Jeffrey Taylor loves the intangibles of being a community bank chief executive: the prestige, the influence, the relationships.

On a recent road show to raise preferred stock, he proudly showed potential investors the products of some of the companies his family banking business helped build-Tootsie Rolls, Beanie Babies, Azteca tortillas.

"The desire to help is part of our business and that's what makes banking special," said Mr. Taylor, chief executive officer of Cole Taylor Bank, a suburban Chicago bank his father and a partner bought 28 years ago.

It's small wonder then that Mr. Taylor and his family turned down a plan by heirs to the bank's other co-owner, Irwin Cole, to sell off the bank to the highest bidder.

Instead, the Taylors paid more than $160 million in cash, stock and other assets to buy $1.8 billion-asset Cole Taylor Bank from the suburban Chicago holding company the Taylors and Coles built together.

Why did the Taylors go contrary to the consolidation craze, especially when their 25% stake in the holding company, Cole Taylor Financial Group, could have netted them tens of millions in a sale?

Based on interviews with the family and industry observers, the decision can't be pinned on a single reason so much as a convergence of personal and professional factors driven by emotion as much as economics.

"We believe in community banking," said Mr. Taylor, 44. "We think it is a wonderful career as well as a life as well as an investment."

The Taylors, especially Jeffrey, have come to represent the complicated motivations that drive some community bankers to go against the grain and to pass up rich takeout premiums. "I truly believe there is a niche for community banks," Mr. Taylor, 44.

The split of Cole Taylor Financial Group into its bank and subprime auto lender subsidiaries was precipitated by fighting that flared up in May 1995 between the founding families. Co-founder Irwin Cole, then 78 and working on his estate planning, wanted to sell out while he was still alive; the Taylors wanted to remain independent.

Valuations of the company, driven by its lucrative subprime lending unit, hit the $450 million range.

Yet the Taylors were blindsided by the Cole family's strategems; Irwin had been a business partner of Jeffrey's father, Sidney, for decades.

"I was surprised," Mr. Taylor said of the Cole family's desire to sell. "But things change."

Lori Cole, who started representing her family's interests in July 1995 after her father fell ill, declined to comment on the whole affair. "I don't want to go into that anymore," she said.

Amid months of takeout rumors, the Taylors hammered together a plan to buy the bank. The plan was approved in June 1996.

In exchange for the bank, a Taylor-led investment group gave the holding company $52.5 million in cash, 4.5 million shares of the holding company stock they owned with a market value of $77.6 million (which the holding company subsequently retired), and $30 million of auto receivables. After the purchase, Taylor Capital Group as the new Taylor-owned bank holding company is called, issued $38 million of preferred stock.

For all that, the Taylors got ownership of a bank that wasn't exactly setting Chicago ablaze. From 1993 through the third quarter of 1996 its returns were consistently mediocre when compared to its peers. Indeed, in the second quarter of 1996 the holding company depended on the subprime subsidiary to push the corporate return on assets above 1%.

But the Taylors are hoping to bolster returns through cost cuts and fee income, and are bully on their ability to cater to small and middle-market businesses.

Bruce Taylor, Jeffrey's brother and president of the bank, said Cole Taylor is perfectly situated to cater to this niche.

"We're either called the smallest big bank in town or the largest small bank, and that's a good position to be in," said Bruce, 41.

This year Cole Taylor is opening its 11th branch, developing an Internet site, and expanding its mortgage and trust offerings. It also is stepping up its data-base marketing.

William W. McGinnis Jr., a banking analyst for Robert W. Baird & Co., Milwaukee, points to this faith in the market as the family's motive for breaking ranks with its longtime partners and risking its wealth to keep the bank independent.

"The Taylors have a very strong belief in the Chicago banking market," Mr. McGinnis said.

But observers point to other motivations as well.

The most obvious is a strong attachment to the family business. This connection goes back to 1929 when Sidney started working for Main State Bank, which had been co-founded by his father-in-law, L. Shirley Tark.

Sidney and Irwin Cole bought the bank in 1969, and the sons soon saw it as a place to get ahead.

Working at the family bank was a "way to get responsibility at an early age," Bruce said. The Taylor brothers took the reins in 1989 after each had been at the bank for little more than 10 years.

Jeffrey denied that the the family bought the bank for sentimental reasons, saying it believed in making the investment.

But family-owned businesses aren't often subject to the same motivations as publicly held companies. One Kansas banker whose family recently sold its bank said big decisions involving such companies are personally wrenching.

"It was very difficult," said Ronald H. Pflumm, chief executive officer of $220 million-asset Shawnee (Kan.) State Bank, which earlier this year agreed to sell out to Commerce Bancshares, Kansas City, Mo. "We're on the third generation of the family and we're a community bank with roots right here in this county."

Bruce Taylor said he enjoys going out to meet with customers and prospects and spends about 30% of his time doing just that.

Beyond themselves, the Taylor brothers see banking as a good investment for the family's wealth. A significant portion of the family's money is tied to the bank, and although Jeffrey's expectations for the bank's expansion-6% asset growth and 10% growth in returns to stockholder per year-aren't explosive, they are sound.

Alluding to Aesop's fables, Jeffrey said he has a tortoise approach to wealth building: slow and steady.

Those words never applied to the subprime auto lending subsidiary of Cole Taylor Financial, now known as Reliance Acceptance Corp. After racking up fast growth and enormous returns for years, the company has seen its stock and credit rating get mauled since the Mercury Finance Co. meltdown.

The stock has tanked since Feb. 12, when it came out under the Reliance name. It reached a high of $20 per share on that day and tumbled all the way to $13 on March 13.

Last week Duff & Phelps Credit Rating Co. lowered the credit rating of Reliance-on its own for about a month-to D4, or below investment grade.

Though he wouldn't gloat about the Reliance situation, Jeffrey Taylor clearly doesn't regret his decision to stick to community banking.

"The best investment we can have is this bank. Period."

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