<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 Quarter Ended Commission File No. 333-14713
March 31, 1997
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) 459-1111
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 shares outstanding of each of the Registrant's classes of common
stock, as of the latest practicable date:
Class Outstanding at May 12, 1997
- ---------------------------- ---------------------------
Common Stock, $.01 Par Value 4,500,000
Exhibit Index is located on page 21
<PAGE> 2
COLE TAYLOR FINANCIAL GROUP, INC.
INDEX
PART I. FINANCIAL INFORMATION ........................................ PAGE
Item 1. Financial Statements
Balance Sheets -
Successor Basis - Taylor Capital Group, Inc. - Consolidated
March 31, 1997; Predecessor Basis - Cole Taylor Bank -
December 31, 1996 ........................................ 3
Statements of Income -
Successor Basis - Taylor Capital Group, Inc. - Consolidated
For the Period of February 12, 1997 to March 31, 1997;
Predecessor Basis - Cole Taylor Bank - For the Period of
January 1, 1997 to February 11, 1997; Predecessor Basis
- Cole Taylor Bank - For the Three Months Ended
March 31, 1996 ........................................... 4
Statements of Cash Flows -
Successor Basis - Taylor Capital Group, Inc. - Consolidated
For the Period of February 12, 1997 to March 31, 1997;
Predecessor Basis - Cole Taylor Bank - For the Period of
January 1, 1997 to February 11, 1997; Predecessor Basis
- Cole Taylor Bank - For the Three Months Ended
March 31, 1996 ........................................... 5
Notes to Financial Statements ............................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations .................................... 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ............................ 19
2
<PAGE> 3
TAYLOR CAPITAL GROUP, INC.
BALANCE SHEETS (Unaudited)
(in thousands)
---------------------
<TABLE>
<S> <C> <C>
Successor
Basis - Taylor
Capital Group, Predecessor
Inc. - Basis - Cole
Consolidated Taylor Bank -
March 31, December 31,
1997 1996
-------------- -------------
ASSETS
Cash and due from banks $ 82,249 $ 67,021
Interest-bearing deposits in other banks 11,086 14,564
Federal funds sold 10,425 5,675
Investment securities:
Available-for-sale, at fair value 384,777 328,817
Held-to-maturity, at amortized cost (fair value of $75,716 and $77,758 at
March 31, 1997 and December 31, 1996, respectively) 75,452 74,972
Loans held for sale, net, at lower of cost or market 20,449 25,153
Loans, net of allowance for loan losses of $24,529 and $24,184 at March 31,1997
and December 31, 1996, respectively 1,165,610 1,175,657
Premises, leasehold improvements and equipment, net 22,326 15,247
Other real estate and repossessed assets, net 1,901 1,119
Auto loan sales proceeds receivable --- 66,570
Goodwill and other intangibles 37,832 2,478
Other assets 34,780 36,318
---------- ----------
Total assets $1,846,887 $1,813,591
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 310,458 $ 334,068
Interest-bearing 1,120,120 1,072,832
---------- ----------
Total deposits 1,430,578 1,406,900
Short-term borrowings 172,911 162,182
Accrued interest, taxes and other liabilities 17,928 16,788
Long-term borrowings 91,881 86,086
---------- ----------
Total liabilities 1,713,298 1,671,956
---------- ----------
Commitments and contingent liabilities
Stockholders' equity:
Series A 9% noncumulative perpetual preferred stock, $.01 par value,
1,530,000 shares authorized, issued and outstanding 38,250 ---
Common stock, $.01 par value; 4,500,000 shares authorized, issued and
outstanding 45 ---
Common stock, $10 par value; 1,500,000 shares authorized, issued and
outstanding --- 15,000
Surplus 96,143 52,028
Retained earnings 1,540 76,586
Unrealized holding loss on securities available-for-sale, net of income taxes (2,389) (1,979)
---------- ----------
Total stockholders' equity 133,589 141,635
---------- ----------
Total liabilities and stockholders' equity $1,846,887 $1,813,591
========== ==========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
TAYLOR CAPITAL GROUP, INC.
STATEMENTS OF INCOME (Unaudited)
(in thousands)
---------------------------
<TABLE>
<CAPTION>
Successor
Basis - Taylor Predecessor
Capital Group, Predecessor Basis - Cole
Inc. - Basis - Cole Taylor Bank -
Consolidated Taylor Bank - For the Three
For the Period of For the Period of Months Ended
Feb. 12, 1997 to Jan. 1, 1997 to Mar. 31,
Mar. 31, 1997 Feb. 11, 1997 1996
------------ ------------- ----------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $13,906 $12,481 $26,857
Interest on investment securities:
Taxable 3,244 2,606 5,711
Tax-exempt 410 431 982
Interest on cash equivalents 244 124 173
------- ------- -------
Total interest income 17,804 15,642 33,723
------- ------- -------
Interest expense:
Deposits 6,665 5,614 12,655
Short-term borrowings 1,221 1,026 2,517
Long-term borrowings 757 436 924
------- ------- -------
Total interest expense 8,643 7,076 16,096
------- ------- -------
Net interest income 9,161 8,566 17,627
Provision for loan losses 484 420 999
------- ------- -------
Net interest income after provision for loan losses 8,677 8,146 16,628
------- ------- -------
Noninterest income:
Service charges 1,264 1,122 2,102
Trust fees 493 359 861
Other noninterest income 593 449 738
------- ------- -------
Total noninterest income 2,350 1,930 3,701
------- ------- -------
Noninterest expense:
Salaries and employee benefits 4,572 3,645 7,655
Occupancy of premises, net 883 656 1,266
Furniture and equipment 412 322 744
Computer processing 273 222 478
Advertising and public relations 107 157 417
Goodwill and other intangible amortization 314 20 50
Other real estate and repossessed asset expense 6 31 551
Other noninterest expense 1,617 1,413 2,776
------- ------- -------
Total noninterest expense 8,184 6,466 13,937
------- ------- -------
Income before income taxes 2,843 3,610 6,392
Income taxes 835 1,328 2,062
------- ------- -------
Net income $2,008 $2,282 $4,330
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
TAYLOR CAPITAL GROUP, INC.
STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
-----------------------
<TABLE>
<CAPTION>
Successor
Basis - Taylor Predecessor
Capital Group, Predecessor Basis - Cole
Inc. - Basis - Cole Taylor Bank -
Consolidated Taylor Bank - For the Three
For the Period of For the Period of Months Ended
Feb. 12, 1997 to Jan. 1, 1997 to Mar. 31,
Mar. 31, 1997 Feb. 11, 1997 1996
------------- ------------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,008 $ 2,282 $ 4,330
Provision for loan losses 484 420 999
Gain on sales of loans originated for sale (323) (137) (210)
Loans originated and held for sale (28,306) (12,852) (65,490)
Proceeds from sales of loans originated for sale 30,063 23,724 28,574
Other adjustments to net income, net 1,093 740 291
Net changes in other assets and liabilities (10,282) 7,645 (4,951)
-------- -------- --------
Net cash (used in) provided by operating activities (5,263) 21,822 (36,457)
-------- -------- --------
Cash flows from investing activities:
Purchases of available-for-sale securities (66,286) (43,533) ---
Proceeds from principal payments and maturities of
available-for-sale securities 48,336 2,000 18,563
Proceeds from principal payments and maturities of
held-to-maturity securities 163 1,209 1,517
Net increase in loans (15,235) (12,509) (14,867)
Net cash of Bank and Mortgage Company acquired 65,306 --- ---
in split-off transaction
Proceeds from sale of new indirect auto loans --- 66,570 ---
Other, net (416) (51) 2,426
-------- -------- --------
Net cash provided by investing activities 31,868 13,686 7,639
-------- -------- --------
Cash flows from financing activities:
Net increase (decrease) in deposits 79,772 (56,094) 97,367
Net (decrease) increase in short-term borrowings (69,718) 80,447 (50,286)
Repayments of long-term borrowings (4) (25,201) (25,167)
Proceeds from long-term borrowings 31,000 --- 25,000
Net proceeds from issuance of preferred stock 36,105 --- ---
Dividends paid --- --- (5,100)
Net cash used in provided (used in ) by -------- -------- --------
financing activities 77,155 (848) 41,814
-------- --------
Net increase in cash and cash equivalents 103,760 34,660 12,996
Cash and cash equivalents, beginning of period --- 87,260 92,547
-------- -------- --------
Cash and cash equivalents, end of period $103,760 $121,920 $105,543
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
TAYLOR CAPITAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation:
The successor basis Taylor Capital Group, Inc. consolidated financial
statements for the period February 12, 1997 to March 31, 1997 include the
accounts of Taylor Capital Group, Inc. (the "Parent Company" or the
"Company") and its wholly owned subsidiaries, Cole Taylor Bank (the "Bank")
and CT Mortgage Company, Inc. (the "Mortgage Company"). All intercompany
balances and transactions have been eliminated in consolidation. Taylor
Capital Group, Inc. is a newly formed bank holding company which was formed
to consummate the acquisition of the Bank and Mortgage Company. Taylor
Capital Group, Inc. acquired the Bank and the Mortgage Company on February
12, 1997 in a split-off transaction (as defined below) which was accounted
for by the purchase method of accounting. Prior to February 12, 1997, the
Bank and Mortgage Company were wholly owned subsidiaries of Cole Taylor
Financial Group, Inc. ("CTFG")
The Split-Off Transactions were a series of transactions purusant to which,
CTFG transferred the common stock of the Bank and the Mortgage Company to
the Company and then transferred all of the common stock of the Company to
certain CTFG stockholders in exchange for 4.5 million shares of CTFG common
stock and a dividend from the Bank to CTFG consisting of cash and loans
totaling approximately $84 million and a cash payment of approximately $1.1
million for the Mortgage Company.
The predecessor basis Cole Taylor Bank financial statements report the
financial position and results of operations of Cole Taylor Bank on its
historical accounting basis.
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
Special Financial Report on Form 10-K for the year ended December 31, 1996,
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, 1997. 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 for
the periods presented.
The results of operations for the period of February 12, 1997 to March 31,
1997 are not necessarily indicative of the results to be expected for the
full year.
2. Acquisition of Cole Taylor Bank and CT Mortgage Company, Inc.:
The Company acquired the Bank and Mortgage Company in the Split-Off
Transactions which were consummated on February 12, 1997. The Bank is a
$1.8 billion asset commercial bank operating predominantly in the Chicago
metropolitan area. The Mortgage Company began operations in early 1996 and
competes in the subprime mortgage market for residential loans on a brokered
basis primarily in the southeastern United States. The acquisition has been
accounted for by the purchase method of accounting, and accordingly, the
results of operations of the Bank and Mortgage Company are included in the
Company's consolidated financial statements from February 12, 1997, the date
of the split-off transaction.
6
<PAGE> 7
TAYLOR CAPITAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. Acquisition of Cole Taylor Bank and CT Mortgage Company, Inc., (continued):
The Company's cost of the acquired Bank consisted of three components: (1)
$17.2 million, which represented the proportionate interest in the Bank's
book value based on the split-off stockholder group's proportionate
ownership prior to the split-off transaction, (2) $81.1 million, which
represented the proportionate fair value of the common stock of CTFG
exchanged by the split-off stockholder group, and (3) $2.2 million, which
represented estimated direct acquisition costs for accountants, attorneys,
financial advisors and other professionals to consummate the transaction.
The final determination and allocation of the purchase price to the Bank's
assets and liabilities is currently in process. Managements estimate of
the amount by which the purchase price will exceed the fair value of the net
assets acquired approximates $37.7 million and is reflected as goodwill in
the financial statements at March 31, 1997. The goodwill is being amortized
over 15 years using the straight-line method.
The Company acquired the Mortgage Company through a cash payment of $1.1
million which exceeded the fair value of the net assets acquired by
$416,000. The resulting goodwill is being amortized over 15 years using the
straight-line method.
3. Investment Securities:
The amortized cost and estimated fair values of investment securities at
March 31, 1997 and December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Successor Basis - Taylor Capital Group, Inc. - Consolidated
March 31, 1997
-----------------------------------------------------------
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 $193,528 $58 $(1,231) $192,355
U.S. government agency securities 41,019 --- (184) 40,835
Mortgage-backed securities 153,838 477 (2,728) 151,587
-------- -------- -------- --------
Total Available-for-Sale 388,385 535 (4,143) 384,777
-------- -------- -------- --------
Held-to-Maturity:
State and municipal obligations 63,426 318 (55) 63,689
Other securities 12,026 1 --- 12,027
-------- -------- -------- --------
Total Held-to-Maturity 75,452 319 (55) 75,716
-------- -------- -------- --------
Total $463,837 $854 $(4,198) $460,493
======== ======== ======== ========
</TABLE>
7
<PAGE> 8
TAYLOR CAPITAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
3. Investment Securities. (continued):
<TABLE>
<CAPTION>
Predecessor Basis - Cole Taylor Bank
December 31, 1996
-----------------------------------------------------------
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 $123,824 $ 267 $ (353) $123,738
U.S. government agency securities 44,855 256 (36) 45,075
Mortgage-backed securities 163,479 668 (4,143) 160,004
-------- -------- -------- --------
Total Available-for-Sale 332,158 1,191 (4,532) 328,817
-------- -------- -------- --------
Held-to-Maturity:
State and municipal obligations 62,948 2,798 (16) 65,730
Other securities 12,024 4 --- 12,028
-------- -------- -------- --------
Total Held-to-Maturity 74,972 2,802 (16) 77,758
-------- -------- -------- --------
Total $407,130 $ 3,993 $(4,548) $406,575
======== ======== ======== ========
</TABLE>
4. Loans:
Loans classified by type at March 31, 1997 and December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
Successor
Basis - Taylor
Capital Group, Predecessor
Inc. - Basis - Cole
Consolidated Taylor Bank -
March 31, December 31,
1997 1996
-------------- -------------
(in thousands)
<S> <C> <C>
Commercial and industrial $ 655,616 $ 655,919
Real estate-construction 201,465 192,759
Real estate-mortgage 185,885 176,819
Consumer 142,089 171,270
Other loans 6,054 4,622
---------- ----------
Gross loans 1,191,109 1,201,389
Less: Unearned discount (970) (1,548)
---------- ----------
Total loans 1,190,139 1,199,841
Less: Allowance for loan losses (24,529) (24,184)
---------- ----------
Loans, net $1,165,610 $1,175,657
========== ==========
</TABLE>
8
<PAGE> 9
TAYLOR CAPITAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
5. Long-Term Borrowings:
Long-term borrowings consisted of the following at March 31, 1997 and
December 31, 1996:
<TABLE>
<CAPTION>
Successor
Basis - Taylor
Capital Group, Predecessor
Inc. - Basis - Cole
Consolidated Taylor Bank -
March 31, December 31,
1997 1996
-------------- -------------
(in thousands)
<S> <C> <C>
COLE TAYLOR BANK:
Federal Home Loan Bank (FHLB) - various
advances ranging from $10 million to $25
million due at various dates through
March 20, 1998, collateralized by qualified
first mortgage residential loans and FHLB
stock; weighted average interest rates at
March 31, 1997 and December 31, 1996 were
6.08% and 5.91%, respectively $60,000 $85,000
Chicago Equity Fund - non-interest bearing
notes payable over a five to seven year
period in approximately equal annual
installments 881 1,086
TAYLOR CAPITAL GROUP, INC.:
Unsecured $25 million term loan bearing
interest at prime rate or LIBOR plus 1.25%,
annual principal reductions of $1 million
commencing 1999 and a balloon payment of
$22 million on February 12, 2002. 25,000 ---
Unsecured $7 million revolving credit
facility bearing interest at prime rate or
LIBOR plus 1.25%, maturing February 12, 1998. 6,000 ---
------- -------
Total $91,881 $86,086
======= =======
</TABLE>
On February 12, 1997, the Parent Company executed a loan agreement with
LaSalle National Bank ("LaSalle") for a $25 million term loan and a $5
million revolving credit facility. On February 27, 1997 the loan agreement
was amended, increasing the revolving credit facility amount from $5 million
to $7 million. The loan agreement includes certain defined financial
covenants relating to the Bank with respect to regulatory capital ratios,
the amount of Tier 1 capital, the ratio of return on average assets, the
ratio of nonperforming assets to capital, the ratio of allowance for loan
losses to nonperforming loans and the ratio of debt to stockholders' equity.
In addition, the Bank's common stock is held in safekeeping at LaSalle and,
in the event of default under the loan agreement, the Company must pledge
the Bank's stock to LaSalle. As of March 31, 1997, the Company was in
compliance with the provisions of the loan agreement.
9
<PAGE> 10
TAYLOR CAPITAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
6. Financial Instruments with Off-Balance Sheet Risk:
The Company is a party to various financial instruments with off-balance
sheet risk. The Company uses these financial instruments in the normal
course of business to meet the financing needs of customers and to
effectively manage exposure to interest rate risk. These financial
instruments include commitments to extend credit, standby letters of credit,
interest-rate exchange contracts (swaps) and forward commitments to sell
loans.
At March 31, 1997, the contractual or notional amounts are as follows:
<TABLE>
<S> <C>
Amount
--------------
(in thousands)
Financial instruments wherein contract amounts
represent credit risk:
Commitments to extend credit $522,770
Standby letters of credit 59,547
Financial instruments wherein notional amounts
exceed the amount of credit risk:
Interest rate exchange agreements (swaps) $75,000
Forward commitments to sell loans 18,000
</TABLE>
10
<PAGE> 11
TAYLOR CAPITAL GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Taylor Capital
Group, Inc. (the "Parent Company" or the "Company") and its wholly owned
subsidiaries, Cole Taylor Bank (the "Bank") and CT Mortgage Company, Inc.
(the "Mortgage Company"). The Company is a newly formed bank holding company
which was formed to consummate the acquisition of the Bank and Mortgage Company
on February 12, 1997 in a split-off transaction (as defined below) which was
accounted for by the purchase method of accounting. Management's discussion and
analysis compares the results of operations and financial condition of the
consolidated Company with the results of operations and financial condition of
the Bank on a stand alone predecessor basis for prior periods. This discussion
should be read in conjunction with the Company's Special Financial Report on
Form 10-K for the year ended December 31, 1996, which contains the audited
financial statements of Cole Taylor Bank on a stand alone predecessor basis for
the years ended December 31, 1996 and 1995.
The Split-Off Transactions were a series of transactions pursuant to which, CTFG
transferred the common stock of the Bank and the Mortgage Company to the Company
and then transferred all of the common stock of the Company to certain CTFG
stockholders in exchange for 4.5 million shares of CTFG common stock, a
dividend from the Bank to CTFG consisting of cash and loans totaling
approximately $84 million and a cash payment of approximately $1.1 million for
the Mortgage Company.
RESULTS OF OPERATIONS
Overview
Generally, the financial results of the consolidated Company in comparison to
the Bank on a stand alone predecessor basis, present reduced profitability.
The primary reasons for the decline in consolidated profitability include: (1)
the application of purchase accounting which resulted in the recording of
substantial goodwill and the related goodwill amortization expense, (2) the
inclusion of approximately $30 million in debt and the related interest expense
and (3) the addition of salary and operating expenses of the newly formed
Parent Company. Additionally, the 1997 consolidated financial results of the
Company on a successor basis, which commenced operations on February 12, 1997,
include less than a full quarter of operations.
For the period February 12, 1997 to March 31, 1997, consolidated net income
was $2.0 million. Annualized return on average assets and return on average
equity were .84 % and 11.26%, respectively. Net income for the Bank on the
predecessor basis for the stub period January 1, 1997 to February 12, 1997 was
$2.3 million.
Net income for the Bank on the predecessor basis for the quarter ended March
31, 1996 was $4.3 million. Annualized return on average assets and return on
average equity for the Bank during the first quarter of 1996 were .98% and
13.03% respectively.
Net Interest Income
Net interest income, the difference between total interest income earned on
earning assets and total interest expense paid 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 interest-bearing liabilities.
Consolidated net interest income for the period of February 12, 1997 to March
31, 1997 was $9.2 million and the net interest margin (on a tax equivalent
basis) was 4.28%. Net interest income for the Bank on the predecessor basis
for the first quarter of 1996 was $17.6 million and the net interest margin (on
a tax equivalent basis) was
11
<PAGE> 12
TAYLOR CAPITAL GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
4.38%. The lower net interest income reported on the successor basis was due
to the consolidated reporting period for 1997 consisting of 43 fewer days of
interest earned than the Bank's 1996 predecessor basis period. The decline in
the consolidated 1997 net interest margin in comparison to the Bank on a
predecessor basis for the first quarter of 1996 was primarily attributable to a
change in asset mix as certain earning assets were replaced by a combination of
lower earning and nonearning assets. In connection with the split-off
transaction, approximately $100 million of certain consumer loans were sold or
transferred. Thereafter in 1997, the yield on earning assets declined because
loans comprised a lower percentage of the Bank's earning assets. In addition,
the composition of the investment securities portfolio changed from the first
quarter of 1996 to the first quarter of 1997 as mortgage-backed securities
liquidations were reinvested in U.S. Treasury securities. This decline was
partially offset by the net write down of the investment portfolio in
connection with the application of purchase accounting. The resulting discount
is being accreted back into income over the remaining life of the related
securities.
The net interest margin was also impacted by the recording of approximately
$37.7 million of goodwill, which resulted in the Company's consolidated
nonearning assets increasing as a percentage of total assets. Funding costs at
the Bank decreased in 1997 as an increase in customer deposits decreased the
utilization of wholesale funding. The addition of the Parent Company's term
loan and revolving credit facility, however, increased the consolidated
Company's cost of long-term borrowings.
The following table sets forth certain information relating to the Company's
and the predecessor Bank'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 income or expense by
the average balance of assets or liabilities. Interest income is measured on a
tax equivalent basis using a 35% rate in each period presented.
12
<PAGE> 13
TAYLOR CAPITAL GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
ANALYSIS OF AVERAGE BALANCES, TAX EQUIVALENT INTEREST AND YIELD/RATES
<TABLE>
<CAPTION>
SUCCESSOR BASIS - TAYLOR
CAPITAL GROUP, INC. - PREDECESSOR BASIS - COLE TAYLOR
CONSOLIDATED FOR THE PERIOD OF BANK - FOR THE THREE
FEB. 12, 1997 TO MAR. 31. 1997 MONTHS ENDED MAR. 31, 1996
-------------------------------- ---------------------------------
YIELD/ YIELD/
AVERAGE RATE AVERAGE RATE
BALANCE INTEREST (%)(3) BALANCE INTEREST (%)(3)
----------- -------- -------- ------------ -------- --------
INTEREST-EARNING ASSETS: (dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Investment securities (1):
Taxable $384,968 $3,244 6.41 % $362,374 $5,711 6.34 %
Non-taxable (tax equivalent) 63,205 676 8.13 65,954 1,511 9.21
---------- ------ ---------- -------
Total investment securities 448,173 3,920 6.65 428,328 7,222 6.78
---------- ------ ---------- -------
Cash equivalents 34,048 244 5.45 12,896 173 5.40
---------- ------ ---------- -------
Loans (2):
Commercial and industrial 853,648 10,109 9.00 777,462 17,679 9.15
Real estate mortgages 201,338 1,938 7.32 228,243 4,182 7.37
Consumer and other 147,195 1,708 8.82 226,938 4,668 8.27
Fees on loans 199 413
Less: Allowance for loan losses (24,909) (24,248)
---------- ------ ---------- -------
Net loans (tax equivalent) 1,177,272 13,954 9.01 1,208,395 26,942 8.97
---------- ------ ---------- -------
Total earning assets 1,659,493 18,118 8.30 1,649,619 34,337 8.37
---------- ------ ---------- -------
NONEARNING ASSETS:
Cash and due from banks 67,523 66,933
Premises and equipment, net 19,426 17,004
Accrued interest and other assets 60,692 35,496
---------- ----------
Total nonearning assets 147,641 119,433
---------- ----------
TOTAL ASSETS $1,807,134 18,118 7.62 $1,769,052 34,337 7.81
========== ------ ========== -------
INTEREST-BEARING LIABILITIES:
Interest-bearing deposits:
Interest-bearing demand deposits $319,660 1,463 3.48 $334,039 2,956 3.56
Savings deposits 118,041 396 2.55 123,027 781 2.55
Time deposits 657,814 4,806 5.56 633,218 8,918 5.66
---------- ------ ---------- -------
Total deposits 1,095,515 6,665 4.63 1,090,284 12,655 4.67
---------- ------ ---------- -------
Short-term borrowings 179,398 1,221 5.18 184,995 2,517 5.47
Long-term borrowings 84,293 757 6.83 60,873 924 6.11
---------- ------ ---------- -------
Total interest-bearing liabilities 1,359,206 8,643 4.84 1,336,152 16,096 4.85
---------- ------ ---------- -------
NONINTEREST-BEARING LIABILITIES:
Noninterest-bearing deposits 294,880 284,660
Accrued interest and other liabilities 17,423 14,587
---------- ----------
Total noninterest-bearing liabilities 312,303 299,247
---------- ----------
STOCKHOLDERS' EQUITY 135,625 133,653
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,807,134 8,643 $1,769,052 16,096
========== ------ ========== -------
Net interest income (tax equivalent) $9,475 $18,241
====== =======
Net interest spread 3.46 % 3.52 %
Net interest margin 4.28 % 4.38 %
- ----------------------- ==== ====
</TABLE>
(1) Investment securities average balances are based on amortized cost.
(2) Nonaccrual loans are included in the above stated average balances.
(3) Yields / rates are annualized.
13
<PAGE> 14
TAYLOR CAPITAL GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
Noninterest Income
Total noninterest income for the consolidated Company for the period of
February 12, 1997 to March 31, 1997 was $2.4 million. Total noninterest income
for the Bank on the predecessor basis for the three month period ended March
31, 1996 was $3.7 million. The lower noninterest income reported on the
successor basis was due to the consolidated Company's 1997 reporting period
having 43 fewer days than the Bank's predecessor basis 1996 reporting period.
However, included in the consolidated Company's 1997 other noninterest income
is $115,000 of gains on the sale of mortgage loans relating to the Mortgage
Company's operations, which are not included in the Bank's predecessor basis
1996 results.
Noninterest Expense
Total noninterest expense for the consolidated Company for the period of
February 12, 1997 to March 31, 1997 was $8.2 million. Total noninterest
expense for the Bank on the predecessor basis for the three month period ended
March 31, 1996 was $13.9 million. The lower noninterest expense is due to the
consolidated Company's 1997 reporting period having 43 fewer days than the
Bank's predecessor basis 1996 reporting period.
Salaries and employee benefits represent the largest category of noninterest
expense, accounting for 55.9% of total noninterest expense for the consolidated
Company's 1997 period. The consolidated Company's 1997 reporting period
includes $369,000 of salary expense relating to the Mortgage and Parent
Companies.
Noninterest expense other than salaries and benefits expense totaled $3.6
million for the consolidated Company for the shorter 1997 reporting period and
$6.3 million for the Bank on the predecessor basis for the first quarter of
1996. The consolidated Company's 1997 reporting period includes $314,000 of
goodwill amortization and $208,000 of other noninterest expense relating to the
Mortgage and Parent Companies.
FINANCIAL CONDITION
Overview
The consolidated Company's total assets were $1.85 billion at March 31, 1997.
The Company's average earning assets for the period February 12, 1997 to March
31, 1997 were $1.68 billion. In connection with the split-off transaction, the
Company sold and transferred approximately $100 million in consumer loans
secured by automobiles. Approximately $67 million of consumer loans were sold
on December 31, 1996 and the proceeds were reinvested in U. S. Treasury loans
securities with average maturities of 1 to 2 years. The remaining $32 million
of consumer loans was transferred to CTFG on the date of the split-off
transactions. In comparison to the first quarter of 1996, the Bank's loan
portfolio transactions composition changed as a result of the sale and transfer
of the consumer loans, offset by growth in commercial and real estate loans.
Nonearning assets increased as a result of the recognition of approximately
$37.7 million in goodwill and the estimated $7.2 million write-up of the Bank's
premises, leasehold improvements and equipment using the purchase method of
accounting for the split-off transactions.
14
<PAGE> 15
TAYLOR CAPITAL GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
Commercial and retail demand and money market deposit declines during the first
quarter of 1997 were offset by increases in short term customer certificates of
deposit. The growth in total customer deposits allowed for temporary decreases
in borrowings from the Federal Home Loan Bank at March 31, 1997.
The consolidated Company's long term borrowings include the Parent company's
$25 million term loan and $6 million revolving credit facility, which were
funded in connection with the split-off transaction.
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 periodically becomes aware of borrowers that 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 periods indicated:
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
Successor
Basis - Taylor
Capital Group, Predecessor
Inc. - Basis - Cole
Consolidated Taylor Bank -
March 31, December 31,
1997 1996
------------- -----------
(dollars in thousands)
<S> <C> <C>
Loans contractually past due 90 days or more but
still accruing $2,310 $2,820
Nonaccrual loans 11,261 10,898
------- -------
Total nonperforming loans 13,571 13,718
Other real estate 1,862 865
Other repossessed assets 39 254
------- -------
Total nonperforming assets $15,472 $14,837
======= =======
Nonperforming loans to total loans 1.12 % 1.12 %
Nonperforming assets to total loans plus repossessed
property 1.28 1.21
Nonperforming assets to total assets 0.84 0.82
</TABLE>
15
<PAGE> 16
TAYLOR CAPITAL GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
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. Loan losses are primarily created
from the loan portfolio, but may also be generated from other sources, such as
commitments to extend credit, guarantees, and standby letters of credit. The
allowance for loan losses is increased by provisions charged to expense and
decreased by charge-offs, net of recoveries.
The following table summarizes, for the periods indicated, activity in the
allowance for loan losses, including amounts charged-off, amount 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:
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Successor
Basis - Taylor
Capital Group, Predecessor Predecessor
Inc. - Basis - Cole Basis - Cole
Consolidated Taylor Bank.- Taylor Bank -
For the Period of For the Period of For the Three
Feb. 12, 1997 to Jan. 1, 1997 to Months Ended
Mar. 31, 1997 Feb. 12, 1997 Mar. 31, 1996
----------------- ----------------- -------------
(dollars in thousands)
<S> <C> <C> <C>
Average total loans $1,202,181 $1,220,001 $1,232,643
========== ========== ==========
Total loans at end of period $1,210,588 $1,226,072 $1,263,756
========== ========== ==========
ALLOWANCE FOR LOAN LOSSES:
Allowance at beginning of period $24,607 $24,184 $23,869
Charge-offs (755) (275) (666)
Recoveries 193 243 231
---------- ---------- ----------
Net charge-offs (562) (32) (435)
---------- ---------- ----------
Provisions for loan losses 484 420 999
---------- ---------- ----------
Allowance at end of period $24,529 $24,572 $24,433
========== ========== ==========
Net charge-offs to average total loans (annualized) 0.36 % 0.02 % 0.14 %
Allowance to total loans at end of period 2.03 2.00 1.93
Allowance to nonperforming loans 180.75 172.13 164.07
</TABLE>
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.
16
<PAGE> 17
TAYLOR CAPITAL GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
The Bank's Tier 1 risk-based capital ratios were 9.51% and 10.23% at March
31, 1997 and December 31, 1996 respectively. The Bank's total risk-based
capital ratios were 10.76% and 11.48% at March 31, 1997 and December 31, 1996
respectively. The declines in these ratios were due to the decrease in
tangible capital resulting from the dividend of approximately $84.0 million to
CTFG in connection with the split-off transactions. The Bank's capital was
immediately supplemented with a capital contribution of $58.7 million from the
Parent Company on the date of the split-off transactions. As a result of the
capital contribution, the Bank remained above the regulatory "well capitalized"
guidelines subsequent to the split-off transactions.
The Company's and the Bank's capital ratios were as follows for the dates
indicated:
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purpose Action Provision
--------------- ---------------- ----------------
Amount Ratio Amount Ratio Amount Ratio
--------------- ---------------- ----------------
(in thousands)
<S> <C> <C> <C>
As of March 31, 1997:
Total Capital (to Risk Weighted Assets)
Successor Basis - Taylor Capital
Group, Inc. - Consolidated $114,300 8.77 % > $104,265 >8.00% NA
Predecessor Basis - Cole Taylor Bank 139,934 10.76 > 103,995 >8.00 > $129,994 >10.00%
Tier I Capital (to Risk Weighted Assets)
Successor Basis - Taylor Capital
Group, Inc. - Consolidated 97,907 7.51 % > 52,133 >4.00 NA
Predessor Basis - Cole Taylor Bank 123,583 9.51 > 51,998 >4.00 > 77,996 >6.00
Leverage (1)
Successor Basis - Taylor Capital
Group, Inc. - Consolidated 97,907 5.53% > 70,763 >4.00 > NA
Predecessor Basis - Cole Taylor Bank 123,583 7.05% > 70,119 >4.00 > 87,649 >5.00
As of December 31, 1996:
Total Capital (to Risk Weighted Assets)
Predecessor Basis - Cole Taylor Bank $158,874 11.48% > $110,702 >8.00 > $138,338 >10.00%
Tier I Capital(to Risk Weighted Assets)
Predecessor Basis - Cole Taylor Bank 141,492 10.23 > 55,351 >4.00 > 83,027 >6.00
Leverage (1)
Predecessor Basis - Cole Taylor Bank 141,492 7.63 > 74,158 >4.00 > 92,698 >5.00
</TABLE>
- -----------------------
(1) The leverage ratio is defined as Tier 1 capital divided by average
quarterly assets.
17
<PAGE> 18
TAYLOR CAPITAL GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
Liquidity and Asset/Liability Management
In connection with the split-off transactions, the Bank sold certain consumer
loans and received a capital contribution from the Parent Company.
These transactions, as well as seasonal growth in customer deposits increased
the Bank's liquidity in early 1997. Excess cash was invested in investment
securities and wholesale borrowings were not all renewed as they matured during
the first quarter of 1997. The increase in liquidity was temporary in nature
and, in April 1997, the Bank's wholesale borrowings returned to the levels
incurred in late 1996.
Safe Harbor Provisions of the Private Securities Reform Act of 1995
Certain statements contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations that are not historical facts are
forward-looking statements subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. The Company cautions the readers of
this Quarterly Report on Form 10-Q that a number of factors could cause the
Company's actual results in 1997 and beyond to differ materially from those
expressed in or implied by any such forward looking statements.
Forward-looking statements are subject to risks and uncertainties that can
materially impact actual results. Important factors that could cause actual
results to differ are described in the Company's previous filings with the
Securities and Exchange Commission including, without limitation the Company's
Prospectus dated February 7, 1997.
18
<PAGE> 19
TAYLOR CAPITAL GROUP, INC.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - See Exhibit Index on page 21.
(b) Form 8-K - No reports on Form 8-K were filed during the period
covered by this report.
19
<PAGE> 20
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: May 14 , 1997 /s/ J. Christopher Alstrin
------------ ---------------------------------
J. Christopher Alstrin*
Chief Financial Officer
* Duly authorized to sign on behalf of the Registrant
20
<PAGE> 21
COLE TAYLOR FINANCIAL GROUP, INC.
EXHIBIT INDEX
Exhibit
Number Description of Documents
------ ------------------------
3.1.1 Certificate of Incorporation of Taylor Capital Group, Inc.
10.8 First Amendment to Loan Agreement between Taylor Capital
Group, Inc., and LaSalle National Bank, dated February 28, 1997
11 Statement regarding computation of primary earnings per share
12 Statement regarding computation of ratio of earnings to
fixed charges
27 Financial Data Schedule
21
<PAGE> 1
EXHIBIT 3.1.1
CERTIFICATE OF INCORPORATION
OF
TAYLOR CAPITAL GROUP, INC.
FIRST: The name of the corporation is Taylor Capital Group,
Inc.
SECOND: The corporation's registered office in the State of
Delaware is located at 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name of the corporation's registered agent at such address is
The Corporation Trust Company.
THIRD: The nature of the business and the objects and
purposes to be transacted, promoted and carried on are to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock
which the corporation shall have the authority to issue is Ten Million
(10,000,000) shares, consisting of (i) Seven Million (7,000,000) shares of
common stock, $0.01 par value per share ("Common Stock"), and (ii) Three
Million (3,000,000) shares of preferred stock, $0.01 par value per share
("Preferred Stock").
The designations, powers, preferences and relative
participating, optional or other special rights and the qualifications,
limitations and restrictions thereof in respect of each class of capital stock
of the corporation are as follows:
A. COMMON STOCK
1. Voting. Except as otherwise provided by law, each share
of Common Stock shall entitle the holder thereof to one vote in any matter
which is submitted to a vote of stockholders of the corporation.
2. Dividends. Subject to the express terms of the Preferred
Stock outstanding from time to time, such dividend or distribution as may be
determined by the Board of Directors of the corporation may from time to time
be declared and paid or made upon the Common Stock out of any source at the
time lawfully available for the payment of dividends.
3. Liquidation. The holders of Common Stock shall be
entitled to share ratably upon any liquidation, dissolution or winding up of
the affairs of the corporation (voluntary of involuntary), all assets of the
corporation which are legally available for distribution, if any, remaining
after payment of
<PAGE> 2
all debts and other liabilities and subject to the prior rights of any holders
of Preferred Stock of the preferential amounts, if any, to which they are
entitled.
4. Purchases. Subject to any applicable provisions of this
Article Fourth, the corporation may at any time or from time to time purchase
or otherwise acquire shares of its Common Stock in any manner now or hereafter
permitted by law, publicly or privately, or pursuant to any agreement.
B. PREFERRED STOCK
Subject to the terms contained in any designation of a series
of Preferred Stock, the Board of Directors is expressly authorized, at any time
and from time to time, to fix, by resolution or resolutions, the following
provisions for shares of any class or classes of Preferred Stock of the
corporation or any series of any class of Preferred Stock:
1. the designation of such class or series, the number of
shares to constitute such class or series which may be increased or decreased
(but not below the number of shares of that class or series then outstanding)
by resolution of the Board of Directors, and the stated value thereof if
different from the par value thereof;
2. whether the shares of such class or series shall have
voting rights, in addition to any voting rights provided by law, and, if so,
the terms of such voting rights;
3. the dividends, if any, payable on such class or series,
whether any such dividends shall be cumulative, and, if so, from what dates,
the conditions and dates upon which such dividends shall be payable, and the
preference or relation which such dividends shall bear to the dividends payable
on any shares of stock of any other class or any other series of the same
class;
4. whether the shares of such class or series shall be
subject to redemption by the corporation, and, if so, the times, prices and
other conditions of such redemption;
5. the amount or amounts payable upon shares of such series
upon, and the rights of the holders of such class or series in, the voluntary
or involuntary liquidation, dissolution or winding up, or upon any distribution
of the assets, of the corporation;
6. whether the shares of such class or series shall be
subject to the operation of a retirement or sinking fund and, if so, the extent
to and manner in which any such retirement or sinking fund shall be applied to
the purchase or redemption of
-2-
<PAGE> 3
the shares of such class or series for retirement or other corporate purposes
and the terms and provisions relative to the operation thereof;
7. whether the shares of such class or series shall be
convertible into, or exchangeable for, shares of stock of any other class or
any other series of the same class or any other securities and, if so, the
price or prices or the rate or rates of conversion or exchange and the method,
if any, of adjusting the same, and any other terms and conditions of conversion
or exchange;
8. the limitations and restrictions, if any, to be effective
while any shares of such class or series are outstanding upon the payment of
dividends or the making of other distributions on, and upon the purchase,
redemption or other acquisition by the corporation of the Common Stock or
shares of stock of any other class or any other series of the same class;
9. the conditions or restrictions, if any, upon the creation
of indebtedness of the corporation or upon the issue of any additional stock,
including additional shares of such class or series or of any other series of
the same class or of any other class;
10. the ranking (be it pari passu, junior or senior) of each
class or series vis-a-vis any other class or series of any class of Preferred
Stock as to the payment of dividends, the distribution of assets and all other
matters; and
11. any other powers, preferences and relative,
participating, optional and other special rights, and any qualifications,
limitations and restrictions thereof, insofar as they are not inconsistent with
the provisions of this Certificate of Incorporation, to the full extent
permitted in accordance with the laws of the State of Delaware.
The powers, preferences and relative, participating, optional
and other special rights of each class or series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding.
C. MISCELLANEOUS
1. Issuance of Stock. Shares of capital stock of the
corporation may be issued by the corporation from time to time in such amounts
and proportions and for such consideration (not less than the par value thereof
in the case of capital stock having par value) as may be fixed and determined
from time to time by the Board of Directors and as shall be permitted by law.
-3-
<PAGE> 4
2. Unclaimed Dividends. Any and all right, title, interest
and claim in or to any dividends declared by the corporation, whether in cash,
stock or otherwise, which are unclaimed by the stockholder entitled thereto for
a period of five years after the close of business on the payment date, shall
be and shall be deemed to be extinguished and abandoned; and such unclaimed
dividends in the possession of the corporation, its transfer agents or other
agents or depositories, shall at such time become the absolute property of the
corporation, free and clear of any and all claims of any persons whatsoever.
FIFTH: Special Meetings of Stockholders. Special meetings of
the stockholders, for any purpose or purposes (except to the extent otherwise
provided by law or this Certificate of Incorporation), may only be called by
the Chairman of the Board, the President or a majority of the Board of
Directors then in office.
SIXTH: A. Amendment of By-Laws. The Board of Directors of
the corporation is authorized to adopt, amend or repeal the By-laws of the
corporation, subject to applicable law and any applicable provisions in any
resolution of the Board of Directors.
B. Election of Directors. Elections of Directors need not be
by written ballot unless the By-laws of the corporation shall so provide.
C. Meetings of Stockholders. Meetings of stockholders may be
held within or without the State of Delaware, as the By-laws of the corporation
may provide.
D. Books of Corporation. The books of the corporation may be
kept at such place within or without the State of Delaware as the By-laws of
the corporation may provide or as may be designated from time to time by the
Board of Directors of the corporation.
SEVENTH: Whenever a compromise or arrangement is proposed
between the corporation and its creditors or any class of them and/or between
the corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in
a summary way of the corporation or of any creditor or stockholder thereof or
on the application of any receiver or receivers appointed for the corporation
under the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for the corporation under the provisions of Section 279 of Title 8 of
the Delaware Code, order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the corporation, as the
case may be, to be summoned in such manner as the said court
-4-
<PAGE> 5
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or the stockholders or class of
stockholders of the corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of the corporation, as the case
may be, and also on the corporation.
EIGHTH: No Director of the corporation shall be personally
liable to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a Director, provided that this Article EIGHTH shall not
eliminate or limit the liability of a Director: (i) for any breach of the
Director's duty of loyalty to the corporation or its stockholders; (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law; (iii) under Section 174 of the Delaware General
Corporation Law (or the corresponding provision of any successor act or law);
or (iv) for any transaction from which the Director derived an improper
personal benefit. Neither the amendment nor repeal of this Article EIGHTH, nor
the adoption of any provision of this Certificate of Incorporation inconsistent
with this Article EIGHTH, shall eliminate or reduce the effect of this Article
EIGHTH in respect of any matter occurring, or any cause of action, suit or
claim that, but for this Article EIGHTH, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision. If the Delaware
General Corporation Law is amended after the effective date of this Article to
further eliminate or limit, or to authorize further elimination or limitation
of, the personal liability of directors for breach of fiduciary duty as a
director, then the personal liability of a director to the corporation or its
stockholders shall be eliminated or limited to the full extent permitted by the
Delaware General Corporation Law, as amended. For purposes of this Article,
"fiduciary duty as a director" shall include any fiduciary duty arising out of
serving at the request of the corporation as a director of another corporation,
partnership, joint venture, trust or other enterprise, and "personally liable
to the corporation" shall include any liability to such other corporation,
partnership, joint venture, trust or other enterprise, and any liability to the
corporation in its capacity as security holder, joint venturer, partner,
beneficiary, creditor or investor of or in any such other corporation,
partnership, joint venture, trust or other enterprise. Any repeal or
modification of the foregoing paragraph by the stockholders of the corporation
shall not adversely affect the elimination or limitation of the personal
liability of a director
-5-
<PAGE> 6
for any act or omission occurring prior to the effective date of such repeal or
modification.
NINTH: The corporation expressly elects not to be governed by
Section 203 of the Delaware General Corporation Law.
TENTH: The corporation reserves the right to amend or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon a stockholder
herein are granted subject to this reservation.
IN WITNESS WHEREOF, the sole incorporator has executed this
Certificate this 9th day of October, 1996.
/s/ Jeffrey W. Taylor
__________________________
Jeffrey W. Taylor
-6-
<PAGE> 7
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF
FIXED RATE NONCUMULATIVE PERPETUAL PREFERRED STOCK, SERIES A
OF
TAYLOR CAPITAL GROUP, INC.
____________________________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
_____________________________
TAYLOR CAPITAL GROUP, INC., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), in accordance with
Section 151 of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY:
1. The Certificate of Incorporation of the Corporation
(the "Certificate of Incorporation"), fixes the total number of shares of all
classes of capital stock which the Corporation shall have the authority to
issue at Ten Million (10,000,000) shares, of which Three Million (3,000,000)
shares shall be shares of Preferred Stock, par value $.01 (herein referred to
as "Preferred Stock"), and of which Seven Million (7,000,000) shares shall be
shares of Common Stock of the par value of $.01 per share (herein referred to
as "Common Stock").
2. The Certificate of Incorporation expressly grants to
the Board of Directors of the Corporation (the "Board of Directors") authority
to provide for the issuance of said Preferred Stock in one or more series, with
such voting powers, full or limited or without voting powers, and with such
designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the resolution or resolutions providing for
the issue thereof adopted by the Board of Directors and as are not stated and
expressed in the Certificate of Incorporation.
3. Pursuant to authority conferred upon the Board of
Directors by the Certificate of Incorporation, the Board of Directors, on
February 7, 1997, by unanimous written consent of a duly authorized committee
thereof, duly authorized and adopted the following resolutions providing for an
issue of a series of its Preferred Stock to be designated "9.0% Noncumulative
Perpetual Preferred Stock, Series A (par value $.01 per share)":
<PAGE> 8
"RESOLVED that an issue of a series of Preferred Stock of the
Corporation, par value $.01 per share (the Preferred Stock of the
Corporation being herein referred to as "Preferred Stock", which term
shall include any additional shares of Preferred Stock of the same
class hereafter authorized to be issued by the Corporation) consisting
of One Million Five Hundred Thirty Thousand (1,530,000) shares is
hereby provided for, and the voting power, designation, preferences
and relative participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of such series
shall be as set forth below:
1. Designation: Number of Shares.
(a) The designation of such series of Preferred Stock
shall be "9.0% Noncumulative Perpetual Preferred Stock, Series A" (hereinafter
referred to as the "Series A Preferred"), stated value $25.00, and the number
of authorized shares constituting the Series A Preferred is One Million Five
Hundred Thirty Thousand (1,530,000). No fractional shares of Series A
Preferred shall be issued.
(b) Any shares of Series A Preferred which at any time
have been redeemed by the Corporation shall, after such redemption, have the
status of authorized but unissued shares of Preferred Stock, without
designation as to series until such shares are once more designated as part of
a particular series of Preferred Stock by the Board of Directors.
2. Dividends.
(a) (i) Holders of shares of Series A Preferred shall be
entitled to receive noncumulative cash dividends, payable
quarterly in arrears for such quarter, when, as and if
declared by the Board of Directors, or a duly authorized
committee thereof, out of funds legally available therefor,
for a dividend period (a "Dividend Period") commencing on the
date of original issuance of the Series A Preferred to and
including March 31, 1997, and for each quarterly period
thereafter commencing on the first day of each April, July,
October and January and ending on and including the day next
preceding the first day of the next Dividend Period at a rate
per annum as follows: (A) for each Dividend Period, at an
annual rate of 9.0% per stated value of each share (the "Fixed
Rate"). The amount of dividends per share payable for any
period of less than a quarter will be paid on the basis of a
360- day year consisting of
-2-
<PAGE> 9
twelve 30-day months. The amount of dividends payable per
share of Preferred Stock for each Dividend Period shall
be computed by dividing the amount of dividends due on an
annual basis by four.
(ii) Dividends as provided for in this Section 2
shall accrue from the date of original issuance and shall be
payable when, as and if declared by the Board of Directors, or
a duly authorized committee thereof, out of funds legally
available therefor, for a Dividend Period on the first of each
April, July, October and January, commencing on April 1, 1997
(each, a "Dividend Payment Date"), to the holders of record on
a date not more than 30 days and not less than 10 days
preceding the related Dividend Payment Date, as may be
determined by the Board of Directors, or a duly authorized
committee thereof, in advance of such Dividend Payment Date.
When a Dividend Payment Date falls on a non- business day, the
dividend will be paid on the next business day.
(b) Dividends on shares of Series A Preferred shall be
noncumulative so that if a dividend on the shares of Series A Preferred with
respect to any Dividend Period is not declared by the Board of Directors, or
any duly authorized committee thereof, then the Corporation shall have no
obligation at any time to pay a dividend on the shares of Series A Preferred
for such Dividend Period whether or not dividends are paid for any subsequent
Dividend Period. Holders of the shares of Series A Preferred shall not be
entitled to any dividends, whether payable in cash, property or stock, in
excess of the noncumulative dividends declared by the Board of Directors, or a
duly authorized committee thereof, as set forth herein.
(c) No full dividends shall be declared or paid or set
apart for payment on any share of any series of Preferred Stock or any share of
any other class of stock, or series thereof, in any such case ranking on a
parity with or junior to the Series A Preferred as to dividends unless full
dividends for the then- current Dividend Period on the Series A Preferred have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof, and for all prior Dividend Periods for
which dividends were declared, set apart for such payment. When dividends are
not paid in full upon the Series A Preferred and any other series or class of
stock ranking on a parity with the Series A Preferred as to dividends, all
dividends declared upon the Series A Preferred and such other series or class
of stock shall be declared pro rata so that the amount of dividends declared
per share on the Series A Preferred and such other series or class of stock
shall in all cases bear the same
-3-
<PAGE> 10
ratio that accrued dividends per share (which in the case of the Series A
Preferred shall not include any accumulation in respect of undeclared or unpaid
dividends for prior Dividend Periods) on the Series A Preferred and on such
other series or class of stock bear to each other.
(d) So long as any shares of Series A Preferred shall be
outstanding, unless full dividends on all outstanding shares of Series A
Preferred shall have been declared and paid or set apart for payment for the
current Dividend Period and have been paid for all Dividend Periods for which
dividends were declared and except as provided in Section 2(c), (i) no dividend
(other than a dividend in Common Stock or in any other stock of the Corporation
ranking junior to the Series A Preferred as to dividends or distribution of
assets upon liquidation, dissolution or winding up) shall be declared and paid
or set aside for payment, or other distribution declared or made, on the Common
Stock or on any other stock ranking junior to or on a parity with Series A
Preferred as to dividends or distribution of assets upon liquidation,
dissolution or winding up, and (ii) no shares of Common Stock or shares of any
other stock of the Corporation ranking junior to or on a parity with Series A
Preferred as to dividends or distribution of assets upon liquidation,
dissolution or winding up shall be redeemed, purchased or otherwise acquired
for any consideration by the Corporation or any subsidiary of the Corporation
(nor may any moneys be paid to or made available for a sinking or other fund
for the redemption, purchase or other acquisition of any shares of any such
stock), other than by conversion into or exchange for Common Stock or any other
stock of the Corporation ranking junior to Series A Preferred as to dividends
or distribution of assets upon liquidation, dissolution or winding up.
3. Redemption.
(a) Issued and outstanding shares of Series A Preferred are
not redeemable prior to January 15, 2002. On or after such date, the shares of
Series A Preferred will be redeemable at the option of the Corporation, at any
time or from time to time on not less than 30, nor more than 60 days written
notice at a redemption price of $25.00 per share, plus an amount equal to
dividends declared and unpaid for the then-current Dividend Period (without
accumulation of accrued and unpaid dividends for prior Dividend Periods unless
previously declared and without interest) to the date fixed for redemption.
(b) (i) In the event the Corporation shall redeem
shares of Series A Preferred, notice of such redemption shall be given
by first-class mail, postage prepaid, mailed not less than 30 days nor
more than 60 days prior to the
-4-
<PAGE> 11
date fixed for redemption, to each holder of record of the shares to
be redeemed, at such holder's address as the same appears on the books
of the Corporation. Each such notice shall state: (A) the date fixed
for redemption; (B) the redemption price (specifying the amount of
declared and unpaid dividends to be included therein) and the manner
in which such redemption price is to be paid and delivered; (C) the
place or places where certificates for such shares are to be
surrendered for payment of the redemption price; (D) that dividends on
the shares to be redeemed will cease to accrue as of the date fixed
for redemption; and (E) the provision hereunder pursuant to which such
redemption is being made. No defect in the notice of redemption or in
the mailing thereof shall affect the validity of the redemption
proceedings, and the failure to give notice to any holder of shares of
Series A Preferred to be so redeemed shall not affect the validity of
the notice given to the other holders of shares of Series A Preferred
to be so redeemed.
(ii) In the event the Corporation shall redeem shares of
Series A Preferred, on or before 12:00 noon, Chicago time, on the date
fixed for redemption, the Corporation shall deposit with a paying
agent (which may be an affiliate of the Corporation) (a "Paying
Agent"), which shall be a bank or trust company organized and in good
standing under the laws of the United States, the State of Illinois or
the State of New York, and having capital, surplus and undivided
profits aggregating at least $100,000,000, funds necessary for such
redemption, in trust, with irrevocable instructions and authorization
that such funds be applied to the redemption of the shares of Series A
Preferred called for redemption upon surrender of certificates for
such shares (properly endorsed or assigned for transfer).
(iii) If such notice of redemption shall have been duly mailed
or if the Corporation shall have given to a Paying Agent irrevocable
authorization promptly to mail such notice, and if on or before the
redemption date specified therein the funds necessary for such
redemption shall have been deposited by the Corporation with a Paying
Agent in trust for the pro rata benefit of the holders of the shares
of Series A Preferred called for redemption, together with irrevocable
instructions that such funds be applied to such redemption, then,
notwithstanding that any certificate for shares of Series A Preferred
so called for redemption shall not have been surrendered for
cancellation, from and after the time of such deposit, all shares of
Series A Preferred so called for redemption shall no longer be deemed
to be outstanding and all rights with respect to such shares of Series
A Preferred shall forthwith cease and terminate,
-5-
<PAGE> 12
except for the right of the holders thereof to receive from such
Paying Agent at any time after the time of such deposit the funds so
deposited, without any interest thereon.
(iv) Any interest accrued on funds deposited with a
Paying Agent in connection with any redemption of shares of Series A
Preferred shall be paid to the Corporation from time to time and the
holders of any such shares to be redeemed with such money shall have
no claim to any such interest. Any funds deposited and unclaimed at
the end of two years from any redemption date shall be repaid or
released to the Corporation, after which the holder or holders of
shares of Series A Preferred so called for redemption shall look only
to the Corporation for payment of the redemption price, without any
interest thereon.
(c) Upon surrender in accordance with such notice of the
certificate for any shares to be redeemed (properly endorsed or assigned for
transfer), such shares shall be redeemed by the Corporation at the applicable
redemption price.
(d) In no event shall the Corporation redeem less than
all the outstanding shares of Series A Preferred, unless dividends for the
then-current Dividend Period (without accumulation of any accrued and unpaid
dividends for prior Dividend Periods unless previously declared and without
interest) to the date fixed for redemption shall have been declared and paid or
set apart for payment on all outstanding shares of Series A Preferred;
provided, however, that the foregoing shall not prevent, if otherwise
permitted, the purchase or acquisition by the Corporation of shares of Series A
Preferred pursuant to a tender or exchange offer made on the same terms to
holders of all the outstanding shares of Series A Preferred and mailed to the
holders of record of all such outstanding shares at such holders' addresses as
the same appear on the books of the Corporation; and provided further that if
some, but less than all, of the shares of Series A Preferred are to be
purchased or otherwise acquired pursuant to such tender or exchange offer and
the number of such shares so tendered exceeds the number of shares so to be
purchased or otherwise acquired by the Corporation, the shares of Series A
Preferred so tendered shall be purchased or otherwise acquired by the
Corporation on a pro rata basis (with adjustments to eliminate fractions)
according to the number of such shares duly tendered by each holder so
tendering shares of Series A Preferred for such purchase or exchange.
(e) If less than all of the outstanding shares of Series
A Preferred are to be redeemed, the Corporation will select the shares to be
redeemed by lot, pro rata (as nearly may be), or in such other equitable manner
as the Board of Directors
-6-
<PAGE> 13
of the Company may determine.
4. Liquidation Preference.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, the holders of
shares of Series A Preferred shall be entitled to receive out of the assets of
the Corporation available for distribution to stockholders, before any
distribution of assets shall be made to the holders of shares of Common Stock
or of any other class or series of stock ranking junior to the Series A
Preferred as to such a distribution, an amount equal to $25.00 per share, plus
an amount equal to any dividends declared and unpaid for the then-current
Dividend Period (without accumulation of accrued and unpaid dividends for prior
Dividend Periods) to the date fixed for payment of such distribution.
(b) If upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation
will be insufficient to make the full liquidating payment with respect to
shares of Series A Preferred and liquidating payments on shares of any other
class or series of stock of the Corporation ranking on a parity with the Series
A Preferred as to any such distribution, then such assets will be distributed
among the holders of shares of Series A Preferred and the holders of shares of
such other class or series of stock, ratably in proportion to the respective
full preferential amounts to which they are entitled.
(c) After payment to the holders of shares of Series A
Preferred of the full preferential amounts provided for in this Section 4, the
holders of such shares shall not be entitled to any further participation in
any distribution of assets by the Corporation.
(d) A consolidation or merger of the Corporation with or
into any other corporation or corporations, or the sale, lease or conveyance of
all or substantially all the assets of the Corporation, whether for cash,
shares of stock, securities or properties, shall not be regarded as a
liquidation, dissolution or winding up of the Corporation within the meaning of
this Section 4.
(e) Written notice of liquidation, dissolution or winding up
of the Corporation stating (i) the payment date, (ii) the amount of payment and
(iii) the place where the amounts distributed shall be payable, shall be given
by first-class mail, postage prepaid, mailed not less than 30 days prior to the
payment date stated therein, to the holders of record of the Series A Preferred
as of such notice date at such holder's
-7-
<PAGE> 14
address as the same appears on the books of the Corporation.
5. Conversion and Exchange. The holders of shares of Series A
Preferred shall not have any rights to convert such shares into, or to exchange
such shares for, shares of Common Stock, any other class or classes of capital
stock (or any other security) or any other series of any class or classes of
capital stock (or any other security) of the Corporation.
6. Voting Rights.
(a) Holders of shares of Series A Preferred shall have no
voting rights, either general or special, except as expressly provided by
applicable law or as specified in this Section 6.
(b) Holders of shares of Series A Preferred, voting
separately as a class with the holders of any one or more other series of
Preferred Stock then entitled to vote thereon, shall be entitled at the
Corporation's next annual meeting of stockholders and at each subsequent annual
meeting of stockholders to cast one vote (or fraction thereof) for each $25.00
of liquidation preference to which such Preferred Stock is entitled for the
election of one director of the Corporation, with the remaining directors of
the Corporation to be elected by the holders of the shares of any other class
or classes or series of stock entitled to vote therefor. Any director who has
been so elected by the holders of shares of Preferred Stock may be removed at
any time, with or without cause, only by the affirmative vote of the holders of
the shares at the time entitled to cast a majority of the votes entitled to be
cast for the election of any such director at a special meeting of such holders
called for that purpose, and any vacancy thereby created may only be filled by
the vote of such holders.
(c) (i) If a Voting Event (as defined below) occurs, the
number of members of the Board of Directors automatically shall be
increased by one and the holders of shares of Series A Preferred,
voting separately as a class with the holders of shares of any one or
more other series of Preferred Stock entitled to vote upon the
occurrence of such Voting Event, shall be entitled commencing at the
Corporation's next annual meeting of stockholders, unless prior
thereto such Voting Event has been terminated, to cast one vote (or
fraction thereof) for each $25.00 of liquidation preference to which
such Preferred Stock is entitled for the election of one additional
director of the Corporation, with the remaining directors of the
Corporation to be elected by the holders of the shares of any other
class or classes or series of stock entitled to vote therefor;
provided, however, that the Board of Directors at
-8-
<PAGE> 15
no time will include more than two directors who have been elected by
the holders of shares of Preferred Stock voting separately as a class.
Until such Voting Event has been terminated, any director who has been
elected as described in this section 6(c)(i) by the holders of shares
of Preferred Stock may be removed at any time, with or with or without
cause, only by the affirmative vote of the holders of the shares at
the time entitled to cast a majority of the votes entitled to be cast
for the election of any such director at a special meeting of such
holders called for that purpose, and any vacancy thereby created may
only be filled by the vote of such holders. If and when such Voting
Event has been terminated, the holders of shares of Preferred Stock
then outstanding and so authorized will be divested of the foregoing
special voting rights, subject to revesting upon further occurrence of
a Voting Event, Upon termination of such Voting Event, the terms of
office of any person who may have been elected a director by vote of
the holders of shares of Series A Preferred and such other series of
Preferred Stock pursuant to the foregoing special voting rights will
immediately terminate.
(ii) A "Voting Event" shall be deemed to have occurred in the
event that dividends payable on any share or shares of Series A
Preferred shall not be declared and paid at the stated rate for the
equivalent of six full quarterly Dividend Periods (whether or not
consecutive). A Voting Event shall be deemed to have been terminated
when all such dividends in arrears have been declared and paid or
declared and set apart for payment in full, subject always to the
revesting of the rights of holders of the Series A Preferred voting as
a class with the holders of any other Preferred Stock, to elect a
director as provided above in the event of any future failure on the
part of the Corporation to pay dividends at the stated rate for any
six full quarterly Dividend Periods (whether or not consecutive).
(d) So long as any shares of Series A Preferred remain
outstanding, without the consent of the holders of shares entitled to cast at
least two-thirds of the votes entitled to be cast by the holders of the total
number of shares of Preferred Stock then outstanding, voting separately as a
class without regard to series, with the holders of shares of Preferred Stock
being entitled to cast one vote (or fraction thereof) for each $25.00 of
liquidation preference to which such stock is entitled, the Corporation may
not: (i) create, authorize or issue, or increase the authorized or issued
amount of any class or series of stock of the Corporation or any warrants,
options or other rights convertible or exchangeable into any class or series of
any capital stock of the Corporation which shall have preference,
-9-
<PAGE> 16
or be on a parity with, as to dividends or distributions of assets upon
liquidation, dissolution or winding up over the Series A Preferred or (ii)
amend, alter or repeal (whether by merger, consolidation or otherwise) any
provision of the Certificate of Incorporation or this Certificate of
Designation, Preferences and Rights of the Corporation so as to adversely
affect the powers, preferences or special rights of the Series A Preferred or
holders thereof; provided, however, that an increase in the authorized amount
of Preferred Stock or the creation of any class or series of stock ranking
junior to the shares of Series A Preferred as to dividends and/or distributions
of assets upon liquidation, dissolution or winding up shall not be deemed to
adversely affect the voting power, preferences or special rights of the holders
of shares of Series A Preferred. The foregoing voting provisions shall not
apply if, at or prior to the time when the act with respect to which such
voting would otherwise be required occurs, all outstanding shares of Series A
Preferred shall have been (x) redeemed or called for redemption and sufficient
funds, together with irrevocable instructions to the Paying Agent to apply such
funds, shall have been deposited in trust, to effect such redemption in
accordance with Section 3(b)(ii) or 3(b)(iii) hereof, or (y) purchased or
otherwise acquired and cancelled.
7. Priority as to Certain Distributions. As a series of
Preferred Stock, the shares of Series A Preferred shall be entitled to such
rights and priorities, and subject to such limitations, as to dividends as are
set forth in these resolutions and in the Certificate of Incorporation.
8. Sinking Fund. No sinking fund shall be provided for the
purchase or redemption of shares of the Series A Preferred.
9. Ranking. For purposes hereof, any class or series of stock of
the Corporation shall be deemed to rank:
(a) prior to the Series A Preferred as to dividends or
distribution of assets upon liquidation, dissolution or winding up, if the
holders of such class or series shall be entitled to the receipt of dividends
or of amounts distributable upon liquidation, dissolution or winding up, as the
case may be, in preference or priority to the holders of Series A Preferred;
(b) on a parity with the Series A Preferred as to
dividends or distribution of assets upon liquidation, dissolution or winding
up, whether or not the dividend rates, dividend payment dates, redemption
prices or liquidation preferences per share thereof are different from those of
the Series A Preferred, if the holders of such class or series of stock and of
the Series A Preferred shall be entitled to the receipt of dividends or of
-10-
<PAGE> 17
amounts distributable upon liquidation, dissolution or winding up, as the case
may be, in proportion to their respective dividend amounts or liquidation
preferences, without preference or priority to the holders of Series A
Preferred; and
(c) junior to the Series A Preferred as to dividends or
distribution of assets upon liquidation, dissolution or winding up, if such
stock shall be Common Stock or if the holders of the Series A Preferred shall
be entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of shares of such class or series.
10. Exclusion of Other Rights. Unless otherwise required by law,
shares of Series A Preferred shall not have any rights, including preemptive
rights, or preferences other than those specifically set forth herein or as
provided by applicable law.
11. Notices. All notices or communications, unless otherwise
specified in the By-laws of the Corporation, the Certificate of Incorporation
or otherwise in these resolutions, shall be sufficiently given if in writing
and delivered in person or mailed by first-class mail, postage prepaid. Notice
shall be deemed given on the earlier of the date received or the date such
notice is mailed.
12. Captions. The captions and headings set forth in these
resolutions are for convenience of reference only and are not a part of, nor
shall they affect the interpretation or construction of, these resolutions."
* * *
-11-
<PAGE> 1
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "Amendment") is entered into
as of the 27th day of February, 1997, by and among LASALLE NATIONAL BANK, a
national banking association (the "Bank"), and TAYLOR CAPITAL GROUP, INC., a
Delaware corporation ("Borrower").
W I T N E S S E T H:
WHEREAS, Bank and Borrower entered into that certain Loan Agreement dated
as of February 12, 1997 (the "Loan Agreement") and now desire to amend such
Loan Agreement, subject to the terms and conditions hereof, to increase
Borrower's Revolving Credit Commitment from $5,000,000 to $7,000,000; and
WHEREAS, the parties hereto now desire to amend such Loan Agreement
pursuant to this Amendment.
NOW, THEREFORE, for and in consideration of the premises and mutual
agreements herein contained and for the purposes of setting forth the terms and
conditions of this Amendment, the parties, intending to be bound, hereby agree
as follows:
1. INCORPORATION OF THE LOAN AGREEMENT. All capitalized terms which are not
defined herein shall have the same meanings as set forth in the Loan Agreement,
and the Loan Agreement, to the extent not inconsistent with this Amendment, is
incorporated herein by this reference as though the same were set forth in its
entirety. To the extent any terms and provisions of the Loan Agreement are
inconsistent with the amendments set forth in Paragraph 2 below, such terms and
provisions shall be deemed superseded hereby. Except as specifically set forth
herein, the Loan Agreement shall remain in full force and effect and its
provisions shall be binding on the parties hereto.
2. AMENDMENT OF THE LOAN AGREEMENT. The Loan Agreement is hereby
amended as follows:
(a) The definition of the term "Revolving Note" appearing in
Section 1.1 of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:
"Revolving Note" means that certain Substitute
Revolving Note dated as of February 27, 1997 in the
original aggregate maximum principal amount of Seven
Million Dollars ($7,000,000), as the same may be
amended, modified or supplemented from time to time,
and together with any renewals thereof or exchanges or
substitutes therefor.
1
<PAGE> 2
(b) Section 2.1 of the Loan Agreement is hereby
amended and restated in its entirety to read as
follows:
2.1 Revolving Credit Commitment. On the terms
and subject to the conditions set forth in this
Agreement, Bank agrees to make revolving credit
available to Borrower from time to time prior to the
Revolving Credit Termination Date in such aggregate
amounts as Borrower may from time to time request but
in no event exceeding Seven Million Dollars
($7,000,000) (the "Revolving Credit Commitment"). The
Revolving Credit Commitment shall be available to
Borrower by means of Revolving Loans, it being
understood that Revolving Loans may be repaid and used
again during the period from the date hereof to and
including the Revolving Credit Termination Date, at
which time the Revolving Credit Commitment shall
expire.
(c) Section 3.1 of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:
3.1 Revolving Note. The Revolving Loans made by
Bank under the Revolving Credit Commitment shall be
evidenced by that certain Revolving Note dated as of
February 27, 1997, payable to the order of Bank in the
maximum aggregate principal amount of Seven Million
Dollars ($7,000,000). The unpaid principal amount of
the Revolving Loan shall bear interest and be due and
payable as provided in this Agreement and the
Revolving Note. Payments to be made by Borrower under
the Revolving Note shall be made at the time, in the
amounts and upon the terms set forth herein and
therein.
(d) Any and all references to the Revolving Note (as defined in
Section 1.1 of the Loan Agreement) shall be deemed to and include,
without limitation, that certain Substitute Revolving Note dated of even
date herewith made by Borrower in favor of Bank in the maximum aggregate
principal amount available of $7,000,000.
3. Representations, Warranties and Covenants; No Default. The
representations, warranties and covenants set forth in Section 7 of the Loan
Agreement shall be deemed remade and affirmed as of the date hereof by
Borrower, except that any and all references to the Loan Agreement in such
representations, warranties and covenants shall be deemed to include this
Amendment. Borrower represents and warrants as of the date of this Amendment
that no Event of Default has occurred or is continuing, and no event has
occurred and is continuing, which, with the lapse of time, the giving of
notice, or both, would constitute such an Event of Default under the Loan
Agreement.
2
<PAGE> 3
4. Closing Conditions. Prior to entering into this Amendment, Bank shall
have received the Substitute Revolving Note in form and substance satisfactory
to it.
5. Effectuation. The amendments to the Loan Agreement contemplated by
this Amendment shall be deemed effective immediately upon the full execution of
this Amendment and without any further action required by the parties hereto.
Except as specifically set forth herein, there are no conditions precedent or
subsequent to the effectiveness of this Amendment.
6. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment
as of the date first above written.
LASALLE NATIONAL BANK
By:
-------------------------------
Jay C. Goldner, Vice President
TAYLOR CAPITAL GROUP, INC.
a Delaware Corporation
By:
-----------------------------
Name:
J.C. Alstrin
--------------------------
Title: Chief Financial Officer
-------------------------
4
<PAGE> 1
EXHIBIT 11
COMPUTATION OF PRIMARY EARNINGS PER SHARE
<TABLE>
<CAPTION>
Successor
Basis - Taylor
Capital Group,
Inc. -
Consolidated
For the Period of
Feb. 12, 1997 to
Mar. 31, 1997
-------------
<S> <C>
AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING:
1 Average common shares outstanding 4,500,000
==========
EARNINGS:
2 Net income $2,008,000
3 Less preferred stock dividends 468,562
----------
4 Earnings available for common shares $1,539,438
==========
PER SHARE AMOUNTS:
Net income per share (line 4 / line 1) $ 0.34
==========
Note: In all periods, earnings per share were calculated using the treasury stock method. Fully diluted earnings per share are not
presented as they are less than 3% dilutive.
</TABLE>
22
<PAGE> 1
EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in thousands)
<TABLE>
<CAPTION>
Successor
Basis - Taylor
Capital Group, Predecessor Predecessor
Inc. - Basis - Cole Basis - Cole
Consolidated Taylor Bank - Taylor Bank -
For the Period of For the Period of For the Three
Feb. 12, 1997 to Jan. 1, 1997 to Months Ended
Mar. 31, 1997 Feb. 11, 1997 Mar. 31, 1997
------------- ------------- -------------
<S> <C> <C> <C>
1 Income before income taxes $2,843 $3,610 $ 6,392
ADD BACK FIXED CHARGES:
2 Total interest expense (1) 8,643 7,076 16,096
3 Interest included in operating lease rental expense (2) 185 145 267
4 Preferred stock dividend (3) 721 --- ---
------- ------- -------
5 Adjusted earnings including interest on deposits 12,392 10,831 22,755
6 Less: interest expense on deposits 6,665 5,614 12,655
------- ------- -------
7 Adjusted earnings excluding interest on deposits $5,727 $5,217 $10,100
======= ======= =======
8 Fixed charges including interest on deposits
(line 2 + line 3 + line 4) $9,549 $7,221 $16,363
======= ======= =======
9 Fixed charges excluding interest on deposits
(line 8 - line 6) $2,884 $1,607 $ 3,708
======= ======= =======
RATIO OF EARNINGS TO FIXED CHARGES
Including interest on deposits (line 5 / line 8) 1.30 1.50 1.39
======= ======= =======
Excluding interest on deposits (line 6 / line 9) 2.31 3.49 3.41
======= ======= =======
(1) Interest expense includes cash interest expense on deposits and other debt and amortization of debt issuance costs.
(2) Calculation of interest included in operating lease rental expense is representative of the interest factor attributable to the
lease payment.
(3) Preferred stock dividends have been computed based on $38,250,000 of preferred stock issued and a dividend rate of 9% per
annum. The stock dividend amount has been grossed up to compute the pretax income equivalent assuming an estimated 35% tax
rate.
</TABLE>
23
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TAYLOR
CAPITAL GROUP, INC. FORM 10-Q FOR THE 48 DAY PERIOD ENDED MARCH 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> FEB-12-1997
<PERIOD-END> MAR-31-1997
<CASH> 82,249
<INT-BEARING-DEPOSITS> 11,086
<FED-FUNDS-SOLD> 10,425
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 384,777
<INVESTMENTS-CARRYING> 75,452
<INVESTMENTS-MARKET> 75,716
<LOANS> 1,210,588
<ALLOWANCE> 24,529
<TOTAL-ASSETS> 1,846,887
<DEPOSITS> 1,430,578
<SHORT-TERM> 172,911
<LIABILITIES-OTHER> 17,928
<LONG-TERM> 91,881
0
38,250
<COMMON> 45
<OTHER-SE> 95,294
<TOTAL-LIABILITIES-AND-EQUITY> 1,846,887
<INTEREST-LOAN> 13,906
<INTEREST-INVEST> 3,654
<INTEREST-OTHER> 244
<INTEREST-TOTAL> 17,804
<INTEREST-DEPOSIT> 6,665
<INTEREST-EXPENSE> 8,643
<INTEREST-INCOME-NET> 9,161
<LOAN-LOSSES> 484
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 8,184
<INCOME-PRETAX> 2,843
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,008
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.28
<LOANS-NON> 11,261
<LOANS-PAST> 2,310
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 24,607
<CHARGE-OFFS> 755
<RECOVERIES> 193
<ALLOWANCE-CLOSE> 24,529
<ALLOWANCE-DOMESTIC> 24,529
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
