Investors obviously were pleased with Taylor Capital Group Inc.'s third-quarter earnings report, but analysts were a little more cautious in their assessments.
After the market closed Tuesday the $3.4 billion-asset Rosemont, Ill., company reported that third-quarter earnings soared 155% from a year earlier, to $18.9 million, and that earnings per share jumped 139%, to $1.70.
The earnings got a big boost from funds that Taylor had set aside for possible tax liabilities for its 2002 returns but was able to restore to its balance sheet. The tax benefit increased Taylor's earnings by $1.02 a share.
Taylor's stock rose more than 14% Wednesday, to $34.50 a share. It was down 1 cent late Thursday.
Brian Martin, an analyst with Howe Barnes Hoefer Arnett Inc. of Chicago, said investors saw past the tax benefit. They saw that core earnings had risen 11 cents from the second quarter, to 68 cents a share.
"Maybe people were expecting the worst, and their numbers came in looking pretty good on several fronts. I think it is people getting comfort that there is no further deterioration," Mr. Martin said.
Until the third quarter, Taylor's year-over-year earnings had declined in three of the previous four quarters. The company attributed the declines to margin compression, expensive funding, and the competitiveness of the Chicago market. Second-quarter earnings per diluted share fell 37% from the same quarter a year earlier, to 57 cents.
Taylor has been working to add commercial lenders to boost loan growth, and it has been building up its cash management products to improve its funding mix. The company also is searching for a CFO to succeed Daniel C. Stevens, who said in a company press release that he had resigned "to seek other opportunities."
Third-quarter net interest income fell 5% from a year earlier but rose 2.5% from the second quarter, to $26 million. Noninterest income jumped 76% from a year earlier and 11.3% from the second quarter, to $3.7 million.
Mr. Martin said that even though the trend from the second to the third quarter looked good, he would like more consistency in the earnings.
Kevin K. Reevey, an analyst with Ryan Beck & Co. Inc., said that core earnings semed to show that the company is on the right track, but agreed that it needs to show more consistent growth.
"My impression is the competitiveness of the Chicago market has not slowed down; it continues to be a very competitive market, which is why we'd rather wait and see before jumping on the bandwagon," Mr. Reevey said.
Chairman Jeffrey W. Taylor said in a conference call Wednesday that increasing core deposits is his company's top priority.
"Our focus continues to be on improving our funding and funding costs. This is where we can get the most lift in our financial performance and shareholder value."
The company will try to boost deposits by getting more cash management accounts and retail accounts from the neighborhoods around its branches, and by persuading current customers to keep more money in their accounts, he said.
Real estate loans may be more of a challenge, he said; Taylor Capital is already experiencing a slowdown in residential construction, but there will be opportunities for growth in industrial and retail projects in the Chicago area.
