When the Taylor family of Chicago took complete control of Cole Taylor Bank in 1997, the plan was to keep the bank private, but a long-running dispute with its former co-owners is forcing the family to sell some shares of the bank’s holding company to the public.

Cole Taylor Bank, of Wheeling, Ill., was formed in 1969, when Sydney Taylor and Irwin Cole bought the former Main State Bank. In 1993 the bank formed a finance arm called Reliance Acceptance Corp. to make subprime auto loans. A year later the bank formed a holding company, Cole Taylor Financial Group Inc., and took it public.

In 1996 shareholders were agitating for higher share prices, the board was disagreeing over whether the company should be a banking or finance company, and Mr. Cole wanted to sell the bank. The Taylor family wanted to remain independent, so it formed Taylor Capital Group to buy the bank. Cole Taylor Financial Group became Reliance Acceptance Group and soon went bankrupt. In 1997 Reliance sued Taylor Capital, alleging that Taylor Capital did not pay enough money for the bank.

Taylor Capital said this month that it has agreed to settle the suit by paying the Reliance bankruptcy estate $15 million in cash, 15% of Taylor Capital’s outstanding shares, and $30 million of trust preferred securities. Taylor Capital will file to have the stock and trust preferred securities listed for public trading.

To cover the settlement, the holding company will borrow from Cole Taylor’s major correspondent bank for the $15 million in cash and issue securities.

“No cash or capital of Cole Taylor Bank is being utilized in the settlement in any way,” said J. Christopher Alstrin, the chief financial officer of $2.3 billion-asset Cole Taylor Bank and the chief financial officer and secretary for Taylor Capital Group.

He stressed that the settlement and stock issue did not indicate that the bank was for sale.

“One of the reasons we’re being so clear that the settlement is at the holding company level is that the bank is not for sale, and we’re not stripping down the bank,” Mr. Alstrin said.

Jeffrey W. Taylor, the chairman of Taylor Capital, said it decided to settle after weighing the costs of a court battle against the settlement.

“We felt that this was very time-consuming, very distracting, and there is no guarantee in litigation that you will get the result you want,” Mr. Taylor said of the suit.

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