News Column

TAYLOR CAPITAL GROUP INC FILES (8-K) Disclosing Other Events

May 14, 2014

Item 8.01. Other Events.



As previously disclosed, Taylor Capital Group, Inc. (the "Company") had been notified by its primary banking regulators that its wholly-owned bank subsidiary, Cole Taylor Bank (the "Bank") may be cited with a violation of Section 5 of the Federal Trade Commission Act (the "FTC Act") relating to the checking account opening process associated with the Bank's former deposit program relationship with an organization that provides electronic financial disbursements and payment services to the higher education industry (the "Former Counterparty").

On May 8, 2014, the Federal Reserve Bank of Chicago formally notified the Bank that it had concluded that the Bank engaged in a deceptive practice relating to the checking account opening process described above in violation of the FTC Act, and that its staff would recommend that the Board of Governors of the Federal Reserve System (the "Board") initiate an enforcement action against the Bank. Based on discussions between the Bank's management and the Board's staff on May 9 and May 12, 2014, the Company believes that it is probable that civil money penalties of up to approximately $3.6 million will be imposed upon the Bank as a result of this violation. In addition, the Company believes that the related administrative order may possibly impose a secondary obligation on the Bank to make restitution to account holders affected by the violation to the extent any such restitution ordered by the Board is not satisfied by the Former Counterparty. The Company is presently unable to reasonably estimate the amount of any such secondary obligation or whether any such amount would have a material impact on the Company's consolidated financial condition or results of operations.

While the Bank will be solely responsible for the payment of any civil money penalties imposed upon it by the Board, to the extent the Bank is ultimately required to make financial restitution as a result of the violation, the Former Counterparty would be obligated to reimburse the Bank for such restitution pursuant to a contractual indemnification agreement. However, the Former Counterparty has publicly disclosed that it is currently in discussions with the Board regarding an administrative order relating to this issue which would likely impose upon the Former Counterparty its own civil money penalties in addition to the primary restitution obligation, among other things. In addition, the Former Counterparty reported that although the ultimate amount of any restitution or civil money penalties to be imposed against the Former Counterparty will be subject to many uncertainties and therefore impossible to predict, such restitution and civil money penalties, when finalized, could reach levels that would cause an event of default under its credit facility and could have a material adverse effect on its business, financial condition and results of operations. Accordingly, the Company is currently unable to reasonably estimate or predict the Former Counterparty's ability to fully honor its commitment under its contractual indemnification with the Bank.

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Source: Edgar Glimpses


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