2008 Business Report COLE TAYLOR BANK BOARD OF DIRECTORS Bruce W. Taylor Chairman Jeffrey W. Taylor Vice Chairman Mark A.
Hoppe President & Chief Executive Officer John J. Lynch, Jr. Vice Chairman, Cole Taylor Bank C.
Bryan Daniels Prairie Capital L.P. Ronald Emanuel ATI Carriage House, Inc. Gary A.
Greenberg Elzie Higginbottom East Lake Management & Development Corp. Joseph Mario Moreno Joseph Mario Moreno & Associates, Ltd. Langdon D.
Neal Neal & Leroy, LLC Irwin Steinberg Steinberg Advisors, Ltd. Eric Wasowicz TAYLOR CAPITAL GROUP BOARD OF DIRECTORS Bruce W. Taylor Chairman and Chief Executive Officer Jeffrey W.
Taylor Vice Chairman Mark A. Hoppe President Ronald L. Bliwas A.
Eicoff & Company C. Bryan Daniels Prairie Capital L.P. Ronald Emanuel ATI Carriage House, Inc.
M. Hill Hammock Chicago Deferred Exchange Corp. Michael H.
Moskow Chicago Council on Global Affairs Louise O'Sullivan Prime Advantage Melvin E. Pearl Katten Muchin Rosenman, LLP Shepherd G. Pryor IV Harrison I.
Steans Financial Investments Corporation Jennifer W. Steans Financial Investments Corporation Richard Tinberg The Bradford Exchange COLE TAYLOR BANK EXECUTIVE MANAGEMENT Bruce W. Taylor Chairman Mark A.
Hoppe President & Chief Executive Officer Randall T. Conte Chief Financial Officer & Chief Operating Officer John J. Lynch, Jr.
Vice Chairman Michael J. Morton Executive Vice President Chief Credit ... more. less.
Officer Lawrence G. Ryan Executive Vice President Commercial Banking Michael D.<br><br> Sharkey Executive Vice President Asset Based Lending Dear Friends, 2008 brought its share of challenges and opportunities to the nation, our customers and our company. There is no doubt that fundamental assumptions about the economy,the effectiveness of regulatory oversight, and the viability of some of our nation 9s largest companies have all been severely tested. As this letter is being written, the economic downturn continues to be the daily headline.<br><br> Nevertheless, we are beginning to see some signs of improvement and are confident in American business 9 resilience, creativity,energy, and ability to find opportunity in even the most difficult of times. For us, the challenge came in the form of the most significant nationwide downturn in the housing market since the great depression. Our portfolio of local homebuilders was thrown into crisis by a decline in home sales of more than 80% from its peak in 2005 and a significant decline in the value of new homes and related land developments.<br><br> As a result, a significant portion of our customers in the homebuilding businesseffectively have gone out of business. This is the primary reason for our increase in non-performing loans, increased credit costs, and the loss we experienced last year. Opportunity, meanwhile, presented itself in two forms, both of which hold great promise for the company and will allow us to emerge from this period a stronger, more significant player in the Chicago commercialbanking market.<br><br> During the last year, we took advantage of disruption in our market caused by acquisitionsand the changing strategic focus of our largest competitors, t o attract fifty experienced commercial bankers to our company. This in turn allowed us to establish new relationships with more t han 180 closely-held businesses, growing our company 9s assets to $4.4 billion at year end. These relationships also represent a substan tial increase in our share of the market for closely held businesses with annual sales of $5 - $200 million.<br><br> With this growth came increased capabilities in interest rate risk management products, treasury management services, and comme rcial finance under the newly formed Cole Taylor Business Capital. This new part of our company specializes in providing capital for leveraged Bruce W. Taylor Chairman & Chief Executive Officer Mark A.<br><br> Hoppe President Michael D. SharkeyNancy KarasekJohn J. Lynch, Jr.Bruce W.<br><br> Taylor Steven H. Shapiro Executive Vice PresidentGroup Senior Vice PresidentVice ChairmanChairmanGroup Senior Vice President Asset Based LendingHuman CapitalGeneral Counsel Michael J. MortonLawrence G.<br><br> RyanMaria TabriziMark A. HoppeRandall T. ConteKathryn Kaporis Executive Vice PresidentExecutive Vice PresidentGroup Senior Vice PresidentPresident Chief Financial OfficerSenior Vice Preside nt Chief Credit OfficerCommercial BankingAudit and Advisory ServicesChief Executive OfficerChief Operating OfficerDirector of Mark eting businesses requiring closer monitoring of the assets supporting the transaction.<br><br> This business not only expands our abilitiesto support our business customers, but, with offices in six cities, adds an element of geographic diversification to our business. The second opportunity came as a result of our rapid growth combined with losses experienced in our home builder portfolio. By mid-year, it was clear we would need to augment the company 9s capital base if we were to continue taking advantage of the marke t opportunity to grow our business.<br><br> As a result, we sought out a partnership with the Steans family and other local investors who shared our vision of growing Cole Taylor into one of Chicago 9s premier commercial banks. On September 29, 2008, we consummated that partnership with the closing of a $120 million private placement of convertible preferred stock and subordinated debt. In conjunction with this offering, Jennifer and Harrison Steans joined the company 9s board of directors.<br><br> In addition, three oth er new directors joined our board during 2008 and early 2009. They include M. Hill Hammock, Michael Moskow, and C.<br><br> Bryan Daniels. We welcome all five new directors to our ranks and have already benefited from their guidance and expertise. We want to thank all of our customers for their continued support through these very difficult times.<br><br> Every day, we see how the recession is impacting our customers' businesses and are inspired by the energy and effort they put forth to position their companies to survive and prosper during this period. We are committed to our relationshipwith each and every one of our customers. Finally, our staff, new and old, has answered the call time and time again over the past year.<br><br> Their commitment to getting the job done for our customers is second to none. They have managed through a significant amount of change and kept focus on what is truly most important: our customers and the communities we serve. We thank them for everything they have done to move the company forward.<br><br>