Taylor Capital Group Inc. Reports Operating Results (10-Q)
Taylor Capital Group Inc. has a market cap of $107.2 million; its shares were traded at around $9.68 with and P/S ratio of 0.5. TAYC is in the portfolios of Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations: We reported a net loss applicable to common stockholders of $48.3 million, or ($3.35) per diluted common share outstanding, for the second quarter of 2010, compared to a net loss applicable to common stockholders of $26.1 million, or ($2.49) per diluted common share, in the second quarter of 2009. For the quarter and six month periods ended June 30, 2010, the loss applicable to common stockholders of $62.0 million, or ($4.97) per diluted common share, compared to a net loss applicable to common stockholders of $31.8 million, or ($3.03) per diluted share, during the first six months of 2009. For the quarter and six month period ending June 30, 2010 loss applicable to common shareholders included a one-time, non-cash charge of $15.8 million, or $1.09 per diluted share, representing an inducement to the holders of all of the Companys Series A preferred stock who converted their Series A preferred shares into common stock as part of the recently completed exchange offer. This non-cash charge and a higher provision for loan losses, coupled with lower noninterest income and higher noninterest expense, more than offset higher net interest income.
On May 28, 2010, we completed our previously announced capital transactions. The transactions provide additional liquidity in order for us to continue to act as a source of strength for our Bank, to better align our capital position to our peers and to support our future growth plans. On one of these transactions, all of the holders of the $60 million Series A preferred stock agreed to convert their preferred shares into common equity. By its terms, the Series A preferred stock was convertible into 6.0 million shares of common stock. In addition, we issued an additional 1.2 million common shares to induce the Series A preferred holders to convert. In total, $60 million of preferred shares were converted to 7.2 million shares of common equity. The Company also raised $75 million in new capital which included a private placement of non-cumulative, convertible Series C Preferred stock and subordinated debt. Currently, $9.1 million of this amount is held in escrow pending regulatory approval.
Net interest income was $34.7 million for the second quarter of 2010, an increase of $4.3 million, or 14.1%, from $30.4 million of net interest income in the second quarter of 2009. Net interest income for the second quarter of 2010, benefited from the low interest rate environment and resulted in a higher net interest margin.
Offsetting the lower cost of funds were lower interest earning asset yields, which declined 12 basis points from 5.00% in the second quarter of 2009 to 4.88% in the second quarter of 2010. The lower yield on interest-earning assets reflected the shift from higher yielding loan balances to lower yielding investments. Average loan balance fell nearly $150 million in the second quarter of 2010 compared to second quarter of 2009. The investment portfolio average balances grew to $1.3 billion for the second quarter 2010 from $1.2 billion for the second quarter of 2009. The lower rate environment negatively impacted the yields on the investment portfolio as rates declined 56 basis points from 4.89% in the second quarter of 2009 to 4.33% in the second quarter of 2010. These decreases were somewhat mitigated by higher yields on loans which are up to 5.06% in the second quarter of 2010 from 4.89% in the second quarter of 2009 as a result of our efforts to improve loan pricing, including the use of interest rate floors.
Net interest income was $68.1 million for the first six months of 2010, compared to $57.7 million during the same six month period a year ago, an increase of $10.4 million, or 18.0%. Net interest income for the first six months of 2010 benefited from the lower interest rate environment, which resulted in a 49 basis point increase in the net interest margin.
Offsetting the lower cost of funds were fluctuations in rates and volume of our earning assets. Average loan volumes declined for the six month period ended June 30, 2010 to $3.0 billion from $3.2 billion for the same period a year ago, as we continue to reposition the loan portfolio to reduce exposure to certain industries and sectors along with loan charge-offs and lower customer line usage. The low rate environment also had a negative impact on our investment portfolio. For the six month period ended June 30, 2010, the yield on our investment securities was 4.35%, compared to 5.10% for the same period a year ago or a 75 basis point reduction.
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