##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



---

FORM 10-Q



---

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

Commission File No. 0-50034



---

TAYLOR CAPITAL GROUP, INC.

(Exact name of registrant as specified in its
charter)



---



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

9550 West Higgins Road

Rosemont, IL 60018

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

(847) 653-7978

(Registrants telephone number, including area code)



---

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of
the Exchange Act).

Large accelerated filer ̈Accelerated filer  x    Non-accelerated filer ̈

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

Indicate the number of outstanding shares of each of the issuers classes of common stock, as of the latest practicable date: At July 31, 2007,
there were 11,821,975 shares of Common Stock, $0.01 par value, outstanding.



---



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

INDEX



|                              |  |                                                                                                                         |  |   
|----------------------------- |  | ----------------------------------------------------------------------------------------------------------------------- |  | --
|                              |  | Page                                                                                                                   
|PART I. FINANCIAL INFORMATION |  |                                                                                                                        
|                              |  |                                                                                                                        
|Item 1.                       |  | Financial Statements                                                                                                    |  |   
|                              |  |                                                                                                                        
|                              |  | Consolidated Balance Sheets (unaudited) -June 30, 2007 and December 31, 2006                                            |  | 1 
|                              |  |                                                                                                                        
|                              |  | Consolidated Statements of Income (unaudited) -For the three and six months ended June 30, 2007 and 2006                |  | 2 
|                              |  |                                                                                                                        
|                              |  | Consolidated Statements of Changes in Stockholders Equity (unaudited) -For the six months ended June 30, 2007 and 2006 |  | 3 
|                              |  |                                                                                                                        
|                              |  | Consolidated Statements of Cash Flows (unaudited) -For the six months ended June 30, 2007 and 2006                      |  | 4 
|                              |  |                                                                                                                        
|                              |  | Notes to Consolidated Financial Statements (unaudited)                                                                  |  | 6 
|                              |  |                                                                                                                        
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                   |  | 14
|                              |  |                                                                                                                        
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                                              |  | 42
|                              |  |                                                                                                                        
|Item 4.                       |  | Controls and Procedures                                                                                                 |  | 42
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                        
|                              |  |                                                                                                                        
|Item 1.                       |  | Legal Proceedings                                                                                                       |  | 44
|                              |  |                                                                                                                        
|Item 1A.                      |  | Risk Factors                                                                                                            |  | 44
|                              |  |                                                                                                                        
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                             |  | 44
|                              |  |                                                                                                                        
|Item 3.                       |  | Defaults Upon Senior Securities                                                                                         |  | 44
|                              |  |                                                                                                                        
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                                     |  | 44
|                              |  |                                                                                                                        
|Item 5.                       |  | Other Information                                                                                                       |  | 45
|                              |  |                                                                                                                        
|Item 6.                       |  | Exhibits                                                                                                                |  | 45
|                              |  |                                                                                                                        
|                              |  | Signatures                                                                                                              |  | 47



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS (unaudited)

(dollars in thousands, except per share data)



|                                                                                                                                                                                                                                                            |  |               |           |   |                   |   |           |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --------- | - | ----------------- | - | --------- | -
|                                                                                                                                                                                                                                                            |  | June 30, 2007 |           |   | December 31, 2006 |  
|ASSETS                                                                                                                                                                                                                                                      |  |               |           |   |                   |   |           |  
|Cash and cash equivalents:                                                                                                                                                                                                                                  |  |               |           |   |                   |   |           |  
|Cash and due from banks                                                                                                                                                                                                                                     |  | $             | 50,663    |   |                   | $ | 61,566    |  
|Federal funds sold                                                                                                                                                                                                                                          |  |               | 500       |   |                   |   | 48,400    |  
|Short-term investments                                                                                                                                                                                                                                      |  |               | 152       |   |                   |   | 24,954    |  
|                                                                                                                                                                                                                                                            |  |               |           |   |                   |   |           |  
|Total cash and cash equivalents                                                                                                                                                                                                                             |  |               | 51,315    |   |                   |   | 134,920   |  
|Investment securities:                                                                                                                                                                                                                                      |  |               |           |   |                   |   |           |  
|Available-for-sale, at fair value                                                                                                                                                                                                                           |  |               | 610,214   |   |                   |   | 668,810   |  
|Held-to-maturity, at amortized cost (fair value of $25 and $275 at June 30, 2007 and December 31, 2006,
respectively)                                                                                                                                       |  |               | 25        |   |                   |   | 275       |  
|Loans, net of allowance for loan losses of $39,799 and $37,516 at June 30, 2007 and December 31, 2006, respectively                                                                                                                                         |  |               | 2,522,201 |   |                   |   | 2,463,169 |  
|Premises, leasehold improvements and equipment, net                                                                                                                                                                                                         |  |               | 13,643    |   |                   |   | 14,799    |  
|Investments in Federal Home Loan Bank and Federal Reserve Bank stock, at cost                                                                                                                                                                               |  |               | 11,832    |   |                   |   | 11,805    |  
|Other real estate and repossessed assets, net                                                                                                                                                                                                               |  |               | 943       |   |                   |   | 412       |  
|Goodwill                                                                                                                                                                                                                                                    |  |               | 23,237    |   |                   |   | 23,237    |  
|Other assets                                                                                                                                                                                                                                                |  |               | 66,274    |   |                   |   | 62,240    |  
|                                                                                                                                                                                                                                                            |  |               |           |   |                   |   |           |  
|Total assets                                                                                                                                                                                                                                                |  | $             | 3,299,684 |   |                   | $ | 3,379,667 |  
|                                                                                                                                                                                                                                                            |  |               |           |   |                   |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                                                        |  |               |           |   |                   |   |           |  
|Deposits:                                                                                                                                                                                                                                                   |  |               |           |   |                   |   |           |  
|Noninterest-bearing                                                                                                                                                                                                                                         |  | $             | 383,393   |   |                   | $ | 447,862   |  
|Interest-bearing                                                                                                                                                                                                                                            |  |               | 2,128,862 |   |                   |   | 2,192,065 |  
|                                                                                                                                                                                                                                                            |  |               |           |   |                   |   |           |  
|Total deposits                                                                                                                                                                                                                                              |  |               | 2,512,255 |   |                   |   | 2,639,927 |  
|Other borrowings                                                                                                                                                                                                                                            |  |               | 291,095   |   |                   |   | 262,319   |  
|Accrued interest, taxes and other liabilities                                                                                                                                                                                                               |  |               | 37,211    |   |                   |   | 39,622    |  
|FHLB advances                                                                                                                                                                                                                                               |  |               | 105,000   |   |                   |   | 80,000    |  
|Junior subordinated debentures                                                                                                                                                                                                                              |  |               | 86,607    |   |                   |   | 86,607    |  
|                                                                                                                                                                                                                                                            |  |               |           |   |                   |   |           |  
|Total liabilities                                                                                                                                                                                                                                           |  |               | 3,032,168 |   |                   |   | 3,108,475 |  
|                                                                                                                                                                                                                                                            |  |               |           |   |                   |   |           |  
|Stockholders equity:                                                                                                                                                                                                                                       |  |               |           |   |                   |   |           |  
|Preferred stock, $.01 par value, 5,000,000 shares authorized, no shares issued and outstanding                                                                                                                                                              |  |               |          |   |                   |   |          |  
|Common stock, $.01 par value; 18,000,000 shares authorized; 11,479,743 and 11,454,066 shares issued at June 30, 2007 and
December 31, 2006, respectively; 10,821,975 and 11,131,059 shares outstanding at June 30, 2007 and December 31, 2006, respectively |  |               | 115       |   |                   |   | 115       |  
|Surplus                                                                                                                                                                                                                                                     |  |               | 195,819   |   |                   |   | 194,687   |  
|Retained earnings                                                                                                                                                                                                                                           |  |               | 99,324    |   |                   |   | 89,045    |  
|Accumulated other comprehensive loss, net                                                                                                                                                                                                                   |  |               | (10,741   | ) |                   |   | (5,598    | )
|Treasury stock, at cost, 657,768 and 323,007 shares at June 30, 2007 and December 31, 2006, respectively                                                                                                                                                    |  |               | (17,001   | ) |                   |   | (7,057    | )
|                                                                                                                                                                                                                                                            |  |               |           |   |                   |   |           |  
|Total stockholders equity                                                                                                                                                                                                                                  |  |               | 267,516   |   |                   |   | 271,192   |  
|                                                                                                                                                                                                                                                            |  |               |           |   |                   |   |           |  
|Total liabilities and stockholders equity                                                                                                                                                                                                                  |  | $             | 3,299,684 |   |                   | $ | 3,379,667 |  
|                                                                                                                                                                                                                                                            |  |               |           |   |                   |   |           |  

See accompanying notes to consolidated financial statements



1



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(dollars in thousands, except per share data)



|                                                    |  |                                     |        |   |                                   |   |        |      |  |   |         |   |  |   |        
|--------------------------------------------------- |  | ----------------------------------- | ------ | - | --------------------------------- | - | ------ | ---- |  | - | ------- | - |  | - | -------
|                                                    |  | For the Three Months Ended June 30, |        |   | For the Six Months Ended June 30,
|                                                    |  | 2007                                |        |   | 2006                              |   |        | 2007 |  |   | 2006   
|Interest income:                                    |  |                                     |        |   |                                   |   |        |      |  |   |         |   |  |   |        
|Interest and fees on loans                          |  | $                                   | 49,208 |   |                                   | $ | 46,488 |      |  | $ | 97,388  |   |  | $ | 90,260 
|Interest and dividends on investment securities:    |  |                                     |        |   |                                   |   |        |      |  |   |         |   |  |   |        
|Taxable                                             |  |                                     | 5,640  |   |                                   |   | 6,409  |      |  |   | 11,415  |   |  |   | 12,342 
|Tax-exempt                                          |  |                                     | 1,524  |   |                                   |   | 1,331  |      |  |   | 3,054   |   |  |   | 2,632  
|Interest on cash equivalents                        |  |                                     | 319    |   |                                   |   | 325    |      |  |   | 840     |   |  |   | 774    
|                                                    |  |                                     |        |   |                                   |   |        |      |  |   |         |   |  |   |        
|Total interest income                               |  |                                     | 56,691 |   |                                   |   | 54,553 |      |  |   | 112,697 |   |  |   | 106,008
|                                                    |  |                                     |        |   |                                   |   |        |      |  |   |         |   |  |   |        
|Interest expense:                                   |  |                                     |        |   |                                   |   |        |      |  |   |         |   |  |   |        
|Deposits                                            |  |                                     | 24,158 |   |                                   |   | 21,269 |      |  |   | 47,882  |   |  |   | 39,434 
|Other borrowings                                    |  |                                     | 2,748  |   |                                   |   | 2,808  |      |  |   | 5,547   |   |  |   | 5,316  
|FHLB advances                                       |  |                                     | 1,356  |   |                                   |   | 1,085  |      |  |   | 2,420   |   |  |   | 1,940  
|Junior subordinated debentures                      |  |                                     | 1,973  |   |                                   |   | 1,935  |      |  |   | 3,937   |   |  |   | 3,843  
|                                                    |  |                                     |        |   |                                   |   |        |      |  |   |         |   |  |   |        
|Total interest expense                              |  |                                     | 30,235 |   |                                   |   | 27,097 |      |  |   | 59,786  |   |  |   | 50,533 
|                                                    |  |                                     |        |   |                                   |   |        |      |  |   |         |   |  |   |        
|Net interest income                                 |  |                                     | 26,456 |   |                                   |   | 27,456 |      |  |   | 52,911  |   |  |   | 55,475 
|Provision for loan losses                           |  |                                     | 1,900  |   |                                   |   | 2,100  |      |  |   | 5,500   |   |  |   | 3,000  
|                                                    |  |                                     |        |   |                                   |   |        |      |  |   |         |   |  |   |        
|Net interest income after provision for loan losses |  |                                     | 24,556 |   |                                   |   | 25,356 |      |  |   | 47,411  |   |  |   | 52,475 
|                                                    |  |                                     |        |   |                                   |   |        |      |  |   |         |   |  |   |        
|Noninterest income:                                 |  |                                     |        |   |                                   |   |        |      |  |   |         |   |  |   |        
|Service charges                                     |  |                                     | 1,895  |   |                                   |   | 1,902  |      |  |   | 3,705   |   |  |   | 3,782  
|Trust and investment management fees                |  |                                     | 1,005  |   |                                   |   | 1,028  |      |  |   | 1,957   |   |  |   | 1,959  
|Loan syndication fees                               |  |                                     | 400    |   |                                   |   |       |      |  |   | 400     |   |  |   | 500    
|Other derivative income (expense)                   |  |                                     | (61    | ) |                                   |   | (105   | )    |  |   | (37     | ) |  |   | 477    
|Other noninterest income                            |  |                                     | 765    |   |                                   |   | 522    |      |  |   | 1,241   |   |  |   | 1,119  
|                                                    |  |                                     |        |   |                                   |   |        |      |  |   |         |   |  |   |        
|Total noninterest income                            |  |                                     | 4,004  |   |                                   |   | 3,347  |      |  |   | 7,266   |   |  |   | 7,837  
|                                                    |  |                                     |        |   |                                   |   |        |      |  |   |         |   |  |   |        
|Noninterest expense:                                |  |                                     |        |   |                                   |   |        |      |  |   |         |   |  |   |        
|Salaries and employee benefits                      |  |                                     | 9,916  |   |                                   |   | 10,265 |      |  |   | 19,530  |   |  |   | 20,600 
|Occupancy of premises                               |  |                                     | 2,080  |   |                                   |   | 1,964  |      |  |   | 3,966   |   |  |   | 3,979  
|Furniture and equipment                             |  |                                     | 825    |   |                                   |   | 942    |      |  |   | 1,699   |   |  |   | 1,934  
|Legal fees, net                                     |  |                                     | 649    |   |                                   |   | 579    |      |  |   | 1,456   |   |  |   | 818    
|Other professional services                         |  |                                     | 503    |   |                                   |   | 351    |      |  |   | 1,184   |   |  |   | 774    
|Computer processing                                 |  |                                     | 440    |   |                                   |   | 479    |      |  |   | 880     |   |  |   | 895    
|Advertising and public relations                    |  |                                     | 203    |   |                                   |   | 437    |      |  |   | 546     |   |  |   | 573    
|Other noninterest expense                           |  |                                     | 3,036  |   |                                   |   | 3,582  |      |  |   | 6,453   |   |  |   | 6,812  
|                                                    |  |                                     |        |   |                                   |   |        |      |  |   |         |   |  |   |        
|Total noninterest expense                           |  |                                     | 17,652 |   |                                   |   | 18,599 |      |  |   | 35,714  |   |  |   | 36,385 
|                                                    |  |                                     |        |   |                                   |   |        |      |  |   |         |   |  |   |        
|Income before income taxes                          |  |                                     | 10,908 |   |                                   |   | 10,104 |      |  |   | 18,963  |   |  |   | 23,927 
|Income tax expense                                  |  |                                     | 3,756  |   |                                   |   | 3,799  |      |  |   | 6,489   |   |  |   | 8,764  
|                                                    |  |                                     |        |   |                                   |   |        |      |  |   |         |   |  |   |        
|Net income                                          |  | $                                   | 7,152  |   |                                   | $ | 6,305  |      |  | $ | 12,474  |   |  | $ | 15,163 
|                                                    |  |                                     |        |   |                                   |   |        |      |  |   |         |   |  |   |        
|Basic earnings per common share                     |  | $                                   | 0.65   |   |                                   | $ | 0.58   |      |  | $ | 1.14    |   |  | $ | 1.39   
|Diluted earnings per common share                   |  |                                     | 0.65   |   |                                   |   | 0.57   |      |  |   | 1.12    |   |  |   | 1.37   

See accompanying notes to consolidated financial statements



2



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (unaudited)

(dollars in thousands, except per share data)



|                                                                                                            |  |                 |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |         |   |  |   |         |  
|----------------------------------------------------------------------------------------------------------- |  | --------------- | - | ----------- | - | ------- |  | - | ---------------------------------- | - |  | ----------------- | ------ | - | ------------------------------------ | - | ------ | ------------- |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                                                                                            |  | Preferred Stock |   | CommonStock |   | Surplus |  |   | UnearnedCompensation -Stock Grants |   |  | Retained Earnings |        |   | Accumulated Other Comprehensive Loss |   |        | TreasuryStock |  |   | Total   |  
|Balance at December 31, 2006                                                                                |  | $               |  |             | $ | 115     |  | $ | 194,687                            |   |  | $                 |       |   |                                      | $ | 89,045 |               |  | $ | (5,598  | ) |  | $ | (7,057  | ) |  | $ | 271,192 |  
|Amortization of stock based compensation awards                                                             |  |                 |  |             |   |        |  |   | 806                                |   |  |                   |       |   |                                      |   |       |               |  |   |        |   |  |   |        |   |  |   | 806     |  
|Exercise of stock options                                                                                   |  |                 |  |             |   |        |  |   | 228                                |   |  |                   |       |   |                                      |   |       |               |  |   |        |   |  |   |         |   |  |   | 228     |  
|Tax benefit on stock options exercised and stock awards                                                     |  |                 |  |             |   |        |  |   | 98                                 |   |  |                   |       |   |                                      |   |       |               |  |   |        |   |  |   |        |   |  |   | 98      |  
|Purchase of treasury stock                                                                                  |  |                 |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   |       |               |  |   |        |   |  |   | (9,944  | ) |  |   | (9,944  | )
|Comprehensive income:                                                                                       |  |                 |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |         |   |  |   |         |  
|Net income                                                                                                  |  |                 |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   | 12,474 |               |  |   |        |   |  |   |        |   |  |   | 12,474  |  
|Change in unrealized loss on available-for-sale investment securities, net of income taxes                  |  |                 |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   |       |               |  |   | (4,498  | ) |  |   |        |   |  |   | (4,498  | )
|Change in unrealized gains and losses from cash flow hedging instruments, net of income taxes               |  |                 |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   |       |               |  |   | (917    | ) |  |   |        |   |  |   | (917    | )
|Changes in deferred gains and losses from termination of cash flow hedging instruments, net of income taxes |  |                 |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   |       |               |  |   | 272     |   |  |   |        |   |  |   | 272     |  
|                                                                                                            |  |                 |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |         |   |  |   |         |  
|Total comprehensive income                                                                                  |  |                 |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |         |   |  |   | 7,331   |  
|                                                                                                            |  |                 |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |         |   |  |   |         |  
|Common stock dividends$0.20 per share                                                                      |  |                 |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   | (2,195 | )             |  |   |        |   |  |   |        |   |  |   | (2,195  | )
|                                                                                                            |  |                 |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |         |   |  |   |         |  
|Balance at June 30, 2007                                                                                    |  | $               |  |             | $ | 115     |  | $ | 195,819                            |   |  | $                 |       |   |                                      | $ | 99,324 |               |  | $ | (10,741 | ) |  | $ | (17,001 | ) |  | $ | 267,516 |  
|                                                                                                            |  |                 |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |         |   |  |   |         |  
|Balance at December 31, 2005                                                                                |  | $               |  |             | $ | 113     |  | $ | 191,816                            |   |  | $                 | (2,322 | ) |                                      | $ | 45,988 |               |  | $ | (9,220  | ) |  | $ | (7,057  | ) |  | $ | 219,318 |  
|Adoption of FAS 123R                                                                                        |  |                 |  |             |   |        |  |   | (2,322                             | ) |  |                   | 2,322  |   |                                      |   |       |               |  |   |        |   |  |   |        |   |  |   |        |  
|Amortization of stock based compensation awards                                                             |  |                 |  |             |   |        |  |   | 1,006                              |   |  |                   |       |   |                                      |   |       |               |  |   |        |   |  |   |        |   |  |   | 1,006   |  
|Exercise of stock options                                                                                   |  |                 |  |             |   | 1       |  |   | 1,818                              |   |  |                   |       |   |                                      |   |       |               |  |   |        |   |  |   |        |   |  |   | 1,819   |  
|Tax benefit on stock options exercised and stock awards                                                     |  |                 |  |             |   |        |  |   | 694                                |   |  |                   |       |   |                                      |   |       |               |  |   |        |   |  |   |        |   |  |   | 694     |  
|Comprehensive income:                                                                                       |  |                 |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |         |   |  |   |         |  
|Net income                                                                                                  |  |                 |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   | 15,163 |               |  |   |        |   |  |   |        |   |  |   | 15,163  |  
|Change in unrealized loss on available-for-sale investment securities, net of income taxes                  |  |                 |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   |       |               |  |   | (9,422  | ) |  |   |        |   |  |   | (9,422  | )
|Change in unrealized gains and losses from cash flow hedging instruments, net of income taxes               |  |                 |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   |       |               |  |   | 233     |   |  |   |        |   |  |   | 233     |  
|Changes in deferred gains and losses from termination of cash flow hedging instruments, net of income taxes |  |                 |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   |       |               |  |   | (1,265  | ) |  |   |        |   |  |   | (1,265  | )
|                                                                                                            |  |                 |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |         |   |  |   |         |  
|Total comprehensive income                                                                                  |  |                 |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |         |   |  |   | 4,709   |  
|                                                                                                            |  |                 |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |         |   |  |   |         |  
|Common stock dividends $0.12 per share                                                                     |  |                 |  |             |   |        |  |   |                                   |   |  |                   |       |   |                                      |   | (1,325 | )             |  |   |        |   |  |   |        |   |  |   | (1,325  | )
|                                                                                                            |  |                 |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |         |   |  |   |         |  
|Balance at June 30, 2006                                                                                    |  | $               |  |             | $ | 114     |  | $ | 193,012                            |   |  | $                 |       |   |                                      | $ | 59,826 |               |  | $ | (19,674 | ) |  | $ | (7,057  | ) |  | $ | 226,221 |  
|                                                                                                            |  |                 |   |             |   |         |  |   |                                    |   |  |                   |        |   |                                      |   |        |               |  |   |         |   |  |   |         |   |  |   |         |  

See accompanying notes to consolidated financial statements



3



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(dollars in thousands)



|                                                                                  |  |                                   |          |   |      |   |          |  
|--------------------------------------------------------------------------------- |  | --------------------------------- | -------- | - | ---- | - | -------- | -
|                                                                                  |  | For the Six Months Ended June 30, |         
|                                                                                  |  | 2007                              |          |   | 2006 |  
|Cash flows from operating activities:                                             |  |                                   |          |   |      |   |          |  
|Net income                                                                        |  | $                                 | 12,474   |   |      | $ | 15,163   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                   |          |   |      |   |          |  
|Other derivative expense (income)                                                 |  |                                   | 37       |   |      |   | (477     | )
|Amortization of premiums and discounts, net                                       |  |                                   | 41       |   |      |   | 564      |  
|Deferred loan fee amortization                                                    |  |                                   | (2,301   | ) |      |   | (2,576   | )
|Provision for loan losses                                                         |  |                                   | 5,500    |   |      |   | 3,000    |  
|Depreciation and amortization                                                     |  |                                   | 1,704    |   |      |   | 1,815    |  
|Deferred income taxes                                                             |  |                                   | (1,283   | ) |      |   | (1,347   | )
|Provision for losses on other real estate                                         |  |                                   | 7        |   |      |   |         |  
|Losses on other real estate                                                       |  |                                   | 14       |   |      |   | 12       |  
|Tax benefit on stock options exercised or stock awards                            |  |                                   | 98       |   |      |   | 694      |  
|Excess tax benefit on stock options exercised and stock awards                    |  |                                   | (61      | ) |      |   | (497     | )
|Cash paid to terminate derivative instruments                                     |  |                                   |         |   |      |   | (12,239  | )
|Other, net                                                                        |  |                                   | 1,047    |   |      |   | 227      |  
|Changes in other assets and liabilities:                                          |  |                                   |          |   |      |   |          |  
|Accrued interest receivable                                                       |  |                                   | 345      |   |      |   | 1,444    |  
|Other assets                                                                      |  |                                   | 1,010    |   |      |   | 500      |  
|Accrued interest, taxes and other liabilities                                     |  |                                   | (4,020   | ) |      |   | (1,200   | )
|                                                                                  |  |                                   |          |   |      |   |          |  
|Net cash provided by operating activities                                         |  |                                   | 14,612   |   |      |   | 5,083    |  
|                                                                                  |  |                                   |          |   |      |   |          |  
|Cash flows from investing activities:                                             |  |                                   |          |   |      |   |          |  
|Purchases of available-for-sale securities                                        |  |                                   | (30,011  | ) |      |   | (91,075  | )
|Proceeds from principal payments and maturities of available-for-sale securities  |  |                                   | 81,180   |   |      |   | 55,287   |  
|Proceeds from principal payments and maturities of held-to-maturity securities    |  |                                   | 250      |   |      |   |         |  
|Net increase in loans                                                             |  |                                   | (62,886  | ) |      |   | (84,451  | )
|Net additions to premises, leasehold improvements and equipment                   |  |                                   | (548     | ) |      |   | (1,167   | )
|Net proceeds from sales of other real estate                                      |  |                                   | 103      |   |      |   | 915      |  
|                                                                                  |  |                                   |          |   |      |   |          |  
|Net cash used in investing activities                                             |  |                                   | (11,912  | ) |      |   | (120,491 | )
|                                                                                  |  |                                   |          |   |      |   |          |  
|Cash flows from financing activities:                                             |  |                                   |          |   |      |   |          |  
|Net increase (decrease) in deposits                                               |  |                                   | (128,200 | ) |      |   | 128,448  |  
|Net increase (decrease)in other borrowings                                        |  |                                   | 28,776   |   |      |   | (30,367  | )
|Proceeds from FHLB advances                                                       |  |                                   | 25,000   |   |      |   | 80,000   |  
|Repayment of FHLB advances                                                        |  |                                   |         |   |      |   | (75,000  | )
|Repayment of junior subordinated debentures                                       |  |                                   |         |   |      |   | (1,031   | )
|Proceeds from exercise of employee stock options                                  |  |                                   | 228      |   |      |   | 1,819    |  
|Purchase of treasury stock                                                        |  |                                   | (9,944   | ) |      |   |         |  
|Excess tax benefit on stock options exercised and stock awards                    |  |                                   | 61       |   |      |   | 497      |  
|Dividends paid                                                                    |  |                                   | (2,226   | ) |      |   | (1,318   | )
|                                                                                  |  |                                   |          |   |      |   |          |  
|Net cash provided (used) in financing activities                                  |  |                                   | (86,305  | ) |      |   | 103,048  |  
|                                                                                  |  |                                   |          |   |      |   |          |  
|Net decrease in cash and cash equivalents                                         |  |                                   | (83,605  | ) |      |   | (12,360  | )
|Cash and cash equivalents, beginning of period                                    |  |                                   | 134,920  |   |      |   | 161,065  |  
|                                                                                  |  |                                   |          |   |      |   |          |  
|Cash and cash equivalents, end of period                                          |  | $                                 | 51,315   |   |      | $ | 148,705  |  
|                                                                                  |  |                                   |          |   |      |   |          |  

Consolidated Statements of Cash Flows continued on the next page

See accompanying notes to consolidated financial statements



4



---

##### Table of Contents

TAYLOR CAPITAL GROUP, INC.

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

(dollars in
thousands)



|                                                                              |  |                                   |        |   |      |   |        |  
|----------------------------------------------------------------------------- |  | --------------------------------- | ------ | - | ---- | - | ------ | -
|                                                                              |  | For the Six Months Ended
June 30, |       
|                                                                              |  | 2007                              |        |   | 2006 |  
|Supplemental disclosure of cash flow information:                             |  |                                   |        |   |      |   |        |  
|Cash paid during the period for:                                              |  |                                   |        |   |      |   |        |  
|Interest                                                                      |  | $                                 | 61,036 |   |      | $ | 48,594 |  
|Income taxes                                                                  |  |                                   | 8,010  |   |      |   | 9,785  |  
|                                                                              |  |                                  
|Supplemental disclosures of noncash investing and financing activities:       |  |                                   |        |   |      |   |        |  
|Change in fair value of available-for-sale investments securities, net of tax |  | $                                 | (4,498 | ) |      | $ | (9,422 | )

See accompanying notes to consolidated financial statements



5



---

##### 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 June 30, 2007 and for the three and six month periods ended June 30, 2007 and 2006. 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 income statement data for the three and six month
periods ended June 30, 2007 are not necessarily indicative of the results that the Company may achieve for the full year.

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

2. Investment
Securities:

The amortized cost and estimated fair values of investment securities at June 30, 2007 and December 31, 2006
were as follows:



|                                            |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|------------------------------------------- |  | -------------- | ------- | -------------------- | - | --------------------- |  | - | ------------------- | - |  | - | -------
|                                            |  | June 30, 2007 
|                                            |  | AmortizedCost  |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFair Value
|                                            |  | (in thousands)
|Available-for-sale:                         |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|U.S. government sponsored agency securities |  | $              | 130,712 |                      | $ | 8                     |  | $ | (1,955              | ) |  | $ | 128,765
|Collateralized mortgage obligations         |  |                | 159,811 |                      |   | 60                    |  |   | (6,032              | ) |  |   | 153,839
|Mortgage-backed securities                  |  |                | 189,795 |                      |   | 38                    |  |   | (6,089              | ) |  |   | 183,744
|State and municipal obligations             |  |                | 146,459 |                      |   | 643                   |  |   | (3,236              | ) |  |   | 143,866
|                                            |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|Total available-for-sale                    |  |                | 626,777 |                      |   | 749                   |  |   | (17,312             | ) |  |   | 610,214
|                                            |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|Held-to-maturity:                           |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|Other debt securities                       |  |                | 25      |                      |   |                      |  |   |                    |   |  |   | 25     
|                                            |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|Total held-to-maturity                      |  |                | 25      |                      |   |                      |  |   |                    |   |  |   | 25     
|                                            |  |                |         |                      |   |                       |  |   |                     |   |  |   |        
|Total                                       |  | $              | 626,802 |                      | $ | 749                   |  | $ | (17,312             | ) |  | $ | 610,239
|                                            |  |                |         |                      |   |                       |  |   |                     |   |  |   |        



6



---

##### Table of Contents

|                                            |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|------------------------------------------- |  | ----------------- | ------- | -------------------- | - | --------------------- |  | - | ------------------- | - |  | - | -------
|                                            |  | December 31, 2006
|                                            |  | AmortizedCost     |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | EstimatedFair Value
|                                            |  | (in thousands)   
|Available-for-sale:                         |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|U.S. government sponsored agency securities |  | $                 | 157,848 |                      | $ |                      |  | $ | (2,257              | ) |  | $ | 155,591
|Collateralized mortgage obligations         |  |                   | 165,297 |                      |   | 27                    |  |   | (3,885              | ) |  |   | 161,439
|Mortgage-backed securities                  |  |                   | 207,275 |                      |   | 953                   |  |   | (4,430              | ) |  |   | 203,798
|State and municipal obligations             |  |                   | 147,566 |                      |   | 1,178                 |  |   | (762                | ) |  |   | 147,982
|                                            |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Total available-for-sale                    |  |                   | 677,986 |                      |   | 2,158                 |  |   | (11,334             | ) |  |   | 668,810
|                                            |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Held-to-maturity:                           |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Other debt securities                       |  |                   | 275     |                      |   |                      |  |   |                    |   |  |   | 275    
|                                            |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Total held-to-maturity                      |  |                   | 275     |                      |   |                      |  |   |                    |   |  |   | 275    
|                                            |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        
|Total                                       |  | $                 | 678,261 |                      | $ | 2,158                 |  | $ | (11,334             | ) |  | $ | 669,085
|                                            |  |                   |         |                      |   |                       |  |   |                     |   |  |   |        

3. Loans:

Loans classified by type at June 30, 2007 and December 31, 2006 were as follows:



|                                      |  |                |           |   |                   |   |            |  
|------------------------------------- |  | -------------- | --------- | - | ----------------- | - | ---------- | -
|                                      |  | June 30, 2007  |           |   | December 31, 2006 |  
|                                      |  | (in thousands) |          
|Commercial and industrial             |  | $              | 864,312   |   |                   | $ | 770,863    |  
|Commercial real estate secured        |  |                | 835,211   |   |                   |   | 791,962    |  
|Real estate-construction              |  |                | 683,353   |   |                   |   | 744,317    |  
|Residential real estate mortgages     |  |                | 62,381    |   |                   |   | 62,453     |  
|Home equity loans and lines of credit |  |                | 103,147   |   |                   |   | 116,516    |  
|Consumer                              |  |                | 12,014    |   |                   |   | 13,237     |  
|Other loans                           |  |                | 1,627     |   |                   |   | 1,396      |  
|                                      |  |                |           |   |                   |   |            |  
|Gross loans                           |  |                | 2,562,045 |   |                   |   | 2 ,500,744 |  
|Less: Unearned discount               |  |                | (45       | ) |                   |   | (59        | )
|                                      |  |                |           |   |                   |   |            |  
|Total loans                           |  |                | 2,562,000 |   |                   |   | 2,500,685  |  
|Less: Allowance for loan losses       |  |                | (39,799   | ) |                   |   | (37,516    | )
|                                      |  |                |           |   |                   |   |            |  
|Loans, net                            |  | $              | 2,522,201 |   |                   | $ | 2,463,169  |  
|                                      |  |                |           |   |                   |   |            |  

Nonaccrual and impaired loans at June 30, 2007 were $34.9 million and $36.0 million,
respectively, as compared to $23.1 million and $24.1 million at December 31, 2006, respectively.



7



---

##### Table of Contents

4. Interest-Bearing Deposits:

Interest-bearing deposits at June 30, 2007 and December 31, 2006 were as follows:



|                                              |  |                |           |                   |   |          
|--------------------------------------------- |  | -------------- | --------- | ----------------- | - | ---------
|                                              |  | June 30,2007   |           | December 31, 2006
|                                              |  | (in thousands)
|NOW accounts                                  |  | $              | 77,029    |                   | $ | 82,484   
|Savings accounts                              |  |                | 53,684    |                   |   | 59,523   
|Money market deposits                         |  |                | 775,925   |                   |   | 807,949  
|Time deposits:                                |  |                |           |                   |   |          
|Certificates of deposit of less than $100,000 |  |                | 180,165   |                   |   | 187,436  
|Certificates of deposit of $100,000 or more   |  |                | 296,975   |                   |   | 329,188  
|Out-of-local-market certificates of deposit   |  |                | 115,543   |                   |   | 105,119  
|Brokered certificates of deposit              |  |                | 562,095   |                   |   | 551,786  
|Public time deposits                          |  |                | 67,446    |                   |   | 68,580   
|                                              |  |                |           |                   |   |          
|Total time deposits                           |  |                | 1,222,224 |                   |   | 1,242,109
|                                              |  |                |           |                   |   |          
|Total                                         |  | $              | 2,128,862 |                   | $ | 2,192,065
|                                              |  |                |           |                   |   |          

Brokered CDs are carried net of the related broker placement fees and fair value adjustments at
the date those brokered CDs were no longer accounted for as fair value hedges. The broker placement fees and fair value adjustment are amortized to the maturity date of the related brokered CDs. The amortization is included in deposit interest
expense. The composition of brokered CDs at June 30, 2007 and December 31, 2006 was as follows:



|                                  |  |                |         |   |                  |   |         |  
|--------------------------------- |  | -------------- | ------- | - | ---------------- | - | ------- | -
|                                  |  | June 30, 2007  |         |   | December 31,2006 |  
|                                  |  | (in thousands) |        
|Par value of brokered CDs         |  | $              | 566,843 |   |                  | $ | 557,062 |  
|Unamortized broker placement fees |  |                | (2,050  | ) |                  |   | (2,146  | )
|Fair value adjustment             |  |                | (2,698  | ) |                  |   | (3,130  | )
|                                  |  |                |         |   |                  |   |         |  
|Total                             |  | $              | 562,095 |   |                  | $ | 551,786 |  
|                                  |  |                |         |   |                  |   |         |  

5. Other Borrowings:

Other borrowings at June 30, 2007 and December 31, 2006 consisted of the following:



|                                                |  |                |         |              |   |        
|----------------------------------------------- |  | -------------- | ------- | ------------ | - | -------
|                                                |  | June 30,2007   |         | Dec. 31,2006
|                                                |  | (in thousands)
|Securities sold under agreements to repurchase: |  |                |         |              |   |        
|Overnight                                       |  | $              | 126,792 |              | $ | 126,415
|Term                                            |  |                | 100,000 |              |   | 100,000
|Federal funds purchased                         |  |                | 64,184  |              |   | 35,823 
|U.S. Treasury tax and loan note option          |  |                | 119     |              |   | 81     
|                                                |  |                |         |              |   |        
|Total                                           |  | $              | 291,095 |              | $ | 262,319
|                                                |  |                |         |              |   |        



8



---

##### Table of Contents

6. FHLB Advances

FHLB advances at June 30, 2007 and December 31, 2006 consisted of the following:



|                                                                                                                                                                                                                               |  |                |         |               |   |       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------- | ------- | ------------- | - | ------
|                                                                                                                                                                                                                               |  | June 30, 2007  |         | Dec. 31, 2006
|                                                                                                                                                                                                                               |  | (in thousands)
|Cole Taylor Bank:                                                                                                                                                                                                              |  |                |         |               |   |       
|FHLB advance  4.83%, due February 1, 2011, callable after January 8, 2004                                                                                                                                                     |  | $              | 25,000  |               | $ | 25,000
|FHLB advance  interest determined quarterly at the 3-month LIBOR plus 0.23%, with maximum interest rate of 5.48%; interest rate was
5.48% at June 30, 2007 and December 31, 2006; due April 7, 2008                           |  |                | 30,000  |               |   | 30,000
|FHLB advance  interest determined quarterly at the 3-month LIBOR plus 0.255%, with maximum interest rate of 5.755%; interest rate was
5.61% and 5.63% at June 30, 2007 and December 31, 2006, respectively, due July 13, 2008 |  |                | 25,000  |               |   | 25,000
|FHLB advance  4.59%, due April 5, 2010, callable after April 4, 2008                                                                                                                                                          |  |                | 25,000  |               |   |      
|                                                                                                                                                                                                                               |  |                |         |               |   |       
|Total FHLB advances                                                                                                                                                                                                            |  | $              | 105,000 |               | $ | 80,000
|                                                                                                                                                                                                                               |  |                |         |               |   |       

7. Other Comprehensive Income/(Loss):

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



|                                                                                     |  |                                          |         |   |                                         |   |       |           |  |   |                 |   |  |           |         |   |           |   |       |   |  |   |        |  
|------------------------------------------------------------------------------------ |  | ---------------------------------------- | ------- | - | --------------------------------------- | - | ----- | --------- |  | - | --------------- | - |  | --------- | ------- | - | --------- | - | ----- | - |  | - | ------ | -
|                                                                                     |  | For the Three Months Ended June 30, 2007 |         |   | For the Three Months EndedJune 30, 2006 |  
|                                                                                     |  | BeforeTaxAmount                          |         |   | TaxEffect                               |   |       | Net ofTax |  |   | BeforeTaxAmount |   |  | TaxEffect |         |   | Net ofTax |  
|                                                                                     |  | (in thousands)                           |        
|Change in unrealized gain/(loss) on available-for-sale securities                    |  | $                                        | (10,317 | ) |                                         | $ | 4,034 |           |  | $ | (6,283          | ) |  | $         | (9,498  | ) |           | $ | 3,324 |   |  | $ | (6,174 | )
|Change in net unrealized gain/(loss) from cash flow hedging instruments              |  |                                          | (2,059  | ) |                                         |   | 806   |           |  |   | (1,253          | ) |  |           | 830     |   |           |   | (288  | ) |  |   | 542    |  
|Change in net deferred gain/(loss) from termination of cash flow hedging instruments |  |                                          | 208     |   |                                         |   | (72   | )         |  |   | 136             |   |  |           | (1,880  | ) |           |   | 658   |   |  |   | (1,222 | )
|                                                                                     |  |                                          |         |   |                                         |   |       |           |  |   |                 |   |  |           |         |   |           |   |       |   |  |   |        |  
|Other comprehensive income/(loss)                                                    |  | $                                        | (12,168 | ) |                                         | $ | 4,768 |           |  | $ | (7,400          | ) |  | $         | (10,548 | ) |           | $ | 3,694 |   |  | $ | (6,854 | )
|                                                                                     |  |                                          |         |   |                                         |   |       |           |  |   |                 |   |  |           |         |   |           |   |       |   |  |   |        |  



|                                                                                     |  |                                        |        |   |                                        |   |       |           |  |   |                 |   |  |           |         |   |           |   |       |   |  |   |         |  
|------------------------------------------------------------------------------------ |  | -------------------------------------- | ------ | - | -------------------------------------- | - | ----- | --------- |  | - | --------------- | - |  | --------- | ------- | - | --------- | - | ----- | - |  | - | ------- | -
|                                                                                     |  | For the Six Months Ended June 30, 2007 |        |   | For the Six Months Ended June 30, 2006 |  
|                                                                                     |  | BeforeTaxAmount                        |        |   | TaxEffect                              |   |       | Net ofTax |  |   | BeforeTaxAmount |   |  | TaxEffect |         |   | Net ofTax |  
|                                                                                     |  | (in thousands)                         |       
|Change in unrealized gain/(loss) on available-for-sale securities                    |  | $                                      | (7,387 | ) |                                        | $ | 2,889 |           |  | $ | (4,498          | ) |  | $         | (14,495 | ) |           | $ | 5,073 |   |  | $ | (9,422  | )
|Change in net unrealized gain/(loss) from cash flow hedging instruments              |  |                                        | (1,510 | ) |                                        |   | 593   |           |  |   | (917            | ) |  |           | 352     |   |           |   | (119  | ) |  |   | 233     |  
|Change in net deferred gain/(loss) from termination of cash flow hedging instruments |  |                                        | 418    |   |                                        |   | (146  | )         |  |   | 272             |   |  |           | (1,946  | ) |           |   | 681   |   |  |   | (1,265  | )
|                                                                                     |  |                                        |        |   |                                        |   |       |           |  |   |                 |   |  |           |         |   |           |   |       |   |  |   |         |  
|Other comprehensive income/(loss)                                                    |  | $                                      | (8,479 | ) |                                        | $ | 3,336 |           |  | $ | (5,143          | ) |  | $         | (16,089 | ) |           | $ | 5,635 |   |  | $ | (10,454 | )
|                                                                                     |  |                                        |        |   |                                        |   |       |           |  |   |                 |   |  |           |         |   |           |   |       |   |  |   |         |  



9



---

##### Table of Contents

8. Earnings Per Share:

The following table sets forth the computation of basic and diluted earnings per common share. For the six month periods ended June 30, 2007 and 2006, stock options outstanding to purchase 297,557 and 108,381
shares of common stock, respectively, were not included in the computation of diluted earnings per share because the effect would have been antidilutive.



|                                                   |  |                                                  |            |                                   |   |            |  |      |            |  |   |           
|-------------------------------------------------- |  | ------------------------------------------------ | ---------- | --------------------------------- | - | ---------- |  | ---- | ---------- |  | - | ----------
|                                                   |  | For the Three Months Ended June 30,              |            | For the Six Months Ended June 30,
|                                                   |  | 2007                                             |            | 2006                              |   | 2007       |  | 2006
|                                                   |  | (dollars in thousands, except per share amounts)
|Net income                                         |  | $                                                | 7,152      |                                   | $ | 6,305      |  | $    | 12,474     |  | $ | 15,163    
|                                                   |  |                                                  |            |                                   |   |            |  |      |            |  |   |           
|Weighted average common shares outstanding         |  |                                                  | 10,921,043 |                                   |   | 10,925,168 |  |      | 10,965,754 |  |   | 10,899,934
|Dilutive effect of common stock equivalents        |  |                                                  | 122,466    |                                   |   | 203,498    |  |      | 129,976    |  |   | 199,225   
|                                                   |  |                                                  |            |                                   |   |            |  |      |            |  |   |           
|Diluted weighted average common shares outstanding |  |                                                  | 11,043,509 |                                   |   | 11,128,666 |  |      | 11,095,730 |  |   | 11,099,159
|                                                   |  |                                                  |            |                                   |   |            |  |      |            |  |   |           
|Basic earnings per common share                    |  | $                                                | 0.65       |                                   | $ | 0.58       |  | $    | 1.14       |  | $ | 1.39      
|Diluted earnings per common share                  |  |                                                  | 0.65       |                                   |   | 0.57       |  |      | 1.12       |  |   | 1.37      
|                                                   |  |                                                  |            |                                   |   |            |  |      |            |  |   |           

9. Stock-Based Compensation:

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

Stock options are granted with an
exercise price equal to the last reported sales price of the common stock on the date of grant. The Company uses the Black-Scholes option-pricing model to determine the fair value of stock options issued to employees and directors. The stock options
granted during 2007 had a grant date fair value of $9.26 per share. Significant assumptions used in the determination of the grant date fair value included a risk-free interest rate of 4.69%, an expected stock price volatility of 29.00%, an expected
dividend payout of 1.32%, and an expected option life of 5.25 years. The stock options granted in 2007 vest over a four-year term (vesting 25% per year) and expire eight years following the grant date. Compensation expense associated with stock
options is recognized over the vesting period, or until the employee or director becomes retirement eligible if that time period is shorter.



10



---

##### Table of Contents

The following is a summary of stock option activity for the six month period ended June 30, 2007:



|                               |  |         |   |  |                               |      
|------------------------------ |  | ------- | - |  | ----------------------------- | -----
|                               |  | Shares  |   |  | Weighted-AverageExercisePrice
|Outstanding at January 1, 2007 |  | 699,548 |   |  | $                             | 25.34
|Granted                        |  | 102,823 |   |  |                               | 30.33
|Exercised                      |  | (10,310 | ) |  |                               | 22.14
|Forfeited                      |  | (16,498 | ) |  |                               | 31.58
|Expired                        |  | (1,039  | ) |  |                               | 37.51
|                               |  |         |   |  |                               |      
|Outstanding at June 30, 2007   |  | 774,524 |   |  | $                             | 25.89
|                               |  |         |   |  |                               |      
|Exercisable at June 30, 2007   |  | 447,939 |   |  | $                             | 22.83
|                               |  |         |   |  |                               |      

Under the Plan, the Company may grant restricted stock awards that vest upon completion of future
service requirements or specified performance criteria. The fair value of these awards is equal to the last reported sales price of the common stock on the date of grant. The Company recognizes stock-based compensation expense for these awards over
the vesting period based upon the number of awards ultimately expected to vest. The Company may issue awards that vest upon satisfaction of specified performance criteria. For these types of awards, the final measure of compensation cost is based
upon the number of shares that ultimately vest considering the performance criteria. The following table provides information regarding nonvested restricted stock for the six month period ended June 30, 2007:



|                             |  |         |   |  |                                      |      
|---------------------------- |  | ------- | - |  | ------------------------------------ | -----
|Nonvested Restricted Stock   |  | Shares  |   |  | Weighted-AverageGrant-Date FairValue
|Nonvested at January 1, 2007 |  | 124,309 |   |  | $                                    | 32.77
|Granted                      |  | 27,536  |   |  |                                      | 30.44
|Vested                       |  | (8,820  | ) |  |                                      | 27.04
|Forfeited                    |  | (10,581 | ) |  |                                      | 31.45
|                             |  |         |   |  |                                      |      
|Nonvested at June 30, 2007   |  | 132,444 |   |  | $                                    | 32.92
|                             |  |         |   |  |                                      |      



11



---

##### Table of Contents

10. Derivative Financial Instruments:

The Company uses derivative financial instruments, including interest rate exchange contracts (swaps) and interest rate floor and collar agreements, to
assist in interest rate risk management. The following table describes the derivative instruments outstanding at June 30, 2007 (dollars in thousands):



|                                                       |  |                |         |              |                         |          |           |           |   |      |  
|------------------------------------------------------ |  | -------------- | ------- | ------------ | ----------------------- | -------- | --------- | --------- | - | ---- | -
|Product                                                |  | NotionalAmount |         | Strike Rates |                         | Maturity |           | FairValue |  
|Derivative Instruments designated as cash flow hedges: |  |                |         |              |                         |          |           |           |   |      |  
|Prime Floor                                            |  | $              | 100,000 |              | 6.25%                   |          | 7/12/2010 |           | $ | 89   |  
|Prime Collar                                           |  |                | 150,000 |              | 7.75% and 8.505%        |          | 5/5/2009  |           |   | 81   |  
|Prime Collar                                           |  |                | 150,000 |              | 7.75% and 8.585%        |          | 5/5/2010  |           |   | 117  |  
|                                                       |  |                |         |              |                         |          |           |           |   |      |  
|Subtotal                                               |  |                | 400,000 |              |                         |          |           |           |   |      |  
|                                                       |  |                |         |             
|Non-hedging derivative instruments:                    |  |                |         |              |                         |          |           |           |   |      |  
|Prime Floor                                            |  |                | 100,000 |              | 5.50%                   |          | 6/30/2010 |           |   | 38   |  
|Interest Rate Swappay fixed/receive variable          |  |                | 5,918   |              | Pay 6.10% Receive 6.57% |          | 8/1/2015  |           |   | 159  |  
|Interest Rate Swapreceive fixed/pay variable          |  |                | 5,918   |              | Receive 6.10% Pay 6.57% |          | 8/1/2015  |           |   | (159 | )
|                                                       |  |                |         |              |                         |          |           |           |   |      |  
|Subtotal                                               |  |                | 111,836 |              |                         |          |           |           |   |      |  
|                                                       |  |                |         |              |                         |          |           |           |   |      |  
|Total                                                  |  | $              | 511,836 |              |                         |          |           |           |   |      |  
|                                                       |  |                |         |              |                         |          |           |           |   |      |  

The Company is party to one Prime floor and two Prime collars, with a total notional amount of
$400 million, which are currently designated as cash flow hedges against interest receipts from Prime-based loans. The fair values of these derivatives are recorded as an asset or liability with the effective portion of the corresponding unrealized
gain or loss recorded in other comprehensive income in stockholders' equity, net of tax. All of our cash flow hedges have been highly effective.

The Company also has $111.8 million of derivative instruments that are not designated as hedges. At inception in June 2005, the $100.0 million notional amount 5.50% Prime floor was designated as a cash flow hedge against interest receipts
from Prime-based loans. In May 2006, the Company de-designated this floor. The fair value of the floor on the date of de-designation was $39,000. Upon de-designation, the balance in accumulated other comprehensive income, which was comprised of the
change in fair value since inception less amortization of the original floor cost, net of tax, is being amortized to loan interest income over the remaining four year term of the floor. Changes in the fair value of the floor subsequent to its
de-designation are reported in noninterest income. During the first half of 2007, the decrease in the fair value of the floor of $37,000 was reflected in other derivative income noninterest income.

In addition, during the second quarter of 2007, as an accommodation to a customer, the Company entered into a $5.9 million amortizing notional amount
interest rate swap. Under this agreement, the Company will receive a fixed interest rate and pay interest at a variable rate. At the same time, in order to offset the exposure, the Company entered into a $5.9 million amortizing notional amount
interest rate swap with a different counterparty with offsetting terms. Under this swap, the Company will pay a fixed rate and receive interest based upon a variable rate. Changes in the fair value of each of the agreements, as well as any net cash
settlements, are recognized in noninterest income in other derivative income or expense.



12



---

##### Table of Contents

11. Income Taxes:

The Company adopted Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109 (FIN 48),
on January 1, 2007. The implementation of FIN No. 48 resulted in no change in the liability for unrecognized tax benefits.

The
total amount of unrecognized tax benefits at January 1, 2007, was $456,000. Of that amount, $296,000 would affect the effective income tax rate if recognized. There have been no significant changes to these amounts during the six month period
ended June 30, 2007. However, the Company believes that it is reasonably possible that $276,000 of unrecognized tax benefits, primarily related to the resolution of potential state tax liabilities, may reverse in the next twelve months.

The amount accrued for payment of interest and penalties as of January 1, 2007 was $117,000. The Company's policy is to recognize
interest and penalties in income tax expense.

The Company is no longer subject to examination by federal tax authorities for the years of
2002 and prior because the statute of limitations has expired. The Company, which is located and primarily does business in Illinois, is no longer subject to examination by the Illinois taxing authorities for the years of 2002 and prior.



13



---

##### Table of Contents

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

Introduction

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

The following discussion and analysis presents our consolidated financial condition and results of
operations as of and for the dates and periods indicated. This discussion should be read in conjunction with our consolidated financial statements and the notes thereto appearing elsewhere in this document. In addition to the historical information
provided below, we have made certain estimates and forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these estimates and forward-looking statements as a result of
certain factors, including those discussed in the section captioned Risk Factors in our 2006 Annual Report on Form 10-K filed with the SEC on March 15, 2007.

Application of Critical Accounting Policies

Our accounting and reporting policies conform to
accounting principles generally accepted in the United States of America and general reporting practices within the financial services industry. Our accounting policies are described in the section captioned Notes to Consolidated Financial
StatementsSummary of Significant Accounting and Reporting Policies in our 2006 Annual Report on Form 10-K.

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

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



14



---

##### Table of Contents

Allowance for Loan Losses

We have established an allowance for loan losses to provide for loans in our portfolio that may not be repaid in their entirety. The allowance is based on our regular, quarterly assessments of the probable estimated
losses inherent in the loan portfolio. Our methodology for measuring the appropriate level of the allowance relies on several key elements, which include a general allowance computed by applying loss factors to categories of loans outstanding in the
portfolio, specific allowances for identified problem loans and portfolio segments, and an unallocated allowance. We maintain the allowance for loan losses at a level considered adequate to absorb probable losses inherent in our portfolio as of the
balance sheet date. In evaluating the adequacy of our allowance for loan losses, we consider numerous quantitative factors, including historical charge-off experience, growth of our loan portfolio, changes in the composition of our loan portfolio
and the volume of delinquent and criticized loans. In addition, we use information about specific borrower situations, including their financial position, work-out plans and estimated collateral values under various liquidation scenarios to estimate
the risk and amount of loss for those borrowers. Finally, we also consider many qualitative factors, including general and economic business conditions, duration of the current business cycle, the impact of competition on our underwriting terms,
current general market collateral valuations, trends apparent in any of the factors we take into account and other matters, which are by nature more subjective and fluid. The significant uncertainties surrounding our portfolio of borrowers
abilities to successfully execute their business models through changing economic environments and competitive challenges, as well as management and other changes, greatly complicate the estimate of the risk of loss and amount of loss on any loan.
Because of the degree of uncertainty and susceptibility of these 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 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. 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, 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 $23.2
million that we recognized in connection with our 1997 acquisition of the Bank. We test this goodwill annually on July 1 for impairment, or whenever events or significant changes in circumstances indicate that the carrying value may not be
recoverable. We tested goodwill for impairment as of July 1, 2007 and we determined that no impairment charge was necessary. The evaluation for impairment includes comparing the estimated fair market value of the Bank to our carrying value for
the Bank. Because there is not a readily observable market value for the 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 at the
holding company level.



15



---

##### Table of Contents

Income Taxes

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

Derivative Financial Instruments

We use derivative financial instruments (derivatives), including interest rate exchange and floor and collar agreements, to assist
in our interest rate risk management. In accordance with Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), all derivatives are measured and reported at
fair value on our consolidated balance sheet as either an asset or a liability. For derivatives that are designated and qualify as a fair value hedge, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item
attributable to the effective portion of the hedged risk, are recognized in current earnings during the period of the change in the fair values. For derivatives that are designated and qualify as a cash flow hedge, the effective portion of the gain
or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. For all hedging relationships, derivative gains and
losses that are not effective in hedging the changes in fair value or expected cash flows of the hedged item are recognized immediately in current earnings during the period of the change. Similarly, the changes in the fair value of derivatives that
do not qualify for hedge accounting under SFAS 133 are also reported currently in earnings.

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

The estimates of fair values of our derivatives are calculated using independent valuation models to estimate mid-market valuations. The fair values produced by these proprietary valuation models are in part theoretical and therefore can
vary between derivative dealers and are not necessarily reflective of the actual price at which the 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.



16



---

##### Table of Contents

RESULTS OF OPERATIONS

Overview

Net income for the quarter ended June 30, 2007 totaled $7.2 million, or $0.65 per diluted common share, an
increase of $847,000, or 13.4%, as compared to the $6.3 million, or $0.57 per diluted common share, during the second quarter in 2006. Higher noninterest income of $657,000 and lower noninterest expense of $947,000 favorably impacted earnings, while
a $1.0 million decline in net interest income partly offset that impact.

Net income for the first six months of 2007 was $12.5 million, or
$1.12 per diluted common share, a decrease of $2.7 million, or 17.7%, as compared to net income of $15.2 million, or $1.37 per diluted common share during the first six months of 2006. The decline in earnings reflected a $2.6 million decrease in net
interest income and a $2.5 million increase in the provision for loan losses during the 2007 year-to-date period. In addition, noninterest income decreased $571,000, largely due to a decrease in other derivative income, while noninterest expense
decreased $671,000 during the first half of 2007 as compared to the same period in 2006.

On May 10, 2007, our Board of Directors
approved a stock repurchase up to $10 million of its issued and outstanding shares of common stock. Between May 16 and June 30, 2007 , we repurchased 334,761 shares of our common stock at a cost of $9.9 million and an average cost per
share of $29.64. The number of common shares outstanding at June 30, 2007 decreased to 10,821,975 as compared to 11,126,642 at the end of the first quarter of 2007 primarily as a result of this program.

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.



17



---

##### Table of Contents

Quarter Ended June 30, 2007 as Compared to the Quarter Ended June 30, 2006

Net interest income was $26.5 million for the second quarter of 2007, a decrease of $1.0 million, or 3.6%, from $27.5 million of net interest income in
the second quarter a year ago. With an adjustment for tax-exempt income, our consolidated net interest income for the second quarter of 2007 was $27.3 million, compared to $28.3 million for the same quarter in 2006. This non-GAAP presentation is
discussed further below. Net interest income for the second quarter of 2007 was lower primarily as a result of a decline in net interest margin.

Our net interest margin, which is determined by dividing taxable equivalent net interest income by average interest-earning assets, was 3.44% for the second quarter of 2007, compared to 3.56% for the same quarter a year ago, a decrease of
12 basis points. These non-GAAP tax-equivalent measures are discussed more fully below. The net interest margin in the second quarter of 2007 declined from the same quarter last year because funding costs increased to a greater extent than asset
yields. Asset yields increased as result of the higher average Prime rate in 2007 compared with 2006, and the reinvestment of investment portfolio cash flows in higher yielding securities and the change in our interest-earning asset mix to include
increased loans and decreased investment securities. Constraining the increase in asset yield was competitive pricing pressure for loans.

Funding costs increased as a result of changes in funding mix and the repricing of term deposits to higher interest rates. Between the second quarters of 2007 and 2006, deposits in lower rate products, including noninterest-bearing demand
deposits, NOW and savings accounts, declined, while balances in higher rate money market accounts increased.

Our interest rate risk simulation modeling of the June 30, 2007 balance sheet, using market interest rates in effect at June 30th, indicated that our net interest margin would likely decline over the next year if our balance sheet remained static and there were no changes in prevailing market interest rates. Our net interest margin would be
subject to downward pressure as more of our interest-bearing liabilities would reprice to current rates, while the yield on our interest-earning assets largely reflects current rates. Additional factors, such as nonaccrual loan volume and the effect
of competition on loan and deposit pricing, could bring about further pressure on our net interest margin. See the section of this discussion and analysis captioned Quantitative and Qualitative Disclosure About Market Risks for further
discussion of the impact of changes in interest rates on our results of operations.

Average interest-earning assets during the
second quarter of 2007 were $3.18 billion, largely unchanged from the second quarter a year ago. Between the two quarterly periods, average loans increased $84.2 million, or 3.5%, while investment securities decreased by $80.9 million, or 11.2%. The
increase in loans was produced by a $125.5 million, or 5.7%, increase in average commercial loan balances, partially offset by the decline in average consumer-oriented loans. Between the second quarters of 2006 and 2007 average interest-bearing
deposit accounts were basically unchanged, decreasing $2.4 million, or less than 1%. Average money market deposits increased while average time deposits decreased. See the section of this discussion and analysis captioned Deposits for
further information on our funding.



18



---

##### Table of Contents

Six Months Ended June 30, 2007 as Compared to the Six Months Ended June 30, 2006

Net interest income was $52.9 million during the first six months of 2007, a decrease of $2.6 million, or 4.6%, from $55.5 million of net interest income
in the same six month period a year ago. With an adjustment for tax-exempt income, our consolidated net interest income for the first half of 2007 was $54.7 million, compared to $57.1 million for the same six month period in 2006. This non-GAAP
presentation is discussed further below. The lower net interest income for the year-to-date period of 2007 was lower as a result of a decline in net interest margin.

Our net interest margin was 3.46% for the first half of 2007, compared to 3.65% for the same six month period last year, a decrease of 19 basis points. These non-GAAP tax-equivalent measures are discussed more fully
below. Similar to the quarterly comparison, the net interest margin in the first six months of 2007 declined from the same period last year because funding costs increased to a greater extent than asset yields. While asset yields benefited from a
higher average Prime rate in the first half of 2007, competitive pricing pressure for loans limited the increase in asset yields. Between the two year-to-date periods, funding costs increased as a result of changes in funding mix and the repricing
of term deposits to higher interest rates.

Average interest-earning assets for first half of 2007 was $3.18 billion, compared to $3.15
billion for the same period a year ago, an increase of $39.6 million, or 1.3%. The increase in average interest-earnings assets was driven by a $102.3 million increase in average loans, partly offset by a $61.3 million decline in average investment
securities. Average commercial loans increased $146.1 million, or 6.7%, while consumer-oriented loans decreased by $43.8 million. Average deposit balances increased by $46.1 million for the first half of 2007 compared to the first half of 2006,
driven by an increase in average money market account balances. This increase was partly offset by a decline in average time deposits. See the section of this discussion and analysis captioned Deposits for further information on our
funding.

Rate vs. Volume Analysis of Net Interest Income

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



|                                    |  |                                                                                |       |   |                                                                                       |   |        |     |  |   |        |   |  |      |        |   |     |   |        |   |  |   |        |  
|----------------------------------- |  | ------------------------------------------------------------------------------ | ----- | - | ------------------------------------------------------------------------------------- | - | ------ | --- |  | - | ------ | - |  | ---- | ------ | - | --- | - | ------ | - |  | - | ------ | -
|                                    |  | Quarter Ended June 30, 2007 OverQuarter Ended June 30, 2006INCREASE/(DECREASE) |       |   | Six Months Ended June 30, 2007 Over Six Months Ended June 30,
2006INCREASE/(DECREASE) |  
|                                    |  | VOLUME                                                                         |       |   | RATE                                                                                  |   |        | NET |  |   | VOLUME |   |  | RATE |        |   | NET |  
|                                    |  | (in thousands)                                                                 |      
|INTEREST EARNED ON:                 |  |                                                                                |       |   |                                                                                       |   |        |     |  |   |        |   |  |      |        |   |     |   |        |   |  |   |        |  
|Investment securities               |  | $                                                                              | (815  | ) |                                                                                       | $ | 344    |     |  | $ | (471   | ) |  | $    | (1,140 | ) |     | $ | 862    |   |  | $ | (278   | )
|Cash equivalents                    |  |                                                                                | (21   | ) |                                                                                       |   | 15     |     |  |   | (6     | ) |  |      | (33    | ) |     |   | 99     |   |  |   | 66     |  
|Loans                               |  |                                                                                | 1,641 |   |                                                                                       |   | 1,049  |     |  |   | 2,690  |   |  |      | 3,921  |   |     |   | 3,147  |   |  |   | 7,068  |  
|                                    |  |                                                                                |       |   |                                                                                       |   |        |     |  |   |        |   |  |      |        |   |     |   |        |   |  |   |        |  
|Total interest-earning assets       |  |                                                                                |       |   |                                                                                       |   |        |     |  |   | 2,213  |   |  |      |        |   |     |   |        |   |  |   | 6,856  |  
|                                    |  |                                                                                |       |   |                                                                                       |   |        |     |  |   |        |   |  |      |        |   |     |   |        |   |  |   |        |  
|INTEREST PAID ON:                   |  |                                                                                |       |   |                                                                                       |   |        |     |  |   |        |   |  |      |        |   |     |   |        |   |  |   |        |  
|Interest-bearing deposits           |  |                                                                                | (204  | ) |                                                                                       |   | 3,093  |     |  |   | 2,889  |   |  |      | 610    |   |     |   | 7,838  |   |  |   | 8,448  |  
|Total borrowings                    |  |                                                                                | (127  | ) |                                                                                       |   | 376    |     |  |   | 249    |   |  |      | (370   | ) |     |   | 1,175  |   |  |   | 805    |  
|                                    |  |                                                                                |       |   |                                                                                       |   |        |     |  |   |        |   |  |      |        |   |     |   |        |   |  |   |        |  
|Total interest-bearing liabilities  |  |                                                                                |       |   |                                                                                       |   |        |     |  |   | 3,138  |   |  |      |        |   |     |   |        |   |  |   | 9,253  |  
|                                    |  |                                                                                |       |   |                                                                                       |   |        |     |  |   |        |   |  |      |        |   |     |   |        |   |  |   |        |  
|Net interest income, tax-equivalent |  | $                                                                              | 207   |   |                                                                                       | $ | (1,132 | )   |  | $ | (925   | ) |  | $    | 853    |   |     | $ | (3,250 | ) |  | $ | (2,397 | )
|                                    |  |                                                                                |       |   |                                                                                       |   |        |     |  |   |        |   |  |      |        |   |     |   |        |   |  |   |        |  



19



---

##### Table of Contents

Tax-Equivalent Adjustments to Yields and Margins

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

The following table reconciles the tax-equivalent net interest income to net interest income as reported on
the consolidated statements of 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 June 30, |        |   | For the Six MonthsEnded June 30, |  
|                                               |  | 2007                               |        |   | 2006                             |   |        | 2007 |  |   | 2006   |  
|                                               |  | (dollars in thousands)             |       
|Net interest income as stated                  |  | $                                  | 26,456 |   |                                  | $ | 27,456 |      |  | $ | 52,911 |   |  | $ | 55,475 |  
|Tax-equivalent adjustment-investments          |  |                                    | 820    |   |                                  |   | 716    |      |  |   | 1,644  |   |  |   | 1,417  |  
|Tax-equivalent adjustment-loans                |  |                                    | 63     |   |                                  |   | 92     |      |  |   | 121    |   |  |   | 181    |  
|                                               |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Tax-equivalent net interest income             |  | $                                  | 27,339 |   |                                  | $ | 28,264 |      |  | $ | 54,676 |   |  | $ | 57,073 |  
|                                               |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|                                               |  |                                    |        |  
|Yield on earning assets without tax adjustment |  |                                    | 7.14   | % |                                  |   | 6.87   | %    |  |   | 7.13   | % |  |   | 6.79   | %
|Yield on earning assets  tax-equivalent       |  |                                    | 7.25   | % |                                  |   | 6.97   | %    |  |   | 7.24   | % |  |   | 6.89   | %
|                                               |  |                                    |        |  
|Net interest margin without tax adjustment     |  |                                    | 3.33   | % |                                  |   | 3.46   | %    |  |   | 3.34   | % |  |   | 3.55   | %
|Net interest margin  tax-equivalent           |  |                                    | 3.44   | % |                                  |   | 3.56   | %    |  |   | 3.46   | % |  |   | 3.65   | %
|                                               |  |                                    |        |  
|Net interest spread without tax adjustment     |  |                                    | 2.46   | % |                                  |   | 2.71   | %    |  |   | 2.48   | % |  |   | 2.82   | %
|Net interest spread  tax-equivalent           |  |                                    | 2.57   | % |                                  |   | 2.80   | %    |  |   | 2.60   | % |  |   | 2.93   | %

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 a tax-equivalent
basis assuming a tax rate of 35%.



20



---

##### Table of Contents

|                                               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|---------------------------------------------- |  | ----------------------------------- | --------- | - | -------- | - | ---------------- |  | ---- | -------------- |  | - | --------- | - | ---------------- | - | ------ |  | ---- | -
|                                               |  | For the Three Months Ended June 30, |          
|                                               |  | 2007                                |           |   | 2006     |  
|                                               |  | AVERAGEBALANCE                      |           |   | INTEREST |   | YIELD/RATE(%)(6) |  |      | AVERAGEBALANCE |  |   | INTEREST  |   | YIELD/RATE(%)(6) |  
|                                               |  | (dollars in thousands)              |          
|INTEREST-EARNING ASSETS:                       |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Investment securities (1):                     |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Taxable                                        |  | $                                   | 496,634   |   |          | $ | 5,640            |  | 4.54 | %              |  | $ | 597,066   |   |                  | $ | 6,409  |  | 4.29 | %
|Tax-exempt (tax-equivalent) (2)                |  |                                     | 146,917   |   |          |   | 2,345            |  | 6.39 |                |  |   | 127,397   |   |                  |   | 2,047  |  | 6.43 |  
|                                               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Total investment securities                    |  |                                     | 643,551   |   |          |   | 7,985            |  | 4.96 |                |  |   | 724,463   |   |                  |   | 8,456  |  | 4.67 |  
|                                               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Cash Equivalents                               |  |                                     | 24,261    |   |          |   | 319              |  | 5.19 |                |  |   | 25,965    |   |                  |   | 325    |  | 4.95 |  
|                                               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Loans (2) (3):                                 |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Commercial and commercial real estate          |  |                                     | 2,335,535 |   |          |   | 45,546           |  | 7.71 |                |  |   | 2,210,014 |   |                  |   | 42,358 |  | 7.58 |  
|Residential real estate mortgages              |  |                                     | 60,708    |   |          |   | 906              |  | 5.97 |                |  |   | 65,614    |   |                  |   | 911    |  | 5.55 |  
|Home equity and consumer                       |  |                                     | 119,993   |   |          |   | 2,401            |  | 8.03 |                |  |   | 156,363   |   |                  |   | 2,933  |  | 7.52 |  
|Fees on loans                                  |  |                                     |           |   |          |   | 417              |  |      |                |  |   |           |   |                  |   | 378    |  |      |  
|                                               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Net loans (tax-equivalent) (2)                 |  |                                     | 2,516,236 |   |          |   | 49,270           |  | 7.85 |                |  |   | 2,431,991 |   |                  |   | 46,580 |  | 7.68 |  
|                                               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Total interest-earning assets (2)              |  |                                     | 3,184,048 |   |          |   | 57,574           |  | 7.25 |                |  |   | 3,182,419 |   |                  |   | 55,361 |  | 6.97 |  
|                                               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|NON-EARNING ASSETS:                            |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Allowance for loan losses                      |  |                                     | (39,016   | ) |          |   |                  |  |      |                |  |   | (37,191   | ) |                  |   |        |  |      |  
|Cash and due from banks                        |  |                                     | 52,044    |   |          |   |                  |  |      |                |  |   | 57,859    |   |                  |   |        |  |      |  
|Accrued interest and other assets              |  |                                     | 90,260    |   |          |   |                  |  |      |                |  |   | 83,805    |   |                  |   |        |  |      |  
|                                               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|TOTAL ASSETS                                   |  | $                                   | 3,287,336 |   |          |   |                  |  |      |                |  | $ | 3,286,892 |   |                  |   |        |  |      |  
|                                               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|INTEREST-BEARING LIABILITIES:                  |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Interest-bearing deposits:                     |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Interest-bearing demand deposits               |  | $                                   | 878,050   |   |          |   | 8,881            |  | 4.06 |                |  | $ | 744,977   |   |                  |   | 6,354  |  | 3.42 |  
|Savings deposits                               |  |                                     | 55,108    |   |          |   | 39               |  | 0.28 |                |  |   | 69,039    |   |                  |   | 49     |  | 0.28 |  
|Time deposits                                  |  |                                     | 1,220,132 |   |          |   | 15,238           |  | 5.01 |                |  |   | 1,341,643 |   |                  |   | 14,866 |  | 4.44 |  
|                                               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Total interest-bearing deposits                |  |                                     | 2,153,290 |   |          |   | 24,158           |  | 4.50 |                |  |   | 2,155,659 |   |                  |   | 21,269 |  | 3.96 |  
|                                               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Other borrowings                               |  |                                     | 248,037   |   |          |   | 2,748            |  | 4.38 |                |  |   | 278,164   |   |                  |   | 2,808  |  | 3.99 |  
|FHLB advances                                  |  |                                     | 104,176   |   |          |   | 1,356            |  | 5.15 |                |  |   | 87,967    |   |                  |   | 1,085  |  | 4.88 |  
|Junior subordinated debentures                 |  |                                     | 86,607    |   |          |   | 1,973            |  | 9.11 |                |  |   | 87,434    |   |                  |   | 1,935  |  | 8.85 |  
|                                               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Total interest-bearing liabilities             |  |                                     | 2,592,110 |   |          |   | 30,235           |  | 4.68 |                |  |   | 2,609,224 |   |                  |   | 27,097 |  | 4.17 |  
|                                               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|NONINTEREST-BEARING LIABILITIES:               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Noninterest-bearing deposits                   |  |                                     | 379,243   |   |          |   |                  |  |      |                |  |   | 396,033   |   |                  |   |        |  |      |  
|Accrued interest, taxes, and other liabilities |  |                                     | 39,677    |   |          |   |                  |  |      |                |  |   | 56,010    |   |                  |   |        |  |      |  
|                                               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Total noninterest-bearing liabilities          |  |                                     | 418,920   |   |          |   |                  |  |      |                |  |   | 452,043   |   |                  |   |        |  |      |  
|                                               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|STOCKHOLDERS EQUITY                           |  |                                     | 276,306   |   |          |   |                  |  |      |                |  |   | 225,625   |   |                  |   |        |  |      |  
|                                               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY     |  | $                                   | 3,287,336 |   |          |   |                  |  |      |                |  | $ | 3,286,892 |   |                  |   |        |  |      |  
|                                               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Net interest income (tax-equivalent) (2)       |  |                                     |           |   |          | $ | 27,339           |  |      |                |  |   |           |   |                  | $ | 28,264 |  |      |  
|                                               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Net interest spread (tax-equivalent) (2) (4)   |  |                                     |           |   |          |   |                  |  | 2.57 | %              |  |   |           |   |                  |   |        |  | 2.80 | %
|                                               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  
|Net interest margin (tax-equivalent) (2) (5)   |  |                                     |           |   |          |   |                  |  | 3.44 | %              |  |   |           |   |                  |   |        |  | 3.56 | %
|                                               |  |                                     |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |        |  |      |  

---

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

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

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

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

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

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



21



---

##### Table of Contents

|                                               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|---------------------------------------------- |  | --------------------------------- | --------- | - | -------- | - | ---------------- |  | ---- | -------------- |  | - | --------- | - | ---------------- | - | ------- |  | ---- | -
|                                               |  | For the Six Months Ended June 30, |          
|                                               |  | 2007                              |           |   | 2006     |  
|                                               |  | AVERAGEBALANCE                    |           |   | INTEREST |   | YIELD/RATE(%)(6) |  |      | AVERAGEBALANCE |  |   | INTEREST  |   | YIELD/RATE(%)(6) |  
|                                               |  | (dollars in thousands)            |          
|INTEREST-EARNING ASSETS:                       |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|Investment securities (1):                     |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|Taxable                                        |  | $                                 | 503,897   |   |          | $ | 11,415           |  | 4.53 | %              |  | $ | 586,399   |   |                  | $ | 12,342  |  | 4.21 | %
|Tax-exempt (tax-equivalent) (2)                |  |                                   | 147,239   |   |          |   | 4,698            |  | 6.38 |                |  |   | 126,013   |   |                  |   | 4,049   |  | 6.43 |  
|                                               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|Total investment securities                    |  |                                   | 651,136   |   |          |   | 16,113           |  | 4.95 |                |  |   | 712,412   |   |                  |   | 16,391  |  | 4.60 |  
|                                               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|Cash Equivalents                               |  |                                   | 32,048    |   |          |   | 840              |  | 5.21 |                |  |   | 33,447    |   |                  |   | 774     |  | 4.60 |  
|                                               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|Loans (2) (3):                                 |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|Commercial and commercial real estate          |  |                                   | 2,317,421 |   |          |   | 90,087           |  | 7.73 |                |  |   | 2,171,308 |   |                  |   | 81,907  |  | 7.50 |  
|Residential real estate mortgages              |  |                                   | 61,335    |   |          |   | 1,778            |  | 5.80 |                |  |   | 64,234    |   |                  |   | 1,751   |  | 5.45 |  
|Home equity and consumer                       |  |                                   | 122,885   |   |          |   | 4,811            |  | 7.89 |                |  |   | 163,848   |   |                  |   | 5,984   |  | 7.37 |  
|Fees on loans                                  |  |                                   |           |   |          |   | 833              |  |      |                |  |   |           |   |                  |   | 799     |  |      |  
|                                               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|Net loans (tax-equivalent) (2)                 |  |                                   | 2,501,641 |   |          |   | 97,509           |  | 7.86 |                |  |   | 2,399,390 |   |                  |   | 90,441  |  | 7.60 |  
|                                               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|Total interest-earning assets (2)              |  |                                   | 3,184,825 |   |          |   | 114,462          |  | 7.24 |                |  |   | 3,145,249 |   |                  |   | 107,606 |  | 6.89 |  
|                                               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|NON-EARNING ASSETS:                            |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|Allowance for loan losses                      |  |                                   | (38,429   | ) |          |   |                  |  |      |                |  |   | (37,454   | ) |                  |   |         |  |      |  
|Cash and due from banks                        |  |                                   | 56,569    |   |          |   |                  |  |      |                |  |   | 60,441    |   |                  |   |         |  |      |  
|Accrued interest and other assets              |  |                                   | 89,114    |   |          |   |                  |  |      |                |  |   | 86,347    |   |                  |   |         |  |      |  
|                                               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|TOTAL ASSETS                                   |  | $                                 | 3,292,079 |   |          |   |                  |  |      |                |  | $ | 3,254,583 |   |                  |   |         |  |      |  
|                                               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|INTEREST-BEARING LIABILITIES:                  |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|Interest-bearing deposits:                     |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|Interest-bearing demand deposits               |  | $                                 | 899,568   |   |          |   | 18,146           |  | 4.07 |                |  | $ | 751,792   |   |                  |   | 11,799  |  | 3.17 |  
|Savings deposits                               |  |                                   | 56,647    |   |          |   | 79               |  | 0.28 |                |  |   | 70,506    |   |                  |   | 99      |  | 0.28 |  
|Time deposits                                  |  |                                   | 1,207,828 |   |          |   | 29,657           |  | 4.95 |                |  |   | 1,295,634 |   |                  |   | 27,536  |  | 4.29 |  
|                                               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|Total interest-bearing deposits                |  |                                   | 2,164,043 |   |          |   | 47,882           |  | 4.46 |                |  |   | 2,117,932 |   |                  |   | 39,434  |  | 3.75 |  
|                                               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|Other borrowings                               |  |                                   | 252,896   |   |          |   | 5,547            |  | 4.36 |                |  |   | 283,050   |   |                  |   | 5,316   |  | 3.74 |  
|FHLB advances                                  |  |                                   | 92,155    |   |          |   | 2,420            |  | 5.22 |                |  |   | 81,519    |   |                  |   | 1,940   |  | 4.73 |  
|Junior subordinated debentures                 |  |                                   | 86,607    |   |          |   | 3,937            |  | 9.09 |                |  |   | 87,535    |   |                  |   | 3,843   |  | 8.78 |  
|                                               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|Total interest-bearing liabilities             |  |                                   | 2,595,701 |   |          |   | 59,786           |  | 4.64 |                |  |   | 2,570,036 |   |                  |   | 50,533  |  | 3.96 |  
|                                               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|NONINTEREST-BEARING LIABILITIES:               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|Noninterest-bearing deposits                   |  |                                   | 380,450   |   |          |   |                  |  |      |                |  |   | 401,718   |   |                  |   |         |  |      |  
|Accrued interest, taxes, and other liabilities |  |                                   | 41,385    |   |          |   |                  |  |      |                |  |   | 59,336    |   |                  |   |         |  |      |  
|                                               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|Total noninterest-bearing liabilities          |  |                                   | 421,835   |   |          |   |                  |  |      |                |  |   | 461,054   |   |                  |   |         |  |      |  
|                                               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|STOCKHOLDERS EQUITY                           |  |                                   | 274,543   |   |          |   |                  |  |      |                |  |   | 223,493   |   |                  |   |         |  |      |  
|                                               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY     |  | $                                 | 3,292,079 |   |          |   |                  |  |      |                |  | $ | 3,254,583 |   |                  |   |         |  |      |  
|                                               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|Net interest income (tax-equivalent) (2)       |  |                                   |           |   |          | $ | 54,676           |  |      |                |  |   |           |   |                  | $ | 57,073  |  |      |  
|                                               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|Net interest spread (tax-equivalent) (2) (4)   |  |                                   |           |   |          |   |                  |  | 2.60 | %              |  |   |           |   |                  |   |         |  | 2.93 | %
|                                               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  
|Net interest margin (tax-equivalent) (2) (5)   |  |                                   |           |   |          |   |                  |  | 3.46 | %              |  |   |           |   |                  |   |         |  | 3.65 | %
|                                               |  |                                   |           |   |          |   |                  |  |      |                |  |   |           |   |                  |   |         |  |      |  

---

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

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

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

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

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

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



22



---

##### Table of Contents

Noninterest Income

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



|                                  |  |                           |       |   |                          |   |       |               |  |   |               |   |  |   |      
|--------------------------------- |  | ------------------------- | ----- | - | ------------------------ | - | ----- | ------------- |  | - | ------------- | - |  | - | -----
|                                  |  | For the ThreeMonths Ended |       |   | For the Six Months Ended
|                                  |  | June 30,2007              |       |   | June 30, 2006            |   |       | June 30, 2007 |  |   | June 30, 2006
|                                  |  | (in thousands)           
|Service charges                   |  | $                         | 1,895 |   |                          | $ | 1,902 |               |  | $ | 3,705         |   |  | $ | 3,782
|Trust services                    |  |                           | 643   |   |                          |   | 588   |               |  |   | 1,129         |   |  |   | 1,052
|Investment management services    |  |                           | 362   |   |                          |   | 440   |               |  |   | 828           |   |  |   | 907  
|Loan syndication fees             |  |                           | 400   |   |                          |   |      |               |  |   | 400           |   |  |   | 500  
|Other noninterest income          |  |                           | 765   |   |                          |   | 522   |               |  |   | 1,241         |   |  |   | 1,119
|                                  |  |                           |       |   |                          |   |       |               |  |   |               |   |  |   |      
|                                  |  |                           | 4,065 |   |                          |   | 3,452 |               |  |   | 7,303         |   |  |   | 7,360
|Other derivative income (expense) |  |                           | (61   | ) |                          |   | (105  | )             |  |   | (37           | ) |  |   | 477  
|                                  |  |                           |       |   |                          |   |       |               |  |   |               |   |  |   |      
|Total noninterest income          |  | $                         | 4,004 |   |                          | $ | 3,347 |               |  | $ | 7,266         |   |  | $ | 7,837
|                                  |  |                           |       |   |                          |   |       |               |  |   |               |   |  |   |      

Total noninterest income was $4.0 million during the second quarter of 2007, compared to $3.3
million during the second quarter a year ago, an increase of $657,000, or $19.6%. A $400,000 syndication fee earned in the second quarter of 2007 produced most of the increase. On a year-to-date basis, noninterest income in 2007 was $7.3 million
compared to $7.8 million during the same six month period a year ago. This decrease of $571,000, or 7.3%, was largely a result of lower other derivative income of $514,000.

Service charges, principally derived from deposit accounts, were $1.9 million during each of the second quarters in 2007 and 2006. For the first six
months of 2007, service charges totaled $3.7 million compared to $3.8 million during the first half of 2006. The lower service charge revenue in 2007 was primarily caused by a higher earnings credit rate given to customers on their collected account
balances, partially offset by a 3.6% increase in gross activity fees. Our earnings credit rate was 13 basis points higher on average in the second quarter of 2007 as compared to the same quarter in 2006.

Trust fees from our corporate trust services totaled $643,000 in the second quarter of 2007, an increase of $55,000 from the second quarter of 2006. For
the first six months of 2007, trust fees totaled $1.1 million, an increase of $77,000 from the same six month period in 2006.

Investment
management fee income declined in 2007 as compared to 2006 for both the quarter and year-to-date periods. In January 2007, we entered into an agreement with Mesirow Financial, a Chicago-based asset management firm, pursuant to which Mesirow
Financial will provide certain of our customers with sub-advisory investment management services. Concurrent with our entering into this arrangement, several of our former investment management employees terminated their employment and joined
another financial services company in Chicago. We expect that our investment management fees in 2007 will be lower as a result of these events. Investment management fees declined $78,000, or 17.7%, to $362,000 during the second quarter of 2007
compared to the second quarter of 2006. On a year-to-date basis, investment management fees declined $79,000, or 8.7%, to $828,000 in 2007 compared to the first six months of 2006.



23



---

##### Table of Contents

Syndication fees for the first six months of 2007 totaled $400,000, all of which were earned during the
second quarter. Syndication fees for the first six months of 2006 totaled $500,000, all of which were earned during the first quarter. Loan syndication fees are an opportunistic revenue source that has been largely dependent on the level of activity
in the real estate development market we serve as well as our balance sheet and credit risk management. At June 30, 2007, we had deferred recognition of $1.0 million in loan syndication fees which we expect to recognize as noninterest income at
a later date when the conditions for revenue recognition are met.

Other derivative expense in 2007 for the second quarter of $61,000 and
for the first six months of $37,000 relates to changes in the fair value, as well as net cash settlements, of our non-hedged derivative instruments. Other derivative income or expense in 2006 primarily related to certain interest rate swap
agreements we had used to convert fixed rate brokered CDs to a variable rate. The other derivative income reflected the changes in the fair value of both the interest rate swaps and the related hedged brokered CDs, as well as the ineffective portion
of the hedging relationship. In May 2006, we terminated all of our interest rate swaps related to brokered CDs. For the second quarter of 2006, we had other derivative expense of $105,000 and other derivative income of $477,000 for the first six
months of 2006.

Other noninterest income includes fees from standby letters of credit, fees for non-customer usage of our automated teller
machines, gains (losses) from equity or partnership investments, changes in the market value of the assets in our employees deferred compensation plans, and other miscellaneous items. Other noninterest income was $765,000 during the second
quarter of 2007 compared to $522,000 during the same quarter a year ago, while on a year-to-date basis, other noninterest income was $1.2 million in 2007 compared to $1.1 million during the first half of 2006. The increase in both the quarterly and
year-to-date period was primarily due to an increase in the market values of assets in our employees deferred compensation plan, the offset to which is recorded in salary expense.



24



---

##### Table of Contents

Noninterest Expense

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



|                                               |  |                           |        |   |                          |   |        |               |  |   |               |   |  |   |        |  
|---------------------------------------------- |  | ------------------------- | ------ | - | ------------------------ | - | ------ | ------------- |  | - | ------------- | - |  | - | ------ | -
|                                               |  | For the ThreeMonths Ended |        |   | For the Six Months Ended |  
|                                               |  | June 30,2007              |        |   | June 30, 2006            |   |        | June 30, 2007 |  |   | June 30, 2006 |  
|                                               |  | (in thousands)            |       
|Salaries and employee benefits:                |  |                           |        |   |                          |   |        |               |  |   |               |   |  |   |        |  
|Salaries, employment taxes, and medical        |  | $                         | 8,427  |   |                          | $ | 8,110  |               |  | $ | 16,638        |   |  | $ | 16,500 |  
|Incentives, commissions, and retirement        |  |                           | 1,489  |   |                          |   | 2,155  |               |  |   | 2,892         |   |  |   | 4,100  |  
|                                               |  |                           |        |   |                          |   |        |               |  |   |               |   |  |   |        |  
|Total salaries and employee benefits           |  |                           | 9,916  |   |                          |   | 10,265 |               |  |   | 19,530        |   |  |   | 20,600 |  
|                                               |  |                           |        |  
|Occupancy of premises, furniture and equipment |  |                           | 2,905  |   |                          |   | 2,906  |               |  |   | 5,665         |   |  |   | 5,913  |  
|Legal fees, net                                |  |                           | 649    |   |                          |   | 579    |               |  |   | 1,456         |   |  |   | 818    |  
|Other professional services                    |  |                           | 503    |   |                          |   | 351    |               |  |   | 1,184         |   |  |   | 774    |  
|Computer processing                            |  |                           | 440    |   |                          |   | 479    |               |  |   | 880           |   |  |   | 895    |  
|Advertising and public relations               |  |                           | 203    |   |                          |   | 437    |               |  |   | 546           |   |  |   | 573    |  
|Nonperforming asset expense                    |  |                           | 141    |   |                          |   | 33     |               |  |   | 432           |   |  |   | 55     |  
|Other noninterest expense                      |  |                           | 2,895  |   |                          |   | 3,549  |               |  |   | 6,021         |   |  |   | 6,757  |  
|                                               |  |                           |        |   |                          |   |        |               |  |   |               |   |  |   |        |  
|Total noninterest expense                      |  | $                         | 17,652 |   |                          | $ | 18,599 |               |  | $ | 35,714        |   |  | $ | 36,385 |  
|                                               |  |                           |        |   |                          |   |        |               |  |   |               |   |  |   |        |  
|Efficiency Ratio                               |  |                           | 57.95  | % |                          |   | 60.38  | %             |  |   | 59.35         | % |  |   | 57.47  | %
|                                               |  |                           |        |   |                          |   |        |               |  |   |               |   |  |   |        |  

Noninterest expense during the second quarter of 2007 totaled $17.7 million, a decrease of
$947,000, or 5.1%, compared to noninterest expense of $18.6 million during the second quarter of 2006. A decrease in salary and benefits and lower advertising combined to produce the decrease in expense. For the first six months of 2007, noninterest
expense was $35.7 million compared to $36.4 million during the first six months of 2006, a decrease of $671,000 or 1.8%. Lower salaries and benefits and occupancy expenses were partly offset by higher legal fees, other professional services, and
nonperforming asset expense.

For the second quarter of 2007, total salaries and employee benefits expense decreased $349,000, or 3.4%,
compared to the second quarter of 2006, while on a year-to-date basis, total salaries and employee benefits declined $1.1 million, or 5.2%. In both the quarterly and year-to-date comparison, the decrease in expense was due to lower incentives,
commissions, and retirement expenses, partly offset by an increase in base salaries. The decrease in incentives, commission and retirement expense mostly reflects the impact of our financial performance on our incentive bonus program. Total
full-time equivalent employees were 421 at June 30, 2007, compared to 420 at June 30, 2006.

Occupancy of premises and furniture
and equipment expense was $2.9 million for the second quarter of 2007, unchanged from the same quarter a year ago. Occupancy expense for the first half of 2007 was $5.7 million, a decrease of $248,000, or 4.2% compared to the same six month period
in 2006. In January 2007, we signed a lease to move our office in downtown Chicago from one leased facility to another leased facility when the current lease expires in December 2007. We have begun to make improvements to the new space and we expect
to incur incremental occupancy expense while we continue to operate the existing space and make the



25



---

##### Table of Contents

improvements on the new leased space. In addition, we closed our banking facility in Itasca on January 31, 2007 and we expect to close our Orland Park
banking facility during the fourth quarter of 2007. Each of these banking centers was a smaller, leased, store-front location without drive-up teller access. We expect no material impact on our occupancy expense from the closing of these facilities.

Legal fees were $649,000 in the second quarter of 2007 compared to $579,000 during the second quarter of 2006. Legal fees during the first
six months of 2007 totaled $1.5 million or $638,000 higher than the $818,000 of legal expense in the first six months of 2006. The increase in 2007 was primarily driven by increased collection activities, the reorganization of our wealth management
business and other general corporate and contract matters.

Other professional services expense in 2007 increased as compared to 2006
mostly due to sub-advisory investment management services now provided by a third-party asset management firm. Other professional service expenses were $503,000 in the second quarter of 2007 compared to $351,000 during the second quarter of 2006. On
a year-to-date basis, other professional services were $1.2 million for the first six months of 2007 compared to $774,000 in 2006.

Advertising and public relations expense was $203,000 during the second quarter of 2007 compared to $437,000 in the same quarter a year ago. For the first six months of 2007, advertising and public relations expense was $546,000 compared to
$573,000 during the same six month period in 2006. The decrease in the quarterly comparison was due to the timing of our print advertising.

Nonperforming asset expense has increased in 2007 due to the general increase in our nonperforming assets and additional costs associated with the property management and marketing costs associated with a single real estate development
project loan, which has been assigned to our loan work-out department. Nonperforming asset expense was $141,000 during the second quarter of 2007 compared to $33,000 during the second quarter of 2006. For the first six months of 2007, nonperforming
asset expense was $432,000 compared to $55,000 during the same six month period in 2006.

Other noninterest expense principally includes
external audit and tax services, business development and entertainment expenses, computer software license fees, and other operating expenses such as telephone, postage, office supplies and printing. Other noninterest expense was $2.9 million in
the second quarter of 2007, compared to $3.5 million in the second quarter of 2006. On a year-to-date basis, other noninterest expense was $6.0 million in 2007 compared to $6.8 million in 2006. A decrease in consulting services, business development
and entertainment expenses all contributed to the lower level of other noninterest expense.

An efficiency ratio is calculated by dividing
total noninterest expense by total revenues (net interest income and noninterest income). Generally, the lower the efficiency ratio the more efficient the entity is operating. Our efficiency ratio was 58.0% in the second quarter of 2007 compared to
60.4% in the same quarter in 2006. The decrease in noninterest expense produced the lower ratio in 2007. For the first half of 2007, our efficiency ratio increased to 59.4% compared to 57.5% for the first six months of 2006. The less favorable
efficiency ratio in the year-to-date 2007 period primarily reflects reduced total revenues.



26



---

##### Table of Contents

Income Taxes

We recorded income taxes of $3.8 million for the second quarter of 2007, resulting in an effective tax rate of 34.4%, compared with income tax expense of $3.8 million, or an effective tax rate of 37.6%, in the same quarter last year. For
the first six months of 2007, we recorded income taxes of $6.5 million, resulting in an effective income tax rate of 34.2%, compared to $8.8 million of expense in the first half of 2006, or an effective income tax rate of 36.6%. The lower effective
tax rate in 2007 was primarily caused by lower 2007 pre-tax income without a corresponding decrease in favorable permanent differences.



27



---

##### Table of Contents

FINANCIAL CONDITION

Overview

Total assets decreased $80.0 million, or 2.4%, to $3.30 billion at June 30, 2007 from total assets of $3.38
billion at December 31, 2006. The decrease in total assets was primarily due to lower cash and cash equivalent balances of $83.6 million. Total loans increased $61.3 million while investment securities declined $58.9 million. Total deposits
decreased by $127.7 million to $2.51 billion at June 30, 2007, compared to $2.64 billion at December 31, 2006, while other borrowings increased by $28.8 million and FHLB advances increased by $25.0 million. Total stockholders equity
at June 30, 2007 was $267.5 million, compared to $271.2 million at December 31, 2006.

Cash and Cash Equivalents

Period-end cash and cash equivalents were $51.3 million at June 30, 2007, compared to $134.9 million at December 31, 2006. Short-term
investments were liquidated during the first half of 2007 in response to deposit outflows from certain significant deposit sources.

Investment
Securities

Investment securities totaled $610.2 million at June 30, 2007, compared to $669.1 million at December 31, 2006, a
decrease of $58.9 million, or 8.8%. Cash flows from maturities and payments on investment securities were not reinvested in securities as our deposit balances have declined since the beginning of the year. The weighted average life of the investment
portfolio at June 30, 2007 was approximately 5.7 years, compared to approximately 5.3 years at December 31, 2006.

At
June 30, 2007, the net unrealized loss on the available for sale securities totaled $16.6 million, an increase of $7.4 million from December 31, 2006. We believe that the unrealized losses arose from increased market interest rates, not
credit deterioration, and that no other than temporary impairment exists. We have the intent and believe we have the ability to hold all of these securities for the time necessary to recover the amortized cost.

Loans

Total loans increased $61.3 million, or 2.5%,
to $2.56 billion at June 30, 2007 from total loans of $2.50 billion at December 31, 2006. Commercial loans increased $75.7 million, or 3.3%, while consumer-oriented loans declined $14.4 million. Growth in total commercial loans was driven
by the 12.1% increase in commercial and industrial (C&I) loans and the 5.5% increase in commercial real estate loans, while real estateconstruction loans decreased 8.2%.



28



---

##### Table of Contents

The composition of our loan portfolio as of June 30, 2007 and December 31, 2006 was as follows:



|                               |  |                        |           |                         |                   |   |        |   |                         |  |     |  
|------------------------------ |  | ---------------------- | --------- | ----------------------- | ----------------- | - | ------ | - | ----------------------- |  | --- | -
|                               |  | June 30, 2007          |           |                         | December 31, 2006 |  
|                               |  | Amount                 |           | Percentageof GrossLoans |                   |   | Amount |   | Percentageof GrossLoans | 
|                               |  | (dollars in thousands) |          
|Commercial and industrial      |  | $                      | 864,312   |                         | 34                | % |        | $ | 770,863                 |  | 31  | %
|Commercial real estate secured |  |                        | 835,211   |                         | 32                |   |        |   | 791,962                 |  | 31  |  
|Real estateconstruction       |  |                        | 683,353   |                         | 27                |   |        |   | 744,317                 |  | 30  |  
|Consumer-oriented loans        |  |                        | 179,169   |                         | 7                 |   |        |   | 193,602                 |  | 8   |  
|                               |  |                        |           |                         |                   |   |        |   |                         |  |     |  
|Gross loans                    |  | $                      | 2,562,045 |                         | 100               | % |        | $ | 2,500,744               |  | 100 | %
|                               |  |                        |           |                         |                   |   |        |   |                         |  |     |  

Our C&I loans increased $93.5 million, or 12.1%, to $864.3 million at June 30, 2007, as
compared to $771.0 million at December 31, 2006. C&I loans include all loans for commercial purposes (other than real estate construction) that are either unsecured or secured by collateral other than commercial real estate. These loans are
generally made to operating companies in a variety of businesses excluding commercial real estate investment. We believe the growth in our C&I portfolio demonstrates the progress of our strategy to expand our business with operating companies.

Our commercial real estate secured loans increased $43.3 million, or 5.5%, to $835.2 million at June 30, 2007, as compared to $792.0
million at December 31, 2006. Both loans secured by non-owner occupied commercial property and owner-occupied commercial real estate increased. The composition of our commercial real estate secured portfolio was approximately as follows as of
the dates indicated:



|                                     |  |                                                |   |  |                          |   |  |                                                |   |  |                          |  
|------------------------------------ |  | ---------------------------------------------- | - |  | ------------------------ | - |  | ---------------------------------------------- | - |  | ------------------------ | -
|                                     |  | June 30, 2007                                  |   |  | December 31, 2006        |  
|                                     |  | Percentageof TotalCommercialReal EstateSecured |   |  | Percentage of GrossLoans |   |  | Percentageof TotalCommercialReal EstateSecured |   |  | Percentage of GrossLoans |  
|Commercial properties:               |  |                                                |   |  |                          |   |  |                                                |   |  |                          |  
|Non-owner occupied                   |  | 60                                             | % |  | 19                       | % |  | 61                                             | % |  | 19                       | %
|Owner occupied                       |  | 24                                             | % |  | 8                        | % |  | 23                                             | % |  | 7                        | %
|                                     |  |                                                |   |  |                          |   |  |                                                |   |  |                          |  
|Subtotal                             |  | 84                                             | % |  | 27                       | % |  | 84                                             | % |  | 26                       | %
|Residential income properties        |  | 16                                             | % |  | 5                        | % |  | 16                                             | % |  | 5                        | %
|                                     |  |                                                |   |  |                          |   |  |                                                |   |  |                          |  
|Total commercial real estate secured |  | 100                                            | % |  | 32                       | % |  | 100                                            | % |  | 31                       | %
|                                     |  |                                                |   |  |                          |   |  |                                                |   |  |                          |  

Our real estate-construction loans decreased by $61.0 million, or 8.2%, to $683.4 million at
June 30, 2007, as compared to $744.3 million at December 31, 2006. The decline was primarily in loans for condominium conversions. We expect that the slowing residential real estate market will continue to impact the amount of loans in
this portion of our commercial loan portfolio. The composition of our real estate-construction portfolio was approximately as follows as of the dates indicated:



29



---

##### Table of Contents

|                                                  |  |                                     |   |  |                          |   |  |                                     |   |  |                          |  
|------------------------------------------------- |  | ----------------------------------- | - |  | ------------------------ | - |  | ----------------------------------- | - |  | ------------------------ | -
|                                                  |  | June 30, 2007                       |   |  | December 31, 2006        |  
|                                                  |  | Percentageof TotalConstructionLoans |   |  | Percentage of GrossLoans |   |  | Percentageof TotalConstructionLoans |   |  | Percentage of GrossLoans |  
|Residential properties:                           |  |                                     |   |  |                          |   |  |                                     |   |  |                          |  
|Single family                                     |  | 27                                  | % |  | 7                        | % |  | 26                                  | % |  | 8                        | %
|Multifamily, including townhomes and condominiums |  | 33                                  | % |  | 9                        | % |  | 43                                  | % |  | 13                       | %
|                                                  |  |                                     |   |  |                          |   |  |                                     |   |  |                          |  
|Subtotal                                          |  | 60                                  | % |  | 16                       | % |  | 69                                  | % |  | 21                       | %
|Commercial properties                             |  | 18                                  | % |  | 5                        | % |  | 15                                  | % |  | 4                        | %
|Land and land development                         |  | 22                                  | % |  | 6                        | % |  | 16                                  | % |  | 5                        | %
|                                                  |  |                                     |   |  |                          |   |  |                                     |   |  |                          |  
|Total real estate-construction                    |  | 100                                 | % |  | 27                       | % |  | 100                                 | % |  | 30                       | %
|                                                  |  |                                     |   |  |                          |   |  |                                     |   |  |                          |  

Total consumer-oriented loans, which include residential real estate mortgages, home equity loans
and lines of credit, and other consumer loans, decreased $14.4 million, or 7.5%, to $179.2 million at June 30, 2007. Residential real estate loans were essentially unchanged at $62 million. Home equity loans and lines of credit declined $13.4
million, or 11.5%. The portion of home equity loans and lines of credit that was originally sourced through brokers declined $4.9 million during the first half of 2007 and totaled $18.4 million at June 30, 2007.

Loan Quality and Nonperforming Assets

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



|                                                                         |  |                        |        |   |              |   |        |              |  |   |        |  
|------------------------------------------------------------------------ |  | ---------------------- | ------ | - | ------------ | - | ------ | ------------ |  | - | ------ | -
|                                                                         |  | June 30,2007           |        |   | Dec. 31,2006 |   |        | June 30,2006 | 
|                                                                         |  | (dollars in thousands) |       
|Loans contractually past due 90 days or more but still accruing interest |  | $                      | 1,339  |   |              | $ | 10,046 |              |  | $ | 2,440  |  
|Nonaccrual loans                                                         |  |                        |        |   |              |   |        |              |  |   |        |  
|Commercial and industrial                                                |  |                        | 3,632  |   |              |   | 4,686  |              |  |   | 6,804  |  
|Commercial real estate secured                                           |  |                        | 6,333  |   |              |   | 1,037  |              |  |   | 2,234  |  
|Real estate  construction                                               |  |                        | 22,185 |   |              |   | 15,570 |              |  |   | 14,607 |  
|All other loan types                                                     |  |                        | 2,712  |   |              |   | 1,818  |              |  |   | 3,274  |  
|                                                                         |  |                        |        |   |              |   |        |              |  |   |        |  
|Total nonaccrual                                                         |  |                        | 34,862 |   |              |   | 23,111 |              |  |   | 26,919 |  
|                                                                         |  |                        |        |   |              |   |        |              |  |   |        |  
|Total nonperforming loans                                                |  |                        | 36,201 |   |              |   | 33,157 |              |  |   | 29,359 |  
|Other real estate owned                                                  |  |                        | 943    |   |              |   | 412    |              |  |   | 234    |  
|Other repossessed assets                                                 |  |                        |       |   |              |   |       |              |  |   |       |  
|                                                                         |  |                        |        |   |              |   |        |              |  |   |        |  
|Total nonperforming assets                                               |  | $                      | 37,144 |   |              | $ | 33,569 |              |  | $ | 29,593 |  
|                                                                         |  |                        |        |   |              |   |        |              |  |   |        |  
|Restructured loans not included in nonperforming assets                  |  |                        |       |   |              |   |       |              |  |   |       |  
|Nonperforming loans to total loans                                       |  |                        | 1.41   | % |              |   | 1.33   | %            |  |   | 1.19   | %
|Nonperforming assets to total loans plus repossessed property            |  |                        | 1.45   | % |              |   | 1.34   | %            |  |   | 1.20   | %
|Nonperforming assets to total assets                                     |  |                        | 1.13   | % |              |   | 0.99   | %            |  |   | 0.88   | %



30



---

##### Table of Contents

Nonperforming assets were $37.1 million, or 1.13% of total assets on June 30, 2007, compared to
$33.6 million, or 0.99% of total assets on December 31, 2006, and $29.6 million, or 0.88% of total assets on June 30, 2006. The increase in nonperforming loans occurred primarily in real estateconstruction and commercial real estate
secured. During the second quarter, we moved the last of three loans to one borrower to nonaccrual. This borrowers three loans for three separate real estate projects totaled $17.2 million at June 30, 2007. The second largest exposure to
a single borrower within nonaccrual loans is a $5.0 million commercial real estate secured loan.

We believe the decline in residential
home sales in the Chicagoland market that began in 2006 has reduced demand not only for new homes but also for developed residential lots and vacant land. Where there is reduced demand for new homes, residential developers may be required to hold
their properties for longer periods of time which can lead to greater interest cost and lower or deferred cash flows for the developer. These current market conditions were reflected in our evaluation of the adequacy of the allowance for loan
losses.

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



|                                                    |  |                |        |              |   |              |  |   |       
|--------------------------------------------------- |  | -------------- | ------ | ------------ | - | ------------ |  | - | ------
|                                                    |  | June 30,2007   |        | Dec. 31,2006 |   | June 30,2006
|                                                    |  | (in thousands)
|Recorded balance of impaired loans                  |  | $              | 36,045 |              | $ | 24,136       |  | $ | 45,353
|Allowance for loan losses related to impaired loans |  | $              | 4,249  |              | $ | 2,528        |  | $ | 2,805 

The allowance for impaired loans increased $1.7 million to $4.2 million at June 30, 2007,
reflecting our estimate of probable losses in our impaired loans. The allowance for certain real estate secured loans increased as the estimated work-out periods for the related loans lengthened.

In addition to nonperforming and impaired loans, we also monitor performing loans where appropriate. Loans to residential development borrowers comprise
a greater portion of the performing loans that are receiving heightened monitoring during 2007 as compared to prior years. Diminished demand in the residential housing market may reveal specific project or borrower weaknesses that otherwise might
have been mitigated by a stronger or more vibrant market.

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



31



---

##### Table of Contents

the appropriate level of the allowance includes identifying problem loans, estimating the amount of probable loss related to those loans, estimating probable
losses from specific portfolio segments and evaluating the impact to our loan portfolio of a number of economic and qualitative factors. Although management believes that the allowance for loan losses is adequate to absorb probable losses on
existing loans that may become uncollectible at this point in time, there can be no assurance that our allowance will prove sufficient to cover actual loan losses in the future.

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



|                                                     |  |                        |           |   |                      |   |           |              |  |   |               |   |  |   |           |  
|---------------------------------------------------- |  | ---------------------- | --------- | - | -------------------- | - | --------- | ------------ |  | - | ------------- | - |  | - | --------- | -
|                                                     |  | For Three Months Ended |           |   | For Six Months Ended |  
|                                                     |  | June 30,2007           |           |   | June 30,2006         |   |           | June 30,2007 |  |   | June 30, 2006 |  
|                                                     |  | (dollars in thousands) |          
|Average total loans                                  |  | $                      | 2,516,236 |   |                      | $ | 2,431,991 |              |  | $ | 2,501,641     |   |  | $ | 2,399,390 |  
|                                                     |  |                        |           |   |                      |   |           |              |  |   |               |   |  |   |           |  
|Total loans at end of period                         |  | $                      | 2,562,000 |   |                      | $ | 2,467,963 |              |  | $ | 2,562,000     |   |  | $ | 2,467,963 |  
|                                                     |  |                        |           |   |                      |   |           |              |  |   |               |   |  |   |           |  
|Allowance for loan losses:                           |  |                        |           |   |                      |   |           |              |  |   |               |   |  |   |           |  
|Allowance at beginning of period                     |  | $                      | 38,330    |   |                      | $ | 36,686    |              |  | $ | 37,516        |   |  | $ | 37,481    |  
|Net (charge-offs) recoveries:                        |  |                        |           |   |                      |   |           |              |  |   |               |   |  |   |           |  
|Commercial and commercial real estate                |  |                        | (215      | ) |                      |   | (2,215    | )            |  |   | (1,390        | ) |  |   | (3,714    | )
|Real estateconstruction                             |  |                        | (10       | ) |                      |   | (3        | )            |  |   | (1,064        | ) |  |   | (3        | )
|Residential real estate mortgages and consumer loans |  |                        | (206      | ) |                      |   | (60       | )            |  |   | (763          | ) |  |   | (256      | )
|                                                     |  |                        |           |   |                      |   |           |              |  |   |               |   |  |   |           |  
|Total net charge-offs                                |  |                        | (431      | ) |                      |   | (2,278    | )            |  |   | (3,217        | ) |  |   | (3,973    | )
|Provision for loan losses                            |  |                        | 1,900     |   |                      |   | 2,100     |              |  |   | 5,500         |   |  |   | 3,000     |  
|                                                     |  |                        |           |   |                      |   |           |              |  |   |               |   |  |   |           |  
|Allowance at end of period                           |  | $                      | 39,799    |   |                      | $ | 36,508    |              |  | $ | 39,799        |   |  |   | 36,508    |  
|                                                     |  |                        |           |   |                      |   |           |              |  |   |               |   |  |   |           |  
|Annualized net charge-offs to average total loans    |  |                        | 0.07      | % |                      |   | 0.37      | %            |  |   | 0.26          | % |  |   | 0.33      | %
|Allowance to total loans at end of period            |  |                        | 1.55      | % |                      |   | 1.48      | %            |  |   | 1.55          | % |  |   | 1.48      | %
|Allowance to nonperforming loans                     |  |                        | 109.94    | % |                      |   | 124.35    | %            |  |   | 109.94        | % |  |   | 124.35    | %

Our allowance for loan losses was $39.8 million at June 30, 2007, or 1.55% of end-of-period
loans and 109.94% of nonperforming loans. At June 30, 2006, the allowance for loan losses was $36.5 million, which represented 1.48% of end-of-period loans and 124.35% of nonperforming loans.

Net charge-offs during the second quarter of 2007 were $431,000, 0.07% of average loans on an annualized basis. In comparison, net charge-offs during the
second quarter of 2006 were $2.3 million, 0.37% of average loans on an annualized basis. For the first six months of 2007, net charge-offs totaled $3.2 million, or 0.26% of average loans compared to $4.0 million, or 0.33% of average loans, during
the same year-to-date period in 2006.

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 $1.9
million for the second quarter of 2007, compared to $2.1 million for the first quarter of 2006. Our provision for loan losses was $5.5 million for the first



32



---

##### Table of Contents

half of 2007 compared to $3.0 million for the same period in 2006. Higher specific reserves for impaired loans, the increase in non-performing loans and the
amount of performing loans that have been assessed by us as having higher credit risk, and therefore receiving heightened monitoring, increased the provision for loan losses in 2007 as compared to 2006. Our provision for loan losses in any
individual accounting period is not an indicator of provisioning in subsequent reporting periods.

Deposits

Total deposit balances at June 30, 2007 declined $127.7 million from year-end 2006 largely
from the impact of two events. Non-interest-bearing deposits include deposits relating to corporate paying agent trusts which routinely increase at common bond coupon dates such as December 31stand reflect regular seasonal characteristics. These trust deposits declined $39.9 million between year end 2006 and June 30, 2007. In addition, money market deposits from a significant customer
declined approximately $100 million over the first six months of 2007. We expect that the remaining deposits of approximately $95 million from this customer will be withdrawn by year-end. As a result, total in-market deposits declined $149.3
million. Total out-of-market deposits increased by $21.6 million, or 3.0%, from year-end 2006.

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



|                                            |  |                |           |               |   |          
|------------------------------------------- |  | -------------- | --------- | ------------- | - | ---------
|                                            |  | June 30,2007   |           | Dec. 31, 2006
|                                            |  | (in thousands)
|In-market deposits:                         |  |                |           |               |   |          
|Non-interest bearing deposits               |  | $              | 383,393   |               | $ | 447,862  
|NOW accounts                                |  |                | 77,029    |               |   | 82,484   
|Savings accounts                            |  |                | 53,684    |               |   | 59,523   
|Money market accounts                       |  |                | 709,981   |               |   | 742,859  
|Customer certificates of deposit            |  |                | 477,140   |               |   | 516,624  
|Public time deposits                        |  |                | 67,446    |               |   | 68,580   
|                                            |  |                |           |               |   |          
|Total in-market deposits                    |  |                | 1,768,673 |               |   | 1,917,932
|                                            |  |               
|Out-of-market deposits:                     |  |                |           |               |   |          
|Brokered money market deposits              |  |                | 65,944    |               |   | 65,090   
|Out-of-local-market certificates of deposit |  |                | 115,543   |               |   | 105,119  
|Brokered certificates of deposit            |  |                | 562,095   |               |   | 551,786  
|                                            |  |                |           |               |   |          
|Total out-of-market deposits                |  |                | 743,582   |               |   | 721,995  
|                                            |  |                |           |               |   |          
|Total deposits                              |  | $              | 2,512,255 |               | $ | 2,639,927
|                                            |  |                |           |               |   |          



33



---

##### Table of Contents

Average deposits during the first half of 2007 increased $24.8 million to $2.54 billion compared to $2.52
billion during the first half of 2006. Money market accounts during 2007 increased $165.2 million, primarily in higher rate market priced money market accounts. Partly offsetting the increase in money market balances were lower customer certificates
of deposit of $43.0 million, non-interest bearing deposit accounts of $21.3 million, brokered certificates of deposits of $21.1 million, and out-of-local-market certificates of deposits of $17.8 million.

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



|                                            |  |                                       |           |                    |                                       |   |      |      |   |                |   |                    |  |       |      |  |      |  
|------------------------------------------- |  | ------------------------------------- | --------- | ------------------ | ------------------------------------- | - | ---- | ---- | - | -------------- | - | ------------------ |  | ----- | ---- |  | ---- | -
|                                            |  | For the Six Months EndedJune 30, 2007 |           |                    | For the Six Months EndedJune 30, 2006 |  
|                                            |  | AverageBalance                        |           | Percent OfDeposits |                                       |   | Rate |      |   | AverageBalance |   | Percent OfDeposits |  |       | Rate | 
|                                            |  | (dollars in thousands)                |          
|Noninterest-bearing demand deposits         |  | $                                     | 380,450   |                    | 15.0                                  | % |      |     | % |                | $ | 401,718            |  | 15.9  | %    |  |     | %
|NOW accounts                                |  |                                       | 82,784    |                    | 3.3                                   |   |      | 0.75 |   |                |   | 100,234            |  | 4.0   |      |  | 0.54 |  
|Money market accounts                       |  |                                       | 816,784   |                    | 32.1                                  |   |      | 4.40 |   |                |   | 651,558            |  | 25.9  |      |  | 3.57 |  
|Savings deposits                            |  |                                       | 56,647    |                    | 2.2                                   |   |      | 0.28 |   |                |   | 70,506             |  | 2.8   |      |  | 0.28 |  
|Time deposits:                              |  |                                       |           |                    |                                       |   |      |      |   |                |   |                    |  |       |      |  |      |  
|Certificates of deposit                     |  |                                       | 504,612   |                    | 19.8                                  |   |      | 4.72 |   |                |   | 547,621            |  | 21.7  |      |  | 3.89 |  
|Out-of-local-market certificates of deposit |  |                                       | 109,604   |                    | 4.3                                   |   |      | 5.41 |   |                |   | 127,423            |  | 5.1   |      |  | 4.49 |  
|Brokered certificates of deposit            |  |                                       | 526,331   |                    | 20.7                                  |   |      | 5.05 |   |                |   | 547,432            |  | 21.7  |      |  | 4.64 |  
|Public Funds                                |  |                                       | 67,281    |                    | 2.6                                   |   |      | 5.14 |   |                |   | 73,158             |  | 2.9   |      |  | 4.19 |  
|                                            |  |                                       |           |                    |                                       |   |      |      |   |                |   |                    |  |       |      |  |      |  
|Total time deposits                         |  |                                       | 1,207,828 |                    | 47.4                                  |   |      | 4.95 |   |                |   | 1,295,634          |  | 51.4  |      |  | 4.29 |  
|                                            |  |                                       |           |                    |                                       |   |      |      |   |                |   |                    |  |       |      |  |      |  
|Total deposits                              |  | $                                     | 2,544,493 |                    | 100.0                                 | % |      |      |   |                | $ | 2,519,650          |  | 100.0 | %    |  |      |  
|                                            |  |                                       |           |                    |                                       |   |      |      |   |                |   |                    |  |       |      |  |      |  

Other Borrowings and Liabilities

Other borrowings include securities sold under agreements to repurchase, federal funds purchased and U.S. Treasury tax and loan note option accounts.
Period-end other borrowings increased $28.8 million to $291.1 million at June 30, 2007, as compared to $262.3 million at December 31, 2006. In addition, borrowings from the FHLB increased $25.0 million during the first six months of 2007
to $105.0 million at June 30, 2007.

At June 30, 2007, we had $45.4 million of junior subordinated debentures issued to TAYC
Capital Trust I, our wholly-owned statutory trust, that are callable by us at par beginning in October 2007. We plan to review alternatives available to us to refinance or repay the 9.75% fixed-rate trust preferred securities and the related junior
subordinated debentures. Unamortized issuance costs relating to these debentures were $2.6 million on June 30, 2007. Unamortized issuance costs would be recognized as an expense if the debentures were called by us in 2007 or thereafter.



34



---

##### Table of Contents

CAPITAL RESOURCES

At June 30, 2007 and December 31, 2006, both the Company and Cole Taylor Bank were considered well capitalized under capital guidelines for bank holding companies and banks. The Companys
and Cole Taylor Banks capital ratios were as follows as of the dates indicated:



|                                         |  |                        |         |       |                             |   |        |                                                              |          |  |       |        |  |       |          |  |        |  
|---------------------------------------- |  | ---------------------- | ------- | ----- | --------------------------- | - | ------ | ------------------------------------------------------------ | -------- |  | ----- | ------ |  | ----- | -------- |  | ------ | -
|                                         |  | ACTUAL                 |         |       | FOR CAPITALADEQUACYPURPOSES |   |        | TO BE WELLCAPITALIZED UNDERPROMPTCORRECTIVE ACTIONPROVISIONS |         
|                                         |  | AMOUNT                 |         | RATIO |                             |   | AMOUNT |                                                              | RATIO    |  |       | AMOUNT |  | RATIO |         
|                                         |  | (dollars in thousands) |        
|As of June 30, 2007:                     |  |                        |         |       |                             |   |        |                                                              |          |  |       |        |  |       |          |  |        |  
|Total Capital (to Risk Weighted Assets)  |  |                        |         |       |                             |   |        |                                                              |          |  |       |        |  |       |          |  |        |  
|Taylor Capital Group, Inc.               |  | $                      | 374,516 |       | 13.21                       | % |        | >$                                                           | 226,832  |  | >8.00 | %      |  | >$    | 283,540  |  | >10.00 | %
|Cole Taylor Bank                         |  |                        | 351,563 |       | 12.42                       |   |        |                                                              | >226,392 |  | >8.00 |        |  |       | >282,989 |  | >10.00 |  
|Tier I Capital (to Risk Weighted Assets) |  |                        |         |       |                             |   |        |                                                              |          |  |       |        |  |       |          |  |        |  
|Taylor Capital Group, Inc.               |  |                        | 339,020 |       | 11.96                       |   |        |                                                              | >113,416 |  | >4.00 |        |  |       | >170,124 |  | >6.00  |  
|Cole Taylor Bank                         |  |                        | 316,135 |       | 11.17                       |   |        |                                                              | >113,196 |  | >4.00 |        |  |       | >169,794 |  | >6.00  |  
|Leverage (to average assets)             |  |                        |         |       |                             |   |        |                                                              |          |  |       |        |  |       |          |  |        |  
|Taylor Capital Group, Inc.               |  |                        | 339,020 |       | 10.39                       |   |        |                                                              | >130,564 |  | >4.00 |        |  |       | >163,205 |  | >5.00  |  
|Cole Taylor Bank                         |  |                        | 316,135 |       | 9.71                        |   |        |                                                              | >130,238 |  | >4.00 |        |  |       | >162,798 |  | >5.00  |  
|                                         |  |                        |         |       |                             |  
|As of December 31, 2006:                 |  |                        |         |       |                             |   |        |                                                              |          |  |       |        |  |       |          |  |        |  
|Total Capital (to Risk Weighted Assets)  |  |                        |         |       |                             |   |        |                                                              |          |  |       |        |  |       |          |  |        |  
|Taylor Capital Group, Inc.               |  | $                      | 372,451 |       | 13.35                       | % |        | >$                                                           | 223,140  |  | >8.00 | %      |  | >$    | 278,925  |  | >10.00 | %
|Cole Taylor Bank                         |  |                        | 334,293 |       | 12.01                       |   |        |                                                              | >222,706 |  | >8.00 |        |  |       | >278,382 |  | >10.00 |  
|Tier I Capital (to Risk Weighted Assets) |  |                        |         |       |                             |   |        |                                                              |          |  |       |        |  |       |          |  |        |  
|Taylor Capital Group, Inc.               |  |                        | 337,553 |       | 12.10                       |   |        |                                                              | >111,570 |  | >4.00 |        |  |       | >167,355 |  | >6.00  |  
|Cole Taylor Bank                         |  |                        | 299,462 |       | 10.76                       |   |        |                                                              | >111,353 |  | >4.00 |        |  |       | >167,029 |  | >6.00  |  
|Leverage (to average assets)             |  |                        |         |       |                             |   |        |                                                              |          |  |       |        |  |       |          |  |        |  
|Taylor Capital Group, Inc.               |  |                        | 337,553 |       | 10.17                       |   |        |                                                              | >132,825 |  | >4.00 |        |  |       | >166,031 |  | >5.00  |  
|Cole Taylor Bank                         |  |                        | 299,462 |       | 9.04                        |   |        |                                                              | >132,488 |  | >4.00 |        |  |       | >165,610 |  | >5.00  |  

During the first half of 2007, Cole Taylor Banks capital ratios increased as retained
earnings increased regulatory capital. During this period, while the Bank's average assets decreased slightly, the change in asset mix to more loans and fewer investment securities increased risk-weighted assets. As result, the Bank's leverage ratio
increased to a greater degree than the total and Tier I capital to risk-weighted asset ratios. Cole Taylor Bank is subject to dividend restrictions established by regulatory authorities. The dividends, as of June 30, 2007, that Cole Taylor Bank
could declare and pay to the Company, without the approval of regulatory authorities, amounted to approximately $80.2 million. The Bank did not pay any dividend to the Company during the first six months of 2007.

During the first six months of 2007, the Companys total capital levels increased only modestly as the retention of earnings was mostly offset by
the repurchase of $9.9 million of Company common stock. The Company's total and Tier I capital ratios decreased, due to the increase in risk-weighted assets. The Company's leverage ratio increased due to the decline in average assets. During 2007,
we declared common stock dividends of $0.20 per share, totaling $2.2 million.



35



---

##### Table of Contents

LIQUIDITY

During the first six months of 2007, our total assets declined by $80.0 million as cash and cash equivalent balances and cash flows from our investment portfolio were used to fund total deposit out flows of $128.2 million and loan growth of
$62.9 million. Deposit outflows resulted primarily from decreases in deposit balances from certain significant deposit customers. In connection with our liquidity risk management, we evaluate and closely monitor significant customer deposit balances
for stability and average life. In order to maintain sufficient liquidity to meet all of our loan and deposit customers withdrawal and funding demands, we routinely measure and monitor the volume of our liquid assets and available funding
sources. Additional sources of liquidity for Cole Taylor Bank include Federal Home Loan Bank advances, the Federal Reserve Banks Borrower-in-Custody Program, federal funds borrowing lines from larger correspondent banks and pre-approved
repurchase agreement availability with major brokers and banks.

At the holding company level, cash and cash equivalents totaled $21.4
million at June 30, 2007, as compared to $34.9 million at December 31, 2006. Cash outflows during the first six months of 2007 included $9.9 million for the repurchase of 334,761 shares of our common stock, $2.2 million of dividends paid
on our common stock and $2.8 million of interest paid on our junior subordinated debentures. Sources of holding company liquidity during the first half of 2007 included the receipt of $228,000 from the exercise of stock options. The Company, as of
June 30, 2007, had a $20.0 million revolving line of credit that has not 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 June 30, 2007, we had $978 million of undrawn commitments to extend credit and
$95 million of financial and performance standby letters of credit. In comparison, at December 31, 2006, we had $915 million of undrawn commitments to extend credit and $110 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.



36



---

##### Table of Contents

Derivative Financial Instruments

The following table describes the derivative instruments outstanding at June 30, 2007 (dollars in thousands):



|                                                       |  |                |         |              |                         |          |           |           |   |      |  
|------------------------------------------------------ |  | -------------- | ------- | ------------ | ----------------------- | -------- | --------- | --------- | - | ---- | -
|Product                                                |  | NotionalAmount |         | Strike Rates |                         | Maturity |           | FairValue |  
|Derivative Instruments designated as cash flow hedges: |  |                |         |              |                         |          |           |           |   |      |  
|Prime Floor                                            |  | $              | 100,000 |              | 6.25%                   |          | 7/12/2010 |           | $ | 89   |  
|Prime Collar                                           |  |                | 150,000 |              | 7.75% and 8.505%        |          | 5/5/2009  |           |   | 81   |  
|Prime Collar                                           |  |                | 150,000 |              | 7.75% and 8.585%        |          | 5/5/2010  |           |   | 117  |  
|                                                       |  |                |         |              |                         |          |           |           |   |      |  
|Subtotal                                               |  |                | 400,000 |              |                         |          |           |           |   |      |  
|                                                       |  |                |         |             
|Non-hedging derivative instruments:                    |  |                |         |              |                         |          |           |           |   |      |  
|Prime Floor                                            |  |                | 100,000 |              | 5.50%                   |          | 6/30/2010 |           |   | 38   |  
|Interest Rate Swappay fixed/receive variable          |  |                | 5,918   |              | Pay 6.10% Receive 6.57% |          | 8/1/2015  |           |   | 159  |  
|Interest Rate Swapreceive fixed/pay variable          |  |                | 5,918   |              | Receive 6.10% Pay 6.57% |          | 8/1/2015  |           |   | (159 | )
|                                                       |  |                |         |              |                         |          |           |           |   |      |  
|Subtotal                                               |  |                | 111,836 |              |                         |          |           |           |   |      |  
|                                                       |  |                |         |              |                         |          |           |           |   |      |  
|Total                                                  |  | $              | 511,836 |              |                         |          |           |           |   |      |  
|                                                       |  |                |         |              |                         |          |           |           |   |      |  

At June 30, 2007, we had $400 million of notional amount of derivative instruments that are
designated as cash flow hedges. Any changes in fair value of these instruments, which are designated as cash flow hedges against interest receipts from Prime-based loans, are recorded in other comprehensive income, net of tax.

We also had $111.8 million of notional amount of derivative instruments that are not designated as accounting hedges. Changes in fair value of these
instruments, as well as any net cash settlements, are recognized in noninterest income as other derivative income or expense. During the second quarter of 2007, as an accommodation to a customer, we entered into a $5.9 million amortizing notional
amount interest rate swap. At the same time, in order to offset our exposure, we entered into a $5.9 million interest rate swap with a different counterparty with offsetting terms.

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

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

Interest rate risk is the most significant market risk affecting
us. Other types of market risk, such as foreign currency risk and commodity price risk, do not arise in the normal course of our business activities. Interest rate risk can be defined as the exposure to a movement in interest rates that could have
an adverse effect on our net interest income or the market value of our financial instruments. The ongoing monitoring and management of this risk is an important component of our asset and liability management process, which is governed by policies



37



---

##### Table of Contents

established by the Board of Directors and carried out by Cole Taylor Banks Asset/Liability Management Committee, or ALCO. ALCOs objectives are to
manage, to the degree prudently possible, our exposure to interest rate risk over both the one year planning cycle and the longer term strategic horizon and, at the same time, to provide a stable and steadily increasing flow of net interest income.
Interest rate risk management activities include establishing guidelines for tenor and repricing characteristics of new business flow, the maturity ladder of wholesale funding and investment security purchase and sale strategies, as well as the use
of derivative financial instruments.

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

Our primary measurement of interest rate risk is earnings at risk, which is determined through computerized simulation modeling. The
primary simulation model assumes a static balance sheet, a parallel interest rate rising or declining ramp and uses the balances, rates, maturities and repricing characteristics of all of our existing assets and liabilities, including derivative
instruments. These models are built with the sole objective of measuring the volatility of the embedded interest rate risk as of the balance sheet date and, as such, do not provide for growth or changes in balance sheet composition. Projected net
interest income is computed by the model assuming market rates remain unchanged and compares those results to other interest rate scenarios with changes in the magnitude, timing, and relationship between various interest rates. The impact of
embedded options in products, such as callable agencies and mortgage-backed securities, real estate mortgage loans, and callable borrowings, are also considered. Changes in net interest income in the rising and declining rate scenarios are then
measured against the net interest income in the rates unchanged scenario. ALCO utilizes the results of the model to quantify the estimated exposure of our net interest income to sustained interest rate changes.

Our simulation modeling of the June 30, 2007 balance sheet, using the market interest rates in effect at period-end (the rates unchanged
scenario), indicated that our net interest margin will decline in future periods as many of our interest-bearing liabilities will reprice to current rates as they mature or reprice. Additional critical factors affecting our net interest margin that
are not specifically measured as part of interest rate risk are the impact of competition on loan and deposit pricing as well as changes in our balance sheet such as the mix of our funding.

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



|                                 |  |                                                                      |        |   |                      |       |    |              |   |        |                  |  |       |   
|-------------------------------- |  | -------------------------------------------------------------------- | ------ | - | -------------------- | ----- | -- | ------------ | - | ------ | ---------------- |  | ----- | --
|                                 |  | Change in Future Net Interest Income from Rates Unchanged Simulation |       
|                                 |  | At June 30, 2007                                                     |        |   | At December 31, 2006 |      
|                                 |  | (dollars in thousands)                                               |       
|Change in interest rates         |  | DollarChange                                                         |        |   | PercentageChange     |       |    | DollarChange |   |        | PercentageChange | 
|+200 basis points over one year  |  | $                                                                    | 950    |   |                      | 0.91  | %  |              | $ | 1,645  |                  |  | 1.52  | % 
|- 200 basis points over one year |  |                                                                      | (2,291 | ) |                      | (2.20 | )% |              |   | (2,411 | )                |  | (2.23 | )%



38



---

##### Table of Contents

Our simulation modeling at June 30, 2007 indicated that future net interest income in a rising rate
environment would be higher than that projected in a rates unchanged environment. Net interest income in year one in a 200 basis point rising rate scenario was calculated to be $950,000, or 0.9%, higher than net interest income in a rates unchanged
scenario. That opportunity for increased net interest income would be diminished, however, if market forces negatively impact our loan and deposit pricing and our funding mix were to change.

Conversely, our simulation modeling of a falling interest rate environment indicated that future net interest income would be even lower than that
projected in the rates unchanged environment. Our net interest income in year one in a 200 basis point falling scenario was calculated to be $2.3 million, or 2.2%, lower than in a rates unchanged scenario.

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

NEW ACCOUNTING PRONOUNCEMENTS

In February 2007, the
Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 provides companies with an option to
report selected financial assets and liabilities at fair value. The objective of SFAS 159 is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related
assets and liabilities differently without having to apply complex hedge accounting. This Statement also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement
attributes for similar types of assets and liabilities. SFAS 159 is effective as of the beginning of an entitys first fiscal year beginning after November 15, 2007. Early adoption was permitted as of the beginning of the previous
fiscal year provided that the entity made that choice in the first 120 days of that fiscal year and also elects to apply the provisions of SFAS No. 157, Fair Value Measurements (SFAS 157). We did not early adopt FAS 159,
and are currently evaluating the impact of SFAS 159 on our consolidated financial statements.



39



---

##### Table of Contents

The FASB issued SFAS 157 in September 2006. SFAS 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles and expands disclosure related to the use of fair value measures in financial statements. This Statement applies under other accounting pronouncements that require or permit fair value
measurements, and does not expand the use of fair value measures in financial statements, but standardizes its definition and guidance in generally accepted accounting principles. The Statement emphasizes that fair value is a market-based
measurement, and not an entity-specific measurement, based on an exchange transaction between market participants in which an entity sells an asset or transfers a liability. SFAS 157 also establishes a fair value hierarchy from observable market
data as the highest level to fair value based on an entitys own fair value assumptions as the lowest level. The Statement is to be effective for financial statements issued for fiscal years beginning after November 15, 2007, however,
earlier application is encouraged. We do not expect that the adoption of SFAS 157 will have a material impact on our consolidated financial statements.

In March 2006, the FASB issued SFAS No. 156 Accounting for Servicing of Financial Assets an amendment of FASB Statement No. 140 (SFAS 156), which amends the guidance in
SFAS 140. SFAS 156 requires that an entity separately recognize a servicing asset or a servicing liability when it undertakes an obligation to service a financial asset under a servicing contract in certain situations, and to initially record
such servicing assets or servicing liabilities at fair value, if practicable. SFAS 156 also allows an entity to measure its servicing assets and servicing liabilities subsequently using either the amortization method, which existed under
SFAS 140, or the fair value measurement method. SFAS 156 was effective for the fiscal year beginning January 1, 2007. The adoption of SFAS 156 did not have a material effect on our consolidated financial statements.

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instrumentsan amendment of FASB Statements
No. 133 and 140 (SFAS 155). SFAS 155 permits fair value re-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and
principal-only strips are not subject to the requirements of SFAS 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments
that contain an embedded derivative requiring bifurcation, and clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives. SFAS 155 also amends SFAS 140 to eliminate the prohibition on a qualifying special
purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS 155 is effective for all financial instruments acquired or issued after the beginning of an
entitys first fiscal year that begins after September 15, 2006. The adoption of SFAS 155 did not have a material effect on our consolidated financial statements.

In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an interpretation of FASB
Statement No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in the consolidated financial statements in accordance with SFAS No. 109, Accounting for Income Taxes.
This Interpretation prescribes the recognition threshold and measurement for the recognition in the financial statements of a tax



40



---

##### Table of Contents

position taken or expected to be taken in a tax return. FIN 48 clarifies that an enterprise should recognize the financial statement effects of a tax
position when that position will more-likely-than-not be sustained. FIN 48 also provides additional guidance on derecognition, interest and penalties, and disclosure of uncertain tax positions. This Interpretation is effective for fiscal
years beginning after December 15, 2006. The adoption of FIN 48 did not have a material effect on our consolidated financial statements.

Quarterly
Financial Information

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



|                                  |  |                                       |        |                    |         |                    |         |  |   |         |   |  |         |        |   |         |   |         |   |  |         |        |  |   |        |   |  |   |        |  
|--------------------------------- |  | ------------------------------------- | ------ | ------------------ | ------- | ------------------ | ------- |  | - | ------- | - |  | ------- | ------ | - | ------- | - | ------- | - |  | ------- | ------ |  | - | ------ | - |  | - | ------ | -
|                                  |  | 2007 Quarter Ended                    |        | 2006 Quarter Ended |         | 2005 Quarter Ended |        
|                                  |  | June 30                               |        |                    | Mar. 31 |                    | Dec. 31 |  |   | Sep. 30 |   |  | June 30 |        |   | Mar. 31 |   | Dec. 31 |   |  | Sep. 30 |       
|                                  |  | (in thousands, except per share data) |       
|Interest income                   |  | $                                     | 56,691 |                    |         | $                  | 56,006  |  | $ | 57,599  |   |  | $       | 57,393 |   |         | $ | 54,553  |   |  | $       | 51,455 |  | $ | 49,873 |   |  | $ | 45,682 |  
|Interest expense                  |  |                                       | 30,235 |                    |         |                    | 29,551  |  |   | 29,970  |   |  |         | 29,305 |   |         |   | 27,097  |   |  |         | 23,436 |  |   | 21,177 |   |  |   | 18,202 |  
|                                  |  |                                       |        |                    |         |                    |         |  |   |         |   |  |         |        |   |         |   |         |   |  |         |        |  |   |        |   |  |   |        |  
|Net interest income               |  |                                       | 26,456 |                    |         |                    | 26,455  |  |   | 27,629  |   |  |         | 28,088 |   |         |   | 27,456  |   |  |         | 28,019 |  |   | 28,696 |   |  |   | 27,480 |  
|Provision for loan losses         |  |                                       | 1,900  |                    |         |                    | 3,600   |  |   | 900     |   |  |         | 2,100  |   |         |   | 2,100   |   |  |         | 900    |  |   | 2,772  |   |  |   |       |  
|Noninterest income                |  |                                       | 4,065  |                    |         |                    | 3,238   |  |   | 4,745   |   |  |         | 3,666  |   |         |   | 3,452   |   |  |         | 3,908  |  |   | 4,386  |   |  |   | 4,473  |  
|Other derivative income (expense) |  |                                       | (61    | )                  |         |                    | 24      |  |   | (42     | ) |  |         | 59     |   |         |   | (105    | ) |  |         | 582    |  |   | (1,561 | ) |  |   | (2,351 | )
|Noninterest expense               |  |                                       | 17,652 |                    |         |                    | 18,062  |  |   | 18,707  |   |  |         | 18,167 |   |         |   | 18,599  |   |  |         | 17,786 |  |   | 17,594 |   |  |   | 17,797 |  
|                                  |  |                                       |        |                    |         |                    |         |  |   |         |   |  |         |        |   |         |   |         |   |  |         |        |  |   |        |   |  |   |        |  
|Income before income taxes        |  |                                       | 10,908 |                    |         |                    | 8,055   |  |   | 12,725  |   |  |         | 11,546 |   |         |   | 10,104  |   |  |         | 13,823 |  |   | 11,155 |   |  |   | 11,805 |  
|Income taxes                      |  |                                       | 3,756  |                    |         |                    | 2,733   |  |   | 618     |   |  |         | (7,347 | ) |         |   | 3,799   |   |  |         | 4,965  |  |   | 4,137  |   |  |   | 4,408  |  
|                                  |  |                                       |        |                    |         |                    |         |  |   |         |   |  |         |        |   |         |   |         |   |  |         |        |  |   |        |   |  |   |        |  
|Net income                        |  | $                                     | 7,152  |                    |         | $                  | 5,322   |  | $ | 12,107  |   |  | $       | 18,893 |   |         | $ | 6,305   |   |  | $       | 8,858  |  | $ | 7,018  |   |  | $ | 7,397  |  
|                                  |  |                                       |        |                    |         |                    |         |  |   |         |   |  |         |        |   |         |   |         |   |  |         |        |  |   |        |   |  |   |        |  
|Earnings per share:               |  |                                       |        |                    |         |                    |         |  |   |         |   |  |         |        |   |         |   |         |   |  |         |        |  |   |        |   |  |   |        |  
|Basic                             |  | $                                     | 0.65   |                    |         | $                  | 0.48    |  | $ | 1.10    |   |  | $       | 1.72   |   |         | $ | 0.58    |   |  | $       | 0.81   |  | $ | 0.65   |   |  | $ | 0.73   |  
|Diluted                           |  |                                       | 0.65   |                    |         |                    | 0.48    |  |   | 1.09    |   |  |         | 1.70   |   |         |   | 0.57    |   |  |         | 0.80   |  |   | 0.63   |   |  |   | 0.71   |  
|                                  |  |                                       |        |                    |         |                    |         |  |   |         |   |  |         |        |   |         |   |         |   |  |         |        |  |   |        |   |  |   |        |  



41



---

##### Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under Management Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this
Quarterly Report on Form 10-Q constitute forward-looking statements. We have tried to identify these forward-looking statements by using words including "may," "will," "expect," "anticipate," "believe," "intend," "could" and "estimate" and similar
expressions. These forward-looking statements are based on information currently available to us and are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities in
2007 and beyond to differ materially from those expressed in, or implied by, these forward-looking statements. These risks, uncertainties and other factors include, without limitation: the effect on our profitability if interest rates fluctuate as
well as the effect of our customers changing use of our deposit products; the possibility that our wholesale funding sources may prove insufficient to replace deposits at maturity and support our growth; the risk that our allowance for loan
losses may prove insufficient to absorb probable losses in our loan portfolio; possible volatility in loan charge-offs and recoveries between periods; the possible decline in residential real estate sales volume and the likely potential for
illiquidity in the real estate market; the risks associated with management changes and employee turnover; the effectiveness of our hedging transactions and their impact on our future results of operations; the risks associated with implementing our
business strategy and managing our growth effectively; changes in general economic conditions, interest rates, deposit flows, loan demand, including loan syndication opportunities, competition, legislation or regulatory and accounting principles,
policies or guidelines, as well as other economic, competitive, governmental, regulatory and technological factors impacting our operations.

For further information about these and other risks, uncertainties and factors, please review the disclosure included in the section captioned "Risk Factors in our December 31, 2006 Annual Report on Form 10-K filed with the SEC
on March 15, 2007. 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



42



---

##### Table of Contents

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 June 30, 2007.
Based upon their evaluation and subject to the foregoing, the Chief Executive Officer and Chief Financial Officer concluded that such controls and procedures were effective as of the end of the period covered by this report, in all material
respects, to ensure that required information will be disclosed on a timely basis in our reports filed under the Exchange Act.

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

There were no changes in our internal control over financial reporting that occurred during the quarter ended
June 30, 2007, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.



43



---

##### Table of Contents

PART II. OTHER INFORMATION



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

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



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

There have been no material changes
in our risk factors from those disclosed in our 2006 Annual Report on Form 10-K.



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

None.



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

None.



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

We held our
annual meeting of stockholders on June 7, 2007. The following matters were voted on at the meeting:



| | 1. | The election of ten directors by common stockholders set forth below:
| | -- | ---------------------------------------------------------------------



|                      |  |           |  |          
|--------------------- |  | --------- |  | ---------
|Director              |  | For       |  | Withheld 
|Bruce W. Taylor       |  | 9,013,542 |  | 328,300  
|Ronald L. Bliwas      |  | 9,043,835 |  | 298,007  
|Ronald D. Emanuel     |  | 9,002,691 |  | 339,151  
|Edward McGowan        |  | 9,043,815 |  | 298,027  
|Louise O'Sullivan     |  | 9,043,835 |  | 298,007  
|Melvin E. Pearl       |  | 8,626,534 |  | 715,308  
|Shepherd G. Pryor, IV |  | 9,002,711 |  | 339,131  
|Jeffrey W. Taylor     |  | 6,380,566 |  | 2,961,276
|Richard W. Tinberg    |  | 8,919,517 |  | 422,325  
|Mark L. Yeager        |  | 8,810,619 |  | 531,223  

Each of these individuals will serve on our Board of Directors for a one-year term or until their
successor is elected and qualified.



44



---

##### Table of Contents

| | 2. | Approval of the Taylor Capital Group, Inc. 2007 Incentive Bonus Plan:
| | -- | ---------------------------------------------------------------------



|         |  |           |  | 
|-------- |  | --------- |  | 
|For:     |  | 8,719,306 |  | 
|Against: |  | 335,050   |  | 
|Abstain: |  | 1,947     |  | 



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

None.



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

EXHIBIT INDEX



|               |  |                                                                                                                                                                                                                                                   
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Exhibits                                                                                                                                                                                                                           
|3.1            |  | Second Amended and Restated Certificate of Incorporation of Taylor Capital Group, Inc. (incorporated by reference from Exhibit 3.1 of the Companys Current Report on Form 8-K filed
September 20, 2005).                                         
|               | 
|3.2            |  | Form of Second Amended and Restated Bylaws of Taylor Capital Group, Inc. (incorporated by reference from Exhibit 3.4 of the Companys Quarterly Report on Form 10-Q for the quarter ended
June 30, 2005).                                         
|               | 
|3.3            |  | Certificate of Elimination of 9% Noncumulative Perpetual Preferred Stock, Series A, of Registrant (incorporated by reference to Exhibit 3.2 of the Registration Statement on Form S-3 filed July
25, 2005 (Registration No. 333-126864)).         
|               | 
|4.1            |  | Form of certificate representing Taylor Capital Group, Inc. Common Stock (incorporated by reference from Exhibit 4.3 of the Amended Registration Statement on Form S-1 filed October 10, 2002
(Registration No. 333-89158)).                      
|               | 
|4.2            |  | Indenture between Taylor Capital Group, Inc. and LaSalle Bank National Association, as trustee (incorporated by reference from Exhibit 4.4 of the Amended Registration Statement on Form S-1 filed
October 10, 2002 (Registration No. 333-89158)).
|               | 
|4.3            |  | Form of Junior Subordinated Debenture due 2032 (incorporated by reference from Exhibit 4.5 of the Amended Registration Statement on Form S-1 filed October 10, 2002 (Registration No. 333-89158)).                                                
|               | 
|4.4            |  | Certificate of Trust of TAYC Capital Trust I (incorporated by reference from Exhibit 4.6 of the Amended Registration Statement on Form S-1 filed October 10, 2002 (Registration No. 333-89158)).                                                  
|               | 
|4.5            |  | Amended and Restated Trust Agreement of TAYC Capital Trust I (incorporated by reference from Exhibit 4.8 of the Amended Registration Statement on Form S-1 filed October 10, 2002 (Registration
No. 333-89158)).                                  
|               | 
|4.6            |  | Preferred Securities Guarantee Agreement (incorporated by reference from Exhibit 4.9 of the Amended Registration Statement on Form S-1 filed October 10, 2002 (Registration No.
333-89158)).                                                      



45



---

##### Table of Contents

|               |  |                                                                                                                                                                                                                                                                                                                                                                              
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Exhibits                                                                                                                                                                                                                                                                                                                                                      
|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).                                                                                                                                                                  
|               | 
|4.16           |  | Form of Registration Rights Agreement (incorporated by reference to Exhibit 4.16 of the Registration Statement on Form S-3 filed August 5, 2005 (Registration No. 333-126864)).                                                                                                                                                                                              
|               | 
|10.49          |  | Taylor Capital Group, Inc. 2007 Incentive Bonus Plan (incorporated by reference to Appendix A to the Proxy Statement for the 2007 Annual Meeting of Stockholders filed on April 30,
2007).                                                                                                                                                                                   
|               | 
|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.                                                                                                                                                                                           



46



---

##### 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: August 6, 2007 |  |  |  |                                                
|                     |  | 
|                     |  |  |  | /s/ BRUCE W. TAYLOR                            
|                     |  |  |  | Bruce W. Taylor                                
|                     |  |  |  | Chairman, Chief Executive Officer and President
|                     |  |  |  | (Principal Executive Officer)                  
|                     |  | 
|                     |  |  |  | /s/ ROBIN VANCASTLE                            
|                     |  |  |  | Robin VanCastle                                
|                     |  |  |  | Chief Financial Officer                        
|                     |  |  |  | (Principal Financial and Accounting Officer)   



47