Taylor Capital Group Reports $33.4 Million Net Income for Third Quarter 2010

Oct 21, 2010, 08:00 ET from Taylor Capital Group, Inc.

CHICAGO, Oct. 21 /PRNewswire-FirstCall/ -- Taylor Capital Group, Inc. (the "Company") (Nasdaq: TAYC), the parent company of Cole Taylor Bank (the "Bank"), today reported encouraging results for the third quarter of 2010.  

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Net income for the third quarter of 2010 was $33.4 million, compared to a net loss of $30.9 million for the second quarter of 2010.  Net income applicable to common stockholders was $30.7 million, or $1.57 per diluted share, for the third quarter of 2010, compared to a net loss applicable to common stockholders of $48.3 million, or $3.35 per diluted share, for the second quarter of 2010.  Net income included $32.8 million in gains from the sale of investment securities in the third quarter of 2010.  It is important to note that income before income taxes excluding these securities gains was $931,000.

"We are pleased to report net income of $33.4 million in the third quarter of 2010," said Mark A. Hoppe, President and Chief Executive Officer of Taylor Capital Group and Cole Taylor Bank.  "These results show strong evidence of success in pursuing our two prong strategy of asset quality improvement and core business growth – what we are now referring to as our 'fix and grow' strategy.  Although gains from the sale of investment securities were the primary contributor to the bottom line, we also had positive earnings as a result of the performance of our key business lines."  

Hoppe continued, "Credit quality also improved this quarter, including realizing the full benefit of the bulk loan sale we announced last quarter.  We remain cautious in the face of a stagnant Chicago area real estate market and continue to closely manage credit quality.  However, we are heartened by some positive trends, including hearing more positive outlooks among some of our clients.  We ended the third quarter with strong pre-tax, pre-provision earnings from core operations, improved asset quality – including loan loss reserve coverage of nonperforming loans of almost 80% – and an improved capital position."

THIRD QUARTER 2010 HIGHLIGHTS

Pre-tax, pre-provision earnings from core operations(1) grew by 19.2% from the second quarter

  • Pre-tax, pre-provision earnings from core operations totaled $20.6 million for the third quarter of 2010, up from $17.3 million for the second quarter of 2010, representing an increase of 19.2%.
  • Total revenue (net interest income plus noninterest income less gains on investment securities) was $45.7 million in the third quarter of 2010, up from $40.7 million in the second quarter of 2010.  
  • Net interest margin increased to 3.25% for the third quarter of 2010, up eight basis points from 3.17% for the second quarter of 2010 and the eighth consecutive quarterly improvement in net interest margin.

Credit quality improved despite lagging economic recovery in the Chicago market

  • Nonperforming loans were $118.4 million and 3.90% of total loans at September 30, 2010, compared to $154.4 million and 5.08% of total loans at June 30, 2010.  This is a 23.3% reduction in nonperforming loans.
  • Provision for loan losses for the third quarter of 2010 was $18.1 million, a decrease of 58.8% from the provision of $43.9 million for the second quarter of 2010.
  • Allowance for loan losses was $94.1 million at September 30, 2010, down from $100.5 million at June 30, 2010.  Despite the reduction in the allowance, the ratio of allowance for loan losses to nonperforming loans increased to 79.5% at September 30, 2010, compared to 65.1% at June 30, 2010.
  • At September 30, 2010, total commercial criticized and classified loans(2) totaled $322.3 million, compared to $381.1 million at June 30, 2010.  

Company received regulatory approval for remaining $9.1 million capital investment

  • During the second quarter of 2010, the Company raised $75 million of new capital, $9.1 million of which was held in escrow pending regulatory approval.  The Company obtained regulatory approval in October of 2010 and expects to complete that remaining portion of its second quarter capital raise transaction shortly.

THIRD QUARTER 2010 PERFORMANCE OVERVIEW

Results of Operations

Net Income and Net Income Applicable to Common Stockholders

Net income for the third quarter of 2010 was $33.4 million, compared to a net loss of $30.9 million for second quarter of 2010.  Net income applicable to common stockholders was $30.7 million, or $1.57 per diluted share, for the third quarter of 2010 compared to a net loss applicable to common stockholders of $48.3 million, or $3.35 per diluted share, for the second quarter of 2010.

The main drivers of the change in net income from second quarter 2010 to third quarter 2010 were improvement in pre-tax, pre-provision earnings from core operations, reduction in credit costs (provision plus nonperforming asset expense), and gains on the sale of investment securities.  Pre-tax net income excluding gains on the sale of investment securities was $931,000.

For the three

months ended September 30, 2010

(in thousands)

Pre-tax, pre-provision earnings from core operations

$

    20,597

   Less: Nonperforming asset  expense

  (1,538)

   Less: Provision for loan losses

(18,128)

Core operating earnings excluding gains on the sale of investment securities

$931

   Plus: Gains on the sale of investment securities

32,804

Net income before taxes

$

    33,735

   Less: Taxes

(321)

Net income

$

33,414

Pre-tax, Pre-Provision Earnings from Core Operations

Pre-tax, pre-provision earnings from core operations totaled $20.6 million for the third quarter of 2010, as compared to $17.3 million for the second quarter of 2010.  This continued positive trend reflects improved business fundamentals and a diversified revenue stream.  The three key lines of business of Cole Taylor Bank that form the foundation of its growth strategy – Commercial Banking, Cole Taylor Business Capital (the asset based lending unit of the Bank), and Cole Taylor Mortgage – all experienced additional growth in the third quarter of 2010.

In the third quarter of 2010, the most significant contribution to the increase in earnings from core operations was from mortgage origination revenue produced by Cole Taylor Mortgage.  In only its third quarter of operations, Cole Taylor Mortgage generated $6.3 million in revenue from mortgage originations, a $4.4 million or 230% increase over the second quarter of 2010 revenue of $1.9 million.

Cole Taylor Mortgage originated $242.4 million of first mortgages in the third quarter of 2010, as compared to $76.4 million in the second quarter of 2010.  Cole Taylor Mortgage's success is partly attributable to its ability to take advantage of high volumes of mortgage refinancings in the current low rate environment.  Additionally, this unit continues to strategically grow its offices nationwide.  Currently, Cole Taylor Mortgage is qualified in 17 states, most recently adding Connecticut, Missouri and Wisconsin.  Cole Taylor Mortgage also opened two new retail mortgage offices during the third quarter of 2010 increasing the total branches offering mortgages to 16, including nine retail branches in the Chicago area.

The Bank's other derivative income also contributed to increased earnings from core operations, adding $1.2 million in revenue during the third quarter of 2010, largely the result of an increase in fees from interest rate exchange agreements as more of the Bank's commercial clients hedged against possible changes in interest rates.

Revenue

Revenue was $45.7 million for the third quarter of 2010, compared to $40.7 million for the second quarter of 2010.  

Net interest income declined slightly to $34.4 million for the third quarter of 2010, compared to $34.7 million for the second quarter of 2010.  The decrease in the total portfolio of investment securities negatively impacted net interest income, partially offset by increased volume of mortgage loans held for sale and lower cost deposits.

Noninterest income for the third quarter of 2010 totaled $44.1 million, up significantly from $6.2 million for the second quarter of 2010, mostly the result of $32.8 million in gains from the sale of investment securities.  These sales significantly reduced prepayment risk, and allowed the Company to capture unrealized gains on investment securities that had higher refinancing risk.  Increased noninterest income from the Bank's core businesses further bolstered total noninterest income, including increased mortgage origination revenue and other derivative income.  

Expenses

Noninterest expense declined to $26.6 million in the third quarter of 2010 from $27.5 million in the second quarter of 2010.  

Reductions in nonperforming asset expense were the primary reason noninterest expense declined. Nonperforming asset expense decreased from $4.1 million in the second quarter of 2010 to $1.5 million in the third quarter of 2010 due to higher nonperforming asset recoveries and lower write-downs on other real estate owned.  Partially offsetting this reduction was a $1.6 million increase in salaries and benefits as a result of additional headcount at Cole Taylor Mortgage.  

Credit Quality

Loan Portfolio Performance and Credit Quality

Credit quality improved in the third quarter of 2010 despite continued weakness in the Chicago real estate market.  Nonperforming loans have been trending down since the second quarter of 2009, though fluctuations may occur given the lagging economy.  The Company continues to pursue multiple strategies to reduce nonperforming assets, especially in the real estate portfolio, with a focus on pursuing the best economic outcome.

Nonperforming assets were $157.5 million at September 30, 2010, compared to $182.5 million at June 30, 2010.  Nonperforming assets to total assets decreased to 3.38% at September 30, 2010, from 3.98% at June 30, 2010.  

Nonaccrual loans totaled $118.4 million at September 30, 2010, as compared to $154.3 million at June 30, 2010.  Asset sales and charge-offs reduced nonaccrual residential construction and land loans by $33.5 million to $17.4 million at September 30, 2010.  Commercial real estate nonaccrual loans decreased $12.4 million to $46.4 million at September 30, 2010.  Partially offsetting these decreases was an increase of $10.0 million in commercial and industrial nonaccrual loans to $31.1 million at September 30, 2010, compared to $21.1 million at June 30, 2010.  

Other real estate and repossessed assets increased from $28.2 million at June 30, 2010 to $39.1 million at September 30, 2010 as a result of several completed foreclosures.

Loans contractually past due 30 through 89 days decreased to $22.1 million at September 30, 2010 from $35.9 million at June 30, 2010.  Commercial criticized and classified loans(3) also decreased to $322.3 million, down from $381.1 million at June 30, 2010.

Provision and Allowance for Loan Losses

The provision for loan losses declined significantly from $43.9 million for the second quarter of 2010 to $18.1 million for the third quarter of 2010.  This decrease resulted from reduced loan migrations to nonperforming status in the third quarter of 2010 as compared to the second quarter of 2010.  In addition, a significant portion of the second quarter 2010 provision was the result of a bulk loan sale.

The allowance for loan losses was $94.1 million at September 30, 2010, compared to $100.5 million at June 30, 2010.  The loan loss allowance represented 3.10% of total loans at September 30, 2010, down from 3.31% at June 30, 2010.  However, as a percent of nonperforming loans, the allowance for loan losses was 79.50% at September 30, 2010, up from 65.10% at June 30, 2010.

Credit Quality Performance Summary

(in thousands)

9/30/2010

6/30/2010

$ Change

% Change

Nonperforming loans

$118,419

$154,378

($35,959)

Decrease of 23.3%

Nonperforming assets

$157,482

$182,547

($25,065)

Decrease of 13.7%

Nonperforming loans to total loans

3.90%

5.08%

-1.18%

Decrease of 23.2%

Allowance to nonperforming loans

79.50%

65.10%

14.40%

Increase of 22.1%

Balance Sheet

Assets

Total assets at September 30, 2010 increased to $4.66 billion from $4.59 billion at June 30, 2010.  

Investment securities declined $257.8 million to $1.17 billion at September 30, 2010, from $1.43 billion at June 30, 2010.  This decrease was partially offset by an increase in other assets of $232.6 million at September 30, 2010, primarily the result of the timing of settlement on investment securities sold.

Loans held for sale increased from $78.4 million at June 30, 2010 to $134.5 million at September 30, 2010 as a result of increased origination activity in Cole Taylor Mortgage.

Total loans in the portfolio were $2.80 billion at September 30, 2010, down $54.4 million from $2.86 billion at June 30, 2010.  Loan growth from new and existing relationships continued to be offset by historically low levels of client line utilization and resolutions of nonperforming loans which includes pay downs and charge-offs.

Liabilities

Total liabilities at September 30, 2010 increased to $4.38 billion from $4.30 billion at June 30, 2010.

Total deposits were down slightly at $2.97 billion at September 30, 2010 from $3.04 billion at June 30, 2010.  Increases in noninterest bearing deposits, NOW accounts and public time deposits were more than offset by decreases in CDARS time deposits, customer certificates of deposits and money market accounts, as well as out-of-market deposits.  The ratio of in-market deposits to total deposits remained relatively unchanged at approximately 82%.

Reduced levels of other borrowings were offset by increases in accrued interest, taxes and other liabilities, as well as in notes payable and other advances.  Similar to the fluctuations in other assets, the $182.8 million increase in other liabilities was a result of settlement timing on the purchase of investment securities.

Capital

At September 30, 2010, the Company's Tier I Risk Based Capital ratio was 10.39%, while its Total Risk Based Capital ratio was 14.15% and its Tier I Capital to Average Assets leverage ratio was 8.04%.  

These ratios are all improved over their respective June 30, 2010 levels and exceed the regulatory requirements of 6.00% for Tier I Risk Based Capital, 10.00% for Total Risk Based Capital and 5.00% for Tier I Capital to Average Assets for well-capitalized banks.

Conference Call and Slide Presentation

Taylor Capital Group will host a webcast and conference call on October 21, 2010, at 10:00 am (Central Time) to discuss third quarter 2010 results and other matters.  To access the call, please dial (800) 561-2731 and enter the passcode 67310484.  To access streaming audio, please go to www.taylorcapitalgroup.com.  

New for third quarter 2010, the Company will also provide a slide presentation which management will speak to during the discussion.  A copy of the presentation will be available for download prior to the start of the call at www.taylorcapitalgroup.com. The presentation will not be webcast live. If you have any trouble obtaining a copy of the presentation, please call Investor Relations at (847) 653-7166.

Accompanying Financial Statements and Tables

This press release is accompanied by the following unaudited financial information:

  • Condensed Consolidated Balance Sheets
  • Consolidated Statements of Operations
  • Summary of Key Quarterly Financial Data
  • Summary of Key Year-To-Date Financial Data
  • Summary of Key Period-End Financial Data
  • Composition of Loan Portfolio
  • Credit Quality
  • Loan Portfolio Aging
  • Funding Liabilities
  • Reconciliation of U.S. GAAP Financial Measures

About Taylor Capital Group, Inc.  (NASDAQ:  TAYC)

Taylor Capital Group, Inc. is a $4.7 billion bank holding company for Cole Taylor Bank, a Chicago-based commercial bank specializing in serving the banking needs of closely held businesses and the people who own and manage them. Cole Taylor is a member of the FDIC and an Equal Housing Lender.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release includes forward-looking statements that reflect our current expectations and projections about our future results, performance, prospects and opportunities. We have tried to identify these forward-looking statements by using words including "may," "might," "contemplate," "plan," "prudent," "potential," "should," "will," "expect," "anticipate," "believe," "intend," "could" and "estimate" and similar expressions. These forward-looking statements are based on information currently available to us and are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities in 2010 and beyond to differ materially from those expressed in, or implied by, these forward-looking statements. These risks, uncertainties and other factors include, without limitation: the effect on our profitability if interest rates fluctuate as well as the effect of our customers' changing use of our deposit products; the possibility that our wholesale funding sources may prove insufficient to replace deposits at maturity and support our growth; the risk that our allowance for loan losses may prove insufficient to absorb probable losses in our loan portfolio; possible volatility in loan charge-offs and recoveries between periods; the decline in residential real estate sales volume and the likely potential for continuing illiquidity in the real estate market, including within the Chicago metropolitan area; the risks associated with the high concentration of commercial real estate loans in our portfolio; the uncertainties in estimating the fair value of developed real estate and undeveloped land in light of declining demand for such assets and continuing illiquidity in the real estate market; the risks associated with management changes, employee turnover and our commercial banking growth initiative, including our expansion of our asset-based lending operations and our entry into new geographical markets; negative developments and disruptions in the credit and lending markets, including the impact of the ongoing credit crisis on our business and on the businesses of our customers as well as other banks and lending institutions with which we have commercial relationships; a continuation of the recent unprecedented volatility in the capital markets; the effectiveness of our hedging transactions and their impact on our future results of operations; the risks associated with implementing our business strategy and managing our growth effectively, including our ability to preserve and access sufficient capital to execute on our strategy; changes in general economic and capital market conditions, interest rates, our debt credit ratings, deposit flows, loan demand, including loan syndication opportunities and competition; changes in legislation or regulatory and accounting principles, policies or guidelines affecting our business; and other economic, competitive, governmental, regulatory and technological factors impacting our operations.

For further information about these and other risks, uncertainties and factors, please review the disclosure included in the section captioned "Risk Factors" in our December 31, 2009 Annual Report on Form 10-K filed with the SEC on March 29, 2010. You should not place undue reliance on any forward-looking statements.  We undertake no obligation to publicly update or revise any forward-looking statements or risk factors, whether as a result of new information, future events, changed circumstances or any other reason after the date of this press release.

(1)

Schedules reconciling earnings in accordance with U. S. generally accepted accounting principles ("GAAP") to the non-GAAP measurement of pre-tax, pre-provision earnings from core operations and of revenue are provided in the attached tables.

(2)

Criticized and classified loans (special mention, substandard, and nonaccrual loans) in commercial & industrial, commercial real estate, residential land and construction and commercial land and construction federal collateral codes. Excludes consumer loans

(3)

Criticized and classified loans (special mention, substandard and nonaccrual loans) in commercial & industrial, commercial real estate, residential construction and land, and commercial construction and land federal collateral codes. Excludes consumer loans.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(Unaudited)  Sept. 30,

2010

(Unaudited)  June 30,

2010

Dec. 31,

2009

ASSETS

Cash and cash equivalents

$144,472

$58,510

$48,469

Investment securities

1,172,600

1,430,419

1,271,271

Loans held for sale

134,508

78,437

81,853

Loans, net of allowance for loan losses of $94,138, $100,500 and $106,185 at Sept. 30, 2010, June 30, 2010 and Dec. 31, 2009, respectively

2,804,293

2,858,727

2,847,290

Premises, leasehold improvements and equipment, net

14,862

14,616

15,515

Investment in Federal Home Loan Bank and Federal Reserve Bank stock

36,484

36,484

31,210

Other real estate and repossessed assets, net

39,063

28,169

26,231

Other assets

312,533

79,868

81,663

Total assets

$4,658,815

$4,585,230

$4,403,502

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits:

Noninterest-bearing

$588,204

$570,423

$659,146

Interest-bearing

2,384,464

2,472,543

2,317,654

Total deposits

2,972,668

3,042,966

2,976,800

Other borrowings

506,857

586,960

337,669

Accrued interest, taxes and other liabilities

238,397

55,575

60,925

Notes payable and other advances

490,000

445,000

627,000

Junior subordinated debentures

86,607

86,607

86,607

Subordinated notes, net

85,545

85,367

55,695

Total liabilities

4,380,074

4,302,475

4,144,696

Stockholders' equity:

Preferred stock, Series A

--

--

60,000

Preferred stock, Series B

99,992

99,603

98,844

Preferred stock, Series C

31,912

31,912

--

Common stock

192

193

120

Surplus

307,120

306,703

226,398

Accumulated deficit

(141,839)

(172,583)

(110,617)

Accumulated other comprehensive income, net

6,000

41,563

8,697

Treasury stock

(24,636)

(24,636)

(24,636)

Total stockholders' equity

278,741

282,755

258,806

Total liabilities and stockholders' equity

$4,658,815

$4,585,230

$4,403,502

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except per share data)

For the Three Months Ended

For the Nine Months Ended

Sept. 30, 2010

June 30, 2010

Sept. 30,  2009

Sept. 30, 2010

Sept. 30, 2009

Interest income:

Interest and fees on loans

$38,821

$38,260

$40,749

$115,292

$119,668

Interest and dividends on investment securities:

Taxable

12,007

14,209

13,921

39,662

42,179

Tax-exempt

1,148

1,212

1,360

3,589

4,203

Interest on cash equivalents

4

1

3

6

15

Total interest income

51,980

53,682

56,033

158,549

166,065

Interest expense:

Deposits

10,448

11,994

16,629

34,884

54,911

Other borrowings

2,097

2,469

2,210

6,851

6,618

Notes payable and other advances

1,200

1,174

1,718

3,998

4,956

Junior subordinated debentures

1,471

1,446

1,477

4,355

4,618

Subordinated notes

2,397

1,921

1,624

5,949

4,861

Total interest expense

17,613

19,004

23,658

56,037

75,964

Net interest income

34,367

34,678

32,375

102,512

90,101

Provision for loan losses

18,128

43,946

15,539

83,204

70,609

Net interest income (loss) after provision for loan losses

16,239

(9,268)

16,836

19,308

19,492

Noninterest income:

Service charges

2,783

2,781

2,892

8,421

8,481

Trust and investment management fees

109

235

332

691

1,341

Mortgage origination revenue

6,308

1,892

--

8,503

--

Loss on disposition of bulk purchased mortgage

   Loans

(410)

(5)

(1,351)

(2,437)

(1,305)

Gain on investment securities

32,804

142

378

34,379

8,637

Other derivative income (loss)

1,127

(42)

108

1,294

1,380

Other noninterest income

1,421

1,155

1,017

3,823

2,322

Total noninterest income

44,142

6,158

3,376

54,674

20,856

Noninterest expense:

Salaries and employee benefits

13,806

12,246

10,440

37,665

31,976

Occupancy of premises, furniture and equipment

2,668

2,753

2,548

7,975

7,704

Nonperforming asset expense

1,538

4,055

2,295

10,531

3,273

FDIC assessment

2,178

1,970

2,314

6,361

8,213

Legal fees, net

1,481

1,427

1,430

3,727

4,225

Other noninterest expense

4,975

5,016

3,489

15,006

11,997

Total noninterest expense

26,646

27,467

22,516

81,265

67,388

Income (loss) before income taxes

33,735

(30,577)

(2,304)

(7,283)

(27,040)

Income tax expense

321

306

144

933

1,481

                              Net income (loss)

33,414

(30,883)

(2,448)

(8,216)

(28,521)

Preferred dividends and discounts

(2,671)

(1,693)

(2,873)

(7,251)

(8,603)

Implied non-cash preferred dividend

--

(15,756)

--

(15,756)

--

Net income (loss) applicable to common stockholders

$30,743

$(48,332)

$(5,321)

$(31,223)

$(37,124)

Basic earnings (loss) per common share

$1.68

$(3.35)

$(0.51)

$(2.19)

$(3.54)

Diluted earnings (loss) per common share

1.57

(3.35)

(0.51)

(2.19)

(3.54)

Weighted-average shares outstanding

17,742,119

14,408,469

10,502,844

14,248,556

10,489,165

Weighted-average diluted shares outstanding

20,740,215

14,408,469

10,502,844

14,248,556

10,489,165

SUMMARY OF KEY QUARTERLY FINANCIAL DATA

(dollars in thousands)

Unaudited

2010

2009

Third

Second

First

Fourth

Third

Quarter

Quarter

Quarter

Quarter

Quarter

Condensed Income Data:

Net interest income

$      34,367

$      34,678

$      33,467

$      32,810

$      32,375

Provision for loan losses

18,128

43,946

21,130

19,002

15,539

Total noninterest income

44,142

6,158

4,374

12,735

3,376

Total noninterest expense

26,646

27,467

27,152

30,219

22,516

Income (loss) before income taxes

33,735

(30,577)

(10,441)

(3,676)

(2,304)

Income tax expense (benefit)

321

306

306

(647)

144

Net income (loss) applicable to common shareholders

33,414

(30,883)

(10,747)

(3,029)

(2,448)

Preferred dividends and discounts

(2,671)

(1,693)

(2,887)

(2,880)

(2,873)

Implied non-cash preferred dividends

-

(15,756)

-

-

-

Net income (loss) applicable to common shareholders

$      30,743

$    (48,332)

$    (13,634)

$      (5,909)

$      (5,321)

Non-GAAP Measures of Performance (1)

Revenue

$      45,705

$      40,694

$      36,408

$      36,587

$      35,373

Pre-tax, pre-provision earnings from core operations

20,597

17,282

14,194

14,821

15,152

Per Share Data:

Basic earnings (loss) per common share

$          1.68

$        (3.35)

$        (1.30)

$        (0.56)

$        (0.51)

Diluted earnings (loss) per common share

1.57

(3.35)

(1.30)

(0.56)

(0.51)

Book value per common share

8.03

8.26

8.54

9.02

11.78

Weighted average shares-basic

17,742,119

14,408,469

10,515,668

10,504,027

10,502,844

Weighted average shares-diluted

20,740,215

14,408,469

10,515,668

10,504,027

10,502,844

Shares outstanding-end of period

18,286,842

18,312,772

11,076,197

11,076,707

11,078,011

Performance Ratios (annualized):

Return (loss) on average assets

3.01%

(2.70)%

(0.96)%

(0.28)%

(0.22)%

Return (loss) on average equity

46.65%

(45.86)%

(16.25)%

(4.19)%

(3.58)%

Efficiency ratio (2)

58.30%

67.50%

74.58%

82.59%

63.65%

Average Balance Sheet Data (3):

Total assets

$ 4,447,421

$ 4,573,030

$ 4,479,495

$ 4,390,123

$ 4,543,191

Investments

1,269,634

1,431,291

1,351,711

1,220,768

1,325,722

Cash equivalents

1,191

656

294

1,118

2,637

Loans

3,018,084

3,034,630

3,022,833

3,079,862

3,180,992

Total interest-earning assets

4,288,909

4,466,577

4,374,838

4,301,748

4,509,351

Interest-bearing deposits

2,389,226

2,470,356

2,312,650

2,340,487

2,526,961

Borrowings

1,101,125

1,205,590

1,245,568

1,058,628

1,074,533

Total interest-bearing liabilities

3,490,351

3,675,946

3,558,218

3,399,115

3,601,494

Noninterest-bearing deposits

602,903

584,246

606,604

640,590

598,760

Total stockholders' equity

286,478

269,356

264,588

289,178

273,504

Tax Equivalent Net Interest Margin:

Net interest income as stated

$      34,367

$      34,678

$      33,467

$      32,810

$      32,375

Add:

Tax equivalent adjust. - investment (4)

618

653

662

681

732

Tax equivalent adjust. - loans (4)

25

25

25

29

29

Tax equivalent net interest income

$      35,010

$      35,356

$      34,154

$      33,520

$      33,136

Net interest margin without tax adjust.

3.19%

3.11%

3.09%

3.03%

2.86%

Net interest margin - tax equivalent (4)

3.25%

3.17%

3.15%

3.10%

2.92%

Yield on earning assets without tax adjust.

4.82%

4.82%

4.88%

4.99%

4.94%

Yield on earning assets - tax equivalent (4)

4.88%

4.88%

4.95%

5.05%

5.01%

Yield on interest-bearing liabilities

2.00%

2.07%

2.21%

2.47%

2.61%

Net interest spread - without tax adjust.

2.82%

2.74%

2.67%

2.52%

2.34%

Net interest spread - tax equivalent (4)

2.88%

2.81%

2.74%

2.58%

2.40%

Footnotes:

(1)  Refer to Reconciliation of U.S. GAAP Financial Measures for a reconciliation to GAAP.  

(2)  Efficiency ratio is determined by dividing noninterest expense by an amount equal to net interest income plus    

 noninterest income, adjusted for gains or losses from  investment securities.  

(3)  Average balances are daily averages.  

(4)  Adjustment reflects tax-exempt interest income on an equivalent before-tax basis assuming a tax rate of 35.0%.  

SUMMARY OF KEY YEAR-TO-DATE FINANCIAL DATA

(dollars in thousands)

Unaudited

Year To Date

September 30,

2010

2009

Condensed Income Data:

Net interest income

$    102,512

$      90,101

Provision for loan losses

83,204

70,609

Total noninterest income

54,674

20,856

Total noninterest expense

81,265

67,388

Loss before income taxes

(7,283)

(27,040)

Income tax expense (benefit)

933

1,481

Net loss

(8,216)

(28,521)

Preferred dividends and discounts

(7,251)

(8,603)

Implied non-cash preferred dividends

(15,756)

-

Net loss applicable to common shareholders

$    (31,223)

$    (37,124)

Non-GAAP Measures of Performance (1)

Revenue

$    122,807

$    102,320

Pre-tax, pre-provision earnings from core operations

52,073

38,205

Per Share Data:

Basic loss per common share

$        (2.19)

$        (3.54)

Diluted loss per common share

(2.19)

(3.54)

Book value per common share

8.03

11.78

Weighted average shares-basic

14,248,556

10,489,165

Weighted average shares-diluted

14,248,556

10,489,165

Shares outstanding-end of period

18,286,842

11,078,011

Performance Ratios (annualized):

Loss on average assets

(0.24)%

(0.84)%

Loss on average equity

(4.00)%

(12.87)%

Efficiency ratio (2)

66.17%

65.86%

Average Balance Sheet Data (3):

Total assets

$ 4,499,864

$ 4,516,405

Investments

1,350,578

1,273,332

Cash equivalents

717

1,880

Loans

3,025,165

3,202,212

Total interest-earning assets

4,376,460

4,477,424

Interest-bearing deposits

2,391,024

2,579,720

Borrowings

1,183,565

1,004,307

Total interest-bearing liabilities

3,574,589

3,584,027

Noninterest-bearing deposits

597,904

565,614

Total stockholders' equity

273,554

295,415

Tax Equivalent Net Interest Margin:

Net interest income as stated

$    102,512

$      90,101

Add:

Tax equivalent adjust. - investment (4)

1,933

2,263

Tax equivalent adjust. - loans (4)

75

86

Tax equivalent net interest income

$    104,520

$      92,450

Net interest margin without tax adjust.

3.13%

2.69%

Net interest margin - tax equivalent (4)

3.19%

2.76%

Yield on earning assets without tax adjust.

4.84%

4.95%

Yield on earning assets - tax equivalent (4)

4.90%

5.02%

Yield on interest-bearing liabilities

2.10%

2.83%

Net interest spread - without tax adjust.

2.74%

2.12%

Net interest spread - tax equivalent (4)

2.80%

2.19%

Footnotes:

(1)  Refer to Reconciliation of U.S. GAAP Financial Measures for a reconciliation to GAAP.  

(2)  Efficiency ratio is determined by dividing noninterest expense by an amount equal to net interest income plus    

 noninterest income, adjusted for gains or losses from investment securities.  

(3)  Average balances are daily averages.  

(4)  Adjustment reflects tax-exempt interest income on an equivalent before-tax basis assuming a tax rate of 35.0%.  

SUMMARY OF KEY PERIOD-END FINANCIAL DATA

(dollars in thousands)

Unaudited

Sept. 30,

June 30,

Mar. 31,

Dec. 31,

Sept. 30,

2010

2010

2010

2009

2009

Condensed Balance Sheet Data:

Investment securities

$ 1,172,600

$ 1,430,419

$ 1,408,240

$ 1,271,271

$ 1,306,098

Loans

3,032,939

3,037,664

3,006,771

3,035,328

3,114,254

Allowance for loan losses

94,138

100,500

100,151

106,185

107,132

Total assets

4,658,815

4,585,230

4,514,180

4,403,502

4,485,081

Total deposits

2,972,668

3,042,966

2,957,720

2,976,800

3,052,729

Total borrowings

1,169,009

1,203,934

1,250,830

1,106,971

1,086,892

Total stockholders' equity

278,741

282,755

253,800

258,806

289,020

Asset Quality Ratios:

Nonperforming loans

$    118,419

$    154,378

$    141,190

$    141,462

$    176,020

Nonperforming assets

157,482

182,547

168,545

167,693

196,333

Allowance for loan losses to total loans

3.10%

3.31%

3.33%

3.50%

3.44%

Allowance for loan losses to nonperforming loans

79.50%

65.10%

70.93%

75.06%

60.86%

Nonperforming assets to total loans plus

    repossessed property

5.13%

5.95%

5.55%

5.48%

6.26%

Capital Ratios (Taylor Capital Group, Inc.):

Total Capital (to Risk Weighted Assets)

14.15%

13.20%

12.34%

12.72%

12.75%

Tier I Capital (to Risk Weighted Assets)

10.39%

9.34%

9.29%

9.79%

9.86%

Leverage (to average assets)

8.04%

7.02%

7.07%

7.60%

7.47%

COMPOSITION OF LOAN PORTFOLIO (unaudited)

(dollars in thousands)

The following table presents the composition of the Company's loan portfolio as of the dates indicated:

September 30, 2010

June 30, 2010

December 31, 2009

Loans:

Balance

Percent of Gross Loans

Balance

Percent of Gross Loans

Balance

Percent of Gross Loans

Commercial and industrial

$1,357,252

46.9%

$1,335,411

45.1%

$1,264,369

42.8%

Commercial real estate secured

1,128,290

38.9

1,164,800

39.4

1,171,777

39.7

Residential construction & land

119,219

4.1

146,494

5.0

221,859

7.5

Commercial construction & land

130,217

4.5

140,473

4.7

142,584

4.8

     Total commercial loans    

2,734,978

94.4

2,787,178

94.2

2,800,589

94.8

Consumer-oriented loans

163,456

5.6

172,053

5.8

152,892

5.2

Gross loans

2,898,434

100.0%

2,959,231

100.0%

2,953,481

100.0%

Less:  Unearned discount

(3)

(4)

(6)

Total loans

2,898,431

2,959,227

2,953,475

Less:  Loan loss allowance

(94,138)

(100,500)

(106,185)

Net loans

$2,804,293

$2,858,727

$2,847,290

Loans Held for Sale

$134,508

$78,437

$81,853

The following tables provide details of the Company's commercial real estate and residential construction and land portfolios:

September 30, 2010

June 30, 2010

December 31, 2009

Commercial real estate secured:

Balance

Percent of Total

Balance

Percent of Total

Balance

Percent of Total

Commercial non-owner occupied:

 Retail strip centers or malls

$200,998

17.8%

$205,660

17.7%

$211,817

18.1%

 Office/mixed use property

129,396

11.5

132,803

11.4

149,951

12.8

 Commercial properties

138,769

12.3

141,854

12.2

144,745

12.3

 Specialized – other

124,965

11.1

125,782

10.8

121,530

10.4

 Other commercial properties

60,925

5.4

66,565

5.7

64,602

5.5

Subtotal commercial non-owner  occupied

655,053

58.1

672,664

57.8

692,645

59.1

Commercial owner-occupied

356,312

31.6

348,808

29.9

334,744

28.6

Multi-family properties

116,925

10.3

143,328

12.3

144,388

12.3

    Total commercial real estate

       secured

$1,128,290

100.0%

$1,164,800

100.0%

$1,171,777

100.0%

Residential construction & land:

Residential construction

$95,880

80.4%

$121,151

82.7%

$173,432

78.2%

Land

23,339

19.6

25,343

17.3

48,427

21.8

  Total residential construction  

      and land

$119,219

100.0%

$146,494

100.0%

$221,859

100.0%

CREDIT QUALITY (unaudited)

(dollars in thousands)

At or for the Three Months Ended

Sept. 30,

2010

June 30,

2010

Dec. 31,

2009

Nonperforming Assets:

Loans contractually past due 90 days or more but still accruing interest

$56

$58

$59

Nonaccrual loans:

Commercial and industrial

31,052

21,101

26,687

Commercial real estate secured

46,396

58,754

36,420

Residential construction and land

17,432

50,932

62,795

Commercial construction and land

12,232

14,883

4,245

All other loan types

11,251

8,650

11,256

Total nonaccrual loans

118,363

154,320

141,403

    Total nonperforming loans

118,419

154,378

141,462

Other real estate owned and repossessed assets

39,063

28,169

26,231

Total nonperforming assets

$157,482

$182,547

$167,693

Other Credit Quality Information:

Loans contractually past due 30 through 89 days and still accruing

$22,138

$35,899

$13,206

Criticized and classified loans (1)

322,252

381,050

406,306

Performing restructured loans

26,548

18,826

1,196

Recorded balance of impaired loans

133,661

167,499

141,697

Allowance for loan losses related to impaired loans

31,757

41,622

33,640

Allowance for Loan Losses Summary:

Allowance at beginning of period

$100,500

$100,151

$107,132

Net (charge-offs) recoveries:

Commercial and commercial real estate

(12,907)

(12,261)

(7,983)

Real estate – construction and land

(11,322)

(29,957)

(10,384)

Total consumer-oriented loans

(261)

(1,379)

(1,582)

    Total net charge-offs

(24,490)

(43,597)

(19,949)

Provision for loan losses

18,128

43,946

19,002

Allowance at end of period

$94,138

$100,500

$106,185

Key Credit Ratios:

Nonperforming loans to total loans

3.90%

5.08%

4.66%

Nonperforming assets to total loans plus repossessed property

5.13%

5.95%

5.48%

Nonperforming assets to total assets

3.38%

3.98%

3.81%

Annualized net charge-offs to average total loans

3.25%

5.75%

2.59%

Allowance to total loans at end of period

3.10%

3.31%

3.50%

Allowance to nonperforming loans

79.50%

65.10%

75.06%

30 – 89 days past due to total loans

0.73%

1.18%

0.44%

(1) Criticized and classified loans (special mention, substandard and nonaccrual loans) in commercial & industrial, commercial real estate, residential construction and land and commercial construction and land federal collateral codes.  Excludes consumer loans

LOAN PORTFOLIO AGING (unaudited)

(dollars in thousands)

As of September 30, 2010

30-89 Days Past Due

>90 Days Past Due and Still Accruing

Nonaccrual

Current

Total Loans

% of Total Loans

Allowance for Loan Loss Allocation

Commercial and industrial

$502

$ --

$31,052

$1,325,698

$1,357,252

45%

$34,471

Commercial real estate secured:

 Commercial non-owner occupied:

 Retail strip centers or malls

--

--

6,439

194,559

200,998

7%

5,765

 Office/mixed use property

864

--

3,344

125,188

129,396

4%

3,711

 Commercial properties

--

--

1,831

136,938

138,769

5%

3,980

 Specialized – other

--

--

3,133

121,832

124,965

4%

3,584

 Other commercial properties

--

--

15

60,910

60,925

2%

1,749

Subtotal commercial non-owner occupied

864

--

14,762

639,427

655,053

22%

18,789

Commercial owner-occupied

--

--

27,253

329,059

356,312

12%

10,220

Multi-family properties

4,022

--

4,381

108,522

116,925

3%

3,354

    Total commercial real estate secured

4,886

--

46,396

1,077,008

1,128,290

37%

32,363

Residential construction & land:

   Residential construction

7,786

--

16,379

71,715

95,880

3%

11,967

   Land

--

--

1,053

22,286

23,339

1%

2,913

    Total residential construction and land

7,786

--

17,432

94,001

119,219

4%

14,880

Commercial construction and land

--

--

12,232

117,985

130,217

4%

8,180

     Total commercial loans

13,174

--

107,112

2,614,692

2,734,978

90%

89,894

Consumer loans

8,964

56

11,251

277,690

297,961

10%

4,244

     Total loans

$22,138

$56

$118,363

$2,892,382

$3,032,939

100%

$94,138

FUNDING LIABILITIES (unaudited)

(dollars in thousands)

The following table presents the distribution of the Company’s average deposit account balances for the periods indicated:

For the Quarter Ended

September 30, 2010

June 30, 2010

September 30, 2009

Average Balance

Percent of Deposits

Average Balance

Percent of Deposits

Average Balance

Percent of Deposits

In-market deposits:

Noninterest-bearing deposits

$602,903

20.1%

$584,246

19.1%

$598,760

19.2%

NOW accounts

300,372

10.0

269,799

8.8

223,386

7.2

Savings deposits

40,545

1.4

40,760

1.3

41,839

1.3

Money market accounts

568,014

19.0

533,098

17.5

407,298

13.0

Customer certificates of deposit

755,765

25.3

784,120

25.7

826,911

26.4

CDARS time deposits

152,170

5.1

165,631

5.4

154,979

5.0

Public time deposits

45,043

1.5

65,829

2.2

76,625

2.4

Total in-market deposits

2,464,812

82.4

2,443,483

80.0

2,329,798

74.5

Out-of-market deposits:

Brokered money market deposits 

6,173

0.2

6,584

0.2

9,390

0.3

Out-of-local-market certificates of deposit

92,805

3.1

107,910

3.5

99,665

3.2

Brokered certificates of deposit

428,339

14.3

496,625

16.3

686,868

22.0

Total out-of-market deposits

527,317

17.6

611,119

20.0

795,923

25.5

Total deposits

$2,992,129

100.0%

$3,054,602

100.0%

$3,125,721

100.0%

The following table sets forth the period end balances of total deposits as of each of the dates indicated below, as well as categorizes the Company’s deposits as “in-market” and “out-of-market” deposits:

Sept. 30, 2010

June 30, 2010

Dec. 31, 2009

In-market deposits:

Noninterest-bearing deposits

$588,204

$570,423

$659,146

NOW accounts

304,798

294,605

307,025

Savings accounts

40,333

40,672

41,479

Money market accounts

569,346

576,157

438,080

Customer certificates of deposit

741,372

775,298

775,663

CDARS time deposits

132,313

167,117

116,256

Public time deposits

54,255

47,684

68,763

 Total in-market deposits

2,430,621

2,471,956

2,406,412

Out-of-market deposits:

Brokered money market deposits

6,083

6,337

7,338

Out-of-local-market certificates of deposit

87,930

100,173

79,015

Brokered certificates of deposit

448,034

464,500

484,035

Total out-of-market deposits

542,047

571,010

570,388

Total deposits

$2,972,668

$3,042,966

$2,976,800

RECONCILIATION OF U.S. GAAP FINANCIAL MEASURES (unaudited)

(dollars in thousands)

The following, as of the dates indicated, reconciles the income (loss) before income taxes to pre-tax, pre-provision earnings from core operations.

For the Three Months Ended

For the Nine Months Ended

Sept. 30, 2010

June 30, 2010

Mar. 31, 2010

Dec. 31, 2009

Sept. 30, 2009

Sept. 30, 2010

Sept. 30, 2009

Income (loss) before income taxes

$33,735

$(30,577)

$(10,441)

$(3,676)

$(2,304)

$(7,283)

$(27,040)

Add back (subtract):

Provision for loan losses

18,128

43,946

21,130

19,002

15,539

83,204

70,609

Nonperforming asset expense

1,538

4,055

4,938

8,453

2,295

10,531

3,273

Gain on investment securities

(32,804)

(142)

(1,433)

(8,958)

(378)

(34,379)

(8,637)

Pre-tax, pre-provision earnings from core operations

$20,597

$17,282

$14,194

$14,821

$15,152

$52,073

$38,205

The following, as of the dates indicated, reconciles net interest income to revenues:

For the Three Months Ended

For the Nine Months Ended

Sept. 30, 2010

June 30, 2010

Mar. 31, 2010

Dec. 31, 2009

Sept. 30, 2009

Sept. 30, 2010

Sept. 30, 2009

Net interest income

$34,367

$34,678

$33,467

$32,810

$32,375

$102,512

$90,101

Add back (subtract):

Noninterest income

44,142

6,158

4,374

12,735

3,376

54,674

20,856

Gain on investment securities

(32,804)

(142)

(1,433)

(8,958)

(378)

(34,379)

(8,637)

Revenues

$45,705

$40,694

$36,408

$36,587

$35,373

$122,807

$102,320

The Company's accounting and reporting policies conform to U.S. generally accepted accounting principles ("GAAP") and general practice within the banking industry.  Management uses certain non-GAAP financial measures to evaluate the Company’s financial performance and has provided the non-GAAP measures of pre-tax, pre-provision earnings from core operations and of revenue.  In the pre-tax, pre-provision earnings non-GAAP financial measure, the provision of loan losses, nonperforming asset expense and certain non-recurring items, such as gains and losses on investment securities, are excluded from the determination of operating results.  The non-GAAP measure of revenue is calculated as the sum of net interest income and noninterest income less investment securities gains and losses.  Management believes that these measures are useful because they provide a more comparable basis for evaluating financial performance from core operations period to period.

SOURCE Taylor Capital Group, Inc.



RELATED LINKS

http://www.coletaylor.com


http://www.taylorcapitalgroup.com