Taylor Capital Group (TAYC)

6. Notes Payable and FHLB Advances:

Notes Payable and FHLB advances at March 31, 2009 and December 31, 2008 consisted of the following:

At March 31, 2009 and December 31, 2008, the Company had a $15.0 million revolving credit facility, of which $12.0 million was outstanding. The notes payable under the revolver required compliance with certain defined financial covenants. As of March 31, 2009, the Company is in compliance with all of the covenants. In March 2009, the Company executed an amendment with its lender to extend the maturity date of this facility from March 31, 2009 to March 31, 2010. The amendment also changed the interest rate to the prime rate plus 4.00% or LIBOR plus 4.00%, at the Company’s election, with a minimum interest rate of 5.00%. In addition, a 0.25% fee will be charged on the unused portion of the revolver. The new interest rate and non-use fee are effective as of April 1, 2009.

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At March 31, 2009 and December 31, 2008, the Company had additional borrowing capacity at the FHLB of $81.8 million and $146.7 million, respectively.

Notes Payable and FHLB Advances

At March 31, 2009 and December 31, 2008, we had $12 million outstanding on our $15 million revolving credit facility. In March 2009, we executed an amendment with our lender to extend the maturity of this facility until March 31, 2010. The underlying loan agreement requires that the Bank remain well capitalized and the holding company remain adequately capitalized as defined by regulatory guidelines. As of March 31, 2009, we were in compliance with these covenants.

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Borrowings from the FHLBC increased $40.0 million during the first three months of 2009 to $490.0 million at March 31, 2009, compared to $450.0 million as of December 31, 2008. We have increased our use of FHLB advances in recent periods to fund asset growth and the increase in our investment portfolio. We have primarily used overnight or short-term FHLB advances with rates that float daily, taking advantage of the low interest rate environment. At March 31, 2009 and December 31, 2008, the Company had additional borrowing capacity at the FHLB of $81.8 million and $146.7 million, respectively.

Notes Payable and FHLB Advances

At December 31, 2008, we had $12 million outstanding on our $15 million revolving credit facility, which was scheduled to mature on March 31, 2009. Subsequent to year-end 2008, we executed an amendment with our lender to extend this facility until March 31, 2010. In comparison, at December 31, 2007, we had not drawn on our revolving credit facility. The revolving credit facility was amended during 2008, reducing the commitment amount to $15 million from $20 million, primarily as a result of our adverse operating results in 2008. The underlying loan agreement requires that the Bank remain well capitalized and the holding company remain adequately capitalized as defined by regulatory guidelines. As of December 31, 2008, we were in compliance with these covenants. We are currently in discussions to renew our credit facility at maturity.

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Our FHLB advances consist of borrowings from the Federal Home Loan Bank of Chicago (“FHLBC”). At December 31, 2008, total FHLB advances were $450.0 million, compared to $205.0 million at December 31, 2007. During 2008, the Bank increased its borrowing from the FHLB to fund purchases of investment securities. The FHLB advances are collateralized by investment securities and a blanket lien on qualified first-mortgage residential and home equity loans. As of December 31, 2008, $315.0 million of the FHLB advances were overnight and an additional $92.5 million were either callable or scheduled to mature within the next 12 months. The remaining $42.5 million of FHLB advances can be called in 2010.

Currently, the FHLBC is under a formal written agreement with its regulator requiring the regulator’s prior approval for the payment of dividends or redemptions of capital stock. Based on written correspondence and verbal communications with the FHLBC, we believe the order should not impact the FHLBC’s ability to provide us with liquidity and funding needs provided we continue to meet their credit standards.

For additional details of the FHLB advances, see the section captioned “Notes to Consolidated Financial Statements–Notes Payable and FHLB Advances” from our audited financial statements contained elsewhere in this annual report.

Notes Payable and FHLB Advances:

Notes payable and FHLB advances have been valued at the present value of estimated future cash flows using rates which approximate current market rates for instruments of like maturities.

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TAYLOR CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Notes Payable and FHLB Advances

At September 30, 2008, we had outstanding $12.0 million under our revolving credit facility. During the third quarter of 2008, we amended this credit facility with our lender, under which our lender approved the issuance of the preferred stock, the revolving loan amount was reduced from $20.0 million to $15.0 million, and the maturity date was extended from November 27, 2008 to March 31, 2009.

Borrowings from the FHLBC decreased $70.0 million during the first nine months of 2008 to $135.0 million at September 30, 2008.

Notes Payable and FHLB Advances

At June 30, 2008, we had outstanding $12.0 million under our $20.0 million revolving credit facility.

Borrowings from the FHLBC decreased $70.0 million during the first six months of 2008 to $135.0 million at June 30, 2008.

Notes Payable and FHLB Advances

At June 30, 2008, we had outstanding $12.0 million under our $20.0 million revolving credit facility.

Borrowings from the FHLBC decreased $70.0 million during the first six months of 2008 to $135.0 million at June 30, 2008.

Notes Payable and FHLB Advances:

Notes payable and FHLB advances have been valued at the present values of future cash flows using rates which approximate current market rates for instruments of like maturities.

Notes Payable and FHLB Advances:

Notes Payable and FHLB Advances:

Notes payable and FHLB advances have been valued at the present values of future cash flows using rates which approximate current market rates for instruments of like maturities.

Notes Payable and FHLB Advances:

Notes payable and FHLB advances have been valued at the present values of future cash flows using rates which approximate current market rates for instruments of like maturities.

Notes Payable and FHLB Advances

Notes payable consists of our subordinated debt, revolving credit facility, and term debt. FHLB advances consist of the Bank’s borrowings from the Federal Home Loan Bank of Chicago.

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Notes payable. At both December 31, 2004 and 2003, we had $10.0 million of unsecured, subordinated debt that is subordinate to the claims of our general creditors. This debt requires interest only payments until maturity. The agreement was amended in 2004 to extend the maturity date by two years to November 27, 2011. The subordinated debt bears interest, based upon our election, at the prime rate plus 2.50% or LIBOR plus 2.75%. The interest rate at December 31, 2004 and 2003 was 5.13% and 3.92%, respectively. The subordinated debt qualifies as Tier II capital under Federal Reserve capital adequacy guidelines.

We also had $500,000 outstanding under our term loan at both December 31, 2004 and 2003. This loan requires interest only payments until maturity. The agreement was also amended in 2004 to extend the maturity date by two years to November 27, 2011. The loan bears interest, based upon our election, at the prime rate or LIBOR plus 1.15%, with a minimum interest rate of 3.50%. The interest rate at December 31, 2004 and 2003 was 3.53% and 3.50%, respectively. In addition, we have an $11.5 million revolving credit facility that has not yet been drawn upon. This facility bears interest, based upon our election, at the prime rate or LIBOR plus 1.15%, with a minimum interest rate of 3.50%. This facility also requires interest only payments until maturity. The facility was renewed during 2004 and the maturity date extended to November 27, 2005. The term note and the revolving credit facility are secured by all of our common stock of the Bank. We capitalized costs associated with obtaining the notes payable, such as loan fees and attorney costs. We are amortizing these costs to interest expense over seven years, the original term of the loans, using the straight-line method.

The notes payable require compliance with certain defined financial covenants relating to the Bank, including covenants related to regulatory capital, return on average assets, nonperforming assets, and Company leverage. As of December 31, 2004, we were in compliance with these covenants. The agreement also restricts the amount of dividends that we can pay to shareholders and the amount of dividends that the Bank can pay to us. We are restricted from paying annual cash dividends to our common shareholders during a calendar year in excess of 25% of that year’s annual net income, additionally the Bank is restricted from paying annual cash dividends in a calendar year to us in excess of 60% of that year’s Bank net income.

FHLB advances. Our borrowings from the FHLB totaled $75.0 million at December 31, 2004 and $100.0 million at December 31, 2003. At December 31, 2004, the FHLB advances were collateralized by $43.2 million of investment securities, $7.6 million of FHLB stock, and a blanket lien on $97.6 million of qualified first-mortgage residential and home equity loans. At December 31, 2003, the FHLB advances were collateralized by $22.3 million of investment securities, $7.2 million of FHLB stock, and a blanket lien on $128.7 million of qualified first-mortgage residential and home equity loans. The weighted average interest rates at December 31, 2004 and 2003 were 4.56% and 4.04%, respectively. For additional details of the FHLB advances, see the section captioned “Notes to Consolidated Financial Statements–Notes Payable and FHLB Advances” from our audited financial statements contained elsewhere in this annual report.

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Notes Payable and FHLB Advances

Notes payable consists of our subordinated debt, revolving credit facility, and term debt. FHLB advances consist of the Bank’s borrowings from the Federal Home Loan Bank of Chicago.

Notes payable. At both December 31, 2004 and 2003, we had $10.0 million of unsecured, subordinated debt that is subordinate to the claims of our general creditors. This debt requires interest only payments until maturity. The agreement was amended in 2004 to extend the maturity date by two years to November 27, 2011. The subordinated debt bears interest, based upon our election, at the prime rate plus 2.50% or LIBOR plus 2.75%. The interest rate at December 31, 2004 and 2003 was 5.13% and 3.92%, respectively. The subordinated debt qualifies as Tier II capital under Federal Reserve capital adequacy guidelines.

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We also had $500,000 outstanding under our term loan at both December 31, 2004 and 2003. This loan requires interest only payments until maturity. The agreement was also amended in 2004 to extend the maturity date by two years to November 27, 2011. The loan bears interest, based upon our election, at the prime rate or LIBOR plus 1.15%, with a minimum interest rate of 3.50%. The interest rate at December 31, 2004 and 2003 was 3.53% and 3.50%, respectively. In addition, we have an $11.5 million revolving credit facility that has not yet been drawn upon. This facility bears interest, based upon our election, at the prime rate or LIBOR plus 1.15%, with a minimum interest rate of 3.50%. This facility also requires interest only payments until maturity. The facility was renewed during 2004 and the maturity date extended to November 27, 2005. The term note and the revolving credit facility are secured by all of our common stock of the Bank. We capitalized costs associated with obtaining the notes payable, such as loan fees and attorney costs. We are amortizing these costs to interest expense over seven years, the original term of the loans, using the straight-line method.

The notes payable require compliance with certain defined financial covenants relating to the Bank, including covenants related to regulatory capital, return on average assets, nonperforming assets, and Company leverage. As of December 31, 2004, we were in compliance with these covenants. The agreement also restricts the amount of dividends that we can pay to shareholders and the amount of dividends that the Bank can pay to us. We are restricted from paying annual cash dividends to our common shareholders during a calendar year in excess of 25% of that year’s annual net income, additionally the Bank is restricted from paying annual cash dividends in a calendar year to us in excess of 60% of that year’s Bank net income.

FHLB advances. Our borrowings from the FHLB totaled $75.0 million at December 31, 2004 and $100.0 million at December 31, 2003. At December 31, 2004, the FHLB advances were collateralized by $43.2 million of investment securities, $7.6 million of FHLB stock, and a blanket lien on $97.6 million of qualified first-mortgage residential and home equity loans. At December 31, 2003, the FHLB advances were collateralized by $22.3 million of investment securities, $7.2 million of FHLB stock, and a blanket lien on $128.7 million of qualified first-mortgage residential and home equity loans. The weighted average interest rates at December 31, 2004 and 2003 were 4.56% and 4.04%, respectively. For additional details of the FHLB advances, see the section captioned “Notes to Consolidated Financial Statements–Notes Payable and FHLB Advances” from our audited financial statements contained elsewhere in this annual report.