##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



---



FORM 10-Q/A

Amendment No. 1 to 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, 2005



Commission File No. 0-50034



---



TAYLOR CAPITAL GROUP, INC.

(Exact name of registrant as specified in its charter)



---



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



9550 West Higgins
Road

Rosemont, IL 60018

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



(847) 653-7978

(Registrants telephone number, including area code)



---



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



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



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 2, 2005, there were 9,678,738 shares of Common Stock, $0.01 par value, outstanding.



---



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.



INDEX



|                                                        |  |                                                                                                                                       |  |     
|------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                        |  |                                                                                                                                       |  | Page
|EXPLANATORY NOTE  RESTATEMENT OF FINANCIAL INFORMATION |  | 1                                                                                                                                    
|                                                        | 
|PART I. FINANCIAL INFORMATION                           |  |                                                                                                                                      
|                                                        |  |                                                                                                                                      
|Item 1.                                                 |  | Financial Statements                                                                                                                  |  |     
|                                                        |  | Consolidated Balance Sheets (unaudited) (restated) -March 31, 2005 and December 31, 2004                                              |  | 3   
|                                                        |  | Consolidated Statements of Income (unaudited) (restated) -For the three months ended March 31, 2005 and 2004                          |  | 4   
|                                                        |  | Consolidated Statements of Changes in Stockholders Equity (unaudited) (restated) -For the three months ended March 31, 2005 and 2004 |  | 5   
|                                                        |  | Consolidated Statements of Cash Flows (unaudited) (restated) -For the three months ended March 31, 2005 and 2004                      |  | 6   
|                                                        |  | Notes to Consolidated Financial Statements (unaudited) (restated)                                                                     |  | 8   
|Item 2.                                                 |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                 |  | 20  
|Item 3.                                                 |  | Quantitative and Qualitative Disclosures About Market Risk                                                                            |  | 47  
|Item 4.                                                 |  | Controls and Procedures                                                                                                               |  | 47  
|                                                        | 
|PART II.
OTHER INFORMATION                              |  |                                                                                                                                      
|                                                        |  |                                                                                                                                      
|Item 1.                                                 |  | Legal Proceedings                                                                                                                     |  | 49  
|Item 2.                                                 |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                           |  | 49  
|Item 3.                                                 |  | Defaults Upon Senior Securities                                                                                                       |  | 49  
|Item 4.                                                 |  | Submission of Matters to a Vote of Security Holders                                                                                   |  | 49  
|Item 5.                                                 |  | Other Information                                                                                                                     |  | 49  
|Item 6.                                                 |  | Exhibits                                                                                                                              |  | 49  
|                                                        | 
|Signatures                                              |  | 52                                                                                                                                   



---

##### Table of Contents

EXPLANATORY NOTE  RESTATEMENT OF FINANCIAL INFORMATION



This Amendment No. 1 to Form 10-Q (Amendment No. 1) is being filed by Taylor Capital Group, Inc. to amend and restate its Quarterly Report on Form 10-Q for the quarter ended March 31, 2005
filed with the Securities and Exchange Commission (SEC) on May 6, 2005 (Initial Form 10-Q). This Amendment No. 1 is being filed to correct errors in the Initial Form 10-Q related to our derivative accounting under
Statement of Financial Accounting Standards 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), and to reflect a change in the amortization period of issuance costs relating to our junior subordinated
debentures. Amendment No. 1 restates the Consolidated Financial Statements and the other financial information for the quarters ended March 31, 2005 and 2004, previously reported in the Initial Form 10-Q and supercedes our previously
issued Consolidated Financial Statements and other financial information for the first quarters of 2005 and 2004.



In 2005 and prior years, we applied a method of fair value hedge accounting under SFAS 133 to account for the interest rate swap agreements (CD swaps)
relating to certain of our brokered certificates of deposit (brokered CDs) that allowed us to assume no ineffectiveness in these transactions (the so-called short-cut method). We recently concluded that the CD swaps did not qualify for
this method in prior periods because the related CD broker placement fee was determined, in retrospect, to have caused the swap not to have a fair value of zero at inception (which is required under SFAS 133 to qualify for the short-cut method).
Furthermore, although historical effectiveness testing performed in November 2005 demonstrated that the CD swaps would have qualified for hedge accounting under the long-haul method, hedge accounting under SFAS 133 is not allowed
retrospectively because the hedge documentation required for the long-haul method was not in place at the inception of the hedge. Eliminating the application of fair value hedge accounting reverses the fair value adjustments that were made to the
hedged items, the brokered CDs, and results in the recording and subsequent amortization of the CD broker placement fee, which was incorporated into the CD swap, as an adjustment to the par amount of the brokered CDs. In connection with the
determination of the appropriate amortization period for the brokered CD placement fees, we also determined that the issuance costs relating to our junior subordinated debentures should have been amortized through the maturity date of the
debentures, rather than their earlier call dates. The net cumulative effect of this non-cash restatement at March 31, 2005 was a decrease to retained earnings of $591,000. For additional information regarding our restatement, see Note 2 to our
Consolidated Financial Statements contained herein.



Amendment
No. 1 includes restated financial information and related disclosures in Part I Items 1 through 4 including disclosures within Managements Discussion and Analysis of Financial Condition and Results of Operations and
Controls and Procedures, as a result of the restatement described above and managements restated assessment of our disclosure controls and procedures as of March 31, 2005. The restatement does not change any of the disclosures
previously reported in Part II Items 1 through 5 of the Initial Form 10-Q, however for the convenience of readers, those parts are included in this Amendment No. 1.



1



---

##### Table of Contents

Except as otherwise specifically noted, all information contained herein is as of March 31, 2005 and
does not reflect any events or changes that have occurred subsequent to that date. We are not required to and have not updated any forward-looking statements previously included in the Initial Form 10-Q filed with the SEC on May 6, 2005.



2



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands, except share and per share data)



|                                                                                                                                                                                                                                                           |  |                         |           |   |                              |   |           |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | --------- | - | ---------------------------- | - | --------- | -
|                                                                                                                                                                                                                                                           |  | (Restated)March 31,2005 |           |   | (Restated) December 31, 2004 |  
|ASSETS                                                                                                                                                                                                                                                     |  |                         |           |   |                              |   |           |  
|Cash and cash equivalents:                                                                                                                                                                                                                                 |  |                         |           |   |                              |   |           |  
|Cash and due from banks                                                                                                                                                                                                                                    |  | $                       | 73,198    |   |                              | $ | 55,101    |  
|Federal funds sold                                                                                                                                                                                                                                         |  |                         | 16,000    |   |                              |   | 15,000    |  
|Short-term investments                                                                                                                                                                                                                                     |  |                         | 4,811     |   |                              |   | 9,149     |  
|                                                                                                                                                                                                                                                           |  |                         |           |   |                              |   |           |  
|Total cash and cash equivalents                                                                                                                                                                                                                            |  |                         | 94,009    |   |                              |   | 79,250    |  
|Investment securities:                                                                                                                                                                                                                                     |  |                         |           |   |                              |   |           |  
|Available-for-sale, at fair value                                                                                                                                                                                                                          |  |                         | 529,763   |   |                              |   | 533,344   |  
|Held-to-maturity, at amortized cost (fair value of $275 at March 31, 2005 and December 31, 2004)                                                                                                                                                           |  |                         | 275       |   |                              |   | 275       |  
|Loans, net of allowance for loan losses of $39,262 and $37,484 at March 31, 2005 and December 31, 2004, respectively                                                                                                                                       |  |                         | 2,216,605 |   |                              |   | 2,174,122 |  
|Premises, leasehold improvements and equipment, net                                                                                                                                                                                                        |  |                         | 12,024    |   |                              |   | 14,787    |  
|Investments in Federal Home Loan Bank and Federal Reserve Bank stock, at cost                                                                                                                                                                              |  |                         | 12,620    |   |                              |   | 12,516    |  
|Other real estate and repossessed assets, net                                                                                                                                                                                                              |  |                         | 57        |   |                              |   | 58        |  
|Goodwill                                                                                                                                                                                                                                                   |  |                         | 23,354    |   |                              |   | 23,354    |  
|Other assets                                                                                                                                                                                                                                               |  |                         | 57,167    |   |                              |   | 51,342    |  
|                                                                                                                                                                                                                                                           |  |                         |           |   |                              |   |           |  
|Total assets                                                                                                                                                                                                                                               |  | $                       | 2,945,874 |   |                              | $ | 2,889,048 |  
|                                                                                                                                                                                                                                                           |  |                         |           |   |                              |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                                                       |  |                         |           |   |                              |   |           |  
|Deposits:                                                                                                                                                                                                                                                  |  |                         |           |   |                              |   |           |  
|Noninterest-bearing                                                                                                                                                                                                                                        |  | $                       | 461,060   |   |                              | $ | 519,158   |  
|Interest-bearing                                                                                                                                                                                                                                           |  |                         | 1,890,250 |   |                              |   | 1,765,539 |  
|                                                                                                                                                                                                                                                           |  |                         |           |   |                              |   |           |  
|Total deposits                                                                                                                                                                                                                                             |  |                         | 2,351,310 |   |                              |   | 2,284,697 |  
|Short-term borrowings                                                                                                                                                                                                                                      |  |                         | 214,866   |   |                              |   | 229,547   |  
|Accrued interest, taxes and other liabilities                                                                                                                                                                                                              |  |                         | 48,168    |   |                              |   | 46,093    |  
|Notes payable and FHLB advances                                                                                                                                                                                                                            |  |                         | 85,500    |   |                              |   | 85,500    |  
|Junior subordinated debentures                                                                                                                                                                                                                             |  |                         | 87,638    |   |                              |   | 87,638    |  
|                                                                                                                                                                                                                                                           |  |                         |           |   |                              |   |           |  
|Total liabilities                                                                                                                                                                                                                                          |  |                         | 2,787,482 |   |                              |   | 2,733,475 |  
|                                                                                                                                                                                                                                                           |  |                         |           |   |                              |   |           |  
|Stockholders equity:                                                                                                                                                                                                                                      |  |                         |           |   |                              |   |           |  
|Preferred stock, $.01 par value, 5,000,000 shares authorized, none issued and outstanding                                                                                                                                                                  |  |                         |          |   |                              |   |          |  
|Common stock, $.01 par value; 25,000,000 shares authorized; 10,001,645 and 9,976,556 shares issued at March 31, 2005 and
December 31, 2004, respectively; 9,678,638 and 9,653,549 shares outstanding at March 31, 2005 and December 31, 2004, respectively |  |                         | 100       |   |                              |   | 100       |  
|Surplus                                                                                                                                                                                                                                                    |  |                         | 148,429   |   |                              |   | 147,682   |  
|Unearned compensation - stock grants                                                                                                                                                                                                                       |  |                         | (1,782    | ) |                              |   | (1,383    | )
|Retained earnings                                                                                                                                                                                                                                          |  |                         | 24,656    |   |                              |   | 16,698    |  
|Accumulated other comprehensive loss                                                                                                                                                                                                                       |  |                         | (5,954    | ) |                              |   | (467      | )
|Treasury stock, at cost, 323,007 shares at March 31, 2005 and December 31, 2004                                                                                                                                                                            |  |                         | (7,057    | ) |                              |   | (7,057    | )
|                                                                                                                                                                                                                                                           |  |                         |           |   |                              |   |           |  
|Total stockholders equity                                                                                                                                                                                                                                 |  |                         | 158,392   |   |                              |   | 155,573   |  
|                                                                                                                                                                                                                                                           |  |                         |           |   |                              |   |           |  
|Total liabilities and stockholders equity                                                                                                                                                                                                                 |  | $                       | 2,945,874 |   |                              | $ | 2,889,048 |  
|                                                                                                                                                                                                                                                           |  |                         |           |   |                              |   |           |  



See accompanying notes
to consolidated financial statements



3



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(in thousands, except per share data)



|                                                    |  |                                     |        |   |                 |   |        |  
|--------------------------------------------------- |  | ----------------------------------- | ------ | - | --------------- | - | ------ | -
|                                                    |  | For the Three MonthsEnded March 31, |       
|                                                    |  | (Restated) 2005                     |        |   | (Restated) 2004 |  
|Interest income:                                    |  |                                     |        |   |                 |   |        |  
|Interest and fees on loans                          |  | $                                   | 33,927 |   |                 | $ | 26,999 |  
|Interest and dividends on investment securities:    |  |                                     |        |   |                 |   |        |  
|Taxable                                             |  |                                     | 4,995  |   |                 |   | 4,980  |  
|Tax-exempt                                          |  |                                     | 481    |   |                 |   | 513    |  
|Interest on cash equivalents                        |  |                                     | 109    |   |                 |   | 18     |  
|                                                    |  |                                     |        |   |                 |   |        |  
|Total interest income                               |  |                                     | 39,512 |   |                 |   | 32,510 |  
|                                                    |  |                                     |        |   |                 |   |        |  
|Interest expense:                                   |  |                                     |        |   |                 |   |        |  
|Deposits                                            |  |                                     | 9,983  |   |                 |   | 7,055  |  
|Short-term borrowings                               |  |                                     | 975    |   |                 |   | 499    |  
|Notes payable and FHLB advances                     |  |                                     | 1,002  |   |                 |   | 1,094  |  
|Junior subordinated debentures                      |  |                                     | 1,705  |   |                 |   | 546    |  
|                                                    |  |                                     |        |   |                 |   |        |  
|Total interest expense                              |  |                                     | 13,665 |   |                 |   | 9,194  |  
|                                                    |  |                                     |        |   |                 |   |        |  
|Net interest income                                 |  |                                     | 25,847 |   |                 |   | 23,316 |  
|Provision for loan losses                           |  |                                     | 1,834  |   |                 |   | 2,750  |  
|                                                    |  |                                     |        |   |                 |   |        |  
|Net interest income after provision for loan losses |  |                                     | 24,013 |   |                 |   | 20,566 |  
|                                                    |  |                                     |        |   |                 |   |        |  
|Noninterest income:                                 |  |                                     |        |   |                 |   |        |  
|Deposit service charges                             |  |                                     | 2,407  |   |                 |   | 2,783  |  
|Trust and wealth management services                |  |                                     | 1,184  |   |                 |   | 1,240  |  
|Gain on sale of land trusts                         |  |                                     | 2,000  |   |                 |   |       |  
|Gain on sale of branch                              |  |                                     | 1,572  |   |                 |   |       |  
|Gain on sale of investment securities, net          |  |                                     | 127    |   |                 |   |       |  
|Net cash settlements on CD swaps                    |  |                                     | 223    |   |                 |   | 207    |  
|Change in fair value of CD swaps                    |  |                                     | (1,576 | ) |                 |   | 958    |  
|Other noninterest income                            |  |                                     | 965    |   |                 |   | 652    |  
|                                                    |  |                                     |        |   |                 |   |        |  
|Total noninterest income                            |  |                                     | 6,902  |   |                 |   | 5,840  |  
|                                                    |  |                                     |        |   |                 |   |        |  
|Noninterest expense:                                |  |                                     |        |   |                 |   |        |  
|Salaries and employee benefits                      |  |                                     | 10,000 |   |                 |   | 10,731 |  
|Occupancy of premises                               |  |                                     | 1,725  |   |                 |   | 1,807  |  
|Furniture and equipment                             |  |                                     | 884    |   |                 |   | 1,135  |  
|Computer processing                                 |  |                                     | 433    |   |                 |   | 434    |  
|Corporate insurance                                 |  |                                     | 370    |   |                 |   | 622    |  
|Legal fees, net                                     |  |                                     | 172    |   |                 |   | 329    |  
|Advertising and public relations                    |  |                                     | 109    |   |                 |   | 422    |  
|Other noninterest expense                           |  |                                     | 3,047  |   |                 |   | 3,303  |  
|                                                    |  |                                     |        |   |                 |   |        |  
|Total noninterest expense                           |  |                                     | 16,740 |   |                 |   | 18,783 |  
|                                                    |  |                                     |        |   |                 |   |        |  
|Income before income taxes                          |  |                                     | 14,175 |   |                 |   | 7,623  |  
|Income taxes                                        |  |                                     | 5,636  |   |                 |   | 2,649  |  
|                                                    |  |                                     |        |   |                 |   |        |  
|Net income                                          |  | $                                   | 8,539  |   |                 | $ | 4,974  |  
|                                                    |  |                                     |        |   |                 |   |        |  
|Preferred dividend requirements                     |  |                                     |       |   |                 |   | (861   | )
|                                                    |  |                                     |        |   |                 |   |        |  
|Net income applicable to common stockholders        |  | $                                   | 8,539  |   |                 | $ | 4,113  |  
|                                                    |  |                                     |        |   |                 |   |        |  
|Basic earnings per common share                     |  | $                                   | 0.88   |   |                 | $ | 0.43   |  
|Diluted earnings per common share                   |  |                                     | 0.87   |   |                 |   | 0.43   |  
|                                                    |  |                                     |        |   |                 |   |        |  



See accompanying notes
to consolidated financial statements



4



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (unaudited)

(in thousands, except per share data)



|                                                                                                                               |  |                                                  |        |              |   |         |  |                                    |         |  |                            |        |   |                                               |   |        |                |  |   |        |   |  |   |        |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------ | ------ | ------------ | - | ------- |  | ---------------------------------- | ------- |  | -------------------------- | ------ | - | --------------------------------------------- | - | ------ | -------------- |  | - | ------ | - |  | - | ------ | - |  | - | ------- | -
|                                                                                                                               |  | Series A 9%NoncumulativePerpetualPreferred Stock |        | Common Stock |   | Surplus |  | UnearnedCompensation -Stock Grants |         |  | Retained Earnings(Deficit) |        |   | Accumulated Other Comprehensive Income/(Loss) |   |        | Treasury Stock |  |   | Total  |  
|Balance at December 31, 2004, as previously stated                                                                             |  | $                                                |       |              | $ | 100     |  | $                                  | 147,682 |  | $                          | (1,383 | ) |                                               | $ | 16,386 |                |  | $ | (467   | ) |  | $ | (7,057 | ) |  | $ | 155,261 |  
|Cumulative effect of restatement                                                                                               |  |                                                  |       |              |   |        |  |                                    |        |  |                            |       |   |                                               |   | 312    |                |  |   |       |   |  |   |       |   |  |   | 312     |  
|                                                                                                                               |  |                                                  |        |              |   |         |  |                                    |         |  |                            |        |   |                                               |   |        |                |  |   |        |   |  |   |        |   |  |   |         |  
|Balance at December 31, 2004, as restated                                                                                      |  |                                                  |       |              |   | 100     |  |                                    | 147,682 |  |                            | (1,383 | ) |                                               |   | 16,698 |                |  |   | (467   | ) |  |   | (7,057 | ) |  |   | 155,573 |  
|Issuance of stock grants                                                                                                       |  |                                                  |       |              |   |        |  |                                    | 571     |  |                            | (571   | ) |                                               |   |       |                |  |   |       |   |  |   |       |   |  |   |        |  
|Amortization of stock grants                                                                                                   |  |                                                  |       |              |   |        |  |                                    |        |  |                            | 172    |   |                                               |   |       |                |  |   |       |   |  |   |       |   |  |   | 172     |  
|Exercise of stock options                                                                                                      |  |                                                  |       |              |   |        |  |                                    | 142     |  |                            |       |   |                                               |   |       |                |  |   |       |   |  |   |       |   |  |   | 142     |  
|Tax benefit on stock options exercised and stock awards                                                                        |  |                                                  |       |              |   |        |  |                                    | 34      |  |                            |       |   |                                               |   |       |                |  |   |       |   |  |   |       |   |  |   | 34      |  
|Comprehensive income:                                                                                                          |  |                                                  |        |              |   |         |  |                                    |         |  |                            |        |   |                                               |   |        |                |  |   |        |   |  |   |        |   |  |   |         |  
|Net income (Restated)                                                                                                          |  |                                                  |       |              |   |        |  |                                    |        |  |                            |       |   |                                               |   | 8,539  |                |  |   |       |   |  |   |       |   |  |   | 8,539   |  
|Change in unrealized loss on available-for-sale investment securities, net of reclassification adjustment, net of income taxes |  |                                                  |       |              |   |        |  |                                    |        |  |                            |       |   |                                               |   |       |                |  |   | (4,946 | ) |  |   |       |   |  |   | (4,946  | )
|Change in unrealized loss from cash flow hedging instruments, net of income taxes                                              |  |                                                  |       |              |   |        |  |                                    |        |  |                            |       |   |                                               |   |       |                |  |   | (498   | ) |  |   |       |   |  |   | (498    | )
|Changes in deferred gain from termination of cash flow hedging instruments, net of income taxes                                |  |                                                  |       |              |   |        |  |                                    |        |  |                            |       |   |                                               |   |       |                |  |   | (43    | ) |  |   |       |   |  |   | (43     | )
|                                                                                                                               |  |                                                  |        |              |   |         |  |                                    |         |  |                            |        |   |                                               |   |        |                |  |   |        |   |  |   |        |   |  |   |         |  
|Total comprehensive income (Restated)                                                                                          |  |                                                  |        |              |   |         |  |                                    |         |  |                            |        |   |                                               |   |        |                |  |   |        |   |  |   |        |   |  |   | 3,052   |  
|                                                                                                                               |  |                                                  |        |              |   |         |  |                                    |         |  |                            |        |   |                                               |   |        |                |  |   |        |   |  |   |        |   |  |   |         |  
|Common stock dividends $0.06 per share                                                                                        |  |                                                  |       |              |   |        |  |                                    |        |  |                            |       |   |                                               |   | (581   | )              |  |   |       |   |  |   |       |   |  |   | (581    | )
|                                                                                                                               |  |                                                  |        |              |   |         |  |                                    |         |  |                            |        |   |                                               |   |        |                |  |   |        |   |  |   |        |   |  |   |         |  
|Balance at March 31, 2005 (Restated)                                                                                           |  | $                                                |       |              | $ | 100     |  | $                                  | 148,429 |  | $                          | (1,782 | ) |                                               | $ | 24,656 |                |  | $ | (5,954 | ) |  | $ | (7,057 | ) |  | $ | 158,392 |  
|                                                                                                                               |  |                                                  |        |              |   |         |  |                                    |         |  |                            |        |   |                                               |   |        |                |  |   |        |   |  |   |        |   |  |   |         |  
|Balance at December 31, 2003                                                                                                   |  | $                                                | 38,250 |              | $ | 98      |  | $                                  | 143,918 |  | $                          | (1,138 | ) |                                               | $ | (2,106 | )              |  | $ | 4,520  |   |  | $ | (7,057 | ) |  | $ | 176,485 |  
|Issuance of stock grants                                                                                                       |  |                                                  |       |              |   |        |  |                                    | 100     |  |                            | (100   | ) |                                               |   |       |                |  |   |       |   |  |   |       |   |  |   |        |  
|Amortization of stock grants                                                                                                   |  |                                                  |       |              |   |        |  |                                    |        |  |                            | 125    |   |                                               |   |       |                |  |   |       |   |  |   |       |   |  |   | 125     |  
|Exercise of stock options                                                                                                      |  |                                                  |       |              |   |        |  |                                    | 118     |  |                            |       |   |                                               |   |       |                |  |   |       |   |  |   |       |   |  |   | 118     |  
|Tax benefit on stock options exercised and stock awards                                                                        |  |                                                  |       |              |   |        |  |                                    | 29      |  |                            |       |   |                                               |   |       |                |  |   |       |   |  |   |       |   |  |   | 29      |  
|Comprehensive income:                                                                                                          |  |                                                  |        |              |   |         |  |                                    |         |  |                            |        |   |                                               |   |        |                |  |   |        |   |  |   |        |   |  |   |         |  
|Net income (Restated)                                                                                                          |  |                                                  |       |              |   |        |  |                                    |        |  |                            |       |   |                                               |   | 4,974  |                |  |   |       |   |  |   |       |   |  |   | 4,974   |  
|Change in unrealized gain on available-for-sale investment securities, net of income taxes                                     |  |                                                  |       |              |   |        |  |                                    |        |  |                            |       |   |                                               |   |       |                |  |   | 2,243  |   |  |   |       |   |  |   | 2,243   |  
|Changes in deferred gain from termination of cash flow hedging instruments, net of income taxes                                |  |                                                  |       |              |   |        |  |                                    |        |  |                            |       |   |                                               |   |       |                |  |   | (43    | ) |  |   |       |   |  |   | (43     | )
|                                                                                                                               |  |                                                  |        |              |   |         |  |                                    |         |  |                            |        |   |                                               |   |        |                |  |   |        |   |  |   |        |   |  |   |         |  
|Total comprehensive income (Restated)                                                                                          |  |                                                  |        |              |   |         |  |                                    |         |  |                            |        |   |                                               |   |        |                |  |   |        |   |  |   |        |   |  |   | 7,174   |  
|                                                                                                                               |  |                                                  |        |              |   |         |  |                                    |         |  |                            |        |   |                                               |   |        |                |  |   |        |   |  |   |        |   |  |   |         |  
|Dividends:                                                                                                                     |  |                                                  |        |              |   |         |  |                                    |         |  |                            |        |   |                                               |   |        |                |  |   |        |   |  |   |        |   |  |   |         |  
|Preferred  $0.5625 per share                                                                                                  |  |                                                  |       |              |   |        |  |                                    |        |  |                            |       |   |                                               |   | (861   | )              |  |   |       |   |  |   |       |   |  |   | (861    | )
|Common  $0.06 per share                                                                                                       |  |                                                  |       |              |   |        |  |                                    |        |  |                            |       |   |                                               |   | (570   | )              |  |   |       |   |  |   |       |   |  |   | (570    | )
|                                                                                                                               |  |                                                  |        |              |   |         |  |                                    |         |  |                            |        |   |                                               |   |        |                |  |   |        |   |  |   |        |   |  |   |         |  
|Balance at March 31, 2004 (Restated)                                                                                           |  | $                                                | 38,250 |              | $ | 98      |  | $                                  | 144,165 |  | $                          | (1,113 | ) |                                               | $ | 1,437  |                |  | $ | 6,720  |   |  | $ | (7,057 | ) |  | $ | 182,500 |  
|                                                                                                                               |  |                                                  |        |              |   |         |  |                                    |         |  |                            |        |   |                                               |   |        |                |  |   |        |   |  |   |        |   |  |   |         |  



See accompanying notes
to consolidated financial statements



5



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)



|                                                                                  |  |                                     |         |   |                 |   |          |  
|--------------------------------------------------------------------------------- |  | ----------------------------------- | ------- | - | --------------- | - | -------- | -
|                                                                                  |  | For the Three MonthsEnded March 31, |        
|                                                                                  |  | (Restated)2005                      |         |   | (Restated) 2004 |  
|Cash flows from operating activities:                                             |  |                                     |         |   |                 |   |          |  
|Net income                                                                        |  | $                                   | 8,539   |   |                 | $ | 4,974    |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                     |         |   |                 |   |          |  
|Amortization of premiums and discounts, net                                       |  |                                     | 508     |   |                 |   | 703      |  
|Gain on sale of available-for-sale securities, net                                |  |                                     | (127    | ) |                 |   |         |  
|Deferred loan fee amortization                                                    |  |                                     | (1,099  | ) |                 |   | (657     | )
|Provision for loan losses                                                         |  |                                     | 1,834   |   |                 |   | 2,750    |  
|Depreciation and amortization                                                     |  |                                     | 779     |   |                 |   | 956      |  
|Deferred income taxes                                                             |  |                                     | (2,450  | ) |                 |   | 1,335    |  
|(Gain) loss on sales of other real estate                                         |  |                                     |        |   |                 |   | 3        |  
|Provision for other real estate                                                   |  |                                     |        |   |                 |   | 66       |  
|Gain on sale of land trusts                                                       |  |                                     | (2,000  | ) |                 |   |         |  
|Gain on sale of branch                                                            |  |                                     | (1,572  | ) |                 |   |         |  
|Other, net                                                                        |  |                                     | (320    | ) |                 |   | (318     | )
|Changes in other assets and liabilities:                                          |  |                                     |         |   |                 |   |          |  
|Accrued interest receivable                                                       |  |                                     | (1,251  | ) |                 |   | (1,401   | )
|Other assets                                                                      |  |                                     | 1,135   |   |                 |   | (1,074   | )
|Accrued interest, taxes and other liabilities                                     |  |                                     | 865     |   |                 |   | (1,613   | )
|                                                                                  |  |                                     |         |   |                 |   |          |  
|Net cash provided by operating activities                                         |  |                                     | 4,841   |   |                 |   | 5,724    |  
|                                                                                  |  |                                     |         |   |                 |   |          |  
|Cash flows from investing activities:                                             |  |                                     |         |   |                 |   |          |  
|Purchases of available-for-sale securities                                        |  |                                     | (20,182 | ) |                 |   | (103,144 | )
|Proceeds from principal payments and maturities of available-for-sale securities  |  |                                     | 13,112  |   |                 |   | 17,034   |  
|Proceeds from sale of available-for-sale securities                               |  |                                     | 2,725   |   |                 |   |         |  
|Net increase in loans                                                             |  |                                     | (48,535 | ) |                 |   | (58,483  | )
|Additions to premises, leasehold improvements and equipment                       |  |                                     | (33     | ) |                 |   | (273     | )
|Net cash paid on sale of branch                                                   |  |                                     | (10,853 | ) |                 |   |         |  
|Proceeds from sale of land trusts                                                 |  |                                     | 2,050   |   |                 |   |         |  
|Proceeds from sales of other real estate                                          |  |                                     | 1       |   |                 |   | 50       |  
|                                                                                  |  |                                     |         |   |                 |   |          |  
|Net cash used in investing activities                                             |  |                                     | (61,715 | ) |                 |   | (144,816 | )
|                                                                                  |  |                                     |         |   |                 |   |          |  
|Cash flows from financing activities:                                             |  |                                     |         |   |                 |   |          |  
|Net increase in deposits                                                          |  |                                     | 86,751  |   |                 |   | 68,986   |  
|Net increase (decrease) in short-term borrowings                                  |  |                                     | (14,681 | ) |                 |   | 54,289   |  
|Repayments of notes payable and FHLB advances                                     |  |                                     |        |   |                 |   | (15,000  | )
|Proceeds from exercise of employee stock options                                  |  |                                     | 142     |   |                 |   | 118      |  
|Dividends paid                                                                    |  |                                     | (579    | ) |                 |   | (1,430   | )
|                                                                                  |  |                                     |         |   |                 |   |          |  
|Net cash provided by financing activities                                         |  |                                     | 71,633  |   |                 |   | 106,963  |  
|                                                                                  |  |                                     |         |   |                 |   |          |  
|Net increase (decrease) in cash and cash equivalents                              |  |                                     | 14,759  |   |                 |   | (32,129  | )
|Cash and cash equivalents, beginning of period                                    |  |                                     | 79,250  |   |                 |   | 88,504   |  
|                                                                                  |  |                                     |         |   |                 |   |          |  
|Cash and cash equivalents, end of period                                          |  | $                                   | 94,009  |   |                 | $ | 56,375   |  
|                                                                                  |  |                                     |         |   |                 |   |          |  



Consolidated Statements
of Cash Flows continued on next page



See accompanying notes to
consolidated financial statements



6



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

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

(in thousands)



|                                                                              |  |                                     |        |   |                 |   |       |  
|----------------------------------------------------------------------------- |  | ----------------------------------- | ------ | - | --------------- | - | ----- | -
|                                                                              |  | For the Three MonthsEnded March 31, |       
|                                                                              |  | (Restated)2005                      |        |   | (Restated) 2004 |  
|Supplemental disclosure of cash flow information:                             |  |                                     |        |   |                 |   |       |  
|Cash paid during the period for:                                              |  |                                     |        |   |                 |   |       |  
|Interest                                                                      |  | $                                   | 12,557 |   |                 | $ | 9,286 |  
|Income taxes                                                                  |  |                                     | 476    |   |                 |   | (46   | )
|                                                                              |  |                                    
|Supplemental disclosures of noncash investing and financing activities:       |  |                                     |        |   |                 |   |       |  
|Change in fair value of available-for-sale investments securities, net of tax |  | $                                   | (4,946 | ) |                 | $ | 2,243 |  
|Tax benefit on stock options exercised and stock awards                       |  |                                     | 34     |   |                 |   | 29    |  
|Loans acquired through foreclosure                                            |  |                                     |       |   |                 |   | 1,551 |  



See accompanying notes
to consolidated financial statements



7



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



1. Basis of Presentation:



These consolidated financial statements contain unaudited information as of
March 31, 2005 and for the three month periods ended March 31, 2005 and 2004. 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 balance sheet at December 31, 2004 reflects restated balances as a result of the restatement described in Note 2.
The income statement data for the three month period ended March 31, 2005 are not necessarily indicative of the results that the Company may achieve for the full year.



2. Restated Results of Operations and Financial Condition:



The Company is restating its previously reported financial information for
the first quarters of 2005 and 2004 to correct errors in those consolidated financial statements relating to its derivative accounting under Statement of Financial Accounting Standards 133, Accounting for Derivative Instruments and Hedging
Activities (SFAS 133), and to reflect a change in the amortization period of issuance costs related to its junior subordinated debentures. In addition, the following Notes to the Consolidated Financial Statements have been restated:
5, 9, 10 and 11. These restated consolidated financial statements supercede the Companys previously issued consolidated financial statements reported in the Company Initial Form 10-Q filed with the SEC on May 6, 2005.



In 2005 and prior years, the Company entered into interest rate swap
agreements (CD swaps) to hedge the interest rate risk inherent in certain of its brokered certificates of deposit (brokered CDs). From the inception of the hedging program, the Company applied a method of fair value hedge accounting under SFAS 133
to account for the CD swaps that allowed the Company to assume no ineffectiveness in these transactions (the so-called short-cut method). The Company has recently concluded that the CD swaps did not qualify for this method in prior
periods because the related CD broker placement fee was determined, in retrospect, to have caused the swap not to have a fair value of zero at inception (which is required under SFAS 133 to qualify for the short-cut method).



8



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



Fair value hedge accounting allows a company to record the effective portion of the change in fair
value of the hedged item (in this case, the brokered CDs) as an adjustment to income that offsets the fair value adjustment on the related interest rate swaps. Eliminating the application of fair value hedge accounting reverses the fair value
adjustments that were made to the brokered CDs. Therefore, while the interest rate swap is recorded on the consolidated balance sheet at its fair value, the related hedged item, the brokered CDs, are required to be carried at par, net of the
unamortized balance of the CD broker placement fee. In addition, the CD broker placement fee, which was incorporated into the swap, is now separately recorded as an adjustment to the par amount of the brokered CDs and amortized through the maturity
date of the related CDs.



The net cumulative pre-tax effect of
eliminating the fair value adjustment to the brokered CDs at March 31, 2005 is $2.3 million (representing a $4.0 million elimination of the fair value adjustment to the brokered CDs less a $1.7 million adjustment to record the unamortized CD
broker placement fees). The cumulative after-tax impact was a $1.4 million reduction to retained earnings.



In connection with the determination of the appropriate amortization period for the brokered CD placement fees, the Company also determined that the
issuance costs relating to its junior subordinated debentures should have been amortized through the maturity date of the debentures, rather than their earlier call dates. The cumulative effect through March 31, 2005 of amortization of the debt
issuance costs through the maturity date of the related debt is an increase to retained earnings of $805,000 ($1.3 million pre-tax).



The combined impact of the errors in derivative accounting and debt issuance cost decreased retained earnings at March 31, 2005 by $591,000. The
reduction to previously reported net income and retained earnings in any of the restated quarterly periods did not cause any violation of the Companys debt covenants and did not cause either Cole Taylor Banks or Taylor Capital
Groups regulatory capital ratios to fall below the well-capitalized levels as of the end of any of these periods.



9



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



The following tables reflect the previously reported amounts, the adjustments made to eliminate hedge
accounting for the CD swaps and the change in the amortization of the issuance costs related to the junior subordinated debentures, and the restated results by financial statement line item for the consolidated statement of income for the quarters
ended March 31, 2005 and 2004 and the consolidated balance sheet at March 31, 2005 and statement of stockholders equity as of March 31, 2005 and 2004. The restatement did not affect previously reported cash flows from operating
activities, investing activities or financing activities.



|                                                    |  |                                       |        |             |                                      |        |             |  |   |                      |   |             |   |        |             |   |       |      |  |   |       
|--------------------------------------------------- |  | ------------------------------------- | ------ | ----------- | ------------------------------------ | ------ | ----------- |  | - | -------------------- | - | ----------- | - | ------ | ----------- | - | ----- | ---- |  | - | ------
|                                                    |  | For the Quarter Ended March 31, 2005  |        |             | For the Quarter Ended March 31, 2004
|                                                    |  | AsOriginallyReported                  |        | Adjustments |                                      |        | As Restated |  |   | AsOriginallyReported |   | Adjustments |   |        | As Restated
|                                                    |  | (in thousands, expect per share data)
|Interest income                                     |  | $                                     | 39,512 |             | $                                    |       |             |  | $ | 39,512               |   |             | $ | 32,510 |             | $ |      |      |  | $ | 32,510
|Interest expense:                                   |  |                                       |        |             |                                      |        |             |  |   |                      |   |             |   |        |             |   |       |      |  |   |       
|Deposits                                            |  |                                       | 9,696  |             |                                      | 287    | (1)         |  |   | 9,983                |   |             |   | 6,527  |             |   | 528   | (1)  |  |   | 7,055 
|Short-term borrowings                               |  |                                       | 975    |             |                                      |       |             |  |   | 975                  |   |             |   | 499    |             |   |      |      |  |   | 499   
|Notes payable and FHLB advances                     |  |                                       | 1,002  |             |                                      |       |             |  |   | 1,002                |   |             |   | 1,094  |             |   |      |      |  |   | 1,094 
|Junior subordinated debentures                      |  |                                       | 1,856  |             |                                      | (151   | )(2)        |  |   | 1,705                |   |             |   | 1,288  |             |   | (742  | )(2) |  |   | 546   
|                                                    |  |                                       |        |             |                                      |        |             |  |   |                      |   |             |   |        |             |   |       |      |  |   |       
|Total interest expense                              |  |                                       | 13,529 |             |                                      | 136    |             |  |   | 13,665               |   |             |   | 9,408  |             |   | (214  | )    |  |   | 9,194 
|                                                    |  |                                       |        |             |                                      |        |             |  |   |                      |   |             |   |        |             |   |       |      |  |   |       
|Net interest income                                 |  |                                       | 25,983 |             |                                      | (136   | )           |  |   | 25,847               |   |             |   | 23,102 |             |   | 214   |      |  |   | 23,316
|Provision for loan losses                           |  |                                       | 1,834  |             |                                      |       |             |  |   | 1,834                |   |             |   | 2,750  |             |   |      |      |  |   | 2,750 
|                                                    |  |                                       |        |             |                                      |        |             |  |   |                      |   |             |   |        |             |   |       |      |  |   |       
|Net interest income after provision for loan losses |  |                                       | 24,149 |             |                                      | (136   | )           |  |   | 24,013               |   |             |   | 20,352 |             |   | 214   |      |  |   | 20,566
|                                                    |  |                                       |        |             |                                      |        |             |  |   |                      |   |             |   |        |             |   |       |      |  |   |       
|Noninterest income:                                 |  |                                       |        |             |                                      |        |             |  |   |                      |   |             |   |        |             |   |       |      |  |   |       
|Service charges                                     |  |                                       | 2,407  |             |                                      |       |             |  |   | 2,407                |   |             |   | 2,783  |             |   |      |      |  |   | 2,783 
|Trust and investment management fees                |  |                                       | 1,184  |             |                                      |       |             |  |   | 1,184                |   |             |   | 1,240  |             |   |      |      |  |   | 1,240 
|Gain on sale of land trusts                         |  |                                       | 2,000  |             |                                      |       |             |  |   | 2,000                |   |             |   |       |             |   |      |      |  |   |      
|Gain on sale of branch                              |  |                                       | 1,572  |             |                                      |       |             |  |   | 1,572                |   |             |   |       |             |   |      |      |  |   |      
|Gain on sale of investment securities, net          |  |                                       | 127    |             |                                      |       |             |  |   | 127                  |   |             |   |       |             |   |      |      |  |   |      
|Net cash settlements on CD swaps                    |  |                                       |       |             |                                      | 223    | (1)         |  |   | 223                  |   |             |   |       |             |   | 207   | (1)  |  |   | 207   
|Change in fair value of CD swaps                    |  |                                       |       |             |                                      | (1,576 | )(3)        |  |   | (1,576               | ) |             |   |       |             |   | 958   | (3)  |  |   | 958   
|Other noninterest income                            |  |                                       | 965    |             |                                      |       |             |  |   | 965                  |   |             |   | 652    |             |   |      |      |  |   | 652   
|                                                    |  |                                       |        |             |                                      |        |             |  |   |                      |   |             |   |        |             |   |       |      |  |   |       
|Total noninterest income                            |  |                                       | 8,255  |             |                                      | (1,353 | )           |  |   | 6,902                |   |             |   | 4,675  |             |   | 1,165 |      |  |   | 5,840 
|                                                    |  |                                       |        |             |                                      |        |             |  |   |                      |   |             |   |        |             |   |       |      |  |   |       
|Noninterest expense                                 |  |                                       | 16,740 |             |                                      |       |             |  |   | 16,740               |   |             |   | 18,783 |             |   |      |      |  |   | 18,783
|                                                    |  |                                       |        |             |                                      |        |             |  |   |                      |   |             |   |        |             |   |       |      |  |   |       
|Income before income taxes                          |  |                                       | 15,664 |             |                                      | (1,489 | )           |  |   | 14,175               |   |             |   | 6,244  |             |   | 1,379 |      |  |   | 7,623 
|Income taxes                                        |  |                                       | 6,222  |             |                                      | (586   | )(4)        |  |   | 5,636                |   |             |   | 2,108  |             |   | 541   | (4)  |  |   | 2,649 
|                                                    |  |                                       |        |             |                                      |        |             |  |   |                      |   |             |   |        |             |   |       |      |  |   |       
|Net income                                          |  | $                                     | 9,442  |             | $                                    | (903   | )           |  | $ | 8,539                |   |             |   | 4,136  |             | $ | 838   |      |  |   | 4,974 
|                                                    |  |                                       |        |             |                                      |        |             |  |   |                      |   |             |   |        |             |   |       |      |  |   |       
|Basic earnings per common share                     |  | $                                     | 0.98   |             | $                                    | (0.10  | )           |  | $ | 0.88                 |   |             | $ | 0.35   |             | $ | 0.08  |      |  | $ | 0.43  
|Diluted earnings per common share                   |  | $                                     | 0.96   |             | $                                    | (0.09  | )           |  | $ | 0.87                 |   |             | $ | 0.34   |             | $ | 0.09  |      |  | $ | 0.43  



10



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



|                                                                    |  |                       |           |   |             |   |       |             |  |   |           |  
|------------------------------------------------------------------- |  | --------------------- | --------- | - | ----------- | - | ----- | ----------- |  | - | --------- | -
|                                                                    |  | As of March 31, 2005  |          
|                                                                    |  | As OriginallyReported |           |   | Adjustments |   |       | As Restated | 
|                                                                    |  | (in thousands)        |          
|ASSETS                                                              |  |                       |           |   |             |   |       |             |  |   |           |  
|Cash and cash equivalents                                           |  | $                     | 94,009    |   |             | $ |      |             |  | $ | 94,009    |  
|Investment securities                                               |  |                       | 530,038   |   |             |   |      |             |  |   | 530,038   |  
|Loans, net of allowance for loan losses                             |  |                       | 2,216,605 |   |             |   |      |             |  |   | 2,216,605 |  
|Premises, leasehold improvements and equipment, net                 |  |                       | 12,024    |   |             |   |      |             |  |   | 12,024    |  
|Investment in Federal Home Loan Bank and Federal Reserve Bank stock |  |                       | 12,620    |   |             |   |      |             |  |   | 12,620    |  
|Other real estate and repossessed assets, net                       |  |                       | 57        |   |             |   |      |             |  |   | 57        |  
|Goodwill                                                            |  |                       | 23,354    |   |             |   |      |             |  |   | 23,354    |  
|Other assets                                                        |  |                       | 55,458    |   |             |   | 1,709 | (5)         |  |   | 57,167    |  
|                                                                    |  |                       |           |   |             |   |       |             |  |   |           |  
|Total assets                                                        |  | $                     | 2,944,165 |   |             | $ | 1,709 |             |  | $ | 2,945,874 |  
|                                                                    |  |                       |           |   |             |   |       |             |  |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                |  |                       |           |   |             |   |       |             |  |   |           |  
|Deposits:                                                           |  |                       |           |   |             |   |       |             |  |   |           |  
|Noninterest-bearing                                                 |  | $                     | 461,060   |   |             | $ |      |             |  | $ | 461,060   |  
|Interest-bearing                                                    |  |                       | 1,887,950 |   |             |   | 2,300 | (6)         |  |   | 1,890,250 |  
|                                                                    |  |                       |           |   |             |   |       |             |  |   |           |  
|Total deposits                                                      |  |                       | 2,349,010 |   |             |   | 2,300 |             |  |   | 2,351,310 |  
|Short-term borrowings                                               |  |                       | 214,866   |   |             |   |      |             |  |   | 214,866   |  
|Accrued interest, taxes and other liabilities                       |  |                       | 48,168    |   |             |   |      |             |  |   | 48,168    |  
|Notes payable and FHLB advances                                     |  |                       | 85,500    |   |             |   |      |             |  |   | 85,500    |  
|Junior subordinated debentures                                      |  |                       | 87,638    |   |             |   |      |             |  |   | 87,638    |  
|                                                                    |  |                       |           |   |             |   |       |             |  |   |           |  
|Total liabilities                                                   |  |                       | 2,785,182 |   |             |   | 2,300 |             |  |   | 2,787,482 |  
|                                                                    |  |                       |           |   |             |   |       |             |  |   |           |  
|Stockholders equity:                                               |  |                       |           |   |             |   |       |             |  |   |           |  
|Common stock                                                        |  |                       | 100       |   |             |   |      |             |  |   | 100       |  
|Surplus                                                             |  |                       | 148,429   |   |             |   |      |             |  |   | 148,429   |  
|Unearned compensation - stock grants                                |  |                       | (1,782    | ) |             |   |      |             |  |   | (1,782    | )
|Retained earnings                                                   |  |                       | 25,247    |   |             |   | (591  | )(7)        |  |   | 24,656    |  
|Accumulated other comprehensive loss                                |  |                       | (5,954    | ) |             |   |      |             |  |   | (5,954    | )
|Treasury stock                                                      |  |                       | (7,057    | ) |             |   |      |             |  |   | (7,057    | )
|                                                                    |  |                       |           |   |             |   |       |             |  |   |           |  
|Total stockholders equity                                          |  |                       | 158,983   |   |             |   | (591  | )           |  |   | 158,392   |  
|                                                                    |  |                       |           |   |             |   |       |             |  |   |           |  
|Total liabilities and stockholders equity                          |  | $                     | 2,944,165 |   |             | $ | 1,709 |             |  | $ | 2,945,874 |  
|                                                                    |  |                       |           |   |             |   |       |             |  |   |           |  



|                                       |  |                                      |         |                                      |   |      |             |  |                      |         |             |   |             |  |   |     |  |   |        
|-------------------------------------- |  | ------------------------------------ | ------- | ------------------------------------ | - | ---- | ----------- |  | -------------------- | ------- | ----------- | - | ----------- |  | - | --- |  | - | -------
|                                       |  | For the Quarter Ended March 31, 2005 |         | For the Quarter Ended March 31, 2004
|                                       |  | AsOriginallyReported                 |         | Adjustments                          |   |      | As Restated |  | AsOriginallyReported |         | Adjustments |   | As Restated
|                                       |  | (in thousands)                      
|Total stockholders equity, January 1  |  | $                                    | 155,261 |                                      | $ | 312  |             |  | $                    | 155,573 |             | $ | 176,485     |  | $ |    |  | $ | 176,485
|Net income                             |  |                                      | 9,442   |                                      |   | (903 | )           |  |                      | 8,539   |             |   | 4,136       |  |   | 838 |  |   | 4,974  
|Total comprehensive income, net of tax |  |                                      | 3,955   |                                      |   | (903 | )           |  |                      | 3,052   |             |   | 6,336       |  |   | 838 |  |   | 7,174  
|Total stockholders equity, March 31   |  |                                      | 158,983 |                                      |   | (591 | )           |  |                      | 158,392 |             |   | 181,662     |  |   | 838 |  |   | 182,500

---

|(1) | The net cash settlements under the CD swaps that were originally reported in deposit interest expense, with the interest expense of the hedged item (the brokered CDs), have been
reclassified to noninterest income from net interest income. In addition, deposit interest expense has been restated to include the amortization of the CD broker placement fee.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The amortization of the issuance costs for the junior subordinated debentures has been reduced to reflect the period to maturity rather than the period to the call date.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



11



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



|(3) | The change in the fair value of the CD swaps during the period that was originally off-set by the change in the fair value of the associated brokered CDs is reported in noninterest
income.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Income tax expense (benefit) for the adjustments reflect the Companys statutory rate of approximately 39%.
|--- | -----------------------------------------------------------------------------------------------------------

|(5) | The adjustments result in changes in deferred tax assets and deferred debt issuance costs, both of which are reported in other assets.
|--- | --------------------------------------------------------------------------------------------------------------------------------------

|(6) | The fair value adjustments to the brokered CDs have been eliminated and the unamortized CD broker placement fees have been recorded.
|--- | ------------------------------------------------------------------------------------------------------------------------------------

|(7) | The adjustment to stockholders equity reflects the cumulative impact of the adjustments, net of income taxes at approximately 39%, at the balance sheet date.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



3. Investment
Securities:



The amortized cost and estimated fair values
of investment securities at March 31, 2005 and December 31, 2004 were as follows:



|                                    |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|----------------------------------- |  | -------------- | ------- | -------------------- | - | --------------------- |  | - | ------------------- | - |  | - | -------
|                                    |  | March 31, 2005
|                                    |  | AmortizedCost  |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFair Value
|                                    |  | (in thousands)
|Available-for-sale:                 |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|U.S. government agency securities   |  | $              | 194,212 |                      | $ | 10                    |  | $ | (3,262              | ) |  | $ | 190,960
|Collateralized mortgage obligations |  |                | 112,880 |                      |   | 154                   |  |   | (2,817              | ) |  |   | 110,217
|Mortgage-backed securities          |  |                | 188,295 |                      |   | 317                   |  |   | (4,838              | ) |  |   | 183,774
|State and municipal obligations     |  |                | 43,214  |                      |   | 1,621                 |  |   | (23                 | ) |  |   | 44,812 
|                                    |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|Total available-for-sale            |  |                | 538,601 |                      |   | 2,102                 |  |   | (10,940             | ) |  |   | 529,763
|                                    |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|Held-to-maturity:                   |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|Other debt securities               |  |                | 275     |                      |   |                      |  |   |                    |   |  |   | 275    
|                                    |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|Total held-to-maturity              |  |                | 275     |                      |   |                      |  |   |                    |   |  |   | 275    
|                                    |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|Total                               |  | $              | 538,876 |                      | $ | 2,102                 |  | $ | (10,940             | ) |  | $ | 530,038
|                                    |  |                |         |                      |   |                       |  |   |                     |   |  |   |        



12



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)



|                                    |  |                   |         |                        |   |                         |  |   |                      |   |  |   |        
|----------------------------------- |  | ----------------- | ------- | ---------------------- | - | ----------------------- |  | - | -------------------- | - |  | - | -------
|                                    |  | December 31, 2004
|                                    |  | Amortized Cost    |         | Gross Unrealized Gains |   | Gross Unrealized Losses |  |   | Estimated Fair Value
|                                    |  | (in thousands)   
|Available-for-sale:                 |  |                   |         |                        |   |                         |  |   |                      |   |  |   |        
|U.S. government agency securities   |  | $                 | 194,370 |                        | $ | 76                      |  | $ | (753                 | ) |  | $ | 193,693
|Collateralized mortgage obligations |  |                   | 117,020 |                        |   | 207                     |  |   | (1,534               | ) |  |   | 115,693
|Mortgage-backed securities          |  |                   | 181,515 |                        |   | 735                     |  |   | (1,899               | ) |  |   | 180,351
|State and municipal obligations     |  |                   | 41,668  |                        |   | 1,939                   |  |   |                     |   |  |   | 43,607 
|                                    |  |                   |         |                        |   |                         |  |   |                      |   |  |   |        
|Total available-for-sale            |  |                   | 534,573 |                        |   | 2,957                   |  |   | (4,186               | ) |  |   | 533,344
|                                    |  |                   |         |                        |   |                         |  |   |                      |   |  |   |        
|Held-to-maturity:                   |  |                   |         |                        |   |                         |  |   |                      |   |  |   |        
|Other debt securities               |  |                   | 275     |                        |   |                        |  |   |                     |   |  |   | 275    
|                                    |  |                   |         |                        |   |                         |  |   |                      |   |  |   |        
|Total held-to-maturity              |  |                   | 275     |                        |   |                        |  |   |                     |   |  |   | 275    
|                                    |  |                   |         |                        |   |                         |  |   |                      |   |  |   |        
|Total                               |  | $                 | 534,848 |                        | $ | 2,957                   |  | $ | (4,186               | ) |  | $ | 533,619
|                                    |  |                   |         |                        |   |                         |  |   |                      |   |  |   |        



4.
Loans:



Loans classified by type at March 31, 2005
and December 31, 2004 were as follows:



|                                      |  |                |           |   |               |   |           |  
|------------------------------------- |  | -------------- | --------- | - | ------------- | - | --------- | -
|                                      |  | March 31, 2005 |           |   | Dec. 31, 2004 |  
|                                      |  | (in thousands) |          
|Commercial and industrial             |  | $              | 656,259   |   |               | $ | 656,099   |  
|Commercial real estate secured        |  |                | 730,473   |   |               |   | 732,251   |  
|Real estate-construction              |  |                | 594,694   |   |               |   | 531,868   |  
|Residential real estate mortgages     |  |                | 62,708    |   |               |   | 64,569    |  
|Home equity loans and lines of credit |  |                | 193,207   |   |               |   | 207,164   |  
|Consumer                              |  |                | 16,977    |   |               |   | 18,386    |  
|Other loans                           |  |                | 1,716     |   |               |   | 1,460     |  
|                                      |  |                |           |   |               |   |           |  
|Gross loans                           |  |                | 2,256,034 |   |               |   | 2,211,797 |  
|Less: Unearned discount               |  |                | (167      | ) |               |   | (191      | )
|                                      |  |                |           |   |               |   |           |  
|Total loans                           |  |                | 2,255,867 |   |               |   | 2,211,606 |  
|Less: Allowance for loan losses       |  |                | (39,262   | ) |               |   | (37,484   | )
|                                      |  |                |           |   |               |   |           |  
|Loans, net                            |  | $              | 2,216,605 |   |               | $ | 2,174,122 |  
|                                      |  |                |           |   |               |   |           |  



Nonaccrual and
impaired loans at March 31, 2005 were $11.1 million and $19.8 million, respectively, as compared to $12.3 million and $18.3 million at December 31, 2004, respectively.



13



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)



5. Interest-Bearing Deposits:



Interest-bearing deposits at March 31, 2005 and December 31, 2004
were as follows:



|                                            |  |                           |           |                          |   |          
|------------------------------------------- |  | ------------------------- | --------- | ------------------------ | - | ---------
|                                            |  | (Restated) March 31, 2005 |           | (Restated) Dec. 31, 2004
|                                            |  | (in thousands)           
|NOW accounts                                |  | $                         | 116,359   |                          | $ | 124,015  
|Savings accounts                            |  |                           | 80,524    |                          |   | 85,371   
|Money market deposits                       |  |                           | 483,552   |                          |   | 421,529  
|Time deposits:                              |  |                           |           |                          |   |          
|Certificates of deposit                     |  |                           | 514,756   |                          |   | 525,173  
|Out-of-local-market certificates of deposit |  |                           | 139,992   |                          |   | 124,005  
|Brokered certificates of deposit            |  |                           | 481,017   |                          |   | 415,811  
|Public time deposits                        |  |                           | 74,050    |                          |   | 69,635   
|                                            |  |                           |           |                          |   |          
|Total time deposits                         |  |                           | 1,209,815 |                          |   | 1,134,624
|                                            |  |                           |           |                          |   |          
|Total                                       |  | $                         | 1,890,250 |                          | $ | 1,765,539
|                                            |  |                           |           |                          |   |          



At March 31, 2005
and December 31, 2004, time deposits in amounts $100,000 or more totaled $331.1 million and $331.3 million, respectively.



6. Short-Term Borrowings:



Short-term borrowings at March 31, 2005 and December 31, 2004 consisted of the following:



|                                               |  |                |         |               |   |        
|---------------------------------------------- |  | -------------- | ------- | ------------- | - | -------
|                                               |  | March 31, 2005 |         | Dec. 31, 2004
|                                               |  | (in thousands)
|Securities sold under agreements to repurchase |  | $              | 193,843 |               | $ | 185,737
|Federal funds purchased                        |  |                | 20,921  |               |   | 43,685 
|U.S. Treasury tax and loan note option         |  |                | 102     |               |   | 125    
|                                               |  |                |         |               |   |        
|Total                                          |  | $              | 214,866 |               | $ | 229,547
|                                               |  |                |         |               |   |        



14



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)



7. Notes Payable and FHLB Advances:



Notes payable and FHLB advances at March 31, 2005 and December 31, 2004 consisted of the following:



|                                                                                                                                                                                                                                                       |  |                |        |               |   |       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------- | ------ | ------------- | - | ------
|                                                                                                                                                                                                                                                       |  | March 31, 2005 |        | Dec. 31, 2004
|                                                                                                                                                                                                                                                       |  | (in thousands)
|Taylor Capital Group, Inc.:                                                                                                                                                                                                                            |  |                |        |               |   |       
|Subordinated Debt  interest, at the Companys election, at prime rate plus 2.50% or LIBOR plus 2.75%; interest rates at
March 31, 2005 and December 31, 2004 were 5.64% and 5.13%, respectively; matures on November 27, 2011                         |  | $              | 10,000 |               | $ | 10,000
|                                                                                                                                                                                                                                                       |  |               
|Term Loan  interest, at the Companys election, at the prime rate or LIBOR plus 1.15%, with a minimum interest rate of
3.50%; interest rates at March 31, 2005 and December 31, 2004 were 4.04% and 3.53%, respectively; matures on November 27, 2011 |  |                | 500    |               |   | 500   
|                                                                                                                                                                                                                                                       |  |               
|Revolving Credit Facility  $11.5 million maximum available; interest, at the Companys election, at the prime rate or LIBOR
plus 1.15%, with a minimum interest rate of 3.50%; matures November 27, 2005                                              |  |                |       |               |   |      
|                                                                                                                                                                                                                                                       |  |                |        |               |   |       
|Total notes payable                                                                                                                                                                                                                                    |  |                | 10,500 |               |   | 10,500
|                                                                                                                                                                                                                                                       |  |               
|Cole Taylor Bank:                                                                                                                                                                                                                                      |  |                |        |               |   |       
|FHLB advance  4.30%, due January 8, 2011, callable after January 8, 2002                                                                                                                                                                              |  |                | 25,000 |               |   | 25,000
|FHLB advance  4.55%, due January 8, 2011, callable after January 8, 2003                                                                                                                                                                              |  |                | 25,000 |               |   | 25,000
|FHLB advance  4.83%, due February 1, 2011, callable after January 8, 2004                                                                                                                                                                             |  |                | 25,000 |               |   | 25,000
|                                                                                                                                                                                                                                                       |  |                |        |               |   |       
|Total FHLB advances                                                                                                                                                                                                                                    |  |                | 75,000 |               |   | 75,000
|                                                                                                                                                                                                                                                       |  |                |        |               |   |       
|Total notes payable and FHLB advances                                                                                                                                                                                                                  |  | $              | 85,500 |               | $ | 85,500
|                                                                                                                                                                                                                                                       |  |                |        |               |   |       



The notes payable
require compliance with certain defined financial covenants. As of March 31, 2005, the Company is in compliance with these covenants.



15



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)



8. Other Comprehensive Income/(Loss):



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



|                                                                                                      |  |                   |        |   |            |   |        |            |  |   |        |  
|----------------------------------------------------------------------------------------------------- |  | ----------------- | ------ | - | ---------- | - | ------ | ---------- |  | - | ------ | -
|                                                                                                      |  | Before Tax Amount |        |   | Tax Effect |   |        | Net of Tax | 
|                                                                                                      |  | (in thousands)    |       
|For the Three Months Ended March 31, 2005:                                                            |  |                   |        |   |            |   |        |            |  |   |        |  
|Unrealized gain/(loss) from securities:                                                               |  |                   |        |   |            |   |        |            |  |   |        |  
|Change in unrealized gain/(loss) on available-for-sale securities                                     |  | $                 | (7,482 | ) |            | $ | 2,619  |            |  | $ | (4,863 | )
|Less: reclassification adjustment for gains included in net income                                    |  |                   | (127   | ) |            |   | 44     |            |  |   | (83    | )
|                                                                                                      |  |                   |        |   |            |   |        |            |  |   |        |  
|Change in unrealized gain/(loss) on available-for-sale securities, net of reclassification adjustment |  |                   | (7,609 | ) |            |   | 2,663  |            |  |   | (4,946 | )
|Change in net unrealized loss from cash flow hedging instruments                                      |  |                   | (766   | ) |            |   | 268    |            |  |   | (498   | )
|Change in deferred gain from termination of cash flow hedging instruments                             |  |                   | (66    | ) |            |   | 23     |            |  |   | (43    | )
|                                                                                                      |  |                   |        |   |            |   |        |            |  |   |        |  
|Other comprehensive loss                                                                              |  | $                 | (8,441 | ) |            | $ | 2,954  |            |  | $ | (5,487 | )
|                                                                                                      |  |                   |        |   |            |   |        |            |  |   |        |  
|For the Three Months Ended March 31, 2004:                                                            |  |                   |        |   |            |   |        |            |  |   |        |  
|Change in unrealized gain/(loss) on available-for-sale securities                                     |  | $                 | 3,450  |   |            | $ | (1,207 | )          |  | $ | 2,243  |  
|Change in deferred gain from termination of cash flow hedging instruments                             |  |                   | (66    | ) |            |   | 23     |            |  |   | (43    | )
|                                                                                                      |  |                   |        |   |            |   |        |            |  |   |        |  
|Other comprehensive income                                                                            |  | $                 | 3,384  |   |            | $ | (1,184 | )          |  | $ | 2,200  |  
|                                                                                                      |  |                   |        |   |            |   |        |            |  |   |        |  



16



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)



9. Earnings per Share:



The following table sets forth the computation of basic and diluted earnings
per common share. Stock options are the only common stock equivalents. For the three month periods ended March 31, 2005 and 2004, stock options outstanding to purchase 1,000 and 228,850 common shares, respectively, were not included in the
computation of diluted earnings per share because the effect would have been antidilutive.



|                                                   |  |                                      |           |                 |   |           |  
|-------------------------------------------------- |  | ------------------------------------ | --------- | --------------- | - | --------- | -
|                                                   |  | For the Three Months Ended March 31, |          
|(in thousands, except share and per share amounts) |  | (Restated) 2005                      |           | (Restated) 2004 |  
|Net income                                         |  | $                                    | 8,539     |                 | $ | 4,974     |  
|Less preferred dividend requirements               |  |                                      |          |                 |   | (861      | )
|                                                   |  |                                      |           |                 |   |           |  
|Net income available to common stockholders        |  | $                                    | 8,539     |                 | $ | 4,113     |  
|                                                   |  |                                      |           |                 |   |           |  
|Weighted average common shares outstanding         |  |                                      | 9,663,676 |                 |   | 9,490,917 |  
|Dilutive effect of stock options                   |  |                                      | 169,299   |                 |   | 132,188   |  
|                                                   |  |                                      |           |                 |   |           |  
|Diluted weighted average common shares outstanding |  |                                      | 9,832,975 |                 |   | 9,623,105 |  
|                                                   |  |                                      |           |                 |   |           |  
|Basic earnings per common share                    |  | $                                    | 0.88      |                 | $ | 0.43      |  
|Diluted earnings per common share                  |  |                                      | 0.87      |                 |   | 0.43      |  
|                                                   |  |                                      |           |                 |   |           |  



10. Stock-based Compensation:



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



17



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)



|                                                                                                                                          |  |                                      |       |   |                |   |       |  
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ----- | - | -------------- | - | ----- | -
|                                                                                                                                          |  | For the Three Months Ended March 31, |      
|(in thousand, except per share amounts)                                                                                                   |  | (Restated) 2005                      |       |   | (Restated)2004 |  
|Net income as reported                                                                                                                    |  | $                                    | 8,539 |   |                | $ | 4,974 |  
|Add: Stock-based compensation, net of tax, included in the determination of net income, as reported                                       |  |                                      | 104   |   |                |   | 75    |  
|Deduct: Stock-based compensation, net of tax, that would have been reported if the fair value based method had been applied to all
awards |  |                                      | (270  | ) |                |   | (238  | )
|                                                                                                                                          |  |                                      |       |   |                |   |       |  
|Pro forma net income                                                                                                                      |  | $                                    | 8,373 |   |                | $ | 4,811 |  
|Less preferred dividend requirements                                                                                                      |  |                                      |      |   |                |   | (861  | )
|                                                                                                                                          |  |                                      |       |   |                |   |       |  
|Pro forma net income available to common stockholders                                                                                     |  | $                                    | 8,373 |   |                | $ | 3,950 |  
|                                                                                                                                          |  |                                      |       |   |                |   |       |  
|Basic earnings per common share                                                                                                           |  |                                      |       |   |                |   |       |  
|As reported                                                                                                                               |  | $                                    | 0.88  |   |                | $ | 0.43  |  
|Pro forma                                                                                                                                 |  |                                      | 0.87  |   |                |   | 0.42  |  
|Diluted earnings per common share                                                                                                         |  |                                      |       |   |                |   |       |  
|As reported                                                                                                                               |  | $                                    | 0.87  |   |                | $ | 0.43  |  
|Pro forma                                                                                                                                 |  |                                      | 0.85  |   |                |   | 0.41  |  



11. Derivative Financial
Instruments:



The Company uses derivative financial
instruments to assist in interest rate risk management. At both March 31, 2005 and December 31, 2004, the only derivative financial instruments outstanding were interest rate exchange agreements. The following table sets forth the activity
in the notional amounts of derivative financial instruments during the first three months of 2005.



|                             |  |                |         |   |                 |   |        |       |  |   |         |  
|---------------------------- |  | -------------- | ------- | - | --------------- | - | ------ | ----- |  | - | ------- | -
|                             |  | CD Swaps       |         |   | Cash Flow Hedge |   |        | Total | 
|                             |  | (in thousands) |        
|Balance at December 31, 2004 |  | $              | 130,000 |   |                 | $ | 50,000 |       |  | $ | 180,000 |  
|Additions                    |  |                | 50,000  |   |                 |   |       |       |  |   | 50,000  |  
|Terminations/calls           |  |                |        |   |                 |   |       |       |  |   |        |  
|Maturities                   |  |                |        |   |                 |   |       |       |  |   |        |  
|                             |  |                |         |   |                 |   |        |       |  |   |         |  
|Balance at March 31, 2005    |  | $              | 180,000 |   |                 | $ | 50,000 |       |  | $ | 230,000 |  
|                             |  |                |         |   |                 |   |        |       |  |   |         |  
|Fair value at March 31, 2005 |  | $              | (4,019  | ) |                 | $ | (1,286 | )     |  | $ | (5,305  | )
|                             |  |                |         |   |                 |   |        |       |  |   |         |  



18



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)



Below is summary information regarding the derivative financial instruments outstanding at
March 31, 2005.



|                |  |                                |              |                   |      |          |  |      |               |  |    
|--------------- |  | ------------------------------ | ------------ | ----------------- | ---- | -------- |  | ---- | ------------- |  | ---
|                |  | Notional Amount (in thousands) |              | Weighted Averages
|                |  |                                | Receive Rate |                   |      | Pay Rate |  |      | Life in Years
|CD Swaps        |  | $                              | 180,000      |                   | 3.46 | %        |  | 2.83 | %             |  | 4.9
|Cash Flow Hedge |  |                                | 50,000       |                   | 6.04 | %        |  | 5.75 | %             |  | 2.4
|                |  |                                |              |                   |      |          |  |      |               |  |    
|Total           |  | $                              | 230,000      |                   | 4.02 | %        |  | 3.47 | %             |  | 4.4
|                |  |                                |              |                   |      |          |  |      |               |  |    



During the first three
months of 2005, we entered into additional interest rate exchange agreements with a notional amount of $50.0 million related to newly issued brokered certificates of deposit of $50.0 million.



19



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS



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



We are a bank holding company headquartered in Rosemont, Illinois, a suburb of Chicago. We derive substantially all of our revenue from our subsidiary,
Cole Taylor Bank. We provide a range of products and services to our commercial customers, and currently operate 11 banking facilities throughout the Chicago metropolitan area.



The following discussion and analysis presents our consolidated financial condition and results of operations as of and for
the dates and periods indicated. This discussion should be read in conjunction with our consolidated financial statements and the notes thereto appearing elsewhere in this 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 Amendment No. 1 to our Registration Statement on Form S-3 (Registration No. 333-126864) filed with the SEC on August 5, 2005.



Restatements of Results of Operations and Financial Condition



We are restating our previously reported financial information for the
quarters ended March 31, 2005 and 2004 to correct errors in those consolidated financial statements relating to our derivative accounting under Statement of Financial Accounting Standards 133, Accounting for Derivative Instruments and
Hedging Activities (SFAS 133), and to reflect a change in the amortization period of issuance costs related to our junior subordinated debentures.



In 2005 and prior years, we entered into interest rate swap agreements (CD swaps) to hedge the interest rate risk inherent
in certain of our brokered certificates of deposit (brokered CDs). We believe using interest rate swaps to convert the interest expense on brokered CDs from fixed to variable is prudent from a risk management standpoint. The brokered CDs are
typically structured with terms of 5 to 7 years with a call option on our part, but no surrender option for the CD holder, other than death. The extended term of the brokered CDs minimize liquidity risk while our option to call the CDs after 1 year
provides us with funding flexibility. This variable rate funding matches well with our large floating rate loan portfolio. We consider these CD swaps to be valuable economic transactions that benefit our Company.



From the inception of the hedging program, we applied a method of fair value
hedge accounting under SFAS 133 to account for the CD swaps that allowed us to assume no ineffectiveness in these transactions (the so-called short-cut method). We recently concluded that the CD swaps did not qualify for this method in
prior periods because the related CD broker placement fee was determined, in retrospect, to have caused the swap not to have a fair value of zero at inception (which is required under SFAS 133 to qualify for the short-cut method). Furthermore,
although historical effectiveness testing performed in November 2005 demonstrated that the CD swaps would have qualified for hedge accounting under the long-haul method, hedge accounting under SFAS 133 is not allowed retrospectively
because the hedge documentation required for the long-haul method was not in place at the inception of the hedge.



20



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS



Fair value hedge accounting allows a company to record the effective portion of the change in fair
value of the hedged item (in this case, the brokered CDs) as an adjustment to income that offsets the fair value adjustment on the related interest rate swaps. Eliminating the application of fair value hedge accounting reverses the fair value
adjustments that were made to the brokered CDs. Therefore, while the interest rate swap is recorded on the consolidated balance sheet at its fair value, the related hedged item, the brokered CDs, are required to be carried at par, net of the
unamortized balance of the CD broker placement fee. In addition, the CD broker placement fee, which was incorporated into the swap, is now separately recorded as an adjustment to the par amount of the brokered CDs and amortized through the maturity
date of the related CDs. Because the majority of the swaps and the brokered CDs have mirror call options after one year, the call of a brokered CD prior to maturity will now result in the expensing of the unamortized CD broker placement fee on the
call date.



The net cumulative pre-tax effect of eliminating
the fair value adjustment to the brokered CDs at March 31, 2005 is $2.3 million (representing a $4.0 million elimination of the fair value adjustment to the brokered CDs less a $1.7 million adjustment to record the unamortized CD broker
placement fees). The cumulative after-tax impact was a $1.4 reduction to retained earnings. Although these CD swaps cannot retrospectively qualify for hedge accounting under SFAS 133, there is no effect on cash flows for these changes and the
effectiveness of the CD swaps as economic hedge transactions has not been affected by these changes in accounting treatment.



On November 18, 2005, we re-designated our interest rate swaps relating to our brokered CDs utilizing the long-haul method and completed
new contemporaneous hedging documentation. Accordingly, we believe these CD swaps should qualify for fair value hedge accounting in future periods under SFAS 133.



In connection with the determination of the appropriate amortization period for the brokered CD placement fees, we also
determined that the issuance costs relating to our junior subordinated debentures should have been amortized through the maturity date of the debentures, rather than their earlier call dates. The cumulative effect through March 31, 2005 of
amortization of the debt issuance costs through the maturity date of the related debt is an increase to retained earnings of $805,000 ($1.3 million pre-tax).



The combined impact of the errors in derivative accounting and debt issuance cost decreased retained earnings at March 31, 2005 by $591,000. The
reduction to previously reported net income and retained earnings in any of the restated quarterly periods did not cause any violation of our debt covenants and did not cause either Cole Taylor Banks or Taylor Capital Groups regulatory
capital ratios to fall below the well-capitalized levels as of the end of any of these periods.



21



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS



Further information regarding the impact of these restatements to our results of operations,
financial condition, and stockholders equity and comprehensive income can be found in Note 2 to the consolidated financial statements. The following discussion and tables include the adjustments made to correct for the incorrect application of fair
value hedge accounting under SFAS 133 and the amortization period for the debt issuance costs.



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. The preparation of
financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.



Certain accounting policies require us to use significant judgment and
estimates, which can have a material impact on the carrying value of certain assets and liabilities. We consider these policies to be critical accounting policies. The judgments and assumptions made by us are based upon historical experience or
other factors that we believe to be reasonable under the circumstances. Because of the nature of the judgments and assumptions, actual results could differ from these judgments and estimates which could have a material affect on our financial
condition and results of operations.



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



Allowance for Loan Losses



We have established an allowance for loan losses to provide for loans in our portfolio that may not be repaid in their entirety. The allowance is based on
our regular, quarterly assessments of the probable estimated losses inherent in the loan portfolio. Our methodology for measuring the appropriate level of the allowance includes identifying problem loans, estimating the amount of probable loss
related to those loans, estimating probable losses from specific portfolio segments and evaluating the impact to our loan portfolio of a number of economic and qualitative factors. We maintain the allowance for loan losses at a level considered
adequate to absorb probable losses inherent in our portfolio as of the balance sheet date. In evaluating the adequacy of our allowance for loan losses, we consider numerous quantitative factors, including historical charge-off experience, growth of
our loan portfolio, changes in the composition of our loan portfolio and the volume of delinquent and criticized loans. In addition, we use information about specific borrower situations, including their financial position, work-out plans and
estimated collateral values under various liquidation scenarios to estimate the risk and amount of



22



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



loss for those borrowers. Finally, we also consider many qualitative factors, including general and economic business
conditions, duration of the current business cycle, the impact of competition on our underwriting terms, current general market collateral valuations, trends apparent in any of the factors we take into account and other matters, which are by nature
more subjective and fluid. The significant uncertainties that could affect the ability of the borrowers in our portfolio to successfully execute their business models through changing economic environments and competitive challenges, as well as
management and other changes that affect our borrowers, complicate the estimate of the risk of loss and amount of loss on any loan. Because of the degree of uncertainty and susceptibility of all of the above factors to change, actual losses may vary
from current estimates.



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



Goodwill Impairment



We have goodwill of $23.4 million that we recognized in connection with our 1997 acquisition of Cole Taylor Bank. We test this goodwill annually for
impairment, or whenever events or significant changes in circumstances indicate that the carrying value may not be recoverable. Most recently, we tested goodwill for impairment as of July 1, 2004 and we determined that no impairment charge was
necessary. The evaluation for impairment includes comparing the estimated fair market value of Cole Taylor Bank to our carrying value for Cole Taylor Bank. Because there is not a readily observable market value for Cole Taylor Bank, the estimation
of the fair market value is based on the market price of our common stock adjusted for the junior subordinated debentures and the notes payable obligations of the holding company.



Income Taxes



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



23



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



Derivative Financial Instruments



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



With the exception of hedges that qualify under the short-cut
method, at the inception of the hedge and quarterly thereafter, a formal assessment is performed to determine whether changes in the fair values or cash flows of the derivative instruments have been highly effective in offsetting the changes in the
fair values or cash flows of the hedged item and whether they are expected to be highly effective in the future. If it is determined that the derivative instrument is not highly effective as a hedge, hedge accounting is discontinued prospectively.
Once hedge accounting is terminated, all changes in fair value of the derivative instrument flow through the consolidated statements of income in other noninterest income, which results in greater volatility in our earnings.



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



RESULTS OF OPERATIONS



Overview



We recorded net income applicable to common stockholders for the quarter
ended March 31, 2005 of $8.5 million, or $0.87 per diluted common share, compared to $4.1 million, or $0.43 per diluted common share, for the first quarter of 2004. Net income applicable to common stockholders increased as a result of both
increased net interest income and noninterest income and decreased noninterest expense. Net income applicable to common stockholders for the first



24



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



quarter of 2005 included pre-tax gains of $3.6 million from the sale of certain non-strategic assets. Additionally,
the first quarter 2005 was not burdened with the $861,000 in dividends paid on our Series A preferred stock in the first quarter of 2004, which we redeemed in July 2004.



Net Interest Income



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



Three Months Ended March 31, 2005 as Compared to the Three Months Ended March 31, 2004



Net interest income was $25.8 million during the first quarter of 2005, a $2.5 million, or 10.9%, increase over the $23.3
million of net interest income during the same quarter a year ago. With an adjustment for tax-exempt income, our consolidated net interest income for the first quarter of 2005 was $26.1 million as compared to $23.6 million during the same quarter in
2004. Net interest income during the first quarter of 2005 has benefited from both an increase in interest-earning assets and a higher net interest margin.



The net interest margin, which is determined by dividing taxable equivalent net interest income by average interest-earning assets, was 3.83% during the
first quarter of 2005 compared to 3.76% during the same quarter a year ago. Our net interest margin benefited from the increase in market interest rates that began at the end of the second quarter of 2004 as well as higher noninterest-bearing
funding. Our net interest spread decreased 5 basis points. The yield on our interest-earning assets increased 60 basis points to 5.83% during the first quarter of 2005 from 5.23% during the same quarter in 2004. The cost of our interest-bearing
liabilities increased 65 basis points to 2.49% during the first quarter of 2005 from 1.84% during the same quarter in 2004.



The rise in market interest rates, which triggered the 175 basis point increase in our prime lending rate, produced an increase in both the yield on
earning assets and the cost of interest-bearing liabilities. The yield earned on our loans was 6.27% during the first quarter of 2005, or 75 basis points higher than the loan yield of 5.52% during the first quarter a year ago. The cost of
interest-bearing deposits increased 49 basis points to 2.23% during the first quarter of 2005 from 1.74% during the first quarter in 2004. In addition, the issuance of $41.2 million of junior subordinated debentures in June 2004, increased interest
expense by $548,000, or 5 basis points, for the first quarter of 2005, as compared to the same quarter a year ago.



Average interest-earning assets increased $242.1 million, or 9.6%, to $2.76 billion for the first quarter of 2005 compared to $2.52 billion for the first
quarter in 2004. Average loans increased $224.8 million, or 11.4%, to $2.20 billion during the first quarter of 2005 compared to $1.97 billion for the same quarter a year ago. The $297.9 million increase in commercial and commercial real estate loan
balances, partly offset by the continued run off of our consumer loan portfolio, produced the increase in average loans.



25



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



The $224.8 million increase in average loans between the first quarters of 2004 and 2005 was funded
primarily with the $222.9 million increase in deposits. Total interest-bearing deposits increased $183.9 million and noninterest-bearing deposits increased $39.1 million. The majority of the increase in interest-bearing deposits between the first
quarters of 2004 and 2005 occurred in brokered and out-of-local-market deposits. Between the two quarterly periods, average brokered certificates of deposits increased $116.9 million, or 37.0%, to $433.0 million for the first quarter of 2005 and
average out-of-local-market certificates of deposit increased $46.3 million, or 54.0%, to $132.0 million for the first quarter of 2005. Average noninterest-bearing demand deposits increased $39.1 million, or 9.6%, to $447.9 million for the first
quarter of 2005.



Average stockholders equity declined
$21.4 million, to $157.9 million for the first quarter 2005 as compared to the first quarter of 2004, primarily as a result of the redemption of our Series A preferred stock in July 2004. The reduction in average stockholders equity caused by
the redemption of $38.25 million in preferred stock was partially offset by net income after dividends.



The interest rate risk position of our overall balance sheet is asset sensitive, which means our assets are expected to re-price before our liabilities
over the one-year horizon. This balance sheet structure provides opportunity for an increase in net interest margin during periods of rising interest rates, such as we experienced over the last nine months. If interest rates remain unchanged in
future periods, we would expect to be exposed to the negative impact of a large percentage of our interest-bearing liabilities repricing at current market rates, while a large portion of our assets has already repriced. If interest rates continue to
gradually rise in future periods, we would expect our net interest margin to increase. See the section of this discussion and analysis captioned Quantitative and Qualitative Disclosure About Market Risks for further discussion on the
impact of interest rates.



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



26



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



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



|                                               |  |                                     |        |   |                |   |        |  
|---------------------------------------------- |  | ----------------------------------- | ------ | - | -------------- | - | ------ | -
|                                               |  | For the Three MonthsEnded March 31, |       
|                                               |  | (Restated) 2005                     |        |   | (Restated)2004 |  
|                                               |  | (in thousands)                      |       
|Net interest income as stated                  |  | $                                   | 25,847 |   |                | $ | 23,316 |  
|Tax equivalent adjustment-investments          |  |                                     | 259    |   |                |   | 279    |  
|Tax equivalent adjustment-loans                |  |                                     | 39     |   |                |   | 44     |  
|                                               |  |                                     |        |   |                |   |        |  
|Tax equivalent net interest income             |  | $                                   | 26,145 |   |                | $ | 23,639 |  
|                                               |  |                                     |        |   |                |   |        |  
|Yield on earning assets without tax adjustment |  |                                     | 5.79   | % |                |   | 5.18   | %
|Yield on earning assets - tax equivalent       |  |                                     | 5.83   | % |                |   | 5.23   | %
|Net interest margin without tax adjustment     |  |                                     | 3.79   | % |                |   | 3.71   | %
|Net interest margin - tax equivalent           |  |                                     | 3.83   | % |                |   | 3.76   | %
|Net interest spread - without tax adjustment   |  |                                     | 3.30   | % |                |   | 3.34   | %
|Net interest spread - tax equivalent           |  |                                     | 3.34   | % |                |   | 3.39   | %



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



27



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



|                                               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|---------------------------------------------- |  | ------------------------------------ | --------- | - | --------------- | - | ---------------- |  | ---- | -------------- |  | - | --------- | - | ---------------- | - | ------ |  | ---- | -
|                                               |  | For the Three Months Ended March 31, |          
|                                               |  | 2005 (Restated)                      |           |   | 2004 (Restated) |  
|                                               |  | AVERAGEBALANCE                       |           |   | INTEREST        |   | YIELD/RATE(%)(6) |  |      | AVERAGEBALANCE |  |   | INTEREST  |   | YIELD/RATE(%)(6) |  
|                                               |  | (dollars in thousands)               |          
|INTEREST-EARNING ASSETS:                       |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Investment securities (1):                     |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Taxable                                        |  | $                                    | 506,068   |   |                 | $ | 4,995            |  | 3.95 | %              |  | $ | 497,299   |   |                  | $ | 4,980  |  | 4.01 | %
|Tax-exempt (tax equivalent) (2)                |  |                                      | 41,790    |   |                 |   | 740              |  | 7.08 |                |  |   | 44,530    |   |                  |   | 792    |  | 7.11 |  
|                                               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Total investment securities                    |  |                                      | 547,858   |   |                 |   | 5,735            |  | 4.19 |                |  |   | 541,829   |   |                  |   | 5,772  |  | 4.26 |  
|                                               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Cash Equivalents                               |  |                                      | 18,516    |   |                 |   | 109              |  | 2.35 |                |  |   | 7,262     |   |                  |   | 18     |  | 0.97 |  
|                                               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Loans (2) (3):                                 |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Commercial and commercial real estate          |  |                                      | 1,911,926 |   |                 |   | 29,656           |  | 6.20 |                |  |   | 1,614,028 |   |                  |   | 21,906 |  | 5.37 |  
|Residential real estate mortgages              |  |                                      | 64,147    |   |                 |   | 854              |  | 5.32 |                |  |   | 82,064    |   |                  |   | 1,124  |  | 5.48 |  
|Home equity and consumer                       |  |                                      | 219,688   |   |                 |   | 2,991            |  | 5.52 |                |  |   | 274,845   |   |                  |   | 3,376  |  | 4.94 |  
|Fees on loans                                  |  |                                      |           |   |                 |   | 465              |  |      |                |  |   |           |   |                  |   | 637    |  |      |  
|                                               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Net loans (tax equivalent) (2)                 |  |                                      | 2,195,761 |   |                 |   | 33,966           |  | 6.27 |                |  |   | 1,970,937 |   |                  |   | 27,043 |  | 5.52 |  
|                                               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Total interest-earning assets (2)              |  |                                      | 2,762,135 |   |                 |   | 39,810           |  | 5.83 |                |  |   | 2,520,028 |   |                  |   | 32,833 |  | 5.23 |  
|                                               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Allowance for loan losses                      |  |                                      | (38,561   | ) |                 |   |                  |  |      |                |  |   | (34,761   | ) |                  |   |        |  |      |  
|NON-EARNING ASSETS:                            |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Cash and due from banks                        |  |                                      | 65,162    |   |                 |   |                  |  |      |                |  |   | 56,243    |   |                  |   |        |  |      |  
|Accrued interest and other assets              |  |                                      | 85,779    |   |                 |   |                  |  |      |                |  |   | 94,232    |   |                  |   |        |  |      |  
|                                               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|TOTAL ASSETS                                   |  | $                                    | 2,874,515 |   |                 |   |                  |  |      |                |  | $ | 2,635,742 |   |                  |   |        |  |      |  
|                                               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|INTEREST-BEARING LIABILITIES:                  |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Interest-bearing deposits:                     |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Interest-bearing demand deposits               |  | $                                    | 573,276   |   |                 |   | 1,790            |  | 1.27 |                |  | $ | 561,147   |   |                  |   | 962    |  | 0.69 |  
|Savings deposits                               |  |                                      | 82,540    |   |                 |   | 60               |  | 0.29 |                |  |   | 91,161    |   |                  |   | 71     |  | 0.31 |  
|Time deposits                                  |  |                                      | 1,156,777 |   |                 |   | 8,133            |  | 2.85 |                |  |   | 976,435   |   |                  |   | 6,022  |  | 2.48 |  
|                                               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Total interest-bearing deposits                |  |                                      | 1,812,593 |   |                 |   | 9,983            |  | 2.23 |                |  |   | 1,628,743 |   |                  |   | 7,055  |  | 1.74 |  
|                                               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Short-term borrowings                          |  |                                      | 234,702   |   |                 |   | 975              |  | 1.66 |                |  |   | 231,034   |   |                  |   | 499    |  | 0.87 |  
|Notes payable and FHLB advances                |  |                                      | 85,500    |   |                 |   | 1,002            |  | 4.69 |                |  |   | 100,115   |   |                  |   | 1,094  |  | 4.32 |  
|Junior subordinated debentures                 |  |                                      | 87,638    |   |                 |   | 1,705            |  | 7.78 |                |  |   | 46,400    |   |                  |   | 546    |  | 4.71 |  
|                                               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Total interest-bearing liabilities             |  |                                      | 2,220,433 |   |                 |   | 13,665           |  | 2.49 |                |  |   | 2,006,292 |   |                  |   | 9,194  |  | 1.84 |  
|                                               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|NONINTEREST-BEARING LIABILITIES:               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Noninterest-bearing deposits                   |  |                                      | 447,904   |   |                 |   |                  |  |      |                |  |   | 408,822   |   |                  |   |        |  |      |  
|Accrued interest, taxes, and other liabilities |  |                                      | 48,295    |   |                 |   |                  |  |      |                |  |   | 41,323    |   |                  |   |        |  |      |  
|                                               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Total noninterest-bearing liabilities          |  |                                      | 496,199   |   |                 |   |                  |  |      |                |  |   | 450,145   |   |                  |   |        |  |      |  
|                                               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|STOCKHOLDERS EQUITY                           |  |                                      | 157,883   |   |                 |   |                  |  |      |                |  |   | 179,305   |   |                  |   |        |  |      |  
|                                               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY     |  | $                                    | 2,874,515 |   |                 |   |                  |  |      |                |  | $ | 2,635,742 |   |                  |   |        |  |      |  
|                                               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Net interest income (tax equivalent) (2)       |  |                                      |           |   |                 | $ | 26,145           |  |      |                |  |   |           |   |                  | $ | 23,639 |  |      |  
|                                               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Net interest spread (tax equivalent) (2) (4)   |  |                                      |           |   |                 |   |                  |  | 3.34 | %              |  |   |           |   |                  |   |        |  | 3.39 | %
|                                               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Net interest margin (tax equivalent) (2) (5)   |  |                                      |           |   |                 |   |                  |  | 3.83 | %              |  |   |           |   |                  |   |        |  | 3.76 | %
|                                               |  |                                      |           |   |                 |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  

---

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

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

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

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

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

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



28



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



Noninterest Income



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



|                                           |  |                                 |        |   |                |   |      
|------------------------------------------ |  | ------------------------------- | ------ | - | -------------- | - | -----
|                                           |  | For Three Months EndedMarch 31,
|                                           |  | (Restated) 2005                 |        |   | (Restated)2004
|                                           |  | (in thousands)                 
|Deposit service charges                    |  | $                               | 2,407  |   |                | $ | 2,783
|Trust services                             |  |                                 | 848    |   |                |   | 975  
|Wealth management services                 |  |                                 | 336    |   |                |   | 265  
|Gain on sale of land trusts                |  |                                 | 2,000  |   |                |   |     
|Gain on sale of branch                     |  |                                 | 1,572  |   |                |   |     
|Gain on sale of investment securities, net |  |                                 | 127    |   |                |   |     
|Net cash settlements on CD swaps           |  |                                 | 223    |   |                |   | 207  
|Change in fair value of CD swaps           |  |                                 | (1,576 | ) |                |   | 958  
|Loan syndication fees                      |  |                                 | 700    |   |                |   |     
|Other noninterest income                   |  |                                 | 265    |   |                |   | 652  
|                                           |  |                                 |        |   |                |   |      
|Total noninterest income                   |  | $                               | 6,902  |   |                | $ | 5,840
|                                           |  |                                 |        |   |                |   |      



Noninterest income
increased by $1.1 million to $6.9 million for the first quarter of 2005, as compared to $5.8 million for the same quarter in 2004. Noninterest income in 2005 included $3.6 million in gains from the sales of our land trust operations and our
Broadview, Illinois branch. In addition, the first quarter of 2005 included $700,000 of loan syndication fees. The loss on the fair value of the CD swaps was $1.6 million during the first quarter of 2005 compared to a gain of $958,000 during the
same quarter a year ago. Also, deposit service charges, trust fees, and other noninterest income were lower in the first quarter of 2005 as compared to the same quarter a year ago.



Deposit service charges were $2.4 million during the first quarter of 2005, $376,000 or 13.5% less than the deposit
service charges of $2.8 million during the same quarter a year ago. Reported service charge income is impacted by a number of factors including the volume of deposit accounts and service transactions, the price established for each deposit service,
the earnings credit rate and the collected balances customers maintain in their commercial checking accounts. The decrease in service charge revenue during 2005 was primarily caused by lower commercial service charge income as a result of reduced
activity fees and an increase in the earnings credit rate given to customers on their collected account balances to offset gross activity charges. We believe intelligent product development and pricing, as well as customer account acquisition, will
be necessary to increase this revenue stream in future periods.



Trust service fees were $848,000 during the first quarter of 2005 compared to $975,000 during the same quarter a year ago, a decrease of $127,000, or 13.0%. Trust services during both periods include corporate, land, and exchange trust
services. The decrease between the two



29



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



quarterly periods was largely due to lower corporate trust fees. On March 31, 2005, we sold our land trust
operations and recorded a gain of $2.0 million. We elected to capitalize on the current value of our land trust operations by selling it to an existing land trustee who can apply greater economies of scale. Our decision is consistent with our focus
on our products and services that best meet the needs of our business customers. We expect that our total trust revenues will be lower beginning with the second quarter of 2005 because of this sale. In prior years, land trust operations had provided
fee income of approximately $1.1 million annually. Direct operating expenses relating to our land trust operations totaled approximately $500,000 annually.



Wealth management services consist primarily of asset management consulting services. Wealth management fees increased $71,000 to $336,000 during the
first quarter of 2005 compared to $265,000 during the same quarter a year ago. The market value of assets under management has increased over the past year. We believe that increased fee opportunities continue to be available to us in providing
these services.



We recorded a $1.6 million gain in connection
with the sale of our Broadview, Illinois branch in January 2005. In addition to selling the land and building, we sold approximately $19.7 million of deposit balances and $5.3 million of loans associated with the branch. This sale allows us to
redeploy our investment in banking facilities into geographic markets more aligned with our targeted customers.



During the first quarter of 2005, we recorded a $127,000 gain on the sale of $2.7 million of available-for-sale investment securities. We sold eleven
low-balance, mortgage-backed securities to improve the operating efficiency of the portfolio. No sales of investment securities occurred during the first quarter of 2004.



We use certain interest rate exchange agreements, or swaps, to convert fixed rate brokered certificates of deposits to a
variable rate. Under these swaps, we receive a fixed rate and pay a variable rate based upon LIBOR. The net cash settlements from these CD swaps were $223,000 during the first quarter of 2005 compared to $207,000 during the same quarter in 2004.



The change in the fair value of the CD swaps can vary greatly
from quarter to quarter based upon market interest rates, the total notional amount and the terms of swap transactions that we have entered into. For the first quarter of 2005, we had a loss in fair value from these CD swaps of $1.6 million compared
to a gain in fair value of $958,000 during the first quarter of 2004. For additional information concerning the accounting treatment for these CD swaps, please see Application of Critical Accounting PoliciesDerivative Financial
Instruments and Notes 2 and 11 to our consolidated financial statements in this Amendment No. 1 to Form 10-Q.



We received $700,000 of loan syndication fees during the first quarter of 2005. We earn these fees through the syndication of certain commercial real
estate development loans for our customers. We expect the opportunity to provide this service to recur, but not necessarily on a routine, predictable basis. We did not receive any similar fees during the first three months of 2004.



30



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



Other noninterest income includes fees received from the issuance of standby letters of credit, fees
for non-customer usage of our automated teller machines, revenues (losses) from mortgage banking operations, gains (losses) from equity or partnership investments, gains (losses) on the assets in our employees deferred compensation plans, and
other miscellaneous sources of revenues. The decrease in other noninterest income during the first quarter of 2005 as compared to the year ago quarter was primarily due to a $250,000 increase in losses from our investment in low-income housing
partnerships and a lower gain realized on the assets held in employee deferred compensation plans.



Noninterest Expense



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



|                                                  |  |                                  |        |      |   |       
|------------------------------------------------- |  | -------------------------------- | ------ | ---- | - | ------
|                                                  |  | For Three Months Ended March 31,
|                                                  |  | 2005                             |        | 2004
|                                                  |  | (in thousands)                  
|Salaries and employee benefits:                   |  |                                  |        |      |   |       
|Salaries, employment taxes, and medical insurance |  | $                                | 7,897  |      | $ | 9,029 
|Incentives, commissions, and retirement benefits  |  |                                  | 2,103  |      |   | 1,702 
|                                                  |  |                                  |        |      |   |       
|Total salaries and employee benefits              |  |                                  | 10,000 |      |   | 10,731
|Occupancy of premises                             |  |                                  | 1,725  |      |   | 1,807 
|Furniture and equipment                           |  |                                  | 884    |      |   | 1,135 
|Computer processing                               |  |                                  | 433    |      |   | 434   
|Corporate insurance                               |  |                                  | 370    |      |   | 622   
|Legal fees, net                                   |  |                                  | 172    |      |   | 329   
|Advertising and public relations                  |  |                                  | 109    |      |   | 422   
|Other noninterest expense                         |  |                                  | 3,047  |      |   | 3,303 
|                                                  |  |                                  |        |      |   |       
|Total noninterest expense                         |  | $                                | 16,740 |      | $ | 18,783
|                                                  |  |                                  |        |      |   |       



Noninterest expense
declined $2.0 million, or 10.9%, to $16.7 million during the first quarter of 2005, as compared to the $18.8 million of noninterest expense during the same quarter in 2004. The decrease in noninterest expense was principally a result of our efforts
to reduce our operating expenses. The lower level of noninterest expense was primarily due to lower salaries and benefits, occupancy of premises, furniture and equipment, corporate insurance, and advertising.



Total salaries and employee benefits expense decreased $731,000, or 6.8%, to
$10.0 million during the first quarter of 2005 compared to $10.7 million during the first quarter a year ago. Salaries, employment taxes, and medical insurance decreased $1.1 million, or 12.5%, to $7.9 million during the first quarter of 2005
compared to $9.0 million for the first quarter of 2004. The decline in total base salaries was a result of the reduction in the number of full-time equivalent employees. The number of full-time equivalent employees declined to 435 at March 31,
2005 from 482 at March 31, 2004. In addition, severance expense declined $395,000 in the first quarter of 2005. Incentives, commissions, and retirement benefits increased $402,000, or 23.6%, to $2.1 million during the first quarter of 2005
reflecting the improved financial performance of the Bank in the first quarter of 2005 as compared to the first quarter of 2004.



31



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



Beginning 2006, salaries and employee benefits expense will be impacted by the implementation of
Statement of Financial Accounting Standard No. 123, Share-Based Payment (SFAS 123R), which is revised and reissued guidance on the accounting for stock-based compensation. SFAS 123R eliminates the intrinsic value method
that we currently use to account for the granting of employee stock options. Beginning in 2006, we will be required to record compensation expense in the future for all existing stock options that have not vested as of date of adoption and for all
future grants of employee stock options. While we have not yet completed our evaluation of the impact of the adoption of SFAS 123R on our consolidated financial statements, including the impact of the transitional provisions of SFAS 123R, we expect
to record increased salary and employee benefit expense as a result of its implementation. See the section of this discussion and analysis captioned New Accounting Pronouncements for additional details concerning our implementation of
SFAS 123R.



Occupancy expense was $1.7 million during the first
quarter of 2005 compared to $1.8 million during the same quarter a year ago, a decrease of $82,000, or 4.5%. Lower building depreciation, real estate taxes, and repair and maintenance expense, partly offset by an increase in rent expense, combined
to produce the lower occupancy expense. The lower depreciation on buildings was primarily due to the January 2005 sale of our Broadview branch and the June 2004 sale of our Burbank facility. Upon sale of our Burbank facility, we leased back
approximately one-half of the space for our retail branch and certain operating departments at that facility. This new lease, as well as our new 2,500 square foot banking facility in Itasca, Illinois, which opened in June 2004, caused the increase
in rent expense between the first quarter of 2004 and the first quarter of 2005.



In addition, we have taken other steps that are expected to impact occupancy expense in the future. On February 18, 2005, we completed a transaction in which we terminated the operating lease for our 58,000
square-foot Wheeling facility. Upon termination of our obligation under the existing lease, we signed a new 10-year operating lease for 8,300 square feet on the first floor of the Wheeling facility for a smaller branch. We expect to save
approximately $400,000 per year by occupying less space at this facility. In addition, in April 2005 we opened a 2,800 square-foot banking facility under a 3-year operating lease in Orland Park, Illinois, a southern suburb of Chicago. We also
completed the sale of our Ashland facility in the fourth quarter of 2004. We retained a small parcel of land to construct a new, smaller facility on that site. We expect to move into this new 6,000 square-foot facility, from our temporary rented
facility on Bishop, during the second half of 2005.



The
expense for furniture and equipment was $884,000 during the first quarter of 2005, compared to $1.1 million during the same quarter in 2004, a decrease of $251,000 or 22.1%. The decrease in expense was mainly due to lower depreciation for furniture
and equipment and a reduction in equipment repairs and maintenance.



32



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



Corporate insurance expense declined for the first quarter of 2005 to $370,000 compared to $622,000
during the first quarter of 2004. An adjustment to our directors and officers insurance coverage and a more favorable insurance market, among other factors, caused the decrease in expense for 2005 as compared to 2004.



We incur legal fees for the holding company and for the Bank. Legal fees at
the Bank relate to collection activities as well as contract and compliance matters. Holding company legal fees are for general corporate matters, including securities law compliance and other costs associated with being a publicly-traded company.
Net legal fees totaled $172,000 during the first quarter of 2005 compared to $329,000 during the same period in 2004. Legal fees in 2005 included a $330,000 reimbursement of legal fees to the Bank from a legal action we instituted in 1999.



Advertising and public relations expense was $109,000 during
the first quarter of 2005 as compared to $422,000 during the same quarter in 2004. The lower expense was a result of the timing of marketing activities and such activities can vary from quarter to quarter.



Other noninterest expense principally includes certain professional fees,
FDIC insurance, outside services, operating losses and other operating expenses such as telephone, postage, office supplies, and printing. Other noninterest expense was $3.0 million during the first quarter of 2005 compared to $3.3 million during
the same period in 2004, a decrease of $256,000, or 7.8%. Lower telephone expense, outside services, and cost related to other real estate owned assets caused the decrease in expense between the two quarterly periods.



Income Taxes



We recorded income tax expense of $5.6 million during the first quarter of 2005, resulting in an effective income tax rate
of 39.8%. In comparison, we recorded income tax expense of $2.6 million during the first quarter of 2004 resulting in an effective income tax rate of 34.8%. The higher pre-tax income coupled with a higher effective income tax rate produced the
increase in income tax expense between the two quarterly periods. Income tax expense in 2005 includes the accrual of interest for unresolved tax positions. Without the accrual of the interest in 2005, the effective tax rate would have been 38% in
2005. The lower effective tax rate in 2004 is also a result of the increased impact of tax-exempt items because of the lower pretax income and the recognition of $46,000 in capital loss carry-back claims.



33



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



FINANCIAL CONDITION



Overview



Our total assets increased to $2.95 billion at March 31, 2005 compared to $2.89 billion at year-end 2004, an increase of $56.8 million, or 2.0%.
Asset growth was driven primarily from a $42.5 million increase in total loans. Total deposits increased by $66.6 million to $2.35 billion at March 31, 2005 compared to $2.28 billion at December 31, 2004. Total stockholders equity at
March 31, 2005 was $158.4 million compared to $155.6 million at December 31, 2004.



Cash and Cash Equivalents



Period-end cash and cash equivalents were $94.0 million at March 31, 2005 compared to $79.3 million at December 31, 2004. Cash consists of cash on hand at branches, balances at correspondent banks and cash letters in process of
collection. Cash equivalents consist of short-term, interest-bearing investments and federal funds sold.



Interest-Earning Assets



Investment securities totaled $530.0 million at March 31, 2005 compared to $533.6 million at December 31, 2004. Purchases of $20.2 million in securities during the quarter were offset by $13.1 million in repayments on
mortgage-related securities, a $7.6 million increase in the unrealized loss on the available for sale investment portfolio and the sale of $2.7 million of securities. The net unrealized loss on the available-for-sale portfolio increased $7.6 million
during the first quarter due to changes in market interest rates. At March 31, 2005, we owned 34 investment securities in an unrealized loss position. Of these securities, ten securities have been in a loss position for more than twelve months.
We believe that none of these unrealized losses represents other-than-temporary impairments of our investment portfolio. We believe that we have both the intent and ability to hold all of these securities for the time necessary to recover the
amortized cost.



Period-end total loans increased $44.3
million, or 2.0%, to $2.26 billion at March 31, 2005 compared to $2.21 billion at December 31, 2004. Our commercial loan portfolio, which includes commercial and industrial, commercial real estate secured, and real estate 
construction loans, increased $61.2 million, or 3.2%, during the first quarter of 2005. The increase was attributable to growth in real estate  construction loans. Our real estate construction portfolio increased $62.8 million to $594.7
million at March 31, 2005 as compared to $531.9 million at December 31, 2004. The majority of the increase in real estate - construction lending related to residential developments.



During the first quarter of 2005, total consumer-oriented loans, which
include residential real estate mortgages, home equity loans and lines of credit, and other consumer loans, decreased $17.2 million to $272.9 million at March 31, 2005. Consumer-oriented loans as a percentage of total loans declined to 12% at
March 31, 2005, from 13% at year-end 2004. The reduction in consumer-oriented loans included the sale of $3.65 million of mortgage, home equity and other consumer loans in connection with the sale of our Broadview banking facility. A
significant portion of the consumer-oriented loan portfolio includes loans we originated through brokers in prior years, a practice we discontinued in 2001 and 2002. As expected, the broker-related loan portfolios have declined from $110 million at
December 31, 2004 to $99 million at March 31, 2005.



34



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



Loan Quality and Nonperforming Assets



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



|                                                                         |  |                        |        |   |               |   |        |  
|------------------------------------------------------------------------ |  | ---------------------- | ------ | - | ------------- | - | ------ | -
|                                                                         |  | March 31, 2005         |        |   | Dec. 31, 2004 |  
|                                                                         |  | (dollars in thousands) |       
|Loans contractually past due 90 days or more but still accruing interest |  | $                      | 4,117  |   |               | $ | 1,807  |  
|Nonaccrual loans                                                         |  |                        | 11,120 |   |               |   | 12,286 |  
|                                                                         |  |                        |        |   |               |   |        |  
|Total nonperforming loans                                                |  |                        | 15,237 |   |               |   | 14,093 |  
|Other real estate owned                                                  |  |                        | 46     |   |               |   | 46     |  
|Other repossessed assets                                                 |  |                        | 11     |   |               |   | 12     |  
|                                                                         |  |                        |        |   |               |   |        |  
|Total nonperforming assets                                               |  | $                      | 15,294 |   |               | $ | 14,151 |  
|                                                                         |  |                        |        |   |               |   |        |  
|Restructured loans not included in nonperforming assets                  |  | $                      | 2,768  |   |               | $ | 1,777  |  
|Impaired loans                                                           |  | $                      | 19,835 |   |               | $ | 18,327 |  
|                                                                         |  |                       
|Nonperforming loans to total loans                                       |  |                        | 0.68   | % |               |   | 0.64   | %
|Nonperforming assets to total loans plus repossessed property            |  |                        | 0.68   | % |               |   | 0.64   | %
|Nonperforming assets to total assets                                     |  |                        | 0.52   | % |               |   | 0.49   | %



The level of
nonperforming loans increased $1.1 million to $15.2 million at March 31, 2005, compared to $14.1 million at December 31, 2004. The ratio of nonperforming loans as a percentage of total loans was 0.68% at March 31, 2005 compared to and
0.64% at December 31, 2004.



Impaired loans include all
nonaccrual loans as well as accruing loans judged to have higher risk of noncompliance with the present contractual repayment schedule for both interest and principal. While impaired loans exhibit weaknesses that may inhibit repayment in compliance
with the original note terms, the measurement of impairment may not always result in an allowance for loan loss for every impaired loan. Total impaired loans were $19.8 million at March 31, 2005 compared to $18.3 million at year-end 2004.
Certain homogenous loans, including residential mortgage and consumer loans, are collectively evaluated for impairment and therefore are excluded from impaired loans. Not included in the impaired loan amount are $13.0 million of loans to consumers
secured by manufactured homes that we continue to monitor closely.



35



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



Allowance for Loan Losses



We have established an allowance for loan losses to provide for loans in our portfolio that may not be repaid in their
entirety. The allowance is based on our regular, quarterly assessments of the probable estimated losses inherent in the loan portfolio. Our methodology for measuring the appropriate level of the allowance relies on several key elements, which
include specific allowances for identified problem loans and portfolio segments and the unallocated allowance. Although management believes that the allowance for loan losses is adequate to absorb probable losses on existing loans that may become
uncollectible, there can be no assurance that our allowance will prove sufficient to cover actual loan losses in the future. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the adequacy
of our allowance for loan losses. Such agencies may require us to make additional provisions to the allowance based upon their judgments about information available to them at the time of their examinations.



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



|                                                  |  |                                  |           |   |      |   |           |  
|------------------------------------------------- |  | -------------------------------- | --------- | - | ---- | - | --------- | -
|                                                  |  | For Three Months Ended March 31, |          
|                                                  |  | 2005                             |           |   | 2004 |  
|                                                  |  | (dollars in thousands)           |          
|Average total loans                               |  | $                                | 2,195,761 |   |      | $ | 1,970,937 |  
|                                                  |  |                                  |           |   |      |   |           |  
|Total loans at end of period                      |  | $                                | 2,255,867 |   |      | $ | 2,017,716 |  
|                                                  |  |                                  |           |   |      |   |           |  
|Allowance for loan losses:                        |  |                                  |           |   |      |   |           |  
|Allowance at beginning of period                  |  | $                                | 37,484    |   |      | $ | 34,356    |  
|Total charge-offs                                 |  |                                  | (501      | ) |      |   | (2,206    | )
|Total recoveries                                  |  |                                  | 445       |   |      |   | 325       |  
|                                                  |  |                                  |           |   |      |   |           |  
|Net charge-offs                                   |  |                                  | (56       | ) |      |   | (1,881    | )
|Provision for loan losses                         |  |                                  | 1,834     |   |      |   | 2,750     |  
|                                                  |  |                                  |           |   |      |   |           |  
|Allowance at end of period                        |  | $                                | 39,262    |   |      | $ | 35,225    |  
|                                                  |  |                                  |           |   |      |   |           |  
|Annualized net charge-offs to average total loans |  |                                  | 0.01      | % |      |   | 0.38      | %
|Allowance to total loans at end of period         |  |                                  | 1.74      | % |      |   | 1.75      | %
|Allowance to nonperforming loans                  |  |                                  | 257.68    | % |      |   | 199.21    | %



Net charge-offs during
the first quarter of 2005 were $56,000, or an annualized 0.01% of average loans. In comparison, net charge-offs during the first quarter of 2004 were $1.9 million representing an annualized 0.38% of average loans. We believe that the level of net
charge-off incurred during the first quarter of 2005 is likely not to be sustainable for future quarters. As a business bank, our loan portfolio is comprised primarily of commercial loans to businesses, the loans to which are inherently larger in
amount than loans to individual consumers. The individually larger commercial loans can cause greater volatility in reported credit quality performance measures, such as total impaired or nonperforming loans. For example, our current credit risk
rating and loss estimate with respect to a single material loan can have a material impact on our reported impaired loans and related loss exposure estimates. We review our estimates on a quarterly basis and, if necessary, adjust the allowance for
loan losses through the recording of a provision for loan losses.



36



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



Our allowance for loan losses increased to $39.3 million at March 31, 2005, or 1.74% of
end-of-period loans and 257.68% of nonperforming loans. At December 31, 2004, the allowance for loan losses was $37.5 million, which represented 1.69% of end-of-period loans and 265.98% of nonperforming loans. At March 31, 2004, the
allowance for loan losses was $35.2 million, which represented 1.75% of end-of-period loans and 199.21% of nonperforming 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 $1.8 million during the first quarter of 2005, compared to $2.8 million during the first quarter a year ago, a decrease of $916,000, or 33.3%. The lower level of provision for loan losses was due
to the lower level of charge-offs and improved credit performance of our loan portfolio. Our loan loss provision is determined based upon an analysis of our portfolio performed on a quarterly basis, with ongoing monitoring by our Credit Policy
Committee and our Credit Administration and Loan Review functions. We expect our provisioning to fluctuate as the circumstances of our individual commercial borrowers and the economic environment changes. Accordingly, the provision for loan losses
in any accounting period is not an indicator of provisioning in subsequent reporting periods.



Non-earning Assets



Premises, leasehold improvements and equipment, net of accumulated depreciation and amortization, totaled $12.0 million at March 31, 2005 compared to $14.8 million at December 31, 2004, a decrease of $2.8 million. In January 2005,
we sold our Broadview branch, which had a book value of $2.0 million. In February 2005, in connection with the termination of the 58,000 square-foot operating lease for the Wheeling facility, we transferred a small parcel of land we owned near the
facility, which had a book value of $195,000. Depreciation expense of $779,000 during the first quarter of 2005 produced the remainder of the decrease.



In April 2005, we opened a 2,800 square-foot branch located in Orland Park, Illinois, a southern suburb of Chicago. We lease this facility under a 3-year
operating lease. Additionally, we are currently building a 6,000 square-foot facility at the former location of our Ashland facility. We expect to be able to move from our temporary Bishop facility into the new Ashland facility during the second
half of 2005.



At December 31, 2004, the Company had
$54,000 of other intangible assets, subject to amortization, that related to the purchase of land trust business in 1998. This intangible asset was included in other assets on the Consolidated Balance Sheets. During the first quarter of 2005, the
Company sold its land trust operations and the unamortized balance of this intangible asset was written off, reducing the gain recognized on the sale.



37



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



Deposits



During the first quarter of 2005, total deposits increased on a net basis by $66.6 million, or 2.9%, to $2.35 billion at March 31, 2005, as compared
to $2.28 billion at December 31, 2004. In January 2005, we sold our Broadview branch, which included $19.7 million of deposit balances. Of the deposits sold, $13.1 million were time deposits, $4.1 million were NOW, savings and money market
accounts and $2.5 million were noninterest-bearing demand deposits. The majority of the gross increase in deposits of $86.3 million was obtained through issuance of brokered and out-of-local-market certificates of deposit. From December 31,
2004 to March 31, 2005, brokered certificates of deposit increased $65.2 million and out-of-local-market certificates of deposits increased $16.0 million. An increase in interest-bearing demand deposits of $53.6 million was largely offset by a
decrease in noninterest-bearing demand deposits of $55.6 million. Historically, we experience a decline in our noninterest-bearing demand deposits in the first calendar quarter of each year, as our customers reduce their cash balances. However, the
decline in the first quarter of 2005 was somewhat larger than what we have experienced in the past. Money market account balances increased during the first quarter of 2005.



We obtain our funding through several deposit generating sources; using a mix of wholesale and local customer funds based on
cost effectiveness, fee income potential and liquidity dynamics. We manage potential liquidity risk associated with wholesale funding by extending and staggering maturities, pledging collateral and maintaining multiple sources within the wholesale
marketplace to obtain funding. We have historically used wholesale funding sources such as brokered CDs, especially when such funds can be obtained at a lower overall cost than in-market deposits. We expect that the wholesale funds market will
remain a significant funding source for us. The cost and availability of funding may be a factor in our evaluation of opportunities to grow our earning assets.



38



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



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

|                                            |  |                                                      |           |                     |                                                      |   |      |      |   |                 |   |                     |  |       |      |  |      |  
|------------------------------------------- |  | ---------------------------------------------------- | --------- | ------------------- | ---------------------------------------------------- | - | ---- | ---- | - | --------------- | - | ------------------- |  | ----- | ---- |  | ---- | -
|                                            |  | (Restated) For the Three Months Ended March 31, 2005 |           |                     | (Restated) For the Three Months Ended March 31, 2004 |  
|                                            |  | Average Balance                                      |           | Percent Of Deposits |                                                      |   | Rate |      |   | Average Balance |   | Percent Of Deposits |  |       | Rate | 
|                                            |  | (dollars in thousands)                               |          
|Noninterest-bearing demand deposits         |  | $                                                    | 447,904   |                     | 19.8                                                 | % |      |     | % |                 | $ | 408,822             |  | 20.1  | %    |  |     | %
|Interest-bearing demand deposits            |  |                                                      | 573,276   |                     | 25.4                                                 |   |      | 1.27 |   |                 |   | 561,147             |  | 27.5  |      |  | 0.69 |  
|Savings deposits                            |  |                                                      | 82,540    |                     | 3.7                                                  |   |      | 0.29 |   |                 |   | 91,161              |  | 4.5   |      |  | 0.31 |  
|Time deposits:                              |  |                                                      |           |                     |                                                      |   |      |      |   |                 |   |                     |  |       |      |  |      |  
|Certificates of deposit                     |  |                                                      | 521,129   |                     | 23.1                                                 |   |      | 2.70 |   |                 |   | 511,590             |  | 25.1  |      |  | 2.31 |  
|Out-of-local-market certificates of deposit |  |                                                      | 132,026   |                     | 5.8                                                  |   |      | 2.88 |   |                 |   | 85,734              |  | 4.2   |      |  | 2.74 |  
|Brokered certificates of deposit            |  |                                                      | 432,992   |                     | 19.1                                                 |   |      | 3.09 |   |                 |   | 316,105             |  | 15.5  |      |  | 2.92 |  
|Public Funds                                |  |                                                      | 70,630    |                     | 3.1                                                  |   |      | 2.45 |   |                 |   | 63,006              |  | 3.1   |      |  | 1.35 |  
|                                            |  |                                                      |           |                     |                                                      |   |      |      |   |                 |   |                     |  |       |      |  |      |  
|Total time deposits                         |  |                                                      | 1,156,777 |                     | 51.1                                                 |   |      | 2.85 |   |                 |   | 976,435             |  | 47.9  |      |  | 2.48 |  
|                                            |  |                                                      |           |                     |                                                      |   |      |      |   |                 |   |                     |  |       |      |  |      |  
|Total deposits                              |  | $                                                    | 2,260,497 |                     | 100.0                                                | % |      |      |   |                 | $ | 2,037,565           |  | 100.0 | %    |  |      |  
|                                            |  |                                                      |           |                     |                                                      |   |      |      |   |                 |   |                     |  |       |      |  |      |  



Quarterly average
deposits increased $222.9 million, or 10.9%, to $2.26 billion for the first quarter in 2005, as compared to the first quarter in 2004. Approximately 73.2% of the increase in deposits was obtained through issuance of brokered and out-of-local-market
certificates of deposit. Another 17.5% was obtained through increased noninterest-bearing demand deposit accounts. Quarterly average brokered certificates of deposit increased $116.9 million or 37.0%, to $433.0 million for the first quarter of 2005
from the first quarter of 2004. Average out-of-local-market certificates of deposits increased $46.3 million or 54.0%, to $132.0 million for the first quarter 2005 compared to the same quarter in 2004. Average noninterest-bearing demand deposits
increased $39.1 million or 9.6%, to $447.9 million during the first quarter of 2005, compared to $408.8 million during the year ago quarter.



Other Borrowings



Our short-term borrowings include federal funds purchased, securities sold under agreements to repurchase and U.S. Treasury tax and loan note option
accounts. Period-end, short-term borrowings decreased $14.7 million, or 6.4%, to $214.9 million at March 31, 2005, as compared to $229.5 million at December 31, 2004. The decline in short-term borrowings was primarily due to lower federal
funds purchased of $22.8 million, partly offset by an $8.1 million increase in securities sold under agreements to repurchase.



FHLB advances totaled $75.0 million at both March 31, 2005 and December 31, 2004. In addition, borrowings at the holding company level were
$10.5 million at both March 31, 2005 and December 31, 2004. Our aggregate borrowings consist of a $10.0 million subordinated debt agreement and $500,000 term loan. We also have an $11.5 million revolving credit facility that has not yet
been drawn upon.



At both March 31, 2005 and
December 31, 2004, we had $87.6 million of junior subordinated debentures issued to two of our wholly owned subsidiaries. We had $46.4 million outstanding from the junior subordinated debentures, at a fixed interest rate of 9.75%, issued to



39



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



TAYC Capital Trust I. In addition, we had $41.2 million of junior subordinated debentures issued to TAYC Capital
Trust II. The junior subordinated debentures have a floating interest rate, which adjusts quarterly, of the three-month LIBOR rate plus 2.68%. The interest rate was 5.71% on March 31, 2005 and 5.18% at December 31, 2004. Each of these
trusts used proceeds from the issuance of trust preferred securities to purchase our junior subordinated debentures.



40



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



CAPITAL RESOURCES



At both March 31, 2005 and December 31, 2004, both the holding company and the Bank were considered well capitalized under capital
guidelines for bank holding companies and banks. The Companys and the Banks capital ratios were as follows for the dates indicated:



|                                         |  |                        |         |       |                               |   |        |                                                                 |          |  |       |        |  |       |          |  |        |  
|---------------------------------------- |  | ---------------------- | ------- | ----- | ----------------------------- | - | ------ | --------------------------------------------------------------- | -------- |  | ----- | ------ |  | ----- | -------- |  | ------ | -
|                                         |  | ACTUAL                 |         |       | FOR CAPITAL ADEQUACY PURPOSES |   |        | TO BE WELL CAPITALIZED UNDER PROMPT CORRECTIVEACTION PROVISIONS |         
|                                         |  | AMOUNT                 |         | RATIO |                               |   | AMOUNT |                                                                 | RATIO    |  |       | AMOUNT |  | RATIO |         
|                                         |  | (dollars in thousands) |        
|As of March 31, 2005 (Restated):         |  |                        |         |       |                               |   |        |                                                                 |          |  |       |        |  |       |          |  |        |  
|Total Capital (to Risk Weighted Assets)  |  |                        |         |       |                               |   |        |                                                                 |          |  |       |        |  |       |          |  |        |  
|Taylor Capital Group, Inc.               |  | $                      | 262,980 |       | 10.37                         | % |        | >$                                                              | 202,890  |  | >8.00 | %      |  | >$    | 253,612  |  | >10.00 | %
|Cole Taylor Bank                         |  |                        | 271,618 |       | 10.73                         |   |        |                                                                 | >202,434 |  | >8.00 |        |  |       | >253,042 |  | >10.00 |  
|Tier I Capital (to Risk Weighted Assets) |  |                        |         |       |                               |   |        |                                                                 |          |  |       |        |  |       |          |  |        |  
|Taylor Capital Group, Inc.               |  |                        | 190,967 |       | 7.53                          |   |        |                                                                 | >101,445 |  | >4.00 |        |  |       | >152,167 |  | >6.00  |  
|Cole Taylor Bank                         |  |                        | 239,905 |       | 9.48                          |   |        |                                                                 | >101,217 |  | >4.00 |        |  |       | >151,825 |  | >6.00  |  
|Leverage (to average assets)             |  |                        |         |       |                               |   |        |                                                                 |          |  |       |        |  |       |          |  |        |  
|Taylor Capital Group, Inc.               |  |                        | 190,967 |       | 6.70                          |   |        |                                                                 | >114,046 |  | >4.00 |        |  |       | >142,558 |  | >5.00  |  
|Cole Taylor Bank                         |  |                        | 239,905 |       | 8.44                          |   |        |                                                                 | >113,721 |  | >4.00 |        |  |       | >142,151 |  | >5.00  |  
|                                         |  |                        |         |       |                               |  
|As of December 31, 2004 (Restated):      |  |                        |         |       |                               |   |        |                                                                 |          |  |       |        |  |       |          |  |        |  
|Total Capital (to Risk Weighted Assets)  |  |                        |         |       |                               |   |        |                                                                 |          |  |       |        |  |       |          |  |        |  
|Taylor Capital Group, Inc.               |  | $                      | 255,616 |       | 10.27                         | % |        | >$                                                              | 199,125  |  | >8.00 | %      |  | >$    | 248,906  |  | >10.00 | %
|Cole Taylor Bank                         |  |                        | 262,350 |       | 10.55                         |   |        |                                                                 | >198,954 |  | >8.00 |        |  |       | >248,692 |  | >10.00 |  
|Tier I Capital (to Risk Weighted Assets) |  |                        |         |       |                               |   |        |                                                                 |          |  |       |        |  |       |          |  |        |  
|Taylor Capital Group, Inc.               |  |                        | 181,437 |       | 7.29                          |   |        |                                                                 | >99,563  |  | >4.00 |        |  |       | >149,344 |  | >6.00  |  
|Cole Taylor Bank                         |  |                        | 231,185 |       | 9.30                          |   |        |                                                                 | >99,477  |  | >4.00 |        |  |       | >149,215 |  | >6.00  |  
|Leverage (to average assets)             |  |                        |         |       |                               |   |        |                                                                 |          |  |       |        |  |       |          |  |        |  
|Taylor Capital Group, Inc.               |  |                        | 181,437 |       | 6.49                          |   |        |                                                                 | >111,757 |  | >4.00 |        |  |       | >139,696 |  | >5.00  |  
|Cole Taylor Bank                         |  |                        | 231,185 |       | 8.29                          |   |        |                                                                 | >111,611 |  | >4.00 |        |  |       | >139,514 |  | >5.00  |  



During the first
quarter of 2005, the Banks capital ratios increased as the increase in regulatory capital exceeded the increase in risk-weighted and average assets. First quarter Bank net income of $12.5 million less dividends paid to the holding company of
$2.0 million created the increase in regulatory capital at the Bank. The Bank is subject to dividend restrictions established by regulatory authorities and in the covenants of the holding companys senior notes payable agreement. The dividends,
as of March 31, 2005, that the Bank could declare and pay to the Company, without the approval of regulatory authorities, amounted to approximately $55.7 million. The note payable covenant is measured on an annual basis whereby the dividends
should not exceed 60% of the total years net income at the Bank.



During the first quarter of 2005, the holding companys capital ratios also increased because the increase in regulatory capital exceeded the increase in risk-weighted and average assets. During the first quarter of 2005, we declared
common stock dividends of $0.06 per share, totaling $581,000. The covenants in our senior notes payable agreement restrict the amount of common dividends that the Company can pay to shareholders to 25% of that years annual consolidated net
income. Management assesses the holding companys capital position on a regular basis and remains cognizant of the degree to which the holding company is leveraged. The factors that management will continue to evaluate are the sources and uses
of additional capital in keeping with our overall strategic plan, as well as the potential dilutive nature of raising capital and the related costs.



41



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



LIQUIDITY



From December 31, 2004 to March 31, 2005, our cash and cash equivalent balances increased $14.8 million to $94.0 million. During the first
quarter of 2005, we increased deposits, primarily brokered and out-of local-market certificates of deposit, to fund loan growth. Total deposits increased $86.8 million to fund $48.5 million in loan growth and the sale of the Broadview deposits of
$19.7 million. Investment securities totaling $20.2 million were purchased during the quarter to offset maturities and sales of $15.8 million as well as the decline in the fair value of the securities of $7.9 million. Additional sources of liquidity
for the 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 declined $2.3 million from December 31, 2004 to $4.6 million at March 31, 2005. The primary source of holding company liquidity for the quarter was the receipt of $2.0 million in dividends from the Bank. During the first
quarter of 2005, the holding company paid interest on the junior subordinated debentures and the notes payable of $1.7 million and $135,000, respectively and dividends to common shareholders of $579,000. Cash used for holding company operations
during the first quarter of 2005 included the payment of salaries, year-end bonuses and insurance premiums. The holding company did not increase its borrowings under its notes payable and at March 31, 2005 has an $11.5 revolving line of credit
that has not yet been drawn upon.



Off-Balance Sheet Arrangements



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



At March 31, 2005, we had $881.8 million of undrawn commitments to extend credit and $105.0 million of financial and performance standby letters of
credit. We expect most of these letters of credit to expire undrawn and we expect no significant loss from our obligation under financial guarantees.



Derivative Financial Instruments



At March 31, 2005, we had $180.0 million of notional amount interest rate exchange contracts related to certain brokered certificates of deposit.
Under these CD swaps, we receive a fixed interest rate equal to the rate paid on the brokered CDs and pay a variable interest rate based upon 3-month LIBOR. During the first three months of 2005, we entered into additional interest rate exchange
agreements with a notional amount totaling of $50.0 million related to newly issued brokered certificates of deposit of $50.0 million. Because these CD swaps did not qualify for fair value hedge accounting under SFAS 133 during the periods, we
reported the net cash settlements and the changes in fair value on the CD swaps as separate components of noninterest income.



42



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



We also have a $50.0 million interest rate exchange contract that qualifies for hedge accounting of
the variability of cash flows of prime-based commercial loans. Under the terms of this swap, we receive a fixed interest rate and pay a floating rate based upon the prime-lending rate based on a notional amount of $50.0 million.



For additional information concerning the accounting treatment for our
derivative instruments, please see Application of Critical Accounting Policies  Derivative Financial Instruments and Notes 2 and 11 to our consolidated financial statements in this Form 10-Q.



QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS



Interest rate risk is the most significant market risk affecting us. Other
types of market risk, such as foreign currency risk and commodity price risk, do not arise in the normal course of our business activities. Interest rate risk can be defined as the exposure to a movement in interest rates that could have an adverse
effect on our net interest income or the market value of our financial instruments. The ongoing monitoring and management of this risk is an important component of our asset and liability management process, which is governed by policies established
by the Board of Directors and carried out by 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, to manage
interest rate and market risk. These contracts are designated as hedges of specific existing assets and liabilities. Our asset and liability management and investment policies do not allow the use of derivative financial instruments for trading
purposes.



Our primary measurement of interest rate risk is
earnings at risk, which is determined through computerized simulation modeling. The primary simulation model assumes a static balance sheet, a parallel interest rate rising or declining ramp and uses the balances, rates, maturities and repricing
characteristics of all of our existing assets and liabilities, including off-balance sheet financial instruments. Net interest income is computed by the model assuming market rates remain unchanged and compares those results to other interest rate
scenarios with changes in the magnitude, timing, and relationship between various interest rates. The impact of imbedded options in products such as callable and mortgage-backed securities, real estate mortgage loans, and callable borrowings are
also considered. Changes in net interest income in the rising and declining rate scenarios are then measured against the net interest income in the rates unchanged scenario. ALCO utilizes the results of the model to quantify the estimated exposure
of our net interest income to sustained interest rate changes.



43



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



Our net interest margin began increasing during the second half of 2004 in response to increased
market interest rates. The impact of the 175 basis point increase in the Banks prime lending rate since June 2004 on our $1.2 billion in prime-indexed, floating-rate commercial loans significantly increased our loan interest income. Critical
factors affecting our net interest margin in future periods will be our pricing strategy on our deposit products as well as the source of our funding growth. Our modeling of the March 31, 2005 balance sheet, using the market interest rates in
effect at period-end, indicated increased pressure on our net interest margin in future periods as many of our interest-bearing liabilities will reprice to current rates as they mature.



Our simulation modeling of a continued rising rate environment indicates that net interest income would increase. Net
interest income for year one in a 200 basis points rising rate scenario was calculated to be $3.0 million, or 2.94%, higher than the net interest income in the rates unchanged scenario at March 31, 2005. Conversely, at March 31, 2005, net
interest income at risk for year one in a 200 basis points falling rate scenario was calculated at $8.0 million, or 7.85%, lower than the net interest income in the rates unchanged scenario. These exposures were within our policy guidelines of 10%.
The direction of our one-year exposure to rising and declining interest rates at March 31, 2005 was generally consistent with our exposure at December 31, 2004. However, in our March 31, 2005 modeling, we measured and reported the
risk of rates declining 200 basis points. At December 31, 2004, we measured and reported the risk of rates declining 100 basis points.



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.



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



|                                 |  |                                      |        |   |                      |       |    |               |   |        |                   |  |       |   
|-------------------------------- |  | ------------------------------------ | ------ | - | -------------------- | ----- | -- | ------------- | - | ------ | ----------------- |  | ----- | --
|                                 |  | Change in Future Net Interest Income |       
|                                 |  | At March 31, 2005                    |        |   | At December 31, 2004 |      
|                                 |  | (dollars in thousands)               |       
|Change in interest rates         |  | Dollar Change                        |        |   | Percentage Change    |       |    | Dollar Change |   |        | Percentage Change | 
|+200 basis points over one year  |  | $                                    | 2,997  |   |                      | 2.94  | %  |               | $ | 3,806  |                   |  | 3.84  | % 
|- 100 basis points over one year |  |                                      |       |   |                      |      |    |               |   | (4,194 | )                 |  | (4.23 | )%
|- 200 basis points over one year |  |                                      | (8,018 | ) |                      | (7.85 | )% |               |   |       |                   |  |      |   



44



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



LITIGATION



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



NEW ACCOUNTING PRONOUNCEMENTS



In 2004, the FASB released Emerging Issues Task Force (EITF) Issue No. 03-01, The Meaning of Other-Than-Temporary Impairment and
Its Application to Certain Investments. Issue No. 03-1 provides guidance for determining when an investment is impaired and whether the impairment is other than temporary as well as guidance for quantifying the impairment. The guidance
from Issue No. 03-01 was to become effective for annual financial statements for fiscal years ending after June 15, 2004. However, in September 2004, the FASB issued FASB Staff Position EITF Issue No. 03-01-1 Effective Date of
Paragraphs 10-20 of EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, which delayed the effective date for certain measurement and recognition guidance of Issue 03-01. This
delay did not suspend the requirements to recognize other-than-temporary impairments as required by existing authoritative literature. In addition, the quantitative and qualitative disclosure requirements of Issue No. 03-1 remain in effect. We
will complete our evaluation of the impact upon issuance of final guidance from the FASB.



In December 2004, the FASB revised and reissued SFAS No. 123, Share-Based Payment (SFAS 123R). This Statement revises the previously issued SFAS No. 123 and supersedes APB Opinion
No. 25. SFAS 123R was to be effective for interim periods beginning after June 15, 2005. However, in April 2005 the Securities and Exchange Commission issued guidance delaying the effective date to annual periods beginning after
June 14, 2005. Therefore, we will be required to adopt SFAS 123R beginning in the first quarter of 2006. SFAS 123R requires public entities to measure cost of employee services received in exchange for award of equity securities based on the
grant-date fair value of the award. The cost of the award will be recognized over the period during which an employee is required to provide service. Public entities are required to measure the cost of employee services received in exchange for an
award of liability instruments based upon the current fair value, adjusted at each reporting date through the settlement date. Changes in the fair value during the requisite service period will be recognized as compensation over that period. SFAS
123R eliminates the intrinsic value method of accounting for employee stock options under APB Opinion No. 25. As a result, we will be required to record compensation expense in the future for all existing stock options that have not vested as
of January 1, 2006, and for all future grants of employee stock options. While we have not yet completed our evaluation of the impact of adoption on the consolidated financial statements and the transitional provisions of SFAS 123R, we expect
to record increased expense as a result of implementation.



45



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



QUARTERLY FINANCIAL INFORMATION



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



|                                                  |  |                                          |        |   |                               |   |                    |         |  |         |        |  |         |        |         |  |         |        |         |   |        |  |   |        |  |   |       
|------------------------------------------------- |  | ---------------------------------------- | ------ | - | ----------------------------- | - | ------------------ | ------- |  | ------- | ------ |  | ------- | ------ | ------- |  | ------- | ------ | ------- | - | ------ |  | - | ------ |  | - | ------
|                                                  |  | (Restated) 2005 Quarter Ended            |        |   | (Restated) 2004 Quarter Ended |   | 2003 Quarter Ended
|                                                  |  | Mar. 31                                  |        |   | Dec. 31                       |   |                    | Sep. 30 |  | Jun. 30 |        |  | Mar. 31 |        | Dec. 31 |  | Sep. 30 |        | Jun. 30
|                                                  |  | (in thousands, except per share amounts)
|Interest income                                   |  | $                                        | 39,512 |   |                               | $ | 37,002             |         |  | $       | 34,972 |  | $       | 32,869 |         |  | $       | 32,510 |         | $ | 32,648 |  | $ | 33,576 |  | $ | 34,873
|Interest expense                                  |  |                                          | 13,665 |   |                               |   | 12,341             |         |  |         | 11,262 |  |         | 10,033 |         |  |         | 9,194  |         |   | 9,123  |  |   | 9,856  |  |   | 10,567
|                                                  |  |                                          |        |   |                               |   |                    |         |  |         |        |  |         |        |         |  |         |        |         |   |        |  |   |        |  |   |       
|Net interest income                               |  |                                          | 25,847 |   |                               |   | 24,661             |         |  |         | 23,710 |  |         | 22,836 |         |  |         | 23,316 |         |   | 23,525 |  |   | 23,720 |  |   | 24,306
|Provision for loan losses                         |  |                                          | 1,834  |   |                               |   | 1,833              |         |  |         | 2,750  |  |         | 2,750  |         |  |         | 2,750  |         |   | 2,700  |  |   | 2,700  |  |   | 1,533 
|Noninterest income                                |  |                                          | 8,128  |   |                               |   | 5,923              |         |  |         | 4,280  |  |         | 4,304  |         |  |         | 4,675  |         |   | 4,939  |  |   | 5,590  |  |   | 4,977 
|Net cash settlements on CD swaps                  |  |                                          | 223    |   |                               |   | 517                |         |  |         | 707    |  |         | 735    |         |  |         | 207    |         |   |       |  |   |       |  |   |      
|Change in fair value of CD swaps                  |  |                                          | (1,576 | ) |                               |   | (279               | )       |  |         | 1,940  |  |         | (2,592 | )       |  |         | 958    |         |   |       |  |   |       |  |   |      
|Gain (loss) on sale of investment securities, net |  |                                          | 127    |   |                               |   | (201               | )       |  |         | 345    |  |         |       |         |  |         |       |         |   |       |  |   |       |  |   |      
|Noninterest expense                               |  |                                          | 16,740 |   |                               |   | 18,164             |         |  |         | 16,310 |  |         | 18,416 |         |  |         | 18,783 |         |   | 22,545 |  |   | 19,005 |  |   | 19,223
|                                                  |  |                                          |        |   |                               |   |                    |         |  |         |        |  |         |        |         |  |         |        |         |   |        |  |   |        |  |   |       
|Income before income taxes                        |  |                                          | 14,175 |   |                               |   | 10,624             |         |  |         | 11,922 |  |         | 4,117  |         |  |         | 7,623  |         |   | 3,219  |  |   | 7,605  |  |   | 8,527 
|Income taxes                                      |  |                                          | 5,636  |   |                               |   | 3,462              |         |  |         | 3,864  |  |         | 1,338  |         |  |         | 2,649  |         |   | 728    |  |   | 2,013  |  |   | 2,988 
|                                                  |  |                                          |        |   |                               |   |                    |         |  |         |        |  |         |        |         |  |         |        |         |   |        |  |   |        |  |   |       
|Net income                                        |  | $                                        | 8,539  |   |                               | $ | 7,162              |         |  | $       | 8,058  |  | $       | 2,779  |         |  | $       | 4,974  |         | $ | 2,491  |  | $ | 5,592  |  | $ | 5,539 
|                                                  |  |                                          |        |   |                               |   |                    |         |  |         |        |  |         |        |         |  |         |        |         |   |        |  |   |        |  |   |       
|Earnings per share:                               |  |                                          |        |   |                               |   |                    |         |  |         |        |  |         |        |         |  |         |        |         |   |        |  |   |        |  |   |       
|Basic                                             |  | $                                        | 0.88   |   |                               | $ | 0.75               |         |  | $       | 0.84   |  | $       | 0.19   |         |  | $       | 0.43   |         | $ | 0.17   |  | $ | 0.50   |  | $ | 0.50  
|Diluted                                           |  |                                          | 0.87   |   |                               |   | 0.73               |         |  |         | 0.84   |  |         | 0.18   |         |  |         | 0.43   |         |   | 0.17   |  |   | 0.50   |  |   | 0.49  
|                                                  |  |                                          |        |   |                               |   |                    |         |  |         |        |  |         |        |         |  |         |        |         |   |        |  |   |        |  |   |       



CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS



This quarterly report includes
forward-looking statements that reflect our current expectations and projections about our future results, performance, prospects and opportunities. We have tried to identify these forward-looking statements by using words including may,
will, expect, anticipate, believe, intend, could and estimate and similar expressions. These forward-looking statements are based on information currently available
to us and are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities in 2005 and beyond to differ materially from those expressed in, or implied by, these
forward-looking statements. These risks, uncertainties and other factors include, without limitation: the effect on our profitability if interest rates fluctuate as well as the effect of any imbalances in the interest rate sensitivities of our
assets and liabilities; the possibility that our wholesale funding sources may prove insufficient to replace deposits at maturity and support our growth; the risk that our allowance for loan losses may prove insufficient to absorb probable losses in
our loan portfolio; possible volatility in loan charge-offs and recoveries between periods; the effectiveness of our hedging transactions and their impact on our future results of operations; the risks associated with implementing our



46



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF
OPERATIONS (Continued)



business strategy and managing our growth effectively; changes in general economic conditions, interest rates,
deposit flows, loan demand, competition, legislation or regulatory and accounting principles, policies or guidelines, as well as other economic, competitive, governmental, regulatory and technological factors impacting our operations.



For further information about these and other risks, uncertainties and
factors, please review the disclosure included in the section captioned Risk Factors in Amendment No.1 to our Registration Statement on Form S-3 (Registration No. 333-126864) filed with the SEC on August 5, 2005.



You should not place undue reliance on any forward-looking statements. Except
as otherwise required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements or risk factors, whether as a result of new information, future events, changed circumstances or any other
reason after the date of this quarterly report.



Item 3. Quantitative and Qualitative Disclosures About Market Risk



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



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, 2005. 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.



Based upon
our evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that such controls and procedures were not effective as of the end of the period covered by this report because of a material weakness in
internal control over financial reporting relating to our accounting for derivative financial instruments under Statement of Financial Accounting Standards 133, Accounting for Derivative Instruments and Hedging Activities (SFAS
133). Specifically, we lacked sufficient technical expertise as to the application of SFAS 133, and our procedures relating to hedging transactions were not designed



47



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.



effectively such that each of the requirements for fair value hedge accounting treatment set forth in SFAS 133 were
evaluated appropriately with respect to the CD swaps entered into to hedge the interest rate risk inherent in certain of our brokered CDs. This deficiency resulted in accounting errors, the correction of which results in eliminating the application
of fair value hedge accounting and separately recording the CD broker placement fee as an adjustment to the par amount of the brokered CDs. As a result of the material weakness, we have restated our financial statements for the year ended
December 31, 2004 and each of the quarters in 2004 and are restating our financial statements for the quarters ended June 30, 2005 and March 31, 2005. In light of these errors and the resulting restatements, our management,
including our Chief Executive Officer and Chief Financial Officer, has determined that this deficiency constituted a material weakness in our internal control over financial reporting. The reader is therefore cautioned not to rely on
managements conclusion set forth in Item 4 Controls and Procedures, included in our Initial Form 10-Q for the quarter ended March 31, 2005, that was filed with the SEC on May 6, 2005, that as of March 31, 2005, our
disclosure controls and procedures were effective.



There were
no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2005, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



In late October 2005, prior to the foregoing deficiency being
identified by management, we engaged external consultants with expertise in hedge accounting requirements to assist us in complying with the requirements of SFAS 133, including the documentation and effectiveness testing requirements relating to
current and future interest rate hedge transactions. We believe that the expertise to be provided by these consultants will help us remediate the material weakness described above.



48



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.



PART II. OTHER INFORMATION



Item 1. Legal Proceedings.



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



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



None.



Item 3. Defaults Upon Senior Securities.



None.



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



None.



Item 5. Other Information.



None.



Item 6. Exhibits.



|               |  |                                                                                                                                                                                                                                                   
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Exhibits                                                                                                                                                                                                                           
|               | 
|3.1            |  | Form of Amended and Restated Certificate of Incorporation of the Taylor Capital Group, Inc. (incorporated by reference from Exhibit 3.1 of the Amended Registration Statement on Form S-1 filed
October 10, 2002 (Registration No. 333-89158)).   
|               | 
|3.2            |  | Form of Amended and Restated Bylaws of the Taylor Capital Group, Inc. (incorporated by reference from Exhibit 3.2 of the Amended Registration Statement on Form S-1 filed October 10, 2002
(Registration No. 333-89158)).                         
|               | 
|4.1            |  | Form of certificate representing Taylor Capital Group, Inc. Common Stock (incorporated by reference from Exhibit 4.3 of the Amended Registration Statement on Form S-1 filed October 10, 2002
(Registration No. 333-89158)).                      
|               | 
|4.2            |  | Indenture between Taylor Capital Group, Inc. and LaSalle Bank National Association, as trustee (incorporated by reference from Exhibit 4.4 of the Amended Registration Statement on Form S-1
filed October 10, 2002 (Registration No. 333-89158)).



49



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.



|               |  |                                                                                                                                                                                                                                                                                                                                                                              
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Exhibits                                                                                                                                                                                                                                                                                                                                                      
|               | 
|4.3            |  | Form of Junior Subordinated Debenture due 2032 (incorporated by reference from Exhibit 4.5 of the Amended Registration Statement on Form S-1 filed October 10, 2002 (Registration No.
333-89158)).                                                                                                                                                                           
|               | 
|4.4            |  | Certificate of Trust of TAYC Capital Trust I (incorporated by reference from Exhibit 4.6 of the Amended Registration Statement on Form S-1 filed October 10, 2002 (Registration No.
333-89158)).                                                                                                                                                                             
|               | 
|4.5            |  | Amended and Restated Trust Agreement of TAYC Capital Trust I (incorporated by reference from Exhibit 4.8 of the Amended Registration Statement on Form S-1 filed October 10, 2002 (Registration
No. 333-89158)).                                                                                                                                                             
|               | 
|4.6            |  | Preferred Securities Guarantee Agreement (incorporated by reference from Exhibit 4.9 of the Amended Registration Statement on Form S-1 filed October 10, 2002 (Registration No.
333-89158)).                                                                                                                                                                                 
|               | 
|4.7            |  | Agreement as to Expenses and Liabilities by and between Taylor Capital Group, Inc. and TAYC Capital Trust I (incorporated by reference from Exhibit 4.10 of the Amended Registration Statement
on Form S-1 filed October 10, 2002 (Registration No. 333-89158)).                                                                                                             
|               | 
|4.8            |  | Certificate representing TAYC Capital Trust I Trust Preferred Security (incorporated by reference from Exhibit 4.11 of the Amended Registration Statement on Form S-1 filed October 10, 2002
(Registration No. 333-89158)).                                                                                                                                                  
|               | 
|4.9            |  | Certificate of Trust of TAYC Capital Trust II (incorporated by reference from Exhibit 4.12 of the Companys Quarterly Report on Form 10-Q for the quarter ending June 30,
2004).                                                                                                                                                                                             
|               | 
|4.10           |  | Amended and Restated Declaration of Trust by and among Wilmington Trust Company, as Delaware and Institutional Trustee, Taylor Capital Group, Inc., as Sponsor, Jeffrey W. Taylor, Bruce
W. Taylor and Robin Van Castle, as Administrators (incorporated by reference from Exhibit 4.13 of the Companys Quarterly Report on Form 10-Q for the quarter ending June 30, 2004).
|               | 
|4.11           |  | Indenture between Taylor Capital Group, Inc. and Wilmington Trust Company, as trustee (incorporated by reference from Exhibit 4.14 of the Companys Quarterly Report on Form 10-Q for
the quarter ending June 30, 2004).                                                                                                                                                     
|               | 
|4.12           |  | Guarantee Agreement by and between Taylor Capital Group, Inc. and Wilmington Trust Company (incorporated by reference from Exhibit 4.15 of the Companys Quarterly Report on Form
10-Q for the quarter ending June 30, 2004).                                                                                                                                                
|               | 
|4.13           |  | Certificate representing Floating Rate Capital Securities of TAYC Capital Trust II (incorporated by reference from Exhibit 4.16 of the Companys Quarterly Report on Form 10-Q for the
quarter ending June 30, 2004).                                                                                                                                                        
|               | 
|4.14           |  | Certificate representing Floating Rate Common Securities of TAYC Capital Trust II (incorporated by reference from Exhibit 4.17 of the Companys Quarterly Report on Form 10-Q for the
quarter ending June 30, 2004).                                                                                                                                                         
|               | 
|4.15           |  | Floating Rate Junior Subordinated Deferrable Interest Debenture due 2034 (incorporated by reference from Exhibit 4.18 of the Companys Quarterly Report on Form 10-Q for the quarter
ending June 30, 2004).                                                                                                                                                                  



50



---

##### Table of Contents

|               |  |                                                                                                                                                                                                                                                                                             
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Exhibits                                                                                                                                                                                                                                                                     
|               | 
|10.42          |  | Tenth Amendment of Taylor Capital Group, Inc. Profit Sharing and Employee Stock Ownership Plan, effective as of October 1, 1998 (incorporated by reference from Exhibit 10.42 of the
Companys Quarterly Report on Form 10-Q for the quarter ending March 31, 2005 filed on May 6, 2005).   
|               | 
|10.43          |  | Eleventh Amendment of Taylor Capital Group, Inc. Profit Sharing and Employee Stock Ownership Plan, effective as of October 1, 1998 (incorporated by reference from Exhibit 10.43 of the
Companys Quarterly Report on Form 10-Q for the quarter ending March 31, 2005 filed on May 6, 2005).
|               | 
|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.                                                                                                          



51



---

##### Table of Contents

SIGNATURES



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



|                        |  |                                             
|----------------------- |  | --------------------------------------------
|                        |  | TAYLOR CAPITAL GROUP, INC.                  
|                        | 
|Date: December 30, 2005 |  |                                             
|                        | 
|                        |  | /s/ DANIEL C. STEVENS                       
|                        |  | Daniel C. Stevens                           
|                        |  | Chief Financial Officer                     
|                        |  | (Principal Financial and Accounting Officer)
|                        | 
|                        |  | /s/ JEFFREY W. TAYLOR                       
|                        |  | Jeffrey W. Taylor                           
|                        |  | Chairman and Chief Executive Officer        
|                        |  | (Principal Executive Officer)