<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999

                          Commission File No. 333-14713


                           TAYLOR CAPITAL GROUP, INC.
                Exact Name of Registrant as Specified in Charter

            DELAWARE                                           36-4108550
  -------------------------------                       ---------------------
   State or Other Jurisdiction of                            I.R.S. Employer
   Incorporation or Organization                        Identification Number


                         350 EAST DUNDEE ROAD, SUITE 300
                          WHEELING, ILLINOIS 60090-3199
                     Address of Principal Executive Offices

                                 (847) 808-6873
               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
                                       ---     ---

The number of outstanding shares of each of the Registrant's classes of common
stock, as of the latest practicable date:

           Class                      Outstanding at November  5 , 1999
----------------------------          ---------------------------------
Common Stock, $.01 Par Value                       4,625,792






<PAGE>   2
                           TAYLOR CAPITAL GROUP, INC.

                                     INDEX

<TABLE>
<CAPTION>
PART  I.  FINANCIAL INFORMATION..........................................................................    PAGE
                                                                                                             -----
<S>                                                                                                          <C>
     Item 1.    Financial Statements

                Consolidated Balance Sheets (Unaudited) -
                    September 30, 1999 and December 31, 1998.............................................     3

                Consolidated Statements of Income (Unaudited) -
                    For the Three and Nine Months Ended September 30, 1999
                    and For the Three and Nine Months Ended September 30, 1998...........................     4

                Consolidated Statements of Cash Flows (Unaudited) -
                    For the Nine Months Ended September 30, 1999 and For
                    the Nine Months Ended September 30, 1998.............................................     5

                Notes to Financial Statements (Unaudited)................................................     6

     Item 2.    Management's Discussion and Analysis of Financial Condition and
                    Results of Operations................................................................    18

     Item 3.    Quantitative and Qualitative Disclosures About Market Risk...............................    35


PART II.  OTHER INFORMATION

     Item 1.    Legal Proceedings........................................................................    36

     Item 5.    Other Information........................................................................    36

     Item 6.    Exhibits and Reports on Form 8-K.........................................................    37

     SIGNATURES..........................................................................................    37

</TABLE>


                                       2
<PAGE>   3
PART I. FINANCIAL INFORMATION  - ITEM 1.  Financial Statements

                           TAYLOR CAPITAL GROUP, INC.
                    CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                (in thousands, except share and per share data)


<TABLE>
<CAPTION>
                                                                                                September 30,      December 31,
                                                                                                    1999              1998
                                                                                                ------------       ------------
<S>                                                                                              <C>               <C>
                                      ASSETS

Cash and due from banks                                                                          $   69,281        $   66,192
Interest-bearing deposits with banks                                                                  3,050             1,200
Federal funds sold                                                                                    1,750                31
Investment securities:
     Available-for-sale, at fair value                                                              347,192           351,408
     Held-to-maturity, at amortized cost (fair value of $84,168 and $91,620 at
          September 30, 1999 and December 31, 1998, respectively)                                    84,229            89,753
Loans held for sale, net, at lower of cost or market                                                 27,874            42,257
Loans, net of allowance for loan losses of $26,561 and $24,599 at September 30,
     1999 and December 31, 1998, respectively                                                     1,381,373         1,269,125
Premises, leasehold improvements and equipment, net                                                  23,702            22,702
Other real estate and repossessed assets, net                                                           759             3,267
Goodwill, net of amortization of $6,495 and $4,683
     at September 30, 1999 and December 31, 1998, respectively                                       29,592            32,053
Other assets                                                                                         36,593            32,342
                                                                                                 ----------        ----------
          Total assets                                                                           $2,005,395        $1,910,330
                                                                                                 ==========        ==========
                     LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits:
     Noninterest-bearing                                                                           $332,082          $350,711
     Interest-bearing                                                                             1,219,021         1,089,026
          Total deposits                                                                          1,551,103         1,439,737
Short-term borrowings                                                                               167,456           171,718
Accrued interest, taxes and other liabilities                                                        25,361            22,242
Notes payable                                                                                       114,500           131,500
                                                                                                 ----------        ----------
               Total liabilities                                                                  1,858,420         1,765,197
                                                                                                 ----------        ----------
Stockholders' equity:
     Preferred stock, $.01 par value, 3,000,000 shares authorized,
          Series A 9% noncumulative perpetual, 1,530,000 shares issued and
          outstanding, $25 stated and redemptive value                                               38,250            38,250
     Common stock, $.01 par value; 7,000,000 shares authorized, 4,625,792
          and 4,658,533 shares issued and outstanding at September 30, 1999 and
          December 31, 1998, respectively                                                                47                47
     Surplus                                                                                        100,016            99,990
     Unearned compensation - stock grants                                                            (1,516)           (2,083)
     Employee stock ownership plan loan                                                                (576)             (576)
     Retained earnings                                                                               14,110             9,434
     Accumulated other comprehensive income (loss)                                                   (2,421)               71
     Treasury stock, at cost                                                                           (935)              ---
                                                                                                 ----------        ----------
          Total stockholders' equity                                                                146,975           145,133
                                                                                                 ----------        ----------
               Total liabilities and stockholders' equity                                        $2,005,395        $1,910,330
                                                                                                 ==========        ==========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       3


<PAGE>   4
                                       PE
                                       ==

                           TAYLOR CAPITAL GROUP, INC.
                 CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
                                 (in thousands)

                          ---------------------------

<TABLE>
<CAPTION>

                                                        For the Three Months Ended     For the Nine Months Ended
                                                               September  30,                 September 30,
                                                        --------------------------     -------------------------
                                                           1999             1998           1999           1998
                                                          ------           ------         ------         ------
<S>                                                       <C>             <C>            <C>            <C>
Interest income:
     Interest and fees on loans                           $30,289         $28,211        $86,747        $82,071
     Interest and dividends on investment securities:
          Taxable                                           5,405           4,918         15,084         17,147
          Tax-exempt                                          828             840          2,583          2,447
     Interest on cash equivalents                             323             307            597            441
                                                           ------          ------         ------         ------
               Total interest income                       36,845          34,276        105,011        102,106
                                                           ------          ------         ------         ------
Interest expense:
     Deposits                                              12,802          12,365         36,140         36,359
     Short-term borrowings                                  2,324           2,525          6,418          7,665
     Notes payable                                          1,552           1,865          4,908          5,610
                                                           ------          ------         ------         ------
               Total interest expense                      16,678          16,755         47,466         49,634
                                                           ------          ------         ------         ------
Net interest income                                        20,167          17,521         57,545         52,472
Provision for loan losses                                   1,500           1,050          4,500          3,300
                                                           ------          ------         ------         ------
               Net interest income after provision
                    for loan losses                        18,667          16,471         53,045         49,172
                                                           ------          ------         ------         ------
Noninterest income:
     Service charges                                        2,533           2,193          7,054          6,784
     Trust fees                                             1,182             965          3,313          2,887
     Gain on sales of loans, net                              363             999          1,854          2,950
     Gain on sale of mortgage servicing rights                  5             ---            198          1,462
     Investment securities gains, net                        ---              ---            107            ---
     Other noninterest income                                 507             392          1,813          1,233
                                                           ------          ------         ------         ------
               Total noninterest income                     4,590           4,549         14,339         15,316
                                                           ------          ------         ------         ------
Noninterest expense:
     Salaries and employee benefits                         9,524           9,341         28,265         27,708
     Occupancy of premises, net                             1,645           1,811          4,965          5,330
     Furniture and equipment                                  954             832          2,577          2,558
     Computer processing                                      588             577          1,776          1,643
     Advertising and public relations                         418             365            831          1,328
     Goodwill and other intangible amortization               600             612          1,812          1,836
     Legal fees                                             1,505             958          4,123          2,960
     Other noninterest expense                              2,571           2,896          8,207          8,583
                                                           ------          ------         ------         ------
          Total noninterest expense                        17,805          17,392         52,556         51,946
                                                           ------          ------         ------         ------
Income before income taxes and cumulative
     effect of change in accounting principle               5,452           3,628         14,828         12,542
Income taxes                                                2,213           1,445          5,982          5,100
                                                           ------          ------         ------         ------
Income before cumulative effect of change in
     accounting principle                                   3,239           2,183          8,846          7,442
Cumulative effect of change in accounting
     principle, net of tax                                    ---             ---           (214)           ---
                                                           ------          ------         ------         ------
               Net income                                  $3,239          $2,183         $8,632         $7,442
                                                           ======          ======         ======         ======
Preferred dividend requirements                             (860)           (861)        (2,581)        (2,582)
                                                           ------          ------         ------         ------
Net income applicable to common stockholders               $2,379          $1,322         $6,051         $4,860
                                                           ======          ======         ======         ======
</TABLE>


          See accompanying notes to consolidated financial statements.

                                       4
<PAGE>   5
                           TAYLOR CAPITAL GROUP, INC.

               CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (in thousands)

                           -------------------------

<TABLE>
<CAPTION>
                                                                  For the Nine Months Ended
                                                                         September 30,
                                                                  -------------------------
                                                                    1999             1998
                                                                  --------         --------
<S>                                                               <C>              <C>
Cash flows from operating activities:
  Net income                                                      $  8,632         $  7,442
  Adjustments to reconcile net income to net cash provided by
    (used in) operating activities:
    Investment securities gains, net                                  (107)             ---
    Amortization of premiums and discounts, net                      1,745            3,364
    Provision for loan losses                                        4,500            3,300
    Gain on sales of loans originated for sale                      (1,108)          (3,783)
    Loans originated and held for sale                            (138,189)        (224,364)
    Proceeds from sales of loans originated for sale               153,549          228,480
    Depreciation and amortization                                    4,800            4,832
    Other adjustments to net income, net                            (1,284)            (677)
    Net changes in other assets and liabilities                      1,751              721
                                                                  --------         --------
    Net cash provided by operating activities                       34,289           19,315
                                                                  --------         --------
Cash flows from investing activities:
  Purchases of available-for-sale securities                      (143,286)         (39,363)
  Purchases of held-to-maturity securities                            (286)         (15,267)
  Proceeds from principal payments and maturities of
    available-for-sale securities                                   92,229          100,147
  Proceeds from principal payments and maturities of
    held-to-maturity securities                                      5,509           10,864
  Proceeds from sales of available-for-sale securities              50,102              ---
  Net increase in loans                                           (115,978)         (92,736)
  Decrease in reverse exchange assets                                  ---           18,757
  Other, net                                                        (1,258)          (1,551)
                                                                  --------         --------
       Net cash used in investing activities                      (112,968)         (19,149)
                                                                  --------         --------
Cash flows from financing activities:
  Net increase in deposits                                         111,366            6,627
  Net (decrease) increase in short-term borrowings                  (4,262)           5,500
  Repayments of notes payable                                      (42,000)        (112,400)
  Proceeds from notes payable                                       25,000          106,900
  Decrease in nonrecourse borrowings                                   ---          (18,757)
  Purchases of treasury stock                                         (935)             ---
  Dividends paid                                                    (3,832)          (4,698)
                                                                  --------         --------
       Net cash provided by (used in) financing activities          85,337          (16,828)
                                                                  --------         --------
Net increase (decrease) in cash and cash equivalents                 6,658          (16,662)
Cash and cash equivalents, beginning of period                      67,423           84,616
                                                                  --------         --------
Cash and cash equivalents, end of period                          $ 74,081         $ 67,954
                                                                  ========         ========
Supplemental disclosure of cash flow information:
  Cash paid during the period for:
     Interest                                                     $ 45,513         $ 49,302
     Income taxes                                                    4,500            6,775
</TABLE>




          See accompanying notes to consolidated financial statements.


                                       5
<PAGE>   6
 1.  Basis of Presentation:

     The Taylor Capital Group, Inc. consolidated financial statements include
     the accounts of Taylor Capital Group, Inc. (the "Parent Company") and its
     wholly owned subsidiaries (collectively, with the Parent Company, the
     "Company") Cole Taylor Bank and its subsidiaries (the "Bank") and CT
     Mortgage Company, Inc. (the "Mortgage Company").

     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 generally accepted accounting principles are not
     included herein. These interim statements should be read in conjunction
     with the financial statements and notes thereto included in the Company's
     Annual Report on Form 10-K for the year ended December 31, 1998, as filed
     with the Securities and Exchange Commission.

     Interim statements are subject to possible adjustment in connection with
     the annual audit of the Company for the year ended December 31, 1999. In
     the opinion of management of the Company, the accompanying unaudited
     interim consolidated financial statements reflect all adjustments
     (consisting of normal recurring adjustments) necessary for a fair
     presentation of the consolidated financial position and consolidated
     results of operations as of the dates and for the periods presented.

     The results of operations for the nine months ended September 30, 1999 are
     not necessarily indicative of the results to be expected for the full year.

     Certain reclassifications to the Company's prior year's consolidated
     financial statements have been made to conform to the current year's
     presentation.

2.   Investment Securities:

     The amortized cost and estimated fair values of investment securities at
     September 30, 1999 and December 31, 1998 were as follows:



                                       6
<PAGE>   7
                           TAYLOR CAPITAL GROUP, INC.
       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)


<TABLE>
<CAPTION>
                                                                       September 30, 1999
                                                      ----------------------------------------------------
                                                                       Gross          Gross
                                                      Amortized     Unrealized     Unrealized   Estimated
                                                        Cost           Gains         Losses     Fair Value
                                                      ---------     -----------    -----------  ----------
                                                                         (in thousands)
<S>                                                    <C>             <C>           <C>         <C>
Available-for-sale:
   U.S. Treasury securities                            $ 65,250        $  107        $   (91)    $ 65,266
   U.S. government agency securities                     71,734             2           (460)     $71,276
   Collateralized mortgage obligations                  113,972             8         (1,816)     112,164
   Mortgage-backed securities                            99,959           922         (2,395)      98,486
                                                       --------        ------        -------     --------
         Total available-for-sale                       350,915         1,039         (4,762)     347,192
                                                       --------        ------        -------     --------
Held-to-maturity:
   State and municipal obligations                       69,310         1,239         (1,299)      69,250
   Federal Reserve Bank and Federal Home Loan
       Bank equity securities                            14,069           ---            ---       14,069
   Other debt securities                                    850             7             (8)         849
                                                       --------        ------        -------     --------
         Total held-to-maturity                          84,229         1,246         (1,307)      84,168
                                                       --------        ------        -------     --------
              Total                                    $435,144        $2,285        $(6,069)    $431,360
                                                       ========        ======        =======     ========

<CAPTION>
                                                                       December 30, 1999
                                                      ----------------------------------------------------
                                                                       Gross          Gross
                                                      Amortized     Unrealized     Unrealized   Estimated
                                                        Cost           Gains         Losses     Fair Value
                                                      ---------     -----------    -----------  ----------
                                                                         (in thousands)
<S>                                                    <C>             <C>           <C>         <C>
Available-for-sale:
   U.S. Treasury securities                            $110,019        $  859        $   ---     $110,878
   U.S. government agency securities                     51,287           125            (86)      51,326
   Collateralized mortgage obligations                   91,696            52         (2,054)      89,694
   Mortgage-backed securities                            98,296         1,466           (252)      99,510
                                                       --------        ------        -------     --------
         Total available-for-sale                       351,298         2,502         (2,392)     351,408
                                                       --------        ------        -------     --------
Held-to-maturity:
   State and municipal obligations                       74,609         2,752           (947)      76,414
   Federal Reserve Bank and Federal Home Loan
       Bank equity securities                            14,319           ---            ---       14,319
   Other debt securities                                    825            62            ---          887
                                                       --------        ------        -------     --------
         Total held-to-maturity                          89,753         2,814           (947)      91,620
                                                       --------        ------        -------     --------
              Total                                    $441,051        $5,316        $(3,339)    $443,028
                                                       ========        ======        =======     ========
</TABLE>



                                       7
<PAGE>   8
3.   Loans:

     Loans classified by type at September 30, 1999 and December 31, 1998 were
 as follows:

                                                  September 30,    December 31,
                                                       1999            1998
                                                  ------------     ------------
                                                           (in thousands)
Commercial and industrial                          $  800,941       $  749,984
Real estate-construction                              248,262          232,018
Residential real estate-mortgages                     165,318          150,930
Home equity lines of credit                           104,774          106,521
Consumer                                               84,720           53,751
Other loans                                             4,787            1,806
                                                   ----------       ----------
    Gross loans                                     1,408,802        1,295,010

Less:  Unearned discount                                 (868)          (1,286)
                                                   ----------       ----------
    Total loans                                     1,407,934        1,293,724

Less:  Allowance for loan losses                      (26,561)         (24,599)
                                                   ----------       ----------
        Loans, net                                 $1,381,373       $1,269,125
                                                   ==========       ==========

4.   Interest-Bearing Deposits:

     Interest-bearing deposits at September 30, 1999 and December 31, 1998 were
as follows:

                                                  September 30,    December 31,
                                                       1999            1998
                                                  ------------     ------------
                                                           (in thousands)
           NOW accounts                            $  142,293       $  120,900
           Savings accounts                           103,098          107,274
           Money market deposits                      244,355          234,197
           Certificates of deposit                    475,649          448,773
           Public time deposits                       100,720          121,614
           Brokered certificates of deposit           152,906           56,268
                                                   ----------       ----------
              Total                                $1,219,021       $1,089,026
                                                   ==========       ==========



                                       8
<PAGE>   9
                           TAYLOR CAPITAL GROUP, INC.
       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)




5.   Notes Payable:

     Notes payable at September 30, 1999 and December 31, 1998 were as follows:

<TABLE>
<CAPTION>
                                                                             September 30,     December 31,
                                                                                 1999             1998
                                                                             ------------      ------------
                                                                                     (in thousands)
     <S>                                                                       <C>              <C>
     TAYLOR CAPITAL GROUP, INC.:
     $25 million term loan bearing interest at prime rate or LIBOR plus
         1.15%, annual principal reductions of $1 million commencing in
         February 1999 and a balloon payment of $22 million on
         February 12, 2002; interest rates at September 30, 1999 and
         December 31, 1998 were 6.46% and 6.42% respectively.                  $ 24,000         $ 25,000


     $12 million revolving credit facility bearing interest at prime rate or
         LIBOR plus 1.15%, maturing September 1, 2000; interest rates at
         September 30, 1999 and December 31, 1998 were 6.52% and 6.43%
         respectively.                                                              500            1,500

     COLE TAYLOR BANK:
     Federal Home Loan Bank (FHLB) - various advances ranging from
         $10 million to $30 million due at various dates through October 2000
         and $30 million due February 2008, callable by the FHLB quarterly
         beginning February 1999; collateralized by qualified first mortgage
         residential loans and FHLB stock; weighted average interest rates at
         September 30, 1999 and December 31, 1998 were 5.03% and 5.23%
         respectively.                                                           90,000          105,000
                                                                               --------         --------
     Total                                                                     $114,500         $131,500
                                                                               ========         ========
</TABLE>

     In September 1999, the Taylor Capital Group, Inc. loan agreement was
     extended, effective September 1, 1999 to September 1, 2000. There were no
     other changes in the terms of the agreement other than the extension. The
     loan agreement requires compliance with certain defined financial covenants
     relating to the Bank, including covenants related to regulatory capital,
     return on average assets, nonperforming assets and Parent Company leverage.
     As of September 30, 1999, the Company was unaware of any instances of
     non-compliance.

 6.  Incentive Compensation Plan:

     The Company has an Incentive Compensation Plan (the "Plan") that allows for
     the granting of stock options and other stock awards. During the nine
     months ended September 30, 1999, stock options were granted with respect to
     116,070 shares of common stock at an exercise price of $27.00 per share,
     the fair market value of the common stock on the grant date, as determined
     by the most recent semi-annual independent appraisal. Stock options with
     respect to 41,006 shares of common stock were forfeited during the period.
     Stock options with respect to 5,982 shares were exercised during the period
     at an average exercise price of $24.16. As of September 30, 1999, there
     were total stock




                                       9
<PAGE>   10
                           TAYLOR CAPITAL GROUP, INC.
       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)


     options outstanding, net of forfeitures, with respect to 299,518 shares of
     common stock at a weighted average option price of $24.48.

     In addition, during the first nine months of 1999, 16,703 shares of common
     stock were awarded, and 24,454 shares of common stock were forfeited, under
     restricted stock agreements.

 7.  Comprehensive Income:

     Comprehensive income has been defined as changes in stockholders' equity
     arising from transactions and other economic events from nonstockholder
     sources. For the Company, comprehensive income includes net income and
     unrealized holding gains or losses on available-for-sale investment
     securities. The following table presents comprehensive income for the
     periods indicated:

<TABLE>
<CAPTION>
                                                     For the Three Months Ended    For the Nine Months Ended
                                                            September 30,                 September 30,
                                                     -------------------------------------------------------
                                                         1999         1998             1999          1998
                                                        ------       ------           ------        ------
                                                                           (in thousands)
     <S>                                                <C>          <C>              <C>           <C>
     Net income, as reported                            $3,239       $2,183           $8,632        $7,442
     Other comprehensive income:
       Change in unrealized gains (losses) on
          available-for- sale securities                   517        1,549           (3,620)         (478)
       Less:  reclassification adjustment for gains
          included in net income                           ---          ---             (107)          ---
                                                        ------       ------           ------        ------
                                                           517        1,549           (3,727)         (478)
       Income tax expense (benefit) related
          to other comprehensive income (loss)             181          532           (1,235)         (156)
                                                        ------       ------           ------        ------
       Other comprehensive income (loss), net of tax       336        1,017           (2,492)         (322)
                                                        ------       ------           ------        ------
             Total comprehensive income                 $3,575       $3,200           $6,140        $7,120
                                                        ======       ======           ======        ======
</TABLE>

8.   Litigation:

     Jeffrey W. Taylor, Chairman of the Board and Chief Executive Officer of the
     Company, Bruce W. Taylor, President of the Company, Iris A. Taylor, Sidney
     J. Taylor, Cindy Taylor Bleil, related trusts and a related partnership
     (collectively, the "Taylor Family") have been named as defendants in the
     lawsuits described below relating to (1) the Split-Off Transactions and (2)
     the financial and public reporting of Reliance Acceptance Group, Inc.
     (Reliance). Certain of the lawsuits also named other current or former
     officers and directors of the Company and Reliance, other stockholders of
     the Company, Reliance's public accountants at the time of the Split-Off
     Transactions (who continue to serve as the Company's public accountants),
     the investment banks that were involved in the Split-Off Transactions,
     Reliance and the Company as additional defendants. The filing dates of
     these lawsuits ranged from October 1997 to October 1999.

     The Split-Off Transactions were a series of transactions completed on
     February 12, 1997 in accordance with the Share Exchange Agreement, dated
     June 12, 1996 (the "Share Exchange Agreement") between Reliance and the
     Taylor Family, which owned approximately 25% of the outstanding common
     stock of Reliance prior to the Split-Off Transactions. Pursuant to the
     Split-Off




                                       10
<PAGE>   11
                           TAYLOR CAPITAL GROUP, INC.
        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Continued)



     Transactions, the Taylor Family and certain other stockholders of Reliance
     exchanged all of their common stock of Reliance for all of the outstanding
     common stock of the Company. On February 9, 1998, Reliance filed a
     voluntary petition under Chapter 11 of the Bankruptcy Code.

     In September 1998, five class actions, brought on behalf of current and
     former stockholders of Reliance and pending in Delaware Chancery Court,
     were consolidated into one class action. The consolidated class action
     alleges that the Taylor Family, certain directors and officers of the
     Company, and certain other defendants breached their fiduciary duties in
     connection with disclosures made to the stockholders prior to the vote
     which approved the Split-Off Transactions. The case seeks relief in the
     form of unspecified damages, attorneys' fees and recision of the Split-Off
     Transactions. On September 9, 1998 the Delaware Chancery Court stayed this
     consolidated class action indefinitely pending resolution of the
     consolidated class action in Texas that is described below.

     In August 1998, nine class actions, brought on behalf of current and former
     stockholders of Reliance and pending in the United States District Court
     for the Western District of Texas, were consolidated into one class action.
     One class action, brought on behalf of current and former stockholders of
     Reliance, is also pending in the Northern District of Illinois. These cases
     allege that the Taylor Family, certain directors and officers of the
     Company, and certain other defendants violated the federal securities laws
     and breached common law fiduciary duties. In addition, the cases allege
     that the Company and certain other defendants violated ERISA and breached
     certain fiduciary duties, including fiduciary duties owed to a subclass
     consisting of participants in Reliance's ESOP and 401(k) Profit Sharing
     Plan. The Texas and Illinois cases seek unspecified damages and attorneys'
     fees. Cole Taylor Bank is named as an additional defendant in the Illinois
     action. The Illinois and Texas cases have been effectively concluded as the
     result of the plaintiffs' filing of a consolidated amended complaint in
     Illinois.

     On August 19, 1998, Irwin Cole and other members of his family, who
     collectively owned approximately 25% of the outstanding common stock of
     Reliance prior to the Split-Off Transactions, brought suit in Delaware
     Chancery Court against members of the Taylor Family, the Company, other
     current and/or former officers and directors of Reliance and the Company,
     and other stockholders of the Company. The suit alleges that the Taylor
     Family, certain directors and officers of the Company, and certain other
     defendants breached their fiduciary duties, committed fraud and/or engaged
     in self-dealing in connection with the operation of Reliance and the
     Split-Off Transactions. The lawsuit seeks unspecified damages and
     attorneys' fees and requests that the Court place all of the shares of the
     Company held by the Taylor Family in a constructive trust.

     On October 5, 1998, the United States Bankruptcy Court of the District of
     Delaware (the "Bankruptcy Court") entered an order preliminarily enjoining
     the plaintiffs in most of the above lawsuits from prosecuting their cases
     on account of the pending adversary proceedings by the Reliance Estate
     Representative that are described below. On June 2, 1999 the District Court
     for the District of Delaware reversed the Bankruptcy Court's order. The
     District Court's order has been appealed.



                                       11
<PAGE>   12
                           TAYLOR CAPITAL GROUP, INC.
       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Continued)


     On July 6, 1998, the Bankruptcy Court entered a confirmation order that
     discharged the liability of Reliance and its subsidiaries in connection
     with all of the lawsuits described above and permanently enjoined the
     filing of similar new suits against them. The Bankruptcy Court also
     appointed an Estate Representative (the "Estate Representative") for the
     Post-Confirmation Chapter 11 Estate of Reliance and its subsidiaries. On
     September 4, 1998, the Estate Representative filed two adversary proceeding
     complaints, since consolidated, which named as defendants members of the
     Taylor Family, certain other directors and officers of the Company, one of
     Reliance's former legal counsel and Reliance's former public accountants
     (both of whom continue to serve the Company), the Company and Cole Taylor
     Bank, as trustee. The complaints allege fraudulent conveyance and breaches
     of fiduciary duties and contract with respect to the Taylor Family, the
     Company and Cole Taylor Bank, as trustee. The complaints charge certain of
     the other defendants with alleged breaches of fiduciary duty, breaches of
     contract, malpractice and negligent misrepresentation and aiding and
     abetting the Taylor Family's and the Company's alleged breaches. These
     complaints seek unspecified damages and attorneys' fees and avoidance of
     the Split-Off Transactions by the transfer to the Estate Representative of
     either the assets exchanged in the Split-Off Transactions or the value of
     such assets. One of the complaints demands monetary damages pursuant to the
     Taylor Family's obligation under the Share Exchange Agreement to indemnify
     Reliance for certain losses resulting from the Split-Off Transactions, and
     asks the court to disallow any claims for indemnification that any of the
     defendants have against Reliance or, in the alternative, to equitably
     subordinate such claims to all other creditor claims against Reliance. On
     July 22, 1999, the District Court for the District of Delaware issued an
     order withdrawing the adversary proceedings from the Bankruptcy Court to
     the District Court. Discovery is ongoing in the adversary proceedings and a
     September 2000 trial date has been set.

     On December 7, 1998, the Estate Representative filed a motion for a
     preliminary injunction which seeks to enjoin the Company and Cole Taylor
     Bank from paying directly or indirectly any dividends to any of their
     respective shareholders and from paying any of the litigation defense costs
     of the Taylor Family or any other co-defendants with respect to any
     litigation arising out of the Split-Off Transactions. On October 14, 1999
     the District Court denied the motion for preliminary injunction.

     On July 21, 1999, the Company and certain other defendants in the federal
     securities cases and the adversary proceedings submitted a request to the
     Judicial Panel on Multidistrict Litigation seeking to have all of these
     cases transferred to the Northern District of Illinois for coordinated or
     consolidated pretrial proceedings. This request is set for a hearing on
     November 18, 1999. An amended consolidated complaint was filed in the
     shareholders' suits on August 11, 1999 in the Northern District of
     Illinois.

     On October 4, 1999, another lawsuit relating to the Split-Off Transactions
     was filed in the Circuit Court of Cook County, Illinois by four Reliance
     stockholders. Members of the Taylor Family, a related partnership, Taylor
     Capital Group, Inc., Cole Taylor Bank, and another officer and director of
     Taylor Capital Group, Inc., were named as defendants. Damages in an
     unspecified amount are sought.

     In accordance with the terms and conditions of the Share Exchange Agreement
     relating to the Split-Off Transactions, the Taylor Family has agreed to
     indemnify Reliance for certain losses incurred




                                       12
<PAGE>   13
                           TAYLOR CAPITAL GROUP, INC.
        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Continued)


     by Reliance, including certain losses relating to the Split-Off
     Transactions ("Taylor Family Indemnification Obligations"). In accordance
     with the terms of an agreement dated February 6, 1997 between the Taylor
     Family and the Company, the Company agreed to indemnify the Taylor Family
     for certain losses that the Taylor Family may incur as a result of the
     Split-Off Transactions, including a portion of the Taylor Family
     Indemnification Obligations under the Share Exchange Agreement. The Company
     is unable at this time to predict the extent to which it will be required
     to pay any amounts under its indemnification obligation to the Taylor
     Family. The Company and its subsidiaries have paid and may continue to pay
     defense and other legal costs of the lawsuits described above that are not
     otherwise advanced by insurance carriers on behalf of the Taylor Family and
     other directors, officers and stockholders of the Company who are
     defendants in these lawsuits.

     The Company believes that it has meritorious defenses to all of the actions
     against the Company, and the Company intends to defend itself and its
     subsidiaries vigorously. However, the Company is unable to predict, at this
     time, the potential impact of the litigation, the indemnification
     obligations and the payment of legal fees described above on the
     management, business, financial condition, liquidity and operating results
     of the Company. Even if the Taylor Family, the Company and the other
     defendants are successful in defending themselves in the lawsuits, the
     Company has incurred and will continue to incur significant costs with
     respect to such lawsuits.

     The Company is from time to time a party to various other legal actions
     arising in the normal course of business. Management knows of no such other
     threatened or pending legal actions against the Company that are likely to
     have a material adverse impact on the business, financial condition,
     liquidity or operating results of the Company.

9.   Segment Reporting

     The Company's operations include two primary segments: banking and mortgage
     banking. Through its 12 banking branches located in the Chicago
     metropolitan area, the Company provides a full range of commercial and
     consumer banking services to small and mid size businesses. The mortgage
     banking segment originates residential mortgage and home equity loans from
     approved mortgage brokers and other financial intermediaries, as well as
     employee loan originators who are compensated on a full commission basis.
     The majority of the first mortgage loans originated are conforming loans
     which are generally sold into the secondary market. The home equity loans
     are retained by the Bank and included in the Company's mortgage banking
     segment.

     The Company's two reportable segments are separately managed, as they offer
     different products and services and have different marketing strategies. In
     addition, the mortgage banking segment, through its wholesale origination
     operation, services a different customer base than the banking segment.

     The segment financial information provided below has been derived from the
     internal profitability reporting system used by management to monitor and
     manage the financial performance of the Bank. The Bank evaluates segment
     performance based on profit or loss before income taxes. Certain



                                       13
<PAGE>   14
                           TAYLOR CAPITAL GROUP, INC.
       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Continued)



     indirect expenses have been allocated based on actual volume measurements
     and other criteria, as the Bank considers appropriate. The Bank accounts
     for intersegment revenue at current market prices.

     The following tables present reportable segment information for the periods
     indicated:

<TABLE>
<CAPTION>
                                                             For the Three Months Ended
                                     --------------------------------------------------------------------------
                                              September 30, 1999                     September 30, 1998
                                     --------------------------------------------------------------------------
                                                    Mortgage                              Mortgage
                                       Banking      Banking       Total        Banking    Banking      Total
                                     --------------------------------------------------------------------------
                                                                   (in thousands)
<S>                                  <C>            <C>         <C>           <C>          <C>       <C>
Net interest income                  $   19,356     $ 1,204     $   20,560    $   17,367   $   621   $   17,988

Noninterest income                        4,146          78          4,224         3,600       102        3,702

Depreciation and amortization             1,677           5          1,682         1,603        26        1,629

Other significant noncash items:
   Provision for loan losses              1,449          51          1,500         1,041         9        1,050
   Gain on sales of loans, net              ---         363            363           ---       999          999
   Gain on sale of mortgage
       servicing rights                     ---           5              5           ---       ---          ---
   Impairment of mortgage
       servicing rights                     ---         ---            ---           ---       151          151

Income taxes (benefit)                    3,389        (342)         3,047         2,157       (61)       2,096

Segment net income (loss)            $    5,475     $  (685)    $    4,790    $    3,320   $    91   $    3,411
                                     ==========================================================================
Segment average assets               $1,925,557     $92,554     $2,018,111    $1,797,072   $62,598   $1,859,670
                                     ==========================================================================
</TABLE>








                                       14
<PAGE>   15
                           TAYLOR CAPITAL GROUP, INC.
       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Continued)


<TABLE>
<CAPTION>
                                                             For the Nine Months Ended
                                  -----------------------------------------------------------------------------
                                            September 30, 1999                     September 30, 1998
                                  -----------------------------------------------------------------------------
                                                    Mortgage                              Mortgage
                                   Banking          Banking     Total       Banking       Banking     Total
                                  -----------------------------------------------------------------------------
                                                                   (in thousands)
<S>                               <C>              <C>       <C>           <C>            <C>       <C>
Net interest income               $   55,402       $ 3,312   $   58,714    $   52,081     $ 1,813   $   53,894

Noninterest income                    12,029           218       12,247        11,006         205       11,211

Depreciation and amortization          4,784            16        4,800         4,644          78        4,722

Other significant noncash items:

   Provision for loan losses           4,358           142        4,500         3,290          10        3,300

   Gain on sales of loans, net           ---         1,854        1,854           ---       2,950        2,950

   Gain on sale of mortgage

      servicing rights                   ---           198          198           ---       1,462        1,462

   Impairment of mortgage

      servicing rights                   ---           ---          ---           ---         301          301

   Reduction of impairment

      reserve on mortgage

      servicing rights                   ---            47           47           ---         ---          ---

Income taxes (benefit)                 8,935          (586)       8,349         6,915         427        7,342

Segment net income (loss)         $   14,518       $(1,177)  $   13,341    $   10,687     $   991   $   11,678
                                  =============================================================================
Segment average assets            $1,867,654       $94,984   $1,962,638    $1,794,113     $56,643   $1,850,756
                                  =============================================================================
</TABLE>



                                       15
<PAGE>   16
                           TAYLOR CAPITAL GROUP, INC.
        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Continued)


The following tables reconcile segment information to the consolidated financial
statements for the periods indicated:

<TABLE>
<CAPTION>
                                                            For the Three Months Ended
                                  -----------------------------------------------------------------------------
                                            September 30, 1999                     September 30, 1998
                                  -----------------------------------------------------------------------------
                                    Reportable               Consolidated   Reportable            Consolidated
                                     Segments       Other       Totals       Segments     Other      Totals
                                  -----------------------------------------------------------------------------
                                                                   (in thousands)
<S>                               <C>              <C>       <C>           <C>           <C>        <C>

Net interest income               $   20,560       $  (393)  $   20,167    $   17,988    $  (467)   $   17,521

Noninterest income                     4,224            (2)       4,222         3,702         (1)        3,701

Depreciation and amortization          1,682           ---        1,682         1,629        ---         1,629

Other significant noncash items:
   Provision for loan losses           1,500           ---        1,500         1,050        ---         1,050
   Gain on sales of loans, net           363           ---          363           999        ---           999
   Gain on sale of mortgage
      servicing rights                     5           ---            5           ---        ---           ---
   Impairment of mortgage
      servicing rights                   ---           ---          ---           151        ---           151

Income taxes (benefit)                 3,047          (834)       2,213         2,096       (651)        1,445

Net income (loss)                 $    4,790       $(1,551)  $    3,239    $    3,411    $(1,228)   $    2,183
                                  =============================================================================
Average assets                    $2,018,111       $ 4,310   $2,022,421    $1,859,670    $ 5,271    $1,864,941
                                  =============================================================================
</TABLE>






                                       16
<PAGE>   17
                           TAYLOR CAPITAL GROUP, INC.
       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Continued)


<TABLE>
<CAPTION>
                                                             For the Nine Months Ended
                                  -----------------------------------------------------------------------------
                                            September 30, 1999                     September 30, 1998
                                  -----------------------------------------------------------------------------
                                    Reportable               Consolidated   Reportable            Consolidated
                                     Segments       Other       Totals       Segments     Other      Totals
                                  -----------------------------------------------------------------------------
                                                                   (in thousands)
<S>                               <C>              <C>        <C>          <C>           <C>        <C>
Net interest income               $   58,714       $(1,169)   $   57,545   $   53,894    $(1,422)   $   52,472

Noninterest income                    12,247            (7)       12,240       11,211         (6)       11,205

Depreciation and amortization          4,800           ---         4,800        4,722        ---         4,722

Other significant noncash items:
    Provision for loan losses          4,500           ---         4,500        3,300        ---         3,300
    Gain on sales of loans, net        1,854           ---         1,854        2,950        ---         2,950
    Gain on sale of mortgage
       servicing rights                  198           ---           198        1,462        ---         1,462
    Impairment of mortgage
       servicing rights                  ---           ---           ---          301        ---           301
    Reduction of impairment
       reserve on mortgage
       servicing rights                   47           ---            47          ---        ---           ---

Income taxes (benefit)                 8,349        (2,367)        5,982        7,342     (2,242)        5,100

Net income (loss)                 $   13,341       $(4,709)   $    8,632   $   11,678    $(4,236)   $    7,442
                                  =============================================================================
Average assets                    $1,962,638       $ 2,497    $1,965,135   $1,850,756    $ 7,881    $1,858,637
                                  =============================================================================
</TABLE>

For the three and nine months ended  September  30, 1999 and 1998,
respectively,  amounts  presented in the other  columns represent the operations
of the Parent Company and the Mortgage Company that have not been defined as
reportable segments.

10. Cumulative Effect of Change in Accounting Principle

As of January 1, 1999, the Company adopted Statement of Position 98-5 (SOP
98-5), "Reporting on the Costs of Start-Up Activities," which requires that the
cost of start-up activities and organization costs be expensed as incurred. The
initial adoption of SOP 98-5 resulted in a charge of $214,000 (net of a tax
benefit of $146,000) and is reported in the Consolidated Statements of Income as
a cumulative effect of change in accounting principle. The charge represents
remaining organization costs associated with the Split-Off Transactions which
had not yet been fully amortized.



                                       17
<PAGE>   18
                           TAYLOR CAPITAL GROUP, INC.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following presents management's discussion and analysis of financial
condition and results of operations of the Company as of the dates and for the
periods indicated. This discussion should be read in conjunction with the
Company's Consolidated Financial Statements, and the Notes thereto, appearing
elsewhere in this Form 10-Q.

BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Taylor Capital
Group, Inc. (the "Parent Company") and its wholly owned subsidiaries
(collectively, with the Parent Company, the "Company"), Cole Taylor Bank and its
subsidiaries (the "Bank") and CT Mortgage Company, Inc. (the "Mortgage
Company"). This discussion should be read in conjunction with the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.

RESULTS OF OPERATIONS

Overview

The Company's third quarter 1999 financial results reflected an increase in
profitability in comparison to the financial results for the third quarter of
1998. This increase was primarily a result of an increase in net interest income
to $20.2 million from $17.5 million for the same period in 1998. This increase
was partially offset by a decrease in gain on sales of loans, net, to $363,000
for the third quarter of 1999 from $999,000 for the same period in 1998 and an
increase in noninterest expense to $17.8 million in 1999 from $17.4 million in
1998.

For the third quarter of 1999, consolidated net income was $3.2 million.
Annualized return on average assets and return on average equity were 0.64% and
8.77%, respectively. For the third quarter of 1998, consolidated net income was
$2.2 million, and annualized return on average assets and return on average
equity were 0.46% and 6.02%, respectively. Total assets of the Company were
$2.01 billion and $1.91 billion at September 30, 1999 and December 31, 1998,
respectively. Loans and deposits grew to $1.44 billion and $1.55 billion,
respectively, at September 30, 1999 from $1.34 billion and $1.44 billion,
respectively, at December 31, 1998. Stockholders' equity increased to $147.0
million at September 30, 1999 as compared to $145.1 million at December 31,
1998.

For the nine months ended September 30, 1999, consolidated net income was $8.6
million. Annualized return on average assets and return on average equity were
0.60% and 7.86%, respectively. For the same period in 1998, consolidated net
income was $7.4 million. Annualized return on average assets and return on
average equity were 0.54% and 6.95%, respectively. Despite an increase in net
interest income to $57.5 million for the nine months ended September 30, 1999
from $52.5 million for the same period in 1998, net income increased only
modestly primarily due to an increase in the loan loss provision to $4.5 million
in 1999 from $3.3 million in 1998, a $1.5 million gain on the sale of mortgage
servicing rights in 1998 and an increase in legal fees to $4.1 million in 1999
compared to $3.0 million in 1998.



                                       18
<PAGE>   19
                           TAYLOR CAPITAL GROUP, INC.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (Continued)



Net Interest Income

The following table sets forth certain information relating to the Company's
average consolidated balance sheets and reflects the yield on average earning
assets and cost of average liabilities for the periods indicated. Such yields
and costs are derived by dividing annualized income or expense by the average
balance of assets or liabilities. Interest income is measured on a tax
equivalent basis using a 35% income tax rate for each period presented.









                                       19
<PAGE>   20
                           TAYLOR CAPITAL GROUP, INC.
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                CONDITION AND RESULTS OF OPERATIONS (Continued)


     ANALYSIS OF AVERAGE BALANCES, TAX EQUIVALENT INTEREST AND YIELD/RATES

<TABLE>
<CAPTION>
                                              FOR THE THREE MONTHS ENDED  FOR THE THREE MONTHS ENDED   FOR THE NINE MONTHS ENDED
                                                  SEPTEMBER 30, 1999          SEPTEMBER 30, 1998           SEPTEMBER 30, 1999
                                              --------------------------  --------------------------   --------------------------
                                                                  YIELD/                      YIELD/                       YIELD/
                                               AVERAGE             RATE    AVERAGE             RATE     AVERAGE             RATE
                                               BALANCE  INTEREST   (%)     BALANCE  INTEREST   (%)      BALANCE   INTEREST  (%)
                                              --------- --------  ------  --------- --------  ------   ---------  -------- ------
                                                                            (dollars in thousands)
<S>                                           <C>       <C>       <C>     <C>       <C>       <C>      <C>        <C>      <C>
INTEREST-EARNING ASSETS:
Investment securities (1):
  Taxable                                    $  372,999   $5,404   5.79%  $  376,307  $ 4,918   5.25%   $  366,661  $15,084   5.49%
  Non-taxable (tax equivalent)                   69,330    1,322   7.63       69,242    1,355   7.83        71,552    4,118   7.67
                                             ----------   ------          ----------  -------           ----------  -------
     Total investment securities                442,329    6,726   6.07      445,549    6,273   5.65       438,213   19,202   5.85
                                             ---------    ------          ----------  -------           ----------  -------
Cash equivalents                                 25,199      323   5.02       22,146      307   5.42        16,091      597   4.89
                                             ---------    ------          ----------  -------           ----------  -------
Loans (2):
  Commercial and industrial                   1,049,749   22,619   8.43      920,270   20,801   8.84     1,021,477   65,513   8.46
  Real estate mortgages                         190,097    3,427   7.21      191,403    3,476   7.26       184,041    9,890   7.17
  Consumer and other                            186,140    3,860   8.23      162,445    3,647   8.91       175,018   10,644   8.13
  Fees on loans                                              483                          348                         1,000
                                             ----------   ------          ----------  -------           ----------  -------
     Net loans (tax equivalent)               1,425,986   30,389   8.46    1,274,118   28,272   8.81     1,380,536   87,047   8.43
                                             ----------   ------          ----------  -------           ----------  -------
       Total earning assets                   1,893,514   37,438   7.86    1,741,813   34,852   7.96     1,834,840  106,846   7.78
                                             ----------   ------          ----------  -------           ----------  -------
Allowance for loan losses                       (26,555)                     (24,758)                      (25,719)
NONEARNING ASSETS:
  Cash and due from banks                        70,598                       59,696                        68,004
  Accrued interest and other assets              84,864                       88,190                        88,010
                                             ----------                   ----------                    ----------
TOTAL ASSETS                                 $2,022,421                   $1,864,941                    $1,965,135
                                             ==========                   ==========                    ==========
INTEREST-BEARING LIABILITIES:
  Interest-bearing deposits:
     Interest-bearing demand deposits        $  368,950    2,864   3.08%  $  343,784    3,028   3.49%   $  361,728    8,337   3.08%
     Savings deposits                           105,576      445   1.67      110,864      618   2.21       106,820    1,359   1.70
     Time deposits                              745,659    9,493   5.05      623,457    8,719   5.55       698,981   26,444   5.06
                                             ----------   ------          ----------  -------           ----------  -------
       Total deposits                         1,220,185   12,802   4.16    1,078,105   12,365   4.55     1,167,529   36,140   4.14
                                             ----------   ------          ----------  -------           ----------  -------
Short-term borrowings                           198,670    2,324   4.64      193,234    2,525   5.18       189,494    6,418   4.53
Notes payable                                   114,373    1,552   5.31      129,345    1,865   5.64       122,229    4,908   5.30
                                             ----------   ------          ----------  -------           ----------  -------
     Total interest-bearing liabilities       1,533,228   16,678   4.32    1,400,684   16,755   4.75     1,479,252   47,466   4.29
                                             ----------   ------          ----------  -------           ----------  -------
NONINTEREST-BEARING LIABILITIES:
  Noninterest-bearing deposits                  317,134                      303,490                       315,948
  Nonrecourse borrowings (3)                        ---                          ---                           ---
  Accrued interest and other liabilities         25,595                       16,864                        23,561

STOCKHOLDERS' EQUITY                            146,464                      143,903                       146,374
                                             ----------                   ----------                    ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $2,022,421                   $1,864,941                    $1,965,135
                                             ==========                   ==========                    ==========
Net interest income (tax equivalent)                     $20,760                      $18,097                       $59,380
                                                         =======                      =======                       =======
Net interest spread                                                3.54%                        3.21%                         3.49%
Net interest margin                                                4.36%                        4.14%                         4.32%
                                                                   ====                         ====                          ====
<CAPTION>
                                               FOR THE NINE MONTHS ENDED
                                                  SEPTEMBER 30, 1998
                                              --------------------------
                                                                  YIELD/
                                               AVERAGE             RATE
                                               BALANCE  INTEREST   (%)
                                              --------- --------  ------
<S>                                           <C>       <C>       <C>
INTEREST-EARNING ASSETS:
Investment securities (1):
  Taxable                                   $  401,199    $17,147   5.71%
  Non-taxable (tax equivalent)                  66,730      3,951   7.89
                                            ----------    -------
     Total investment securities               467,929     21,098   6.02
                                            ----------    -------
Cash equivalents                                10,630        441   5.47
                                            ----------    -------
Loans (2):
  Commercial and industrial                    887,424     59,836   8.89
  Real estate mortgages                        198,403     10,866   7.30
  Consumer and other                           158,297     10,553   8.91
  Fees on loans                                             1,045
                                            ----------    -------
     Net loans (tax equivalent)              1,244,124     82,300   8.84
                                            ----------    -------
       Total earning assets                  1,722,683    103,839   8.05
                                            ----------    -------
Allowance for loan losses                      (25,292)
NONEARNING ASSETS:
  Cash and due from banks                       65,396
  Accrued interest and other assets             95,850
                                            ----------
TOTAL ASSETS                                $1,858,637
                                            ==========
INTEREST-BEARING LIABILITIES:
  Interest-bearing deposits:
     Interest-bearing demand deposits       $  342,182      9,063   3.54%
     Savings deposits                          112,290      1,995   2.38
     Time deposits                             604,939     25,301   5.59
                                            ----------    -------
       Total deposits                        1,059,411     36,359   4.59
                                            ----------    -------
Short-term borrowings                          198,278      7,665   5.17
Notes payable                                  127,893      5,610   5.78
                                            ----------    -------
     Total interest-bearing liabilities      1,385,582     49,634   4.79
                                            ----------    -------
NONINTEREST-BEARING LIABILITIES:
  Noninterest-bearing deposits                 306,544
  Nonrecourse borrowings (3)                     5,359
  Accrued interest and other liabilities        18,067

STOCKHOLDERS' EQUITY                           143,085
                                            ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $1,858,637
                                            ==========
Net interest income (tax equivalent)                      $54,205
                                                          =======
Net interest spread                                                 3.26%
Net interest margin                                                 4.20%
                                                                    =====
</TABLE>


(1) Investment securities average balances are based on amortized cost.
(2) Nonaccrual loans are included in the above stated average balances.
(3) Interest expense on nonrecourse borrowings is netted against trust fees on
    the income statement.


                                       20
<PAGE>   21
                           TAYLOR CAPITAL GROUP, INC.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (Continued)

Net Interest Income -- continued

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

Net interest income (with an adjustment for tax-exempt income) for the third
quarter of 1999 was $20.8 million, compared to $18.1 million for the third
quarter of 1998. The increase in net interest income in 1999 was a result of an
increase in average earning assets and net interest margin. Average earning
assets increased $151.7 million, or 8.7%, for the three months ended September
30, 1999 when compared to the 1998 reporting period. Net interest margin, which
is determined by dividing taxable-equivalent net interest income by average
earning assets, increased to 4.36% for the third quarter of 1999, from 4.14% for
the same 1998 quarter. The third quarter 1998 net interest margin was adversely
impacted by mortgage prepayment activity, in excess of that originally expected
related to certain sequential paying obligations that were purchased at a
significant premium. This excess prepayment activity resulted in impairment
charges of $463,000 and additional premium amortization of approximately
$200,000. During 1999 a change in asset mix occurred whereby maturing investment
securities were utilized to fund higher yielding loans. These factors increasing
the net margin during 1999 were partially offset by reduced yields on loans. The
yield on earning assets declined to 7.86% from 7.96% for the three months ended
September 30, 1999 and 1998, respectively. The yield on loans reflected reduced
yields as a result of a lower interest rate environment versus the same period
in 1998 as well as increased competitive pressure on loan pricing. The cost of
interest-bearing liabilities declined to 4.32% from 4.75% for the three months
ended September 30, 1999 and 1998, respectively, primarily as a result of
lowering the rate paid on interest-bearing deposits and the renewal of maturing
notes payable at lower interest rates due to the comparatively lower interest
rate environment from the last quarter of 1998 through the first half of 1999.

Net interest income (with an adjustment for tax-exempt income) for the first
nine months of 1999 totaled $59.4 million as compared to $54.2 million for the
first nine months of 1998. The increase in net interest income was a result of
an increase in average earning assets and net interest margin. Average earning
assets increased $112.2 million, or 6.5%, for the nine months ended September
30, 1999 when compared to the 1998 reporting period. Net interest margin was
4.32% for the first nine months of 1999 as compared to 4.20% for the 1998
reporting period. The 1999 net interest margin was positively impacted by a
payoff of a loan which was originally purchased at a discount by the Bank. This
payoff resulted in the recognition of the remaining unamortized discount as
interest income in the amount of $535,000. The net interest margin was also
positively impacted by a 50 basis point decline in the cost of interest-bearing
liabilities. These increases were partially offset by declines in the investment
security and loan yields. The yield on earning assets declined to 7.78% from
8.05% for the first nine months of 1999, as compared to the same period in 1998.
In late 1997 and January 1998, the Bank purchased approximately $92 million of
sequential-paying collateralized mortgage obligations at a premium of $7.5
million. The decline in mortgage interest rates and higher refinancing activity
experienced during 1998 required that the Bank amortize the purchase premium at
a rate faster than originally expected. Accordingly, in the third and fourth
quarters of 1998, adjustments were recorded to reduce the yields of the
securities to an expected yield given actual payments received to date and the
future expected prepayment rate for these securities. At September 30, 1999,
these securities totaled $29.5 million, with $1.2 million of premium remaining
and an expected yield of 5.79%. These securities are backed



                                       21
<PAGE>   22
                           TAYLOR CAPITAL GROUP, INC.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (Continued)


Net Interest Income -- continued

by pools of single-family mortgage loans and guaranteed, as to principal and
interest, by certain agencies, including the Federal National Mortgage
Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC). The
decreased yield on commercial loans reflected the 75 basis point reduction in
the Company's prime rate during the fourth quarter of 1998, as well as increased
competitive pressure on loan pricing. The yield on real estate mortgages
decreased as mortgage prepayments increased and new mortgage production rates
were lower due to the lower interest rate environment. The decrease in consumer
loan yields resulted from a change in portfolio mix due to the sale of the
majority of the Bank's credit card portfolio in October 1998.

The cost of interest-bearing liabilities declined to 4.29% during the first nine
months of 1999 from 4.79% for the comparable period in 1998 primarily as a
result of lowering the rate paid on interest-bearing deposits and the renewal of
maturing notes payable at lower interest rates due to the lower interest rate
environment from the last quarter of 1998 through the first half of 1999.

Provision for Loan Losses

Management determines a provision for loan losses which it considers sufficient
to maintain an allowance covering probable losses inherent in the portfolio as
of the balance sheet date. In evaluating the adequacy of the allowance for loan
losses, consideration is given to historical charge-off experience, growth of
the loan portfolio, changes in the composition of the loan portfolio, general
economic conditions, information about specific borrower situations, including
their financial position and collateral values, and other factors and estimates
which are subject to change over time. Estimating the risk of loss and amount of
loss on any loan is subjective. Ultimate losses may vary from current estimates.
These estimates are reviewed quarterly and, as changes in estimates are
identified by management, the amounts are reflected in income through the
provision for loan losses in the appropriate period.

The provision for loan losses in the third quarter of 1999 and the third quarter
of 1998 were $1.5 million and $1.1 million, respectively. For the first nine
months of 1999 the provision for loan losses totaled $4.5 million versus $3.3
million for the same period of 1998. The $1.2 million increase in the provision
was primarily a result of an increase in loan volume in 1999. Net charge-offs
were $794,000 for the third quarter of 1999 as compared to $1.1 million for the
same 1998 period. For the first nine months of 1999 net charge-offs totaled $2.5
million as compared to $4.6 million for the same 1998 period. The higher net
charge-off activity experienced in 1998 was a result of the resolution of
certain older, chronic commercial problem loans. If the loan portfolio continues
to grow and/or future net charge-offs, and/or nonperforming loans continue to
increase, the Company expects that the provision for loan losses will continue
to exceed 1998 levels. As of September 30, 1999, management believes that the
allowance for loan losses is adequate. See "Financial Condition -- Nonperforming
Loans and Assets."


                                       22
<PAGE>   23
                           TAYLOR CAPITAL GROUP, INC.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (Continued)


Noninterest Income

The following table displays noninterest income for the periods indicated:

<TABLE>
<CAPTION>
                                                                  NONINTEREST INCOME
                                                 For the  Three Months          For the Nine Months
                                                  Ended September 30,           Ended September 30,
                                                 ---------------------        -----------------------
                                                  1999           1998          1999            1998
                                                 ------         ------        -------         -------
                                                                   (in thousands)
<S>                                              <C>            <C>            <C>             <C>
Deposit service charges                          $2,513         $1,911         $6,809          $6,098
Retail credit card service charges                   12            140            210             407
Merchant credit card processing fees                  8            142             35             279
Trust fees                                        1,182            965          3,313           2,887
Gain on sale of loans, net                          363            999          1,854           2,950
Mortgage loan servicing income (loss)                78            (47)           264             (95)
ATM fees                                            263            219            765             626
Gain on sale of mortgage servicing rights             5            ---            198           1,462
Investment securities gains, net                    ---            ---            107             ---
Other noninterest income                            166            220            784             702
                                                 ------         ------        -------         -------
     Total noninterest income                    $4,590         $4,549        $14,339         $15,316
                                                 ======         ======        =======         =======
</TABLE>

Noninterest income for the third quarter of 1999 totaled $4.6 million, a
$41,000, or 0.9%, increase from the same quarter in 1998. Increases in deposit
service charges, trust fees, ATM fees, and mortgage loan servicing income, which
totaled $988,000, in the aggregate, for the three months ended September 30,
1999, as compared to the same period in 1998 were primarily offset by a $636,000
decrease in gain on sale of loans, net and a decrease of $262,000 in retail and
merchant credit card charges and fees. The increase in deposit service charges
was due to the increased service charge schedules/rates during 1999. The
decrease in the gain on sale of loans, net was primarily a result of a 32%
decrease in the volume of loans sold as compared to 1998.

Total noninterest income for the first nine months of 1999 was $14.3 million as
compared to $15.3 million for the same period in 1998. The decrease in
noninterest income was primarily due to the 1998 reporting period inclusion of a
gain on sale of mortgage servicing rights of $1.5 million versus a gain of only
$198,000 for the 1999 reporting period. In addition, merchant credit card
processing fees decreased during 1999 due to reductions in pricing of credit
card deposit services.

For the first nine months of 1999, trust fees increased $426,000, as compared to
the same period in 1998, primarily due to an increase in corporate trust
business. The gain on sale of loans, net continued to decrease during 1999 due
to a slowdown in mortgage prepayment activity and a rising mortgage interest
rate environment. The increase in mortgage loan servicing income was primarily a
result of a $47,000 reduction in the valuation reserve related to capitalized
mortgage servicing rights during the first quarter of 1999, as mortgage
prepayment activity slowed during 1999. An impairment provision of $301,000 had
been recognized during the first nine months of 1998. The Company's higher ATM
fee income during the first nine months of 1999 was due to an increase in the
surcharge fee implemented in the fourth quarter of 1998.




                                       23
<PAGE>   24
                           TAYLOR CAPITAL GROUP, INC.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (Continued)


Noninterest Expense

The following table displays noninterest expense for the periods indicated:

<TABLE>
<CAPTION>
                                                                  NONINTEREST INCOME
                                                 For the  Three Months          For the Nine Months
                                                  Ended September 30,           Ended September 30,
                                                 ---------------------        -----------------------
                                                  1999           1998          1999            1998
                                                 ------         ------        -------         -------
                                                                   (in thousands)
<S>                                              <C>            <C>            <C>             <C>
Salaries and employee benefits                   $ 9,524        $ 9,341        $ 28,265        $27,708
Occupancy of premises, net                         1,645          1,811           4,965          5,330
Furniture and equipment                              954            832           2,577          2,558
Computer processing                                  588            577           1,776          1,643
Legal fees                                         1,505            958           4,123          2,960
Advertising and public relations                     418            365             831          1,328
Goodwill and other intangible amortization           600            612           1,812          1,836
Other real estate and repossessed asset expense      (92)           200              73            409
Other noninterest expense                          2,663          2,696           8,134          8,174
    Total noninterest expense                    $17,805        $17,392        $ 52,556        $51,946
Efficiency ratio (1)                               71.92%         78.80%          73.11%         76.63%
</TABLE>

-------------------
(1) Noninterest expense divided by an amount equal to net interest income plus
    noninterest income.

Total noninterest expense for the third quarter of 1999 was $17.8 million, a
$413,000, or 2.4%, increase as compared to the prior year's third quarter
noninterest expense of $17.4 million. The primary reason for the higher expense
for the 1999 reporting period was an increase in legal fees of $547,000 related
to Parent Company legal costs. Decreases in occupancy expense of $166,000 and
other real estate and repossessed asset expense of $292,000 were partially
offset by an increase in furniture and equipment expenses of $122,000.

Noninterest expense for the nine months ended September 30, 1999 totaled $52.6
million, as compared to $51.9 million for the 1998 reporting period. The primary
reasons for the higher expense in the 1999 reporting period over that in the
1998 period were increased legal fees and employee benefit costs, partially
offset by decreases in advertising and public relations expense, occupancy
expenses, and other real estate and repossessed asset expense.

Salaries and benefits expense for the first nine months of 1999 increased 2.0%
versus the same period in 1998. The primary reason for the increase was routine
annual salary increases partially offset by a lower number of full-time
equivalent employees in 1999 versus 1998.

Occupancy expense for the first nine months of 1999 decreased $365,000 as
compared to the same 1998 period. A reduction in rent expense related to one of
the Bank's facilities contributed to the decrease.





                                       24
<PAGE>   25
                           TAYLOR CAPITAL GROUP, INC.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (Continued)


Noninterest Expense -- continued

In late 1998 and the first two quarters of 1999, the Bank implemented
significant technology enhancements within the Bank's operations center and
replaced certain hardware and software applications with systems of greater
functionality. Capital expenditures related to the replacement of hardware and
software totaled approximately $2.8 million. These enhancements and replacements
have resulted in increased furniture and equipment expenses during 1999 versus
the same period in 1998.

Legal expenses for the first nine months of 1999 increased $1.2 million from
1998. Parent Company legal costs increased during 1999, relating to the defense
of the various lawsuits relating to the Split-Off Transactions. The legal costs
relating to the defense of the various related lawsuits relating to the
Split-Off Transactions totaled approximately $3.5 million and $2.4 million
during the 1999 and 1998 reporting periods. The Company expects to continue to
incur significant legal expenses in connection with the Split-Off Transactions
litigation, which will continue to adversely affect profitability. A portion of
these defense costs have been, and will be, submitted to insurance carriers for
reimbursement. The Company, however, cannot predict to what extent such costs
will be reimbursed or when such reimbursement could occur. See "Litigation"
below.

Other real estate and repossessed asset expense decreased $336,000 for the first
nine months of 1999 versus the same reporting period in 1998. This decrease was
primarily a result of 13 other real estate properties being sold during 1999.
These sales resulted in gains on sale and other income on other real estate
owned of approximately $223,000. In addition, carrying expenses related to these
properties decreased as sales occurred in 1999.

Income Taxes

Income tax expense of $2.2 million and $1.4 million was recorded for the third
quarters of 1999 and 1998, respectively, reflecting an effective tax rate of 41%
and 40%, respectively. The income tax expense for the first nine months of 1999
and 1998 totaled $6.0 million and $5.1 million, respectively, reflecting an
effective tax rate of 40% and 41%, respectively.

Cumulative Effect of Change in Accounting Principle

As of January 1, 1999, the Company adopted Statement of Position 98-5 (SOP
98-5), "Reporting on the Costs of Start-Up Activities," which requires that the
cost of start-up activities and organization costs be expensed as incurred. The
initial adoption of SOP 98-5 resulted in a charge of $214,000 (net of a tax
benefit of $146,000) and is reported in the Consolidated Statements of Income as
a cumulative effect of change in accounting principle. The charge represents
remaining organization costs associated with the Split-Off Transactions which
had not yet been fully amortized.





                                       25
<PAGE>   26
                           TAYLOR CAPITAL GROUP, INC.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (Continued)


FINANCIAL CONDITION

Overview

During the first nine months of 1999 total assets increased $95.1 million to
$2.01 billion at September 30, 1999 from $1.91 billion at December 31, 1998. The
asset growth in the Company's commercial and consumer loan portfolios was
primarily funded with brokered certificates of deposit. Growth in customer
interest-bearing deposits was offset by a seasonal decline in customer
non-interest bearing deposits and a decrease in FHLB advances. Mortgage loans
held-for-sale declined due to a slowdown in mortgage prepayment activity and a
rising mortgage interest rate environment.

In March 1999, the Company executed a modest restructuring of the
available-for-sale investment portfolio. Approximately $50 million of
short-maturity U.S. Treasury securities were sold, and the proceeds were
reinvested in longer-term Treasury, government agency and mortgage-backed
securities, thereby lengthening the duration of the investment portfolio.

Premises and equipment expenses increased approximately $1.0 million during the
first nine months of 1999 primarily as a result of the purchase of operations
and technology hardware and software.

Goodwill may periodically be reduced by the utilization of state net operating
loss carryforwards acquired in connection with the Split-Off Transactions. The
state income tax benefit of these items is applied against goodwill when
recognized, rather than as a reduction of income tax expense.

Nonperforming Loans and Assets

Management reviews the loan portfolio for problem loans through a loan review
function and various credit committees. During the ordinary course of business,
management may become aware of borrowers who may not be able to meet the
contractual requirements of loan agreements. Such loans are placed under close
supervision with consideration given to placing the loan on a nonaccrual status,
the need for an additional allowance for loan loss, and, if appropriate, a
partial or full charge-off.

The following table sets forth the amounts of nonperforming loans and other
assets at the end of the periods indicated:






                                       26
<PAGE>   27
                           TAYLOR CAPITAL GROUP, INC.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (Continued)


Nonperforming Loans and Assets -- continued

                              NONPERFORMING ASSETS

<TABLE>
<CAPTION>
                                                                       September 30,  December 31,
                                                                           1999           1998
                                                                       ------------   -----------
<S>                                                                      <C>            <C>
                                                                         (dollars in thousands)
Loans contractually past due 90 days or more but still accruing          $ 4,839        $ 2,618
Nonaccrual loans                                                          13,078         11,365
                                                                         -------        -------
      Total nonperforming loans                                           17,917         13,983
Other real estate                                                            719          3,185
Other repossessed assets                                                     116             83
                                                                         -------        -------
      Total nonperforming assets                                         $18,752        $17,251
                                                                         =======        =======

Nonperforming loans to total loans                                          1.25%          1.05%
Nonperforming assets to total loans plus repossessed property               1.31%          1.29%
Nonperforming assets to total assets                                        0.94%          0.90%
</TABLE>

Allowance for Loan Losses

An allowance for loan losses has been established to provide for those loans
which may not be repaid in their entirety. The allowance for loan losses is
increased by provisions charged to expense and decreased by charge-offs, net of
recoveries. The allowance is maintained by management at a level it considers
adequate to absorb probable losses inherent in the portfolio as of the balance
sheet date. Factors considered include past loss experience, general economic
conditions, information about specific borrower situations, including their
financial position, collateral values, and other factors and estimates which are
subject to change over time. These estimates are reviewed quarterly and, as
changes in estimates are identified by management, the resulting amounts are
reflected through the provision for loan losses in the appropriate period.
Although management believes that the Company's allowance for loan losses is
adequate to absorb any losses on existing loans that may become uncollectible,
there can be no assurance that the allowance will prove sufficient to cover
actual loan losses in the future.
See "Results of Operations --Provision for Loan Losses".

The following table summarizes, for the periods indicated, activity in the
allowance for loan losses, including amounts charged-off, amounts of recoveries,
additions to the allowance charged to operating expense, the ratio of annualized
net charge-offs to average total loans, the ratio of the allowance to total
loans at end of period, and the ratio of the allowance to nonperforming loans:






                                       27
<PAGE>   28
                           TAYLOR CAPITAL GROUP, INC.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (Continued)


Allowance for Loan Losses -- continued

                     ANALYSIS OF ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>

                                               For the Three  Months Ended     For The Nine Months Ended
                                                     September  30,                  September 30,
                                               ---------------------------     --------------------------
                                                   1999            1998           1999             1998
                                                ----------     ----------      ----------      ----------
                                                                 (dollars in thousands)
<S>                                             <C>            <C>             <C>             <C>
Average total loans                             $1,425,364     $1,274,118      $1,380,536      $1,224,124
                                                ==========     ==========      ==========      ==========
Total loans at end of period                                                   $1,435,808      $1,291,356
                                                                               ==========      ==========
ALLOWANCE FOR LOAN LOSSES:
Allowance at beginning of period                $   25,855     $   24,503      $   24,599      $   25,813
Charge-offs                                         (1,333)        (1,336)         (4,166)         (5,752)
Recoveries                                             539            260           1,628           1,116
                                                ----------     ----------      ----------      ----------
    Net charge-offs                                   (794)        (1,076)         (2,538)         (4,636)
                                                ----------     ----------      ----------      ----------
Provision for loan losses                            1,500          1,050           4,500           3,300
                                                ----------     ----------      ----------      ----------
Allowance at end of period                      $   26,561     $   24,477      $   26,561      $   24,477
                                                ==========     ==========      ==========      ==========
Net charge-offs to average total loans                0.22%          0.34%           0.25%           0.50%

    (annualized)
Allowance to total loans at end of period                                            1.85%           1.90%
Allowance to nonperforming loans                                                   148.24%         131.33%
</TABLE>

Net charge-offs for the quarter and nine months ended September 30, 1999
decreased over the comparable periods for 1998. Net charge-offs were $2.5
million for the nine months ended September 30, 1999, as compared to $4.6
million for the 1998 reporting period. The decrease in 1999 was primarily due to
the resolution of certain older, chronic commercial problem loans which were
charged-off during the second quarter of 1998. The amount of nonperforming loans
was $17.9 million at September 30, 1999 as compared to $14.0 million at December
31, 1998. The increase in nonperforming loans and corresponding decrease in the
ratio of the allowance to nonperforming loans was primarily due to one
commercial loan, totalling $2.1 million, net of a charge-off of $1.0 million,
being put into nonaccrual status during September 1999.

Capital Resources

The Company actively monitors compliance with bank regulatory capital
requirements, focusing primarily on the risk-based capital guidelines. Under the
risk-based method of capital measurement, computed ratios are dependent on the
amount and composition of assets recorded on the balance sheet, as well as the
amount and composition of off-balance sheet items, in addition to the level of
capital.

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





                                       28
<PAGE>   29
                           TAYLOR CAPITAL GROUP, INC.
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                CONDITION AND RESULTS OF OPERATIONS (Continued)


Capital Resources -- continued

<TABLE>
<CAPTION>
                                                                                                      To Be Well
                                                                                                   Capitalized Under
                                                                               For Capital         Prompt Corrective
                                                          Actual            Adequacy Purposes      Action Provision
                                                    -----------------       -----------------      ------------------
                                                     Amount    Ratio          Amount   Ratio        Amount     Ratio
                                                    --------   ------       ---------  ------      ---------  -------
                                                                         (dollars in thousands)
<S>                                                 <C>         <C>          <C>       <C>          <C>       <C>
As of September 30, 1999:
   Total Capital (to Risk Weighted Assets)
      Taylor Capital Group, Inc. - Consolidated     $138,527     8.97%     >$123,547  >8.00%         NA
      Cole Taylor Bank                               163,231    10.60      > 123,211  >8.00        >$154,015  >10.00%
   Tier I Capital (to Risk Weighted Assets)
      Taylor Capital Group, Inc. - Consolidated      119,133     7.71      >  61,773  >4.00          NA
      Cole Taylor Bank                               143,890     9.34      >  61,606  >4.00        >  92,409   >6.00
   Leverage (1)
      Taylor Capital Group, Inc. - Consolidated      119,133     5.98      >  79,726  >4.00          NA
      Cole Taylor Bank                               143,890     7.23      >  79,615  >4.00        >  99,518   >5.00

As of December 31, 1998:
   Total Capital (to Risk Weighted Assets)
      Taylor Capital Group, Inc. - Consolidated     $131,218     9.02 %    >$116,405  >8.00%         NA
      Cole Taylor Bank                               154,943    10.67      > 116,144  >8.00       >$145,507  >10.00%
   Tier I Capital (to Risk Weighted Assets)
      Taylor Capital Group, Inc. - Consolidated      112,951     7.76      >  58,203  >4.00          NA
      Cole Taylor Bank                               136,717     9.42      >  58,072  >4.00       >  87,304   >6.00
   Leverage (1)
      Taylor Capital Group, Inc. - Consolidated      112,951     6.17      >  73,204  >4.00          NA
      Cole Taylor Bank                               136,717     7.33      >  74,655  >4.00       >  91,506   >5.00
</TABLE>

-----------------------------
(1)  The leverage ratio is defined as Tier 1 capital divided by average
quarterly assets.

Management of the Company recognizes the need to effectively manage capital
levels to remain above the regulatory "well capitalized" guidelines as it
relates to asset growth. In order to maintain desired capital levels, at the
Bank, management will continue to evaluate options to fund Parent Company legal
costs and other expenses, including utilizing the Parent Company's revolving
credit facility.

For the first nine months of 1999,  the Parent  Company  declared  $2.6 million
and $1.3  million in  preferred  and common stock dividends, respectively.

Under the terms of the Company's Employee Stock Ownership Plan (ESOP), the
Company is obligated to purchase shares of Company stock from terminated and
current employees related to "put" rights. During the three months ended
September 30, 1999, the Company repurchased 24,990 shares of its common stock
totaling approximately $935,000. These shares are currently being held as
treasury stock at their purchase price, as determined by the June 30, 1999
independent third party appraisal.



                                       29
<PAGE>   30
                           TAYLOR CAPITAL GROUP, INC.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity

The asset growth of loans was funded primarily through the issuance of brokered
certificates of deposits as loan growth outpaced customer deposit growth.
Brokered certificates of deposits increased to $152.9 million at September 30,
1999 from $56.3 million at December 31, 1998. Adverse operating results at the
Bank or changes in industry conditions could lead to an inability to replace
such brokered deposits at maturity, which could result in higher costs to or
reduced asset levels of the Bank. The Parent Company paid $1 million on its term
loan and $1 million on its revolving credit facility during the first nine
months of 1999. The Company believes that its current sources of funds are
adequate to meet all of the Company's financial commitments and asset growth
targets for 1999 and beyond.

On December 7, 1998 a motion was filed for a preliminary injunction which seeks
to prevent the Company and the Bank from paying any dividends to any of their
respective shareholders. On October 14, 1999 the District Court denied the
motion for preliminary injunction. See "Litigation."

As described in Footnote 8 to the consolidated financial statements included in
Part I, Item 1, and under the caption "Litigation" in this Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
Company and its subsidiaries continue to pay defense and other legal costs
related to certain significant litigation. As these costs are being paid
primarily by the Parent Company, the Parent Company's cash needs have increased.
The liquidity requirements for the Parent Company on a standalone basis consist
primarily of dividends to shareholders and expenses for general corporate
purposes including legal costs. The primary source of Parent Company cash flow
is dividends received from the Bank. The Company believes that the Bank
currently has adequate capital to allow continued dividends, out of earnings, to
support the Parent Company.

YEAR 2000 COMPLIANCE

The Company continues to be actively addressing its Year 2000 ("Y2K") compliance
issues. A comprehensive Y2K plan (the "Plan") has been prepared which includes
awareness, assessment, renovation, validation/testing, implementation and
contingency planning. The Company has developed an extensive Y2K communication
program. The Company will continue to update customers as to our progress as the
year ensues. A part of this communication program will focus on Y2K-related
fraud prevention. A Y2K oversight committee is responsible for ensuring that the
Plan is executed on a timely basis.

The Company has substantially completed the awareness, assessment, renovation,
and validation phases of the Plan. The Plan called for the replacement or
upgrade of non-compliant systems and validation of those replacements or
upgrades during the fourth quarter of 1998 and early 1999. Non-compliant systems
were upgraded or replaced during the fourth quarter of 1998 and early 1999 in
accordance with the Company's Plan. The Company has completed remediation,
testing, and implementation of mission critical applications and substantially
all mission critical applications/systems have been remediated as of June 30,
1999 in accordance with milestones set forth by the Federal Financial
Institutions Examination Council (FFIEC).

The majority of the Company's mission critical systems (specifically those that
process loans, deposits, and general ledger transactions) are provided by third
party processors. At this time, the primary data processing provider reports



                                       30
<PAGE>   31
                                       PE
                                       ==

                           TAYLOR CAPITAL GROUP, INC.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (Continued)


Year 2000 Compliance -- continued

that it is on target to meet all required dates to provide compliant systems.
All core applications provided by the Company's primary data processing provider
have been tested for Y2K readiness and implemented into the production
environment.

The Company has made significant progress relative to contingency plans for Year
2000. Throughout the remainder of the fourth quarter we will continue to
validate and refine contingency plans. In conjunction with contingency planning,
the Company has developed a liquidity strategy for Y2K in order to meet expected
currency demands at the Bank's branches and automated teller machines. This
strategy will be implemented during the fourth quarter of 1999.

The Company expensed approximately $211,000 during the first nine months of
1999, and expects to incur additional costs throughout the remainder of 1999,
for its Y2K compliance program. With respect to certain technology applications,
the Company elected to replace the existing applications with applications
having greater functionality, rather than limit its response only to remediation
of the Y2K issue. For that reason, the Company's technology expenditures have
materially increased from historical levels. The Company expects the additional
costs incurred related to Y2K remediation to represent only a small portion of
its overall technology expenditures.

Regardless of the Y2K compliance of the Company's systems, there can be no
assurance that the Company will not be adversely affected by the failure of
others to become Y2K compliant. Other risks may include potential losses related
to major loan or deposit customers, vendors or other counterparties who have Y2K
compliance problems. The Company has been evaluating, in accordance with the
guidelines outlined by the FFIEC, the potential credit and liquidity risk
associated with Y2K as it relates to the Company's customer base. The Company's
analysis performed to date has not identified major credit exposure within the
high risk category of customers; in-depth analysis will continue to be performed
during the fourth quarter of 1999.

Based on the Company's progress to date in executing its Plan, the Company
expects no significant disruption of business activities resulting from the
arrival of the Y2K.

As a regulated financial institution, the Company is subject to possible
supervisory or enforcement action if the governing regulatory agency deems the
Company's response and progress with respect to the Y2K issue to be of serious
concern. At this time, management believes its progress with respect to Y2K
compliance to be satisfactory.

LITIGATION

Jeffrey W. Taylor, Chairman of the Board and Chief Executive Officer of the
Company, Bruce W. Taylor, President of the Company, Iris A. Taylor, Sidney J.
Taylor, Cindy Taylor Bleil, related trusts and a related partnership
(collectively, the "Taylor Family") have been named as defendants in the
lawsuits described below relating to (1) the Split-Off Transactions and (2) the
financial and public reporting of Reliance Acceptance Group, Inc. (Reliance).
Certain of the lawsuits also named other current or former officers and
directors of the Company and Reliance, other stockholders of the Company,
Reliance's public accountants at the time of the Split-Off Transactions (who
continue to serve as the Company's public accountants), the investment banks
that were involved



                                       31
<PAGE>   32
                           TAYLOR CAPITAL GROUP, INC.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (Continued)


Litigation -- continued

in the Split-Off Transactions, Reliance and the Company as additional
defendants. The filing dates of these lawsuits ranged from October 1997 to
October 1999.

The Split-Off Transactions were a series of transactions completed on February
12, 1997 in accordance with the Share Exchange Agreement, dated June 12, 1996
(the "Share Exchange Agreement") between Reliance and the Taylor Family, which
owned approximately 25% of the outstanding common stock of Reliance prior to the
Split-Off Transactions. Pursuant to the Split-Off Transactions, the Taylor
Family and certain other stockholders of Reliance exchanged all of their common
stock of Reliance for all of the outstanding common stock of the Company. On
February 9, 1998, Reliance filed a voluntary petition under Chapter 11 of the
Bankruptcy Code.

In September 1998, five class actions, brought on behalf of current and former
stockholders of Reliance and pending in Delaware Chancery Court, were
consolidated into one class action. The consolidated class action alleges that
the Taylor Family, certain directors and officers of the Company, and certain
other defendants breached their fiduciary duties in connection with disclosures
made to the stockholders prior to the vote which approved the Split-Off
Transactions. The case seeks relief in the form of unspecified damages,
attorneys' fees and recision of the Split-Off Transactions. On September 9, 1998
the Delaware Chancery Court stayed this consolidated class action indefinitely
pending resolution of the consolidated class action in Texas that is described
below.

In August 1998, nine class actions, brought on behalf of current and former
stockholders of Reliance and pending in the United States District Court for the
Western District of Texas, were consolidated into one class action. One class
action, brought on behalf of current and former stockholders of Reliance, is
also pending in the Northern District of Illinois. These cases allege that the
Taylor Family, certain directors and officers of the Company, and certain other
defendants violated the federal securities laws and breached common law
fiduciary duties. In addition, the cases allege that the Company and certain
other defendants violated ERISA and breached certain fiduciary duties, including
fiduciary duties owed to a subclass consisting of participants in Reliance's
ESOP and 401(k) Profit Sharing Plan. The Texas and Illinois cases seek
unspecified damages and attorneys' fees. Cole Taylor Bank is named as an
additional defendant in the Illinois action. The Illinois and Texas cases have
been effectively concluded as the result of the plaintiffs' filing of a
consolidated amended complaint in Illinois.

On August 19, 1998, Irwin Cole and other members of his family, who collectively
owned approximately 25% of the outstanding common stock of Reliance prior to the
Split-Off Transactions, brought suit in Delaware Chancery Court against members
of the Taylor Family, the Company, other current and/or former officers and
directors of Reliance and the Company, and other stockholders of the Company.
The suit alleges that the Taylor Family, certain directors and officers of the
Company, and certain other defendants breached their fiduciary duties, committed
fraud and/or engaged in self-dealing in connection with the operation of
Reliance and the Split-Off Transactions. The lawsuit seeks unspecified damages
and attorneys' fees and requests that the Court place all of the shares of the
Company held by the Taylor Family in a constructive trust.

On October 5, 1998, the United States Bankruptcy Court of the District of
Delaware (the "Bankruptcy Court") entered an order preliminarily enjoining the
plaintiffs in most of the above lawsuits from prosecuting their cases on account
of the pending adversary proceedings by the Reliance Estate Representative that
are described below. On



                                       32
<PAGE>   33
                           TAYLOR CAPITAL GROUP, INC.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (Continued)


Litigation -- continued

June 2, 1999 the District Court for the District of Delaware reversed the
Bankruptcy Court's order. The District Court's order has been appealed.

On July 6, 1998, the Bankruptcy Court entered a confirmation order that
discharged the liability of Reliance and its subsidiaries in connection with all
of the lawsuits described above and permanently enjoined the filing of similar
new suits against them. The Bankruptcy Court also appointed an Estate
Representative (the "Estate Representative") for the Post-Confirmation Chapter
11 Estate of Reliance and its subsidiaries. On September 4, 1998, the Estate
Representative filed two adversary proceeding complaints, since consolidated,
which named as defendants members of the Taylor Family, certain other directors
and officers of the Company, one of Reliance's former legal counsel and
Reliance's former public accountants (both of whom continue to serve the
Company), the Company and Cole Taylor Bank, as trustee. The complaints allege
fraudulent conveyance and breaches of fiduciary duties and contract with respect
to the Taylor Family, the Company and Cole Taylor Bank, as trustee. The
complaints charge certain of the other defendants with alleged breaches of
fiduciary duty, breaches of contract, malpractice and negligent
misrepresentation and aiding and abetting the Taylor Family's and the Company's
alleged breaches. These complaints seek unspecified damages and attorneys' fees
and avoidance of the Split-Off Transactions by the transfer to the Estate
Representative of either the assets exchanged in the Split-Off Transactions or
the value of such assets. One of the complaints demands monetary damages
pursuant to the Taylor Family's obligation under the Share Exchange Agreement to
indemnify Reliance for certain losses resulting from the Split-Off Transactions,
and asks the court to disallow any claims for indemnification that any of the
defendants have against Reliance or, in the alternative, to equitably
subordinate such claims to all other creditor claims against Reliance. On July
22, 1999, the District Court for the District of Delaware issued an order
withdrawing the adversary proceedings from the Bankruptcy Court to the District
Court. Discovery is ongoing in the adversary proceedings and a September 2000
trial date has been set.

On December 7, 1998, the Estate Representative filed a motion for a preliminary
injunction which seeks to enjoin the Company and Cole Taylor Bank from paying
directly or indirectly any dividends to any of their respective shareholders and
from paying any of the litigation defense costs of the Taylor Family or any
other co-defendants with respect to any litigation arising out of the Split-Off
Transactions. On October 14, 1999 the District Court denied the motion for
preliminary injunction.

On July 21, 1999, the Company and certain other defendants in the federal
securities cases and the adversary proceedings submitted a request to the
Judicial Panel on Multidistrict Litigation seeking to have all of these cases
transferred to the Northern District of Illinois for coordinated or consolidated
pretrial proceedings. This request is set for a hearing on November 18, 1999. An
amended consolidated complaint was filed in the shareholders' suits on August
11, 1999 in the Northern District of Illinois.

On October 4, 1999, another lawsuit relating to the Split-Off Transactions was
filed in the Circuit Court of Cook County, Illinois by four Reliance
stockholders. Members of the Taylor Family, a related partnership, Taylor
Capital Group, Inc., Cole Taylor Bank, and another officer and director of
Taylor Capital Group, Inc., were named as defendants. Damages in an unspecified
amount are sought.




                                       33
<PAGE>   34
                           TAYLOR CAPITAL GROUP, INC.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (Continued)


Litigation -- continued

In accordance with the terms and conditions of the Share Exchange Agreement
relating to the Split-Off Transactions, the Taylor Family has agreed to
indemnify Reliance for certain losses incurred by Reliance, including certain
losses relating to the Split-Off Transactions ("Taylor Family Indemnification
Obligations"). In accordance with the terms of an agreement dated February 6,
1997 between the Taylor Family and the Company, the Company agreed to indemnify
the Taylor Family for certain losses that the Taylor Family may incur as a
result of the Split-Off Transactions, including a portion of the Taylor Family
Indemnification Obligations under the Share Exchange Agreement. The Company is
unable at this time to predict the extent to which it will be required to pay
any amounts under its indemnification obligation to the Taylor Family. The
Company and its subsidiaries have paid and may continue to pay defense and other
legal costs of the lawsuits described above that are not otherwise advanced by
insurance carriers on behalf of the Taylor Family and other directors, officers
and stockholders of the Company who are defendants in these lawsuits.

The Company believes that it has meritorious defenses to all of the actions
against the Company, and the Company intends to defend itself and its
subsidiaries vigorously. However, the Company is unable to predict, at this
time, the potential impact of the litigation, the indemnification obligations
and the payment of legal fees described above on the management, business,
financial condition, liquidity and operating results of the Company. Even if the
Taylor Family, the Company and the other defendants are successful in defending
themselves in the lawsuits, the Company has incurred and will continue to incur
significant costs with respect to such lawsuits.

The Company is from time to time a party to various other legal actions arising
in the normal course of business. Management knows of no such other threatened
or pending legal actions against the Company that are likely to have a material
adverse impact on the business, financial condition, liquidity or operating
results of the Company.

NEW ACCOUNTING PRONOUNCEMENTS

Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" was issued in June 1998. This Statement
standardizes the accounting for derivative instruments. Under the standard,
entities are required to carry all derivative instruments in the statement of
financial position at fair value. The accounting for changes in fair value (i.e.
gains or losses) of the derivative instrument depends on whether it has been
designated and qualifies as part of a hedging relationship and, if so, on the
reason for holding it. If certain conditions are met, entities may elect to
designate the derivative instrument as a hedge of exposure to changes in fair
values, cash flows or foreign currencies. If the hedged exposure is a fair value
exposure, the gain or loss on the derivative instrument is recognized in
earnings in the period of change, together with the offsetting gain or loss on
the hedged item attributable to the risk being hedged. If the hedged exposure is
a cash flow exposure, the effective portion of the gain or loss on the
derivative instrument is reported initially as a component of other
comprehensive income (outside earnings) an subsequently reclassified into
earnings when the forecasted transaction affects earnings. Any amounts excluded
from the assessment of hedge effectiveness, as well as the ineffective portion
of the gain or loss, is reported in earnings immediately. Accounting for foreign
currency hedged is similar to the accounting for fair value and cash flow
hedges. If the derivative instrument is not designated as a hedge, the gain or
loss is recognized in earnings in the period of change. In June 1999 the
Financial Accounting Standards




                                       34
<PAGE>   35
                           TAYLOR CAPITAL GROUP, INC.
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS (Continued)


New Accounting Pronouncements -- continued

Board (FASB) issued statement of Financial Accounting Standards No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133 - an amendment of FASB Statement No.
133." This statement delays the effective date of FASB No. Statement 133 for one
year, to fiscal years beginning after June 15, 2000. The Company must adopt the
Statement by January 1, 2001, however early adoption is permitted. Upon
adoption, the provisions of the Statement must only be applied prospectively.
The Company has not yet quantified the impact of the adoption of the Statement.

SAFE HARBOR PROVISION OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain statements contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations and elsewhere in this Form 10-Q,
including the statements in Part I, Item 3 "Quantitative and Qualitative
Disclosures About Market Risk," are forward-looking statements that are based on
the beliefs of the Company's management, as well as assumptions made by and
information currently available to the Company's management. Such
forward-looking statements are subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. When used in this Form 10-Q, the words
"anticipates," "believes," "estimates," "expects" and similar expressions, as
they relate to the Company or its management, are intended to identify such
forward-looking statements but are not the exclusive means of identifying such
statements. The Company cautions readers of this Quarterly Report on Form 10-Q
that a number of risks, uncertainties and other factors could cause the
Company's actual results, performance or achievements in the remainder of 1999
and beyond to differ materially from the results, performance or achievements
expressed in, or implied by, such forward-looking statements. These risks,
uncertainties and other factors include, without limitation, the general
economic and business conditions affecting the Company's customers; the ability
of the Bank to maintain sufficient funds to respond to the needs of depositors
and borrowers; changes in interest rates; changes in customer response to the
Bank's pricing strategies; the effects of the Year 2000 compliance issue on the
computer systems of the Company, its service providers and its loan customers;
competition from the Company's principal competitors; changes in federal and
state legislation or regulatory requirements; the adequacy of the Company's
allowance for loan losses; contractual, statutory or regulatory restrictions on
the Bank's ability to pay dividends to the Company; and continuing obligations
or potential liabilities or restrictions arising from or relating to the
Split-Off Transactions, including pending legal actions. Certain of these risks,
uncertainties and other factors are more fully described elsewhere in this Form
10-Q. Except as specifically required by the federal securities laws the Company
does not undertake any obligation to update or revise any forward looking
statements to reflect new events or circumstances or for any other reason.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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




                                       35
<PAGE>   36
                           TAYLOR CAPITAL GROUP, INC.



Quantitative and Qualitative Disclosures About Market Risk -- continued

Company's Asset/Liability Management Committee ("ALCO"). ALCO's objectives are
to manage, to the degree prudently possible, the Company's 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.

The Company uses various interest rate contracts (floors) and forward sale
commitments to manage interest rate and market risk. These contracts are
designated as hedges of specific existing assets and liabilities. The Company's
asset and liability management and investment policies do not allow the use of
derivative financial instruments for trading purposes.

The Company's primary measurement of interest rate risk is earnings at risk,
which is determined through computerized simulation modeling. The simulation
model assumes a static balance sheet, using the balances, rates, maturities and
repricing characteristics of all of the Bank's existing assets and liabilities,
including off-balance sheet financial instruments. Net interest income is
computed by the model assuming market rates remaining unchanged and also
assuming parallel shifts of market interest rates up and down 200 basis points.
The impact of imbedded options in products such as callable securities and
mortgage-backed securities, real estate mortgage loans and callable borrowings
is considered. Changes in net interest income in the rising and declining rate
scenarios are then measured against the modeled net interest income in the rates
unchanged scenario. ALCO utilizes all of the results of the model to quantify
the estimated exposure of net interest income to sustained interest rate
changes.

There have been no material changes in the Company's market risk exposure from
the information provided in the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999.

PART II.  OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

Footnote 8 to the Consolidated Financial Statements and "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Litigation"
included in this Form 10-Q discuss certain significant litigation relating to
the Split-Off Transactions. Such discussion is incorporated in this Part II.
Item 1. by reference.

ITEM 5.     OTHER INFORMATION

The Company's management intends to suspend its duty to file reports (including
Form 10-Q's and Form 10-K's) pursuant to the Securities Exchange Act of 1934
following the Company's filing of its Annual Report on Form 10-K for the year
ending December 31, 1999.



                                       36
<PAGE>   37
ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

           (a)   Exhibits - Exhibit 10.1 - First Amendment of Taylor Capital
                                           Group, Inc. 401(k) plan
                          - Exhibit 10.2 - $12,000,000 Substitute Revolving Note
                                           between  Taylor Capital Group, Inc.
                                           and LaSalle Bank National Association
                          - Exhibit 10.3 - Seventh Amendment to Revolving Loan
                                           Agreement between Taylor Capital
                                           Group, Inc. and LaSalle Bank National
                                           Association
                          - Exhibit 27 - Financial Data Schedule
           (b)   Reports on Form 8-K - No reports on Form 8-K were filed during
                 the period covered by this report.

                                   SIGNATURES



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



                                                Taylor Capital Group, Inc.
                                           -------------------------------------
                                                      (Registrant)



Date:   November 12, 1999                        /s/   Jeffrey W. Taylor
       ------------------                  -------------------------------------
                                                   Jeffrey W. Taylor*
                                           Chairman and Chief Executive Officer

Date:   November 12, 1999                       /s/  J. Christopher Alstrin
       ------------------                  -------------------------------------
                                                  J. Christopher Alstrin*
                                                  Chief Financial Officer






* Duly authorized to sign on behalf of the Registrant






                                       37