Amendment to Registration Statement

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of earlier effective registration statement for the same offering: o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: o

The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

This Registration Statement contains a prospectus relating to an offering of our common stock, together with separate prospectus pages relating to a concurrent offering by TAYC Capital Trust I, a Delaware statutory trust formed by us for the purpose of offering % cumulative trust preferred securities guaranteed by us. The complete prospectus for the offering of common stock follows immediately. Following the common stock prospectus are alternate pages for the prospectus for the offering of trust preferred securities, including:


	•	Front and back cover pages;

	•	Table of Contents;

	•	“Prospectus Summary;”

	•	“Risk Factors;”

	•	“Use of Proceeds;”

	•	“Capitalization;”

	•	“Principal Stockholders;” and

	•	“Description of the Trust Preferred Securities.”

The trust preferred securities offering prospectus will include the following sections, which are in addition to the sections contained in the common stock offering prospectus:


	•	“Description of the Trust;”

	•	“Description of the Debentures;”

	•	“Book-Entry Issuance;”

	•	“Description of the Guarantee;”

	•	“Relationship among the Trust Preferred Securities, the Debentures and the Guarantee;” and

	•	“Material United States Federal Income Tax Consequences.”

Finally, the trust preferred securities offering prospectus will not contain the following sections, which are contained in the common stock offering prospectus:


	•	“Dividend Policy;”

	•	“Dilution;”

	•	“Principal and Selling Stockholders;”

	•	“Shares Eligible for Future Sale;” and

	•	“Description of Capital Stock.”

Final forms of each prospectus will be filed with the Securities and Exchange Commission in accordance with Rule 424(b) under the Securities Act.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not permitted.

We are offering 2,250,000 shares of our common stock and the selling stockholder is offering 525,000 shares of our common stock.

This is an initial public offering of our common stock. We currently expect that the initial public offering price will be between $18.00 and $20.00 per share. We will not receive any proceeds from the sale of common stock by the selling stockholder. Our common stock has been approved for quotation on the Nasdaq National Market under the symbol “TAYC.”

Concurrently with this offering, TAYC Capital Trust I, a Delaware statutory trust we formed for the purpose of issuing trust preferred securities, is offering $40,000,000 aggregate principal amount of % cumulative trust preferred securities guaranteed by us, assuming an offering price of $25.00 per trust preferred security.

Although our common stock and the trust preferred securities are being offered separately, each offering is conditioned upon the completion of the other.

Investing in our common stock involves risks. See “Risk Factors” beginning on page 6.

This offering is on a firm commitment basis. We have granted the underwriters a 30-day option to purchase up to 337,500 additional shares of common stock to cover over-allotments, if any.

These securities are not savings accounts, deposits or other obligations of any bank and are not insured by any insurance fund of the Federal Deposit Insurance Corporation or any other governmental agency.

Neither the Securities and Exchange Commission nor any state securities commission or regulatory authority has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Chicago, Illinois Primary Metropolitan Statistical Areas (as defined by the U. S. Department of Commerce)

*The number of businesses and reported annual sales are as compiled and reported by Dun and Bradstreet, Inc. as of July 2002.

This summary highlights only some of the information contained in this prospectus and does not contain all of the information you should consider in making your investment decision. You should read carefully the entire prospectus, including the “Risk Factors” section and our consolidated financial statements and notes to those financial statements appearing elsewhere in this prospectus, before making an investment decision.

We are a bank holding company headquartered in Wheeling, Illinois, a suburb of Chicago. We derive virtually all of our revenue from our subsidiary, Cole Taylor Bank, which we refer to throughout this prospectus as the Bank. The Bank has served the Chicago metropolitan area for over 73 years. As of December 31, 2001, the Bank was the tenth largest commercial bank headquartered in the Chicago metropolitan area based on assets. We provide a range of products and services concentrating in four primary banking areas: middle-market business banking, small business banking, commercial real estate lending and wealth management. We currently operate 11 branches throughout the Chicago metropolitan area with approximately $2.5 billion of assets as of June 30, 2002.

Our primary business objectives are to enhance our profitability and be a premier Chicago business bank for small- and mid-sized businesses and the people who own and manage them. Our core customers are middle-market companies, small companies, real estate developers and investors and owners and executives of our business customers. We believe the Chicago market, with over 58,000 small- and mid-sized businesses, is receptive to a locally owned and managed banking institution that provides responsive, personalized service, customized products and local decision making. We believe that our opportunities for expansion in this market are favorable and will increase as the Chicago banking market continues to experience significant consolidation.

In the fall of 2001, we adopted a strategic plan designed to capitalize on our perceived market opportunity within Chicago’s small- and middle-market business banking environment by focusing on owner-operated, family-held and closely-held companies. It is with these customers that we believe we can add the most value by understanding the challenges that owners experience and offering them advice and solutions to help them achieve their business and personal financial goals. The key elements of our strategy are:


	•	Expand Our Core Customer Base. We intend to expand our core customer base by providing a high level of customer service, competitive products and delivery systems, as well as competing for customers of recently acquired banks in our markets.

	•	Capitalize On Our Relationship Banking Approach. We are working to leverage our business banking relationships in order to capture more personal wealth management business. We believe our existing relationships with businesses provide a natural opportunity to assist with business owners’ personal financial needs.

	•	Focus On Our Targeted Customers. We focus our time and resources on targeted customer segments: small- and mid-size businesses, as well as the individuals who own and manage them. As part of our effort to increase resources available to invest in serving these targeted customers, we have reduced or eliminated other activities. We intend to reallocate our resources to expand our commercial banking business and develop our wealth management business.

	•	Enhance Our Operational Efficiency. We plan to further centralize and automate important operational functions to enhance operating leverage as well as service quality. We anticipate that this realignment will involve the relocation and consolidation of currently dispersed facilities, processes and personnel.

The Taylor family, including related trusts and a related partnership, acquired a majority interest in Taylor Capital and the Bank from Reliance Acceptance Group, Inc. in a series of split-off transactions in February 1997. In these transactions, the Taylor family exchanged all their common stock of Reliance for all of the outstanding stock of Taylor Capital. In February 1998, Reliance filed for bankruptcy. Thereafter, numerous lawsuits were filed that named as defendants Taylor Capital, the Bank, certain of our directors and officers and members of the Taylor family.

These suits variously allege violations of the federal securities laws and breaches of common law fiduciary duties in connection with the split-off transactions and the public reporting of Reliance. These suits seek monetary damages, attorneys’ fees and other forms of relief, including the unwinding of the split-off transactions.

In order to limit the substantial expense and distraction of continued litigation and to eliminate any exposure to potential liability, we have entered into settlement agreements with the plaintiffs and other parties in these cases. On May 24, 2002, we entered into agreements which provide that we will pay the plaintiffs, out of the net proceeds from this offering and the concurrent offering of trust preferred securities, an amount that will vary based on the initial public offering price of our common stock. Assuming an initial public offering price of $19.00 per share, the midpoint of the range shown on the cover of this prospectus, we anticipate the aggregate net proceeds from this offering will be $39.0 million. We anticipate the net proceeds from the concurrent trust preferred securities offering will be $37.7 million. Of the combined net proceeds from these concurrent offerings, approximately $64.5 million will be used to fully satisfy our obligations under the settlement agreements. Upon our delivery of this payment, each of the Taylor Capital-related defendants will be fully released from any liability with respect to the lawsuits described above. For additional information regarding the settlement agreements, see the section of this prospectus captioned “Litigation and Settlement.”

We were incorporated in Delaware in 1996. Our principal executive offices are located at 350 East Dundee Road, Suite 300, Wheeling, Illinois 60090. Our telephone number is (847) 537-0020 and our web site is www.coletaylor.com. Information contained in our web site is not incorporated by reference into this prospectus, and you should not consider information contained in our web site as part of this prospectus.

The number of shares of our common stock outstanding immediately after this offering is based on the number of shares outstanding as of September 26, 2002. This number does not take into account (1) 816,494 shares of common stock reserved for issuance upon the exercise of outstanding options at a weighted average exercise price of $18.90 per share, and (2) 176,792 shares of common stock reserved for issuance pursuant to future grants under our incentive compensation plan.

Concurrently with this offering, TAYC Capital Trust I is offering $40,000,000 aggregate principal amount of % cumulative trust preferred securities guaranteed by us, assuming an offering price of $25.00 per trust preferred security. For information regarding the trust preferred securities, see the section of this prospectus captioned “Description of the Trust Preferred Securities.”


	•	the completion of a three-for-two stock split of our common stock that will be effected as a dividend to stockholders of record as of October 2, 2002;

	•	the completion of the concurrent offering of trust preferred securities; and

	•	the underwriters do not exercise their over-allotment option with respect to this offering.

The summary consolidated financial data presented below under the caption “Taylor Capital Group, Inc.” as of and for the six months ended June 30, 2002 and 2001 and as of and for the four years ended December 31, 2001, and for the period from February 12, 1997 to December 31, 1997, is derived from our historical financial statements. Our consolidated financial statements for each of the four years ended December 31, 2001, and for the period from February 12, 1997 to December 31, 1997, have been audited by KPMG LLP, independent accountants. The financial data as of and for the six months ended June 30, 2002 and 2001 is derived from unaudited financial information. The summary financial information presented below under the caption of “Cole Taylor Bank” is derived from unaudited financial statements of the Bank or from our audited consolidated financial statements. You should read this information in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus. Results from past periods are not necessarily indicative of results that may be expected for any future period.

In the second quarter of 2002, we recorded a charge of $64.5 million related to a likely settlement of pending litigation against Taylor Capital that will be funded with the net proceeds from the concurrent offerings of common stock and trust preferred securities. The recognition of the charge resulted in our reporting a consolidated net loss of $54.2 million for the first six months of 2002. The loss reduced total stockholders’ equity to $118.3 million. For additional information on this charge, see the sections of this prospectus captioned “Capitalization,” “Litigation and Settlement” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.


(1)	All share and per share information for all periods presented has been adjusted for a three-for-two split of our common stock that will be effected as a dividend to stockholders of record as of October 2, 2002.

(2)	Selected earnings performance data and net loan charge-offs to average total loans are annualized for the six-month periods ended June 30, 2002 and 2001 and for 1997.

(3)	Net interest margin is determined by dividing taxable equivalent net interest income by average interest-earning assets.

(4)	The efficiency ratio is determined by dividing noninterest expense, excluding the litigation settlement charge, by an amount equal to net interest income plus noninterest income, less investment securities gains.

(5)	For purposes of calculating the ratio of earnings to fixed charges, earnings consist of income before the litigation settlement charge, income taxes and cumulative effect of change in accounting principle plus interest and rent expense. Fixed charges consist of interest expense, rent expense and preferred stock dividend requirements.

(6)	Nonperforming loans include loans contractually past due 90 days or more but still accruing interest.

(7)	Nonperforming assets include nonperforming loans, other real estate and other repossessed assets.

(8)	Financial data for Cole Taylor Bank represents a full year for 1997.

An investment in our common stock involves a number of risks. You should read carefully and consider the following risks as well as the other information contained in this prospectus, including our consolidated financial statements and the notes to those financial statements, before making an investment decision. Our business, financial condition and results of operations could be materially adversely affected by any of these risks. The trading price of our common stock could decline due to any of these risks, and you could lose all or part of your investment.

The Taylor family, which includes Jeffrey W. Taylor, Bruce W. Taylor, Cindy Taylor Bleil and certain trusts for their benefit and the benefit of certain of their family members, in the aggregate, beneficially owns or controls in excess of 89% of our outstanding common stock. The Taylor family’s majority ownership interest in us stems from a series of split-off transactions in which we acquired the Bank from its former parent. These transactions are the subject of the litigation described in this prospectus under the caption “Litigation and Settlement.” Immediately after we complete this offering, the Taylor family will, in the aggregate, own or control more than 61% of our common stock. As a result, these stockholders, if they act together, will have the ability to control virtually all matters submitted to our stockholders for approval, including amending our charter, approving mergers or similar transactions and electing all of our directors (except that holders of our Series A preferred stock have the right to elect one director, or in some circumstances, two directors). If the Taylor family acted together, they could cause a result that is not in the best interests of all stockholders. In addition, the Taylor family may have interests that differ from or conflict with yours and those of other stockholders. The concentration of ownership of our common stock among the Taylor family may delay or discourage others from initiating potential merger, takeover or other change in control transactions. As a result, the market price of our common stock could be adversely affected.

Conversely, the death of one or more of our substantial stockholders, or the decision by the Taylor family to sell or liquidate their position in us for any reason, would have the effect of altering the balance of our effective stockholder control and, among other things, the composition of our Board of Directors. Jeffrey Taylor, Bruce Taylor and Cindy Taylor Bleil serve as members of our Board of Directors. Jeffrey Taylor and Bruce Taylor also serve as members of the Bank’s Board of Directors and as both our and the Bank’s highest ranking officers. Melvin Pearl, a member of the Board of Directors, serves as trustee of certain Taylor family trusts. These persons may experience conflicts of interest in the execution of their duties on our behalf and on behalf of the Bank. We cannot assure you that these conflicts would be resolved in a manner favorable to us or the Bank.

Prior to this offering, there has been no public market for our common stock. Keefe, Bruyette and Woods, Inc. and other representatives of the underwriters have advised us that they intend to make a market in the common stock as long as the volume of trading activity in the common stock and other market making conditions justify doing so. Nonetheless, we cannot predict the extent to which investor interest in us will lead to an active trading market in our common stock or how liquid that market might become. Making a market involves maintaining bid and ask quotations for the common stock and being available as principal to effect transactions in reasonable quantities at those quoted prices, subject to various securities laws and other regulatory requirements. A public trading market having the desired characteristics of depth, liquidity and orderliness depends upon the presence in the marketplace of willing buyers and sellers of the common stock at any given time, which presence is dependent upon the individual decisions of investors over which neither we nor any market maker has any control.

The initial public offering price of our common stock will be determined through negotiations between us and representatives of the underwriters. This price may not indicate prices that will prevail in any future trading market. You may not be able to sell shares of our common stock at or above our initial public offering price.

Additionally, the market price of our common stock may be highly volatile and subject to wide fluctuations in response to numerous factors, including but not limited to the following:


	•	actual or anticipated fluctuations in our operating results;

	•	changes in interest rates;

	•	the public’s reaction to our press releases, announcements and filings with the SEC;

	•	changes in earnings estimates or recommendations by research analysts;

	•	future sales of our common stock;

	•	changes in general conditions in the U.S. economy, financial markets or the banking industry; and

	•	other developments affecting our competitors or us.

The stock markets, from time to time, experience extreme price and volume fluctuations that may be unrelated or disproportionate to the operating performance of companies. These broad fluctuations may adversely affect the market price of our common stock, regardless of our trading performance.

In the past, stockholders have often brought securities class action litigation against a company following periods of volatility in the market price of their securities. We may be the target of similar litigation in the future, which could result in substantial costs and divert management’s attention and resources.

We have a significant amount of indebtedness. At the holding company level, we have a $35.0 million credit facility consisting of a $23.0 million term loan and a $12.0 million revolving line of credit. As of June 30, 2002, we had $4.2 million outstanding under the revolving line of credit.

We intend to use a portion of our net proceeds from the concurrent offerings of our common stock and trust preferred securities to reduce our outstanding term loan. We also have received a commitment letter from our lender to replace our existing term loan with a $10.0 million subordinated term loan. Following the completion of the concurrent offerings of common stock and trust preferred securities, our total indebtedness at the holding company level is expected to be approximately $55.1 million. This will consist of the $40.0 million of debentures issued to TAYC Capital Trust I in connection with the concurrent offering of trust preferred securities, the $10.0 million subordinated term loan and $5.1 million outstanding under the $12.0 million revolving line of credit. At that time, we will have the ability to borrow an additional $6.9 million under our revolving line of credit. Our credit facility will continue to contain covenants that may limit our operating flexibility as well as our ability to pay any dividends on our capital stock.

Our ability to make payments on our indebtedness, as well as to fund our operations and any future growth, depends on our ability to generate cash. Our success in doing so depends primarily upon the results of the Bank and the ability of the Bank to dividend its earnings to us. Other determinants of our ability to generate cash include general economic, financial, regulatory and competitive conditions and other factors beyond our control.


	•	make us more vulnerable to unfavorable economic conditions;

	•	make it more difficult to pursue our strategic objectives;


	•	require us to dedicate or reserve a large portion of our cash flow from operations to making payments on our indebtedness, which would prevent us from using it for other purposes, including payment of any dividends on our capital stock; and

	•	make us susceptible to fluctuations in market interest rates that affect the cost of our borrowings because a portion of our indebtedness is currently payable at variable rates.

We are a holding company, and we conduct no business operations. Our principal asset is the outstanding capital stock of the Bank. As a result, we must rely on payments from the Bank to meet our obligations. Dividend payments from the Bank are subject to Illinois law and to regulatory limitations, generally based on capital levels and current and retained earnings, imposed by the various regulatory agencies with authority over the Bank. As of June 30, 2002, the Bank could declare and pay $24.4 million of dividends to us without the approval of regulatory authorities. The ability of the Bank to pay dividends, however, is always subject to regulatory restrictions if paying dividends would impair its profitability, financial condition or other cash flow requirements. Although the Bank is considered “well-capitalized” under Federal Reserve guidelines, we cannot assure you that the Bank will continue to meet the criteria under Illinois law or these regulatory guidelines, in which case it may stop paying or reduce the amount of dividends paid to us.

While we have historically paid cash dividends on our common stock, we cannot assure you that we will pay dividends on our common stock in the future. If we stop paying dividends, the price of our common stock could be adversely affected. The declaration and payment of dividends on our common stock will depend on our earnings and financial condition, liquidity and capital requirements, the general economic and regulatory climate, our ability to secure any equity or debt obligations senior to our common stock and other matters deemed relevant by our Board of Directors. The amount of net income (loss) available to our common stockholders after preferred dividend requirements totaled $(55.9) million for the six-month period ended June 30, 2002 and $14.2 million, $5.5 million and $7.9 million for the years ended December 31, 2001, 2000 and 1999, respectively. Our ability to pay dividends is currently limited by Federal Reserve guidelines, the terms of our existing loan agreement and the terms of our Series A preferred stock. These limitations are discussed in more detail below.

We are currently required to seek approval from the Federal Reserve before paying dividends. In the second quarter of 2002, we recorded a charge to earnings related to the likely settlement of pending litigation described in this prospectus. This charge has caused our capital to fall below minimum capital guidelines for bank holding companies set by the Federal Reserve. Thus, we are considered undercapitalized at the holding company level. As a result, the Federal Reserve has informed us that we must now seek its prior approval before we may pay any dividends on our common or preferred stock. The Federal Reserve has approved the payment of our scheduled quarterly dividends on our common stock and our Series A preferred stock in October 2002, prior to completion of this offering. Absent this approval, our ability to declare and pay dividends would be restricted.

Our existing loan agreement may limit our ability to pay dividends. Our existing loan agreement also restricts our ability to pay dividends if certain events of default exist or would result from paying the dividend. As a result of the litigation settlement charge, as of June 30, 2002, we were not in compliance with a financial covenant in our loan agreement relating to holding company leverage. After giving effect to the concurrent offerings of our common stock and trust preferred securities, we will be in compliance with this financial covenant. Our lender has waived compliance with this financial covenant as of June 30, 2002 and September 30, 2002 and has suspended compliance with it from June 30, 2002 through completion of this offering, but not later than December 1, 2002. Absent this waiver, our ability to declare and pay dividends would be restricted.

The terms of our Series A preferred stock and the trust preferred securities restrict our ability to pay dividends. Generally, unless we have paid all declared dividends on our Series A preferred stock or set apart payment for the current dividend period, no dividend may be declared and paid, or set aside for payment, on our common stock. As a result of the settlement charge and the restrictions relating to our loan agreement, as of June 30, 2002, we would not be able to pay dividends on our Series A preferred stock without the Federal Reserve’s consent and our lender’s waiver. Finally, we will also be prohibited from paying dividends on our common stock if we fail to make distributions or required payments on the trust preferred securities issued by the Trust. For further information about these restrictions, see the sections of this prospectus captioned “Description of Capital Stock” and “Description of the Trust Preferred Securities.”

We are subject to interest rate risk. We realize income primarily from the difference between interest earned on loans and investments and the interest paid on deposits and borrowings. We expect that we will periodically experience imbalances in the interest rate sensitivities of our assets and liabilities, meaning that either our interest-earning assets will be more sensitive to changes in market interest rates than our interest-bearing liabilities, or vice versa. In either event, if market interest rates should move contrary to our position, this gap will work against us, and our earnings may be negatively affected. In addition, loan volume and yields are affected by market interest rates on loans, and rising interest rates are generally associated with a lower volume of originations. Accordingly, changes in levels of market interest rates could materially adversely affect our net interest spread, asset quality, origination volume and overall profitability.

As of June 30, 2002, our financial models indicated an exposure to declining rates. The net interest income at risk for year one in the falling rate scenario was calculated at $2.1 million, or 2.05%, lower than the net interest income in the rates unchanged scenario. Computation of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan and security prepayments, deposit decay and pricing and reinvestment strategies and should not be relied upon as indicative of actual results. Further, the computations do not contemplate any actions that we may take in response to changes in interest rates.

We principally manage interest rate risk by managing our mix of financial instruments. In a changing interest rate environment, we may not be able to manage this risk effectively. If we are unable to manage interest rate risk effectively, our business, financial condition and results of operations could be materially harmed. For more information concerning our interest rate sensitivity, see the section of this prospectus captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Quantitative and Qualitative Disclosure About Market Risks.”

We must maintain sufficient funds to respond to the needs of depositors and borrowers. As a part of our liquidity management, we use a number of funding sources in addition to core deposit growth and repayments and maturities of loans and investments. As we continue to grow, we are likely to become more dependent on these sources, which include Federal Home Loan Bank, or FHLB, advances, brokered deposits, out-of-market certificates of deposit, broker/dealer repurchase agreements and federal funds purchased. At June 30, 2002, we had $100.0 million of FHLB advances, $183.9 million of brokered deposits and $69.9 million of out-of-market certificates of deposit outstanding. At June 30, 2002, we had no broker/dealer repurchase agreements or federal funds purchased outstanding. Generally, we have paid a premium for brokered deposits. These premiums are included in interest expense and approximated 36 basis points as of June 30, 2002. Adverse operating results or changes in industry conditions could lead to an inability to replace these additional funding sources at maturity. Our financial flexibility will be severely constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. Finally, if we are required to rely more heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs. In this case, our operating margins and profitability will be adversely affected.

Like all financial institutions, we maintain an allowance for loan losses to provide for loan defaults and non-performance. We believe that our allowance for loan losses is maintained at a level adequate to absorb probable losses inherent in our loan portfolio. However, our allowance for loan losses may not be sufficient to cover actual loan losses, and future provisions for loan losses could materially adversely affect our operating results. Management’s estimates are used to determine an allowance for loan losses that we consider adequate to absorb probable losses inherent in our loan portfolio. In evaluating the adequacy of our allowance for loan losses, we consider historical charge-off experience, growth of our loan portfolio, changes in the composition of our loan portfolio, trends in delinquency and criticized assets, general economic conditions, information about specific borrower situations, including their financial position and collateral values, and other factors and estimates that are subject to change over time. Estimating the risk of loss and amount of loss on any loan is necessarily subjective, and actual losses may vary from current estimates. Net charge-offs arising from loans totaled $3.2 million for the six months ended June 30, 2002, and $8.2 million, $4.1 million and $4.3 million for the years ended December 31, 2001, 2000 and 1999, respectively. If the recent economic downturn continues or other adverse factors occur, our actual loan losses could increase significantly and could exceed our allowance estimates.

In addition, federal and state regulators periodically review our allowance for loan losses and may require us to increase our allowance for loan losses by recognizing provisions for loan losses charged to expense, or to decrease our allowance for loan losses by recognizing loan charge-offs, net of recoveries. Any such provisions for loan losses or charge-offs, as required by these regulatory agencies, could have a material adverse effect on our financial condition and results of operations.

Our accounting policies require that we recognize as a loss legal and other contingencies when, based on available information, it is probable that a liability has been incurred and the amount of the loss contingency or range of amounts can be reasonably estimated. In the second quarter of 2002, we recorded a charge of $64.5 million related to a likely settlement of pending litigation against us that will be funded with a portion of the net proceeds from the concurrent offerings of our common stock and trust preferred securities. The recognition of the charge resulted in our reporting a consolidated net loss of $54.2 million for the first six months of 2002 and reduced total stockholders’ equity to $118.3 million. As a result, under Federal Reserve guidelines, we are considered undercapitalized at the holding company level. After giving effect to the concurrent offerings of common stock and trust preferred securities, we will comply with the Federal Reserve’s capital adequacy guidelines. Our status as an undercapitalized bank holding company has affected the amount of supervision and oversight we receive from regulatory authorities and may affect our ability to expand. As a result of our capital classification, we have been advised by the Federal Reserve that we must receive its prior approval before we can pay dividends. The Federal Reserve has approved the payment of our scheduled quarterly dividends on our common stock and Series A preferred stock in October 2002, prior to completion of this offering. For additional information, please see the section of this prospectus captioned “Supervision and Regulation.”

Sales of a substantial number of shares of our common stock in the public market following this offering, or the perception that large sales could occur, could cause the market price of our common stock to decline or limit our future ability to raise capital through an offering of equity securities. After completion of this offering, there will be 9,091,779 shares of our common stock outstanding. All of the shares of common stock sold in this offering will be freely tradable without restriction or further registration under the federal securities laws unless purchased by our “affiliates” within the meaning of Rule 144 under the Securities Act. 6,104,804

of the remaining shares of outstanding common stock, representing approximately 67.15% of the outstanding common stock upon completion of this offering, will be “restricted securities” under the Securities Act, subject to restrictions on the timing, manner and volume of sales of those shares. Our directors, officers and substantially all of our existing stockholders, including the selling stockholder, have agreed for a period of 180 days after the date of this prospectus, to not, without the prior written consent of Keefe, Bruyette & Woods, Inc., directly or indirectly, offer to sell, sell or otherwise dispose of any shares of our common stock, other than shares acquired in this offering. Following the closing of this offering, we also intend to file a registration statement on Form S-8 under the Securities Act covering 1,285,226 shares reserved for issuance under our incentive compensation plan as of August 31, 2002. Accordingly, subject to applicable vesting requirements and exercise with respect to options, shares registered under that registration statement will be available for sale in the open market immediately after the 180-day lock-up agreements expire. For a more detailed description of additional shares that may be sold in the future, see the sections of this prospectus captioned “Shares Eligible for Future Sale” and “Underwriting.”

If you purchase shares of our common stock in this offering, you will experience an immediate and substantial dilution of $8.54 net tangible book value per share of your investment. This means that the price you pay for the shares you acquire in this offering will be significantly higher than their net tangible book value per share. If we issue additional shares of common stock in the future, you may experience further dilution in the net tangible book value of your shares. You will incur additional dilution if the holders of outstanding options to purchase shares of our common stock at prices below our net tangible book value per share after this offering exercise their options.

In an effort to improve our service levels, risk profile and efficiency, we have initiated a plan to review the consolidation of our administrative and operational functions. Our plan includes process and operational restructuring, and may expand to include the repositioning of branches, all designed to improve service levels, create operational efficiencies and promote profitability. We may experience difficulties in executing this plan. Further, we cannot assure you that we will be able to implement our plan or that, if implemented, our plan will help us achieve our desired objectives.

We have adopted a new business strategy that involves an enhanced focus on commercial banking and wealth management activities. To implement our strategy, we have begun to discontinue offering some products and services in order to deploy additional resources to our commercial banking activities. Specifically, we have decided to discontinue non-customer conforming first mortgage loan originations, some fiduciary trust services and the funding of broker-originated auto and manufactured housing loans. As a result, the risks associated with our commercial banking activities will have a greater impact on our overall performance as our operations become less diversified.

Our business strategy also involves increasing our small- to middle-market business customer base and expanding the range of financial products and services we offer these customers. This growth may place a significant strain on our management, personnel, systems and resources. We must continue to improve our operational and financial systems and managerial controls and procedures to accommodate this growth, and we will need to continue to expand, train and manage our workforce. For example, the expansion of our commercial banking business may increase our need for internal audit and monitoring processes that are more extensive and broader in scope than those we have historically required. We must also maintain close coordination among our technology, compliance, accounting, finance, marketing and sales organizations. We cannot assure you that we will manage our growth effectively. If we fail to do so, our business could be materially harmed. Further, unless our expansion of commercial banking and wealth management activities

Our future success depends largely upon the continued service of our executive officers and other key management personnel who are experienced in banking and financial services. In addition to the services of Jeffrey and Bruce Taylor, the two most senior officers of both the holding company and the Bank, and Christopher Alstrin, the Chief Financial Officer of both the holding company and the Bank, we depend on the services of our lending officers and our operational and staff officers. Our lending officers maintain strong community ties and personal banking relationships with our customer base, which is a key aspect of our business and our strategy to increase our market presence. Their skills, years of experience and relationships in the communities we serve are among our competitive strengths. Our operational and staff officers maintain our systems and processes in an effort to deliver to our customers the highest possible quality products and services. This is another key aspect of our business and strategy. We rely on these officers to ensure customer satisfaction. We do not have employment agreements with any of our key personnel. The unexpected loss of the services of any one of these key people would materially harm our business. Furthermore, our future success depends upon the ability of our key personnel, including several recently recruited individuals, to function effectively as a team.

Our future success and growth will also depend upon our ability to recruit and retain highly skilled employees with strong community relationships and specialized knowledge in the financial services industry. The level of competition in our industry for people with these skills is intense, and from time to time we have experienced losses of key employees. Significant losses of key personnel, particularly to our competitors, could have a material adverse effect on our business, financial condition and results of operations.

The banking business is highly competitive. We encounter substantial competition in attracting and retaining deposits and in obtaining loan customers. Our principal competitors are numerous and include other commercial banks, savings and loan associations, mutual funds, money market funds, finance companies, credit unions, mortgage companies, the United States Government, private issuers of debt obligations and suppliers of other investment alternatives, such as securities firms. In recent years, several major multi-bank holding companies have entered the Chicago metropolitan market. Many of our competitors are significantly larger than us and have access to greater financial and other resources. As a result of these and other factors, our future growth opportunities may be limited. In addition, many of our non-bank competitors are not subject to the same extensive federal regulations that govern bank holding companies and federally insured banks and state regulations governing state chartered banks. As a result, our non-bank competitors may have advantages over us in providing some services.

We expect that competition will intensify in the future, particularly as a result of the Gramm-Leach-Bliley Act of 1999. The Gramm-Leach-Bliley Act has expanded the permissible activities of a bank holding company and allows qualifying bank holding companies to elect to be treated as financial holding companies. A financial holding company may engage in activities that are financial in nature, or are incidental or complementary to financial activities. The Gramm-Leach-Bliley Act also eliminated restrictions imposed by the Glass-Steagall Act, adopted in the 1930s, which prevented banking, insurance and securities firms from fully entering each other’s business. While it is uncertain what the full impact of this legislation will be, it is likely to result in further consolidation in the financial services industry. In addition, removal of these restrictions will likely increase the number of entities providing banking services and thereby create additional competition.

Our business is directly affected by domestic and international factors that are beyond our control, including economic, political and market conditions, broad trends in industry and finance, legislative and regulatory changes, competition, changes in government monetary and fiscal policies, consolidation within our customer base and within our industry and inflation. For example, a significant decline in general economic conditions, such as recession, unemployment and other factors beyond our control, would significantly impact our business. A deterioration in economic conditions may result in a decrease in demand for consumer and commercial credit and a decline in real estate and other asset values. Delinquencies, foreclosures and losses generally increase during economic slowdowns or recessions, and we therefore expect that our servicing costs and credit losses would increase during such periods.

Our success is dependent to a significant extent upon economic conditions in the Chicago metropolitan area, where virtually all of our loans are originated. For example, our small- and middle-market business and commercial real estate customers in the Chicago metropolitan area could be significantly affected by a local recession or economic downturn, which may result in an increase of defaults on outstanding loans and reduced demand for future loans, both of which could adversely affect us. Adverse changes in the economy of the Chicago metropolitan area could also impair our ability to gather deposits and could otherwise have a negative effect on our business, including the demand for new loans, the ability of customers to repay loans and the value of the collateral securing loans. Furthermore, a substantial portion of our loan portfolio involves loans that are to some degree secured by real estate properties located primarily within the Chicago metropolitan area. In the event that real estate values in the Chicago metropolitan area decline, the value of this collateral would be impaired.

We are subject to extensive federal and state regulation and supervision, which is primarily for the protection of depositors and customers rather than for the benefit of investors. As a bank holding company, we are subject to regulation and supervision primarily by the Federal Reserve. The Bank, as an Illinois-chartered member bank, is subject to regulation and supervision by the Illinois Commissioner of Banks and Real Estate, which we refer to as the Illinois Commissioner of Banks, and by the Federal Reserve. We must undergo periodic examinations by our regulators, who have extensive discretion and power to prevent or remedy unsafe or unsound practices or violations of law by banks and bank holding companies. For additional information, see the section of this prospectus captioned “Supervision and Regulation.” Our failure to comply with state and federal regulations can lead to, among other things, termination or suspension of our licenses, rights of rescission for borrowers, class action lawsuits and administrative enforcement actions. We cannot assure you that we will be able to fully comply with these regulations. Recently enacted, proposed and future legislation and regulations have had, and will continue to have, a significant impact on the financial services industry. Regulatory or legislative changes could cause us to change or limit some of our loan products or the way we operate our business and could affect our profitability.

Our operations are also subject to a wide variety of state and federal consumer protection and similar statutes and regulations. For example, consumer loan originations are highly regulated and recent regulatory initiatives have focused on the mortgage and home equity lending markets. Federal, state and local government agencies and legislators have begun to consider, and in some instances have adopted, legislation to restrict lenders’ ability to charge rates and fees in connection with residential mortgage loans. In general, these proposals involve lowering the existing federal Home Ownership and Equity Protection Act thresholds for defining a “high-cost” loan and establishing enhanced protections and remedies for borrowers who receive these loans. The proposed legislation has also included various loan term restrictions, such as limits on balloon loan features. Frequently referred to as “predatory lending” legislation, many of these laws and rules extend beyond curbing predatory lending practices to restrict commonly accepted lending activities, including some of our activities. For example, some of these laws and rules prohibit any form of prepayment charge and severely restrict a borrower’s ability to finance the points and fees charged in connection with his or her loan. It is possible that passage of these laws could limit our ability to impose various fees and charge what we believe

We may seek additional capital in the future to fund the growth of our operations and to enhance further our regulatory capital levels. We may not be able to obtain additional debt or equity financing, or if available, it may not be in amounts or on terms acceptable to us, or it may impose conditions on our ability to pay dividends or grow our business. If we are unable to obtain the funding we need, we may be unable to continue to implement our business strategy, enhance our financial products and services, take advantage of future opportunities or respond to competitive pressures, which could have a material adverse effect on our financial condition and our ability to grow our business. If we raise additional capital through the sale of equity securities, your ownership interest in us will be diluted.

In the second quarter of 2002, we recorded a charge of $64.5 million related to a likely settlement of pending litigation against us. The recognition of the charge resulted in our reporting a consolidated net loss of $54.2 million for the first six months of 2002 and reduced total stockholders’ equity to $118.3 million. As a result, under Federal Reserve guidelines, we are considered undercapitalized at the holding company level. After giving effect to the concurrent offerings of common stock and trust preferred securities, we will comply with the Federal Reserve’s capital adequacy guidelines.

If we are able to complete the concurrent offerings of common stock and trust preferred securities as described in this prospectus, as well as replace the current $23.0 million term loan with a $10.0 million subordinated term loan, we believe we will be considered “well capitalized” at the holding company level. If we are not able to reduce our existing term loan or complete the subordinated debt financing described above, we will nonetheless comply with the Federal Reserve’s capital adequacy guidelines, but we will not qualify as a “well-capitalized” bank holding company. In this case, we will remain subject, at a minimum, to regulatory scrutiny by the Federal Reserve if we seek to engage in transactions that might be beneficial to us, such as new activities, acquisitions or redemptions of securities. If the Federal Reserve were to conclude that we did not have adequate capital to support the proposed transaction, it might deny our requests or condition approval on our raising additional capital.

We rely on selected outside investment managers to provide specialized investment advice and asset management services to our customers. We cannot assure you that any of these providers will be able to continue to provide these services to our customers or that they will be able to adequately meet our customers’ or our needs. Further, we cannot be sure that our customers will continue to utilize the services of these investment managers through us, rather than directly from the investment management firms themselves. The loss of any of these outside investment managers may impact our ability to provide customers with quality service or some types of portfolio management without incurring the cost of replacing them.

There have been a number of highly publicized cases involving fraud or other misconduct by employees of financial services firms in recent years. Misconduct by our employees could include hiding unauthorized activities from us, improper or unauthorized activities on behalf of our customers or improper use of confidential information. Employee errors and misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation. It is not always possible to prevent employee errors and misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases. Employee errors could also subject us to financial claims for negligence.

We maintain a system of internal controls and insurance coverage to mitigate against operational risks, including data processing system failures and errors and customer or employee fraud. Should our internal

controls fail to prevent or detect an occurrence, or if it is not insured or exceeds applicable insurance limits, it could have a material adverse effect on our business, financial condition or results of operations. Our losses relating to these operational risks were $213,000, $1.6 million, $388,000 and $251,000 for the six months ended June 30, 2002, and the years ended December 31, 2001, 2000 and 1999, respectively. These losses related primarily to non-employee initiated fraud involving either loan or deposit accounts.

Security breaches in our internet banking activities could expose us to possible liability and damage our reputation. Any compromise of our security also could deter customers from using our internet banking services that involve the transmission of confidential information. We rely on standard internet security systems to provide the security and authentication necessary to effect secure transmission of data. These precautions may not protect our systems from compromises or breaches of our security measures that could result in damage to our reputation and our business.

Our amended and restated certificate of incorporation and by-laws and Delaware law could delay, defer or prevent a third party from acquiring us, despite the possible benefit to our stockholders, or otherwise adversely affect the price of our common stock. For example, our charter contains advance notice requirements for nominations for election to our Board of Directors and for proposing matters that shareholders may act on at shareholder meetings. We also have a staggered board, which means that only one-third of our Board can be replaced by stockholders at any annual meeting. In addition, we are subject to Delaware laws, including one that prohibits us from engaging in a business combination with any interested stockholder for a period of three years from the date the person became an interested stockholder unless certain conditions are met. These provisions may discourage potential takeover attempts, discourage bids for our common stock at a premium over market price or adversely affect the market price of, and the voting and other rights of the holders of, our common stock. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors other than the candidates nominated by our Board.

Any individual, acting alone or with other individuals, who is seeking to acquire, directly or indirectly, 10% or more of our outstanding common stock must comply with the Change in Bank Control Act, which requires prior notice to the Federal Reserve for any acquisition. Any entity that wants to acquire 5% or more of our outstanding common stock, or otherwise to control us, may need to obtain the prior approval of the Federal Reserve under the Bank Holding Company Act of 1956, as amended. As a result, prospective investors in our common stock need to be aware of and to comply with those requirements, to the extent applicable. Approval may also be required by the Illinois Commissioner of Banks.

Some of the statements under the captions “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “The Company” and elsewhere in this prospectus constitute forward-looking statements. You can identify these statements from our use of the words “may,” “should,” “could,” “potential,” “continue,” “plan,” “forecast,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target,” “is likely,” “will,” or the negative of these terms, and similar expressions. These forward-looking statements may include, among other things:


	•	statements and assumptions relating to projected growth, earnings, earnings per share and other financial performance measures, as well as management’s short-term and long-term performance goals;

	•	statements relating to the anticipated effects on results of operations or financial condition from recent and expected developments or events;

	•	statements relating to our business and growth strategies; and

	•	any other statements, projections or assumptions that are not historical facts.

We believe that our expectations are based on reasonable assumptions. However, these forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from our expectations of future results, performance or achievements expressed or implied by these forward-looking statements. In addition, our past results of operations do not necessarily indicate our future results. We discuss these and other uncertainties in the “Risk Factors” section of this prospectus.

You should not place undue reliance on any forward-looking statements. These statements speak only as of the date of this prospectus. Except as otherwise required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements or the risk factors described in this prospectus, whether as a result of new information, future events, changed circumstances or any other reason after the date of this prospectus.

We are a bank holding company headquartered in Wheeling, Illinois, a suburb of Chicago. We derive virtually all of our revenue from our subsidiary, Cole Taylor Bank. As of December 31, 2001, the Bank was the tenth largest commercial bank headquartered in the Chicago metropolitan area based on assets. We provide a range of products and services concentrating in four primary banking areas: middle-market business banking, small business banking, commercial real estate lending and wealth management. We currently operate 11 bank branches throughout the Chicago metropolitan area with approximately $2.5 billion of assets as of June 30, 2002.

We were formed in 1996 in connection with the split-off of the Bank from Cole Taylor Financial Group, Inc., also referred to as Cole Taylor Financial and later renamed Reliance Acceptance Group, Inc. The Taylor family acquired a majority interest in the Bank when they exchanged all of their common stock of Cole Taylor Financial for the outstanding stock of Taylor Capital. In connection with the split-off transaction, we issued noncumulative perpetual preferred stock and commenced voluntary filing as a public company. We ceased voluntary filing in 2000 because our preferred stock was not widely held, listed on a securities exchange or actively traded.

Subsequent to the split-off of Taylor Capital from Reliance, Reliance filed for bankruptcy. Thereafter, numerous lawsuits were filed that named as defendants Taylor Capital, the Bank, some of our directors and officers and members of the Taylor family. A significant portion of the proceeds from the concurrent common stock and trust preferred securities offerings will be used to satisfy our obligations relating to the settlement of these lawsuits.

Our primary business objectives are to enhance our profitability and be a premier Chicago business bank for small- and mid-sized businesses and the people who own and manage them. We believe the Chicago market, with over 58,000 small-and mid-sized businesses, is receptive to a locally owned and managed banking institution that provides responsive, personalized service, customized products and local decision making. We believe that our opportunities for expansion in this market are favorable and will increase as the Chicago banking market continues to experience significant consolidation.


	•	Expand Our Core Customer Base. We will continue to focus on expanding our core customer base by increasing the number of businesses we serve in the Chicago metropolitan area. We intend to increase our market share by providing a high level of customer service, competitive products and delivery systems and competing for customers of recently acquired banks in our market area. We believe our growth objectives can be achieved while maintaining our historical risk standards and effectively managing credit risk.

	•	Capitalize On Our Relationship Banking Approach. We intend to leverage our business banking relationships in order to capture more personal wealth management business. Closely held business owners often have complex needs for the management of personal and family wealth. We believe our existing relationships with their businesses provide a natural opportunity to assist with their personal financial needs. We also believe that providing personal wealth management services will strengthen our commercial banking relationships. We deliver our products and services through relationship managers who lead a team of banking professionals. Collectively, the team is responsible for providing for our customer’s banking needs. With this relationship banking approach, we believe we are able to


		quickly address the critical needs for both the customer’s business as well as personal financial goals. We have only recently begun to implement this strategy and have not yet achieved any meaningful results.

	•	Focus On Our Targeted Customers. We focus our time and resources on targeted customer segments: small- and mid-size businesses, as well as the individuals who own and manage them. As part of our effort to increase resources available to invest in serving these targeted customers, we have reduced or eliminated other activities. We have stopped originating non-customer conforming first mortgage loans for sale into the secondary market, the offering of some fiduciary trust services and the funding of broker-originated auto and manufactured housing loans. We intend to reallocate these resources to expand our commercial banking business and develop our wealth management business.

	•	Enhance Our Operational Efficiency. We plan to further centralize and automate important operational functions to enhance operating leverage as well as service quality. We intend to realign our people, processes and systems in support of the high quality sales and service requirements that our customers desire. We anticipate that this realignment will involve the relocation and consolidation of currently dispersed facilities, processes and personnel.

We deliver financial services built around the customers we serve rather than the products we offer. Our targeted customers are middle-market companies, small companies, real estate developers and investors and owners and executives of our business customers. Our relationship managers lead teams of bank professionals who are responsible for providing for the banking needs of a large portion of these customers. Through their relationship managers, these customers have a single point of access to all of our services.

Middle-Market Companies. Our middle-market business customers characteristically have annual sales ranging from $5 million to $50 million. We offer products and services to a wide variety of middle-market businesses involved with manufacturing, wholesale and retail distribution, construction contracting, transportation and professional services. We believe these customers value our executive management access and attention as well as experienced and responsive relationship managers. We work to provide these customers with products customized to fit their needs and seamless execution, from sales to delivery to ongoing servicing. Loans to middle-market businesses comprised approximately 42% of our commercial loan portfolio as of June 30, 2002.

Small Companies. Our small business customers typically have annual sales of $500,000 to $5 million. We believe our success with small businesses is based on the fast and convenient offering of standard products specifically designed for businesses in this category. Many of these customers reside in the neighborhoods around our branch offices. Another important segment of our small business customer base includes health care service businesses, such as medical, dental and veterinary practices, and their owners, for which we believe we have developed financial services expertise. We provide professional practice financing as well as equipment and capital expansion credit facilities to these businesses. Loans to small businesses and professionals comprised approximately 26% of our commercial loan portfolio as of June 30, 2002.

Real Estate Developers and Investors. Our real estate development and investment customers seek acquisition, development and construction loans and stand-by letters of credit for terms from 18 to 36 months. Approximately 60% of our development and construction lending is for residential single-family home development, primarily in the suburban communities of Chicago. We also finance condominium developers within the city of Chicago. Our real estate investment customers also seek term financing on selected income producing properties, including multi-family, retail, office and industrial properties. Our real estate banking relationship managers have an average of 20 years of specialized real estate lending experience. Loans to real estate developers and investors comprised approximately 32% of our commercial loan portfolio as of June 30, 2002.

Owners and Executives of Our Business Customers. We cross-sell products and services to the owners and executives of our business customers designed to help them meet their personal financial goals. We focus

on facilitating the cycle of wealth creation, preservation and transfer for the owner-operators of small- and middle-market businesses in Chicago. These products and services include personal customized credit and cash management, personal financial planning, investments, investment management and insurance products. While we directly provide credit and cash management products, we also offer brokerage, insurance and most investment management products and services with the assistance of third-party providers. We believe these arrangements with third-party providers allow us the flexibility to select and sell non-proprietary products that may provide an optimal solution for our customers’ needs.

Other Customers. We also provide services and offer banking products to community-based customers located near our branch locations. These customers, typically individuals and municipalities, seek credit and depository products from a convenient, reliable and stable institution with reasonably competitive products and automated delivery channels such as automated teller machines, or ATMs, and telephone and internet banking.

Our primary business is commercial banking. As of June 30, 2002, approximately 72% of our loan portfolio was comprised of commercial loans. We also offer wealth management, community banking, home equity lending, mortgage banking and trust services.

Our commercial banking business is comprised of commercial lending and real estate construction lending activities. Our commercial lending activities consist of providing loans for the following customer needs: working capital, business expansion or acquisition, owner-occupied commercial real estate financing, revolving lines of credit and stand-by and commercial letters of credit. Additionally, we offer asset-based credit facilities, including, in some cases, where strong asset values and financial controls support businesses with otherwise minimally acceptable operating performance or experience. Our real estate construction lending activities consist of providing loans to professional home builders, condominium and commercial real estate developers and investors.

We offer collateralized as well as unsecured commercial banking loans. Typical collateral includes accounts receivable, inventory, equipment and real estate. Commercial real estate loans are generally collateralized by owner-occupied properties used for business purposes or property to be developed or acquired for investment. Commercial real estate construction loans are structured primarily to fund construction of pre-sold homes or units. Under our commercial lending policies, as of June 30, 2002, our internal management-designated lending limit was $12 million, with some limited exceptions.

We also offer our commercial banking customers deposit products such as checking, savings and money market accounts, time deposits and repurchase agreements. We offer corporate cash management options, including internet balance reporting, automated clearing house products, lock-box processing, controlled disbursement accounts and an account reconciliation and positive pay feature to help them meet their cash management needs.

As part of our strategy, we plan to increase our penetration of the market representing owner-operators and executives of our targeted business customers. We intend to offer enhanced wealth management services by expanding our product offerings and adding relationship managers with wealth management experience. Our product offerings currently include personal wealth management loans, customized residential real estate loans and home equity lines of credit and specially designed deposit products. Our relationship managers provide personal financial planning and investment management services. Through third-party providers, we also offer insurance products and brokerage services. We believe that our increased emphasis on wealth management will be further aided by transferring some asset management accounts and a few individual managers from our trust department to our wealth management area, which we intend to do during 2002. To

Our community banking approach relies on personal service and the delivery of an array of financial products, including checking, savings and money market accounts, certificates of deposit, personal lines of credit and vehicle loans. We offer convenient account access through our ATM network, internet banking, internet bill payment, telephone banking, direct deposit service and debit cards. We provide portfolio management expertise, offering stocks, bonds, mutual funds, annuities and insurance products through a third party broker-dealer with representatives located in our branches.

We originate home equity loans and lines of credit through our branches as well as through mortgage brokers. The majority of our outstanding home equity assets were sourced through mortgage brokers, but underwritten by us. Our underwriting guidelines do not allow home equity credits in excess of 100% of appraised value. As of June 30, 2002, approximately 38% of these credits on our books exceeded 80% of appraised value after giving effect to any outstanding first mortgage. As of June 30, 2002, we held $327.5 million of home equity loans, which comprised approximately 18% of our total loan portfolio.

We offer mortgages to our core customers and our community banking customers. We also act as a broker for our customers needing reverse or sub-prime mortgage products that are not funded or retained by us. Until the fall of 2001, we were active in the conforming first mortgage loan origination market. We offered both conforming and selected non-conforming mortgage products to our existing customers as well as through mortgage brokers. The majority of the loans originated were sold into the secondary market with servicing released. We subsequently elected to discontinue origination of non-customer conforming first mortgage loans for sale into the secondary market. As of June 30, 2002, we held $136.4 million of mortgage loans.

Trust services offered by our trust professionals have historically included corporate trust, asset management, land trust and tax-deferred exchange services, as well as fiduciary services for personal and employee benefit trusts. As a result of our strategic focus on targeted customers, we have elected to discontinue offering fiduciary services for personal and employee benefit trusts. We are negotiating the transfer of certain accounts in these categories to other providers who will maintain these accounts and handle future customer inquiries for similar services. Revenue from the accounts targeted for transfer totaled $1.6 million during 2001. In addition, some asset management accounts and a few individual managers will be transferred from our trust department to our wealth management department.

We anticipate that in the future the services offered by our trust professionals will relate primarily to corporate trust, land trust and tax-deferred exchange activities.

We encounter intense competition for all of our products and services, including substantial competition in attracting and retaining deposits and in obtaining loan customers. The principal competitive factors in the banking and financial services industry are quality of services to customers, ease of access to services and pricing of services, including interest rates paid on deposits, interest rates charged on loans and fees charged for trust, investment and other professional services. Our principal competitors are numerous and include other commercial banks, savings and loan associations, mutual funds, money market funds, finance companies, credit unions, mortgage companies, the United States Government, private issuers of debt obligations and suppliers of other investment alternatives, such as securities firms.

In recent years, several major multi-bank holding companies have entered the Chicago metropolitan market. Many of our competitors are significantly larger than us and have access to greater financial and other resources. In addition, many of our non-bank competitors are not subject to the same extensive federal regulations that govern bank holding companies and federally insured banks or the state regulations governing state chartered banks. As a result, our non-bank competitors may have advantages over us in providing some services.

We expect that competition will intensify in the future, particularly as a result of the Gramm-Leach-Bliley Act. The Gramm-Leach-Bliley Act has expanded the permissible activities of a bank holding company and it allows qualifying bank holding companies to elect to be treated as financial holding companies. A financial holding company may engage in activities that are financial in nature or are incidental or complementary to financial activities. The Gramm-Leach-Bliley Act also eliminated restrictions imposed by the Glass-Steagall Act, adopted in the 1930s, which prevented banking, insurance and securities firms from fully entering each other’s business. While it is uncertain what the full impact of this legislation will be, it is likely to result in further consolidation in the financial services industry. In addition, removal of these restrictions will likely increase the number of entities providing banking services and thereby create additional competition. For more information on the Gramm-Leach-Bliley Act, see the section of this prospectus captioned “Supervision and Regulation — The Bank — Gramm-Leach-Bliley Act.”

Our principal offices, including the principal offices of the Bank, are located in our main office building at 350 East Dundee Road, Suite 300, Wheeling, Illinois 60090. We lease our main office under a lease that commenced on January 1, 1995 and expires on March 31, 2010, with options to purchase the property or to extend the lease until March 31, 2025.

We own seven of the buildings from which bank branches are operated, including Ashland, Skokie, Burbank, Yorktown, Broadview, Old Orchard and Milwaukee. We lease the land under the buildings at Yorktown, Old Orchard and Milwaukee. We lease the buildings for our Woodlawn, Jackson and West Washington branches, which in accordance with the current lease terms expire in, or may be extended to, May 2013, February 2004 and December 2007, respectively. In January 2002, we closed the Cicero branch when the lease expired. Our Cicero customers are now directed to our Burbank branch.

We are from time to time a party to litigation arising in the normal course of business. As of the date of this prospectus, except for the proceedings described in the section of this prospectus captioned “Litigation and Settlement,” management knows of no threatened or pending legal actions against us that are likely to have a material adverse effect on our business, financial condition or results of operations. For further information about our pending litigation, see the section of this prospectus captioned “Litigation and Settlement.”

Together with the Bank, we had a total of approximately 552 full-time equivalent employees as of August 31, 2002. None of our employees is subject to a collective bargaining agreement. We consider our relationships with our employees to be good.

We estimate that the net proceeds from the sale of our common stock in this offering, assuming an initial public offering price of $19.00 per share, the midpoint of the range shown on the cover of this prospectus, will be approximately $39.0 million. If the underwriters exercise their over-allotment option, we estimate our net proceeds will be $44.9 million. Net proceeds are what we expect to receive after paying the underwriters’ discount and other expenses of the offering. We will not receive any proceeds from the sale of shares of our common stock by the selling stockholder.

We intend to use the net proceeds from this offering of our common stock to satisfy a portion of our obligations under the settlement agreements described more fully in the section of this prospectus captioned “Litigation and Settlement.” Assuming an initial public offering price of $19.00 per share in this offering, the midpoint of the range shown on the cover of this prospectus, we estimate our obligation under the settlement agreements to be approximately $64.5 million. The remainder of our obligations under the settlement agreements will be satisfied by our proceeds from the concurrent offering of trust preferred securities. We estimate the net proceeds from the concurrent offering of trust preferred securities will be approximately $37.7 million. For a detailed description of the terms of the settlement agreements, see the section of this prospectus captioned “Litigation and Settlement.”

We intend to use the remaining aggregate net proceeds from this offering and the concurrent offering of trust preferred securities to reduce our outstanding term loan. We estimate that the remaining net proceeds from the offerings available to reduce our outstanding term loan will be $12.1 million. As of June 30, 2002, we had approximately $27.2 million of outstanding indebtedness at the holding company level, consisting of a $23.0 million term loan and $4.2 million outstanding under our $12 million revolving line of credit. Our term loan bears interest, at our option, at either the lender’s prime rate or the London Interbank Offering Rate, or LIBOR, plus 1.15% with a minimum interest rate of 3.50%. The interest rate was 3.50% at June 30, 2002. The term loan is currently scheduled to mature on April 30, 2003.

We have also received a commitment letter from our lender for a $10.0 million subordinated term loan. We will use the proceeds of this subordinated loan and, if necessary, our available revolving line of credit, to repay in full any remaining amounts outstanding under our existing term loan. Assuming completion of the concurrent offerings of common stock and trust preferred securities and the application of the net proceeds from these offerings as described above, and the replacement of the current $23.0 million term loan with a $10.0 million subordinated term loan, our total indebtedness at the holding company level will be approximately $55.1 million. This will consist of the $40.0 million of debentures issued to TAYC Capital Trust I in connection with the concurrent offering of trust preferred securities, the $10.0 million subordinated term loan and $5.1 million outstanding under the $12.0 million revolving line of credit. The subordinated term loan will require that we make interest only payments until 2009 with a balloon payment at maturity. We believe that these transactions will result in our being considered “well capitalized” at the holding company level under Federal Reserve guidelines.

Pending these uses, we intend to invest the net proceeds of the concurrent offerings of common stock and trust preferred securities in short-term, interest-bearing investment grade securities, certificates of deposit or guaranteed obligations of the United States of America.

Holders of our common stock are entitled to receive any cash dividends that may be declared by our Board of Directors. Since 1997, we have paid regular cash dividends on our common stock. The declaration and payment of future dividends to holders of our common stock will be at the discretion of our Board of Directors and will depend upon our earnings and financial condition, the capital requirements of our subsidiaries, regulatory conditions and considerations and other factors as our Board of Directors may deem relevant. It is our intention to continue to pay cash dividends on the common stock to the extent permitted by our loan agreement, applicable banking regulations and the terms of the trust preferred securities. For further information, see the section of this prospectus captioned “Description of Capital Stock — Common Stock.”

As a holding company, we ultimately are dependent upon the Bank to provide funding for our operating expenses, debt service and dividends. Various banking laws applicable to the Bank limit the payment of dividends, management fees and other distributions by the Bank to us, and may therefore limit our ability to pay dividends on our common stock. We will also be prohibited from paying dividends on our common stock if we fail to make distributions or required payments on the trust preferred securities. In addition, our loan agreement and the terms of our Series A preferred stock also limit our ability to pay dividends on our common stock.

As a result of the $64.5 million charge we recognized in connection with the settlement agreements described in this prospectus, we are not in compliance with the Federal Reserve’s capital adequacy guidelines. As a consequence, we have been informed by the Federal Reserve that we must receive its permission before paying dividends on our common or preferred stock. The Federal Reserve has approved the payment of our scheduled quarterly dividends on our common stock and our Series A preferred stock in October 2002, prior to completion of this offering. For further information concerning these restrictions, see the sections of this prospectus captioned “Risk Factors,” “Use of Proceeds,” “Supervision and Regulation” and “Description of the Trust Preferred Securities.”

The following table sets forth, for each quarter in 2001 and 2000, and the first, second and third quarters of 2002, the dividends declared on our common stock:

Dilution is the amount by which the offering price paid by the purchasers of our common stock to be sold in this offering exceeds the net tangible book value per share of our common stock after this offering. Net tangible book value per share is determined at any date by subtracting our total liabilities and preferred stock from the total book value of our tangible assets and dividing the difference by the number of shares of common stock deemed to be outstanding as of that date.

Our net tangible book value, as of June 30, 2002, was approximately $55.8 million, or $8.19 per share of common stock. After giving effect to adjustments relating to this offering, our pro forma net tangible book value as of June 30, 2002 would have been approximately $94.8 million, or $10.46 per share. This represents an immediate increase in pro forma net tangible book value of $2.27 per share of common stock to existing stockholders and an immediate dilution of $8.54 per share to new investors purchasing shares of common stock in this offering. The adjustments made to determine pro forma net tangible book value per share are:


	•	increasing total assets and equity to reflect the estimated net proceeds of this offering as described under “Use of Proceeds,” assuming that the public offering price will be $19.00 per share, the midpoint of the range shown on the cover of this prospectus; and

	•	adding the number of shares offered by this prospectus to the number of shares outstanding.

The following table illustrates the pro forma increase in net tangible book value of $2.27 per share and the dilution to new investors:

The following table summarizes, on a pro forma basis as of June 30, 2002, the differences between existing stockholders and new investors with respect to:


	•	the number of shares of common stock purchased from us;

	•	the total consideration paid to us, assuming an initial public offering price of $19.00 per share of common stock, the midpoint of the range shown on the cover of this prospectus (before deducting the estimated underwriting discount and offering expenses payable by us in connection with this offering); and

	•	the average price per share paid by existing stockholders and by new investors purchasing common stock in this offering. The effect of treasury stock purchased by us has been excluded from this calculation.

The tables and calculations above, dated as of June 30, 2002, do not take into account (1) 846,867 shares of common stock reserved for issuance upon the exercise of outstanding options at a weighted average exercise price of $18.91 per share, and (2) 178,850 shares of common stock reserved for issuance pursuant to future grants under our incentive compensation plan. To the extent that any of these options are exercised, there will be further dilution to new investors.


	•	on an actual basis;

	•	on an adjusted basis to give effect to the following events, as if each event had occurred on June 30, 2002:


	•	the issuance and sale of the 2,250,000 shares of common stock offered by us in this offering at an assumed initial public offering price of $19.00 per share, the midpoint of the range shown on the cover of this prospectus, and the application of the net proceeds therefrom; and

	•	the issuance and sale of 1,600,000 shares of trust preferred securities in the concurrent offering at an assumed offering price of $25.00 per trust preferred security and the application of the net proceeds therefrom; and


	•	on a pro forma as adjusted basis to give effect to the application of $12.1 million of the net proceeds from the concurrent offerings of common stock and trust preferred securities and $900,000 of revolving credit to repay $13.0 million outstanding under our existing term loan and the replacement of the remaining term loan with $10.0 million of subordinated debt, as if each of these events had occurred on June 30, 2002.

In the second quarter of 2002, we recorded a charge of $64.5 million related to a likely settlement of pending litigation against Taylor Capital that will be funded with a portion of the net proceeds from the concurrent offerings of common stock and trust preferred securities. The recognition of the charge resulted in our reporting a consolidated net loss of $54.2 million for the first six months of 2002. The loss reduced total stockholders’ equity to $118.3 million. For additional information on this charge, see the sections of this prospectus captioned “Litigation and Settlement” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.

The outstanding share information as of June 30, 2002 excludes (1) 846,867 shares of common stock reserved for issuance upon the exercise of outstanding options at a weighted average exercise price of $18.91 per share, and (2) 178,850 shares of common stock reserved for issuance pursuant to future grants under our incentive compensation plan.

The information presented below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.

The selected consolidated financial data presented below under the caption “Taylor Capital Group, Inc.” as of and for the six months ended June 30, 2002 and 2001 and as of and for the four years ended December 31, 2001, and for the period from February 12, 1997 to December 31, 1997, is derived from our historical financial statements. Our consolidated financial statements for each of the four years ended December 31, 2001, and for the period from February 12, 1997 to December 31, 1997, have been audited by KPMG LLP, independent accountants. The financial data as of and for the six months ended June 30, 2002 and 2001 is derived from unaudited financial information. The selected financial information presented below under the caption of “Cole Taylor Bank” is derived from unaudited financial statements of the Bank or from our audited consolidated financial statements. You should read this information in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus. Results from past periods are not necessarily indicative of results that may be expected for any future period.

In the second quarter of 2002, we recorded a charge of $64.5 million related to a likely settlement of pending litigation against Taylor Capital that will be funded with the net proceeds from the concurrent common stock and trust preferred securities offerings. The recognition of the charge resulted in our reporting a consolidated net loss of $54.2 million for the first six months of 2002. The loss reduced total stockholders’ equity to $118.3 million. For additional information on this charge, see the sections of this prospectus captioned “Litigation and Settlement” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.


(1)	All share and per share information for all periods presented has been adjusted for a three-for-two split of our common stock that will be effected as a dividend to stockholders of record as of October 2, 2002.

(2)	Selected earnings performance data and net loan charge-offs to average total loans are annualized for the six month periods ended June 30, 2002 and 2001 and for 1997.


(3)	Net interest margin is determined by dividing taxable equivalent net interest income by average interest-earning assets.

(4)	The efficiency ratio is determined by dividing noninterest expense less the litigation settlement charge by an amount equal to net interest income plus noninterest income, less investment securities gains.

(5)	For purposes of calculating the ratio of earnings to fixed charges, earnings consist of income before the litigation settlement charge, income taxes and cumulative effective of change in accounting principle plus interest and rent expense. Fixed charges consist of interest expense, rent expense and preferred stock dividend requirements.

(6)	Nonperforming loans include loans contractually past due 90 days or more but still accruing interest.

(7)	Nonperforming assets include nonperforming loans, other real estate and other repossessed assets.

(8)	Financial data for Cole Taylor Bank represents a full year for 1997.

The following discussion and analysis presents our consolidated financial condition and results of operations for the six months ended June 30, 2002 and 2001, as well as for the years ended December 31, 2001, 2000 and 1999. This discussion should be read together with the “Selected Consolidated Financial Data,” our financial statements and the notes thereto and other financial data included in this prospectus. In addition to the historical information provided below, we have made certain estimates and forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these estimates and forward-looking statements as a result of certain factors, including those discussed in the section captioned “Risk Factors” and elsewhere in this prospectus. All share and per share information for all periods presented has been adjusted for a three-for-two split of our common stock that will be effected as a dividend to stockholders of record as of October 2, 2002.

We are a bank holding company headquartered in Wheeling, Illinois, a suburb of Chicago. We derive virtually all of our revenue from our subsidiary, Cole Taylor Bank. As of December 31, 2001, the Bank was the tenth largest commercial bank headquartered in the Chicago metropolitan area based on assets. We provide a range of products and services to our commercial and consumer customers. We currently operate 11 branches throughout the Chicago metropolitan area.

The Taylor family entered the banking business in 1929 to provide credit and depository services to local businesses. Over the course of our 73-year history, we have worked to build solid foundations in the Chicago metropolitan area business community by providing our customers with highly personalized, professional and experienced service.

We recorded a net loss of $54.2 million, or $8.18 per common share, for the first six months of 2002 due to a $64.5 million charge recorded in the second quarter. This charge related to a likely settlement of pending litigation against the holding company that will be funded with the net proceeds from the concurrent offerings of common stock and trust preferred securities.

As a result of the settlement litigation charge, as of June 30, 2002, total stockholders’ equity was reduced to $118.3 million. Consequently, we were not in compliance with a financial covenant in our loan agreement relating to holding company leverage, and our capital fell below minimum capital guidelines for bank holding companies set by the Federal Reserve. We expect to return to compliance with all covenants under our credit facility and to adequately capitalized status upon completion of the concurrent offerings of common stock and trust preferred securities. For additional information on this charge, see the section of this prospectus captioned “Litigation and Settlement” and our consolidated financial statements. For additional information on the impact of the loan covenant violation and our regulatory capital adequacy, see the section of this discussion and analysis captioned “Financial Condition — Notes Payable and Federal Home Loan Bank Advances” and “Capital Resources.”

Additionally, a number of other matters arising in 2002 and 2001 impact the comparability of net income between the two periods. Net income in 2002 was positively impacted by the adoption of a new accounting standard on January 1, 2002, that eliminated the amortization expense on our goodwill. Goodwill amortization for the first six months of 2001 was $1.2 million. See the section of this discussion and analysis captioned “New Accounting Pronouncements” for additional details. Net income in 2002 was also impacted by the execution to date of our strategic plan adopted in the fall of 2001. Non-interest income in 2002 declined $1.3 million as a result of the reduced revenues from mortgage banking activities and fiduciary trust services. Moreover, non-interest income in 2001 included $2.2 million from gains on the sale of investment securities. Non-interest expense in 2002 was negatively impacted by the recognition of $1.7 million of severance and outplacement costs relating to our internal reorganization. The impact of these matters is described in more detail below. Net income for the first half of 2001 was $10.1 million, or $1.20 per diluted common share.

We recorded net income of $17.6 million, or $2.05 per diluted common share, for the year ended December 31, 2001, an increase of $8.6 million, or 96.9%, as compared to 2000 net income of $9.0 million, or

$0.79 per diluted common share. This increase was primarily a result of higher net interest income and noninterest income and slightly lower noninterest expense, partially offset by a higher provision for loan losses. Net income in 2000 was $9.0 million, a decrease of $2.3 million, or 20.7%, as compared to net income of $11.3 million in 1999, or $1.12 per diluted common share outstanding. This decrease was primarily attributable to an $8.0 million increase in noninterest expense, which was partially offset by higher net interest income. We have incurred significant expenses in connection with litigation discussed in this prospectus under the caption “Litigation and Settlement” and Note 1 to our consolidated financial statements. At the holding company level, we have incurred legal fees, net of reimbursements, related to this litigation of $580,000 and $1.5 million during the first half of 2002 and 2001, respectively. These legal expenses, net of reimbursements, approximated $195,000, $10.1 million, and $4.9 million during the years of 2001, 2000, and 1999, respectively.

Total assets were $2.46 billion at June 30, 2002, an increase of $72.2 million, or 3.0%, over year-end 2001. During the first six months of 2002, total gross loans were $1.80 billion, an increase of $60.0 million, or 3.4%, compared to total gross loans of $1.74 billion at December 31, 2001. Total deposits were $1.90 billion, an increase of $67.4 million, or 3.7%, compared to total deposits of $1.83 billion at December 31, 2001. Stockholders’ equity was $118.3 million at June 30, 2002, a decrease of $52.6 million compared to $171.0 million at December 31, 2001. Our total assets were $2.39 billion at December 31, 2001, an increase of $127.3 million, or 5.6%, over total assets of $2.26 billion at December 31, 2000. Total gross loans at December 31, 2001 were $1.74 billion, an increase of $130.0 million, or 8.1%, as compared to December 31, 2000. Total deposits were $1.83 billion at December 31, 2001, an increase of $90.9 million, or 5.2%, as compared to December 31, 2000. Total stockholders’ equity was $170.9 million at December 31, 2001, an increase of $13.6 million, or 8.6%, as compared to total stockholders’ equity of $157.3 million at the previous year-end.

During the first six months of 2002, excluding the charge related to a likely settlement of pending litigation, our annualized return on average assets and return on average equity was 0.85% and 11.71%, respectively, as compared to an annualized return on average assets and return on average equity of 0.86% and 12.48%, respectively, during the first six months of 2001. In comparison, return on average assets was 0.75%, 0.40% and 0.57% for the years ended December 31, 2001, 2000 and 1999, respectively, while our return on average equity was 10.62%, 5.93% and 7.70% over the same periods, respectively.

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

We have established an allowance for loan losses to provide for loans in our portfolio that may not be repaid in their entirety. The allowance is periodically increased by provisions for loan losses charged to expense and decreased by charge-offs, net of recoveries. Although we charge-off a loan when we deem it uncollectable, collection efforts may continue and future recoveries may occur.

We maintain the allowance for loan losses at a level considered adequate to absorb probable losses inherent in our portfolio as of the balance sheet date. In evaluating the adequacy of our allowance for loan losses, we consider historical charge-off experience, growth of our loan portfolio, changes in the composition of our loan portfolio, trends in delinquency and criticized assets, general economic conditions, information about specific borrower situations, including their financial position and collateral values, and other factors and estimates which are subject to change over time. Estimating the risk of loss and amount of loss on any loan is necessarily subjective and actual losses may vary from current estimates. We review our estimates on a quarterly basis and we identify changes in estimates in income through the provision for loan losses in the appropriate period.

A portion of our total allowance for loan losses is related to impaired loans. A loan is considered impaired, based on current information and events, if it is probable that we will be unable to collect the scheduled payments of principal or interest when due in accordance with the contractual terms of the loan agreement. Certain homogenous loans, including residential mortgage and consumer loans, are collectively evaluated for

impairment and, therefore, excluded from impaired loans. Commercial loans exceeding established size thresholds are individually evaluated for impairment. The amount included for impaired loans in our allowance for loan losses is based on the present value of expected future cash flows discounted at the loan’s effective interest rate, except that collateral-dependent loans may be measured for impairment based on the fa


Taylor Capital Group, Inc.		TAYC Capital Trust I

(Exact name of registrant as specified in its charter)		(Exact name of registrant as specified in its charter)

Delaware		Delaware
(State or other jurisdiction of incorporation or organization)


36-4108550	6712	01-6209821
(I.R.S. Employer Identification No.)	(Primary Standard Industrial Classification Code No.)	(I.R.S. Employer Identification No.)


EXPLANATORY NOTE
PROSPECTUS SUMMARY
RISK FACTORS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
THE COMPANY
USE OF PROCEEDS
DIVIDEND POLICY
DILUTION
CAPITALIZATION
SELECTED CONSOLIDATED FINANCIAL DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LITIGATION AND SETTLEMENT
MANAGEMENT
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PRINCIPAL AND SELLING STOCKHOLDERS
SUPERVISION AND REGULATION
DESCRIPTION OF CAPITAL STOCK
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
SHARES ELIGIBLE FOR FUTURE SALE
UNDERWRITING
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND MORE INFORMATION
PROSPECTUS SUMMARY
RISK FACTORS
USE OF PROCEEDS
CAPITALIZATION
PRINCIPAL STOCKHOLDERS
DESCRIPTION OF THE TRUST
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
DESCRIPTION OF THE DEBENTURES
BOOK-ENTRY ISSUANCE
DESCRIPTION OF THE GUARANTEE
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE DEBENTURES AND THE GUARANTEE
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
UNDERWRITING
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND MORE INFORMATION
INDEX TO FINANCIAL STATEMENTS
Opinion of Katten Muchin Zavis Rosenman
Consent of KPMG LLP


	Per Share	Total

Initial public offering price of common stock	$	$
Underwriting discount	$	$
Proceeds (before expenses) to Taylor Capital Group	$	$
Proceeds (before expenses) to the selling stockholder	$	$


						Reported
	Number					Annual
	of					Sales*
Businesses in the Chicago Metropolitan Statistical Area	Businesses		% of Total			(in millions)

Services		142,380		44.1	%	$	173,293
Retail Trade		56,058		17.4			218,404
Finance, Insurance and Real Estate		29,481		9.1			339,183
Construction		26,815		8.3			43,669
Manufacturing		21,961		6.8			543,028
Wholesale Trade		21,381		6.6			148,496
Transportation and Public Utilities		14,557		4.5			66,132
Agriculture, Forestry and Fishing		6,676		2.1			1,900
Public Administration		3,168		1.0			54
Mining		194		0.1			4,715

Totals		322,671		100.0	%	$	1,538,874


Jeffrey R. Patt, Esq. Ernest W. Torain, Jr., Esq. Katten Muchin Zavis Rosenman 525 West Monroe Street Chicago, Illinois 60661 (312) 902-5200		William R. Kunkel, Esq. Skadden, Arps, Slate, Meagher & Flom (Illinois) 333 West Wacker Drive Chicago, Illinois 60606 (312) 407-0700


Keefe, Bruyette & Woods, Inc.	Stifel, Nicolaus & Company


Common stock offered by us		2,250,000 shares

Common stock offered by the selling stockholder		525,000 shares

Common stock to be outstanding immediately after this offering		9,091,779 shares

Use of proceeds		We intend to use our net proceeds from this offering of common stock and the concurrent offering of trust preferred securities described below to satisfy our obligations pursuant to the settlement agreements described in the section of this prospectus captioned “Litigation and Settlement.” We intend to use the remaining net proceeds from this offering and the concurrent offering of trust preferred securities to reduce our outstanding term loan. We will not receive any proceeds from the sale of shares of common stock by the selling stockholder. See the section of this prospectus captioned “Use of Proceeds.”

Nasdaq National Market symbol		TAYC


																						Period from
				For the Six Months																		February 12,
				Ended June 30,						Year Ended December 31,												1997 to
																						December 31,
				2002			2001			2001			2000			1999			1998			1997


				(in thousands, except share and per share data)
TAYLOR CAPITAL GROUP, INC.
Income Statement Data:
	Net interest income			$	50,349		$	44,667		$	91,718		$	87,322		$	78,834		$	70,736		$	62,156
	Provision for loan losses				4,950			4,250			9,700			7,454			6,000			5,135			4,061

		Net interest income after provision for loan loss			45,399			40,417			82,018			79,868			72,834			65,601			58,095
	Noninterest income:
		Service charges			5,864			5,672			11,513			10,346			9,609			8,997			8,279
		Trust fees			2,810			3,234			6,425			4,654			4,563			3,971			3,331
		Mortgage-banking revenues			275			1,118			2,122			1,534			2,682			5,083			2,598
		Gain on sale of investment securities, net			8			2,241			2,333			750			108			11			401
		Other noninterest income			1,351			1,076			1,880			1,989			2,228			2,559			3,264

			Total noninterest income		10,308			13,341			24,273			19,273			19,190			20,621			17,873
	Noninterest expense:
		Salaries and benefits			22,971			19,976			43,207			39,383			38,205			37,303			31,683
		Legal expense, net			1,846			2,369			2,504			12,053			6,226			4,364			2,227
		Goodwill amortization			—			1,158			2,316			2,326			2,393			2,431			2,230
		Litigation settlement charge			64,509			—			—			—			—			—			—
		Other noninterest expense			14,778			14,652			31,105			26,821			25,720			26,330			23,394

			Total noninterest expense		104,104			38,155			79,132			80,583			72,544			70,428			59,534

	Income (loss) before income taxes and cumulative effect of change in accounting principle				(48,397	)		15,603			27,159			18,558			19,480			15,794			16,434
	Income taxes				5,822			5,532			9,528			9,604			7,973			6,353			6,321
	Cumulative effect of change in accounting principle, net of income taxes				—			—			—			—			(214	)		—			—

	Net income (loss)				(54,219	)		10,071			17,631			8,954			11,293			9,441			10,113
	Preferred dividend requirements				(1,721	)		(1,721	)		(3,443	)		(3,443	)		(3,442	)		(3,442	)		(3,052	)

	Net income (loss) applicable to common stockholders			$	(55,940	)	$	8,350		$	14,188		$	5,511		$	7,851		$	5,999		$	7,061

Common Share Data:(1)
	Basic earnings (loss) per share			$	(8.18	)	$	1.21		$	2.07		$	0.80		$	1.13		$	0.86		$	1.04
	Diluted earnings (loss) per share				(8.18	)		1.20			2.05			0.79			1.12			0.86			1.04
	Cash dividends per share				0.12			0.12			0.24			0.24			0.24			0.24			0.24
	Book value per share				11.75			18.83			19.41			17.25			15.76			15.29			14.77
	Dividend payout ratio				(1.47	)%		9.89	%		11.61	%		30.13	%		21.30	%		27.93	%		23.15	%
	Weighted average shares — basic earnings per share				6,838,856			6,881,706			6,862,761			6,919,751			6,967,028			6,981,047			6,810,194


	The Taylor family, which may have interests that differ from or conflict with those of other stockholders, owns a significant majority of our common stock and, after this offering, will continue to control all fundamental matters affecting our business.


	Our common stock does not have a trading history and you may not be able to trade our common stock if an active trading market does not develop. Additionally, the price of our common stock may fluctuate significantly.


	*We require a significant amount of cash to service our indebtedness, which reduces the cash available to finance our operations.*


	As a holding company, we are dependent on receiving dividends from the Bank in order to pay dividends and other obligations, and there are restrictions on the Bank’s ability to pay dividends to us.


	*Our ability to pay dividends on our common stock may be limited by a number of restrictions.*


	*Fluctuations in interest rates could reduce our profitability.*


																					Period from
			For the Six Months																		February 12,
			Ended June 30,						Year Ended December 31,												1997 to
																					December 31,
			2002			2001			2001			2000			1999			1998			1997


			(in thousands, except share and per share data)
	Weighted average shares — diluted earnings per share			6,838,856			6,959,393			6,908,070			6,960,494			6,991,478			6,995,766			6,810,194
	Shares outstanding — end of period			6,813,588			6,848,526			6,836,028			6,902,289			6,939,240			6,987,800			6,960,680
Balance Sheet Data (at end of period):
	Total assets		$	2,462,869		$	2,376,506		$	2,390,670		$	2,263,323		$	2,044,370		$	1,910,330		$	1,855,711
	Investment securities			506,699			514,322			494,208			510,187			433,412			426,732			463,821
	Total loans			1,801,676			1,642,069			1,741,637			1,611,692			1,456,805			1,335,981			1,204,437
	Allowance for loan losses			32,918			32,623			31,118			29,568			26,261			24,599			25,813
	Goodwill			23,354			24,512			23,354			25,671			28,860			31,903			34,334
	Total deposits			1,901,100			1,824,124			1,833,689			1,742,830			1,607,550			1,439,737			1,377,957
	Short-term borrowings			224,847			227,100			244,993			249,819			147,129			171,718			186,053
	Notes payable and FHLB advances			127,200			129,000			111,000			77,000			114,500			131,500			112,000
	Preferred stock			38,250			38,250			38,250			38,250			38,250			38,250			38,250
	Common stockholders’ equity			80,034			128,959			132,666			119,061			109,347			106,883			102,820
	Total stockholders’ equity			118,284			167,209			170,916			157,311			147,597			145,133			141,070
Earnings Performance Data(2):
	Return on average assets			(4.50	)%		0.86	%		0.75	%		0.40	%		0.57	%		0.51	%		0.61	%
	Return on average stockholders’ equity			(61.84	)		12.48			10.62			5.93			7.70			6.57			8.64
	Net interest margin (tax-equivalent)(3)			4.50			4.14			4.22			4.25			4.39			4.22			4.23
	Noninterest income to revenues			12.39			13.15			12.72			9.84			11.82			13.15			12.72
	Efficiency ratio(4)			65.29			68.42			69.62			76.13			74.09			77.10			74.77
	Loans to deposits			94.77			90.02			94.98			92.48			90.62			92.79			87.41
	Average interest-earning assets to average interest bearing liabilities			123.40			121.52			122.48			122.58			124.09			124.49			122.80
	Ratio of earnings to fixed charges(5):
		Including interest on deposits		1.52	x		1.28	x		1.27	x		1.14	x		1.20	x		1.15	x		1.18	x
		Excluding interest on deposits		2.74	x		2.01	x		1.97	x		1.49	x		1.65	x		1.43	x		1.56	x
Asset Quality Ratios:
	Allowance for loan losses to total loans			1.83	%		1.99	%		1.79	%		1.83	%		1.80	%		1.84	%		2.14	%
	Allowance for loan losses to nonperforming loans(6)			214.74			239.33			178.84			264.69			180.90			175.92			189.34
	Net loan charge-offs to average total loans(2)			0.36			0.15			0.49			0.27			0.31			0.50			0.27
	Nonperforming assets to total loans plus repossessed property(7)			0.86			0.84			1.03			0.71			1.06			1.29			1.25
Capital Ratios:


	*Our wholesale funding sources may prove insufficient to replace deposits at maturity and support our future growth.*


	*Our allowance for loan losses may prove to be insufficient to absorb potential losses in our loan portfolio.*


	Under Federal Reserve guidelines, we are currently considered “undercapitalized” at the holding company level as a result of a charge taken in the second quarter of 2002. This classification has increased our regulatory oversight and may limit our ability to expand, pending completion of the concurrent offerings of common stock and trust preferred securities.


	*Future sales of common stock by existing stockholders may have an adverse impact on the market price of our common stock.*


	*As a new investor, you will incur immediate and substantial dilution.*


	*We may experience difficulties in relocating and consolidating our administrative and operational functions.*


	*If we do not successfully implement our business strategy and manage our growth effectively, our business, financial condition and results of operations could be adversely affected.*


	*We rely heavily on our management team and key personnel, and the unexpected loss of key managers and personnel may adversely affect our operations.*


	*Our future success is dependent on our ability to compete effectively in the highly competitive banking industry.*


	Our business is subject to the vagaries of domestic and international economic conditions and other factors, many of which are beyond our control and could significantly harm our business.


	*Our business may be adversely affected by the highly regulated environment in which we operate.*


	*Following this offering, we may need additional capital, and adequate financing may not be available to us on acceptable terms, or at all.*


	*We rely on third party professionals to provide certain financial services to our customers.*


	*We are subject to certain operational risks, including, but not limited to, data processing system failures and errors and customer or employee fraud.*


	*We are subject to security risks relating to our internet banking activities that could damage our reputation and our business.*


	Provisions of our amended and restated certificate of incorporation, by-laws and Delaware law, as well as state and federal banking regulations, could delay or prevent a takeover of us by a third party.


		Square
Facility	Address	Feet

Wheeling	350 East Dundee Road, Wheeling, Illinois		58,310
West Washington	111 West Washington, Chicago, Illinois		40,662
Jackson	850 West Jackson, Chicago, Illinois		3,995
Ashland	47th Street and Ashland, Chicago, Illinois		79,260
Milwaukee	1965 North Milwaukee, Chicago, Illinois		27,394
Woodlawn	824 E. 63rd Street, Chicago, Illinois		2,100
Broadview	Cermak and 17th Street, Broadview, Illinois		5,550
Burbank	5501 West 79th Street, Burbank, Illinois		37,500
Yorktown	One Yorktown Center, Lombard, Illinois		12,400
Skokie	4400 West Oakton, Skokie, Illinois		15,800
Old Orchard	Golf Road and Skokie Boulevard, Skokie, Illinois		10,000


	2002 Dividends			2001 Dividends		2000 Dividends
	Per Share of			Per Share of		Per Share of
	Common Stock			Common Stock		Common Stock

First quarter	$	0.06		$	0.06	$	0.06
Second quarter		0.06			0.06		0.06
Third quarter		0.06	*		0.06		0.06
Fourth quarter		—			0.06		0.06


*	The record date and payment date for the scheduled third quarter dividend on our common stock are September 27, 2002 and October 11, 2002, respectively. This offering will be completed after the record date for this dividend. As a result, investors in this offering will not be entitled to receive this dividend.


Assumed initial public offering price per share				$	19.00
	Net tangible book value per common share before this offering	$	8.19
	Increase in pro forma net tangible book value per common share resulting from this offering		2.27

Pro forma net tangible book value per common share after giving effect to this offering					10.46

Dilution per share to new investors				$	8.54