Profile: Taylor Capital Group Inc (TAYC.OQ)

Taylor Capital Group, Inc. is a bank holding company. The Company derives its revenue from its wholly owned subsidiary, Cole Taylor Bank (the Bank). It provides a range of products and services to closely-held commercial customers and their owner operators in the Chicago area. It also provides asset-based lending and residential mortgage origination services through offices both in Chicago and other geographic markets. Its businesses are commercial banking, asset based lending, mortgage origination services and retail banking. The Bank’s primary businesses are commercial banking, asset based lending, mortgage banking services and retail banking. Its commercial lending activities consists of providing loans for working capital, business expansion or acquisition, owner-occupied commercial real estate financing, revolving lines of credit, and stand-by and commercial letters of credit. It also offers treasury cash management services, including repurchase agreements, interest rate swap agreements, Internet balance reporting, remote deposit capture, positive pay, automated clearing house products, imaged lock-box processing, controlled disbursement and account reconciliation. Its commercial and industrial lending group operates in the Chicago area. In addition, through offices across the United States, it also offers asset-based financing through Cole Taylor Business Capital, including revolving lines of credit supported by receivables and inventory and term loans supported by equipment and real estate.

The Bank originates and sells mortgage loans through Cole Taylor Mortgage. As of December 31, 2011, this unit was doing business in 33 states. Loan production is sourced through a national broker network, retail offices across the United States and from the Bank’s banking centers (branches), located in the Chicago area . In addition to its lending activities, it offers deposit products, such as checking, savings and money market accounts, as well as time deposits through nine banking centers located in the Chicago area and through its on-line banking application. It also cross sells products and services to the owners and executives of its business customers, including personal credit. In addition to commercial clients, it provides deposit and credit services to its community-based customers. It uses third-party providers to offer investment management and brokerage services. Its commercial and retail banking and deposit products are delivered by a single operations area located in Rosemont, Illinois. Its mortgage unit is based in Ann Arbor, Michigan. The Bank has two operating segments: Banking and Mortgage Banking.

Lending Activities

As of December 31, 2011, the Bank’s portfolio loans were $ 2.93 billion. Approximately 90% of its loan portfolio consisted of loan portfolio was comprised of commercial loans, which include commercial and industrial (C&I), commercial real estate secured, and real estate construction and land loans. C & I loans are loans to businesses or for business purposes. C & I loans are made on either a secured or unsecured basis for a range of business purposes, terms, and maturities. These loans are made primarily in the form of seasonal or working-capital loans or term loans. The Company’s C&I loan portfolio is comprised of loans made to a variety of businesses in a diverse range of industries. C&I loans also include those loans made by the Company’s asset-based lending division. Asset-based loans are made to businesses with the primary source of repayment derived from payments on the related assets securing the loan. As of December 31, 2011, C&I loans were $1.43 billion.

Commercial real estate loans on completed properties include loans for the purchase of real property or for other business purposes where the primary collateral is the underlying real property. The Company’s commercial real estate loans consist of loans on commercial owner-occupied properties and investment properties. As of December 31, 2011, total commercial real estate loans were $1.04 billion. Residential real estate construction and land loans primarily consist of loans to real estate developers to construct single-family homes, town-homes and condominium conversions. Commercial real estate construction and land loans primarily consist of loans to construct commercial real estate or income-producing properties. The Company’s consumer loans consist of open and closed-end credit extended to individuals for household, family, and other personal expenditures. Consumer loans primarily include loans to individuals secured by their personal residence, including first mortgages and home equity and home improvement loans. As of December 31, 2011, its portfolio of residential real estate mortgages totaled $232.0 million. As of December 31, 2011, its portfolio of home equity loans and lines of credit portfolio totaled $61.9 million.

Investment Activities

As of December 31, 2011, the Company’s securities were classified as both available for sale and held to maturity securities. As of December 31, 2011, the Company had $1.19 billion of mortgage related investment securities, which consisted of mortgage-backed securities and collateralized mortgage obligations. Of the total mortgage related investment securities, $1.18 billion, or 99.6%, were issued by government sponsored enterprises, such as Government National Mortgage Association (Ginnie Mae), Federal National Mortgage Association (Fannie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac). The mortgage related portfolio also includes $4.9 million of private-label mortgage related securities at December 31, 2011. Mortgage related securities include residential and commercial mortgage-backed securities and collateralized mortgage obligations. Residential mortgage-backed securities and collateralized mortgage obligations include securities collateralized by one-to-four family residential mortgage loans, while commercial mortgage-backed securities include securities collateralized by mortgage loans on multifamily properties. At December 31, 2011, the Company had three securities in its investment portfolio that have been in an unrealized loss position for twelve or more months with a total unrealized loss of $1.7 million. The three securities were from the Company’s portfolio of private-label residential mortgage-backed securities.

Sources of Fund

The Bank’s consist of noninterest and interest-bearing demand deposits, savings deposits, certificates of deposit (CDs), and certain public funds. Its customer repurchase agreements are reported in other borrowings. In addition to funding from customers, the Bank also uses brokered CDs and other out-of-local-market CDs to support its asset base. As of December 31, 2011, its total in-market deposits were $ 2.56 billion. As of December 31, 2011, its other borrowings totaled $168.1 million million. Other borrowings include securities sold under agreements to repurchase (repos), federal funds purchased and the United States Treasury tax and loan note option accounts. Repos include overnight and term agreements. The overnight repos are collateralized financing transactions and are primarily executed with local Bank customers. As of December 31, 2011, overnight repos totaled $14.3 million million. As of December 31, 2011, its term repos totaled $75.0 million. At December 31, 2011, the Bank had available pre-approved total repurchase agreement lines of $850 million. At December 31, 2011, federal funds purchased totaled $78.8 million. Its Federal Home Loan Bank (FHLB) advances consist of borrowings from the Federal Home Loan Bank of Chicago (FHLBC). As of December 31, 2011, its total FHLB advances were $747.5 million. At December 31, 2011, it had $86.6 million of junior subordinated debentures outstanding, $45.4 million million issued to TAYC Capital Trust I and $41.2 million issued to TAYC Capital Trust II. At December 31, 2011, the subordinated notes were at $3.1 million.