    |   |      |   | (1,607   | )
|Accrued interest, taxes and other liabilities                                    |  |                                     | (9,095   | ) |      |   | (9,968   | )
|                                                                                 |  |                                     |          |   |      |   |          |  
|Net cash provided by operating activities                                        |  |                                     | 8,141    |   |      |   | 8,208    |  
|                                                                                 |  |                                     |          |   |      |   |          |  
|Cash flows from investing activities:                                            |  |                                     |          |   |      |   |          |  
|Purchase of available-for-sale securities                                        |  |                                     | (231,454 | ) |      |   | (302,577 | )
|Proceeds from principal payments and maturities of available-for-sale securities |  |                                     | 62,489   |   |      |   | 51,954   |  
|Proceeds from sales of available-for-sale securities                             |  |                                     | 42,847   |   |      |   | 47,947   |  
|Purchases of FHLB and FRB stock                                                  |  |                                     | (5,274   | ) |      |   | (4,361   | )
|Net increase in loans                                                            |  |                                     | (13,702  | ) |      |   | (839     | )
|Net additions to premises, leasehold improvements and equipment                  |  |                                     | (5       | ) |      |   | (80      | )
|Proceeds from sales of other real estate                                         |  |                                     | 5,258    |   |      |   | 1,537    |  
|Capital improvements to other real estate owned                                  |  |                                     |         |   |      |   | (261     | )
|                                                                                 |  |                                     |          |   |      |   |          |  
|Net cash used in investing activities                                            |  |                                     | (139,841 | ) |      |   | (206,680 | )
|                                                                                 |  |                                     |          |   |      |   |          |  
|Cash flows from financing activities:                                            |  |                                     |          |   |      |   |          |  
|Net increase (decrease) in deposits                                              |  |                                     | (19,248  | ) |      |   | 15,631   |  
|Net increase in other borrowings                                                 |  |                                     | 295,753  |   |      |   | 140,648  |  
|Repayments of notes payable and other advances                                   |  |                                     | (162,000 | ) |      |   |         |  
|Proceeds from notes payable and other advances                                   |  |                                     | 10,000   |   |      |   | 40,000   |  
|Preferred stock issuance costs                                                   |  |                                     |         |   |      |   | (27      | )
|Excess tax benefit on stock options exercised and stock awards                   |  |                                     | (98      | ) |      |   | (175     | )
|Dividends paid                                                                   |  |                                     | (2,510   | ) |      |   | (2,636   | )
|                                                                                 |  |                                     |          |   |      |   |          |  
|Net cash provided by financing activities                                        |  |                                     | 121,897  |   |      |   | 193,441  |  
|                                                                                 |  |                                     |          |   |      |   |          |  
|Net decrease in cash and cash equivalents                                        |  |                                     | (9,803   | ) |      |   | (5,031   | )
|Cash and cash equivalents, beginning of period                                   |  |                                     | 48,469   |   |      |   | 53,012   |  
|                                                                                 |  |                                     |          |   |      |   |          |  
|Cash and cash equivalents, end of period                                         |  | $                                   | 38,666   |   |      | $ | 47,981   |  
|                                                                                 |  |                                     |          |   |      |   |          |  

Consolidated Statements of Cash Flows continued on the next page

See accompanying notes to consolidated financial statements (unaudited)



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TAYLOR CAPITAL GROUP, INC.

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

(dollars in thousands)



|                                                                                               |  |                                     |        |      |   |       
|---------------------------------------------------------------------------------------------- |  | ----------------------------------- | ------ | ---- | - | ------
|                                                                                               |  | For the Three Months EndedMarch 31,
|                                                                                               |  | 2010                                |        | 2009
|Supplemental disclosure of cash flow information:                                              |  |                                     |        |      |   |       
|Cash paid during the period for:                                                               |  |                                     |        |      |   |       
|Interest                                                                                       |  | $                                   | 22,047 |      | $ | 31,278
|Income taxes                                                                                   |  |                                     | 6      |      |   | 5     
|                                                                                               |  |                                    
|Supplemental disclosures of noncash investing and financing activities:                        |  |                                     |        |      |   |       
|Transfer of available-for-sale investment securities to held-to-maturity investment securities |  | $                                   | 39,131 |      | $ |      
|Change in fair value of available-for-sale investments securities, net of tax                  |  |                                     | 8,653  |      |   | 10,450
|Transfer of held-for-sale loans to portfolio loans                                             |  |                                     | 41,745 |      |   |      
|Non-cash acquisition of available-for-sale investment securities                               |  |                                     |       |      |   | 14,057
|Loans transferred to other real estate and repossessed assets                                  |  |                                     | 10,385 |      |   | 6,990 



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TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1. Basis of Presentation:

These consolidated financial statements contain unaudited information as of March 31, 2010 and for the three month periods ended
March 31, 2010 and March 31, 2009. The unaudited interim financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain disclosures required by accounting principles generally
accepted in the United States of America are not included herein. In managements opinion, these unaudited financial statements include all adjustments necessary for a fair presentation of the information when read in conjunction with the
Companys audited consolidated financial statements and the related notes. The statement of operations data for the three month period ended March 31, 2010 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 March 31, 2010 and December 31, 2009 were as follows:



|                                            |  |                |           |                      |   |                       |  |   |                     |   |  |   |          
|------------------------------------------- |  | -------------- | --------- | -------------------- | - | --------------------- |  | - | ------------------- | - |  | - | ---------
|                                            |  | March 31, 2010
|                                            |  | AmortizedCost  |           | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFair Value
|                                            |  | (in thousands)
|Available-for-sale:                         |  |                |           |                      |   |                       |  |   |                     |   |  |   |          
|U.S. government sponsored agency securities |  | $              | 46,970    |                      | $ | 307                   |  | $ | (319                | ) |  | $ | 46,958   
|Mortgage-backed securities:                 |  |                |           |                      |   |                       |  |   |                     |   |  |   |          
|Residential                                 |  |                | 874,570   |                      |   | 18,235                |  |   | (5,879              | ) |  |   | 886,926  
|Commercial                                  |  |                | 164,019   |                      |   | 4,591                 |  |   | (49                 | ) |  |   | 168,561  
|Collateralized mortgage obligations         |  |                | 138,302   |                      |   | 4,728                 |  |   | (52                 | ) |  |   | 142,978  
|State and municipal obligations             |  |                | 119,871   |                      |   | 1,683                 |  |   | (241                | ) |  |   | 121,313  
|Other debt securities                       |  |                | 2,227     |                      |   | 146                   |  |   |                    |   |  |   | 2,373    
|                                            |  |                |           |                      |   |                       |  |   |                     |   |  |   |          
|Total available-for-sale                    |  |                | 1,345,959 |                      |   | 29,690                |  |   | (6,540              | ) |  |   | 1,369,109
|                                            |  |                |           |                      |   |                       |  |   |                     |   |  |   |          
|Held-to-maturity:                           |  |                |           |                      |   |                       |  |   |                     |   |  |   |          
|Residential mortgage-backed securities      |  |                | 39,131    |                      |   |                      |  |   |                    |   |  |   | 39,131   
|                                            |  |                |           |                      |   |                       |  |   |                     |   |  |   |          
|Total held-to-maturity                      |  |                | 39,131    |                      |   |                      |  |   |                    |   |  |   | 39,131   
|                                            |  |                |           |                      |   |                       |  |   |                     |   |  |   |          
|Total                                       |  | $              | 1,385,090 |                      | $ | 29,690                |  | $ | (6,540              | ) |  | $ | 1,408,240
|                                            |  |                |           |                      |   |                       |  |   |                     |   |  |   |          



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|                                            |  |                   |           |                      |   |                       |  |   |                     |   |  |   |          
|------------------------------------------- |  | ----------------- | --------- | -------------------- | - | --------------------- |  | - | ------------------- | - |  | - | ---------
|                                            |  | December 31, 2009
|                                            |  | AmortizedCost     |           | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFair Value
|                                            |  | (in thousands)   
|Available-for-sale:                         |  |                   |           |                      |   |                       |  |   |                     |   |  |   |          
|U.S. government sponsored agency securities |  | $                 | 44,956    |                      | $ | 202                   |  | $ | (64                 | ) |  | $ | 45,094   
|Mortgage-backed securities                  |  |                   |           |                      |   |                       |  |   |                     |   |  |   |          
|Residential                                 |  |                   | 803,516   |                      |   | 15,591                |  |   | (9,075              | ) |  |   | 810,032  
|Commercial                                  |  |                   | 159,688   |                      |   | 2,249                 |  |   | (544                | ) |  |   | 161,393  
|Collateralized mortgage obligations         |  |                   | 127,641   |                      |   | 4,071                 |  |   | (1,614              | ) |  |   | 130,098  
|State and municipal obligations             |  |                   | 120,716   |                      |   | 1,787                 |  |   | (196                | ) |  |   | 122,307  
|Other debt securities                       |  |                   | 2,220     |                      |   | 127                   |  |   |                    |   |  |   | 2,347    
|                                            |  |                   |           |                      |   |                       |  |   |                     |   |  |   |          
|Total available-for-sale                    |  | $                 | 1,258,737 |                      | $ | 24,027                |  | $ | (11,493             | ) |  | $ | 1,271,271
|                                            |  |                   |           |                      |   |                       |  |   |                     |   |  |   |          

As of March 31, 2010, the Company had $1.24
billion of mortgage related investment securities which consisted of residential and commercial mortgage-backed securities and collateralized mortgage obligations. Residential mortgage-backed securities and collateralized mortgage obligations
includes 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, $1.23 billion, or 99.5%, were issued by government sponsored enterprises, such as Ginnie Mae, Fannie Mae, and Freddie Mac, and the remaining $6.7 million were private-label mortgage related securities. Other debt securities at
March 31, 2010 include $2.2 million of asset backed securities collateralized by student loans.

Investment securities
with an approximate book value of $1.0 billion and $674 million at March 31, 2010 and December 31, 2009, respectively, were pledged to collateralize certain deposits, securities sold under agreements to repurchase, Federal Home Loan Bank
(FHLB) advances, and for other purposes as required or permitted by law.

During the first quarter 2010, the
Company realized gross gains of $1.4 million on the sale of available-for-sale investment securities, compared to gross gains of $664,000 in the first quarter 2009.



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The following table summarizes, for investment securities with unrealized losses as of
March 31, 2010 and December 31, 2009, 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.



|                                                     |  |                                               |         |                  |                     |        |            |       |                  |       |  |            |        |                  |  |   |         |  |   |        |  
|---------------------------------------------------- |  | --------------------------------------------- | ------- | ---------------- | ------------------- | ------ | ---------- | ----- | ---------------- | ----- |  | ---------- | ------ | ---------------- |  | - | ------- |  | - | ------ | -
|                                                     |  | March 31, 2010                                |        
|                                                     |  | 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:                                  |  |                                               |         |                  |                     |        |            |       |                  |       |  |            |        |                  |  |   |         |  |   |        |  
|U.S. government sponsored agency securities          |  | $                                             | 16,681  |                  | $                   | (319   | )          |       | $                |      |  | $          |       |                  |  | $ | 16,681  |  | $ | (319   | )
|Mortgage-backed securities:                          |  |                                               |         |                  |                     |        |            |       |                  |       |  |            |        |                  |  |   |         |  |   |        |  
|Residential                                          |  |                                               | 316,034 |                  |                     | (2,699 | )          |       |                  | 6,699 |  |            | (3,180 | )                |  |   | 322,733 |  |   | (5,879 | )
|Commercial                                           |  |                                               | 7,683   |                  |                     | (49    | )          |       |                  |      |  |            |       |                  |  |   | 7,683   |  |   | (49    | )
|Collateralized mortgage obligations                  |  |                                               | 10,024  |                  |                     | (52    | )          |       |                  |      |  |            |       |                  |  |   | 10,024  |  |   | (52    | )
|State and municipal obligations                      |  |                                               | 16,816  |                  |                     | (161   | )          |       |                  | 928   |  |            | (80    | )                |  |   | 17,744  |  |   | (241   | )
|                                                     |  |                                               |         |                  |                     |        |            |       |                  |       |  |            |        |                  |  |   |         |  |   |        |  
|Temporarily impaired securities  Available-for-sale |  | $                                             | 367,238 |                  | $                   | (3,280 | )          |       | $                | 7,627 |  | $          | (3,260 | )                |  | $ | 374,865 |  | $ | (6,540 | )
|                                                     |  |                                               |         |                  |                     |        |            |       |                  |       |  |            |        |                  |  |   |         |  |   |        |  



|                                                     |  |                                               |         |                  |                     |        |            |       |                  |        |  |            |        |                  |  |   |         |  |   |         |  
|---------------------------------------------------- |  | --------------------------------------------- | ------- | ---------------- | ------------------- | ------ | ---------- | ----- | ---------------- | ------ |  | ---------- | ------ | ---------------- |  | - | ------- |  | - | ------- | -
|                                                     |  | December 31, 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:                                  |  |                                               |         |                  |                     |        |            |       |                  |        |  |            |        |                  |  |   |         |  |   |         |  
|U.S. government sponsored agency securities          |  | $                                             | 14,906  |                  | $                   | (64    | )          |       | $                |       |  | $          |       |                  |  | $ | 14,906  |  | $ | (64     | )
|Mortgage-backed securities:                          |  |                                               |         |                  |                     |        |            |       |                  |        |  |            |        |                  |  |   |         |  |   |         |  
|Residential                                          |  |                                               | 278,252 |                  |                     | (5,365 | )          |       |                  | 6,602  |  |            | (3,710 | )                |  |   | 284,854 |  |   | (9,075  | )
|Commercial                                           |  |                                               | 62,802  |                  |                     | (544   | )          |       |                  |       |  |            |       |                  |  |   | 62,802  |  |   | (544    | )
|Collateralized mortgage obligations                  |  |                                               | 26,131  |                  |                     | (166   | )          |       |                  | 8,475  |  |            | (1,448 | )                |  |   | 34,606  |  |   | (1,614  | )
|State and municipal obligations                      |  |                                               | 14,521  |                  |                     | (117   | )          |       |                  | 930    |  |            | (79    | )                |  |   | 15,451  |  |   | (196    | )
|                                                     |  |                                               |         |                  |                     |        |            |       |                  |        |  |            |        |                  |  |   |         |  |   |         |  
|Temporarily impaired securities  Available-for-sale |  | $                                             | 396,612 |                  | $                   | (6,256 | )          |       | $                | 16,007 |  | $          | (5,237 | )                |  | $ | 412,619 |  | $ | (11,493 | )
|                                                     |  |                                               |         |                  |                     |        |            |       |                  |        |  |            |        |                  |  |   |         |  |   |         |  

At March 31, 2010, the Company had five securities in its investment portfolio that have been in an
unrealized loss position for twelve or more months, with a total unrealized loss of $3.3 million. Of the five securities in an unrealized loss position, two securities were from the Companys state and municipal obligation portfolio and three
securities were from its portfolio of private-label residential mortgage-backed securities.

The total unrealized loss for the
two state and municipal securities at March 31, 2010 totaled $80,000, or about 8% of the total amortized cost of these securities. In addition to severity and duration of loss, the Company considered the current credit rating, changes in
ratings, and any credit enhancements in the form of insurance in making its determination of other-than-temporary impairment. The Company believes the decline in fair value was related to changes in market interest rates and was not credit related.



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Of the three 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 7% of amortized cost. As part of its normal process, the Company reviewed the security, considering the severity and duration of the loss and
current credit ratings, and believes that the decline in fair value was not credit related but related to changes in interest rates and current illiquidity in the market for these types of securities. The other two private-label residential mortgage
related securities had a total unrealized loss of $2.9 million, and 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 two private-label residential mortgage-backed securities, the Company 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 continues to impact the values of these private-label securities because of the continued lack of active trading. 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, the Company had recognized an other-than-temporary impairment loss on one of these two securities. The independent cash flow
analysis performed at March 31, 2010 indicated that there was no additional credit loss on this security. For the other private-label security 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.



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The following table shows the contractual maturities of debt securities, categorized by
amortized cost and estimated fair value, at March 31, 2010.



|                                       |  |                |           |                     |   |          
|-------------------------------------- |  | -------------- | --------- | ------------------- | - | ---------
|                                       |  | AmortizedCost  |           | EstimatedFair Value
|                                       |  | (in thousands)
|Available-for-sale:                    |  |                |           |                     |   |          
|Due in one year or less                |  | $              | 835       |                     | $ | 836      
|Due after one year through five years  |  |                | 18,592    |                     |   | 18,774   
|Due after five years through ten years |  |                | 49,344    |                     |   | 49,960   
|Due after ten years                    |  |                | 100,297   |                     |   | 101,074  
|Residential mortgage-backed securities |  |                | 874,570   |                     |   | 886,926  
|Commercial mortgage-backed securities  |  |                | 164,019   |                     |   | 168,561  
|Collateralized mortgage obligations    |  |                | 138,302   |                     |   | 142,978  
|                                       |  |                |           |                     |   |          
|Total available-for-sale               |  | $              | 1,345,959 |                     | $ | 1,369,109
|Held-to-maturity:                      |  |                |           |                     |   |          
|Residential mortgage-backed securities |  | $              | 39,131    |                     | $ | 39,131   
|                                       |  |                |           |                     |   |          
|Total debt securities                  |  | $              | 1,385,090 |                     | $ | 1,408,240
|                                       |  |                |           |                     |   |          

Investment securities do not include the Banks
investment in Federal Home Loan Bank of Chicago (FHLBC) and Federal Reserve Bank (FRB) stock of $36.5 million at March 31, 2010 and $31.2 million at December 31, 2009. 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
outstanding FHLB borrowings. At March 31, 2010, the Company had a $27.5 million investment in FHLBC stock, compared to $22.3 million at December 31, 2009. Since 2007, the FHLBC has been under a cease and desist order with its regulators
that requires prior regulatory approval to declare dividends and to redeem member capital stock other than excess capital stock under limited circumstances. 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 considers factors such as the severity and duration of declines in the market value of its net assets relative to its capital amount, its
recent operating performance, its commitment to make required payments and the structure of the FHLB system which enables the regulator of the FHLBs to reallocate debt among the FHLB entities, the impact of legislative and regulatory changes on the
FHLBC and its operations, and its ability to continue to provide liquidity and funding to its members.

As of March 31,
2010, after evaluating these factors, considering that transactions of FHLBC stock in first quarter 2010 continue to occur at par value and that the Companys redemption of $5.0 million of FHLBC stock in the fourth quarter of 2009 occurred at
par, the Company believes that it will ultimately recover the par value of the FHLBC stock.



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3. Loans:

Loans classified by type at March 31, 2010 and December 31, 2009 were as follows:



|                                                                              |  |               |           |   |                  |   |           |  
|----------------------------------------------------------------------------- |  | ------------- | --------- | - | ---------------- | - | --------- | -
|                                                                              |  | March 31,2010 |           |   | December 31,2009 |  
|Portfolio Loans                                                               |  |               |           |   |                  |   |           |  
|Commercial and industrial                                                     |  | $             | 1,263,210 |   |                  | $ | 1,264,369 |  
|Commercial real estate secured                                                |  |               | 1,180,988 |   |                  |   | 1,171,777 |  
|Residential construction and land                                             |  |               | 206,727   |   |                  |   | 221,859   |  
|Commercial construction and land                                              |  |               | 142,845   |   |                  |   | 142,584   |  
|Residential real estate mortgages                                             |  |               | 87,400    |   |                  |   | 57,887    |  
|Home equity loans and lines of credit 88,784                                  |  |               | 88,784    |   |                  |   | 86,227    |  
|Consumer                                                                      |  |               | 7,791     |   |                  |   | 8,221     |  
|Other loans                                                                   |  |               | 538       |   |                  |   | 557       |  
|                                                                              |  |               |           |   |                  |   |           |  
|Gross loans                                                                   |  |               | 2,978,283 |   |                  |   | 2,953,481 |  
|Less: Unearned discount                                                       |  |               | (4        | ) |                  |   | (6        | )
|                                                                              |  |               |           |   |                  |   |           |  
|Total loans                                                                   |  |               | 2,978,279 |   |                  |   | 2,953,475 |  
|Less: Allowance for loan losses                                               |  |               | (100,151  | ) |                  |   | (106,185  | )
|                                                                              |  |               |           |   |                  |   |           |  
|Portfolio Loans, net                                                          |  | $             | 2,878,128 |   |                  | $ | 2,847,290 |  
|                                                                              |  |               |           |   |                  |   |           |  
|Loans Held for Sale                                                           |  |               |           |   |                  |   |           |  
|Commercial and bulk purchased mortgage loans (at lower of cost or fair value) |  | $             | 24,293    |   |                  | $ | 81,853    |  
|Originated mortgage loans (at fair value)                                     |  |               | 4,199     |   |                  |   |          |  
|                                                                              |  |               |           |   |                  |   |           |  
|Total Loans Held for Sale                                                     |  | $             | 28,492    |   |                  | $ | 81,853    |  
|                                                                              |  |               |           |   |                  |   |           |  

The total amount of loans transferred to third parties as loan participations at March 31, 2010 was $377.3
million, all of which has been derecognized as a sale under the applicable accounting guidance in effect at the time of the transfers of the financial assets. The Company continues to have involvement with these loans through relationship management
and all servicing responsibilities.

At March 31, 2010, loans held for sale included $4.2 million of residential mortgage
loans originated by our new residential origination unit for which the Company has elected to account for under the fair value options in accordance with ASC 825  Financial Instruments. The unpaid principal balance associated with these loans
was $4.0 million at March 31, 2010 and the resulting unrealized gain of $187,000 was included in mortgage origination revenues in noninterest income on the Consolidated Statements of Operations. None of these loans are 90 days or more past due
or on a nonaccrual status. Interest income on these loans is included in net interest income and is not considered part of the change in fair value.

The bulk purchased mortgage loans and the commercial loans held for sale are accounted for at the lower of cost or fair value.



11



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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 repayment schedule.



|                                                                                             |  |                |         |                  |   |        
|-------------------------------------------------------------------------------------------- |  | -------------- | ------- | ---------------- | - | -------
|                                                                                             |  | March 31,2010  |         | December 31,2009
|                                                                                             |  | (in thousands)
|Recorded balance of loans contractually past due 90 days or more but still accruing interest |  | $              | 58      |                  | $ | 59     
|Nonaccrual loans                                                                             |  |                | 141,132 |                  |   | 141,403
|                                                                                             |  |                |         |                  |   |        
|Total nonperforming loans                                                                    |  | $              | 141,190 |                  | $ | 141,462
|                                                                                             |  |                |         |                  |   |        
|Restructured loans not included in nonperforming loans                                       |  | $              | 1,247   |                  | $ | 1,196  
|Recorded balance of impaired loans:                                                          |  |                |         |                  |   |        
|With related allowance for loan loss                                                         |  | $              | 101,364 |                  | $ | 95,936 
|With no related allowance for loan loss                                                      |  |                | 31,547  |                  |   | 45,761 
|                                                                                             |  |                |         |                  |   |        
|Total recorded balance of impaired loans                                                     |  | $              | 132,911 |                  | $ | 141,697
|                                                                                             |  |                |         |                  |   |        
|Allowance for loan losses related to impaired loans                                          |  | $              | 24,341  |                  | $ | 33,640 

4. Interest-Bearing
Deposits:

Interest-bearing deposits at March 31, 2010 and December 31, 2009 were as follows:



|                                            |  |                |           |                   |   |          
|------------------------------------------- |  | -------------- | --------- | ----------------- | - | ---------
|                                            |  | March 31,2010  |           | December 
31,2009
|                                            |  | (in thousands)
|NOW accounts                                |  | $              | 227,981   |                   | $ | 307,025  
|Savings accounts                            |  |                | 40,903    |                   |   | 41,479   
|Money market deposits                       |  |                | 489,948   |                   |   | 445,418  
|Time deposits:                              |  |                |           |                   |   |          
|Certificates of deposit                     |  |                | 784,108   |                   |   | 775,663  
|Out-of-local-market certificates of deposit |  |                | 105,384   |                   |   | 79,015   
|CDARS time deposits                         |  |                | 163,025   |                   |   | 116,256  
|Brokered certificates of deposit            |  |                | 483,799   |                   |   | 484,035  
|Public time deposits                        |  |                | 75,170    |                   |   | 68,763   
|                                            |  |                |           |                   |   |          
|Total time deposits                         |  |                | 1,611,486 |                   |   | 1,523,732
|                                            |  |                |           |                   |   |          
|Total                                       |  | $              | 2,370,318 |                   | $ | 2,317,654
|                                            |  |                |           |                   |   |          

As of March 31, 2010, time deposits in the amount
of $100,000 or more totaled $642.4 million compared to $539.1 million at December 31, 2009.

Brokered CDs are carried net
of the related broker placement fees and fair value adjustments of $1.3 million at March 31, 2010 and $1.4 million at December 31, 2009. Broker placement fees are amortized to the maturity date of the related brokered CDs, and are included
in deposit interest expense. Certain brokered CDs had an option that allowed the Company to call the CD before its stated maturity. When a brokered CD is called, any unamortized broker placement fee and fair value adjustment are written off and
included in noninterest expense on the Consolidated Statements of Operations. At March 31, 2010, the Company had no brokered CDs that could be called before maturity. During the first quarter of 2009, the Company wrote-off $527,000 of
unamortized broker placement fees and fair value adjustment.



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5. Other Borrowings:

Other borrowings at March 31, 2010 and December 31, 2009 consisted of the following:



|                                                |  |                        |         |                     |                   |   |                |   |                     |  |      |  
|----------------------------------------------- |  | ---------------------- | ------- | ------------------- | ----------------- | - | -------------- | - | ------------------- |  | ---- | -
|                                                |  | March 31, 2010         |         |                     | December 31, 2009 |  
|                                                |  | AmountBorrowed         |         | WeightedAverageRate |                   |   | AmountBorrowed |   | WeightedAverageRate | 
|                                                |  | (dollars in thousands) |        
|Securities sold under agreements to repurchase: |  |                        |         |                     |                   |   |                |   |                     |  |      |  
|Overnight                                       |  | $                      | 36,488  |                     | 0.16              | % |                | $ | 45,453              |  | 0.16 | %
|Term                                            |  |                        | 387,695 |                     | 2.32              |   |                |   | 200,000             |  | 4.05 |  
|Federal funds purchased                         |  |                        | 207,200 |                     | 0.47              |   |                |   | 89,384              |  | 0.35 |  
|U.S. Treasury tax and loan note option          |  |                        | 2,039   |                     | 0.00              |   |                |   | 2,832               |  | 0.00 |  
|                                                |  |                        |         |                     |                   |   |                |   |                     |  |      |  
|Total                                           |  | $                      | 633,422 |                     | 1.58              | % |                | $ | 337,669             |  | 2.52 | %
|                                                |  |                        |         |                     |                   |   |                |   |                     |  |      |  

Overnight repurchase agreements are collateralized financing transactions primarily executed with local Bank
customers and with overnight maturities. Term repurchase agreements are collateralized financing transactions executed with broker/dealer counterparties with terms longer than overnight. As of March 31, 2010 and December 31, 2009, the term
repurchase agreements consisted of the following:



|                                                                                                                                                                                                    |  |                |         |                  |   |        
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | ---------------- | - | -------
|                                                                                                                                                                                                    |  | March 31,2010  |         | December 31,2009
|                                                                                                                                                                                                    |  | (in thousands)
|Term Repurchase Agreements:                                                                                                                                                                         |  |                |         |                  |   |        
|Repurchase agreement - rate 0.30%, matured April 1, 2010                                                                                                                                            |  | $              | 48,329  |                  | $ |       
|Repurchase agreement - rate 0.30%, matured April 1, 2010                                                                                                                                            |  |                | 51,814  |                  |   |       
|Repurchase agreement - rate 0.28%, matured April 5, 2010                                                                                                                                            |  |                | 52,552  |                  |   |       
|Repurchase agreement - rate 1.29%, due January 26, 2012                                                                                                                                             |  |                | 10,000  |                  |   |       
|Repurchase agreement - rate 1.24%, due March 2, 2012                                                                                                                                                |  |                | 25,000  |                  |   |       
|Repurchase agreement - rate 4.08%, due September 13, 2010, callable after December 13, 2007                                                                                                         |  |                | 40,000  |                  |   | 40,000 
|Repurchase agreement - rate 4.02%, due October 11, 2010, callable after January 10, 2008                                                                                                            |  |                | 40,000  |                  |   | 40,000 
|Repurchase agreement - rate 3.20%, due December 13, 2012, callable after March 13, 2008                                                                                                             |  |                | 20,000  |                  |   | 20,000 
|Structured repurchase agreement - rate 4.41%, due August 31, 2012, callable after August 31, 2009, with embedded double
interest rate caps on the 3 month LIBOR at 5.58% and a floor of 0.00%       |  |                | 40,000  |                  |   | 40,000 
|Structured repurchase agreement - rate 4.31%, due September 27, 2012, callable after September 27, 2009, with embedded
double interest rate caps on the 3 month LIBOR at 5.20% and a floor of 0.00% |  |                | 40,000  |                  |   | 40,000 
|Structured repurchase agreement - rate 3.70%, due December 13, 2012, callable after December 13, 2009, with embedded
double interest rate caps on the 3 month LIBOR at 5.11% and a floor of 0.00%   |  |                | 20,000  |                  |   | 20,000 
|                                                                                                                                                                                                    |  |                |         |                  |   |        
|Total term repurchase agreements                                                                                                                                                                    |  | $              | 387,695 |                  | $ | 200,000
|                                                                                                                                                                                                    |  |                |         |                  |   |        



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6. Notes Payable and Other Advances:

Notes payable and other advances at March 31, 2010 and December 31, 2009 consisted of the following:



|                                                                                                                                                       |  |                |         |              |   |        
|------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------- | ------- | ------------ | - | -------
|                                                                                                                                                       |  | March 31,2010  |         | Dec. 31,2009
|                                                                                                                                                       |  | (in thousands)
|Taylor Capital Group, Inc.:                                                                                                                            |  |                |         |              |   |        
|Revolving credit facility  matured March 31, 2010; $15.0 million maximum available at December 31, 2009, interest
rate at December 31, 2009 was 5.00% |  | $              |        |              | $ | 12,000 
|                                                                                                                                                       |  |                |         |              |   |        
|Total notes payable                                                                                                                                    |  |                |        |              |   | 12,000 
|                                                                                                                                                       |  |                |         |              |   |        
|Cole Taylor Bank:                                                                                                                                      |  |                |         |              |   |        
|Federal Reserve Bank Term Auction Facility 0.25%, matured January 14, 2010                                                                             |  |                |        |              |   | 460,000
|FHLB overnight advance  0.21% at March 31, 2010                                                                                                       |  |                | 310,000 |              |   |       
|FHLB advance  4.59%, matured April 5, 2010, callable after April 4, 2008                                                                              |  |                | 25,000  |              |   | 25,000 
|FHLB advance  0.62%, due November 10, 2010                                                                                                            |  |                | 10,000  |              |   | 10,000 
|FHLB advance  4.83%, due February 1, 2011, callable after January 8, 2004                                                                             |  |                | 25,000  |              |   | 25,000 
|FHLB advance  2.29%, due April 7, 2011, callable after April 7, 2009                                                                                  |  |                | 25,000  |              |   | 25,000 
|FHLB advance  0.91%, due June 1, 2011                                                                                                                 |  |                | 10,000  |              |   | 10,000 
|FHLB advance  2.84%, due July 14, 2011, callable after July 14, 2009                                                                                  |  |                | 17,500  |              |   | 17,500 
|FHLB advance  1.39%, due January 11, 2012                                                                                                             |  |                | 10,000  |              |   |       
|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                                                                                                                                   |  |                | 475,000 |              |   | 615,000
|                                                                                                                                                       |  |                |         |              |   |        
|Total notes payable and other advances                                                                                                                 |  | $              | 475,000 |              | $ | 627,000
|                                                                                                                                                       |  |                |         |              |   |        

The Company had a $15.0 million revolving credit
facility, which was repaid prior to its March 31, 2010 maturity.

At March 31, 2010, the FHLB advances were
collateralized by $782.4 million of investment securities and a blanket lien on $206.8 million of qualified first-mortgage residential and home equity loans. Based on the value of collateral pledged at March 31, 2010, the Bank had additional
borrowing capacity at the FHLB of $389.6 million. In comparison, at December 31, 2009, the FHLB advances were collateralized by $352.0 million of investment securities and a blanket lien on $143.0 million of qualified first-mortgage residential
and home equity loans with additional borrowing capacity of $278.7 million.

The Bank participates in the FRBs Borrower
In Custody (BIC) program. At March 31, 2010, the Bank pledged $773.0 million of commercial loans as collateral for an available $466.2 million borrowing capacity at the FRB. At December 31, 2009, the Bank also participated in
the FRBs Term Auction Facility. At December 31, 2009, the Bank pledged $85.3 million of securities and $790.8 million of commercial loans for these borrowings at the FRB. During the first quarter of 2010, the Bank replaced its borrowing
under the Term Auction Facility as the FRB plans to phase out the program.



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##### Table of Contents

7. Stockholders Equity:

In March 2010, the Company announced its intention to increase its capital levels to provide additional liquidity to continue to act as a
source of strength for the Bank, to better align the Companys capital position to its peers and to support future growth plans.

The Company has made a tender offer to holders of its Series A convertible preferred stock to convert their shares into common equity.
Shares of the Series A preferred is currently convertible into 6.0 million shares of Company common stock. The Company has offered to issue up to an additional 1.2 million common shares to induce holders of the Series A preferred to
convert to common shares. If all holders accept the offer and convert to common shares, the Company would issue a total of 7.2 million shares of common stock and would have converted $60.0 million of preferred stock into common equity. The
transaction would increase common stock and surplus for the fair value of the 1.2 million shares issued as an inducement. The fair value of the 1.2 million common shares issued would also be considered a non-cash implied dividend to holders of
the Series A preferred that would reduce retained earnings and result in no net impact to total stockholders equity. In the period in which the inducement shares are issued, the non-cash implied dividends would be a deduction from net income
or loss in arriving at net income or loss applicable to common stockholders on the Consolidated Statement of Operations and would be considered in the determination of basic and diluted earnings or loss per share.

The Company is also in the process of a private placement of $30 million of convertible preferred stock and $30 million of subordinated
notes issued at the holding company level. We anticipate completing the private placement and the conversion of the Series A preferred into common equity during the second quarter of 2010. The conversion of the Series A preferred is expected to
occur during the second quarter of 2010. Effective immediately after the payment of the quarterly dividend on April 15, 2010, the Company does not expect to declare or pay dividends on the Series A preferred stock.

The terms of the Series B Preferred require the Company to obtain consent, under certain circumstances, before paying dividends on common
shares, and the terms of the junior subordinated debentures and Series A Preferred place defined restrictions on the Companys ability to pay common dividends in the event of deferral of the payment of interest or dividends on those securities.
Consistent with past practice, the Company provides notice to its regulators before the payment of any dividends on the Series A and Series B preferred stock.



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##### Table of Contents

8. Other Comprehensive Income:

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



|                                                                           |  |                                          |        |   |                                          |   |        |           |  |   |                 |   |  |           |        |           |  |   |       |  |   |        |  
|-------------------------------------------------------------------------- |  | ---------------------------------------- | ------ | - | ---------------------------------------- | - | ------ | --------- |  | - | --------------- | - |  | --------- | ------ | --------- |  | - | ----- |  | - | ------ | -
|                                                                           |  | For the Three Months EndedMarch 31, 2010 |        |   | For the Three Months EndedMarch 31, 2009 |  
|                                                                           |  | BeforeTaxAmount                          |        |   | TaxEffect                                |   |        | Net ofTax |  |   | BeforeTaxAmount |   |  | TaxEffect |        | Net ofTax | 
|                                                                           |  | (in thousands)                           |       
|Change in unrealized gains on available-for-sale securities                |  | $                                        | 12,049 |   |                                          | $ | (2,530 | )         |  | $ | 9,519           |   |  | $         | 9,891  |           |  | $ | 960   |  | $ | 10,851 |  
|Less: reclassification adjustment for gains included in net loss           |  |                                          | (1,433 | ) |                                          |   | 567    |           |  |   | (866            | ) |  |           | (664   | )         |  |   | 263   |  |   | (401   | )
|                                                                           |  |                                          |        |   |                                          |   |        |           |  |   |                 |   |  |           |        |           |  |   |       |  |   |        |  
|Change in net unrealized gains on available-for-sale securities            |  |                                          | 10,616 |   |                                          |   | (1,963 | )         |  |   | 8,653           |   |  |           | 9,227  |           |  |   | 1,223 |  |   | 10,450 |  
|Change in deferred gains and losses recorded in other comprehensive income |  |                                          | (1,701 | ) |                                          |   | 675    |           |  |   | (1,026          | ) |  |           | (2,106 | )         |  |   | 834   |  |   | (1,272 | )
|                                                                           |  |                                          |        |   |                                          |   |        |           |  |   |                 |   |  |           |        |           |  |   |       |  |   |        |  
|Other comprehensive income                                                 |  | $                                        | 8,915  |   |                                          | $ | (1,288 | )         |  | $ | 7,627           |   |  | $         | 7,121  |           |  | $ | 2,057 |  | $ | 9,178  |  
|                                                                           |  |                                          |        |   |                                          |   |        |           |  |   |                 |   |  |           |        |           |  |   |       |  |   |        |  

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 Financial
Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 740 - Income Taxes.



16



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##### Table of Contents

9. Earnings (Loss) 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 the three month period ended March 31, 2010, all common stock equivalents, consisting of 951,371 stock options 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 loss per share. For the three month period ended March 31, 2009, stock options to purchase 680,209
common shares, 2,862,647 warrants to purchase shares of common stock and the convertible Series A preferred stock which would be converted into 6,000,00 shares of common stock were not included in the computation of diluted loss per share because
the effect would have been antidilutive.



|                                                   |  |                                                   |            |   |      |   |            |  
|-------------------------------------------------- |  | ------------------------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                   |  | For the Three MonthsEnded
March 31,               |           
|                                                   |  | 2010                                              |            |   | 2009 |  
|                                                   |  | (dollars in thousands,
except per share amounts.) |           
|Net loss                                           |  | $                                                 | (10,747    | ) |      | $ | (2,818     | )
|Preferred dividends and discounts                  |  |                                                   | (2,887     | ) |      |   | (2,862     | )
|                                                   |  |                                                   |            |   |      |   |            |  
|Net loss available to common stockholders          |  | $                                                 | (13,634    | ) |      | $ | (5,680     | )
|                                                   |  |                                                   |            |   |      |   |            |  
|Weighted average common shares outstanding         |  |                                                   | 10,515,668 |   |      |   | 10,471,516 |  
|Dilutive effect of common stock equivalents        |  |                                                   |           |   |      |   |           |  
|                                                   |  |                                                   |            |   |      |   |            |  
|Diluted weighted average common shares outstanding |  |                                                   | 10,515,668 |   |      |   | 10,471,516 |  
|                                                   |  |                                                   |            |   |      |   |            |  
|Basic loss per common share                        |  | $                                                 | (1.30      | ) |      | $ | (0.54      | )
|Diluted loss per common share                      |  |                                                   | (1.30      | ) |      |   | (0.54      | )

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. The stock options granted during the first quarter of 2010 had a
weighted average grant date fair value of $4.44 per share. The weighted average assumptions used in the determination of the grant date fair value included a risk-free interest rate of 2.587%, an expected stock price volatility of 55.00%, an
expected dividend payout of 0.00% and an expected option life of 5.25 years. The stock options granted in the first quarter of 2010 vest over a four-year term (vesting 25% per year) and expire eight years following the grant date. Compensation
expense associated with stock options is recognized over the vesting period, or until the employee or director becomes retirement eligible if that time period is shorter.

The following is a summary of stock option activity for the three month period ended March 31, 2010:



|                               |  |         |   |  |                                |      
|------------------------------ |  | ------- | - |  | ------------------------------ | -----
|                               |  | Shares  |   |  | Weighted-AverageExercise Price
|Outstanding at January 1, 2010 |  | 813,099 |   |  | $                              | 18.76
|Granted                        |  | 172,450 |   |  |                                | 8.75 
|Exercised                      |  |        |   |  |                                |     
|Forfeited                      |  | (480    | ) |  |                                | 32.60
|Expired                        |  | (33,698 | ) |  |                                | 24.08
|                               |  |         |   |  |                                |      
|Outstanding at March 31, 2010  |  | 951,371 |   |  |                                | 16.75
|                               |  |         |   |  |                                |      
|Exercisable at March 31, 2010  |  | 494,970 |   |  |                                | 23.88
|                               |  |         |   |  |                                |      



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##### Table of Contents

As of March 31, 2010, the total compensation cost related to nonvested stock options
that has not yet been recognized totaled $1.7 million and the weighted average period over which these costs are expected to be recognized is approximately 3.4 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.

The following table provides information regarding nonvested restricted stock for the three month period
ended March 31, 2010:



|                             |  |         |   |  |                                      |      
|---------------------------- |  | ------- | - |  | ------------------------------------ | -----
|Nonvested Restricted Stock   |  | Shares  |   |  | Weighted-AverageGrant-DateFair Value
|Nonvested at January 1, 2010 |  | 572,322 |   |  | $                                    | 15.06
|Granted                      |  |        |   |  |                                      |     
|Vested                       |  | (19,530 | ) |  |                                      | 21.39
|Forfeited                    |  | (510    | ) |  |                                      | 18.53
|                             |  |         |   |  |                                      |      
|Nonvested at March 31, 2010  |  | 552,282 |   |  |                                      | 14.83
|                             |  |         |   |  |                                      |      

As of March 31, 2010, the total compensation cost
related to nonvested restricted stock that has not yet been recognized totaled $5.7 million and the weighted average period over which these costs are expected to be recognized is approximately 2.9 years.



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##### Table of Contents

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 manage the interest rate risk associated with its commercial loan portfolio and its brokered CDs. The following table describes the derivative
instruments outstanding at March 31, 2010 (dollars in thousands):



|                                                          |  |                |         |              |                         |          |         |                                       |                                      |           |   |         |  
|--------------------------------------------------------- |  | -------------- | ------- | ------------ | ----------------------- | -------- | ------- | ------------------------------------- | ------------------------------------ | --------- | - | ------- | -
|Product                                                   |  | NotionalAmount |         | Strike Rates |                         | Maturity |         | BalanceSheet/IncomeStatement Location |                                      | FairValue |  
|Fair value hedging derivative instruments:                |  |                |         |              |                         |          |         |                                       |                                      |           |   |         |  
|Brokered CD Interest Rate Swappay variable/receive fixed |  | $              | 31,000  |              | Receive 3.03%Pay 0.251% |          | 5.0 yrs |                                       | Other assets/Noninterest income      |           | $ | 339     |  
|                                                          |  |                |         |              |                         |          |         |                                       |                                      |           |   |         |  
|Total hedging derivative instruments                      |  | $              | 31,000  |              |                         |          |         |                                       |                                      |           |   |         |  
|Non-hedging derivative instruments:                       |  |                |         |              |                         |          |         |                                       |                                      |           |   |         |  
|Customer Interest Rate Swappay fixed/receive variable    |  | $              | 201,227 |              | Pay 4.16%Receive 0.515% |          | 3.0 yrs |                                       | Other liabilities/Noninterest income |           |   | (11,216 | )
|Customer Interest Rate Swapreceive fixed/pay variable    |  |                | 201,227 |              | Receive 4.16%Pay 0.515% |          | 3.0 yrs |                                       | Other assets/Noninterest income      |           |   | 11,038  |  
|                                                          |  |                |         |              |                         |          |         |                                       |                                      |           |   |         |  
|Total non-hedging derivative instruments                  |  |                | 402,454 |              |                         |          |         |                                       |                                      |           |   |         |  
|                                                          |  |                |         |              |                         |          |         |                                       |                                      |           |   |         |  
|Total derivative instruments                              |  | $              | 433,454 |              |                         |          |         |                                       |                                      |           |   |         |  
|                                                          |  |                |         |              |                         |          |         |                                       |                                      |           |   |         |  

During the first quarter of 2010, the Company entered into $31.0 million of notional amount
interest rate swap agreements that are designated as fair value hedges against certain brokered CDs. The CD swaps are used to convert the fixed rate paid on the brokered CDs to a variable rate based upon 3-month LIBOR computed on the notional
amount. The fair value of these hedging derivative instruments is reported on the Consolidated Balance Sheets in other assets and the change in fair value of the related hedged brokered CD is reported as an adjustment to the carrying value of the
brokered CDs. Total ineffectiveness on the interest rate swap was $10,000 and was recorded in other derivative income in noninterest income.

12. Fair Value:

On January 1, 2008, the Company adopted FASB ASC 820 - Fair Value Measurements and Disclosures. On January 1, 2010, the Company
elected to account for all residential mortgage loans originated by its new residential mortgage loan operations and currently held for sale at fair value under the fair value option in accordance with ASC 825  Financial Instruments. The
Company has not elected the fair value option for any other financial asset or liability.

Fair Value Measurement

In accordance with FASB ASC 820, 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.



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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.

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 derivative instrument 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. In
accordance with accounting guidance of fair value measurements, 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 held for sale:

At March 31, 2010, loans held for sale included of $4.2 million residential mortgage loans that have been originated by the Company
and for which the Company has elected to account for on a recurring basis under the fair value option.

In addition, the
Company has certain residential mortgage loans that it acquired in a bulk purchase transaction and nonaccrual commercial loans classified as held for sale. These loans are recorded at the lower of cost or fair value and are recorded at fair value on
a nonrecurring basis. 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 classified in Level 2 of the fair value hierarchy. The fair value of the commercial
loans was initially determined based upon the estimated net contracted sales price, less cost to sell and was classified in Level 2 of the fair value hierarchy. During the first quarter of 2010, the Company transferred these commercial loans to
portfolio at the lower of cost or fair value with a charge to nonperforming asset expense in noninterest expense in the Consolidated Statements of Operations.

Loans:

The Company does
not record loans 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 established. At
March 31, 2010, a portion of the Companys total impaired loans were evaluated based on the fair value of the collateral. In accordance with fair value measurements, 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 the liquidation value of collateral, the Company classifies the impaired loan as nonrecurring Level 3 in 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.



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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.

Assets and Liabilities Measured on a Recurring Basis

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



|                                                    |  |                         |           |                                       |   |                                           |  |                                        |           |  |   |  
|--------------------------------------------------- |  | ----------------------- | --------- | ------------------------------------- | - | ----------------------------------------- |  | -------------------------------------- | --------- |  | - | -
|                                                    |  | As of March 31, 2010   
|                                                    |  | Total FairValue         |           | QuotedPrices inActiveMarkets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level 3)
|                                                    |  | (in thousands)         
|Assets:                                             |  |                         |           |                                       |   |                                           |  |                                        |           |  |   |  
|Available-for-sale investment securities            |  | $                       | 1,369,109 |                                       | $ |                                          |  | $                                      | 1,369,109 |  | $ | 
|Loans held for sale accounted for at fair value     |  |                         | 4,199     |                                       |   |                                          |  |                                        | 4,199     |  |   | 
|Assets held in employee deferred compensation plans |  |                         | 2,290     |                                       |   | 2,290                                     |  |                                        |          |  |   | 
|Derivative instruments                              |  |                         | 11,377    |                                       |   |                                          |  |                                        | 11,377    |  |   | 
|Liabilities:                                        |  |                         |           |                                       |   |                                           |  |                                        |           |  |   |  
|Derivative instruments                              |  |                         | 11,216    |                                       |   |                                          |  |                                        | 11,216    |  |   | 
|                                                    | 
|                                                    |  | As of December 31, 2009
|                                                    |  | Total FairValue         |           | QuotedPrices inActiveMarkets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level 3)
|                                                    |  | (in thousands)         
|Assets:                                             |  |                         |           |                                       |   |                                           |  |                                        |           |  |   |  
|Available-for-sale investment securities            |  | $                       | 1,271,271 |                                       | $ |                                          |  | $                                      | 1,271,271 |  | $ | 
|Assets held in employee deferred compensation plans |  |                         | 2,461     |                                       |   | 2,461                                     |  |                                        |          |  |   | 
|Derivative instruments                              |  |                         | 10,630    |                                       |   |                                          |  |                                        | 10,630    |  |   | 
|Liabilities:                                        |  |                         |           |                                       |   |                                           |  |                                        |           |  |   |  
|Derivative instruments                              |  |                         | 10,216    |                                       |   |                                          |  |                                        | 10,216    |  |   | 



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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, loans held for sale accounted for at the lower
of cost or fair value, and other real estate owned and repossessed assets.



|                                               |  |                      |        |                                       |   |                                           |  |                                        |        |  |   |       
|---------------------------------------------- |  | -------------------- | ------ | ------------------------------------- | - | ----------------------------------------- |  | -------------------------------------- | ------ |  | - | ------
|                                               |  | As of March 31, 2010
|                                               |  | Total FairValue      |        | QuotedPrices inActiveMarkets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level 3)
|                                               |  | (in thousands)      
|Assets:                                        |  |                      |        |                                       |   |                                           |  |                                        |        |  |   |       
|Loans and loans held for sale                  |  | $                    | 77,023 |                                       | $ |                                          |  | $                                      | 64,243 |  | $ | 12,780
|Other real estate owned and repossessed assets |  |                      | 23,474 |                                       |   |                                          |  |                                        | 7,113  |  |   | 16,361



|                                               |  |                         |        |                                       |   |                                           |  |                                        |        |  |   |       
|---------------------------------------------- |  | ----------------------- | ------ | ------------------------------------- | - | ----------------------------------------- |  | -------------------------------------- | ------ |  | - | ------
|                                               |  | As of December 31, 2009
|                                               |  | Total FairValue         |        | QuotedPrices inActiveMarkets(Level 1) |   | SignificantOtherObservableInputs(Level 2) |  | SignificantUnobservableInputs(Level 3)
|                                               |  | (in thousands)         
|Assets:                                        |  |                         |        |                                       |   |                                           |  |                                        |        |  |   |       
|Loans and loans held for sale                  |  | $                       | 83,868 |                                       | $ |                                          |  | $                                      | 68,269 |  | $ | 15,599
|Other real estate owned and repossessed assets |  |                         | 18,064 |                                       |   |                                          |  |                                        | 7,725  |  |   | 10,339

At March 31,
2010, the Company had $12.8 million of impaired loans and $16.4 million of other real estate and repossessed assets measured at fair value on a nonrecurring basis and classified in Level 3 in the fair value hierarchy. The carrying value of the
impaired loans totaled $17.3 million and was written down to fair value of $12.8 million through a provision for loan loss of $4.5 million which was included in earnings in the first quarter of 2010. During the first quarter of 2010, impaired loans
classified as Level 3 was reduced by $2.8 million because of sales, payments or net charge-offs. No additional impaired loans were classified as Level 3 during the first quarter of 2010. The carrying value of the other real estate and repossessed
assets totaled $18.3 million and was written down to fair value of $16.4 million, resulting in a loss of $1.9 million which was included in earnings in the first quarter of 2010 as either nonperforming asset expense or as additional loan loss
provision for assets recently transferred from the loan portfolio. During the first quarter of 2010, $7.9 million of other real estate owned assets were added to Level 3, while $1.9 million of sales or write-downs reduced other real estate owned
assets classified as Level 3.



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Fair Value of Financial Instruments

The Company is required to provide certain disclosures of the estimated fair value of its financial instruments. A portion of the
Companys assets and liabilities are considered financial instruments. Many of the Companys financial instruments, however, lack an available, or readily determinable, trading market as characterized by a willing buyer and willing seller
engaging in an exchange transaction. The Company can use significant estimations and present value calculations for the purposes of estimating fair values. Accordingly, fair values are based on various factors relative to current economic
conditions, risk characteristics, and other factors. The assumptions and estimates used in the fair value determination process are subjective in nature and involve uncertainties and significant judgment and, therefore, fair values cannot be
determined with precision. Changes in assumptions could significantly affect these estimated values.

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 amount 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.

Investment Securities:

The Company obtains fair value measurements from an independent pricing service. These 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 the residential mortgage loans held for sale, the fair value has been determined based upon quoted market prices for
similar assets in active markets. For commercial loans held for sale, the fair value has been determined based upon the estimated net contracted sales prices, less cost to sell.

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. This method of
estimating fair value does not incorporate the exit price concept of fair value prescribed by ASC Fair Value Measurements and Disclosures, (Topic 820). 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



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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 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 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 posting 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.

Other
Assets:

Financial instruments in other assets consist of assets in the Companys nonqualified deferred compensation
plan. The carrying value of these assets approximates their fair value and is 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.



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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 other 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 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:



|                                                  |  |                |           |                   |   |               |  |           |           |  |   |          
|------------------------------------------------- |  | -------------- | --------- | ----------------- | - | ------------- |  | --------- | --------- |  | - | ---------
|                                                  |  | March 31, 2010 |           | December 31, 2009
|                                                  |  | CarryingValue  |           | FairValue         |   | CarryingValue |  | FairValue
|                                                  |  | (in thousands)
|Financial Assets:                                 |  |                |           |                   |   |               |  |           |           |  |   |          
|Cash and cash equivalents                         |  | $              | 38,666    |                   | $ | 38,666        |  | $         | 48,469    |  | $ | 48,469   
|Investments                                       |  |                | 1,408,240 |                   |   | 1,408,240     |  |           | 1,271,271 |  |   | 1,271,271
|Loans held for sale                               |  |                | 28,492    |                   |   | 28,842        |  |           | 81,853    |  |   | 82,104   
|Loans, net of allowance                           |  |                | 2,878,128 |                   |   | 2,838,587     |  |           | 2,847,290 |  |   | 2,799,863
|Investment in FHLB and Federal Reserve Bank stock |  |                | 36,484    |                   |   | 36,484        |  |           | 31,210    |  |   | 31,210   
|Accrued interest receivable                       |  |                | 17,847    |                   |   | 17,847        |  |           | 16,653    |  |   | 16,653   
|Derivative financial instruments                  |  |                | 11,377    |                   |   | 11,377        |  |           | 10,630    |  |   | 10,630   
|Other assets                                      |  |                | 2,290     |                   |   | 2,290         |  |           | 2,461     |  |   | 2,461    
|                                                  |  |                |           |                   |   |               |  |           |           |  |   |          
|Total financial assets                            |  | $              | 4,421,524 |                   | $ | 4,382,333     |  | $         | 4,309,837 |  | $ | 4,262,661
|                                                  |  |                |           |                   |   |               |  |           |           |  |   |          
|Financial Liabilities:                            |  |                |           |                   |   |               |  |           |           |  |   |          
|Deposits without stated maturities                |  | $              | 1,346,234 |                   | $ | 1,346,234     |  | $         | 1,453,069 |  | $ | 1,453,069
|Deposits with stated maturities                   |  |                | 1,611,486 |                   |   | 1,639,783     |  |           | 1,523,731 |  |   | 1,554,230
|Other borrowings                                  |  |                | 633,422   |                   |   | 645,927       |  |           | 337,669   |  |   | 352,352  
|Notes payable and other advances                  |  |                | 475,000   |                   |   | 478,563       |  |           | 627,000   |  |   | 630,709  
|Accrued interest payable                          |  |                | 8,669     |                   |   | 8,669         |  |           | 11,457    |  |   | 11,457   
|Derivative financial instruments                  |  |                | 11,216    |                   |   | 11,216        |  |           | 10,216    |  |   | 10,216   
|Junior subordinated debentures                    |  |                | 86,607    |                   |   | 59,245        |  |           | 86,607    |  |   | 50,583   
|Subordinated notes, net                           |  |                | 55,801    |                   |   | 53,777        |  |           | 55,695    |  |   | 53,792   
|                                                  |  |                |           |                   |   |               |  |           |           |  |   |          
|Total financial liabilities                       |  | $              | 4,228,435 |                   | $ | 4,243,414     |  | $         | 4,105,444 |  | $ | 4,116,408
|                                                  |  |                |           |                   |   |               |  |           |           |  |   |          
|Off-Balance-Sheet Financial Instruments:          |  |                |           |                   |   |               |  |           |           |  |   |          
|Unfunded commitments to extend credit             |  | $              | 3,796     |                   | $ | 3,796         |  | $         | 3,485     |  | $ | 3,485    
|Standby letters of credit                         |  |                | 266       |                   |   | 266           |  |           | 307       |  |   | 307      
|                                                  |  |                |           |                   |   |               |  |           |           |  |   |          
|Total off-balance-sheet financial instruments     |  | $              | 4,062     |                   | $ | 4,062         |  | $         | 3,792     |  | $ | 3,792    
|                                                  |  |                |           |                   |   |               |  |           |           |  |   |          

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.

13. Subsequent
Events

Events subsequent to the balance sheet date of March 31, 2010 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 (the 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. We also provide asset-based lending and residential mortgage origination services outside our Chicagoland
region through offices in other geographic markets.

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 2009 Annual Report on Form 10-K filed with the SEC on March 29, 2010.

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
2009 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 realizability of deferred tax assets and the valuation of financial
instruments such as investment securities and derivatives to be critical accounting policies.



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

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 categories, 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; changes in the size 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.

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 for each loan. These larger 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 for any one loan may 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 an 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 maintained 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 deferred tax asset valuation allowance is required to be recognized if it is more 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



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concerning managements evaluation of both positive and negative evidence, the forecasts of future income, applicable tax planning strategies, and assessments of current and future economic
and business conditions. We consider both positive and negative evidence regarding the ultimate realizability of our deferred tax assets. Examples of positive evidence may include the existence, if any, of taxes paid in available carry-back years
and the likelihood that taxable income will be generated in future periods. Examples of negative evidence may include a cumulative loss in the current year and prior two years and negative general business and economic trends. We currently maintain
a valuation allowance against substantially all of our deferred tax asset because it is more likely than not that all of these deferred tax assets 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 loan loss provisions made during those periods. In addition, general uncertainty surrounding future economic and business conditions has increased the likelihood of volatility in our
future earnings.

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.

At the inception of a formally designated hedge
and quarterly thereafter, an assessment is made 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 certain of our derivative instruments, such as 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



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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

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 use other independent pricing sources to obtain fair value estimates and perform discounted cash flow analysis for selected securities. When
the discounted cash flow analysis obtained from those independent pricing sources indicates that we expect all future principal and interest payments will 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 will be recorded in current earnings for the amount of the credit loss component. 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 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.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain of the statements under Management Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this
Annual Report on Form 10-K constitute forward-looking statements. These forward looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act reflect our current expectations and
projections about our future results, performance, prospects and opportunities. We have tried to identify these forward-looking statements by using words



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including may, might, expect, plan, predict, potential, contemplate, should, will,
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 2010 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 we will not be able to complete any offer to issue shares of common stock to the holders of our Series A Preferred to induce them to
convert their shares of Series A Preferred into common stock on terms acceptable to us, if at all;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the risk that we will not be able to raise the announced private placement of $30 million of convertible preferred stock and $30 million of
subordinated notes on terms that are acceptable to us, if at all;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the risk that our regulators could require us to maintain regulatory capital in excess of the levels needed to be considered well capitalized;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



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



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



| |  |  | negative developments and 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 volume of loans secured by commercial real estate in our portfolio;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | uncertainty in estimating the fair value of loans held for sale and the possibility that we will not be able to dispose of these assets on terms
acceptable to us;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 risks associated with the establishment of our new residential loan origination line of business, including the expansion 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 recent unprecedented volatility in the capital markets;
| | - |  | -----------------------------------------------------------------------------



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



| |  |  | 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, including those relating to capital
requirements; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

For further information about these and other risks, uncertainties and factors, please review the disclosure included in the sections captioned
Risk Factors in our December 31, 2009 Annual Report on Form 10-K filed with the SEC on March 29, 2010. 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

For the first quarter of 2010, we reported a net loss applicable to common stockholders of $13.6 million, or ($1.30) per
diluted share outstanding, compared to a net loss applicable to common stockholders of $5.7 million, or ($0.54) per diluted share, in the first quarter of 2009. The increase in the credit related costs, including the provision for loan losses and
nonperforming asset expense, primarily produced the higher net loss applicable to common stockholders in the first quarter of 2010 as compared to the first quarter of 2009.

During the first quarter of 2010, pre-tax, pre-provision earnings from core operations were $14.2 million, as compared to $11.6 million
during the first quarter of 2009, an increase of $2.6 million, or 22.2%. The increase in pre-tax, pre-provision earnings from core operations was due to a $6.1 million increase in net interest income, partly offset by higher noninterest expense. Our
accounting and reporting policies conform to U.S. generally accepted accounting principles (GAAP) and general practice within the banking industry. Management does use certain non-GAAP financial measures to evaluate the Companys
financial performance such as the non-GAAP measure of pre-tax, pre-provision earnings from core operations. In this non-GAAP financial measure, the provision for loan losses, nonperforming asset expense and certain non-recurring items, such as gains
and losses on investment securities, are excluded from the determination of operating results. Management believes that this measure is useful because it provides a more comparable basis for evaluating financial performance from core operations
period to period. The following table reconciles the loss before income taxes to pre-tax, pre-provision earnings from core operations as of the dates indicated.



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|                                                     |  |                                     |         |   |      |   |        |  
|---------------------------------------------------- |  | ----------------------------------- | ------- | - | ---- | - | ------ | -
|                                                     |  | For the Three MonthsEnded March 31, |        
|                                                     |  | 2010                                |         |   | 2009 |  
|                                                     |  | (dollars in thousands)              |        
|Loss before income taxes                             |  | $                                   | (10,441 | ) |      | $ | (4,039 | )
|Add back (subtract):                                 |  |                                     |         |   |      |   |        |  
|Provision for loan losses                            |  |                                     | 21,130  |   |      |   | 15,563 |  
|Nonperforming asset expense                          |  |                                     | 4,938   |   |      |   | 754    |  
|Gain on sales of investment securities               |  |                                     | (1,433  | ) |      |   | (664   | )
|                                                     |  |                                     |         |   |      |   |        |  
|Pre-tax, pre-provision earnings from core operations |  | $                                   | 14,194  |   |      | $ | 11,614 |  
|                                                     |  |                                     |         |   |      |   |        |  

During the first quarter of 2010, we announced plans to increase our capital. We have made a tender offer to
holders of our Series A convertible preferred stock to convert their shares into common equity. The Series A preferred stock could be converted into 6.0 million shares of common stock. We offered to issue up to an additional 1.2 million
common shares to induce holders of the Series A preferred to convert to common shares. If all holders accept the offer and convert to common shares, we will have issued a total of 7.2 million shares of common stock and will have converted $60.0
million of preferred stock into common equity. We are also undertaking a private placement of $30 million of convertible preferred stock and $30 million of subordinated notes issued at the holding company level. The proceeds from this private
placement would be used to provide additional liquidity at the holding company to continue to act as a source of strength for our Bank, to better align our capital position to our peers and to support our future growth plans. We anticipate
completing the private placement and the conversion of the Series A preferred into common equity during the second quarter of 2010.

In December 2009, we established a new residential mortgage origination line of business by hiring a team of individuals with extensive
mortgage banking experience. This unit began originating loans during the first quarter of 2010, and we expect that origination volumes will increase as operations continue to grow. We anticipate that this unit will have offices in several states,
with production coming from established relationships with mortgage brokers, retail originations and production from our Banks branch locations. We expect that this new line of business will be a source of fee income for us and provide
additional earnings diversification.

Net Interest Income

Net interest income is our principal source of earnings and is the difference between total interest income and fees generated by
interest-earning assets and total interest expense incurred on interest-bearing liabilities. The amount of net interest income is affected by changes in the volume and mix of interest-earning assets and interest-bearing liabilities and the level of
rates earned or incurred on those assets and liabilities.



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Quarter Ended March 31, 2010 as Compared to the Quarter Ended March 31, 2009

Net interest income was $33.5 million for the first quarter of 2010, an increase of $6.1 million, or 22.4%, from $27.3 million of net
interest income in the first quarter of 2009. With an adjustment for tax-exempt income, our consolidated net interest income for the first quarter of 2010 was $34.2 million, compared to $28.1 million for the same quarter a year ago. This non-GAAP
presentation is discussed further below.

Our net interest margin is determined by dividing taxable equivalent net interest
income by average interest-earning assets, and was 3.15% for the first quarter of 2010, compared to 2.58% for the first quarter of 2009, an increase of 57 basis points. Net interest margin increased in the first quarter of 2010 from the first
quarter of 2009 primarily due to a decrease in our cost of funds. Our cost of funds in the first quarter of 2010 was 2.21%, compared to 3.09% during the first quarter of 2009, a decrease of 88 basis points. Between those two quarterly periods, our
cost of funds benefited from the continued repricing of term deposits to lower current rates and the reduced reliance on more costly out-of-market funds, such as brokered certificates of deposits (CDs). The average cost of time deposits
was 2.69% during the first quarter of 2010 as compared to 3.88% during the first quarter of 2009. In addition, an increase in noninterest-bearing deposit balances from customers and the use of available low cost short-term funding opportunities also
contributed to the lower cost of funds between the two periods.

At the same time, our interest earning asset yield declined
12 basis points from 5.07% in the first quarter of 2009 to 4.95% in the first quarter of 2010. The decrease in the yield was largely due to changes in the investment portfolio, which caused the yield earned on investment to decrease from 5.46%
during the first quarter of 2009 to 4.54% during the first quarter of 2010. Throughout 2009 and into the first quarter of 2010, we have taken steps to increase the size of our investment portfolio in an effort to increase average interest-earning
assets and net interest income. These purchases, partly offset by repayments and maturities of higher yield investment securities and the sale of securities, largely produced the lower investment yield. This decrease was partly offset by an increase
in the yield earned on loans, which increased 20 basis points from 4.93% during the first quarter of 2009 to 5.13% during the first quarter of 2010. The increase in the loan yield was due to efforts to improve loan pricing, including the use of
interest rate floors.

Average interest-earning assets during the first quarter of 2010 were $4.48 billion as compared to
$4.43 billion during the first quarter of 2009. Between those two quarterly periods, average investment balances increased while average loan balances decreased. During the first quarter of 2010, average investment securities were $1.35 billion, an
increase of $201.1 million, or 17.5%, as compared to average investment securities in the first quarter of 2009. Average loan balances also decreased $215.7 million to $3.02 billion in the first quarter of 2010 as compared to $3.24 billion during
the first quarter of 2009. Average loan balances decreased between the two quarterly periods because of our repositioning of our loan portfolio to reduce exposure to industries and sectors we no longer considered economically desirable, gross loan
charge-offs, and lower line usage by our customers. On the liability side, average interest-bearing deposits decreased $320.3 million, or 12.2%, to $2.31 billion during the first quarter of 2010 as compared to $2.63 billion in the first quarter of
2009. A $362.3 million decrease in average time deposit balances between the two quarterly periods resulted in the decrease in average interest bearing deposits. This decrease was offset by an increase in average other borrowings and notes payable
and other advances.



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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.

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%.



|                                    |  |                                                                                           |        |   |      |   |        |     |  |   |        |  
|----------------------------------- |  | ----------------------------------------------------------------------------------------- | ------ | - | ---- | - | ------ | --- |  | - | ------ | -
|                                    |  | INCREASE/(DECREASE)Quarter Ended March 31, 2010As Compared to Quarter EndedMarch 31,
2009 |       
|                                    |  | VOLUME                                                                                    |        |   | RATE |   |        | NET | 
|                                    |  | (in thousands)                                                                            |       
|INTEREST EARNED ON:                 |  |                                                                                           |        |   |      |   |        |     |  |   |        |  
|Investment securities               |  | $                                                                                         | 2,353  |   |      | $ | (2,724 | )   |  | $ | (371   | )
|Cash equivalents                    |  |                                                                                           | (8     | ) |      |   | (1     | )   |  |   | (9     | )
|Loans                               |  |                                                                                           | (2,734 | ) |      |   | 1,574  |     |  |   | (1,160 | )
|                                    |  |                                                                                           |        |   |      |   |        |     |  |   |        |  
|Total interest-earning assets       |  |                                                                                           |        |   |      |   |        |     |  |   | (1,540 | )
|                                    |  |                                                                                           |        |   |      |   |        |     |  |   |        |  
|                                    |  |                                                                                           |       
|INTEREST PAID ON:                   |  |                                                                                           |        |   |      |   |        |     |  |   |        |  
|Interest-bearing deposits           |  |                                                                                           | (2,945 | ) |      |   | (4,672 | )   |  |   | (7,617 | )
|Total borrowings                    |  |                                                                                           | 1,349  |   |      |   | (1,283 | )   |  |   | 66     |  
|                                    |  |                                                                                           |        |   |      |   |        |     |  |   |        |  
|Total interest-bearing liabilities  |  |                                                                                           |        |   |      |   |        |     |  |   | (7,551 | )
|                                    |  |                                                                                           |        |   |      |   |        |     |  |   |        |  
|Net interest income, tax-equivalent |  | $                                                                                         | (337   | ) |      | $ | 6,348  |     |  | $ | 6,011  |  
|                                    |  |                                                                                           |        |   |      |   |        |     |  |   |        |  



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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%. 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 March 31, |       
|                                               |  | 2010                                |        |   | 2009 |  
|                                               |  | (dollars in thousands)              |       
|Net interest income as stated                  |  | $                                   | 33,467 |   |      | $ | 27,346 |  
|Tax equivalent adjustment-investments          |  |                                     | 662    |   |      |   | 768    |  
|Tax equivalent adjustment-loans                |  |                                     | 25     |   |      |   | 29     |  
|                                               |  |                                     |        |   |      |   |        |  
|Tax equivalent net interest income             |  | $                                   | 34,154 |   |      | $ | 28,143 |  
|                                               |  |                                     |        |   |      |   |        |  
|                                               |  |                                    
|Yield on earning assets without tax adjustment |  |                                     | 4.88   | % |      |   | 5.00   | %
|Yield on earning assets - tax equivalent       |  |                                     | 4.95   | % |      |   | 5.07   | %
|                                               |  |                                    
|Net interest margin without tax adjustment     |  |                                     | 3.09   | % |      |   | 2.51   | %
|Net interest margin - tax equivalent           |  |                                     | 3.15   | % |      |   | 2.58   | %
|                                               |  |                                    
|Net interest spread without tax adjustment     |  |                                     | 2.67   | % |      |   | 1.91   | %
|Net interest spread - tax equivalent           |  |                                     | 2.74   | % |      |   | 1.98   | %



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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%.



|                                              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|--------------------------------------------- |  | ------------------------------------ | --------- | - | -------- | - | ---------------- |  | ----- | -------------- |  | - | --------- | - | ---------------- | - | ------ |  | ----- | -
|                                              |  | For the Three Months Ended March 31, |          
|                                              |  | 2010                                 |           |   | 2009     |  
|                                              |  | AVERAGEBALANCE                       |           |   | INTEREST |   | YIELD/RATE(%)(6) |  |       | AVERAGEBALANCE |  |   | INTEREST  |   | YIELD/RATE(%)(6) |  
|                                              |  | (dollars in thousands)               |          
|INTEREST-EARNING ASSETS:                      |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Investment securities (1):                    |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Taxable                                       |  | $                                    | 1,231,724 |   |          | $ | 13,446           |  | 4.37  | %              |  | $ | 1,012,630 |   |                  | $ | 13,513 |  | 5.34  | %
|Tax-exempt (tax equivalent) (2)               |  |                                      | 119,987   |   |          |   | 1,891            |  | 6.30  |                |  |   | 137,957   |   |                  |   | 2,195  |  | 6.37  |  
|                                              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Total investment securities                   |  |                                      | 1,351,711 |   |          |   | 15,337           |  | 4.54  |                |  |   | 1,150,587 |   |                  |   | 15,708 |  | 5.46  |  
|                                              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Cash equivalents                              |  |                                      | 294       |   |          |   | 1                |  | 1.36  |                |  |   | 2,473     |   |                  |   | 10     |  | 1.62  |  
|                                              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|                                              |  |                                      |           |   |          |  
|Loans (2) (3):                                |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Commercial and commercial real estate         |  |                                      | 2,801,126 |   |          |   | 35,659           |  | 5.09  |                |  |   | 3,082,591 |   |                  |   | 37,218 |  | 4.83  |  
|Residential real estate mortgages             |  |                                      | 122,616   |   |          |   | 1,383            |  | 4.51  |                |  |   | 53,846    |   |                  |   | 777    |  | 5.77  |  
|Home equity and consumer                      |  |                                      | 99,091    |   |          |   | 1,036            |  | 4.24  |                |  |   | 102,100   |   |                  |   | 1,090  |  | 4.33  |  
|Fees on loans                                 |  |                                      |           |   |          |   | 158              |  |       |                |  |   |           |   |                  |   | 311    |  |       |  
|                                              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Net loans (tax equivalent) (2)                |  |                                      | 3,022,833 |   |          |   | 38,236           |  | 5.13  |                |  |   | 3,238,537 |   |                  |   | 39,396 |  | 4.93  |  
|                                              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Total interest-earning assets (2)             |  |                                      | 4,374,838 |   |          |   | 53,574           |  | 4.95  |                |  |   | 4,391,597 |   |                  |   | 55,114 |  | 5.07  |  
|                                              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|NON-EARNING ASSETS:                           |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Allowance for loan losses                     |  |                                      | (111,348  | ) |          |   |                  |  |       |                |  |   | (131,235  | ) |                  |   |        |  |       |  
|Cash and due from banks                       |  |                                      | 74,160    |   |          |   |                  |  |       |                |  |   | 58,452    |   |                  |   |        |  |       |  
|Accrued interest and other assets             |  |                                      | 141,845   |   |          |   |                  |  |       |                |  |   | 115,479   |   |                  |   |        |  |       |  
|                                              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|TOTAL ASSETS                                  |  | $                                    | 4,479,495 |   |          |   |                  |  |       |                |  | $ | 4,434,293 |   |                  |   |        |  |       |  
|                                              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|INTEREST-BEARING LIABILITIES:                 |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Interest-bearing deposits:                    |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Interest-bearing demand deposits              |  | $                                    | 708,216   |   |          |   | 2,045            |  | 1.17  |                |  | $ | 665,091   |   |                  |   | 1,628  |  | 0.99  |  
|Savings deposits                              |  |                                      | 41,050    |   |          |   | 8                |  | 0.08  |                |  |   | 42,139    |   |                  |   | 8      |  | 0.08  |  
|Time deposits                                 |  |                                      | 1,563,384 |   |          |   | 10,389           |  | 2.69  |                |  |   | 1,925,731 |   |                  |   | 18,423 |  | 3.88  |  
|                                              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Total interest-bearing deposits               |  |                                      | 2,312,650 |   |          |   | 12,442           |  | 2.18  |                |  |   | 2,632,961 |   |                  |   | 20,059 |  | 3.09  |  
|                                              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Other borrowings                              |  |                                      | 481,034   |   |          |   | 2,285            |  | 1.90  |                |  |   | 340,419   |   |                  |   | 2,176  |  | 2.56  |  
|Notes payable and other advances              |  |                                      | 622,178   |   |          |   | 1,624            |  | 1.04  |                |  |   | 427,189   |   |                  |   | 1,519  |  | 1.42  |  
|Junior subordinated debentures                |  |                                      | 86,607    |   |          |   | 1,438            |  | 6.64  |                |  |   | 86,607    |   |                  |   | 1,600  |  | 7.39  |  
|Subordinated notes                            |  |                                      | 55,749    |   |          |   | 1,631            |  | 11.70 |                |  |   | 55,350    |   |                  |   | 1,617  |  | 11.69 |  
|                                              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Total interest-bearing liabilities            |  |                                      | 3,558,218 |   |          |   | 19,420           |  | 2.21  |                |  |   | 3,542,526 |   |                  |   | 26,971 |  | 3.09  |  
|                                              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|NONINTEREST-BEARING LIABILITIES:              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Noninterest-bearing deposits                  |  |                                      | 606,604   |   |          |   |                  |  |       |                |  |   | 519,187   |   |                  |   |        |  |       |  
|Accrued interest, taxes and other liabilities |  |                                      | 50,085    |   |          |   |                  |  |       |                |  |   | 67,469    |   |                  |   |        |  |       |  
|                                              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Total noninterest-bearing liabilities         |  |                                      | 656,689   |   |          |   |                  |  |       |                |  |   | 586,656   |   |                  |   |        |  |       |  
|                                              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|STOCKHOLDERS EQUITY                          |  |                                      | 264,588   |   |          |   |                  |  |       |                |  |   | 305,111   |   |                  |   |        |  |       |  
|                                              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY    |  | $                                    | 4,479,495 |   |          |   |                  |  |       |                |  | $ | 4,434,293 |   |                  |   |        |  |       |  
|                                              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Net interest income (tax equivalent) (2)      |  |                                      |           |   |          | $ | 34,154           |  |       |                |  |   |           |   |                  | $ | 28,143 |  |       |  
|                                              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Net interest spread (tax equivalent) (2) (4)  |  |                                      |           |   |          |   |                  |  | 2.74  | %              |  |   |           |   |                  |   |        |  | 1.98  | %
|                                              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  
|Net interest margin (tax equivalent) (2) (5)  |  |                                      |           |   |          |   |                  |  | 3.15  | %              |  |   |           |   |                  |   |        |  | 2.58  | %
|                                              |  |                                      |           |   |          |   |                  |  |       |                |  |   |           |   |                  |   |        |  |       |  



|(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 |       
|                                                              |  | March 31,2010              |        |   | March 31,2009 |  
|                                                              |  | (in thousands)             |       
|Service charges                                               |  | $                          | 2,857  |   |               | $ | 2,821 |  
|Trust and investment management fees                          |  |                            | 347    |   |               |   | 534   |  
|Mortgage origination revenue                                  |  |                            | 303    |   |               |   |      |  
|Loss on disposition of bulk purchased mortgage loans          |  |                            | (2,022 | ) |               |   |      |  
|Gain on sales of investment securities                        |  |                            | 1,433  |   |               |   | 664   |  
|Letter of credit & other loan fees                            |  |                            | 1,008  |   |               |   | 206   |  
|Change in market value of employee deferred compensation plan |  |                            | 15     |   |               |   | (242  | )
|Other derivative income                                       |  |                            | 209    |   |               |   | 1,119 |  
|Other noninterest income                                      |  |                            | 224    |   |               |   | 241   |  
|                                                              |  |                            |        |   |               |   |       |  
|Total noninterest income                                      |  | $                          | 4,374  |   |               | $ | 5,343 |  
|                                                              |  |                            |        |   |               |   |       |  

Quarter Ended March 31, 2010 Compared to the Quarter Ended March 31, 2009

Total noninterest income was $4.4 million during the first quarter of 2010, a decrease of $969,000, or 18.1%, as compared to the $5.3
million of noninterest income for the first quarter of 2009. An increase in the losses from the disposition of bulk purchased mortgage loans was partly offset by an increase in letter of credit and other loan fees and higher gains from the sale of
investment securities.

Service charges, principally derived from deposit accounts, were $2.9 million during the first quarter
of 2010, essentially the same as the $2.8 million during the first quarter of 2009. An increase in service charges from commercial accounts was largely offset by lower overdraft and service charges from personal accounts.

During April 2010, we completed the sale of our trust business to a third party. After the sale, trust revenues will be eliminated, but
we also expect a reduction in noninterest expense, primarily in salaries and benefits, from sale of these operations.

During
the first quarter of 2010, our new residential mortgage origination group began operations. This unit originates new, prime residential mortgages through a number of channels and then immediately sells those mortgages in the markets. Total revenues
from this mortgage origination group were $303,000 during the first quarter of 2010, and we expect that revenues from this unit will increase in the future as lending volumes increase.

We incurred a $2.0 million loss during first quarter of 2010 associated with our disposition of bulk purchased mortgage loans. This loss
was largely due to losses on hedges placed on these single-family loans held for sale and write-downs on the transfer of some of these loans to the loan portfolio. While we classified these loans for sale at December 31, 2009, we have
re-evaluated our disposition strategy and transferred certain loans to the loan portfolio where we believe we could obtain the highest economic value for these loans. We completed a sale of approximately $7 million of these loans during the first
quarter of 2010 at a small gain.



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We recorded a gain on the sale of available-for-sale investment securities of $1.4 million
during the first quarter of 2010, as compared to $664,000 during the first quarter of 2009. During the first quarter of 2010, we sold approximately $43 million of mortgage-related securities, at a gain of $1.4 million to take advantage of tightening
spreads in the marketplace and to reduce our exposure to certain private label mortgage related securities.

Standby letters
of credit and other loan fees totaled $1.0 million during the first quarter of 2010, compared to $206,000 during the first quarter of 2009. The increase in fees was primarily due to our expanded asset based lending operations.

Other derivative income is primarily attributable to recording the initial fair value from the offering of derivative instruments to our
customers. Other derivative income was $209,000 during the first quarter of 2010 compared to $1.1 million during the first quarter of 2009. The decrease in revenue was primarily due to a decline in the volume of new swaps.

Noninterest Expense

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



|                                                  |  |                            |        |   |               |   |        |  
|------------------------------------------------- |  | -------------------------- | ------ | - | ------------- | - | ------ | -
|                                                  |  | For the Three Months Ended |       
|                                                  |  | March 31,2010              |        |   | March 31,2009 |  
|                                                  |  | (dollars in thousands)     |       
|Salaries and employee benefits:                   |  |                            |        |   |               |   |        |  
|Salaries, employment taxes, and medical insurance |  | $                          | 10,462 |   |               | $ | 9,363  |  
|Sign-on bonuses and severance                     |  |                            | 171    |   |               |   | 259    |  
|Incentives, commissions, and retirement benefits  |  |                            | 980    |   |               |   | 910    |  
|                                                  |  |                            |        |   |               |   |        |  
|Total salaries and employee benefits              |  |                            | 11,613 |   |               |   | 10,532 |  
|Occupancy of premises, furniture and equipment    |  |                            | 2,554  |   |               |   | 2,617  |  
|Nonperforming asset expense                       |  |                            | 4,938  |   |               |   | 754    |  
|FDIC assessment                                   |  |                            | 2,213  |   |               |   | 1,531  |  
|Legal fees, net                                   |  |                            | 819    |   |               |   | 1,140  |  
|Early extinguishment of debt                      |  |                            |       |   |               |   | 527    |  
|Other professional services                       |  |                            | 685    |   |               |   | 306    |  
|Other noninterest expense                         |  |                            | 4,330  |   |               |   | 3,758  |  
|                                                  |  |                            |        |   |               |   |        |  
|Total noninterest expense                         |  | $                          | 27,152 |   |               | $ | 21,165 |  
|                                                  |  |                            |        |   |               |   |        |  
|Efficiency ratio                                  |  |                            | 74.58  | % |               |   | 66.09  | %
|                                                  |  |                            |        |   |               |   |        |  

Quarter Ended March 31, 2010 Compared to the Quarter Ended March 31, 2009

Noninterest expense during the first quarter of 2010 increased $6.0 million, or 28.3%, to $27.2 million, as compared to $21.2 million
during the same quarter in 2009. A $4.2 million increase in nonperforming asset expense, a $1.1 million increase in salaries and benefits, and higher Federal Deposit Insurance Corporation (FDIC) assessments combined to produce a higher
level of noninterest expense in the first quarter of 2010.



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Total salaries and employee benefits expense during the first quarter of 2010 increased $1.1
million, or 10.3%, to $11.6 million, as compared to $10.5 million during the first quarter a year ago. Most of the increase was due to higher salaries, employment taxes, and medical insurance, which increased by $1.1 million to $10.5 million during
the first quarter of 2010 as compared to $9.4 million during the first quarter of 2009. This increase was primarily due to higher base salaries, mainly caused by an increase in the number of employees associated with the new mortgage loan
originations unit, and an increase in employment taxes and costs associated with employee benefit plans. The number of full time equivalent employees increased to 473 at March 31, 2010 as compared to 421 at March 31, 2009. During 2010, we
expect that our total salaries and employee benefits expense and the number of full time equivalent employees to increase as our mortgage loan business grows.

Nonperforming asset expenses totaled $4.9 million during the first quarter of 2010 as compared to $754,000 during the first quarter of
2009, an increase of $4.2 million. Nonperforming asset expense during the first quarter of 2010 included a $3.2 million write-down associated with the transfer of certain nonperforming commercial loans held for sale to the loan portfolio. The
transfer occurred at the lower of cost or fair value. In addition, an $1.1 million increase in the estimated liability for probable losses on unfunded credit commitments also contributed to the increase in expense during the first quarter of 2010.

FDIC insurance premiums increased to $2.2 million during the first quarter of 2010 as compared to $1.5 million during the
first quarter of 2009. The increase was primarily due to higher insurance assessment that went into effect during 2009 for all financial institutions.

Legal fees declined to $819,000 during the first quarter of 2010 as compared to $1.1 million during the first quarter 2009, a decrease of
$321,000 or 28.2%. Lower legal fees associated with fees for general corporate matters and loans in our work-out area primarily resulted in the decrease in expense.

During the first quarter of 2009, we incurred $527,000 of expense for the early redemption of approximately $29 million of above market
rate brokered CDs. The unamortized issuance costs and fair value adjustments on these deposits were written off at the time of redemption. We incurred no such expense during the first quarter of 2010.

Other noninterest expense principally includes external audit and tax services, advertising, business development and entertainment
expenses, consulting, corporate insurance, computer software license fees, and other operating expenses such as telephone, postage, office supplies and printing. Other noninterest expense increased to $4.3 million in the first quarter of 2010, as
compared to $3.8 million of other expense in the same quarter in 2009, largely due to higher corporate insurance, operational costs, and computer software and processing.



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Efficiency Ratio

An efficiency ratio is calculated by dividing total noninterest expense by total revenues (net interest income and noninterest income,
adjusted for gains or losses on investment securities). The lower the efficiency ratio, the more efficient the entity is operating. Our efficiency ratio was 74.58% in the first quarter of 2010, compared to 66.09% in the first quarter in 2009. The
higher ratio in the first quarter of 2010 was primarily due to a $4.2 million increase in nonperforming asset expense. Without considering the increase in nonperforming asset expense, our efficiency ratio during the first quarter of 2010 would have
been lower than in the first quarter of 2009 largely due to a $6.1 million increase in net interest income.

Income Taxes

During first quarter of 2010, despite a pre-tax loss of $10.4 million, we recorded total income tax expense of $306,000. Because of the
valuation allowance on our deferred tax asset, we were not able to record an income tax benefit 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. The expense recorded in the first quarter of 2010 was mostly due 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. We expect income tax
expense of $1.3 million during 2010 associated with the release of the residual tax effects.

We recorded a tax benefit of
$1.2 million during first quarter of 2009 based upon the annual effective tax rate expected at that time.

FINANCIAL CONDITION

Overview

Total assets increased $110.7 million, or 2.5%, to $4.51 billion at March 31, 2010 from total assets of $4.40 billion at
December 31, 2009, largely the result of a $137.0 million increase in investment securities. Total investment securities increased to $1.41 billion at March 31, 2010, compared to $1.27 billion at December 31, 2009. Total loans
decreased $22.5 million to $2.91 billion at March 31, 2010, compared to $2.93 billion at December 31, 2009. Total deposits decreased by $19.1 million to $2.96 billion at March 31, 2010, compared to $2.98 billion at December 31,
2009. In addition, during the first three months of 2010, other borrowings increased by $295.8 million to $633.4 million at March 31, 2010 while notes payable and other advances decreased by $152.0 million. Total stockholders equity at
March 31, 2010 was $253.8 million, as compared to $258.8 million at December 31, 2009.



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Investment Securities

Investment securities totaled $1.41 billion at March 31, 2010, compared to $1.27 billion at December 31, 2009, an increase of
$137.0 million, or 10.8%. During the first quarter of 2010, we increased our investment portfolio in an effort to increase interest earning assets and enhance our net interest margin. During the first three months of 2010, we purchased approximately
$231.5 million of investment securities, mostly mortgage-related securities. We also sold $42.8 million of mortgage-related securities, at a gain of $1.4 million. The overall weighted average life of our investment portfolio at March 31, 2010
was approximately 5.8 years, compared to approximately 6.0 years at December 31, 2009. At March 31, 2010, we transferred $39.1 million of mortgage-related securities from available-for-sale to our held-to-maturity portfolio.

As of March 31, 2010, mortgage-related securities comprised 87.9% of our investment portfolio, of which, over 99% were securities
issued by government and government-sponsored enterprises.

The following table shows the composition of our mortgage-related
securities as of March 31, 2010 by type of issuer.



|                                    |  |                                   |           |                |   |       |  |                                   |           |                |   |           |  |   |       |  |   |          
|----------------------------------- |  | --------------------------------- | --------- | -------------- | - | ----- |  | --------------------------------- | --------- | -------------- | - | --------- |  | - | ----- |  | - | ---------
|                                    |  | Amortized Cost                    |           | Fair Value    
|                                    |  | Ginnie Mae,Fannie Mae,Freddie Mac |           | PrivateIssuers |   | Total |  | Ginnie Mae,Fannie Mae,Freddie Mac |           | PrivateIssuers |   | Total    
|                                    |  | (in thousands)                   
|Available-for-sale:                 |  |                                   |           |                |   |       |  |                                   |           |                |   |           |  |   |       |  |   |          
|Mortgage-backed securities          |  | $                                 | 1,028,710 |                | $ | 9,879 |  | $                                 | 1,038,589 |                | $ | 1,048,788 |  | $ | 6,699 |  | $ | 1,055,487
|Collateralized mortgage obligations |  |                                   | 138,302   |                |   |      |  |                                   | 138,302   |                |   | 142,978   |  |   |      |  |   | 142,978  
|                                    |  |                                   |           |                |   |       |  |                                   |           |                |   |           |  |   |       |  |   |          
|                                    |  |                                   | 1,167,012 |                |   | 9,879 |  |                                   | 1,176,891 |                |   | 1,191,766 |  |   | 6,699 |  | $ | 1,198,465
|Held-to-maturity:                   |  |                                   |           |                |   |       |  |                                   |           |                |   |           |  |   |       |  |   |          
|Mortgage-backed securities          |  |                                   | 39,131    |                |   |      |  |                                   | 39,131    |                |   | 39,131    |  |   |      |  |   | 39,131   
|                                    |  |                                   |           |                |   |       |  |                                   |           |                |   |           |  |   |       |  |   |          
|                                    |  | $                                 | 1,206,143 |                | $ | 9,879 |  | $                                 | 1,216,022 |                | $ | 1,230,897 |  | $ | 6,699 |  | $ | 1,237,596
|                                    |  |                                   |           |                |   |       |  |                                   |           |                |   |           |  |   |       |  |   |          

During the first quarter of 2010, we took advantage of
pricing opportunities in the market to reduce our exposure to the private-label mortgage-related securities and sold $21.4 million of private-label, collateralized mortgage obligations at a gain of $396,000.

At March 31, 2010, we had a net unrealized gain of $23.2 million in our available-for-sale investment portfolio, which was comprised
of $29.7 million of gross unrealized gains and $6.5 million of gross unrealized losses. In comparison, at December 31, 2009, we had a net unrealized gain of $12.5 million, which was comprised of $24.0 million of gross unrealized gains and $11.5
million of gross unrealized losses. The gross unrealized losses at March 31, 2010 related to 45 investment securities with a carrying value of $374.9 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 or for more than 10% of their carrying value are subjected to further



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analysis 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-then-temporary impairment has occurred. Of the 57 securities with gross unrealized losses at March 31, 2010, only 5 securities have been in a loss position for 12 months or more and none had additional other-than-temporary
impairment.

As a member of Federal Home Loan Bank (FHLB), we are required to hold FHLB stock. The amount of
required FHLB stock is based on the Banks asset size and the amount of borrowings from the FHLB. At March 31, 2010, we held $27.5 million of FHLB stock and maintained $475.0 million of FHLB advances. Currently, 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 believe no impairment
has occurred.

Loans

Total loans held for portfolio increased $30.8 million to $2.88 billion at March 31, 2010, from total loans of $2.85 billion at
December 31, 2009. Commercial loans, which includes commercial and industrial (C&I), commercial real estate secured, and real estate-construction loans, decreased $6.8 million, or 0.2%, while consumer-oriented loans increased
$31.6 million. The decline in total commercial loans was primarily due to a decrease of $15.1 million, or 6.8%, in residential construction and land loans. This decrease was partly offset by a $9.2 million, or 0.8%, increase in commercial real
estate loans. The increase in consumer loans was primarily due to the transfer of certain mortgage loans from held-for-sale.

The composition of our loan portfolio as of March 31, 2010 and December 31, 2009 was as follows:



|                                  |  |                        |           |   |                         |     |   |        |   |           |                         |  |     |  
|--------------------------------- |  | ---------------------- | --------- | - | ----------------------- | --- | - | ------ | - | --------- | ----------------------- |  | --- | -
|                                  |  | March 31, 2010         |           |   | December 31, 2009       |    
|                                  |  | Amount                 |           |   | Percentageof GrossLoans |     |   | Amount |   |           | Percentageof GrossLoans | 
|                                  |  | (dollars in thousands) |          
|Loans Held for Portfolio:         |  |                        |           |   |                         |     |   |        |   |           |                         |  |     |  
|Commercial and industrial         |  | $                      | 1,263,210 |   |                         | 42  | % |        | $ | 1,264,369 |                         |  | 43  | %
|Commercial real estate secured    |  |                        | 1,180,988 |   |                         | 40  |   |        |   | 1,171,777 |                         |  | 39  |  
|Residential construction and land |  |                        | 206,727   |   |                         | 7   |   |        |   | 221,859   |                         |  | 8   |  
|Commercial construction and land  |  |                        | 142,845   |   |                         | 5   |   |        |   | 142,584   |                         |  | 5   |  
|                                  |  |                        |           |   |                         |     |   |        |   |           |                         |  |     |  
|Total commercial loans            |  |                        | 2,793,770 |   |                         | 94  |   |        |   | 2,800,589 |                         |  | 95  |  
|Consumer-oriented loans           |  |                        | 184,513   |   |                         | 6   |   |        |   | 152,892   |                         |  | 5   |  
|                                  |  |                        |           |   |                         |     |   |        |   |           |                         |  |     |  
|Gross loans                       |  |                        | 2,978,283 |   |                         | 100 | % |        |   | 2,953,481 |                         |  | 100 | %
|Less: Unearned discount           |  |                        | (4        | ) |                         |     |   |        |   | (6        | )                       |  |     |  
|                                  |  |                        |           |   |                         |     |   |        |   |           |                         |  |     |  
|Total loans                       |  |                        | 2,978,279 |   |                         |     |   |        |   | 2,953,475 |                         |  |     |  
|Less: Allowance for loan losses   |  |                        | (100,151  | ) |                         |     |   |        |   | (106,185  | )                       |  |     |  
|                                  |  |                        |           |   |                         |     |   |        |   |           |                         |  |     |  
|Portfolio loans, net              |  | $                      | 2,878,128 |   |                         |     |   |        | $ | 2,847,290 |                         |  |     |  
|                                  |  |                        |           |   |                         |     |   |        |   |           |                         |  |     |  
|Loans Held for Sale               |  | $                      | 28,492    |   |                         |     |   |        | $ | 81,853    |                         |  |     |  
|                                  |  |                        |           |   |                         |     |   |        |   |           |                         |  |     |  



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Total C&I loans were relatively unchanged at $1.26 billion at both March 31, 2010
and December 31, 2009 and account for 42% of our total loan portfolio. C&I loans include all loans for commercial purposes (other than real estate construction) that are either unsecured or secured by collateral other than commercial real
estate. These loans are generally made to operating companies in a variety of businesses, excluding commercial real estate investment. While we continue to actively develop new relationships and originate loans, historically low levels of line
utilization by our customers has limited growth in this portfolio.

Our commercial real estate secured loans increased $9.2
million, or 0.8%, to $1.18 billion at March 31, 2010, as compared to $1.17 billion at December 31, 2009. Most of the increase was due to increases in loans secured by owner occupied commercial properties. Approximately 88% of the total
commercial real estate secured portfolio is 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:



|                                       |  |                        |           |                                              |                   |   |         |   |                                              |  |     |  
|-------------------------------------- |  | ---------------------- | --------- | -------------------------------------------- | ----------------- | - | ------- | - | -------------------------------------------- |  | --- | -
|                                       |  | March 31, 2010         |           |                                              | December 31, 2009 |  
|                                       |  | Balance                |           | Percentage ofTotalCommercialReal
EstateLoans |                   |   | Balance |   | Percentage ofTotalCommercialReal
EstateLoans | 
|                                       |  | (dollars in thousands) |          
|Commercial non-owner occupied:         |  |                        |           |                                              |                   |   |         |   |                                              |  |     |  
|Retail strip centers or malls          |  | $                      | 211,933   |                                              | 18                | % |         | $ | 211,817                                      |  | 18  | %
|Office/mix use property                |  |                        | 145,139   |                                              | 12                |   |         |   | 149,951                                      |  | 13  |  
|Commercial properties                  |  |                        | 144,415   |                                              | 12                |   |         |   | 144,745                                      |  | 12  |  
|Specialized  other                    |  |                        | 125,726   |                                              | 11                |   |         |   | 121,530                                      |  | 10  |  
|Other commercial properties            |  |                        | 66,228    |                                              | 6                 |   |         |   | 64,602                                       |  | 6   |  
|                                       |  |                        |           |                                              |                   |   |         |   |                                              |  |     |  
|Subtotal commercial non-owner occupied |  |                        | 693,441   |                                              | 59                |   |         |   | 692,645                                      |  | 59  |  
|Commercial owner occupied              |  |                        | 341,106   |                                              | 29                |   |         |   | 334,744                                      |  | 29  |  
|Multi-family properties                |  |                        | 146,441   |                                              | 12                |   |         |   | 144,388                                      |  | 12  |  
|                                       |  |                        |           |                                              |                   |   |         |   |                                              |  |     |  
|Total commercial real estate secured   |  | $                      | 1,180,988 |                                              | 100               | % |         | $ | 1,171,777                                    |  | 100 | %
|                                       |  |                        |           |                                              |                   |   |         |   |                                              |  |     |  



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Our real estate construction and land loans consist primarily of loans to professional real
estate developers for the construction of single-family homes, town-homes, and condominium conversions and commercial properties. Our residential construction and land loans decreased by $15.1 million, or 6.8%, to $206.7 million at March 31,
2010, as compared to $221.9 million at December 31, 2009. Because of the slowdown in the residential real estate markets and reduced real estate valuations, we have been actively reducing our exposure to this portion of the loan portfolio. The
composition of our residential real estate construction and land portfolio as of the date indicated was as follows:



|                                            |  |                        |         |                                     |                   |   |                          |   |   |         |   |                                     |  |     |                          |  |   |  
|------------------------------------------- |  | ---------------------- | ------- | ----------------------------------- | ----------------- | - | ------------------------ | - | - | ------- | - | ----------------------------------- |  | --- | ------------------------ |  | - | -
|                                            |  | March 31, 2010         |         |                                     | December 31, 2009 |  
|                                            |  | Balance                |         | Percentage ofTotalConstructionLoans |                   |   | Percentage ofGross Loans |   |   | Balance |   | Percentage ofTotalConstructionLoans |  |     | Percentage ofGross Loans | 
|                                            |  | (dollars in thousands) |        
|Residential properties:                     |  |                        |         |                                     |                   |   |                          |   |   |         |   |                                     |  |     |                          |  |   |  
|Single family attached and detached housing |  | $                      | 48,949  |                                     | 24                | % |                          | 2 | % |         | $ | 55,849                              |  | 25  | %                        |  | 2 | %
|Condo (new & conversions)                   |  |                        | 57,252  |                                     | 27                |   |                          | 2 |   |         |   | 54,424                              |  | 25  |                          |  | 2 |  
|Multi-family                                |  |                        | 51,216  |                                     | 25                |   |                          | 2 |   |         |   | 51,191                              |  | 23  |                          |  | 2 |  
|Completed for sale                          |  |                        | 10,311  |                                     | 5                 |   |                          | * |   |         |   | 11,968                              |  | 5   |                          |  | 1 |  
|                                            |  |                        |         |                                     |                   |   |                          |   |   |         |   |                                     |  |     |                          |  |   |  
|Total residential construction              |  |                        | 167,728 |                                     | 81                |   |                          | 6 |   |         |   | 173,432                             |  | 78  |                          |  | 7 |  
|Land  unimproved & farmland                |  |                        | 27,440  |                                     | 13                |   |                          | 1 |   |         |   | 37,317                              |  | 17  |                          |  | 1 |  
|Land  improved & entitled                  |  |                        | 1,999   |                                     | 1                 |   |                          | * |   |         |   | 2,271                               |  | 1   |                          |  | * |  
|Land  under development                    |  |                        | 9,560   |                                     | 5                 |   |                          | * |   |         |   | 8,839                               |  | 4   |                          |  | * |  
|                                            |  |                        |         |                                     |                   |   |                          |   |   |         |   |                                     |  |     |                          |  |   |  
|Total land                                  |  |                        | 38,999  |                                     | 19                |   |                          | 1 |   |         |   | 48,427                              |  | 22  |                          |  | 1 |  
|                                            |  |                        |         |                                     |                   |   |                          |   |   |         |   |                                     |  |     |                          |  |   |  
|Total residential construction and land     |  | $                      | 206,727 |                                     | 100               | % |                          | 7 | % |         | $ | 221,859                             |  | 100 | %                        |  | 8 | %
|                                            |  |                        |         |                                     |                   |   |                          |   |   |         |   |                                     |  |     |                          |  |   |  



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

Commercial construction and land loans totaled $142.8 million at March 31, 2010 as compared to $142.6 million at December 31,
2009, an increase of $261,000.

Total consumer-oriented loans, which include residential real estate mortgages, home equity
loans and lines of credit, and other consumer loans, increased $31.6 million, or 20.7%, to $184.5 million at March 31, 2010. The increase was primarily due to the transfer of $33.7 million of certain mortgage loans held-for-sale to the loan
portfolio.

Loans Held for Sale

At March 31, 2010, we held $28.5 million loans classified as held for sale, as compared to $81.9 million at December 31, 2009.
At March 31, 2010, the held for sale portfolio consisted of both originated and bulk purchased residential loans. At December 31, 2009, the held for sale portfolio consisted of bulk purchased residential mortgage loans and certain
nonaccrual commercial loans.

At March 31, 2010, we had $24.3 million of bulk purchased residential mortgage loans
classified as held for sale. In 2009, we purchased a participation interest in 20 pools of residential single family mortgages that were to have been pooled into pass-through certificates to be issued by a mortgage originator and guaranteed by the
Government National Mortgage Association, otherwise known as Ginnie Mae, and sold to third party investors. However, the mortgage loan originator was not able to securitize all the single family loans because Ginnie Mae removed the originator from
its list of eligible issuers, so we took possession of the underlying collateral and we continue to work on disposing of those loans. In the first quarter 2010, we sold $7.2 million of these loans without retaining servicing rights. We also moved a
portion of these loans to the loan portfolio as we have re-evaluated our disposition strategy in order to the highest economic value for these loans.



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At March 31, 2010, we had $4.2 million of mortgage loans held for sale that were
originated by our new mortgage loan origination unit. These loans will be sold shortly after closing with no servicing rights retained. The Company has elected to account for these loans at fair value. The unpaid principal balance associated with
these loans was $4.0 million at March 31, 2010 and the resulting unrealized gain of $187,000 was included in mortgage origination revenues in noninterest income on the Consolidated Statements of Operations.

At December 31, 2009, in addition to the bulk purchased mortgage loans, we also had certain commercial nonaccrual loans that we were
in negotiations to sell. In first quarter 2010, the pending transaction to sell these loans did not close, and we transferred these loans to the loan portfolio. This transfer occurred at the lower of cost or fair value and we recorded an additional
write-down of $3.2 million in nonperforming asset expense in noninterest expense on the Consolidated Statements of Operations. At March 31, 2010, we no longer had any commercial loans classified as held for sale.

Loan Quality and Nonperforming Assets

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



|                                                                         |  |                        |         |   |              |   |         |              |  |   |         |  
|------------------------------------------------------------------------ |  | ---------------------- | ------- | - | ------------ | - | ------- | ------------ |  | - | ------- | -
|                                                                         |  | Mar. 31,2010           |         |   | Dec. 31,2009 |   |         | Mar. 31,2009 | 
|                                                                         |  | (dollars in thousands) |        
|Loans contractually past due 90 days or more but still accruing interest |  | $                      | 58      |   |              | $ | 59      |              |  | $ | 95      |  
|Nonaccrual loans:                                                        |  |                        |         |   |              |   |         |              |  |   |         |  
|Commercial and industrial                                                |  |                        | 25,310  |   |              |   | 26,687  |              |  |   | 25,472  |  
|Commercial real estate secured                                           |  |                        | 34,863  |   |              |   | 36,420  |              |  |   | 35,154  |  
|Residential construction and land                                        |  |                        | 57,320  |   |              |   | 62,795  |              |  |   | 100,558 |  
|Commercial construction and land                                         |  |                        | 14,171  |   |              |   | 4,245   |              |  |   | 17,117  |  
|All other loan types                                                     |  |                        | 9,468   |   |              |   | 11,256  |              |  |   | 5,901   |  
|                                                                         |  |                        |         |   |              |   |         |              |  |   |         |  
|Total nonaccrual loans                                                   |  |                        | 141,132 |   |              |   | 141,403 |              |  |   | 184,202 |  
|                                                                         |  |                        |         |   |              |   |         |              |  |   |         |  
|Total nonperforming loans                                                |  |                        | 141,190 |   |              |   | 141,462 |              |  |   | 184,297 |  
|Other real estate owned and repossessed assets                           |  |                        | 27,355  |   |              |   | 26,231  |              |  |   | 18,232  |  
|                                                                         |  |                        |         |   |              |   |         |              |  |   |         |  
|Total nonperforming assets                                               |  | $                      | 168,545 |   |              | $ | 167,693 |              |  | $ | 202,529 |  
|                                                                         |  |                        |         |   |              |   |         |              |  |   |         |  
|Restructured loans not included in nonperforming assets                  |  | $                      | 1,247   |   |              | $ | 1,196   |              |  | $ |        |  
|Nonperforming loans to total loans                                       |  |                        | 4.70    | % |              |   | 4.66    | %            |  |   | 5.73    | %
|Nonperforming assets to total loans plus repossessed property            |  |                        | 5.55    | % |              |   | 5.48    | %            |  |   | 6.27    | %
|Nonperforming assets to total assets                                     |  |                        | 3.73    | % |              |   | 3.81    | %            |  |   | 4.41    | %

Nonperforming assets were
$168.5 million, or 3.73% of total assets on March 31, 2010, compared to $167.7 million, or 3.81% of total assets on December 31, 2009, and $202.5 million, or 4.41% of total assets on March 31, 2009. During the first quarter of 2010,
$27.2 million of nonperforming commercial loans were charged-off and $10.4 million of loans were transferred to other real estate owned and repossessed assets. These decreases in nonperforming assets were partly offset by new nonaccrual loans.



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Nonperforming loans:

Nonperforming loans include nonaccrual loans and interest-accruing loans that are contractually past due 90 days or more. We evaluate all
loans on which principal or interest is contractually past due 90 days or more to determine if they are adequately secured and in the process of collection. If sufficient doubt exists as to the full collection of principal and interest on a loan, we
place it on nonaccrual and we discontinue recognizing interest income. After a loan is placed on nonaccrual status, any current period interest previously accrued but not yet collected is reversed against current income. Interest is included in
income subsequent to the date the loan is placed on nonaccrual status only as interest is received and so long as management is satisfied that there is a high probability that principal will be collected in full. The loan is returned to accrual
status only when the borrower has made required payments for a minimum length of time and demonstrates the ability to make future payments of principal and interest as scheduled.

Residential construction and land loans continue to be the largest category of nonaccrual loans and comprise approximately 41% of all
nonaccrual loans. The decrease in residential construction and land loans was primarily due to charge-offs and transfers to other real estate owned. These decreases were partly offset by new nonaccrual loans. Commercial construction and land
nonaccrual loans increased to $14.2 million at March 31, 2010 from $4.2 million at December 31, 2009, primarily due to one new nonaccrual loan.

Other Real Estate Owned and Repossessed Assets

Other real estate owned and repossessed assets totaled $27.4 million at March 31, 2010 as compared to $26.2 million at
December 31, 2009 and $18.2 million at March 31, 2009. The following table provides a rollforward, for the periods indicated, of other real estate and repossessed assets:



|                                               |  |                      |        |   |               |   |        |  
|---------------------------------------------- |  | -------------------- | ------ | - | ------------- | - | ------ | -
|                                               |  | For the Period Ended |       
|                                               |  | March 31,2010        |        |   | March 31,2009 |  
|Balance at beginning of period                 |  | $                    | 26,231 |   |               | $ | 13,179 |  
|Transfers from loans                           |  |                      | 10,385 |   |               |   | 6,990  |  
|Additional investment in foreclosed properties |  |                      |       |   |               |   | 261    |  
|Dispositions                                   |  |                      | (5,025 | ) |               |   | (1,438 | )
|Additional impairment                          |  |                      | (4,236 | ) |               |   | (760   | )
|                                               |  |                      |        |   |               |   |        |  
|Balance at end of period                       |  | $                    | 27,355 |   |               | $ | 18,232 |  
|                                               |  |                      |        |   |               |   |        |  

During first quarter 2010, we transferred $10.4 million of loans into other real estate and repossessed
assets. The loans transferred primarily consisted of $8.5 million from our residential construction and land portfolio and $1.1 million from our commercial construction and land portfolio. During first quarter of 2010, we also received net proceeds
of $5.3 million on the sale of other real estate owned assets that had a carrying value of $5.0 million, resulting in a net gain of $232,000, which reduced nonperforming asset expense in noninterest expense. We also



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reduced the carrying value of certain other real estate owned and repossessed assets by $4.2 million during first quarter 2010 to reflect a decrease in the estimated fair value of those assets.
This decrease was recorded as either additional nonperforming asset expense or provision for loan losses for assets recently transferred from the loan portfolio. The level of other real estate owned and repossessed assets have increased during 2010
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:

At March 31, 2010, impaired loans totaled $132.9 million, compared to $141.7 million at December 31, 2009. Total impaired loans
were $191.8 million at March 31, 2009.

The balance of impaired loans and the related allowance for loan losses for
impaired loans is as follows:



|                                             |  |                |         |              |   |               |  |   |        
|-------------------------------------------- |  | -------------- | ------- | ------------ | - | ------------- |  | - | -------
|                                             |  | March 31,2010  |         | Dec. 31,2009 |   | March 31,2009
|                                             |  | (in thousands)
|Impaired loans:                              |  |                |         |              |   |               |  |   |        
|Commercial and industrial                    |  | $              | 25,310  |              | $ | 31,447        |  | $ | 31, 372
|Commercial real estate secured               |  |                | 34,863  |              |   | 36,420        |  |   | 35,153 
|Residential construction and land            |  |                | 57,320  |              |   | 68,389        |  |   | 108,128
|Commercial construction and land             |  |                | 14,171  |              |   | 4,245         |  |   | 17,116 
|Consumer-oriented                            |  |                | 1,247   |              |   | 1,196         |  |   |       
|                                             |  |                |         |              |   |               |  |   |        
|Total impaired loans                         |  | $              | 132,911 |              | $ | 141,697       |  | $ | 191,769
|                                             |  |                |         |              |   |               |  |   |        
|Recorded balance of impaired loans:          |  |                |         |              |   |               |  |   |        
|With related allowance for loan losses       |  | $              | 101,364 |              | $ | 95,936        |  | $ | 175,085
|With no related allowance for loan losses    |  |                | 31,547  |              |   | 45,761        |  |   | 16,684 
|                                             |  |                |         |              |   |               |  |   |        
|Total impaired loans                         |  | $              | 132,911 |              | $ | 141,697       |  | $ | 191,769
|                                             |  |                |         |              |   |               |  |   |        
|Allowance for losses on impaired loans:      |  |                |         |              |   |               |  |   |        
|Commercial and industrial                    |  | $              | 5,961   |              | $ | 10,085        |  | $ | 10,670 
|Commercial real estate secured               |  |                | 3,589   |              |   | 4,485         |  |   | 3,591  
|Residential construction and land            |  |                | 10,095  |              |   | 19,070        |  |   | 30,502 
|Commercial construction and land             |  |                | 4,696   |              |   |              |  |   | 4,797  
|Consumer-oriented                            |  |                |        |              |   |              |  |   |       
|                                             |  |                |         |              |   |               |  |   |        
|Total allowance for losses on impaired loans |  | $              | 24,341  |              | $ | 33,640        |  | $ | 49,560 
|                                             |  |                |         |              |   |               |  |   |        

The decrease in impaired loans during the first
quarter of 2010 primarily resulted from net charge-offs and transfers into other real estate owned, partially offset by additions to impaired loans during the period. The allowance for loan losses related to impaired loans decreased during 2010 and
totaled $24.3 million at March 31, 2010 as compared to $33.6 million at December 31, 2009 and $49.6 million at March 31, 2009. The decrease in the allowance for losses on impaired loans in 2010 was primarily due to net charge-offs
during the period, partially offset by an increase in the estimated impairment on these loans. Residential construction and land loans comprise approximately 40% of all impaired loans and comprised 42% of the allowance for loan losses on impaired
loans.



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Through an individual impairment analysis, at March 31, 2010, we determined that $101.4
million of our impaired loans had a specific measure of impairment and required a related allowance for loan losses of $24.3 million. We also held $31.5 million of impaired loans, for which the individual analysis did not result in a measure of
impairment, and so no related allowance for loan losses was provided. Once we determine the loan is 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. 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 of the underlying collateral.
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. In addition, we have modified certain consumer-orientated loans, primarily home equity loans, with a remaining total principal balance of $1.2 million, which were considered troubled-debt
restructurings. These loans are reported as impaired loans and evaluated for impairment.

At March 31, 2010, we held $5.7
million of loans classified as a troubled debt restructuring. Total troubled debt restructurings included consumer loans of $1.2 million and commercial loans of $4.5 million. The commercial loans are considered nonaccrual and included in
nonperforming loans. At March 31, 2010, we did not have additional commitments to lend on loans considered troubled debt restructurings.

A reconciliation of nonaccrual and impaired loans as of March 31, 2010 is presented below:



|                                         |  |                        |         |               |   |        
|---------------------------------------- |  | ---------------------- | ------- | ------------- | - | -------
|                                         |  | NonaccrualLoans        |         | ImpairedLoans
|                                         |  | (dollars in thousands)
|Commercial nonaccrual loans              |  | $                      | 131,664 |               | $ | 131,664
|Commercial loans on accrual but impaired |  |                        | n/a     |               |   |       
|Consumer-oriented loans                  |  |                        | 9,468   |               |   | 1,247  
|                                         |  |                        |         |               |   |        
|                                         |  | $                      | 141,132 |               | $ | 132,911
|                                         |  |                        |         |               |   |        

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 internally identify certain loans in our loan risk ratings that we have placed on heightened monitoring because of certain weaknesses that may inhibit the borrowers ability to
perform under the contractual terms of the loan agreement but have not reached the status of nonaccrual loans. As of March 31, 2010, these potential problem loans totaled $72.9 million. Of these potential problem loans at March 31, 2010,
$34.1 million were in our commercial and industrial portfolio, $22.5 million were in our residential construction and land portfolio and $16.2 million were in our commercial real estate portfolio. In comparison, potential problem loans at
December 31, 2009 totaled $75.6 million. The largest categories of potential problem loans at December 31, 2009 included $30.7 million of residential construction and land loans and $30.0 million of commercial and industrial loans, and the
remaining $14.9 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 may 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
EndedMarch 31, |          
|                                                     |  | 2010                            |           |   | 2009 |  
|                                                     |  | (dollars in thousands)          |          
|Average total loans                                  |  | $                               | 3,022,833 |   |      | $ | 3,238,537 |  
|                                                     |  |                                 |           |   |      |   |           |  
|Total loans at end of period                         |  | $                               | 3,006,771 |   |      | $ | 3,214,096 |  
|                                                     |  |                                 |           |   |      |   |           |  
|Allowance for loan losses:                           |  |                                 |           |   |      |   |           |  
|Allowance at beginning of period                     |  | $                               | 106,185   |   |      | $ | 128,548   |  
|Net (charge-offs) recoveries:                        |  |                                 |           |   |      |   |           |  
|Commercial and commercial real estate                |  |                                 | (8,439    | ) |      |   | (5,312    | )
|Real estate  construction                           |  |                                 | (17,605   | ) |      |   | (8,448    | )
|Residential real estate mortgages and consumer loans |  |                                 | (1,120    | ) |      |   | (69       | )
|                                                     |  |                                 |           |   |      |   |           |  
|Total net charge-offs                                |  |                                 | (27,164   | ) |      |   | (13,829   | )
|Provision for loan losses                            |  |                                 | 21,130    |   |      |   | 15,563    |  
|                                                     |  |                                 |           |   |      |   |           |  
|Allowance at end of period                           |  | $                               | 100,151   |   |      | $ | 130,282   |  
|                                                     |  |                                 |           |   |      |   |           |  
|Annualized net charge-offs to average total loans    |  |                                 | 3.59      | % |      |   | 1.71      | %
|Allowance to total loans at end of period            |  |                                 | 3.33      | % |      |   | 4.05      | %
|Allowance to nonperforming loans                     |  |                                 | 70.93     | % |      |   | 70.69     | %

Our allowance for loan
losses was $100.2 million at March 31, 2010, or 3.33% of end-of-period loans and 70.93% of nonperforming loans. At March 31, 2009, the allowance for loan losses was $130.3 million, which represented 4.05% of end-of-period loans and 70.69%
of nonperforming loans. Net charge-offs during the first quarter of 2010 were $27.2 million, or 3.59% of average loans on an annualized basis. In comparison, net charge-offs during the first quarter of 2009 were $13.8 million, or 1.71% of average
loans on an annualized basis. Net charge-offs have increased as we continue to work through our nonperforming assets and impaired loans.

Provision for Loan Losses

We determine a provision for loan losses that we consider sufficient to maintain an allowance covering probable losses inherent in our
portfolio as of the balance sheet date. Our provision for loan losses was $21.1 million for the first quarter of 2010, compared to $15.6 million for the first quarter of 2009. An increase in the level of net charge-offs during the first quarter of
2010 primarily produced the higher loan loss provision as compared to the first quarter of 2009. During the first quarter of 2010, the total allowance for loan losses decreased as net charge-offs exceeded the provision for loan losses. While
charge-offs continue to be elevated, the portion of the allowance for loan losses related to impaired loans decreased from $33.6 million at December 31, 2009 to $24.3 million at March 31, 2010.

Deposits

Total deposit
balances at March 31, 2010 decreased $19.1 million to $2.96 billion as compared to $2.98 billion at year-end 2009. During the first quarter of 2010, our total in-market deposits decreased $44.6 million, or 1.9% to $2.36 billion at
March 31, 2010. At the same time, our out-of-market deposits increased by $25.5 million, or 4.5% to $595.9 million at March 31, 2010.



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Total in-market deposits were $2.36 billion at March 31, 2010 as compared to $2.41
billion at December 31, 2009. Noninterest-bearing deposits decreased $71.7 million to $587.4 million at March 31, 2010, primarily due to a $38.9 million decrease in trust deposits as compared to December 31, 2009, and seasonal factors
as first quarter noninterest-bearing deposits typically decrease from year-end balances. Lower NOW accounts, which decreased $79.0 million primarily due to a decrease in balances from one customer, also contributed to the decrease. In addition,
these decreases were partly offset by time deposits maintained through the CDARS network which increased by $46.8 million and money market accounts which increased $45.1 million. Total out-of-market deposits increased by $25.5 million to $595.9
million at March 31, 2010 from $570.4 million at year-end 2009, with most of the increase occurring in out-of-local market CDs which increased by $26.4 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:



|                                            |  |                |           |              |   |          
|------------------------------------------- |  | -------------- | --------- | ------------ | - | ---------
|                                            |  | Mar. 31,2010   |           | Dec. 31,2009
|                                            |  | (in thousands)
|In-market deposits:                         |  |                |           |              |   |          
|Non-interest bearing deposits               |  | $              | 587,402   |              | $ | 659,146  
|NOW accounts                                |  |                | 227,981   |              |   | 307,025  
|Savings accounts                            |  |                | 40,903    |              |   | 41,479   
|Money market accounts                       |  |                | 483,209   |              |   | 438,080  
|Customer certificates of deposit            |  |                | 784,108   |              |   | 775,663  
|CDARS time deposits                         |  |                | 163,025   |              |   | 116,256  
|Public time deposits                        |  |                | 75,170    |              |   | 68,763   
|                                            |  |                |           |              |   |          
|Total in-market deposits                    |  |                | 2,361,798 |              |   | 2,406,412
|                                            |  |               
|Out-of-market deposits:                     |  |                |           |              |   |          
|Brokered money market deposits              |  |                | 6,739     |              |   | 7,338    
|Out-of-local-market certificates of deposit |  |                | 105,384   |              |   | 79,015   
|Brokered certificates of deposit            |  |                | 483,799   |              |   | 484,035  
|                                            |  |                |           |              |   |          
|Total out-of-market deposits                |  |                | 595,922   |              |   | 570,388  
|                                            |  |                |           |              |   |          
|Total deposits                              |  | $              | 2,957,720 |              | $ | 2,976,800
|                                            |  |                |           |              |   |          

Average deposits for the first three months of 2010
decreased $232.9 million, or 7.4%, to $2.92 billion, compared to $3.15 billion for the first three months of 2009. Total time deposits decreased $362.3 million, with a $345.5 million decrease in average brokered CDs accounting for most of that
decrease. This decrease was partly offset by an $87.4 million, or 16.8%, increase in noninterest-bearing demand deposits and higher money market account balances of $30.0 million. Since 2009, we focused on changing our funding mix by obtaining more
funding from core customers and increasing noninterest-bearing deposits and reducing our reliance on higher costing out-of-market deposits, such as brokered CDs.



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



|                                            |  |                                          |           |                    |                                          |   |      |      |   |                |   |                    |  |       |      |  |      |  
|------------------------------------------- |  | ---------------------------------------- | --------- | ------------------ | ---------------------------------------- | - | ---- | ---- | - | -------------- | - | ------------------ |  | ----- | ---- |  | ---- | -
|                                            |  | For the Three Months EndedMarch 31, 2010 |           |                    | For the Three Months EndedMarch 31, 2009 |  
|                                            |  | AverageBalance                           |           | Percent ofDeposits |                                          |   | Rate |      |   | AverageBalance |   | Percent ofDeposits |  |       | Rate | 
|                                            |  | (dollars in thousands)                   |          
|Noninterest-bearing demand deposits         |  | $                                        | 606,604   |                    | 20.8                                     | % |      |     | % |                | $ | 519,187            |  | 16.5  | %    |  |     | %
|NOW accounts                                |  |                                          | 243,649   |                    | 8.3                                      |   |      | 1.52 |   |                |   | 230,573            |  | 7.3   |      |  | 1.52 |  
|Money market accounts                       |  |                                          | 464,567   |                    | 15.9                                     |   |      | 0.99 |   |                |   | 434,518            |  | 13.8  |      |  | 0.71 |  
|Savings deposits                            |  |                                          | 41,050    |                    | 1.4                                      |   |      | 0.08 |   |                |   | 42,139             |  | 1.3   |      |  | 0.08 |  
|Time deposits:                              |  |                                          |           |                    |                                          |   |      |      |   |                |   |                    |  |       |      |  |      |  
|Certificates of deposit                     |  |                                          | 779,963   |                    | 26.7                                     |   |      | 2.59 |   |                |   | 862,203            |  | 27.4  |      |  | 3.85 |  
|Out-of-local-market certificates of deposit |  |                                          | 85,822    |                    | 2.9                                      |   |      | 2.44 |   |                |   | 121,909            |  | 3.9   |      |  | 3.99 |  
|Brokered certificates of deposit            |  |                                          | 498,665   |                    | 17.1                                     |   |      | 3.44 |   |                |   | 844,125            |  | 26.7  |      |  | 4.07 |  
|CDARS time deposits                         |  |                                          | 124,558   |                    | 4.3                                      |   |      | 1.58 |   |                |   | 28,258             |  | 0.9   |      |  | 1.32 |  
|Public Funds                                |  |                                          | 74,376    |                    | 2.6                                      |   |      | 0.90 |   |                |   | 69,236             |  | 2.2   |      |  | 2.81 |  
|                                            |  |                                          |           |                    |                                          |   |      |      |   |                |   |                    |  |       |      |  |      |  
|Total time deposits                         |  |                                          | 1,563,384 |                    | 53.6                                     |   |      | 2.69 |   |                |   | 1,925,731          |  | 61.1  |      |  | 3.88 |  
|                                            |  |                                          |           |                    |                                          |   |      |      |   |                |   |                    |  |       |      |  |      |  
|Total deposits                              |  | $                                        | 2,919,254 |                    | 100.0                                    | % |      |      |   |                | $ | 3,152,148          |  | 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 $295.8 million to $633.4 million at March 31, 2010, as compared to $337.7 million at December 31, 2009. Most of the increase resulted from higher Federal fund purchased balances of
$117.8 million and a $187.7 million increase in term repurchase agreements. We increased these borrowings to help fund investment securities purchased in the first quarter of 2010 and to replace borrowing under the FRBs Term Auction Facility
when we exited this program during the first quarter of 2010.

At March 31, 2010, subject to available collateral and
current borrowings, the Bank had available pre-approved repurchase agreement lines of $483 million and pre-approved overnight federal funds borrowing lines of $68 million. In comparison, at December 31, 2009, we had available pre-approved
repurchase agreement lines of $830 million and pre-approved overnight federal funds borrowing lines of $130 million.

Notes Payable and
Other Advances

Borrowings from the FHLBC increased $320.0 million during the first three months of 2010 to $475.0 million
at March 31, 2010, compared to $155.0 million as of December 31, 2009. We increased borrowings from the FHLBC during the first quarter to replace funds we had borrowed under the FRBs Term Auction Facility. At March 31, 2010, the
borrowings from the FHLBC are collateralized by $782.4 million of securities and $206.8 million of qualified first-mortgage residential and home equity loans and we have additional borrowing capacity of $389.6 million. At December 31, 2009, we
maintained collateral of $352.0 million of securities and $143.0 million on qualified first-mortgage residential and home equity loans and had additional borrowing capacity of $278.7 million.



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During the first quarter of 2010, we exited the FRBs Term Auction Facility program. At
December 31, 2009, we had $460.0 million of borrowings from the FRB Term Auction Facility. We continue to participate in the FRBs Borrower In Custody (BIC) program. At March 31, 2010 the Bank pledged $773.0 of commercial
loans as collateral and had available $466.2 million of borrowing capacity at the FRB.

During the first quarter of 2010, we
repaid the $12.0 million that was outstanding under our $15 million revolving credit facility prior to its March 31, 2010 maturity. At December 31, 2009, $12.0 million was outstanding under this facility.

Junior Subordinated Debentures

At March 31, 2010, we had $86.6 million of junior subordinated debentures comprised of $45.4 million issued to TAYC Capital Trust I
and $41.2 million issued to TAYC Capital Trust II. The junior subordinated debentures issued by each trust are currently callable at par, at our option. At March 31, 2010, unamortized issuance costs relating to TAYC Capital Trust I were $2.3
million and $380,000 related to TAYC Capital Trust II. Unamortized issuance costs would be recognized as noninterest expense if the debentures were called by us.

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 March 31, 2010, the subordinated notes reported on the Consolidated Balance Sheet totaled $55.8 million, which was net of $4.3 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 Sheet. 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 March 31, 2010 and December 31, 2009, 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 March 31, 2010:                    |  |                        |         |       |                             |   |        |                                                              |       |       |   |        |           |       |        |  
|Total Capital (to Risk Weighted Assets)  |  |                        |         |       |                             |   |        |                                                              |       |       |   |        |           |       |        |  
|Taylor Capital Group, Inc.               |  | $                      | 420,650 |       | 12.34                       | % |        | >$272,740                                                    |       | >8.00 | % |        | >$340,925 |       | >10.00 | %
|Cole Taylor Bank                         |  |                        | 412,621 |       | 12.12                       |   |        | >272,388                                                     |       | >8.00 |   |        | >340,485  |       | >10.00 |  
|Tier I Capital (to Risk Weighted Assets) |  |                        |         |       |                             |   |        |                                                              |       |       |   |        |           |       |        |  
|Taylor Capital Group, Inc.               |  |                        | 316,635 |       | 9.29                        |   |        | >136,370                                                     |       | >4.00 |   |        | >204,555  |       | >6.00  |  
|Cole Taylor Bank                         |  |                        | 313,502 |       | 9.21                        |   |        | >136,194                                                     |       | >4.00 |   |        | >204,291  |       | >6.00  |  
|Leverage (to average assets)             |  |                        |         |       |                             |   |        |                                                              |       |       |   |        |           |       |        |  
|Taylor Capital Group, Inc.               |  |                        | 316,635 |       | 7.07                        |   |        | >179,180                                                     |       | >4.00 |   |        | >223,975  |       | >5.00  |  
|Cole Taylor Bank                         |  |                        | 313,502 |       | 7.01                        |   |        | >178,893                                                     |       | >4.00 |   |        | >223,617  |       | >5.00  |  
|                                         |  |                        |         |       |                             |  
|As of December 31, 2009:                 |  |                        |         |       |                             |   |        |                                                              |       |       |   |        |           |       |        |  
|Total Capital (to Risk Weighted Assets)  |  |                        |         |       |                             |   |        |                                                              |       |       |   |        |           |       |        |  
|Taylor Capital Group, Inc.               |  | $                      | 433,197 |       | 12.72                       | % |        | >$272,411                                                    |       | >8.00 | % |        | >$340,514 |       | >10.00 | %
|Cole Taylor Bank                         |  |                        | 395,869 |       | 11.64                       |   |        | >272,030                                                     |       | >8.00 |   |        | >340,038  |       | >10.00 |  
|Tier I Capital (to Risk Weighted Assets) |  |                        |         |       |                             |   |        |                                                              |       |       |   |        |           |       |        |  
|Taylor Capital Group, Inc.               |  |                        | 333,479 |       | 9.79                        |   |        | >136,205                                                     |       | >4.00 |   |        | >204,308  |       | >6.00  |  
|Cole Taylor Bank                         |  |                        | 296,839 |       | 8.73                        |   |        | >136,015                                                     |       | >4.00 |   |        | >204,023  |       | >6.00  |  
|Leverage (to average assets)             |  |                        |         |       |                             |   |        |                                                              |       |       |   |        |           |       |        |  
|Taylor Capital Group, Inc.               |  |                        | 333,479 |       | 7.60                        |   |        | >175,605                                                     |       | >4.00 |   |        | >219,506  |       | >5.00  |  
|Cole Taylor Bank                         |  |                        | 296,839 |       | 6.77                        |   |        | >175,318                                                     |       | >4.00 |   |        | >219,147  |       | >5.00  |  

All of
our capital asset ratios declined during the first quarter of 2010 mostly due to a decrease in regulatory capital caused by the net loss in the period. In addition, an increase in average assets and a slight increase in risk-weighted assets also
contributed to the lower ratios.

In order to further strengthen the Banks capital ratios, we made a $25.0 million
capital contribution to the Bank during the first quarter of 2010. As a result, all of the Banks regulatory capital ratios increased during the period. The impact on the capital ratios from this contribution were partly offset by the
Banks net loss during the first quarter of 2010 and higher average and risk-weighted assets.

In order to maintain
sufficient capital to act as a source of strength for our Bank, to better align our capital position to our peers and to support our future growth plans, we plan to increase our capital levels in the second quarter of 2010. Accordingly, we commenced
an offering to issue 1,200,000 shares of our common stock to induce the holders of our Series A Preferred stock to convert their preferred shares into shares of our common stock. We are also undertaking a private placement of $30.0 million of
convertible preferred stock and $30.0 million in subordinated notes issued at the holding company level. The conversion of the Series A preferred is expected to occur during the second quarter of 2010. Effective immediately after the payment of the
quarterly dividend on April 15, 2010, we do not expect to declare or pay dividends on the Series A preferred stock.



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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 three months of 2010 or during the entire year of 2009. 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 quarter of 2010 or during 2009. Our ability to pay common dividends has
been impacted by the issuance of preferred stock. The Series B Preferred stock requires the consent of the U.S. Treasury Department to pay any dividends 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. During the first quarter of 2010, we declared dividends on our Series A preferred of $1.2 million and Series B preferred stock of $1.3 million. Consistent with our past practice, we provide our
regulators notice before we pay dividends on our Series A and Series B preferred stock and the payment of interest on our trust preferred securities.

LIQUIDITY

During the
first quarter of 2010, total assets increased by $110.7 million, or 2.5%, primarily due to an increase in the size of our investment portfolio. This growth was primarily funded with additional borrowings. Cash inflows during the first three months
of 2010 consisted of a $295.8 million increase in other borrowing balances, which included an increase in wholesale repurchase agreements and Federal fund purchased balances. In addition, we received $105.3 million from principal repayments and
sales of available for sale investment securities.

Cash outflows during the first three months 2010 included $231.5 million
for the purchase of investment securities, a $162.0 million reduction in notes payable and other advances, a net decrease in deposits of $19.2 million, a net increase in loans of $13.7 million, and the payment of $2.5 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 Borrower-in-Custody Program, federal funds borrowing lines from larger
correspondent banks and pre-approved repurchase agreement availability with major brokers and banks.

At the holding company
level, cash and cash equivalents decreased to $5.0 million at March 31, 2010 from $45.9 million at December 31, 2010. Significant cash outflows during the first quarter of 2010 included a $25.0 million capital contribution to the Bank, the
repayment of the $12.0 million outstanding balance on our revolving letter of credit, $2.5 million for the payment of dividends on our Series A and Series B preferred stock, and $1.4 million of interest paid on our junior subordinated debentures.



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During the first quarter of 2010, we announced plans to increase our capital levels. We are
undertaking a private placement of $30 million of convertible preferred stock and $30 million of subordinated notes issued at the holding company level. The proceeds from this private placement would be used to provide additional liquidity at the
holding company to continue to act as a source of strength for our Bank, to better align our capital position to our peers and to support our future growth plans. We anticipate completing the private placement and the conversion of the Series A
preferred into common equity during the second quarter of 2010. We believe that proceeds from this plan will provide sufficient liquidity at the holding company to continue to support the Banks capital position and allow us to meet our
recurring cash needs.

Off-Balance Sheet Arrangements

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

At March 31, 2010, we had $839 million of undrawn
commitments to extend credit and $81 million of financial and performance standby letters of credit. In comparison, at December 31, 2009, we had $865 million of undrawn commitments to extend credit and $84 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 March 31, 2010 and December 31, 2009, we maintained a liability for $3.8 million and $3.5 million, respectively, for commitments under standby letters of credit for which we believed funding and loss were
probable.

Derivative Financial Instruments

During the first quarter of 2010, we entered into $31.0 million of notional amount interest rate swap agreements that are designated as
fair value hedges against certain brokered CDs. The CD swaps are used to convert the fixed rate paid on the brokered CDs to a variable rate based upon 3-month LIBOR computed on the notional amount. The fair value of these hedging derivative
instruments is reported on the Consolidated Balance Sheets in other assets and the change in fair value of the related hedged brokered CD is reported as an adjustment to the carrying value of the brokered CDs. Total ineffectiveness on the interest
rate swap was $10,000 and was recorded in other derivative income in noninterest income.

We use derivative financial
instruments to accommodate customer needs and to assist in interest rate risk management. At March 31, 2010, $402.5 million of derivative instruments which were interest rate exchange agreements related to customer transactions, which are not
designated as hedges. As of March 31, 2010, we had notional amounts of $201.2 million of interest rate swaps with customers in which we agreed to receive a fixed interest rate and pay a variable interest rate. In addition, as of March 31,
2010, we had offsetting interest rate swaps with other counterparties with a notional amount of $201.2 in which we agreed to receive a variable interest rate and pay a fixed interest rate.



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QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

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

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

Our primary measurement of interest rate risk is earnings at risk, which is determined through computerized simulation modeling. The
primary simulation model assumes a static balance sheet, a parallel interest rate rising or declining ramp and uses the balances, rates, maturities and repricing characteristics of all of our existing assets and liabilities, including derivative
financial 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 any changes in balance sheet composition.
Projected net interest income is computed by the model assuming market rates remaining 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 the balance sheet 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 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 decrease $457,000, or 0.3%, as compared to
the net interest income in the rates unchanged scenario at March 31, 2010. In a rising rate scenario, our interest-earning assets yields would not immediately benefit from the increased rates because of interest rate floors in our portfolio. At
the same time, our funding costs would increase because of higher rates on short-term borrowings and interest-bearing deposits, resulting in the net decrease in net interest income in comparison to the rates unchanged scenario. At December 31,
2009, the projected variance in the rising rate scenario was $1.0 million, or 0.7%, lower 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 March 31, 2010 and December 31, 2009.



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



|                                 |  |                                                                     |      |   |                      |      |    |              |   |        |                  |  |      |   
|-------------------------------- |  | ------------------------------------------------------------------- | ---- | - | -------------------- | ---- | -- | ------------ | - | ------ | ---------------- |  | ---- | --
|                                 |  | Change in Future Net Interest
Incomefrom Rates Unchanged Simulation |     
|                                 |  | At March 31, 2010                                                   |      |   | At December 31, 2009 |     
|                                 |  | (dollars in thousands)                                              |     
|Change in interest rates         |  | DollarChange                                                        |      |   | PercentageChange     |      |    | DollarChange |   |        | PercentageChange | 
|+200 basis points over one year  |  | $                                                                   | (457 | ) |                      | (0.3 | )% |              | $ | (1,026 | )                |  | (0.7 | )%
|- 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 January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)
No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Values, which provides additional guidance relating to fair value measurement disclosures. Specifically, companies will be required
to separately disclose significant transfers into and out of Level 1 and Level 2 measurements in the fair value hierarchy and the reasons for those transfers. For Level 3 fair value measurements, the new guidance requires presentation of separate
information about purchases, sales, issuances and settlements. Additionally, the FASB also clarified existing fair value measurement disclosure requirements relating to the level of disaggregation, inputs, and valuation techniques. Certain
provisions of this accounting update related to detailed Level 3 disclosures will be effective at the beginning of 2011. The remainder of the provision was effective on January 1, 2010 and the adoption of these provisions did not have a
material effect on our consolidated financial statements.

In December 2009, the FASB issued ASU No. 2009-16,
Transfers and Servicing (Topic 860)Accounting for Transfers of Financial Assets. ASU 2009-16 amends the derecognition accounting and disclosure guidance, eliminates the exemption from consolidation for qualifying special-purpose
entities (QSPEs) and also requires a transferor to evaluate all existing QSPEs to determine whether they must be consolidated. This accounting standard will be effective as of the beginning of the first annual reporting period beginning
after November 15, 2009. We have adopted the accounting standard at the beginning of 2010 and the adoption did not have a material impact on our consolidated financial statements.



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In June 2009, FASB issued ASU No 2009-17, Consolidations (Topic 810)Improvements
to Financial Reporting for Enterprises involved with Variable Interest Entities, which amends the consolidation guidance applicable to variable interest entities. The amendments to the consolidation guidance affect all entities, as well as
QSPEs that are currently excluded from previous consolidation guidance. This accounting standard became effective as of the beginning of the first annual reporting period beginning after November 15, 2009. We have adopted the accounting
standard at the beginning of 2010 and the adoption did not have a material impact on our consolidated financial statements.

QUARTERLY
FINANCIAL INFORMATION

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



|                                          |  |                                       |         |   |                    |   |        |                    |  |   |         |   |  |         |         |   |         |   |        |         |  |   |         |   |  |   |         |   |  |   |         |  
|----------------------------------------- |  | ------------------------------------- | ------- | - | ------------------ | - | ------ | ------------------ |  | - | ------- | - |  | ------- | ------- | - | ------- | - | ------ | ------- |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                          |  | 2010 Quarter Ended                    |         |   | 2009 Quarter Ended |   |        | 2008 Quarter Ended | 
|                                          |  | Mar. 31                               |         |   | Dec. 31            |   |        | Sep. 30            |  |   | Jun. 30 |   |  | Mar. 31 |         |   | Dec. 31 |   |        | Sep. 30 |  |   | Jun. 30 |  
|                                          |  | (in thousands, except per share data) |        
|Interest income                           |  | $                                     | 52,887  |   |                    | $ | 53,965 |                    |  | $ | 56,033  |   |  | $       | 55,715  |   |         | $ | 54,317 |         |  | $ | 54,624  |   |  | $ | 50,764  |   |  | $ | 46,406  |  
|Interest expense                          |  |                                       | 19,420  |   |                    |   | 21,155 |                    |  |   | 23,658  |   |  |         | 25,335  |   |         |   | 26,971 |         |  |   | 30,210  |   |  |   | 28,866  |   |  |   | 24,841  |  
|                                          |  |                                       |         |   |                    |   |        |                    |  |   |         |   |  |         |         |   |         |   |        |         |  |   |         |   |  |   |         |   |  |   |         |  
|Net interest income                       |  |                                       | 33,467  |   |                    |   | 32,810 |                    |  |   | 32,375  |   |  |         | 30,380  |   |         |   | 27,346 |         |  |   | 24,414  |   |  |   | 21,898  |   |  |   | 21,565  |  
|Provision for loan losses                 |  |                                       | 21,130  |   |                    |   | 19,002 |                    |  |   | 15,539  |   |  |         | 39,507  |   |         |   | 15,563 |         |  |   | 30,353  |   |  |   | 52,700  |   |  |   | 49,355  |  
|Noninterest income                        |  |                                       | 4,374   |   |                    |   | 12,735 |                    |  |   | 3,376   |   |  |         | 12,137  |   |         |   | 5,343  |         |  |   | 1,085   |   |  |   | 3,220   |   |  |   | 4,030   |  
|Noninterest expense                       |  |                                       | 27,152  |   |                    |   | 30,219 |                    |  |   | 22,516  |   |  |         | 23,707  |   |         |   | 21,165 |         |  |   | 21,630  |   |  |   | 27,301  |   |  |   | 22,623  |  
|                                          |  |                                       |         |   |                    |   |        |                    |  |   |         |   |  |         |         |   |         |   |        |         |  |   |         |   |  |   |         |   |  |   |         |  
|Loss before income taxes                  |  |                                       | (10,441 | ) |                    |   | (3,676 | )                  |  |   | (2,304  | ) |  |         | (20,697 | ) |         |   | (4,039 | )       |  |   | (26,484 | ) |  |   | (54,883 | ) |  |   | (46,383 | )
|Income taxes (benefit)                    |  |                                       | 306     |   |                    |   | (647   | )                  |  |   | 144     |   |  |         | 2,558   |   |         |   | (1,221 | )       |  |   | (11,648 | ) |  |   | 25,653  |   |  |   | (21,067 | )
|                                          |  |                                       |         |   |                    |   |        |                    |  |   |         |   |  |         |         |   |         |   |        |         |  |   |         |   |  |   |         |   |  |   |         |  
|Net loss                                  |  |                                       | (10,747 | ) |                    |   | (3,029 | )                  |  |   | (2,448  | ) |  |         | (23,255 | ) |         |   | (2,818 | )       |  |   | (14,836 | ) |  |   | (80,536 | ) |  |   | (25,316 | )
|                                          |  |                                       |         |   |                    |   |        |                    |  |   |         |   |  |         |         |   |         |   |        |         |  |   |         |   |  |   |         |   |  |   |         |  
|Preferred dividends and discounts         |  |                                       | (2,887  | ) |                    |   | (2,880 | )                  |  |   | (2,873  | ) |  |         | (2,868  | ) |         |   | (2,862 | )       |  |   | (2,150  | ) |  |   | (16,680 | ) |  |   |        |  
|                                          |  |                                       |         |   |                    |   |        |                    |  |   |         |   |  |         |         |   |         |   |        |         |  |   |         |   |  |   |         |   |  |   |         |  
|Net loss available to common stockholders |  | $                                     | (13,634 | ) |                    | $ | (5,909 | )                  |  | $ | (5,321  | ) |  | $       | (26,123 | ) |         | $ | (5,680 | )       |  | $ | (16,986 | ) |  | $ | (97,216 | ) |  | $ | (25,316 | )
|                                          |  |                                       |         |   |                    |   |        |                    |  |   |         |   |  |         |         |   |         |   |        |         |  |   |         |   |  |   |         |   |  |   |         |  
|Loss per common share:                    |  |                                       |         |   |                    |   |        |                    |  |   |         |   |  |         |         |   |         |   |        |         |  |   |         |   |  |   |         |   |  |   |         |  
|Basic                                     |  | $                                     | (1.30   | ) |                    | $ | (0.56  | )                  |  | $ | (0.51   | ) |  | $       | (2.49   | ) |         | $ | (0.54  | )       |  | $ | (1.62   | ) |  | $ | (9.30   | ) |  | $ | (2.42   | )
|Diluted                                   |  |                                       | (1.30   | ) |                    |   | (0.56  | )                  |  |   | (0.51   | ) |  |         | (2.49   | ) |         |   | (0.54  | )       |  |   | (1.62   | ) |  |   | (9.30   | ) |  |   | (2.42   | )
|                                          |  |                                       |         |   |                    |   |        |                    |  |   |         |   |  |         |         |   |         |   |        |         |  |   |         |   |  |   |         |   |  |   |         |  



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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 March 31, 2010. Based upon their evaluation and subject to the foregoing, the Chief Executive
Officer and Chief Financial Officer concluded that such controls and procedures were effective as of the end of the period covered by this report, in all material respects, to ensure that required information will be disclosed on a timely basis in
our reports filed under the Exchange Act.

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

There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2010, 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 2009 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. | (Removed and Reserved).
|------- | -----------------------



|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            |  | 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).                                                                                                                                                                                          
|               | 
|4.3            |  | 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).                                                                                                
|               | 
|4.4            |  | 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).                                                                                                                                                                                                                               
|               | 
|4.5            |  | 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: May 12, 2010 |  |  |  |                                             
|                   |  |  |  | /s/ MARK A. HOPPE                           
|                   |  |  |  | Mark A. Hoppe                               
|                   |  |  |  | President and Chief Executive Officer       
|                   |  |  |  | (Principal Executive Officer)               
|                   |  | 
|                   |  |  |  | /s/ RANDALL T. CONTE                        
|                   |  |  |  | Randall T. Conte                            
|                   |  |  |  | Chief Financial Officer                     
|                   |  |  |  | (Principal Financial and Accounting Officer)



65