Mortgage Income Boosts Profits at Taylor Capital

Taylor Capital Group's (TAYC) bet on mortgage banking is starting to pay off big for the Chicago company.

The $4.7 billion-asset parent of Cole Taylor Bank swung to a $7.7 million profit in the first quarter from a $2 million loss in the same period last year, thanks largely to a surge in mortgage lending. The company generated $17.5 million in mortgage banking revenues, nearly double its revenues from the prior quarter and up substantially from $1.5 million in revenues a year earlier. The mortgage unit funded $895 million of loans in the quarter, up 14% from three months earlier, and its mortgage servicing portfolio has more than doubled since Dec. 31, to $2.4 billion.

Taylor launched a national mortgage lending division in late 2009 — at a time when many lenders were backing away from originating mortgages — and brought in a team of experienced lenders from the former ABN Amro to run it.

In a news release Thursday, President and Chief Executive Mark A. Hoppe said that the unit has been able to grow quickly because, unlike many other lenders, it has not been distracted by foreclosures and delinquencies. "The performance of our mortgage division has been outstanding as we continue to build a sustainable business model that is not hindered by historical mortgage concerns," he said.

Taylor has also established a national asset-based lending division and that unit's loans increased by 33%, or $130 million, year over year, and 9% from the prior quarter.

In a research note Thursday, Sandler O'Neill & Partners said Taylor's earnings per share of 26 cents beat its estimates by 12 cents and beat consensus estimates by a dime. It said it is considering raising its estimates going forward based on the strong revenue growth and improving asset quality.

Taylor's shares were trading at $14.35 Thursday, up 3.2% from Wednesday's closing price.