HED: Despite credit squeeze, Taylor Capital Group raises $120 million

             Taylor Capital Group Inc. announced Monday that it has completed raising $120 million in capital from several investors, including former LaSalle National Bank chairman Harrison I. Steans and his daughter, Jennifer W. Steans, who become directors of Taylor. The stock jumped 3.1 percent Tuesday to $11.99.

The company operates nine banking centers in the Chicago area, including one in Burbank.

The capital derived from the sale of $60 million of non-cumulative, convertible preferred stock by Taylor Capital Group and $60 million of subordinated debt by its subsidiary Cole Taylor Bank.

 Other investors include the Taylor family, several members of Cole Taylor Bank’s management, and Chicago-based investment firms and individuals, according to a press release. The company’s total assets are $3.7 billion as of June 30.

The announcement follows an agreement for the transaction announced Sept. 4.

“With Taylor Capital Group able to do this, it bodes well for the company going forward,” said analyst Brian Martin, vice president of Howe Barnes Hoefer & Arnett Inc. He said the other few banks he researches have not been able to raise capital.

Investors will receive a quarterly dividend of 8 percent for the preferred stock, convertible into an aggregate of 6 million common stock shares at a conversion price of $10 per share, according to Martin’s research note. The subordinated debt will bear an annual interest rate of 10 percent and will mature on the eighth anniversary of closing, with the option of prepayment in whole or in part at the bank’s option after three years.

Mark A. Nystuen, a public relations representative for Cole Taylor at The Kineo Group, said the new capital will help the company achieve its strategic growth plan. Taylor Capital Group has recently hired 40 people, mostly from the former LaSalle Bank after its takeover by Bank of America, said Nystuen. One of them is Mark A. Hoppe, who now serves as president and a director of Taylor Capital Group and president and CEO of Cole Taylor Bank.

PrivateBancorp Inc. of Chicago has hired about 150 employees from LaSalle, according to Director of Communications Amy Yuhn.

Taylor Capital Group has increased its net loan portfolio to $2.6 billion as of June 30, up 5.7 percent from $2.5 billion in the year-earlier period, according to the company’s balance sheet. Nystuen said the company specializes in serving small to mid-sized businesses in the Chicago area.

The company also announced that Harrison Steans will serve as chairman of the board's executive committee, which includes Bruce W. Taylor, chairman and CEO of Taylor Capital Group, and Hoppe.

The company lost $29.2 million, or $2.79 per diluted share, in the six months ended June 30, compared with a profit of $12.5 million, or $1.12 per diluted share, in the year-earlier period.

The loss came from an allocation of $49.4 million to the reserve for loan losses in the second quarter, 26 times the $1.9 million provided in the second quarter last year.

With the newly issued convertible preferred stock, Martin lowered his 2008 earnings-per-share estimate by 11 cents to a loss of $4.36 per diluted share and his 2009 estimate by 35 cents to a loss of $1.75 per diluted share. The company lost 89 cents per diluted share in 2007. Martin estimates the Taylor family ownership will fall to 30 percent from its current 43 percent ownership with this transaction.