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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------

                                   FORM 10-K

<TABLE>
<C>               <S>
   (MARK ONE)
      [X]         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                  THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
                                               OR
      [ ]         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                  THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE TRANSITION PERIOD FROM ____________ TO ____________
</TABLE>

                         COMMISSION FILE NUMBER 0-25033

                              THE BANC CORPORATION
             (Exact Name of Registrant as Specified in Its Charter)

<TABLE>
<S>                                              <C>
                    DELAWARE                                        63-1201350
        (State or Other Jurisdiction of                          (I.R.S. Employer
         Incorporation or Organization)                        Identification No.)
              17 NORTH 20TH STREET                                    35203
                 BIRMINGHAM, AL                                     (Zip Code)
    (Address of Principal Executive Offices)
</TABLE>

                                 (205) 326-2265
              (Registrant's Telephone Number, Including Area Code)

          Securities registered pursuant to Section 12(b) of the Act:
                                      NONE

          Securities registered pursuant to Section 12(g) of the Act:

                    COMMON STOCK, PAR VALUE $.001 PER SHARE
                              (Titles of Classes)

     INDICATE BY CHECK MARK WHETHER THE REGISTRANT:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  [X]  No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]

     State the aggregate market value of the voting stock held by non-affiliates
of the registrant: $70,598,494 as of March 24, 2000.

     Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of the latest practicable date: the number of shares
outstanding as of March 24, 2000, of the registrant's only issued and
outstanding class of stock, its $.001 per share par value common stock, was
14,385,021.

                      DOCUMENTS INCORPORATED BY REFERENCE

     The information set forth under Items 10, 11, 12 and 13 of Part III of this
Report is incorporated by reference from the registrant's definitive proxy
statement for its 2000 annual meeting of stockholders that will be filed no
later than April 29, 2000.
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                                     PART I

ITEM 1.  BUSINESS.

GENERAL

     The Banc Corporation is a bank holding company registered under the Bank
Holding Company Act of 1956 ("BHCA"), a thrift holding company registered under
the Home Owner's Loan Act ("HOLA"), and, effective March 13, 2000, a financial
holding company under the Gramm-Leach-Bliley Act ("GLBA"). The Corporation is
incorporated under the laws of Delaware and headquartered in Birmingham,
Alabama. Through its banking subsidiaries, the Corporation operates 30 banking
offices in Alabama and Florida. As of December 31, 1999, the Corporation had
assets of approximately $827.4 million, loans of approximately $632.8 million,
deposits of approximately $682.5 million and stockholders equity of
approximately $68.8 million.

     The Corporation was established in April 1998 so that Warrior Capital
Corporation ("Warrior") could merge into the Corporation and thereby change its
name to "The Banc Corporation" and its domicile from Alabama to Delaware. The
Warrior merger occurred with the Corporation on September 24, 1998. Since the
Warrior merger, the Corporation has acquired two banks, six bank holding
companies and three additional branches:

<TABLE>
<CAPTION>
                        ACQUISITIONS                          DATE OF ACQUISITION
                        ------------                          -------------------
<S>                                                           <C>
Commercial Bancshares of Roanoke, Inc., and its bank
  subsidiary................................................   October 16, 1998
City National Corporation, and its bank subsidiary..........   October 30, 1998
First Citizens Bancshares, Inc., and its bank subsidiary....   October 30, 1998
Commerce Bank of Alabama....................................   November 6, 1998
Emerald Coast Bancshares, Inc., and its bank subsidiary.....  February 12, 1999
C&L Banking Corporation, and its bank subsidiary............      June 30, 1999
C&L Bank of Blountstown.....................................      June 30, 1999
BankersTrust of Alabama, Inc., and its bank subsidiary......      July 13, 1999
Branches of Community Bank & Trust of Southeast Alabama,
  Inc.......................................................   November 4, 1999
</TABLE>

     The Corporation operates three banking subsidiaries: The Bank, an Alabama
banking corporation; Emerald Coast Bank, a federally chartered thrift; and C&L
Bank, a Florida banking corporation (collectively, the "banking subsidiaries").
Through its banking subsidiaries, the Corporation offers a broad range of
banking services.

     The Bank is headquartered in Birmingham, Alabama, and is 99.75% owned by
the Corporation. The Bank became a subsidiary of the Corporation as a result of
the Warrior merger. The Bank was known as Warrior Savings Bank until February
1998. The Bank has been in business as a full service commercial and retail bank
since it was established in 1957 and had five branches at the time of the
Warrior merger. Commerce Bank and the banking subsidiaries of Commercial
Bancshares of Roanoke, Inc; City National Corporation; First Citizens
Bancshares, Inc.; and Bankers Trust of Alabama, Inc., were merged with and into
The Bank, expanding its market areas. The Bank has also opened or acquired four
new branches in 1999. As a result, The Bank currently has 23 locations in
Alabama and is the Corporation's largest subsidiary. The Bank was formerly an
Alabama banking corporation. On February 3, 2000, The Bank was converted from an
Alabama state chartered nonmember bank to a state member of the Federal Reserve
System under the supervision and regulation of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") and the State of Alabama
Banking Department.

     Emerald Coast Bank is a federally chartered thrift regulated by the Office
of Thrift Supervision. Emerald Coast Bank became a subsidiary of the Corporation
on February 12, 1999 as a result of the merger of Emerald Coast Bancshares, Inc.
with the Corporation. Emerald Coast Bank was originally a Florida state bank
formed on August 30, 1996, and was converted into a federally chartered thrift
in 1999. Emerald Coast Bank has four

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<PAGE>   3

locations in Panama City Beach, Destin, Seagrove and Bay Point, Florida. Emerald
Coast Bank has one subsidiary, Emerald Coast Financial Management, Inc., a
Florida corporation, which provides investment services and insurance to Emerald
Coast Bank's customers and others.

     C&L Bank is a Florida banking corporation headquartered in Bristol,
Florida, and has been in operation since 1975. C&L Bank became a subsidiary of
the Corporation as a result of the Corporation's acquisitions of C&L Banking
Corporation and its bank subsidiary, C&L Bank of Bristol, and C&L Bank of
Blountstown on June 30, 1999. C&L Bank has three locations in the panhandle
region of Florida.

     The principal executive offices of the Corporation and The Bank are located
at 17 North 20th Street, Birmingham, Alabama 35203, and the telephone number is
(205) 326-2265. The principal executive offices of Emerald Coast Bank are
located at 7522 Front Beach Road, Panama City, Florida 32407, and its telephone
number is (850) 230-9800. The principal executive offices of C&L Bank are
located at Highway 20 and Baker Street, Bristol, Florida 32321, and its
telephone number is (850) 643-2221. As used in this Annual Report, the term
"Corporation" refers to The Banc Corporation and its respective subsidiaries and
affiliates, including The Bank, C&L Bank and Emerald Coast Bank, unless the
context requires otherwise.

RECENT DEVELOPMENTS

     On February 11, 2000, the Corporation filed an application with the Federal
Reserve Board and the Alabama Banking Department to merge Emerald Coast Bank and
C&L Bank with and into The Bank. The Corporation expects to receive the
necessary approvals from the Federal Reserve Board and Alabama Banking
Department and to complete the consolidation of its banking subsidiaries in the
second quarter of 2000.

STRATEGY

     Operations.  The Corporation's management team has historically been
successful in the integration of multiple community banking organizations. The
Corporation operates primarily in non-metropolitan areas, except for The Bank's
Birmingham, Alabama operations. The Corporation targets individuals and local
and regional businesses that prefer local bank decision making and personalized
service. To implement this strategy, the Corporation operates on a decentralized
basis, emphasizing local knowledge and authority to make credit decisions. The
Bank has eleven branch presidents and chief executive officers each of whom is
responsible for the day-to-day operations and decisions for the branches under
his or her supervision. The presidents and chief executive officers of Emerald
Coast Bank and C&L Bank are responsible for the day-to-day operations and
decisions of Emerald Coast Bank and C&L Bank. The Corporation supplements this
decentralized management approach with centralized policy oversight, credit
review and management systems. The Corporation implements administrative and
operations policies at each of its locations while retaining local management
and directors as an advisory board to capitalize on their knowledge of the local
community. The Corporation believes this strategy enables its banking
subsidiaries to generate high yielding loans and to attract and retain low cost
core deposits that provide substantially all of its banking subsidiaries'
funding requirements.

     The Corporation's banking subsidiaries focus on residential mortgage,
consumer, commercial and real estate construction lending to customers in each
of their respective local markets. The banking subsidiaries also offer a variety
of deposit programs to individuals and to businesses and other organizations at
interest rates generally consistent with local market conditions. In addition,
each banking subsidiary offers individual retirement, safe deposit and night
depository facilities and additional services such as the sale of traveler's
checks, money orders and cashier's checks.

     Market Areas.  The Bank operates in Birmingham, Alabama, and its suburbs of
Warrior, Morris and Mt. Olive, Alabama, in relatively rural northern Jefferson
County. The Bank also operates branches in Albertville, Andalusia, Boaz,
Childersburg, Decatur, Frisco City, Gadsden, Guntersville, Huntsville, Kinston,
Madison, Mignon, Monroeville, Opp, Rainbow City, Roanoke (2), Samson, and
Sylacauga, Alabama. Emerald Coast Bank operates in Destin, Panama City Beach,
Seagrove and Bay Point, Florida. C&L Bank operates in Altha, Blountstown and
Bristol, Florida.

                                        2
<PAGE>   4

     Growth.  The Corporation believes its future growth will depend primarily
on the expansion of the business of its banking subsidiaries through internal
growth, the opening of new branch offices in new markets and the acquisition of
other financial institutions and branches. The ability to grow profitably
through the opening or acquisition of new branches will depend primarily on,
among other things, the Corporation's ability to identify profitable, growing
markets and branch locations within such markets, attract necessary deposits to
operate such branches profitably and locate sound loans and investment
opportunities within such markets.

     Since 1998, a substantial portion of the Corporation's growth has been
through the acquisition of eight financial institutions and their assets and
deposits. In addition, the Corporation acquired three branches from a regional
bank. The Corporation from time to time evaluates business combination
opportunities and sometimes conducts discussions and due diligence activities in
connection with them. As a result, business combination discussions and, in some
cases, negotiations may take place and transactions involving cash, debt or
equity securities might occur from time to time. Any future business combination
or series of business combinations that the Corporation might undertake may be
material, in terms of assets acquired or liabilities assumed to the
Corporation's financial condition. Any future acquisition is subject to approval
by the appropriate bank regulatory agencies. See "Supervision and Regulation".

LENDING ACTIVITIES

     General.  Through its banking subsidiaries, the Corporation offers a range
of lending services, including real estate, consumer and commercial loans,
primarily to individuals and businesses and other organizations that are located
in or conduct a substantial portion of their business in the Corporation's
market areas. The Corporation's total loans at December 31, 1999, were $632.8
million, or 86.9% of total earning assets. The interest rates charged on loans
vary with the degree of risk, maturity and amount of the loan and are further
subject to competitive pressures, money market rates, availability of funds and
government regulations. The Corporation has no foreign loans or loans for highly
leveraged transactions.

  Loan Portfolio

     Real Estate Loans.  Loans secured by real estate are a significant
component of the Corporation's loan portfolio, constituting $342.2 million, or
54.1% of total loans at December 31, 1999. The Corporation's primary type of
real estate loan is single family first mortgage loans, typically structured
with fixed or adjustable interest rates, based on market conditions. Fixed rate
loans usually have terms of five years or less, with payments through the date
of maturity generally based on a 15 to 30-year amortization schedule. Adjustable
rate loans generally have a term of 15 years. The Bank, C&L Bank and Emerald
Coast Bank charge an origination fee on these loans.

     The banking subsidiaries' nonresidential mortgage loans include commercial,
industrial and raw land loans. The commercial real estate loans are typically
used to provide financing for retail establishments, offices and manufacturing
facilities. The Corporation's banking subsidiaries generally require
nonresidential mortgage loans to have an 80% loan-to-value ratio and usually
underwrite their commercial loans on the basis of the borrower's cash flow and
ability to service the debt from earnings, rather than on the basis of the value
of the collateral. Terms are typically five years and may have payments through
the date of maturity based on a 15 to 30 year amortization schedule.
Construction loans usually have a term of twelve months and generally require
personal guarantees.

     Commercial, Industrial, and Agricultural Loans.  The banking subsidiaries
make loans for commercial purposes in various lines of business. These loans are
typically made on terms up to 5 years at fixed or variable rates and are secured
by accounts receivable, inventory or, in the case of equipment loans, the
financed equipment. The banking subsidiaries attempt to reduce their credit risk
on commercial loans by limiting the loan to value ratio to 65% on loans secured
by accounts receivable or inventory and 75% on equipment loans. The banking
subsidiaries also make unsecured commercial loans. Commercial, industrial and
agricultural loans constituted $207.6 million, or 32.8% of the Corporation's
loan portfolio at December 31, 1999.

     Consumer Loans.  Consumer lending includes installment lending to
individuals in the Corporation's market areas and consists of loans to purchase
automobiles, recreational vehicles, mobile homes and
                                        3
<PAGE>   5

appliances. Consumer loans constituted $74.8 million, or 11.8% of the
Corporation's loan portfolio at December 31, 1999. Consumer loans are
underwritten based on the borrower's income, current debt, credit history and
collateral. Terms generally range from four to five years on automobile loans
and one to three years on other consumer loans.

  Credit Procedures and Review

     Loan Approval.  There are credit risks associated with making any loan.
These include prepayment risks, risks resulting from uncertainties in the future
value of collateral, risks resulting from changes in economic and industry
conditions and risks inherent in dealing with individual borrowers. In
particular, longer maturities increase the risk that economic conditions will
change and adversely affect collectibility.

     The Corporation attempts to minimize loan losses through various means and
uses generally recognized underwriting criteria. In particular, on larger
credits, the Corporation generally relies on the cash flow of a debtor as the
source of repayment and secondarily on the value of the underlying collateral.
In addition, the Corporation attempts to utilize shorter loan terms in order to
reduce the risk of a decline in the value of such collateral.

     The Corporation addresses repayment risks by adhering to internal credit
policies and procedures that include officer and customer lending limits, a
multi-layered loan approval process for larger loans, periodic documentation
examination and follow-up procedures for any exceptions to credit policies. The
point in the Corporation's loan approval process at which a loan is approved
depends on the size of the borrower's credit relationship with the Corporation.

     Loan Review.  The Corporation has a loan review process designed to promote
early identification of credit quality problems. A risk rating system is
employed whereby each loan is assigned a rating which corresponds to the
perceived credit risk. Risk ratings are subject to independent review by a loan
review department which also performs ongoing, independent review of the risk
management process which includes underwriting, documentation and collateral
control. Regular reports are made to senior management and the Board of
Directors regarding credit quality as measured by assigned risk ratings and
other measures, including, but not limited to, the level of past due percentages
and non-performing assets. The loan review function is centralized and
independent of the lending function. Review results are reported to the Audit
Committee of the Board of Directors as well as to the Corporation's independent
auditors.

DEPOSITS

     The principal sources of funds for each of the banking subsidiaries are
core deposits, consisting of demand deposits, interest-bearing transaction
accounts, money market accounts, savings deposits and certificates of deposit.
Transaction accounts include checking, money market and negotiable order of
withdrawal accounts that provide the banks with a source of fee income and
cross-marketing opportunities, as well as a low-cost source of funds. Time and
savings accounts also provide a relatively stable and low-cost source of
funding. The largest source of funds for the Corporation's banking subsidiaries
is certificates of deposit. Certificates of deposit in excess of $100,000 are
held primarily by customers in the Corporation's market areas.

     Deposit rates are set periodically by senior management of The Bank, C&L
Bank and Emerald Coast Bank, subject to approval by management of the
Corporation. Management believes that the rates its banking subsidiaries offer
are competitive with those offered by competing institutions in their market
areas. The banking subsidiaries focus on customer service, not high rates, to
attract and retain deposits.

EMPLOYEES

     As of March 1, 2000, the Corporation and its subsidiaries employed
approximately 366 individuals. The management of the Corporation believes that
its employee relations have been and continue to be good.

                                        4
<PAGE>   6

COMPETITION

     The banking subsidiaries encounter strong competition both in making loans
and attracting deposits. Competition among financial institutions is based upon
interest rates offered on deposit accounts, interest rates charged on loans and
other credit and service charges. Customers also consider the quality and scope
of the services rendered, the convenience of banking facilities and, in the case
of loans to commercial borrowers, relative lending limits, and may also consider
the fact that other banks offer different services. In addition, most of the
Corporation's non-bank competitors are not subject to the same extensive federal
regulations that govern bank holding companies, federally insured banks and
federally insured thrifts. See "Supervision and Regulation."

SUPERVISION AND REGULATION

     As a bank holding company registered with the Federal Reserve Board under
the BHCA and, effective March 13, 2000, a financial holding company under the
GLBA, the Corporation and its banking subsidiaries are subject to the
supervision, examination and reporting requirements of the Federal Reserve
Board, the BHCA and GLBA. As a thrift holding company, the Corporation is also
supervised and regulated by the OTS. The BHCA and other federal laws subject
bank and thrift holding companies to particular restrictions on the types of
activities in which they may engage and to a range of supervisory requirements
and activities, including regulatory enforcement actions for violations of laws
and regulations.

     The supervision and regulation of bank and thrift holding companies and
their subsidiaries are intended primarily for the protection of depositors, the
deposit insurance funds of the Federal Deposit Insurance Corporation (the
"FDIC") and the banking system as a whole, not for the protection of bank
holding company stockholders or creditors. The banking agencies have broad
enforcement power over bank holding companies and banks including the power to
impose substantial fines and other penalties for violation of laws and
regulations. The following description summarizes some of the laws to which the
Corporation, The Bank, C&L Bank and Emerald Coast Bank are subject. References
herein to applicable statutes and regulations are brief summaries thereof, do
not purport to be complete and are qualified in their entirety by reference to
such statutes and regulations.

  Holding Company Regulation

     Recent Legislative Developments.  The GLBA became law on November 12, 1999
and became effective March 11, 2000. The GLBA enables bank holding companies to
acquire insurance companies and securities firms and effectively repeals
depression-era laws, which prohibited the affiliation of banks and these other
financial services entities under a single holding company. Bank holding
companies, and other types of financial services entities, may elect to become
financial holding companies under the new law. Financial holding companies are
permitted to engage in activities considered financial in nature, as defined in
the GLBA, and may engage in a broader range of activities than bank holding
companies or banks. The GLBA will enable financial holding companies to offer
virtually any type of financial service, or services incident to financial
services, including banking, securities underwriting, merchant banking and
insurance (both underwriting and agency services). The new financial services
authorized by the GLBA also may be engaged in by a "financial subsidiary" of a
national or state bank, with the exception of insurance or annuity underwriting,
insurance company portfolio investments, real estate investment and development,
and merchant banking, all of which must be conducted under the financial holding
company.

     To become a financial holding company, a bank holding company must provide
notice to the Federal Reserve Board of its desire to become a financial holding
company, and certify to the Federal Reserve Board that each of its bank
subsidiaries is "well-capitalized," "well-managed" and has at least a
"satisfactory" rating under the CRA. On February 12, 2000, the Corporation filed
with the Federal Reserve Board its election to become a financial holding
company. The Corporation's election was effective as of March 13, 2000.

     The GLBA establishes a system of functional regulation, under which the
Federal Reserve Board will regulate the banking activities of financial holding
companies and other federal banking regulators will regulate banks' financial
subsidiaries. The SEC will regulate securities activities of financial holding
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<PAGE>   7

companies and state insurance regulators will regulate their insurance
activities. The GLBA also provides new protections against the transfer and use
by financial institutions of consumers' non-public, personal information.

     Regulatory Restrictions on Dividends.  The payment of dividends to the
Corporation by its banking subsidiaries is subject to certain restrictions
imposed by state and federal banking laws, regulations and authorities. It is
the policy of the Federal Reserve Board that bank holding companies should pay
cash dividends on common stock only out of income available over the past year
and only if prospective earnings retention is consistent with the organization's
expected future needs and financial condition. The policy provides that bank
holding companies should not maintain a level of cash dividends that undermines
the bank holding company's ability to serve as a source of strength to its
banking subsidiaries.

     The federal banking statutes prohibit federally insured banks from making
any capital distributions, including a dividend payment if, after making the
distribution, the institution would be "undercapitalized" as defined by the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"). In
addition, the relevant federal regulatory agencies also have authority to
prohibit an insured bank from engaging in an unsafe or unsound practice, as
determined by the agency, in conducting an activity. The payment of dividends
could be deemed to constitute such an unsafe or unsound practice, depending on
the financial conditions of the banking subsidiaries. Regulatory authorities
could impose administratively stricter limitations on the ability of the banking
subsidiaries to pay dividends to the Corporation if such limits were deemed
appropriate to preserve certain capital adequacy requirements.

     As of December 31, 1999, an aggregate of approximately $3.6 million was
available for payment of dividends by the Corporation's subsidiaries to the
Corporation under applicable restrictions, without obtaining regulatory
approval. See "-- Banking Subsidiaries."

     Source of Strength.  Under Federal Reserve Board policy, a bank holding
company is expected to act as a source of financial strength to each of its
banking subsidiaries and commit resources to their support. This support may be
required by the Federal Reserve Board at times when, absent this policy, a bank
holding company may not be inclined to provide it. A bank holding company, in
certain circumstances, could be required to guarantee the capital plan of an
undercapitalized banking subsidiary. In addition, any capital loans by a bank
holding company to any of its depository institution subsidiaries are
subordinate in right of payment to deposits and to certain other indebtedness of
the banks.

     In the event of a bank holding company's bankruptcy under Chapter 11 of the
U.S. Bankruptcy Code, the bankruptcy trustee will assume any deficit under any
commitment by the debtor holding company to any of the federal banking agencies
to maintain the capital of a banking subsidiary, and any claim for breach of
such obligation will generally have priority over most other unsecured claims.

     Under the Federal Deposit Insurance Act ("FDIA"), an FDIC-insured
depository institution can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC in connection with (1) the
default of a commonly controlled FDIC-insured depository institution or (2) any
assistance provided by the FDIC to any commonly controlled FDIC-insured
depository institution "in danger of default." "Default" is defined generally as
the appointment of a conservator or receiver and "in danger of default" is
defined generally as the existence of certain conditions indicating that a
default is likely to occur in the absence of regulatory assistance. The FDIC's
claim for damages is superior to claims of stockholders of the insured
depository institution or its holding company but is subordinate to claims of
depositors, secured creditors and holders of subordinated debt (other than
affiliates) of the commonly controlled insured depository institution. The
banking subsidiaries are subject to these cross guarantee provisions. As a
result, any loss suffered by the FDIC in respect to one or more of the banking
subsidiaries would likely result in the assertion of the cross-guarantee
provisions, the assessment of such potential losses against the subsidiaries'
banking affiliates, and a potential loss of the Corporation's investment in its
other banking subsidiaries. Commonly controlled insured depository institutions
are liable to the FDIC for any losses incurred in connection with the failure of
a commonly controlled depository institution.

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     Safe and Sound Banking Practices.  Bank holding companies are not permitted
to engage in unsafe or unsound banking practices. The Federal Reserve Board's
Regulation Y, for example, generally requires a holding company to give the
Federal Reserve Board prior notice of any redemption or repurchase of its own
equity securities, if the consideration to be paid, together with the
consideration paid for any repurchases or redemptions in the preceding year, is
equal to 10% or more of the company's consolidated net worth. The Federal
Reserve Board may oppose the transaction if it believes that the transaction
would constitute an unsafe or unsound practice or would violate any law or
regulation. Depending upon the circumstances, the Federal Reserve Board could
take the position that paying a dividend would constitute an unsafe or unsound
banking practice.

     The Federal Reserve Board has broad authority to prohibit activities of
bank holding companies and their non-banking subsidiaries which represent unsafe
or unsound banking practices or which constitute violations of laws or
regulations, and can assess civil money penalties for certain activities
conducted on a knowing and reckless basis, if those activities caused a
substantial loss to a depository institution. The penalties can be as high as
$1,000,000 for each day the activity continues.

     Capital Adequacy Requirements.  The Corporation and its banking
subsidiaries are required to comply with the capital adequacy standards
established by the Federal Reserve Board and the appropriate federal banking
regulator in the case of each banking subsidiary. The Federal Reserve Board has
adopted two basic measures of capital adequacy for bank holding companies: a
risk based measure and a leverage measure. All applicable capital standards must
be satisfied for a bank holding company to be in compliance.

     The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and bank
holding companies, to account for off-balance-sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance-sheet items are
assigned to broad risk categories, each with appropriate weights. The resulting
capital ratios represent capital as a percentage of total risk-weighted assets
and off-balance-sheet items.

     The minimum guideline for the ratio (the "Total Risk-Based Capital Ratio")
of total capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8%. At least half
of Total Capital must comprise common stock, minority interests in the equity
accounts of consolidated subsidiaries, noncumulative perpetual preferred stock,
and a limited amount of cumulative perpetual preferred stock, less goodwill and
certain other intangible assets ("Tier 1 Capital"). The remainder may consist of
subordinated debt, other preferred stock, and a limited amount of loan loss
reserves ("Tier 2 Capital").

     In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less
goodwill and certain other intangible assets, of 3% for bank holding companies
that meet certain specified criteria, including having the highest regulatory
rating. All other bank holding companies generally are required to maintain a
Leverage Ratio of at least 3%, plus an additional cushion of 100 to 200 basis
points. The Corporation's Leverage Ratio at December 31, 1999, was 7.74%. The
guidelines also provide that bank holding companies experiencing internal growth
or making acquisitions will be expected to maintain strong capital positions
substantially above the minimum supervisory levels without significant reliance
on intangible assets. Furthermore, the Federal Reserve Board has indicated that
it will consider a tangible Tier 1 Capital Leverage Ratio (deducting all
intangibles) and other indicia of capital strength in evaluating proposals for
expansion or new activities.

     The federal banking agencies' risk-based and leverage ratios are minimum
supervisory ratios generally applicable to banking organizations that meet
certain specified criteria, assuming that they have the highest regulatory
rating. Banking organizations not meeting these criteria are expected to operate
with capital positions well above the minimum ratios. The federal bank
regulatory agencies may set capital requirements for a particular banking
organization that are higher than the minimum ratios when circumstances warrant.
Federal Reserve Board guidelines also provide that banking organizations
experiencing internal growth or making acquisitions will be expected to maintain
strong capital positions substantially above the minimum supervisory levels,
without significant reliance on intangible assets.
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     The Corporation's banking subsidiaries are subject to risk based and
leverage capital requirements adopted by their applicable federal regulatory
agency that are substantially similar to those established by the Federal
Reserve Board for bank holding companies. Each of the Corporation's banking
subsidiaries were in compliance with the applicable minimum capital requirements
as of December 31, 1999. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Failure to meet capital guidelines could
subject the banking subsidiaries to a variety of enforcement remedies by the
appropriate federal banking regulators, including termination of deposit
insurance by the FDIC, and to certain restrictions on business.

     The following is a table of the Corporation's and its subsidiaries'
regulatory capital ratios at December 31, 1999:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31, 1999
                                                      ----------------------------------------
                                                       TOTAL RISK-    TIER 1 RISK-
                                                      BASED CAPITAL   BASED CAPITAL   LEVERAGE
                                                          RATIO           RATIO        RATIO
                                                      -------------   -------------   --------
<S>                                                   <C>             <C>             <C>
Corporation.........................................      10.61%           9.41%        7.74%
The Bank............................................      10.61            9.41         8.10
Emerald Coast Bank..................................      10.04            9.51          N/A
C&L Bank............................................      14.08           12.84         9.21
</TABLE>

     Acquisitions by Bank Holding Companies.  The BHCA requires every bank
holding company to obtain the prior approval of the Federal Reserve Board before
it (1) may acquire all or substantially all of the assets of any bank; (2) it
may acquire direct or indirect ownership or control of any voting shares of any
bank, if after such acquisition it would own or control, directly or indirectly,
more than 5% of the voting shares of such bank; or (3) it may merge or
consolidate with any other bank holding company. In approving bank acquisitions
by bank holding companies, the Federal Reserve Board is required to consider the
financial and managerial resources and future prospects of the bank holding
company and the banks concerned, the convenience and needs of the communities to
be served and various competitive factors. Similar federal statutes require a
thrift holding company to obtain prior approval of the OTS before acquiring
direct or indirect ownership or control of a federally-chartered thrift.

     The BHCA further provides that the Federal Reserve Board may not approve
any transaction that would result in a monopoly or would be in furtherance of
any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any section of the United States, or the effect of which
may be substantially to lessen competition or to tend to create a monopoly in
any section of the country, or that in any other manner would be in restraint of
trade, unless the anti-competitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve Board is required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned, including capital adequacy, and the convenience
of the community to be served including the parties' performance under the
Community Reinvestment Act of 1977 ("CRA").

     Control Acquisitions.  The Change in Bank Control Act prohibits a person or
group of persons from acquiring "control" of a bank holding company unless the
Federal Reserve Board has been notified and has not objected to the transaction.
Under a rebuttable presumption established by the Federal Reserve Board, the
acquisition of 10% or more of a class of voting stock of a bank holding company
with a class of securities registered under Section 12 of the Exchange Act,
would, under the circumstances set forth in the presumption, constitute
acquisition of control of that bank holding company.

     In addition, any company is required to obtain the approval of the Federal
Reserve Board under the BHCA before acquiring 25% (and bank holding companies
are required to obtain approval of the Federal Reserve Board before acquiring
5%) or more of the outstanding common stock of the Corporation, or other wise
obtaining control or a "controlling influence" over the Corporation.

     Branching.  The BHCA, as amended by the interstate banking provisions of
the Reigle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Act") repealed the prior statutory restrictions on
interstate banking, such that the Corporation may acquire a bank located in any
other state, and

                                        8
<PAGE>   10

any bank holding company located outside Alabama may lawfully acquire any
Alabama-based bank regardless of state law to the contrary, in either case
subject to certain deposit-percentage, aging requirements and other
restrictions. In addition, the Interstate Banking Act generally provided that
after June 1, 1997, national and state-chartered banks may branch interstate
through acquisitions of banks in other states.

     Alabama and Florida each have laws relating specifically to acquisitions of
banks, bank holding companies and other types of financial institutions in each
state, by financial institutions that are based in, and not based in those
states. Alabama law sets five years as the minimum age of banks which may be
acquired. Florida law requires that the bank to be acquired be in existence at
least three years and the satisfaction of various provisions of state law before
a bank may be acquired.

  Banking Subsidiaries Regulation

     Each banking subsidiary is also subject to numerous state and federal
statutes and regulations that affect its business, activities and operations,
and each is supervised and examined by one or more state or federal bank
regulatory agencies which is given authority to approve or disapprove mergers,
establishment of branches, to prevent unsafe or unsound banking practices or
other violations of law and similar actions.

     The Bank, an Alabama state chartered bank and member of the Federal Reserve
System, is subject to regulation, supervision and examination by the Federal
Reserve Board, FDIC and Alabama Banking Department. C&L Bank, a Florida state
chartered bank, is not a member of the Federal Reserve System and is subject to
supervision and examination by the FDIC and the Florida Department of Banking
and Finance ("Florida Banking Department"). Emerald Coast Bank, a federally
chartered thrift, is subject to the supervision, regulation and examination of
the OTS and FDIC.

     The deposits of The Bank and C&L Bank are insured by the Bank Insurance
Fund ("BIF") of the FDIC. The deposits of Emerald Coast Bank are insured by the
Savings Association Insurance Fund ("SAIF") administered by the FDIC. As a
result, all three banking subsidiaries are subject to supervision and regulation
by the FDIC. Such supervision and regulation subjects The Bank, Emerald Coast
Bank and C&L Bank to special restrictions, requirements, potential enforcement
actions and periodic examination by the FDIC. Because the Federal Reserve Board
regulates the bank holding company parent of banks, the Federal Reserve Board
also has supervisory authority which directly affects the banking subsidiaries.

     Restrictions on Transactions With Affiliates and Insiders.  Transactions
between each banking subsidiary and its affiliates, including the Corporation,
are subject to Sections 23A and 23B of the Federal Reserve Act. In general,
Section 23A imposes limits on the amount of such transactions, and also requires
certain levels of collateral for loans to affiliated parties. It also limits the
amount of advances to third parties which are collateralized by the securities
or obligations of the Corporation or any of its subsidiaries. Section 23B of the
Federal Reserve Act generally requires that certain transactions between a bank
and its respective affiliates be on terms substantially the same, or at least as
favorable to such bank, as those prevailing at the time for comparable
transactions with or involving other nonaffiliated persons.

     The restrictions on loans to directors, executive officers, principal
stockholders and their related interests (collectively referred to herein as
"insiders") contained in the Federal Reserve Act and Regulation O apply to all
federally insured institutions and their subsidiaries and holding companies.
These restrictions include limits on loans to one borrower and conditions that
must be met before such a loan can be made. There is also an aggregate
limitation on all loans to insiders and their related interests. These loans
cannot exceed the institution's total unimpaired capital and surplus, and the
FDIC may determine that a lesser amount is appropriate. Insiders are subject to
enforcement actions for knowingly accepting loans in violation of applicable
restrictions.

     Restrictions on Distribution of Subsidiary Bank Dividends and
Assets.  Dividends paid by the banking subsidiaries can be a substantial part of
the Corporation's operating funds and, for the foreseeable future, it is
anticipated that dividends paid by the banking subsidiaries to the Corporation
will be a source of operating funds for the Corporation. The FDIC and Alabama
Banking Department regulations govern the amount of dividends that may be paid
by The Bank. The FDIC and Florida Banking Department regulations govern the

                                        9
<PAGE>   11

amount of dividends that may be paid by C&L Bank. The OTS regulations govern the
amount of dividends that Emerald Coast Bank may pay. Capital adequacy
requirements serve to limit the amount of dividends that may be paid by banks.
Under federal law, none of the banking subsidiaries can pay a dividend if, after
paying the dividend, it would be "undercapitalized." The FDIC may declare a
dividend payment to be unsafe and unsound even though the banking subsidiary
would continue to meet its capital requirements after the dividend.

     Examinations.  The FDIC periodically examines and evaluates insured banks.
Based upon such an evaluation, the FDIC may revalue the assets of the
institution and require that it establish specific reserves to compensate for
the difference between the FDIC-determined value and the bank's established book
value of such assets. The banking subsidiaries are also periodically examined by
the appropriate federal or state bank regulatory agencies.

     Corrective Measures for Capital Deficiencies.  The federal banking
regulators are required to take "prompt corrective action" with respect to
capital-deficient institutions. Agency regulations define, for each capital
category, the levels at which institutions are "well capitalized," "adequately
capitalized," "under capitalized," "significantly under capitalized" and
"critically under capitalized." A "well capitalized" bank has a total risk based
capital ratio of 10.0% or higher; a Tier 1 risk based capital ratio of 6.0% or
higher; a leverage ratio of 5.0% or higher; and is not subject to any written
agreement, order or directive requiring it to maintain a specific capital level
for any capital measure. An "adequately capitalized" bank has a total risk based
capital ratio of 8.0% or higher; a Tier 1 risk based capital ratio of 4.0% or
higher; a leverage ratio of 4.0% or higher (3.0% or higher if the bank was rated
a CAMEL 1 in its most recent examination report and is not experiencing
significant growth); and does not meet the criteria for a well capitalized bank.
A depository institution that has a Total Capital ratio of less than 8.0%, a
Tier 1 Capital ratio of less than 4.0%, or a Leverage Ratio of less than 4.0% is
considered to be "undercapitalized." A depository institution that has a Total
Capital Ratio of less than 6.0%, a Tier 1 Capital ratio of less than 3.0%, or a
Leverage Ratio of less than 3.0% is considered to be "significantly
undercapitalized," and an institution that has a tangible equity capital to
assets ratio equal to or less than 2.0% is deemed to be "critically
undercapitalized." For purposes of the regulation, the term "tangible equity"
includes core capital elements counted as Tier 1 Capital for purposes of the
risk-based capital standards plus the amount of outstanding cumulative perpetual
preferred stock (including related surplus), minus all intangible assets with
certain exceptions. A depository institution may be deemed to be in a
capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.

     An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that subsidiary depository
institution meet its capital restoration plan, subject to certain limitations.
The obligation of a controlling bank holding company under FDICIA to fund a
capital restoration plan is limited to the lesser of 5.0% of an undercapitalized
subsidiary's assets and the amount required to meet regulatory capital
requirements. An undercapitalized institution is also generally prohibited from
increasing its average total assets, making acquisitions, establishing any
branches, or engaging in any new line of business, except in accordance with an
accepted capital restoration plan or with the approval of the FDIC. In addition,
the appropriate federal banking agency is given authority with respect to any
undercapitalized depository institution to take any of the actions it is
required to or may take with respect to a significantly undercapitalized
institution as described below if it determines "that those actions are
necessary to carry out the purpose" of FDICIA.

     As of December 31, 1999, each of the Corporation's subsidiaries had the
requisite capital levels to be classified as "well capitalized."

     In addition to requiring undercapitalized institutions to submit a capital
restoration plan, federal banking regulations contain broad restrictions on
certain activities of undercapitalized institutions including asset growth,
acquisitions, branch establishment and expansion into new lines of business.
With certain exceptions, an insured depository institution is prohibited from
making capital distributions, including dividends, and is

                                       10
<PAGE>   12

prohibited from paying management fees to control persons if the institution
would be undercapitalized after any such distribution or payment.

     As an institution's capital decreases, the FDIC's enforcement powers become
more extensive. A significantly undercapitalized institution is subject to
mandated capital raising activities, restrictions on interest rates paid and
transactions with affiliates, removal of management, and other restrictions. The
FDIC has only very limited discretion in dealing with a critically
undercapitalized institution and is virtually required to appoint a receiver or
conservator.

     Banks with risk-based capital and leverage ratios below the required
minimums may also be subject to certain administrative actions, including the
termination of deposit insurance upon notice and hearing, or a temporary
suspension of insurance without a hearing in the event the institution has no
tangible capital.

     FDIC Insurance Assessments.  Pursuant to FDICIA, the FDIC adopted a
risk-based assessment system for insured depository institutions that takes into
account the risks attributable to different categories and concentrations of
assets and liabilities. The system assigns an institution to one of three
capital categories: (1) well capitalized; (2) adequately capitalized; and (3)
undercapitalized. These three categories are substantially similar to the prompt
corrective action categories described above, with the "undercapitalized"
category including institutions that are undercapitalized, significantly
undercapitalized, and critically undercapitalized for prompt corrective action
purposes. An institution is also assigned by the FDIC to one of three
supervisory subgroups within each capital group. The supervisory subgroup to
which an institution is assigned is based on a supervisory evaluation provided
to the FDIC by the institution's primary federal regulator and information which
the FDIC determines to be relevant to the institution's financial condition and
the risk posed to the deposit insurance funds (which may include, if applicable,
information provided by the institution's state supervisor). An institution's
insurance assessment rate is then determined based on the capital category and
supervisory category to which it is assigned. Under the risk-based assessment
system, there are nine assessment risk classifications (i.e., combinations of
capital groups and supervisory subgroups) to which different assessment rates
are applied.

     Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is in
an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC.

     Enforcement Powers.  The federal banking agencies have broad enforcement
powers, including the power to terminate deposit insurance, impose substantial
fines and other civil and criminal penalties and appoint a conservator or
receiver. Failure to comply with applicable laws, regulations and supervisory
agreements could subject the Corporation or its banking subsidiaries, as well as
officers, directors and other institution-affiliated parties of these
organizations, to administrative sanctions and substantial civil money
penalties. The appropriate federal banking agency may appoint the FDIC as
conservator or receiver for a banking institution (or the FDIC may appoint
itself, under certain circumstances) if any one or more of a number of
circumstances exist, including, without limitation, the fact that the banking
institution is under capitalized and has no reasonable prospect of becoming
adequately capitalized; fails to become adequately capitalized when required to
do so; fails to submit a timely and acceptable capital restoration plan; or
materially fails to implement an accepted capital restoration plan. The Florida
Banking Department and the Alabama Banking Department also have broad
enforcement powers over C&L Bank and The Bank, respectively, including the power
to impose orders, remove officers and directors, impose fines and appoint
supervisors and conservators.

     Community Reinvestment Act.  The banking subsidiaries are subject to the
CRA. The CRA and the regulations issued thereunder are intended to encourage
banks to help meet the credit needs of their service area, including low and
moderate income neighborhoods, consistent with the safe and sound operations of
the banks. These regulations also provide for regulatory assessment of a bank's
record in meeting the needs of its service area when considering applications to
establish branches, merger applications and applications to acquire the assets
and assume the liabilities of another bank. The Financial Institutions Reform,
Recovery and Enforcement Act of 1989 ("FIRREA") requires federal banking
agencies to make public a rating of a bank's performance under the CRA. In the
case of a bank holding company, the CRA performance record of the
                                       11
<PAGE>   13

banks involved in the transaction are reviewed by federal banking agencies in
connection with the filing of an application to acquire ownership or control of
shares or assets of a bank or thrift or to merge with any other bank holding
company. An unsatisfactory record can substantially delay or block the
transaction. Each of the banking subsidiaries has received a satisfactory CRA
rating from federal banking agencies.

     Consumer Laws and Regulations.  In addition to the laws and regulations
discussed herein, the banking subsidiaries are also subject to certain consumer
laws and regulations that are designed to protect consumers in transactions with
banks. While the list set forth herein is not exhaustive, these laws and
regulations include the Truth in Lending Act, the Truth in Savings Act, the
Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Equal
Credit Opportunity Act and the Fair Housing Act, among others. These laws and
regulations mandate certain disclosure requirements and regulate the manner in
which financial institutions must deal with customers when taking deposits,
making loans to or engaging in other types of transactions with such customers.

INSTABILITY OF REGULATORY STRUCTURE

     Various bills are routinely introduced in the United States Congress with
respect to the regulation of financial institutions. Certain of these proposals,
if adopted, could significantly change the regulations of banks and the
financial services industry. The Corporation cannot predict whether any of these
proposals will be adopted or, if adopted, how these proposals would affect the
Corporation.

EFFECT ON ECONOMIC ENVIRONMENT

     The policies of regulatory authorities, especially the monetary policy of
the Federal Reserve Board, have a significant effect on the operating results of
bank holding companies and their subsidiaries. Among the means available to the
Federal Reserve Board to affect the money supply are open market operations in
U.S. Government securities, changes in the discount rate on member bank
borrowings and changes in reserve requirements against member bank deposits.
These means are used in varying combinations to influence overall growth and
distribution of bank loans, investments and deposits, and their use may affect
interest rates charged on loans or paid for deposits.

     Federal Reserve Board monetary policies have materially affected the
operating results of commercial banks in the past and are expected to continue
to do so in the future. The nature of future monetary policies and the effect of
such policies on the business and earnings of the Corporation and its
subsidiaries cannot be predicted.

ITEM 2.  PROPERTIES.

     The corporate headquarters of the Corporation are located at 17 North 20th
Street, Birmingham, Alabama, in the John A. Hand Building, a 21-story building.
As of December 21, 1999, the Corporation and The Bank, who jointly own the
building, converted the building into condominiums known as The Bank
Condominiums. The Corporation owns the Bank Unit, which consists of 4 floors of
the building, including a branch of The Bank and the Corporation's headquarters,
and intends to sell or lease the remaining condominium units for commercial or
residential use.

     The Corporation and its subsidiaries operate through 31 office facilities,
including its operations center. Of these, 24 are owned by the Corporation or
one of its subsidiaries and 7 are leased. Rental expense on the leased
properties totaled approximately $511,000 in 1999.

ITEM 3.  LEGAL PROCEEDINGS.

     While the Corporation may from time to time be a party to various legal
proceedings arising from the ordinary course of its business, the Corporation
believes that there are currently no proceedings threatened or pending against
the Corporation at this time that will individually, or in the aggregate,
materially or adversely effect the Corporation's business or financial
condition.

                                       12
<PAGE>   14

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     None.

                                    PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.

     Before the Corporation's public offering on December 10, 1998, there was no
public market for Corporation common stock. The Corporation's common stock
trades on Nasdaq under the ticker symbol "TBNC". As of March 24, 2000, there
were approximately 943 record holders of the Corporation's common stock. The
following table sets forth, for the calendar periods indicated, the range of
high and low sales prices:

<TABLE>
<CAPTION>
                                                               HIGH     LOW
                                                              ------   ------
<S>                                                           <C>      <C>
1998
(from December 10, 1998 -- through December 31, 1998).......  $14.38   $11.75
1999
First Quarter...............................................   12.81     9.75
Second Quarter..............................................   10.94     9.38
Third Quarter...............................................   12.25     9.63
Fourth Quarter..............................................   11.63     6.38
2000
First Quarter (through March 24, 2000)......................    8.00     6.00
</TABLE>

     On December 31, 1999, the last sale price for the common stock was $7.63
per share.

     The Corporation has never paid dividends on its common stock, and there can
be no assurances that dividends will be paid in the future. The Corporation
conducts its principal business through its subsidiaries. The Corporation
derives cash available to pay dividends primarily, if not entirely, from
dividends paid to the Corporation by its subsidiaries. Certain state and federal
legal and regulatory restrictions limit the subsidiaries' ability to pay
dividends to the Corporation. The Corporation's ability to pay dividends to its
stock holders will depend on the Corporation's earnings and financial condition,
liquidity and capital requirements, the general economic and regulatory climate,
the Corporation's ability to service any equity or debt obligations senior to
the Corporation common stock and other factors deemed relevant by the
Corporation's Board of Directors.

                                       13
<PAGE>   15

ITEM 6.  SELECTED FINANCIAL DATA.

     The following table sets forth selected financial data for the Corporation
derived from the Corporation's consolidated financial statements and should be
read in conjunction with the related consolidated financial statements and notes
thereto. See "Item 8. Financial Statements and Supplemental Data."

<TABLE>
<CAPTION>
                                                               DECEMBER 31,(1)(2)
                                              ----------------------------------------------------
                                                1999       1998       1997       1996       1995
                                              --------   --------   --------   --------   --------
                                                (DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
<S>                                           <C>        <C>        <C>        <C>        <C>
SELECTED STATEMENT OF FINANCIAL CONDITION
  DATA:
Total assets................................  $827,427   $630,089   $461,956   $359,533   $278,799
Loans, net of unearned income...............   632,777    431,931    282,902    213,533    152,440
Investment securities.......................    70,916     98,208     98,885     93,590     82,732
Deposits....................................   682,517    531,070    395,222    313,514    243,814
Stockholders' equity........................    68,848     65,967     53,716     40,875     31,882
SELECTED STATEMENT OF INCOME DATA:
Interest income.............................    55,557     42,472     33,705     25,207     20,052
Interest expense............................    26,749     20,206     15,793     11,486      8,739
                                              --------   --------   --------   --------   --------
          Net interest income...............    28,808     22,266     17,912     13,721     11,313
Provision for loan losses...................     2,850      4,657      2,685      1,236        699
Noninterest income..........................     6,164      4,081      3,019      2,646      2,246
Merger related costs........................       744      1,466         --         --         --
Other noninterest expense...................    27,938     20,663     14,776     12,031      9,588
                                              --------   --------   --------   --------   --------
  Income (loss) before income taxes.........     3,440       (439)     3,470      3,100      3,272
Income tax expense (benefit)................       520       (724)     1,074        917        841
                                              --------   --------   --------   --------   --------
          Net income........................  $  2,920   $    285   $  2,396   $  2,183   $  2,431
                                              ========   ========   ========   ========   ========
PER SHARE DATA:
Net income -- basic.........................  $   0.20   $   0.02   $   0.23   $   0.23   $   0.28
           -- diluted.......................      0.20       0.02       0.22       0.23       0.28
PERFORMANCE RATIOS:
Return on average assets....................      0.41%      0.05%      0.58%      0.71%      0.97%
Return on average equity....................      4.33       0.51       5.57       6.12       8.53
ASSETS QUALITY RATIOS:
Allowance for loan losses to nonperforming
  loans.....................................    216.22%    172.93%    146.42%    111.49%    230.22%
Allowance for loan losses to loans, net of
  unearned income...........................      1.27       1.50       1.32       1.18       1.36
Nonperforming loans to loans, net of
  unearned income...........................      0.59       0.58       0.90       1.06       0.59
Net loan charge-offs to average loans.......      0.90       0.67       0.58       0.45       0.31
</TABLE>

---------------

(1) Information for all prior periods has been restated for the poolings of
    interest completed during 1999.
(2) The selected financial data includes the financial data for Emerald Coast
    Bancshares, Inc. since the date of its inception, August 30, 1996.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

BASIS OF PRESENTATION

     The following is a narrative discussion and analysis of significant changes
in the Corporation's results of operations and financial condition. This
discussion should be read in conjunction with the consolidated financial
statements and selected financial data included elsewhere in this document.

                                       14
<PAGE>   16

     The principal subsidiaries of the Corporation are; The Bank, a bank
organized and existing under the laws of Alabama and headquartered in
Birmingham, Alabama, Emerald Coast Bank, a federally-chartered thrift,
headquartered in Panama City Beach, Florida, and C & L Bank, a bank organized
and existing under the laws of Florida and headquartered in Bristol, Florida.

     Recently Completed Acquisitions.  The acquisitions of other banks and
related institutions have contributed significantly to the Corporation's growth.
The following chart lists the Corporation's acquisitions completed during 1998
and 1999:

                                      1998

<TABLE>
<CAPTION>
DATE COMPLETED     ACQUISITIONS                        BANKING LOCATION
--------------     ------------                        ----------------
<S>                <C>                                 <C>
October 16, 1998   Commercial Bancshares of Roanoke,   Roanoke, Alabama(2)
                     Inc.
October 30, 1998   First Citizens Bancorp, Inc.        Monroeville and Frisco City,
                                                         Alabama
October 30, 1998   City National Corporation           Sylacauga, Childersburg and Mignon,
                                                         Alabama
November 6, 1998   Commerce Bank of Alabama            Albertville, Gadsden, Guntersville
                                                         and Rainbow City, Alabama
</TABLE>

                                      1999

<TABLE>
<CAPTION>
DATE COMPLETED     ACQUISITIONS                        BANKING LOCATION
--------------     ------------                        ----------------
<S>                <C>                                 <C>
February 12,       Emerald Coast Bancshares, Inc.      Panama City Beach, Destin, Seagrove
  1999                                                   and Bay Point, Florida
June 30, 1999      C & L Banking Corporation           Bristol, Florida
June 30, 1999      C & L Bank of Blountstown           Blountstown and Altha, Florida
July 13, 1999      BankersTrust of Alabama, Inc.       Huntsville and Madison, Alabama
November 4, 1999   Branches of Community Bank &        Opp, Samson and Kinston, Alabama
                     Trust of Southeast Alabama,
                     Inc.
</TABLE>

     This discussion contains information and forward-looking statements that
are based on the Corporation's belief as well as certain assumptions made by,
and information currently available to, the Corporation with respect to its
ability to achieve the operating results it expects relating to the
recently-completed acquisitions; the ability of the Corporation to achieve
anticipated cost savings and revenue enhancements with respect to the acquired
operations; the assimilation of the acquired operations by the Corporation,
including installing the Corporation's centralized policy oversight, credit
review and management systems at the acquired institutions; the absence of
material contingencies related to the acquired operations; the adequacy of the
allowance for loan losses; the effect of legal proceedings on the Corporation's
financial condition, results of operations and liquidity and market risk
disclosures, as well as other information. The risks and uncertainties that may
affect operations, performance, growth projections and the results of the
Corporation's business include, but are not limited to, fluctuations in the
economy, the relative strength and weakness in the commercial and consumer
sector and in the real estate market, the actions taken by the Federal Reserve
Board for the purpose of managing the economy, interest rate movements, the
impact of competitive products, services and pricing, timely development by the
Corporation of technology enhancements for its products and operating systems,
legislation and similar matters. Although management of the Corporation believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to be
correct. Actual results may vary materially from those anticipated, estimated,
projected or expected.

                                       15
<PAGE>   17

RESULTS OF OPERATIONS

  Year ended December 31, 1999, compared with year ended December 31, 1998

     The Corporation's net income increased $2.6 million to $2.9 million in the
year ended December 31, 1999, from $285,000 in the year ended December 31, 1998.
This increase is due primarily to increases in the Corporation's net interest
income and noninterest income, partially offset by an increase in noninterest
expenses. The Corporation's return on average assets in 1999 was .41%, compared
to .05% in 1998. Return on average equity was 4.33% in 1999 compared to .51% in
1998. Average equity to average assets was 9.36% in 1999 compared to 10.46% in
1998.

     The Corporation incurred nonrecurring merger related costs of $744,000 and
$1.5 million during 1999 and 1998, respectively. Without these nonrecurring
expenses, operating earnings for the year ended December 31, 1999 would have
been $3.6 million, an increase of $1.8 million from 1998 operating earnings of
$1.8 million. These nonrecurring expenses consisted primarily of professional
fees for legal and accounting services.

     Net interest income increased $6.5 million, or 29.4% to $28.8 million for
the year ended December 31, 1999, from $22.3 million for the year ended December
31, 1998 as interest income increased $13.1 million, or 30.8%, and interest
expense increased $6.5 million, or 32.4%. The increase in net interest income is
primarily attributable to a $194.9 million, or 57.2% increase in average loans
to $535.8 million during 1999, from $340.8 million during 1998. This increase
was partially offset by a $159.8 million, or 39.4%, increase in average
interest-bearing liabilities to $565.6 million during 1999, from $405.7 million
during 1998.

     The Corporation's net interest spread and net interest margin were 3.98%
and 4.55%, respectively, in 1999, compared to 3.96% and 4.73% in 1998. The 18
basis point decline in net interest margin is primarily the result of lower
yields in the loan portfolio during 1999 offset in part by a lower average rate
on interest bearing liabilities. The lower yields in the loan portfolio are
primarily the result of an increase in volume in the Birmingham market where
competition produces lower yielding loans than in smaller markets. However, the
lower yields are offset by an increase in the volume of loans produced in the
larger market.

     The provision for loan losses was $2.9 million for the year ended December
31, 1999 compared to $4.7 million in 1998. The provision for loan losses
represents the amount determined by management necessary to maintain the
allowance for loan losses at a level capable of absorbing inherent losses in the
loan portfolio. The Corporation had net charge-offs of $4.8 million in 1999,
resulting in a ratio of net charge-offs to average loans of .90%. This compares
to $2.3 million or .67% in 1998. Net charge-off loans as a percentage of the
provision for loan losses was 169.89% in 1999, compared to 49.39% in 1998. The
increase in net charge-off loans resulted primarily from the charge-off of loans
acquired in a business combination and charge-offs related to a single
commercial loan customer.

     Noninterest income increased $2.1 million, or 51.0% to $6.2 million in
1999, from $4.1 million in 1998, primarily as the result of increased income
from mortgage banking operations and additional customer service charges and
fees. Income from mortgage banking operations was $1.4 million, or 22.9% of
total noninterest income, an increase of $1.2 million from $232,000 in 1998,
primarily due to the mortgage banking department of the bank operating for the
full year. Income from customer service charges and fees was $3.3 million, or
54.3% of total noninterest income, an increase of $343,000 or 11.4% from $3.0
million in 1998, primarily due to the increase in the volume of customer
deposits. Also included in other noninterest income for 1999 is $383,000
attributable to the increase in the cash surrender value of single premium life
insurance policies purchased during 1999 and $342,000 gain from the sale of real
estate.

     Noninterest expense increased $6.6 million, or 29.6% to $28.7 million in
1999 from $22.1 million in 1998. Salaries and employee benefits increased $2.8
million, or 26.3%, to $13.4 million in 1999 compared to $10.6 million in 1998.
The increase in salaries and benefits primarily resulted from the acquisition of
new banks and branches, and the addition of personnel in the administration and
operation areas. All other noninterest expenses increased $3.8 million, or
32.7%, to $15.3 million, compared to $11.5 million in 1998. This increase in
other expenses included a $1.8 million increase in occupancy expenses, a $1.0
million increase in professional fees and $907,000 in foreclosure losses.
Occupancy expenses increased during 1999 as a result of the Corporation
incurring a full year of depreciation, rental expense and maintenance on
buildings and

                                       16
<PAGE>   18

equipment either acquired or leased since the acquisitions. Professional fees
increased primarily due to increased auditing, consulting and legal services
necessary for a growing financial institution. The majority of the foreclosure
losses represent payments made by the Corporation to secure certain rights in
properties acquired in foreclosure from a single commercial account.

     Income before provision for income taxes increased $3.9 million to $3.4
million in 1999, from a $439,000 pre-tax loss in 1998.

     The Corporation's income tax expense (benefit) was $520,000 and $(724,000)
in 1999 and 1998, respectively. The primary difference in the effective tax rate
and the federal statutory rate (34%) for 1999 and 1998 arose from the
recognition of a rehabilitation tax credit of $730,000 and $1.7 million,
respectively, generated from the restoration of the Corporation's headquarters,
the John A. Hand building.

     The Corporation's determination of the realization of deferred tax assets
is based upon management's judgment of various future events and uncertainties,
including the timing and amount of future income earned by its subsidiaries and
the implementation of various tax planning strategies to maximize realization of
the deferred tax assets. The Corporation believes that its subsidiaries will be
able to generate sufficient operating earnings to realize the deferred tax
benefits. In addition, a portion of the amount of the deferred tax asset that
can be realized in any year is subject to certain statutory federal income tax
limitations. The Corporation periodically evaluates the realizability of the
deferred tax assets and, if necessary, adjusts any valuation allowance
accordingly.

  Year ended December 31, 1998, compared with the year ended December 31, 1997

     The Corporation's net income decreased $2.1 million, or 88.1% to $285,000
in the year ended December 31, 1998, from $2.4 million in the year ended
December 31, 1997. This decrease was primarily due to increases in the
Corporation's provision for loan losses and other noninterest expenses. The
Corporation's return on average assets in 1998 was .05% compared to .58% in
1997. Return on average equity was .51% in 1998 compared to 5.57% in 1997.
Average equity to average assets was 10.46% in 1998 compared to 10.48% in 1997.

     During 1998, the Corporation incurred nonrecurring merger related costs of
$1.5 million. Without these nonrecurring expenses, operating earnings for the
year ended December 31, 1998 would have been $1.8 million, a decrease of
$645,000 from 1997 operating earnings of $2.4 million. These nonrecurring
expenses consisted primarily of professional fees for legal and accounting
services, and the write off of obsolete equipment.

     Net interest income increased $4.4 million, or 24.3% to $22.3 million for
the year ended December 31, 1998, from $17.9 million for the year ended December
31, 1997, as interest income increased $8.8 million, or 26.0%, and interest
expense increased $4.4 million, or 27.9%. The increase in net interest income is
primarily attributable to a $86.7 million, or 34.1% increase in average loans to
$340.8 million during 1998, from $254.1 million during 1997. This increase was
offset by a $92.2 million, or 29.4% increase in average interest bearing
liabilities to $405.7 million during 1998, from $313.6 million during 1997.

     The Corporation's net interest spread and net interest margin were 3.96%
and 4.73%, respectively, in 1998, compared to 3.98% and 4.84% in 1997. The 11
basis point decline in net interest margin is primarily a result of lower yields
in the loan portfolio during 1998. The lower yields in the loan portfolio are
primarily the result of an increase in volume in the Birmingham market where
competition produces lower yielding loans than in smaller markets. However, the
lower yields are offset by an increase in the volume of loans produced in the
larger market.

     The provision for loan losses was $4.7 million for the year ended December
31, 1998 compared to $2.7 million in 1997. The provision for loan losses
represents the amount determined by management to maintain the allowance for
loan losses at a level capable of absorbing inherent losses in the loan
portfolio. The Corporation had net charge-offs of $2.3 million in 1998,
resulting in a ratio of net charge-offs to average loans of .67%. This compares
to $1.5 million or .58% in 1997. Net charge-off loans as a percentage of the
provision for loan losses was 49.39% in 1998 compared to 54.60% in 1998.
                                       17
<PAGE>   19

     Noninterest income increased $1.1 million, or 35.2% to $4.1 million in
1998, from $3.0 million in 1997, primarily as the result of additional customer
service charges and fees. Income from customer service charges and fees of $3.0
million, or 73.7% of noninterest income, increased $544,000 or 22.1% from $2.5
million in 1997, due to increases in the volume of customer deposits and the
related fees charged.

     Noninterest expense increased $7.4 million, or 49.8% to $22.1 million in
1998 from $14.8 million in 1997. The increase is primarily attributable to
increases in salaries and employee benefits, occupancy expenses due to the
opening of new offices, the creation of new departments and the conversion of
the data processing system. Another major component of the increase in
noninterest expense is approximately $1.5 million incurred in legal, accounting
and printing expenses related to the Corporation's recent acquisitions and the
write off of obsolete equipment.

     The Corporation's income tax benefit for 1998 was $724,000 on a pre-tax
loss of $439,000. For 1997, the Corporation's income tax expense was $1.1
million on pre-tax income of $3.5 million. The primary difference in the
effective rate and the federal statutory rate (34%) for 1998 arose from the
recognition of a rehabilitation tax credit of $1.7 million generated from the
restoration of the Corporation's headquarters, the John A. Hand building. The
rate difference for 1997 is related to the Corporation's investment in tax-free
state, county and municipal securities.

NET INTEREST INCOME

     The largest component of the Corporation's net income is its net interest
income, which is the difference between the income earned on interest earning
assets and interest paid on deposits and borrowings used in support of such
assets. Net interest income is determined by the rates earned on the
Corporation's interest earning assets, rates paid on its interest-bearing
liabilities; the relative amounts of interest earning assets and
interest-bearing liabilities, the degree of mismatch, and the maturity and
repricing characteristics of its interest-earning assets and interest-bearing
liabilities. Net interest income divided by average interest-earning assets
represents the Corporation's net interest margin.

     Average Balances, Income, Expenses and Rates.  The following tables depict,
on a tax-equivalent basis for the periods indicated, certain information related
to the Corporation's average balance sheet and its average yields on assets and
average costs of liabilities. Such yields are derived by dividing income or
expense by the average balance of the corresponding assets or liabilities.
Average balances have been derived from daily averages.

                                       18
<PAGE>   20

              CONSOLIDATED AVERAGE BALANCE INTEREST/INCOME/EXPENSE
                    AND YIELD/RATES TAXABLE EQUIVALENT BASIS

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                    ------------------------------------------------------------------------------------------
                                                1999                           1998                           1997
                                    ----------------------------   ----------------------------   ----------------------------
                                    AVERAGE    INCOME/    YIELD/   AVERAGE    INCOME/    YIELD/   AVERAGE    INCOME/    YIELD/
                                    BALANCE    EXPENSE     RATE    BALANCE    EXPENSE     RATE    BALANCE    EXPENSE     RATE
                                    --------   --------   ------   --------   --------   ------   --------   --------   ------
                                                                      (DOLLARS IN THOUSANDS)
<S>                                 <C>        <C>        <C>      <C>        <C>        <C>      <C>        <C>        <C>
                                                            ASSETS
Earning assets:
  Loans, net of unearned
    income(1).....................  $535,754   $49,244     9.19%   $340,813   $34,310    10.07%   $254,146   $26,090    10.27%
  Investment securities
    Taxable.......................    68,240     4,141     6.07      90,727     5,493     6.05      85,786     5,552     6.47
    Tax-exempt(2).................    18,373     1,400     7.62      18,391     1,402     7.62      12,526     1,055     8.42
                                    --------   -------             --------   -------             --------   -------
        Total investment
          securities..............    86,613     5,541     6.40     109,118     6,895     6.32      98,312     6,607     6.72
    Federal funds sold............    15,136       763     5.04      27,189     1,492     5.49      23,118     1,234     5.34
    Other investments.............     5,701       485     8.51       3,475       252     7.25       2,075       133     6.41
                                    --------   -------             --------   -------             --------   -------
        Total interest-earning
          assets..................   643,204    56,033     8.71     480,595    42,949     8.94     377,651    34,064     9.02
Noninterest-earning assets:
  Cash and due from banks.........    32,771                         22,019                         17,114
  Premises and equipment..........    28,738                         23,465                          9,579
  Accrued interest and other
    assets........................    21,583                         10,313                          9,236
  Allowance for loan losses.......    (6,361)                        (5,653)                        (3,374)
                                    --------                       --------                       --------
        Total assets..............  $719,935                       $530,739                       $410,206
                                    ========                       ========                       ========

                                             LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
  Demand deposits.................  $149,755   $ 5,129     3.42%   $106,691   $ 3,529     3.31%   $ 66,351   $ 2,302     3.47%
  Savings deposits................    32,248       938     2.91      30,155       889     2.95      32,070       937     2.92
  Time deposits...................   333,720    18,034     5.40     257,360    15,198     5.91     212,697    12,425     5.84
  Other borrowings................    49,850     2,648     5.31      11,543       590     5.11       2,437       129     5.29
                                    --------   -------             --------   -------             --------   -------
        Total interest-bearing
          liabilities.............   565,573    26,749     4.73     405,749    20,206     4.98     313,555    15,793     5.04
Noninterest-bearing liabilities:
  Demand deposits.................    81,500                         61,624                         50,031
  Accrued interest and other
    liabilities...................     5,454                          7,831                          3,630
  Stockholders' equity............    67,408                         55,535                         42,990
                                    --------                       --------                       --------
        Total liabilities and
          stockholders' equity....  $719,935                       $530,739                       $410,206
                                    ========                       ========                       ========
Net interest income/net interest
  spread..........................              29,284     3.98%               22,743     3.96%               18,271     3.98%
                                                           ====                          =====                          =====
Net yield on earning assets.......                         4.55%                          4.73%                          4.84%
                                                           ====                          =====                          =====
Taxable equivalent adjustment:
  Investment securities(2)........                 476                            477                            359
                                               -------                        -------                        -------
      Net interest income.........             $28,808                        $22,266                        $17,912
                                               =======                        =======                        =======
</TABLE>

---------------

(1) Nonaccrual loans of an immaterial amount are included in loans net of
    unearned income. No adjustment has been made for these loans in the
    calculation of yields.
(2) Interest income and yields are presented on a fully taxable equivalent basis
    using a tax rate of 34 percent.

                                       19
<PAGE>   21

     Analysis of Changes in Net Interest Income.  The following table sets
forth, on a taxable equivalent basis, the effect which the varying levels of
earning assets and interest-bearing liabilities and the applicable rates have
had on changes in net interest income for the years ended December 31, 1999 and
1998.

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31, (1)
                                           ------------------------------------------------------------
                                                    1999 VS 1998                   1998 VS 1997
                                           ------------------------------   ---------------------------
                                                         CHANGES DUE TO                  CHANGES DUE TO
                                            INCREASE    -----------------    INCREASE    --------------
                                           (DECREASE)    RATE     VOLUME    (DECREASE)   RATE    VOLUME
                                           ----------   -------   -------   ----------   -----   ------
                                                              (DOLLARS IN THOUSANDS)
<S>                                        <C>          <C>       <C>       <C>          <C>     <C>
Increase (decrease) in:
  Income from earning assets:
     Interest and fees on loans..........   $14,934     $(3,224)  $18,158     $8,220     $(512)  $8,732
     Interest on securities:
          Taxable........................    (1,352)         18    (1,370)       (59)     (361)     302
          Tax-exempt.....................        (2)         --        (2)       347      (104)     451
  Interest on federal funds..............      (729)       (114)     (615)       258        35      223
  Interest on other investments..........       233          50       183        119        19      100
                                            -------     -------   -------     ------     -----   ------
          Total interest income..........    13,084      (3,270)   16,354      8,885      (923)   9,808
                                            -------     -------   -------     ------     -----   ------
Expense from interest-bearing
  liabilities:
  Interest on demand deposits............     1,600         122     1,478      1,227      (109)   1,336
  Interest on savings deposits...........        49         (12)       61        (48)       10      (58)
  Interest on time deposits..............     2,836      (1,395)    4,231      2,773       149    2,624
  Interest on other borrowings...........     2,058          24     2,034        461        (5)     466
                                            -------     -------   -------     ------     -----   ------
          Total interest expense.........     6,543      (1,261)    7,804      4,413        45    4,368
                                            -------     -------   -------     ------     -----   ------
          Net interest income............   $ 6,541     $(2,009)  $ 8,550     $4,472     $(968)  $5,440
                                            =======     =======   =======     ======     =====   ======
</TABLE>

---------------

(1) The change in interest due to both rate and volume has been allocated to
    volume and rate changes in proportion to the relationship of the absolute
    dollar amounts of the changes in each.

MARKET RISK -- INTEREST RATE SENSITIVITY

     Market risk is the risk of loss arising from adverse changes in the fair
value of financial instruments due to a change in interest rates, exchange rates
and equity prices. The Corporation's primary market risk is interest rate risk.

     The primary objective of Asset/Liability management is to manage interest
rate risk and achieve reasonable stability in net interest income throughout
interest rate cycles. This is achieved by maintaining the proper balance of
interest rate sensitive earning assets and interest rate sensitive liabilities.
The relationship of rate sensitive earning assets to rate sensitive liabilities
is the principal factor in projecting the effect that fluctuating interest rates
will have on future net interest income. Rate sensitive earning assets and
interest-bearing liabilities are those that can be repriced to current market
rates within a relatively short time period.

     The Corporation has structured its rate sensitive assets and liabilities to
increase net interest income if rates rise over the next twelve-month period.
During the next twelve months approximately $3.3 million more interest-earning
assets than interest-bearing liabilities can be repriced to current market
rates. As a result, the one-year cumulative gap (the ratio of rate sensitive
assets to rate sensitive liabilities) at December 31, 1999, was 1.01, indicating
a slightly asset sensitive position. The Corporation's interest rate risk is
heavily asset sensitive during the first ninety days of 2000 with a gap ratio of
1.90 which leads to a liability sensitive gap ratio of .30 during the next three
to twelve month period. As of December 31, 1999, the Corporation's interest rate
risk model indicated that projected net interest income would increase on an
annual basis by 1.4%, or approximately $468,000, assuming an instantaneous
increase in interest rates of 200 basis points. Assuming an instantaneous
decrease of 200 basis points, projected net interest income is expected to
decrease on an annual basis by 1.6%, or approximately $531,000. The amounts
produced by these scenarios are well within the Corporation's policy.

                                       20
<PAGE>   22

     The Corporation attempts to manage the one-year gap position as close to
even as possible. This ensures the Corporation of avoiding wide variances in
case of a rapid change in its interest rate environment. Also, certain products
that are classified as being rate sensitive do not reprice on a contractual
basis. These products include regular savings, interest-bearing transaction
accounts, money market and now accounts. The rates paid on these accounts are
typically not related directly to market interest rates and management exercises
some discretion in adjusting these rates as market rates change. In the event of
a rapid shift in interest rates, management would attempt to take certain
actions to mitigate the negative impact to net interest income. These actions
include but are not limited to, restructuring of interest-earning assets,
seeking alternative funding sources and entering into interest rate swap
agreements.

     The Corporation evaluates interest rate sensitivity risk and then
formulates guidelines regarding asset generation and repricing, funding sources
and pricing and off-balance sheet commitments in order to decrease interest rate
sensitivity risk. The Corporation uses computer simulations to measure the net
interest income effect of various interest rate scenarios. The modeling reflects
interest rate changes and the related impact on net interest income over
specified periods of time.

LIQUIDITY

     The goal of liquidity management is to provide adequate funds to meet
changes in loan demand or unexpected deposit withdrawals. Additionally,
management strives to maximize its earnings by investing its excess funds in
securities and other securitized loan assets with maturities matching its
offsetting liabilities. See the "Selected Loan Maturity and Interest Rate
Sensitivity" and the "Maturity Distribution of Investment Securities" tables.

     Historically, the Corporation has maintained a high loan-to-deposit ratio.
To meet its short-term liquidity needs, the Corporation maintains core deposits
and has borrowing capacity through the Federal Home Loan Bank ("FHLB"), federal
funds line, and a line of credit with a regional bank. Long-term liquidity needs
are met primarily through these sources, the repayment of loans, and the
maturity or sale of investment securities, including short-term investments.

                                       21
<PAGE>   23

FINANCIAL CONDITION

     Loans.  Loans are the largest category of earning assets and typically
provide higher yields than other types of earning assets. Loans involve inherent
credit and liquidity risks which management attempts to control and
counterbalance. At December 31, 1999, total loans net of unearned income were
$632.8 million, an increase of $200.9 million from $431.9 million at December
31, 1998, compared to an increase of $149.0 million during 1998 from $282.9
million at December 31, 1997. For the two year period ended December 31, 1999
these increases represent an annual compound growth rate of 49.6%. Loans
averaged $535.8 million during 1999 compared to $340.8 million during 1998 and
$254.1 million during 1997. Loan growth during 1999 and 1998 was generated
primarily through internal growth in the Birmingham, Alabama and Florida
markets. During these periods approximately $42.0 million in loan growth was
attributable to cash purchases of existing banks and branches.

                       DISTRIBUTION OF LOANS BY CATEGORY

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                              ----------------------------------------------------
                                                1999       1998       1997       1996       1995
                                              --------   --------   --------   --------   --------
                                                             (DOLLARS IN THOUSANDS)
<S>                                           <C>        <C>        <C>        <C>        <C>
Commercial, industrial and agricultural.....  $207,620   $158,855   $ 96,783   $ 74,083   $ 42,483
Real estate -- construction.................    59,496     36,121     17,730      5,604      4,272
Real estate -- mortgage.....................   282,717    152,732    115,790     87,474     67,339
Consumer....................................    74,769     75,796     51,471     45,701     39,459
Other.......................................     8,802      9,671      2,995      2,861        443
                                              --------   --------   --------   --------   --------
          Total loans.......................   633,404    433,175    284,769    215,723    153,996
Unearned income.............................      (627)    (1,244)    (1,867)    (2,190)    (1,556)
Allowance for loan losses...................    (8,065)    (6,466)    (3,741)    (2,522)    (2,072)
                                              --------   --------   --------   --------   --------
          Net loans.........................  $624,712   $425,465   $279,161   $211,011   $150,368
                                              ========   ========   ========   ========   ========
</TABLE>

     The repayment of loans as they mature is a source of liquidity for the
Corporation. The following table sets forth the Corporation's loans in selected
categories maturing within specified intervals at December 31, 1999.

              SELECTED LOAN MATURITY AND INTEREST RATE SENSITIVITY

<TABLE>
<CAPTION>
                                               MATURITY                             RATE STRUCTURE FOR LOANS
                         -----------------------------------------------------       MATURING OVER ONE YEAR
                                    OVER ONE YEAR                                -------------------------------
                         ONE YEAR   THROUGH FIVE                                 PREDETERMINED     FLOATING OR
                         OR LESS        YEARS       OVER FIVE YEARS    TOTAL     INTEREST RATE   ADJUSTABLE RATE
                         --------   -------------   ---------------   --------   -------------   ---------------
                                                         (DOLLARS IN THOUSANDS)
<S>                      <C>        <C>             <C>               <C>        <C>             <C>
Commercial, industrial
  and agricultural.....  $106,269     $ 89,534          $11,817       $207,620     $ 87,248          $14,103
Real estate --
  construction.........    41,754       14,984            2,758         59,496       16,510            1,232
                         --------     --------          -------       --------     --------          -------
                         $148,023     $104,518          $14,575       $267,116     $103,758          $15,335
                         ========     ========          =======       ========     ========          =======
</TABLE>

     The information presented in the above table is based on the contractual
maturities of the individual loans, including loans which may be subject to
renewal at their contractual maturity. Renewal of such loans is subject to
review and credit approval, as well as modification of terms upon their
maturity. Consequently, management believes this treatment presents fairly the
maturity and repricing structure of the loan portfolio.

     Allowance for Loan Losses.  The Corporation maintains an allowance for loan
losses at a level that it believes is adequate to absorb estimated losses
inherent in the loan portfolio, plus estimated losses associated with
off-balance sheet credit instruments such as letters of credits and unfunded
lines of credit. The Corporation prepares an analysis to assess the risk in the
loan portfolio and to determine the adequacy of the allowance for loan losses.
Generally, the Corporation estimates the allowance using factors such as
historical

                                       22
<PAGE>   24

loss experience based on volume and types of loans, volume and trends in
delinquencies and non-accruals, national and local economic conditions and other
pertinent information.

     The Corporation manages and controls risk in the loan portfolio through
adherence to credit standards approved by the Board of Directors and implemented
by senior management. These standards are set forth in a formal loan policy,
which establishes loan underwriting/approval procedure, sets limits on credit
concentration and enforces regulatory requirements.

     Loan portfolio concentration risk is reduced through concentration limits
for borrowers and collateral types and through geographical diversification.
Concentration risk is measured and reported to senior management and the Board
of Directors on a regular basis.

     A risk rating system is employed whereby each loan is assigned a rating
which corresponds to the perceived credit risk. Risk ratings are subject to
independent review by a Loan Review Department, which also performs ongoing,
independent review of the risk management process that includes underwriting,
documentation and collateral control. Regular reports are made to senior
management and the Board of Directors regarding credit quality as measured by
assigned risk ratings and other measures, including, but not limited to, the
level of past due percentages and nonperforming assets.

     The loan review function is centralized and independent of the lending
function. Review results are reported to the Audit Committee of the Board of
Directors as well as to the Corporation's independent auditors.

     The Corporation historically has allocated its allowance for loan losses to
specific loan categories. Although the allowance is allocated, it is available
to absorb losses in the entire loan portfolio.

                  ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                            --------------------------------------------------------------------------------------------
                                  1999               1998               1997               1996               1995
                            ----------------   ----------------   ----------------   ----------------   ----------------
                                     PERCENT            PERCENT            PERCENT            PERCENT            PERCENT
                                       OF                 OF                 OF                 OF                 OF
                            AMOUNT    TOTAL    AMOUNT    TOTAL    AMOUNT    TOTAL    AMOUNT    TOTAL    AMOUNT    TOTAL
                            ------   -------   ------   -------   ------   -------   ------   -------   ------   -------
                                                               (DOLLARS IN THOUSANDS)
<S>                         <C>      <C>       <C>      <C>       <C>      <C>       <C>      <C>       <C>      <C>
Domestic
  Commercial, industrial
    and agricultural......  $4,460     55.3%   $3,119     48.2%   $1,583     42.3%   $  983     39.0%   $  684     33.0%
  Real estate --
    Construction..........     223      2.8       181      2.8       151      4.1        70      2.8        62      3.0
  Real
    estate -- Mortgage....     871     10.8       826     12.8     1,296     34.6       919     36.4       795     38.4
  Consumer................   2,452     30.4     2,295     35.5       686     18.3       532     21.1       525     25.3
  Unallocated.............      59       .7        45       .7        25       .7        18       .7         6       .3
                            ------    -----    ------    -----    ------    -----    ------    -----    ------    -----
                            $8,065    100.0%   $6,466    100.0%   $3,741    100.0%   $2,522    100.0%   $2,072    100.0%
                            ======    =====    ======    =====    ======    =====    ======    =====    ======    =====
</TABLE>

     Net charge-offs increased 110.5% from $2.3 million in 1998 to $4.8 million
in 1999. The ratio of net charge-offs to average loans has increased in each of
the past four years, averaging .72%, with a ratio of .90% in 1999 and .67% in
1998. Historically, net charge-offs have been more significant for commercial
and consumer loans. The increase in net charge-off loans during 1999 resulted
primarily from the charge-off of loans acquired in a business combination, and
from a single commercial loan customer. These charge-off loans constituted
approximately 83% of the net charge-off loans during 1999. The Corporation
believes that in future periods loan losses should reflect amounts that are
similar to its historical averages.

     The allowance as a percentage of loans at December 31, 1999 was 1.27%. The
allowance as a percentage of period ending loans for the last three years has
averaged 1.36%. Allowance for loan losses as a percentage of nonperforming loans
increased to 216.2% at December 31, 1999 from 172.9% at December 31, 1998. The
dollar level of nonperforming loans has remained consistent for the past three
years; however, with the increase

                                       23
<PAGE>   25

in loan volume, the actual dollar amount could increase in the future.
Nonperforming loans as a percent of net loans decreased from .87% at December
31, 1998 to .59% at December 31, 1999. This significant improvement is primarily
attributable to enhanced credit monitoring and other controls implemented by the
Corporation during 1999, and was an important contributing factor to the
reduction of the provision for loan losses in 1999 compared to 1998.

     The following table summarizes certain information with respect to the
Corporation's allowance for loan losses and the composition of charge-offs and
recoveries for the periods indicated.

                        SUMMARY OF LOAN LOSS EXPERIENCE

<TABLE>
<CAPTION>
                                                                      YEAR
                                              ----------------------------------------------------
                                                1999       1998       1997       1996       1995
                                              --------   --------   --------   --------   --------
                                                             (DOLLARS IN THOUSANDS)
<S>                                           <C>        <C>        <C>        <C>        <C>
Allowance for loan losses at beginning of
  year......................................  $  6,466   $  3,741   $  2,522   $  2,072   $  1,781
Allowance of acquired bank..................     3,591        368         --         --         --
Charge-offs:
  Commercial, industrial and agricultural...     4,531      1,256        795        114         41
  Real estate...............................       286        359         81         56         95
  Consumer..................................       975      1,291        883        789        446
                                              --------   --------   --------   --------   --------
          Total charge-offs.................     5,792      2,906      1,759        959        582
Recoveries:
  Commercial, industrial and agricultural...       418        108         42         24         37
  Real estate...............................       172         86         23          5          7
  Consumer..................................       360        412        228        144        130
                                              --------   --------   --------   --------   --------
          Total recoveries..................       950        606        293        173        174
                                              --------   --------   --------   --------   --------
Net charge-offs.............................     4,842      2,300      1,466        786        408
Provision for loan losses...................     2,850      4,657      2,685      1,236        699
                                              --------   --------   --------   --------   --------
Allowance for loan losses at end of year....  $  8,065   $  6,466   $  3,741   $  2,522   $  2,072
                                              ========   ========   ========   ========   ========
Loans at end of period, net of unearned
  income....................................  $632,777   $431,931   $282,902   $213,533   $152,440
Average loans, net of unearned income.......   535,754    340,813    254,146    175,772    130,672
Ratio of ending allowance to ending loans...      1.27%      1.50%      1.32%      1.18%      1.36%
Ratio of net charge-offs to average loans...      0.90       0.67       0.58       0.45       0.31
Net charge-offs as a percentage of:
  Provision for loan losses.................    169.89      49.39      54.60      63.59      58.37
  Allowance for loan losses.................     60.04      35.57      39.19      31.17      19.69
Allowance for loan losses as a percentage of
  nonperforming loans.......................    216.22     172.93     146.42     111.49     230.22
</TABLE>

     Nonperforming Loans.  The following table represents the Corporation's
nonperforming loans for the dates indicated.

                  NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS

<TABLE>
<CAPTION>
                                                                        DECEMBER 31,
                                                          ----------------------------------------
                                                           1999     1998     1997     1996    1995
                                                          ------   ------   ------   ------   ----
                                                                   (DOLLARS IN THOUSANDS)
<S>                                                       <C>      <C>      <C>      <C>      <C>
Nonaccrual..............................................  $3,097   $1,496   $1,169   $1,562   $544
Past due (contractually past due 90 days or more).......     575    2,243    1,386      700    356
Restructured............................................      58       --       --       --     --
                                                          ------   ------   ------   ------   ----
                                                          $3,730   $3,739   $2,555   $2,262   $900
                                                          ======   ======   ======   ======   ====
</TABLE>

                                       24
<PAGE>   26

     A delinquent loan is generally placed on nonaccrual status when it becomes
90 days or more past due and management believes, after considering economic and
business conditions and collection efforts, that the borrower's financial
condition is such that the collection of interest is doubtful. When a loan is
placed on nonaccrual status, all interest which has been accrued on the loan but
remains unpaid is reversed and deducted from earnings as a reduction of reported
interest income. No additional interest income is accrued on the loan balance
until the collection of both principal and interest becomes reasonably certain.
When a problem loan is finally resolved, there may ultimately be an actual
write-down or charge-off of the principal balance of the loan, which may
necessitate additional charges to earnings.

     Investment Securities.  The investment securities portfolio is a
significant component of the Corporation's total earning assets. Total
securities averaged $86.6 million in 1999, compared to $109.1 million in 1998
and $98.3 million in 1997. At December 31, 1999, the Corporation's securities
portfolio had an amortized cost of $74.5 million.

     The following table sets forth the amortized costs of the securities held
by the Corporation at the dates indicated.

                              INVESTMENT PORTFOLIO

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                             -------------------------------------------------------
                                                 HELD TO MATURITY            AVAILABLE FOR SALE
                                             -------------------------   ---------------------------
                                              1999     1998     1997      1999      1998      1997
                                             ------   ------   -------   -------   -------   -------
                                                             (DOLLARS IN THOUSANDS)
<S>                                          <C>      <C>      <C>       <C>       <C>       <C>
U.S. Treasury and agencies.................  $   --   $   --   $19,787   $11,645   $20,965   $40,408
State and political subdivisions...........   3,711    4,124     7,837    13,991    18,345     7,798
Mortgage-backed securities.................   1,766    2,602     6,109    42,292    48,894    12,867
Other investments..........................      --       --       200     1,090     3,095     3,328
                                             ------   ------   -------   -------   -------   -------
          Total investment securities......  $5,477   $6,726   $33,933   $69,018   $91,299   $64,401
                                             ======   ======   =======   =======   =======   =======
</TABLE>

     The following table shows the scheduled maturities and average yields of
securities held at December 31, 1999.

                 MATURITY DISTRIBUTION OF INVESTMENT SECURITIES

<TABLE>
<CAPTION>
                                                                                MATURING
                                         --------------------------------------------------------------------------------------
                                                           AFTER ONE BUT    AFTER FIVE BUT
                                           WITHIN ONE       WITHIN FIVE       WITHIN TEN
                                              YEAR             YEARS             YEARS        AFTER TEN YEARS        TOTAL
                                         --------------   ---------------   ---------------   ---------------   ---------------
                                         AMOUNT   YIELD   AMOUNT    YIELD   AMOUNT    YIELD   AMOUNT    YIELD   AMOUNT    YIELD
                                         ------   -----   -------   -----   -------   -----   -------   -----   -------   -----
                                                                         (DOLLARS IN THOUSANDS)
<S>                                      <C>      <C>     <C>       <C>     <C>       <C>     <C>       <C>     <C>       <C>
Securities available for sale:
  U.S. Treasury and agencies...........   $ --      --%   $ 5,445   5.60%   $ 5,205   6.53%   $   995   6.83%   $11,645   6.12%
  State and political subdivision......    455    5.05      1,452   6.13        857   5.83     11,227   5.36     13,991   5.46
  Mortgage-backed securities...........     --      --      2,808   6.13      5,309   6.61     34,175   6.33     42,292   6.35
  Other securities.....................    420    6.43        403   6.45        267   5.62         --     --      1,090   6.24
                                          ----            -------           -------           -------           -------
        Total..........................   $875    5.71%   $10,108   5.86%   $11,638   6.50%   $46,397   6.11%   $69,018   6.13%
                                          ====    ====    =======   ====    =======   ====    =======   ====    =======   ====
Securities held to maturity:
  State and political subdivision......   $715    4.89%   $ 2,379   4.91%   $   489   5.03%   $   128   7.00%   $ 3,711   4.99%
  Mortgage-backed securities...........    112    5.50          8   8.75        150   7.34      1,496   6.50      1,766   6.52
                                          ----            -------           -------           -------           -------
        Total..........................   $827    4.96%   $ 2,387   4.92%   $   639   6.23%   $ 1,624   6.50%   $ 5,477   5.48%
                                          ====    ====    =======   ====    =======   ====    =======   ====    =======   ====
</TABLE>

     Short-Term Investments.  Short-term investments as of December 31, 1999
consisted of federal funds sold and short-term commercial paper of $5.8 million
and $14.5 million, respectively. Typically, the Corporation's short-term
investments consist primarily of federal funds, which averaged $ 15.1 million in
1999, compared to $ 27.2 million in 1998 and $ 23.1 million in 1997. Federal
funds are a primary source of the Corporation's liquidity and are generally
invested on an overnight basis. All of the short-term commercial paper held at
December 31, 1999 matured in January 2000.

                                       25
<PAGE>   27

     In addition to liquidity management, the Corporation also utilizes
short-term investments when the level of funds committed to lending and
investment portfolios change, or the level of deposit generation changes.

     Deposits.  During 1999, average total deposits increased $141.4 million, or
31.0% to $597.2 million, from $455.8 million in 1998. Average total deposits
increased $94.7 million, or 26.2% to $455.8 million during 1998, from $361.1
million in 1997. The increase in average deposits for the two-year period ended
December 31, 1999 represents an average annual compound growth rate of 28.6%.
Deposit growth during this two-year period has been generated primarily through
internal growth in the Corporation's various markets. Deposit growth attributed
to the cash purchase of existing banks and branches totaled approximately $94.0
million dollars during the same period.

     The following table sets forth average deposits of the Corporation by
category for the periods indicated.

                                AVERAGE DEPOSITS

<TABLE>
<CAPTION>
                                                               AVERAGE FOR THE YEAR
                                    ---------------------------------------------------------------------------
                                             1999                      1998                      1997
                                    -----------------------   -----------------------   -----------------------
                                      AVERAGE                   AVERAGE                   AVERAGE
                                      AMOUNT       AVERAGE      AMOUNT       AVERAGE      AMOUNT       AVERAGE
                                    OUTSTANDING   RATE PAID   OUTSTANDING   RATE PAID   OUTSTANDING   RATE PAID
                                    -----------   ---------   -----------   ---------   -----------   ---------
                                                              (DOLLARS IN THOUSANDS)
<S>                                 <C>           <C>         <C>           <C>         <C>           <C>
Noninterest bearing demand
  deposits........................   $ 81,500         --%      $ 61,624         --%      $ 50,031         --%
Interest-bearing demand
  deposits........................    149,755       3.42        106,691       3.31         66,351       3.47
Savings deposits..................     32,248       2.91         30,155       2.95         32,070       2.92
Time deposits.....................    333,720       5.40        257,360       5.91        212,697       5.84
                                     --------                  --------                  --------
          Total average
            deposits..............   $597,223       4.04%      $455,830       4.30%      $361,149       4.34%
                                     ========       ====       ========       ====       ========       ====
</TABLE>

     Deposits, and particularly core deposits, have historically been the
Corporation's primary source of funding and have enabled the Corporation to meet
successfully both its short-term and long-term liquidity needs. These core
deposits represent 73.5% of the Corporation's total deposits at December 31,
1999. The Corporation anticipates that such deposits will continue to be its
primary source of funding in the future. The Corporation's loan-to-deposit ratio
was 92.7% at December 31, 1999, compared to 81.3% at December 31, 1998. The
maturity distribution of the Corporation's time deposits over $100,000 at
December 31, 1999 is shown in the following table.

                MATURITIES OF TIME DEPOSITS OF $100,000 OR MORE

<TABLE>
<CAPTION>
               AT DECEMBER 31, 1999
--------------------------------------------------
 UNDER      3-6      6-12       OVER
3 MONTHS  MONTHS    MONTHS    12 MONTHS    TOTAL
--------  -------   -------   ---------   --------
              (DOLLARS IN THOUSANDS)
<S>       <C>       <C>       <C>         <C>
$74,533   $14,939   $55,827    $35,342    $180,641
========  =======   =======    =======    ========
</TABLE>

     Approximately 41.3% of the Corporation's time deposits over $100,000 had
scheduled maturities within three months. The Corporation believes that large
denomination certificate of deposit customers tend to be extremely sensitive to
interest rate levels, making these deposits less reliable sources of funding for
liquidity planning purposes than core deposits. While some financial
institutions partially fund their balance sheets using large certificates of
deposits obtained through brokers, these broker deposits are generally expensive
and are unreliable as long-term funding sources. As of December 31, 1999, the
Corporation did not have any brokered deposits.

     Borrowed Funds.  During 1999, average borrowed funds increased $38.3
million, or 331.9%, to $49.9 million, from $11.5 million during 1998, which
increased $9.1 million, or 373.6%, from $2.4 million during 1997. The average
rate paid on borrowed funds during 1999, 1998 and 1997 was 5.3%, 5.1% and 5.3%
respectively. Because of a relatively high loan-to-deposit ratio, the existence
and stability of these funding sources are critical to the Corporation's
maintenance of short-term and long-term liquidity.

                                       26
<PAGE>   28

     Borrowed funds consist primarily of two types of borrowings; advances from
the FHLB and a note payable from a regional bank.

     The following is a summary, by year of maturity, of advances from the FHLB
as of December 31, 1999 and 1998 (in thousands):

<TABLE>
<CAPTION>
                                                    1999                      1998
                                           -----------------------   -----------------------
                                             WEIGHTED                  WEIGHTED
YEAR                                       AVERAGE RATE    BALANCE   AVERAGE RATE    BALANCE
----                                       ------------    -------   ------------    -------
<S>                                        <C>             <C>       <C>             <C>
2000.....................................      6.07%       $ 1,000       0.00%       $    --
2003.....................................      5.05         17,660       5.05         17,660
2004.....................................      5.21         25,000         --             --
2008.....................................      5.52          2,500       5.24          5,500
2009.....................................      5.18         16,340         --             --
                                               ----        -------       ----        -------
                                               5.20%       $62,500       5.09%       $23,160
                                               ====        =======       ====        =======
</TABLE>

     The above schedule is by contractual maturity. Certain advances are subject
to call dates as follows: year 2000, $16,340,000; 2002, $25,000,000; 2003,
$2,500,000 and 2004, $2,000,000.

     The advances are secured by FHLB stock, agency securities and a blanket
lien on certain residential real estate loans, all with a carrying value of
approximately $111.0 million at December 31, 1999. The Corporation has remaining
approximately $74.1 million in unused lines of credit with the FHLB subject to
the availability of qualified collateral.

     As of December 31, 1999 the Corporation has borrowed $7.1 million under a
$10.0 million line of credit with a regional bank. Interest is one and
one-quarter (1.25%) percentage points in excess of the applicable LIBOR Index
Rate. The line matures May 1, 2001.

     The Corporation also has available approximately $30.6 million in unused
federal funds lines of credit with regional banks, subject to certain
restrictions and collateral requirements.

     Stockholder's Equity.  Stockholder's equity increased $2.9 million during
1999 to $68.8 million at December 31, 1999 from $66.0 million at December 31,
1998. The increase in stockholder's equity during 1999 consisted of $2.9 million
net income and $2.3 million in proceeds from the issuance of common stock. This
increase was offset by a $2.3 million unrealized loss on securities available
for sale, net of taxes.

     Regulatory Capital.  The table below represents the Corporation's actual
regulatory and minimum regulatory capital requirements at December 31, 1999
(dollars in thousands):

<TABLE>
<CAPTION>
                                                          FOR CAPITAL
                                                           ADEQUACY          TO BE WELL
                                         ACTUAL            PURPOSES          CAPITALIZED
                                     ---------------    ---------------    ---------------
                                     AMOUNT    RATIO    AMOUNT    RATIO    AMOUNT    RATIO
                                     -------   -----    -------   -----    -------   -----
<S>                                  <C>       <C>      <C>       <C>      <C>       <C>
Total Risk-Based Capital...........  $71,288   10.61%   $53,746   8.00%    $67,182   10.00%
Tier 1 Risk-Based Capital..........   63,224    9.41     26,873   4.00      40,309    6.00
Leverage Capital...................   63,224    7.74     32,671   4.00      40,839    5.00
</TABLE>

     Each of the Corporation's subsidiaries is required to maintain risk-based
and leverage ratios equal to those required for the Corporation. Each of the
banking subsidiaries are well capitalized at December 31, 1999, as set forth in
the following table:

<TABLE>
<CAPTION>
                                                            DECEMBER 31, 1999
                                         --------------------------------------------------------
                                         TOTAL RISK BASED    TIER I RISK BASED    TIER I LEVERAGE
                                         ----------------    -----------------    ---------------
<S>                                      <C>                 <C>                  <C>
The Bank...............................       10.61%                9.41%              8.10%
Emerald Coast Bank.....................       10.04                 9.51                N/A
C & L Bank.............................       14.08                12.84               9.21
</TABLE>

                                       27
<PAGE>   29

IMPACT OF INFLATION

     Unlike most industrial companies, the assets and liabilities of financial
institutions such as the Corporation are primarily monetary in nature.
Therefore, interest rates have a more significant effect on the Corporation's
performance than do the effects of changes in the general rate of inflation and
changes in prices. In addition, interest rates do not necessarily move in the
same direction or in the same magnitude as the prices of goods and services. The
Corporation seeks to manage the relationships between interest sensitive assets
and liabilities in order to protect against wide interest rate fluctuations,
including those resulting from inflation.

YEAR 2000 COMPLIANCE

     During 1999, the Corporation completed its plan to address the Year 2000
date change. The Corporation has not experienced any failures or disruptions in
its systems since the date change and does not anticipate any date change
problems in the future. However, management will continue to monitor, throughout
the year, its systems and interactions with vendors and other third parties to
ensure that all systems continue to function properly. The costs of the Year
2000 project through December 31, 1999 totaled approximately $225,000.

ITEM 7(A).  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.

     Please refer to "Item 7.  Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Earnings Assets," which is incorporated
herein by reference.

                                       28
<PAGE>   30

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     Consolidated financial statements of the Corporation meeting the
requirements of Regulation S-X are filed on the succeeding pages of this Item 8
of this Annual Report on Form 10-K.

                     THE BANC CORPORATION AND SUBSIDIARIES

                       CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 1999 AND 1998

                                    CONTENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Auditors, Ernst & Young LLP...........    30
Report of Independent Auditors, Saltmarsh Cleaveland &
  Gund......................................................    31
Report of Independent Auditors, Williams, Cox, Weidner &
  Cox.......................................................    32
Report of Independent Auditors, Williams, Cox, Weidner &
  Cox.......................................................    33
Consolidated Statements of Financial Condition..............    34
Consolidated Statements of Income...........................    35
Consolidated Statements of Cash Flows.......................    36
Consolidated Statements of Changes in Stockholders'
  Equity....................................................    38
Notes to Consolidated Financial Statements..................    39
</TABLE>

                                       29
<PAGE>   31

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
The Banc Corporation

     We have audited the accompanying consolidated statements of financial
condition of The Banc Corporation and Subsidiaries as of December 31, 1999 and
1998, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the consolidated
financial statements of Emerald Coast Bancshares, Inc., C&L Bank of Blountstown
and C&L Banking Corporation as of and for each of the two years in the period
ended December 31, 1998, which statements combined reflect total assets
constituting 30% in 1998, and net interest income constituting 33% in 1998 and
32% in 1997, of the related consolidated totals. Those statements were audited
by other auditors whose report has been furnished to us, and our opinion,
insofar as it relates to data included for Emerald Coast Bancshares, Inc., C&L
Bank of Blountstown and C&L Banking Corporation, is based solely on the report
of the other auditors.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.

     In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of The Banc Corporation and Subsidiaries at
December 31, 1999 and 1998, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States.

                                          Ernst & Young LLP

Birmingham, Alabama
March 3, 2000

                                       30
<PAGE>   32

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
The Banc Corporation

     We have audited and reported on the consolidated statements of financial
condition of Emerald Coast Bancshares, Inc. and Subsidiary as of December 31,
1998 and 1997 and the consolidated statements of operations, changes in
stockholders' equity, and cash flows for the years ended December 31, 1998 and
1997, prior to their inclusion in the consolidated financial position of The
Banc Corporation and Subsidiaries as of December 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended December 31, 1998. These consolidated financial
statements are the responsibility of the management of Emerald Coast Bancshares,
Inc. and Subsidiary. Our responsibility is to express an opinion on these
financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Emerald Coast
Bancshares, Inc. and Subsidiary as of December 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1998 and 1997 in conformity with generally accepted
accounting principles.

                                          Saltmarsh Cleaveland & Gund

Pensacola, Florida
March 19, 1999

                                       31
<PAGE>   33

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
The Banc Corporation

     We have audited and reported on the statements of financial condition of C
& L Bank of Bristol as of December 31, 1998 and 1997, and the statements of
income, changes in stockholders' equity, and cash flows for the years then ended
December 31, 1998 and 1997. These financial statements are the responsibility of
the management of C & L Bank of Bristol. Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of C & L Bank of Bristol as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.

                                          Williams, Cox, Weidner and Cox

March 3, 1999

Marianna, Florida

                                       32
<PAGE>   34

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
The Banc Corporation

     We have audited and reported on the statements of financial condition of C
& L Bank of Blountstown as of December 31, 1998 and 1997, and the related
statements of income, changes in stockholders' equity, and cash flows for the
years then ended December 31, 1998 and 1997. These financial statements are the
responsibility of the management of C & L Bank of Blountstown. Our
responsibility is to express an opinion on these financial statements based on
our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of C & L Bank of Blountstown as
of December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

                                          Williams, Cox, Weidner and Cox

March 3, 1999
Marianna, Florida

                                       33
<PAGE>   35

                     THE BANC CORPORATION AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              ----------------------
                                                                1999         1998
                                                              ---------    ---------
                                                              (AMOUNTS IN THOUSANDS)
<S>                                                           <C>          <C>
                                       ASSETS
Cash and due from banks.....................................  $ 31,825     $ 31,307
Interest bearing deposits in other banks....................     1,862        1,048
Federal funds sold..........................................     5,843       25,045
Short-term commercial paper.................................    14,484           --
Securities available for sale...............................    65,439       91,482
Securities held to maturity (fair value of $5,411,000 and
  $6,775,000 in 1999 and 1998, respectively)................     5,477        6,726
Mortgage loans held for sale................................     2,127        4,899
Loans.......................................................   633,404      433,175
Unearned income.............................................      (627)      (1,244)
                                                              --------     --------
Loans, net of unearned income...............................   632,777      431,931
Less allowance for loan losses..............................    (8,065)      (6,466)
                                                              --------     --------
          Net loans.........................................   624,712      425,465
Premises and equipment, net.................................    37,734       29,666
Accrued interest receivable.................................     6,286        4,812
Stock in FHLB and Federal Reserve Bank......................     3,461        1,760
Other assets................................................    28,177        7,879
                                                              --------     --------
                                                              $827,427     $630,089
                                                              ========     ========

                        LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
  Noninterest bearing demand................................  $ 83,733     $ 79,990
  Interest bearing demand...................................   160,044      141,416
  Savings...................................................    33,998       30,356
  Time deposits $100,000 and over...........................   180,641       90,557
  Other time................................................   224,101      188,751
                                                              --------     --------
          Total deposits....................................   682,517      531,070
Advances from FHLB..........................................    62,500       23,160
Other borrowed funds........................................       295        3,700
Notes payable...............................................     7,104           --
Accrued expenses and other liabilities......................     6,163        6,192
                                                              --------     --------
          Total liabilities.................................   758,579      564,122
Stockholders' equity:
  Preferred stock, par value $.001 per share; shares
     authorized 5,000,000; shares issued -0-................        --           --
  Common stock, par value $.001 per share; shares authorized
     25,000,000; shares issued 14,385,021 in 1999 and
     14,077,036 in 1998.....................................        14           14
  Surplus...................................................    47,756       45,492
  Retained earnings.........................................    23,283       20,363
  Accumulated other comprehensive (loss) income.............    (2,205)          98
                                                              --------     --------
          Total stockholders' equity........................    68,848       65,967
                                                              --------     --------
                                                              $827,427     $630,089
                                                              ========     ========
</TABLE>

                See notes to consolidated financial statements.

                                       34
<PAGE>   36

                     THE BANC CORPORATION AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                              ---------------------------
                                                               1999      1998      1997
                                                              -------   -------   -------
                                                                (AMOUNTS IN THOUSANDS,
                                                                EXCEPT PER SHARE DATA)
<S>                                                           <C>       <C>       <C>
Interest income:
  Interest and fees on loans................................  $49,244   $34,310   $26,090
  Interest on taxable securities............................    4,141     5,493     5,552
  Interest on tax exempt securities.........................      924       925       696
  Interest on federal funds sold............................      763     1,492     1,234
  Interest and dividends on other investments...............      485       252       133
                                                              -------   -------   -------
          Total interest income.............................   55,557    42,472    33,705
Interest expense:
  Interest on deposits......................................   24,101    19,616    15,664
  Interest expense on advances from FHLB and other borrowed
     funds..................................................    2,648       590       129
                                                              -------   -------   -------
          Total interest expense............................   26,749    20,206    15,793
                                                              -------   -------   -------
Net interest income.........................................   28,808    22,266    17,912
Provision for loan losses...................................    2,850     4,657     2,685
                                                              -------   -------   -------
          Net interest income after provision for loan
            losses..........................................   25,958    17,609    15,227
Noninterest income:
  Service charges and fees..................................    3,350     3,007     2,463
  Mortgage banking income...................................    1,409       232        25
  Securities gains..........................................       83       279       220
  Other.....................................................    1,322       563       311
                                                              -------   -------   -------
          Total noninterest income..........................    6,164     4,081     3,019
Noninterest expense:
  Salaries and employee benefits............................   13,421    10,629     7,893
  Occupancy and equipment...................................    5,242     3,432     2,471
  Merger related costs......................................      744     1,466        --
  Other.....................................................    9,275     6,602     4,412
                                                              -------   -------   -------
          Total noninterest expenses........................   28,682    22,129    14,776
                                                              -------   -------   -------
  Income (loss) before income taxes.........................    3,440      (439)    3,470
  Income tax expense (benefit)..............................      520      (724)    1,074
                                                              -------   -------   -------
          Net income........................................  $ 2,920   $   285   $ 2,396
                                                              =======   =======   =======
Average common shares outstanding...........................   14,335    13,115    10,553
Average common shares outstanding, assuming dilution........   14,362    13,210    10,672
Basic net income per common share...........................  $   .20   $   .02   $   .23
Diluted net income per common share.........................      .20       .02       .22
</TABLE>

                See notes to consolidated financial statements.

                                       35
<PAGE>   37

                     THE BANC CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                              ---------------------------------
                                                                1999        1998        1997
                                                              ---------   ---------   ---------
                                                                   (AMOUNTS IN THOUSANDS)
<S>                                                           <C>         <C>         <C>
OPERATING ACTIVITIES
Net income..................................................  $   2,920   $     285   $   2,396
Adjustments to reconcile net income to net cash provided by
  operations:
  Depreciation..............................................      2,194       1,786       1,121
  Net (accretion) amortization of securities................        (69)        301        (241)
  Gain on sale of securities available for sale.............        (83)       (279)       (220)
  Provision for loan losses.................................      2,850       4,657       2,685
  Decrease (increase) in mortgage loans held for sale.......      2,772      (4,899)         --
  Increase in accrued interest receivable...................     (1,055)       (326)       (547)
  Deferred income tax expense (benefit).....................         46      (1,977)       (127)
  Other changes, net........................................       (826)      1,382         575
                                                              ---------   ---------   ---------
          Net cash provided by operating activities.........      8,749         930       5,642
INVESTING ACTIVITIES
(Increase) decrease in interest bearing deposits in other
  banks.....................................................       (814)        435        (100)
Decrease (increase) in federal funds sold...................     22,422      19,705     (19,898)
Increase in short-term commercial paper.....................    (14,151)         --          --
Proceeds from sale of subsidiary's net assets...............      3,392          --          --
Proceeds from sales of securities available for sale........     18,283      65,170      30,592
Proceeds from maturities of securities available for sale...     19,426      39,509       8,951
Proceeds from maturities of securities held to maturity.....      1,231      15,926      12,933
Purchase of securities available for sale...................    (12,499)    (78,833)    (41,746)
Purchase of securities held to maturity.....................         --     (23,520)    (15,181)
Net increase in loans.......................................   (178,349)   (138,013)    (70,886)
Net cash received (paid) in business combinations...........     11,893      (5,786)         --
Purchase of premises and equipment..........................     (8,312)    (14,740)     (5,000)
Proceeds from sale of bank premises.........................         --       3,795          --
Other investing activities, net.............................     (9,804)     (3,447)       (434)
                                                              ---------   ---------   ---------
          Net cash used in investing activities.............   (147,282)   (119,799)   (100,769)
</TABLE>

                                       36
<PAGE>   38

                     THE BANC CORPORATION AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              -----------------------------
                                                                1999       1998      1997
                                                              --------   --------   -------
                                                                 (AMOUNTS IN THOUSANDS)
<S>                                                           <C>        <C>        <C>
FINANCING ACTIVITIES
Net increase in demand and savings deposits.................  $  6,450   $ 67,170   $33,516
Net increase in time deposits...............................    87,392     33,068    48,193
Increase (decrease) in FHLB advances........................    39,340     23,160    (1,600)
Payment on assumed debt.....................................        --         --    (1,513)
Net increase in note payable................................     7,104         --        --
(Payments) advances of other borrowed funds.................    (3,405)    (4,529)    7,980
Proceeds from issuance and reissuance of common stock.......     2,170     12,279    17,890
Repurchase of common stock..................................        --         --    (9,496)
Dividends paid by pooled subsidiaries.......................        --       (231)     (498)
                                                              --------   --------   -------
Net cash provided by financing activities...................   139,051    130,917    94,472
                                                              --------   --------   -------
Increase (decrease) in cash and due from banks..............       518     12,048      (655)
Cash and due from banks at beginning of year................    31,307     19,259    19,914
                                                              --------   --------   -------
Cash and due from banks at end of year......................  $ 31,825   $ 31,307   $19,259
                                                              ========   ========   =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
  Interest..................................................  $ 25,888   $ 19,710   $15,554
  Income taxes..............................................     1,168      1,042     1,481
Sale of subsidiary's net assets financed by the
  Corporation...............................................     2,202         --        --
Assets acquired in business combinations....................    60,097     43,413        --
Liabilities assumed in business combinations................    58,353     36,113        --
Real estate acquired by assuming related liability and
  issuing common stock......................................        --         --     4,534
Minority interest in subsidiary acquired by issuing common
  stock.....................................................        95        130        --
</TABLE>

                See notes to consolidated financial statements.

                                       37
<PAGE>   39

                     THE BANC CORPORATION AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                    (AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                          ACCUMULATED
                                                                             OTHER
                                                                         COMPREHENSIVE                  TOTAL
                                           COMMON             RETAINED      INCOME       TREASURY   STOCKHOLDERS'
                                           STOCK    SURPLUS   EARNINGS      (LOSS)        STOCK        EQUITY
                                           ------   -------   --------   -------------   --------   -------------
<S>                                        <C>      <C>       <C>        <C>             <C>        <C>
BALANCE AT JANUARY 1, 1997...............   $10     $22,451   $18,498       $   (84)     $    --       $40,875
Comprehensive income:....................
  Net income.............................    --          --     2,396            --           --         2,396
  Other comprehensive income, net of
    taxes of $179........................    --                                               --
    Unrealized gains on securities
      available for sale, net of
      reclassification adjustment........    --          --        --           345           --           345
                                                                                                       -------
Comprehensive income.....................                                                                2,741
Dividends declared by pooled
  subsidiaries...........................    --          --      (499)           --           --          (499)
Issuance of 1,778,215 shares of common
  stock, net of direct costs.............     2       8,429        --            --           --         8,431
Acquisition of building through issuance
  of 460,500 shares of common stock......    --       2,205        --            --           --         2,205
Purchase of 1,990,908 shares of treasury
  stock..................................    --          --        --            --       (9,496)       (9,496)
Reissuance of treasury stock.............    --          --        --            --        9,459         9,459
Retirement of 14,908 shares of treasury
  stock..................................    --          --       (37)           --           37            --
                                            ---     -------   -------       -------      -------       -------
BALANCE AT DECEMBER 31, 1997.............    12      33,085    20,358           261           --        53,716
Comprehensive income:
  Net income.............................    --          --       285            --           --           285
  Other comprehensive loss net of tax
    benefit of $111......................
    Unrealized losses on securities
      available for sale, arising during
      the period, net of reclassification
      adjustment.........................    --          --        --          (163)          --          (163)
                                                                                                       -------
Comprehensive income.....................                                                                  122
Issuance of 1,526,054 shares of common
  stock, net of direct costs.............     2      12,116        --            --           --        12,118
Stock options exercised..................    --         177        --            --           --           177
Restricted shares issued by pooled
  subsidiary.............................    --         114        --            --           --           114
Redemption of common stock by pooled
  subsidiary.............................    --          --       (49)           --           --           (49)
Dividends declared by pooled
  subsidiaries...........................    --          --      (231)           --           --          (231)
                                            ---     -------   -------       -------      -------       -------
BALANCE AT DECEMBER 31, 1998.............    14      45,492    20,363            98           --        65,967
Comprehensive income:
  Net income.............................    --          --     2,920            --           --         2,920
  Other comprehensive loss net of tax
    benefit of $1,459....................
    Unrealized losses on securities
      available for sale, arising during
      the period, net of reclassification
      adjustment.........................    --          --        --        (2,303)          --        (2,303)
                                                                                                       -------
Comprehensive income.....................                                                                  617
Issuance of 174,500 shares of common
  stock, net of direct costs.............    --       1,628        --            --           --         1,628
Stock options exercised..................    --         636        --            --           --           636
                                            ---     -------   -------       -------      -------       -------
BALANCE AT DECEMBER 31, 1999.............   $14     $47,756   $23,283       $(2,205)     $    --       $68,848
                                            ===     =======   =======       =======      =======       =======
</TABLE>

                See notes to consolidated financial statements.

                                       38
<PAGE>   40

                     THE BANC CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The Banc Corporation ("Corporation"), through its three subsidiaries,
provides a full range of banking and bank-related services to individual and
corporate customers across Alabama and the panhandle of Florida. The accounting
and reporting policies of the Corporation conform with generally accepted
accounting principles and to general practice within the banking industry. The
following summarizes the most significant of these policies.

BASIS OF PRESENTATION

     The Corporation's consolidated financial statements have been retroactively
restated to reflect the pooling of interest business combinations with Emerald
Coast Bancshares, Inc. ("Emerald"), which was consummated in the first quarter
of 1999, and C&L Banking Corporation ("C&L") and C&L Bank of Blountstown
("Blountstown"), which were consummated in the second quarter of 1999. In
addition, Blountstown was immediately merged into C&L's subsidiary to form a
single bank subsidiary, the C &L Bank of Bristol.

     On July 13, 1999, the Corporation acquired BankersTrust of Alabama, Inc.
("BankersTrust") in a business combination accounted for as a purchase. As such,
the Corporation's consolidated financial statements include the results of
operations of BankersTrust only from its date of acquisition. See Note 13 for
more disclosure regarding the Corporation's business combinations.

PRINCIPLES OF CONSOLIDATION

     The accompanying consolidated financial statements and notes to
consolidated financial statements include the accounts of the Corporation and
its wholly-owned or majority-owned subsidiaries. All significant intercompany
transactions or balances have been eliminated in consolidation.

USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

     For the purpose of presentation in the statements of cash flows, cash and
cash equivalents are defined as those amounts included in the statements of
financial condition caption "Cash and Due from Banks."

INVESTMENT SECURITIES

     Investment securities are classified as either held to maturity, available
for sale or trading at the time of purchase. The Corporation defines held to
maturity securities as debt securities which management has the positive intent
and ability to hold to maturity.

     Held to maturity securities are reported at cost, adjusted for amortization
of premiums and accretion of discounts that are recognized in interest income
using the effective yield method.

     Securities available for sale are reported at fair value and consist of
bonds, notes, debentures, and certain equity securities not classified as
trading securities nor as securities to be held to maturity. Unrealized holding
gains and losses, net of deferred taxes, on securities available for sale are
excluded from earnings and reported in accumulated other comprehensive income
(loss) within stockholders' equity.

                                       39
<PAGE>   41
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

     Gains and losses on the sale of securities available for sale are
determined using the specific-identification method.

LOANS AND ALLOWANCE FOR LOAN LOSSES

     Loans are stated at the amount of unpaid principal, reduced by unearned
discount and an allowance for loan losses. Interest income with respect to loans
is accrued on the principal amount outstanding, except for interest on certain
consumer loans, which is recognized over the term of the loan using a method
which approximates a level yield.

     Accrual of interest is discontinued on loans which are past due greater
than ninety days unless the loan is well secured and in the process of
collection. "Well secured," means that the debt must be secured by collateral
having sufficient realizable value to discharge the debt, including accrued
interest, in full. "In the process of collection," means that collection of the
debt is proceeding in due course either through legal action or other collection
effort that is reasonably expected to result in repayment of the debt in full
within a reasonable period of time, usually within one hundred eighty days of
the date the loan became past due. Any unpaid interest previously accrued on
these loans is reversed from income. Interest payments received on these loans
are applied as a reduction of the loan principal balance.

     Impaired loans are specifically reviewed loans for which it is probable
that the Corporation will be unable to collect all amounts due according to the
terms of the loan agreement. Impairment is measured by comparing the recorded
investment in the loan with the present value of expected future cash flows
discounted at the loan's effective interest rate, at the loans observable market
price, or the fair value of the collateral if the loan is collateral dependent.
A valuation allowance is provided to the extent that the measure of the impaired
loans is less than the recorded investment. A loan is not considered impaired
during a period of delay in payment if the ultimate collectibility of all
amounts due is expected. Larger groups of homogenous loans such as consumer
installment and residential real estate mortgage loans are collectively
evaluated for impairment. Payments received on impaired loans for which the
ultimate collectibility of principal is uncertain are generally applied first as
principal reductions.

     The allowance for loan loss is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes the collectibility of principal is unlikely. The
allowance is the amount that management believes will be adequate to absorb
possible losses on existing loans which may become uncollectible.

     Management reviews the adequacy of the allowance on a monthly basis. The
allowance for classified loans is established based on risk ratings assigned by
loan officers. Loans are risk rated using a seven point scale, and loan officers
are responsible for the timely reporting of changes in the risk ratings. This
process, and the assigned risk ratings, are subject to review by the
Corporation's internal loan review function. Based on the assigned risk ratings,
the loan portfolio is segregated into the regulatory classifications of: Special
Mention, Substandard, Doubtful or Loss. Regulatory reserve percentages are
applied to these categories to estimate the amount of loan loss. Reserve
percentages assigned to non-rated loans are based on historical charge-off
experience adjusted for geographic location risk factors.

     Significant problem credits are individually reviewed by management.
Generally, these loans are commercial or real estate construction loans selected
for review based on their balance, assigned risk rating, payment history, and
other risk factors at the time of management's review. Losses are estimated on
each loan based on management's review. These individually reviewed credits are
excluded from the classified loan loss calculation discussed above.

                                       40
<PAGE>   42
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

     To evaluate the overall adequacy of the allowance to absorb losses inherent
in the Corporation's loan portfolio, the Corporation considers general economic
conditions, geographic concentrations, and changes in the nature and volume of
the loan portfolio. Management's assessment of these conditions is reflected in
the portion of the allowance that is unallocated.

MORTGAGE LOANS HELD FOR SALE

     Mortgage loans held for sale are carried at the lower of cost or market,
determined on a net aggregate basis. Differences between the carrying amount of
mortgage loans held for sale and the amounts received upon sale are credited or
charged to income at the time the proceeds of the sale are collected. The fair
values are based on quoted market prices of similar loans, adjusted for
differences in loan characteristics.

PREMISES AND EQUIPMENT

     Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is computed over the estimated service lives of the
assets using straight-line and accelerated methods, generally using five to
forty years for premises and five to ten years for furniture and equipment.

     Expenditures for maintenance and repairs are charged to operations as
incurred; expenditures for renewals and betterments are capitalized and written
off by depreciation charges. Property retired or sold is removed from the asset
and related accumulated depreciation accounts and any profit or loss resulting
therefrom is reflected in the statement of income.

INTANGIBLE ASSETS

     Intangible assets, primarily goodwill, are included in other assets, net of
amortization calculated on a straight-line basis over a fifteen-year period.

     The Corporation reviews on a regular basis the carrying value of goodwill
to determine if any impairment has occurred or if the period of recoverability
has changed. If this review indicates that goodwill will not be recoverable, as
determined based on the undiscounted cash flows of the entity acquired over the
remaining amortization period, the carrying value of the goodwill will be
reduced by the estimated shortfall of such cash flows. At December 31, 1999 and
1998 goodwill, net of accumulated amortization totaled $7,219,000 and $731,000,
respectively.

OTHER REAL ESTATE

     Other real estate, acquired through partial or total satisfaction of loans,
is carried at the lower of cost or net realizable value in other assets. At the
date of acquisition, losses are charged to the allowance for loan losses. Gain
or loss from the sale of other real estate is included in other expense. Total
other real estate was $2,185,000 and $546,000 at December 31, 1999 and 1998,
respectively.

INCOME TAXES

     The consolidated financial statements are prepared on the accrual basis.
The Corporation accounts for income taxes using the liability method pursuant to
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to reverse.

                                       41
<PAGE>   43
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

OFF BALANCE SHEET FINANCIAL INSTRUMENTS

     In the ordinary course of business the Corporation has entered into off
balance sheet financial instruments consisting of commitments to extend credit,
commitments under credit card arrangements and commercial letters of credit and
standby letters of credit. Such financial instruments are recorded in the
financial statements when they become payable.

PER SHARE AMOUNTS

     Earnings per share computations are based on the weighted average number of
shares outstanding during the periods presented.

     Diluted earnings per share computations are based on the weighted average
number of shares outstanding during the period, plus the dilutive effect of
stock options.

STOCK-BASED COMPENSATION

     SFAS No. 123, Accounting for Stock-Based Compensation (Statement 123)
establishes a "fair value" based method of accounting for stock-based
compensation plans and allows entities to adopt that method of accounting for
their employee stock compensation plans. However, it also allows an entity to
continue to measure compensation cost for those plans using the intrinsic value
based method of accounting prescribed by the Accounting Principles Board ("APB")
Opinion No. 25, Accounting for Stock Issued to Employees (Opinion 25). The
Corporation has elected to follow Opinion 25 and related interpretations in
accounting for its employee stock options. Under Opinion 25, because the
exercise price of the Corporation's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.

     Statement 123 requires the disclosure of pro forma net income and earnings
per share determined as if the Corporation had accounted for its employee stock
options under the fair value method of that statement. The fair value for these
options was estimated at the date of grant using a Black-Scholes option pricing
model. Option valuation models require the input of subjective assumptions.
Because these assumptions are subjective, the effects of applying Statement 123
for pro forma disclosures are not likely to be representative of the effects on
reported net income for future years (see Note 8).

RECENT ACCOUNTING PRONOUNCEMENTS

     Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and for Hedging Activities", as amended by Statement of
Financial Accounting Standards No. 137, "Accounting for Derivative Instruments
and Hedging Activities -- Deferral of the Effective Date of FASB Statement No.
133", requires derivative instruments be carried at fair value on the statement
of financial condition. The statement continues to allow derivative instruments
to be used to hedge various risks and sets forth specific criteria to be used to
determine when hedge accounting can be used. The statement also provides for
offsetting changes in fair value or cash flows of both the derivative and the
hedged asset or liability to be recognized in earnings in the same period;
however, any changes in fair value or cash flow that represent the ineffective
portion of a hedge are required to be recognized in earnings and cannot be
deferred. For derivative instruments not accounted for as hedges, changes in
fair value are required to be recognized in earnings.

     The Corporation plans to adopt the provisions of this statement, as
amended, for its quarterly and annual reporting beginning January 1, 2001, the
statement's effective date. The impact of adopting the provisions of this
statement on the Corporation's financial position, results of operations and
cash flow subsequent to the

                                       42
<PAGE>   44
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

effective date is not currently estimable and will depend on the financial
position of the Corporation and the nature and purpose of the derivative
instruments in use at that time.

2. INVESTMENT SECURITIES

     The amounts at which investment securities are carried and their
approximate fair values at December 31, 1999 are as follows:

<TABLE>
<CAPTION>
                                                                       GROSS        GROSS      ESTIMATED
                                                         AMORTIZED   UNREALIZED   UNREALIZED     FAIR
                                                           COST        GAINS        LOSSES       VALUE
                                                         ---------   ----------   ----------   ---------
                                                                         (IN THOUSANDS)
<S>                                                      <C>         <C>          <C>          <C>
Investment securities available for sale:
  Equity securities....................................   $   370       $ --        $   33      $   337
  U.S. Treasury and agency securities..................    11,645         --           650       10,995
  State, county and municipal securities...............    13,991         93         1,043       13,041
  Mortgage-backed securities...........................    42,292         38         1,975       40,355
  Corporate debt.......................................       453         --             9          444
  Other securities.....................................       267         --            --          267
                                                          -------       ----        ------      -------
          Total........................................   $69,018       $131        $3,710      $65,439
                                                          =======       ====        ======      =======
Investment securities held to maturity:
  State, county and municipal securities...............   $ 3,711       $ 20        $    3      $ 3,728
  Mortgage-backed securities...........................     1,766          2            85        1,683
                                                          -------       ----        ------      -------
          Total........................................   $ 5,477       $ 22        $   88      $ 5,411
                                                          =======       ====        ======      =======
</TABLE>

     The amounts at which investment securities are carried and their
approximate fair values at December 31, 1998 are as follows:

<TABLE>
<CAPTION>
                                                                       GROSS        GROSS      ESTIMATED
                                                         AMORTIZED   UNREALIZED   UNREALIZED     FAIR
                                                           COST        GAINS        LOSSES       VALUE
                                                         ---------   ----------   ----------   ---------
                                                                         (IN THOUSANDS)
<S>                                                      <C>         <C>          <C>          <C>
Investment securities available for sale:
  Equity securities....................................   $   170       $ --         $ 25       $   145
  U.S. Treasury and agency securities..................    20,965         85           40        21,010
  State, county and municipal securities...............    18,345        452           18        18,779
  Mortgage-backed securities...........................    48,894        173          491        48,576
  Corporate debt.......................................     1,712         25           --         1,737
  Other securities.....................................     1,213         22           --         1,235
                                                          -------       ----         ----       -------
          Total........................................   $91,299       $757         $574       $91,482
                                                          =======       ====         ====       =======
Investment securities held to maturity:
  State, county and municipal securities...............   $ 4,124       $ 97         $ --       $ 4,221
  Mortgage-backed securities...........................     2,602         47           95         2,554
                                                          -------       ----         ----       -------
          Total........................................   $ 6,726       $144         $ 95       $ 6,775
                                                          =======       ====         ====       =======
</TABLE>

     Securities with an amortized cost of $36,450,000 and $44,684,000 at
December 31, 1999 and 1998, respectively, were pledged to secure United States
government deposits and other public funds and for other purposes as required or
permitted by law.

                                       43
<PAGE>   45
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. INVESTMENT SECURITIES -- (CONTINUED)

     The amortized cost and estimated fair values of investment securities at
December 31, 1999, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
                                                           SECURITIES HELD TO     SECURITIES AVAILABLE FOR
                                                                MATURITY                    SALE
                                                         ----------------------   ------------------------
                                                         AMORTIZED   ESTIMATED    AMORTIZED     ESTIMATED
                                                           COST      FAIR VALUE      COST      FAIR VALUE
                                                         ---------   ----------   ----------   -----------
                                                                          (IN THOUSANDS)
<S>                                                      <C>         <C>          <C>          <C>
Due in one year or less................................   $  715       $  718      $   505       $   505
Due after one year through five years..................    2,379        2,391        7,300         7,049
Due after five years through ten years.................      489          491        6,330         5,981
Due after ten years....................................      128          128       12,221        11,212
Mortgage-backed securities.............................    1,766        1,683       42,292        40,355
Equity securities......................................       --           --          370           337
                                                          ------       ------      -------       -------
                                                          $5,477       $5,411      $69,018       $65,439
                                                          ======       ======      =======       =======
</TABLE>

     Gross realized gains on sales of investment securities available for sale
in 1999, 1998 and 1997 were $170,000, $391,000 and $249,000, respectively, and
gross realized losses for the same periods were $87,000, $112,000 and $29,000,
respectively.

     During 1998 the Corporation transferred securities with a carrying value of
$34,790,000 and fair value of $34,988,000 from the held to maturity category to
available for sale. The unrealized gain of $198,000 at the date of transfer has
been recognized in other comprehensive income net of deferred income taxes of
$79,000. The securities were transferred in order to provide liquidity to the
Corporation to meet the increasing loan demand being generated from its
Birmingham branch which opened on July 1, 1998.

     The components of other comprehensive income for the years ended December
31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                           PRE-TAX      INCOME TAX       NET OF INCOME
                                                           AMOUNT    (BENEFIT) EXPENSE        TAX
                                                           -------   -----------------   -------------
                                                                         (IN THOUSANDS)
<S>                                                        <C>       <C>                 <C>
1999
Unrealized loss on available for sale securities.........  $(3,679)       $(1,427)          $(2,252)
Less: reclassification adjustment for gains realized in
  net income.............................................       83             32                51
                                                           -------        -------           -------
     Net unrealized loss.................................  $(3,762)       $(1,459)          $(2,303)
                                                           =======        =======           =======
1998
Unrealized gain on available for sale securities.........  $     5        $    --           $     5
Less: reclassification adjustment for gains realized in
  net income.............................................      279            111               168
                                                           -------        -------           -------
     Net unrealized loss.................................  $  (274)       $  (111)          $  (163)
                                                           =======        =======           =======
</TABLE>

                                       44
<PAGE>   46
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. LOANS

     At December 31, 1999 and 1998 the composition of the loan portfolio was as
follows:

<TABLE>
<CAPTION>
                                                                1999       1998
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Commercial, industrial and agricultural.....................  $207,620   $158,855
Real estate -- construction.................................    59,496     36,121
Real estate -- mortgage.....................................   282,717    152,732
Consumer....................................................    74,769     75,796
All other loans.............................................     8,802      9,671
                                                              --------   --------
          Total loans.......................................  $633,404   $433,175
                                                              ========   ========
</TABLE>

     At December 31, 1999 and 1998 the Corporation's recorded investment in
loans considered to be impaired under SFAS No. 114 was $12,111,000 and $894,000,
respectively. There was approximately $3,000,000 and $134,000 at December 31,
1999 and 1998, respectively, in the allowance for loan losses specifically
allocated to impaired loans. The average recorded investment in impaired loans
during 1999, 1998 and 1997 was approximately $6,484,000, $598,000 and $258,000,
respectively. Interest income recognized on loans considered impaired totaled
approximately $431,000 for the year ended December 31, 1999. No material amount
of interest income was recognized on impaired loans for the years ended December
31, 1998 and 1997.

     The Corporation has no commitments to loan additional funds to the
borrowers whose loans are considered impaired.

4. ALLOWANCE FOR LOAN LOSSES

     A summary of the allowance for loan losses for the years ended December 31,
1999, 1998 and 1997 follows:

<TABLE>
<CAPTION>
                                                               1999      1998      1997
                                                              -------   -------   -------
                                                                    (IN THOUSANDS)
<S>                                                           <C>       <C>       <C>
Balance at beginning of year................................  $ 6,466   $ 3,741   $ 2,522
Allowance of acquired bank..................................    3,591       368        --
Provision for loan losses...................................    2,850     4,657     2,685
Loan charge-offs............................................   (5,792)   (2,906)   (1,759)
Recoveries..................................................      950       606       293
                                                              -------   -------   -------
Balance at end of year......................................  $ 8,065   $ 6,466   $ 3,741
                                                              =======   =======   =======
</TABLE>

                                       45
<PAGE>   47
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. PREMISES AND EQUIPMENT

     Components of premises and equipment at December 31, 1999 and 1998 are as
follows:

<TABLE>
<CAPTION>
                                                               1999      1998
                                                              -------   -------
                                                               (IN THOUSANDS)
<S>                                                           <C>       <C>
Land........................................................  $ 5,096   $ 3,922
Premises....................................................   26,335    21,005
Furniture and equipment.....................................   12,303    10,529
                                                              -------   -------
                                                               43,734    36,456
Less accumulated depreciation and amortization..............   (7,822)   (6,417)
                                                              -------   -------
Net book value of premises and equipment in service.........   35,912    29,039
Real estate under renovation or held for sale...............    1,822       627
                                                              -------   -------
          Total.............................................  $37,734   $29,666
                                                              =======   =======
</TABLE>

     Depreciation expense for the years ended December 31, 1999, 1998 and 1997
was $2,194,000, $1,786,000 and $1,121,000, respectively.

     Emerald Coast Bank leases all of its branch buildings under operating
leases expiring through 2003. The leases require payment of taxes, insurance and
maintenance costs in addition to rental payments. In addition, three of the four
building leases have two five-year renewal options.

     Future minimum lease payments under the operating leases are summarized as
follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
-----------------------
<S>                                                           <C>
  2000......................................................  $  460
  2001......................................................     448
  2002......................................................     433
  2003......................................................     244
                                                              ------
          Total minimum lease payments......................  $1,585
                                                              ======
</TABLE>

     Rental expense relating to operating leases amounted to approximately
$734,000, $299,000 and $135,000 for the years ended December 31, 1999, 1998 and
1997, respectively.

6. DEPOSITS

     The following schedule details interest expense on deposits:

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                            ---------------------------
                                                             1999      1998      1997
                                                            -------   -------   -------
                                                                  (IN THOUSANDS)
<S>                                                         <C>       <C>       <C>
Interest-bearing demand...................................  $ 5,129   $ 3,529   $ 2,302
Savings...................................................      938       889       937
Time deposits $100,000 and over...........................    7,275     4,721     3,889
Other time................................................   10,759    10,477     8,536
                                                            -------   -------   -------
          Total...........................................  $24,101   $19,616   $15,664
                                                            =======   =======   =======
</TABLE>

                                       46
<PAGE>   48
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. DEPOSITS -- (CONTINUED)

     At December 31, 1999, the scheduled maturities of time deposits are as
follows (in thousands):

<TABLE>
<S>                                                           <C>
2000........................................................  $332,315
2001........................................................    36,661
2002........................................................    11,444
2003........................................................    15,269
2004 and thereafter.........................................     9,053
                                                              --------
                                                              $404,742
                                                              ========
</TABLE>

7. BORROWED FUNDS

     The following is a summary, by year of maturity, of advances from the
Federal Home Loan Bank ("FHLB") as of December 31, 1999 and 1998 (in thousands):

<TABLE>
<CAPTION>
                                                       1999                     1998
                                              ----------------------   ----------------------
                                                WEIGHTED                 WEIGHTED
                    YEAR                      AVERAGE RATE   BALANCE   AVERAGE RATE   BALANCE
                    ----                      ------------   -------   ------------   -------
<S>                                           <C>            <C>       <C>            <C>
2000........................................      6.07%      $ 1,000         --%      $    --
2003........................................      5.05        17,660       5.05        17,660
2004........................................      5.21        25,000         --            --
2008........................................      5.52         2,500       5.24         5,500
2009........................................      5.18        16,340         --            --
                                                             -------                  -------
                                                  5.20%      $62,500       5.09%      $23,160
                                                  ====       =======       ====       =======
</TABLE>

     The above schedule is by contractual maturity. Certain advances have call
dates as follows: 2000, $16,340,000; 2002, $25,000,000; 2003, $2,500,000 and
2004, $2,000,000.

     The advances are secured by FHLB stock, agency securities and a blanket
lien on certain residential real estate loans all with a carrying value of
approximately $111,000,000 at December 31, 1999.

     As of December 31, 1999 the Corporation has borrowed $7,104,000 under a
$10,000,000 line of credit with a regional bank. Interest is one and one-quarter
(1.25%) percentage points in excess of the applicable LIBOR Index Rate and the
line matures May 1, 2001. The loan agreement contains various covenants
pertaining to the maintenance of regulatory capital, specified levels of
classified assets and the amount of stockholders' equity. The Corporation was in
compliance with all covenants as of December 31, 1999.

     The Corporation had federal funds purchased outstanding of $3,150,000 at
December 31, 1998. There were no outstanding federal funds purchased at December
31, 1999.

8. STOCK OPTION PLAN

     The Corporation has established a stock option plan for directors and
certain key employees that provides for the granting of incentive and
nonqualified options to purchase up to 1,000,000 shares of the Corporation's
common stock. The terms of the options granted are determined by the
compensation committee of the Board of Directors. All options granted have a
maximum term of ten years, and the option price per share of options granted
cannot be less than the fair market value of the Corporation's common stock on
the grant date. All options granted under this plan vest 20% on the grant date
and an additional 20% annually on the anniversary of the grant date.

     In addition, the Corporation assumed the Commerce Bank of Alabama Incentive
Stock Compensation Plan concurrent with the Commerce merger. Options to purchase
82,396 shares of the Corporation's common

                                       47
<PAGE>   49
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. STOCK OPTION PLAN -- (CONTINUED)

stock have been granted under this plan, of which, 52,227 were exercised during
1999. No additional options may be granted under this plan.

     For purposes of the following disclosures, the number and exercise prices
for options granted by entities which merged with the Corporation during 1998
have been converted to equivalent amounts for the Corporation based on the
exchange ratios in the mergers.

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                     -------------------------------------------------------------------
                                             1999                    1998                   1997
                                     ---------------------   --------------------   --------------------
                                                 WEIGHTED-              WEIGHTED-              WEIGHTED-
                                                  AVERAGE                AVERAGE                AVERAGE
                                                 EXERCISE               EXERCISE               EXERCISE
                                      NUMBER       PRICE      NUMBER      PRICE      NUMBER      PRICE
                                     ---------   ---------   --------   ---------   --------   ---------
<S>                                  <C>         <C>         <C>        <C>         <C>        <C>
Under option, beginning of year....    620,806    $ 9.52      202,589    $ 4.70      186,575     $4.64
  Granted..........................    239,000     10.64      466,677     10.87       16,014      5.40
  Exercised........................   (134,137)     4.74      (48,460)     3.65           --        --
  Forfeited........................    (10,000)    11.00           --        --           --        --
                                     ---------               --------               --------
Under option, end of year..........    715,669     10.68      620,806      9.52      202,589      4.71
                                     =========               ========               ========
Exercisable at end of year.........    256,569                255,606                196,751
                                     =========               ========               ========
Weighted-average fair value per
  option of options granted during
  the year.........................  $    5.40               $   5.49               $   1.22
                                     =========               ========               ========
</TABLE>

     A further summary about options outstanding at December 31, 1999 is as
follows:

<TABLE>
<CAPTION>
                                     OPTIONS OUTSTANDING
---------------------------------------------------------------------------------------------
                                                                   WEIGHTED-
                                                                    AVERAGE
                                                    NUMBER        CONTRACTUAL       NUMBER
EXERCISE PRICE                                    OUTSTANDING    LIFE IN YEARS    EXERCISABLE
--------------                                    -----------    -------------    -----------
<S>                                               <C>            <C>              <C>
$ 6.24..........................................     30,169          6.50            30,169
 10.50..........................................    174,000          9.54            34,800
 11.00..........................................    511,500          8.88           191,600
                                                    -------                         -------
                                                    715,669                         256,569
                                                    =======                         =======
</TABLE>

                                       48
<PAGE>   50
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. STOCK OPTION PLAN -- (CONTINUED)

     The Corporation recognizes compensation cost for stock-based employee
compensation awards in accordance with APB Opinion No. 25, Accounting for Stock
Issued to Employees. The Corporation recognized no compensation cost for
stock-based employee compensation awards for the years ended December 31, 1999,
1998 and 1997. If the Corporation had recognized compensation cost in accordance
with SFAS No. 123, net income and earnings per share would have been reduced as
follows (amounts in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              -----------------------
                                                               1999    1998     1997
                                                              ------   -----   ------
<S>                                                           <C>      <C>     <C>
Net income (loss):
  As reported...............................................  $2,920   $ 285   $2,396
  Pro forma.................................................   2,379    (119)   2,384
Basic net income (loss) per share:
  As reported...............................................  $  .20   $ .02   $  .23
  Pro forma.................................................     .17    (.01)     .23
Diluted net income (loss) per share:
  As reported...............................................     .20     .02      .22
  Pro forma.................................................     .17    (.01)     .22
</TABLE>

     The fair value of the options granted was based upon the Black-Scholes
pricing model. The Corporation used the following weighted-average assumptions
for 1999 and 1998, respectively: a risk free interest rate of 6.12% and 6.44%, a
volatility factor of .39% and .42%, a weighted average expected life of options
(in years) of 6.5 and 6.0, and a dividend yield of 0% for both years.

9. RETIREMENT PLANS

     Warrior Savings Bank ("Warrior"), which merged with the Corporation on
September 24, 1998, sponsors a defined benefit plan ("Plan") that provides
retirement, disability and death benefits. All employees of Warrior over age 21
are eligible to participate in the plan after the completion of one year of
service. The Corporation contributes amounts to the pension funds sufficient to
satisfy funding requirements of the Employee Retirement Income Security Act. The
net periodic pension costs and the prepaid pension costs related to the Plan are
not material to the Corporation's financial condition and results of operations.
This plan is in the process of being terminated.

     The Corporation sponsors a profit-sharing plan that permits participants to
make contributions by salary reduction pursuant to Section 401(k) of the
Internal Revenue Code. This plan covers substantially all employees who meet
certain age and length of service requirements. The Corporation matches
contributions at its discretion. The Corporation's contributions to the plan
were $108,000, $199,000 and $191,000 in 1999, 1998 and 1997, respectively.

     The Corporation has nonqualified retirement plans for the benefit of
certain executive officers and directors. The present value of these benefits is
accrued on a monthly basis. Payments under these plans are scheduled to begin in
2003 for some participants who will reach retirement age. In connection with the
plans, the Corporation has purchased single premium life insurance policies with
cash surrender values of approximately $11,500,000 at December 31, 1999. No
significant amount of compensation expense was incurred for the years ended
December 31, 1999 and 1998.

                                       49
<PAGE>   51
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. INCOME TAXES

     The components of the income tax expense (benefit) are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                              1999    1998      1997
                                                              ----   -------   ------
<S>                                                           <C>    <C>       <C>
Current:
  Federal...................................................  $320   $   706   $  985
  State.....................................................   154        92      185
                                                              ----   -------   ------
Total current expense.......................................   474       798    1,170
Deferred tax expense (benefit)..............................    46    (1,522)     (96)
                                                              ----   -------   ------
          Total income tax expense (benefit)................  $520   $  (724)  $1,074
                                                              ====   =======   ======
</TABLE>

     Significant components of the Corporation's deferred tax assets and
liabilities as of December 31, 1999 and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                               1999     1998
                                                              ------   ------
<S>                                                           <C>      <C>
Deferred tax assets:
  Rehabilitation tax credit.................................  $2,468   $1,737
  Provision for loan losses.................................   1,664    2,094
  NOL carryover.............................................       -      235
  Alternative minimum tax credit carryover..................     143       47
  Unrealized loss on securities.............................   1,372        -
  Other.....................................................     171      129
                                                              ------   ------
Total deferred tax assets before valuation allowance........   5,818    4,242
Valuation allowance.........................................       -     (200)
                                                              ------   ------
Total deferred tax assets after valuation allowance.........   5,818    4,042
Deferred tax liabilities:
  Difference in book and tax basis of premises and
     equipment..............................................   1,928    1,445
  Depreciation..............................................     602      320
  Unrealized gain on securities.............................       -       86
  Other.....................................................      93      408
                                                              ------   ------
Total deferred tax liabilities..............................   2,623    2,259
                                                              ------   ------
          Net deferred tax asset............................  $3,195   $1,783
                                                              ======   ======
</TABLE>

     The valuation allowance for net deferred tax assets was eliminated as a
result of the Corporation's reassessment of its ability to fully utilize its
rehabilitation tax credit.

                                       50
<PAGE>   52
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. INCOME TAXES -- (CONTINUED)
     The effective tax rate differs from the expected tax using statutory rate
of 34%. Reconciliation between the expected tax and the actual income tax
expense (benefit) follows (in thousands):

<TABLE>
<CAPTION>
                                                               1999     1998      1997
                                                              ------   -------   ------
<S>                                                           <C>      <C>       <C>
Expected tax (benefit) at 34% of income before taxes........  $1,170   $  (146)  $1,180
Add (deduct):
  Rehabilitation tax credit.................................    (731)   (1,737)      --
  State income taxes, net of federal tax benefit............     102        20       97
  Effect of interest income exempt from Federal income
     taxes..................................................    (346)     (338)    (268)
  Nondeductible merger costs................................     253       447       --
  Basis reduction...........................................     251       590       --
  Valuation allowance.......................................    (200)      200       --
  Other items -- net........................................      21       240       65
                                                              ------   -------   ------
Income tax expense (benefit)................................  $  520   $  (724)  $1,074
                                                              ======   =======   ======
</TABLE>

     The Corporation has generated a rehabilitation tax credit of approximately
$2,468,000 during 1998 and 1999 which can be carried forward and utilized
through 2019 and 2020. This credit was established as a result of the
restoration and enhancement of the John A. Hand building, which is designated as
an historical structure and serves as the corporate headquarters for the
Corporation. This credit is equal to 20% of certain qualified expenditures
incurred by the Corporation prior to December 31, 1999. The Corporation is
required to reduce its tax basis in the John A. Hand building by the amount of
the credit.

     Applicable income tax expense of $32,000, $111,000 and $81,000 on
securities gains for the years ended December 31, 1999, 1998 and 1997,
respectively, is included in income taxes.

11. RELATED PARTY TRANSACTIONS

     The Corporation has entered into transactions with its directors, executive
officers, significant stockholders and their affiliates (related parties). Such
transactions were made in the ordinary course of business on substantially the
same terms and conditions, including interest rates and collateral, as those
prevailing at the same time for comparable transactions with other customers,
and did not, in the opinion of management, involve more than normal credit risk
or present other unfavorable features. The aggregate amount of loans to such
related parties at December 31, 1999 and 1998 were $25,975,000 and $21,180,000,
respectively.

     Activity during the year ended December 31, 1999 is summarized as follows
(in thousands):

<TABLE>
<CAPTION>
        BALANCE                                          BALANCE
      DECEMBER 31,                            OTHER    DECEMBER 31,
          1998       ADVANCES   REPAYMENTS   CHANGES       1999
      ------------   --------   ----------   -------   ------------
<S>   <C>            <C>        <C>          <C>       <C>
      21$,180...     $27,239     $(14,130)   $(8,314)    $25,975
        =======      =======     ========    =======     =======
</TABLE>

     At December 31, 1999, the deposits of such related parties in the
subsidiary banks amounted to approximately $4,254,000.

     During 1997 the Corporation, through its predecessor Warrior, purchased a
twenty-one story building in downtown Birmingham from Taylor Acquisition
Corporation, a corporation owned by James A. Taylor, Sr., Chairman and Chief
Executive Officer of the Corporation and certain family members. The building
was purchased through the issuance of 1,535 shares of Warrior common stock
(equivalent to 460,500 shares of the Corporation) and, in addition, the
Corporation assumed $1,513,000 in outstanding debt on the property. The building
and related equipment have been capitalized at the appraised fair value of
$3,718,000.

                                       51
<PAGE>   53
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. RELATED PARTY TRANSACTIONS -- (CONTINUED)

     In July 1998, Emerald sold the land and building of its main office
building and two branch offices to an entity under the control of certain
members of Emerald's Board of Directors for their fair value of approximately
$3,794,700. The sales were accounted for under a sale-leaseback arrangement. The
deferred gain on the sales amounted to $87,000 and is being amortized into
income over the lease terms. At December 31, 1999, the deferred gain amounted to
approximately $62,000. Terms of the leases are described in Note 5. Rental
expense under these operating leases amounted to approximately $459,000 and
$163,000 in 1999 and 1998, respectively.

12. COMMITMENTS AND CONTINGENCIES

     The consolidated financial statements do not reflect the Corporation's
various commitments and contingent liabilities which arise in the normal course
of business and which involve elements of credit risk, interest rate risk and
liquidity risk. These commitments and contingent liabilities are commitments to
extend credit and standby letters of credit. The following is a summary of the
Corporation's maximum exposure to credit loss for loan commitments and standby
letters of credit (in thousands):

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                              -----------------
                                                               1999      1998
                                                              -------   -------
<S>                                                           <C>       <C>
Commitments to extend credit................................  $68,693   $50,319
Standby letters of credit...................................    4,121     2,465
</TABLE>

     Commitments to extend credit and standby letters of credit all include
exposure to some credit loss in the event of nonperformance of the customer. The
Corporation's credit policies and procedures for credit commitments and
financial guarantees are the same as those for extension of credit that are
recorded in the consolidated statement of financial condition. Because these
instruments have fixed maturity dates, and because many of them expire without
being drawn upon, they do not generally present any significant liquidity risk
to the Corporation.

     The Corporation is party to litigation and claims arising in the normal
course of business. Management, after consultation with legal counsel, believes
that the liabilities, if any, arising from such litigation and claims will not
be material to the consolidated financial statements.

13. MERGERS AND ACQUISITIONS AND MERGER RELATED COSTS

     The Corporation has completed the following business combinations during
1999 and 1998:

<TABLE>
<CAPTION>
                                                                                    ACCOUNTING
DATE                      INSTITUTION         TOTAL ASSETS       CONSIDERATION      TREATMENT
----                      -----------         -------------      -------------      ----------
                                              (IN MILLIONS)
<S>                 <C>                       <C>             <C>                   <C>
February 12,
  1999............  Emerald Coast                 $ 92        1,379,978 shares of    Pooling
                      Bancshares, Inc.                          common stock
June 30, 1999.....  C&L Banking Corporation         49        1,289,454 shares of    Pooling
                                                                common stock
June 30, 1999.....  C&L Bank of Blountstown         56        838,902 shares of      Pooling
                                                                common stock
July 13, 1999.....  BankersTrust of Alabama,        35        $1,584,000 cash        Purchase
                      Inc.
September 24,
  1998............  Warrior Capital                 84        5,448,000 shares of    Pooling
                      Corporation                               common stock
</TABLE>

                                       52
<PAGE>   54
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. MERGERS AND ACQUISITIONS AND MERGER RELATED COSTS -- (CONTINUED)


<TABLE>
<CAPTION>
                                                                                    ACCOUNTING
DATE                      INSTITUTION         TOTAL ASSETS       CONSIDERATION      TREATMENT
----                      -----------         -------------      -------------      ----------
                                              (IN MILLIONS)
<S>                 <C>                       <C>             <C>                   <C>
October 16,
  1998............  Commercial Bancshares of        42        $7,300,000 cash        Purchase
                      Roanoke, Inc.
October 30,
  1998............  City National                   84        2,026,579 shares of    Pooling
                      Corporation                               common stock
October 30,
  1998............  First Citizens Bancorp,         35        652,859 shares of      Pooling
                      Inc.                                      common stock
November 6, 1998..  Commerce Bank of Alabama       105        1,547,198 shares of    Pooling
                                                                common stock
</TABLE>

     In addition, on November 4, 1999, the Corporation purchased three branches
in south Alabama with assets totaling approximately $22,000,000 for $1,565,000
in cash.

     The following table presents financial information contributed by the
pooled companies during 1999 prior to the consummation of the mergers (in
thousands):

<TABLE>
<CAPTION>
                                                              NET INTEREST
1999                                                             INCOME      NET INCOME
----                                                          ------------   ----------
<S>                                                           <C>            <C>
Emerald.....................................................     $  474         $ 58
C&L.........................................................      1,162          319
Blountstown.................................................        989          166
</TABLE>

     The following table presents net interest income, net income and basic net
income per common share of the combining entities on a historical and combined
basis in the years prior to the 1999 mergers (amounts in thousands, except per
share data):

<TABLE>
<CAPTION>
                                                               1998      1997
                                                              -------   -------
<S>                                                           <C>       <C>
Net interest income:
  Corporation...............................................  $14,942   $12,189
  Emerald...................................................    3,149     1,563
  C&L.......................................................    2,154     2,030
  Blountstown...............................................    2,021     2,130
                                                              -------   -------
Combined....................................................  $22,266   $17,912
                                                              =======   =======
Net (loss) income:
  Corporation...............................................  $  (439)  $ 2,074
  Emerald...................................................       72      (396)
  C&L.......................................................      576       699
  Blountstown...............................................       76        19
                                                              -------   -------
Combined....................................................  $   285   $ 2,396
                                                              =======   =======
Basic net (loss) income per equivalent share of Corporation:
  Corporation...............................................  $  (.04)  $   .29
  Emerald...................................................      .06      (.31)
  C&L.......................................................      .46       .55
  Blountstown...............................................      .09       .02
Combined....................................................      .02       .23
</TABLE>

                                       53
<PAGE>   55
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. MERGERS AND ACQUISITIONS AND MERGER RELATED COSTS -- (CONTINUED)

     On July 13, 1999, the Corporation acquired BankersTrust of Alabama, Inc.
("BankersTrust") in a business combination accounted for as a purchase.
BankersTrust was a one-bank holding company operating in north Alabama. The net
assets of BankersTrust included loans of $25,000,000 and deposits of
$36,000,000. The total cost of the acquisition was $1,624,000, which exceeded
the fair value of the net assets of BankersTrust by $5,125,000. The excess is
being amortized on a straight-line basis over 15 years. On October 16, 1998, the
Corporation acquired Commercial Bancshares of Roanoke ("Roanoke") in a business
combination accounted for as a purchase. Roanoke was a one-bank holding company
operating in east Alabama. The Corporation's consolidated financial statements
include the results of operations of BankersTrust and Roanoke only from the
dates of acquisition.

     The following unaudited summary information presents the consolidated
results of operations of the Corporation on a pro forma basis, as if
BankersTrust and Roanoke had been acquired on January 1, 1998. The pro forma
summary does not necessarily reflect the results of operations that would have
occurred if the acquisition had occurred as of the beginning of the periods
presented, or of results that may occur in the future.

<TABLE>
<CAPTION>
                                                               1999      1998
                                                              -------   -------
<S>                                                           <C>       <C>
Interest income.............................................  $57,117   $47,917
Interest expense............................................   27,648    23,166
                                                              -------   -------
          Net interest income...............................   29,469    24,751
Provision for loan losses...................................    5,847     6,200
Noninterest income..........................................    6,349     6,858
Noninterest expense.........................................   30,676    26,470
                                                              -------   -------
     Loss before income taxes...............................     (705)   (1,061)
Income tax expense (benefit)................................      441      (537)
                                                              -------   -------
          Net loss..........................................  $(1,146)  $  (524)
                                                              =======   =======
  Basic and diluted net loss per common share...............  $  (.08)  $  (.04)
                                                              =======   =======
</TABLE>

     The following is a summary of pre-tax nonrecurring merger related costs
incurred by the Corporation during 1999 and 1998:

<TABLE>
<CAPTION>
                                                              1999    1998
                                                              ----   ------
<S>                                                           <C>    <C>
Professional and other fees.................................  $744   $1,314
Obsolete equipment write-off................................    --      152
                                                              ----   ------
                                                              $744   $1,466
                                                              ====   ======
</TABLE>

                                       54
<PAGE>   56
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. REGULATORY RESTRICTIONS

     A source of funds available to the Corporation is the payment of dividends
by its subsidiaries. Banking regulations limit the amount of dividends that may
be paid without prior approval of the subsidiaries' regulatory agency.
Approximately $3,622,000 in retained earnings are available to be paid as
dividends by the subsidiaries at December 31, 1999.

     The Corporation and its subsidiaries are subject to various regulatory
capital requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could have
a direct material effect on the Corporation's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Corporation and its subsidiaries must meet specific capital
guidelines that involve quantitative measures of the Corporation's and its
subsidiaries' assets, liabilities, and certain off-balance sheet items as
calculated under regulatory accounting practices. The Corporation's and its
subsidiaries' capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.

     Quantitative measures established by regulation to ensure capital adequacy
require the Corporation and its subsidiaries to maintain minimum amounts and
ratios (set forth in the table below) of total and Tier I capital (as defined in
the regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). In February 1999, Emerald Coast Bank
changed its charter from a state bank to a Federal Thrift. The minimum
requirements for capital adequacy purposes for a thrift are also included in the
following table. Management believes, as of December 31, 1999 and 1998 that the
Corporation and its subsidiaries meet all capital adequacy requirements to which
it is subject.

     As of December 31, 1999 and 1998, the most recent notification from the
FDIC categorized the subsidiaries as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized
the Corporation and its subsidiaries must maintain minimum total risk-based,
Tier I risk-based and Tier I leverage ratios as set forth in the table. There
are no conditions or events since that notification that management believes
have changed the institution's category:

<TABLE>
<CAPTION>
                                                                                   TO BE WELL
                                                                FOR CAPITAL     CAPITALIZED UNDER
                                                                 ADEQUACY       PROMPT CORRECTIVE
                                                ACTUAL           PURPOSES            ACTION
                                            ---------------   ---------------   -----------------
                                            AMOUNT    RATIO   AMOUNT    RATIO    AMOUNT    RATIO
                                            -------   -----   -------   -----   --------   ------
<S>                                         <C>       <C>     <C>       <C>     <C>        <C>
As of December 31, 1999:
  Total Capital (to Risk Weighted Assets):
     Corporation..........................  $71,288   10.61%  $53,746   8.00%   $67,182    10.00%
     The Bank.............................   53,074   10.61    40,036   8.00     50,046    10.00
     Emerald Coast Bank...................    8,943   10.04     7,128   8.00      8,910    10.00
     C&L Bank.............................   11,746   14.08     6,673   8.00      8,341    10.00
  Tier I Capital (to Risk Weighted
     Assets):
     Corporation..........................   63,224    9.41    26,873   4.00     40,309     6.00
     The Bank.............................   47,086    9.41    20,018   4.00     30,027     6.00
     Emerald Coast Bank...................    8,474    9.51       N/A    N/A      4,455     5.00
     C&L Bank.............................   10,710   12.84     3,336   4.00      5,005     6.00
  Tier I Capital (to Average Assets):
     Corporation..........................   63,224    7.74    32,671   4.00     40,839     5.00
     The Bank.............................   47,086    8.10    23,245   4.00     29,056     5.00
     C&L Bank.............................   10,710    9.21     4,653   4.00      5,817     5.00
</TABLE>

                                       55
<PAGE>   57
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. REGULATORY RESTRICTIONS -- (CONTINUED)


<TABLE>
<CAPTION>
                                                                                   TO BE WELL
                                                                FOR CAPITAL     CAPITALIZED UNDER
                                                                 ADEQUACY       PROMPT CORRECTIVE
                                                ACTUAL           PURPOSES            ACTION
                                            ---------------   ---------------   -----------------
                                            AMOUNT    RATIO   AMOUNT    RATIO    AMOUNT    RATIO
                                            -------   -----   -------   -----   --------   ------
<S>                                         <C>       <C>     <C>       <C>     <C>        <C>
  Core Capital (to Adjusted Tangible
     Assets):
     Emerald Coast Bank...................  $ 8,474    7.07%  $ 4,797   4.00%   $ 5,996     5.00%
  Tangible Capital (to Tangible Assets):
     Emerald Coast Bank...................    8,474    7.07     1,799   1.50        N/A      N/A
As of December 31, 1998:
  Total Capital (to Risk Weighted Assets):
     Corporation..........................  $70,559   15.05%  $37,502   8.00%   $46,878    10.00%
     The Bank.............................   38,485   11.85    25,971   8.00     32,464    10.00
     Emerald Coast Bank...................    6,283    9.50     5,293   8.00      6,618    10.00
     C&L Bank.............................    9,636   15.47     4,982   8.00      6,228    10.00
  Tier I Capital (to Risk Weighted
     Assets): Corporation.................   65,236   13.92    18,751   4.00     28,127     6.00
     The Bank.............................   34,626   10.67    12,985   4.00     19,478     6.00
     Emerald Coast Bank...................    5,609    8.48     2,646   4.00      3,969     6.00
     C&L Bank.............................    8,843   14.20     2,491   4.00      3,737     6.00
  Tier I Capital (to Average Assets):
     Corporation..........................   65,236   10.59    24,650   4.00     30,813     5.00
     The Bank.............................   34,626    8.32    16,646   4.00     20,808     5.00
     Emerald Coast Bank...................    5,609    6.92     3,244   4.00      4,055     5.00
     C&L Bank.............................    8,843    8.50     4,162   4.00      5,203     5.00
</TABLE>

15. FAIR VALUES OF FINANCIAL INSTRUMENTS

     The following methods and assumptions were used by the Corporation in
estimating fair values of financial instruments as disclosed herein:

          Cash and short-term instruments.  The carrying amounts of cash and
     short-term instruments, including interest bearing due from banks, federal
     funds sold and short-term commercial paper, approximate their fair value.

          Securities available for sale and securities held to maturity.  Fair
     values for securities are based on quoted market prices. The carrying
     values of stock in FHLB and Federal Reserve Bank approximate fair values.

          Mortgage loans held for sale.  The carrying amounts of mortgage loans
     held for sale approximate their fair value.

          Net loans.  Fair values for variable-rate loans that reprice
     frequently and have no significant change in credit risk are based on
     carrying values. Fair values for certain mortgage loans (for example,
     one-to-four family residential), and other consumer loans are based on
     quoted market prices of similar loans sold in conjunction with
     securitization transactions, adjusted for differences in loan
     characteristics. Fair values for commercial real estate and commercial
     loans are estimated using discounted cash flow analyses using interest
     rates currently being offered for loans with similar terms to borrowers of
     similar credit quality. Fair values for impaired loans are estimated using
     discounted cash flow analyses or underlying collateral values, where
     applicable.

                                       56
<PAGE>   58
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. FAIR VALUES OF FINANCIAL INSTRUMENTS -- (CONTINUED)

          Accrued interest receivable.  The carrying amounts of accrued interest
     receivable approximate their fair values.

          Deposits.  The fair values disclosed for demand deposits are, by
     definition, equal to the amount payable on demand at the reporting date
     (that is, their carrying amounts). The carrying amounts of variable-rate,
     fixed-term money market accounts and certificates of deposit ("CDs")
     approximate their fair values at the reporting date. Fair values for
     fixed-rate CDs are estimated using a discounted cash flow calculation that
     applies interest rates currently being offered on certificates to a
     schedule of aggregated expected monthly maturities on time deposits.

          Advances from FHLB.  Rates currently available to the Corporation for
     debt with similar terms and remaining maturities are used to estimate fair
     value of existing debt.

          Note payable and other borrowed funds.  The carrying amounts of note
     payable and other borrowed funds approximate their fair values.

          Off-balance sheet items.  The fair values of commitments to extend
     credit and standby letters of credit are not material to the Corporation's
     financial condition.

          Limitations.  Fair value estimates are made at a specific point of
     time and are based on relevant market information which is continuously
     changing. Because no quoted market prices exist for a significant portion
     of the Corporation's financial instruments, fair values for such
     instruments are based on management's assumptions with respect to future
     economic conditions, estimated discount rates, estimates of the amount and
     timing of future cash flows, expected loss experience, and other factors.
     These estimates are subjective in nature involving uncertainties and
     matters of significant judgment; therefore, they cannot be determined with
     precision. Changes in the assumptions could significantly affect the
     estimates.

     The estimated fair values of the Corporation's financial instruments are as
follows:

<TABLE>
<CAPTION>
                                                 DECEMBER 31, 1999     DECEMBER 31, 1998
                                                -------------------   -------------------
                                                CARRYING     FAIR     CARRYING     FAIR
                                                 AMOUNT     VALUE      AMOUNT     VALUE
                                                --------   --------   --------   --------
                                                             (IN THOUSANDS)
<S>                                             <C>        <C>        <C>        <C>
Financial assets:
  Cash and due from banks.....................  $ 31,825   $ 31,825   $ 31,307   $ 31,307
  Interest bearing deposits in other banks....     1,862      1,862      1,048      1,048
  Federal funds sold..........................     5,843      5,843     25,045     25,045
  Short-term commercial paper.................    14,484     14,484         --         --
  Securities available for sale...............    65,439     65,439     91,482     91,482
  Securities held to maturity.................     5,477      5,411      6,726      6,775
  Mortgage loans held for sale................     2,127      2,127      4,899      4,899
  Net loans...................................   624,712    626,842    425,465    433,483
  Stock in FHLB and Federal Reserve Bank......     3,461      3,461      1,760      1,760
  Accrued interest receivable.................     6,286      6,286      4,812      4,812
Financial liabilities:
  Deposits....................................   682,517    682,882    531,070    534,201
  Advances from FHLB..........................    62,500     59,959     23,160     23,166
  Other borrowed funds........................       295        295      3,700      3,700
  Note payable................................     7,104      7,104         --         --
</TABLE>

                                       57
<PAGE>   59
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. OTHER NONINTEREST EXPENSE

     Other noninterest expense consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                              ------------------------
                                                               1999     1998     1997
                                                              ------   ------   ------
<S>                                                           <C>      <C>      <C>
Professional fees...........................................  $2,196   $1,159   $  609
Directors fees..............................................     789      760      486
Insurance and assessments...................................     478      354      256
Postage, stationery and supplies............................   1,161      889      595
Advertising.................................................     372      420      334
Foreclosure losses..........................................     907       --       --
Other operating expense.....................................   3,372    3,020    2,132
                                                              ------   ------   ------
          Total.............................................  $9,275   $6,602   $4,412
                                                              ======   ======   ======
</TABLE>

17. CONCENTRATIONS OF CREDIT RISK

     All of the Corporation's loans, commitments and standby letters of credit
have been granted to customers in the Corporation's market area. The
concentrations of credit by type of loan or commitment are set forth in Notes 3
and 12, respectively.

     The Corporation maintains cash balances and federal funds sold at several
financial institutions in Alabama and Florida. Cash balances at each institution
are insured by the Federal Deposit Insurance Corporation (the "FDIC") up to
$100,000. At various times throughout the year cash balances held at these
institutions will exceed federally insured limits. The Bank's management
monitors these institutions on a quarterly basis in order to determine that the
institutions meet "well-capitalized" guidelines as established by the FDIC.

18. NET INCOME PER SHARE

     The following table sets forth the computation of basic net income per
common share and diluted net income per common share (in thousands, except per
share amounts):

<TABLE>
<CAPTION>
                                                             1999      1998      1997
                                                            -------   -------   -------
<S>                                                         <C>       <C>       <C>
Numerator:
  For basic and diluted, net income.......................  $ 2,920   $   285   $ 2,396
                                                            =======   =======   =======
Denominator:
  For basic, weighted average common shares outstanding...   14,335    13,115    10,553
  Effect of dilutive stock options........................       27        95       119
                                                            -------   -------   -------
  Average common shares outstanding, assuming dilution....   14,362    13,210    10,672
                                                            =======   =======   =======
Basic net income per common share.........................  $   .20   $   .02   $   .23
                                                            =======   =======   =======
Diluted net income per common share.......................  $   .20   $   .02   $   .22
                                                            =======   =======   =======
</TABLE>

                                       58
<PAGE>   60
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

19. PARENT COMPANY

     The condensed financial information for The Banc Corporation (parent
company only) is presented as follows (in thousands):

<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                              -----------------
                                                               1999      1998
                                                              -------   -------
<S>                                                           <C>       <C>
STATEMENTS OF FINANCIAL CONDITION
Assets:
  Cash......................................................  $   278   $ 2,542
  Investment in subsidiaries................................   71,621    49,420
  Loans.....................................................      200        --
  Intangibles, net..........................................      276       444
  Premises and equipment -- net.............................    3,637    15,012
  Other assets..............................................      867       703
                                                              -------   -------
                                                              $76,879   $68,121
                                                              =======   =======
Liabilities:
  Accounts payable and deferred taxes.......................  $   554   $   965
  Dividends payable.........................................       --        24
  Note payable..............................................    7,104        --
  Accrued expenses and other liabilities....................      373     1,165
Stockholders' equity........................................   68,848    65,967
                                                              -------   -------
                                                              $76,879   $68,121
                                                              =======   =======
</TABLE>

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                              ---------------------------
                                                               1999       1998      1997
                                                              -------   --------   ------
<S>                                                           <C>       <C>        <C>
STATEMENTS OF INCOME
Income:
  Dividends from subsidiaries...............................  $    --   $  2,429   $  328
  Interest..................................................      133        199       67
  Other income..............................................      837        515       95
                                                              -------   --------   ------
                                                                  970      3,143      490
Expense:
  Directors' fees...........................................      140        194      136
  Salaries and benefits.....................................      965        529       94
  Occupancy expense.........................................      439        250       --
  Interest expense..........................................      210         81       --
  Other.....................................................    1,302      1,124       70
                                                              -------   --------   ------
                                                                3,056      2,178      300
                                                              -------   --------   ------
(Loss) income before income taxes and equity in
  undistributed earnings of subsidiaries....................   (2,086)       965      190
Income tax benefit..........................................    1,100      1,321       48
                                                              -------   --------   ------
(Loss) income before equity in undistributed earnings of
  subsidiaries..............................................     (986)     2,286      238
Equity in undistributed earnings (loss) of subsidiaries.....    3,906     (2,001)   2,158
                                                              -------   --------   ------
          Net income........................................  $ 2,920   $    285   $2,396
                                                              =======   ========   ======
</TABLE>

                                       59
<PAGE>   61
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

19. PARENT COMPANY -- (CONTINUED)


<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                              ---------------------------
                                                               1999       1998      1997
                                                              -------   --------   ------
<S>                                                           <C>       <C>        <C>
STATEMENTS OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................................  $ 2,920   $    285   $2,396
Adjustments to reconcile net income to net cash (used)
  provided by operating activities:
  Amortization and depreciation expense.....................      275        171       25
  Equity in undistributed (earnings) loss of subsidiaries...   (3,906)     2,001   (2,158)
  Gain on sale of property..................................     (342)        --       --
  (Decrease) increase in other liabilities..................   (1,587)       786       62
  Increase in other assets..................................      (21)    (1,181)    (202)
                                                              -------   --------   ------
Net cash (used) provided by operating activities............   (2,661)     2,062      123
NET CASH USED IN INVESTING ACTIVITIES
Purchases of premises and equipment.........................   (3,810)    (9,102)    (141)
Proceeds from sale of property..............................      300         --       --
Net cash paid in acquisition................................   (1,372)    (5,390)      --
Maturity of investment securities available for sale........       --        500       --
Sale of investment securities available for sale............       --        246       --
Proceeds from other receivables.............................       --        329       30
Capital contribution to subsidiary..........................   (3,995)    (5,000)      --
                                                              -------   --------   ------
Net cash used in investing activities.......................   (8,877)   (18,417)    (111)
CASH USED IN FINANCING ACTIVITIES
Dividends paid by pooled subsidiaries.......................       --       (170)    (438)
Proceeds from issuance of common stock......................    2,170     12,281   17,878
Repurchase of common stock..................................       --         --   (9,496)
Increase in notes payable...................................    7,104         --       --
Payment on assumed debt.....................................       --         --   (1,513)
                                                              -------   --------   ------
Net cash provided by financing activities...................    9,274     12,111    6,431
                                                              -------   --------   ------
Net (decrease) increase in cash.............................   (2,264)    (4,244)   6,443
Cash at beginning of year...................................    2,542      6,786      343
                                                              -------   --------   ------
Cash at end of year.........................................  $   278   $  2,542   $6,786
                                                              =======   ========   ======
</TABLE>

                                       60
<PAGE>   62
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

20. SELECTED QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

     A summary of the unaudited results of operations for each quarter of 1999
and 1998 follows (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                     FIRST    SECOND     THIRD    FOURTH
                                                    QUARTER   QUARTER   QUARTER   QUARTER
                                                    -------   -------   -------   -------
<S>                                                 <C>       <C>       <C>       <C>
1999
Total interest income.............................  $11,915   $12,851   $14,580   $16,211
Total interest expense............................    5,609     6,078     6,930     8,132
Net interest income...............................    6,306     6,773     7,650     8,079
Provision for loan losses.........................      244       298     1,445       863
Securities (losses) gains.........................      (20)       79         6        18
Merger related costs..............................       69       622        53        --
Income before income taxes........................      980       816     1,107       537
Net income........................................      812       579       755       774
Basic and diluted net income per share............      .06       .04       .05       .05
1998
Total interest income.............................  $ 9,407   $ 9,819   $11,168   $12,078
Total interest expense............................    4,545     4,578     5,231     5,852
Net interest income...............................    4,862     5,241     5,937     6,226
Provision for loan losses.........................      440       853     2,275     1,089
Securities gains (losses).........................       75        (6)      148        62
Merger related costs..............................       --        --        --     1,466
Income (loss) before income taxes.................    1,423       929    (1,814)     (977)
Net income (loss).................................    1,028       818      (964)     (597)
Basic and diluted net income (loss) per share.....      .08       .06      (.07)     (.05)
</TABLE>

21. SEGMENT REPORTING

     The Corporation has two reportable segments, the Alabama Region and the
Florida Region. The Alabama Region consists of operations located throughout the
state of Alabama. The Florida Region consists of operations located in the
panhandle of Florida. The Corporation's reportable segments are managed as
separate business units because they are located in different geographic areas.
Both segments derive revenues from the delivery of financial services. These
services include commercial loans, mortgage loans, consumer loans, deposit
accounts and other financial services.

     The Corporation evaluates performance and allocates resources based on
profit or loss from operations. There are no material intersegment sales or
transfers. Net interest revenue is used as the basis for performance evaluation
rather than its components, total interest revenue and total interest expense.
The accounting policies used by each reportable segment are the same as those
discussed in Note 1. All costs have been allocated to the reportable segments.
Therefore, combined segment amounts agree to the consolidated totals.


                                       61
<PAGE>   63
                     THE BANC CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

21. SEGMENT REPORTING -- (CONTINUED)


<TABLE>
<CAPTION>
                                                         ALABAMA    FLORIDA
                                                          REGION     REGION    COMBINED
                                                         --------   --------   --------
<S>                                                      <C>        <C>        <C>
1999
Net interest income....................................  $ 19,321   $  9,487   $ 28,808
Provision for loan losses (reduction in allowance).....     3,186       (336)     2,850
Noninterest income.....................................     4,606      1,558      6,164
Noninterest expense....................................    21,646      7,036     28,682
Income tax (benefit) expense...........................    (1,068)     1,588        520
Net income.............................................       165      2,755      2,920
Total assets...........................................   590,751    236,676    827,427
1998
Net interest income....................................  $ 14,942   $  7,324   $ 22,266
Provision for loan losses..............................     3,094      1,563      4,657
Noninterest income.....................................     2,617      1,464      4,081
Noninterest expense....................................    15,926      6,203     22,129
Income tax (benefit) expense...........................    (1,022)       298       (724)
Net (loss) income......................................      (439)       724        285
Total assets...........................................   440,845    189,244    630,089
1997
Net interest income....................................  $ 12,189   $  5,723   $ 17,912
Provision for loan losses..............................     1,516      1,169      2,685
Noninterest income.....................................     2,205        814      3,019
Noninterest expense....................................     9,913      4,863     14,776
Income tax expense.....................................       891        183      1,074
Net income.............................................     2,074        322      2,396
Total assets...........................................   307,713    154,243    461,956
</TABLE>

                                       62
<PAGE>   64

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

     On June 16, 1998, the Corporation approved the engagement of Ernst & Young
LLP as its independent auditors for the three years ended December 31, 1998, to
replace the firm of Dudley, Hopton-Jones, Sims & Freeman PLLP who were the
auditors of Warrior Capital Corporation ("Warrior"), the predecessor of the
Corporation. The Board of Directors of the Corporation approved the change in
auditors on June 16, 1998. The reports of Dudley, Hopton-Jones, Sims & Freeman
PLLP on Warrior's financial statements for the past two fiscal years did not
contain an adverse opinion or a disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principles.

     In connection with the audits of Warrior's financial statements for each of
the two fiscal years ended December 31, 1998, and in the subsequent interim
period, there were no disagreements with Dudley, Hopton-Jones, Sims & Freeman
PLLP on any matters of accounting principles or practices, financial statement
disclosure or auditing scope and procedures which, if not resolved to the
satisfaction of Dudley, Hopton-Jones, Sims & Freeman PLLP, would have caused
Dudley, Hopton-Jones, Sims & Freeman PLLP to make reference to the matter in
their report. The Corporation asked Dudley, Hopton-Jones, Sims & Freeman PLLP to
furnish a letter to the commission stating whether it agrees with the above
statements. A copy of that letter, dated September 30, 1998, is filed as Exhibit
16 to this Annual Report on Form 10-K.

                                    PART III

ITEMS 10, 11, 12 AND 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT,
                         EXECUTIVE COMPENSATION; SECURITY OWNERSHIP OF CERTAIN
                         BENEFICIAL OWNERS AND MANAGEMENT; AND CERTAIN
                         RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information set forth under the captions "Directors and Executive
Officers of the Registrant," "Election of Directors," "Committees of the
Company's Board of Directors and Meeting Attendance," "Executive Compensation
and Other Information," "Security Ownership of Certain Beneficial Owners and
Management," and "Certain Relationships and Related Transactions" included in
the Corporation's definitive proxy statement to be filed no later than April 29,
2000, in connection with the Corporation's 2000 Annual Meeting of Stockholders
is incorporated herein by reference.

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) List of Documents filed as part of this Report.

          (1) Financial Statements.

<TABLE>
<CAPTION>
                                                               PAGE
                                                              NUMBER
                                                              ------
<S>                                                           <C>
Report of Independent Auditors, Ernst & Young LLP...........    30
Report of Independent Auditors, Saltmarsh Cleaveland &
  Gund......................................................    31
Report of Independent Auditors, Williams, Cox, Weidner &
  Cox.......................................................    32
Report of Independent Auditors, Williams, Cox, Weidner &
  Cox.......................................................    33
Consolidated Statements of Financial Condition as of
  December 31, 1999 and 1998................................    34
Consolidated Statements of Income for the years ended
  December 31, 1999, 1998 and 1997..........................    35
Consolidated Statements of Cash Flows for the years ended
  December 31, 1999, 1998 and 1997..........................    36
Consolidated Statements of Stockholders' Equity for the
  years ended December 31, 1999, 1998 and 1997..............    38
Notes to Consolidated Financial Statements..................    39
</TABLE>

          (2) Financial Statement Schedules.

     All other financial statements and schedules have been omitted because they
are not required or are not applicable.

                                       63
<PAGE>   65

          (3) Exhibits (numbered in accordance with Item 601 of Regulation S-K).

<TABLE>
<CAPTION>
EXHIBIT
  NO.                                    EXHIBIT
-------                                  -------
<C>       <C>  <S>
   (2)-1   --  Reorganization Agreement and Plan of Merger, dated as of
               June 2, 1998, by and between The Banc Corporation and
               Emerald Coast Bancshares. Inc., filed as Exhibit (2)-5 to
               the Corporation's Registration Statement on Form S-4
               (Registration No. 333-58493), is hereby incorporated herein
               by reference.
   (2)-2   --  Plan and Agreement of Merger, dated as of February 25, 1999,
               by and among The Banc Corporation and C&L Banking
               Corporation, file as Exhibit (2)-1 to the Corporation's
               Registration Statement on Form S-4 (Registration No.
               333-77513), is hereby incorporated by reference.
   (2)-3   --  Plan and Agreement of Merger, dated as of February 25, 1999,
               by and among The Banc Corporation, C&L Banking Corporation,
               C&L Bank of Bristol and C&L Bank of Blountstown, filed as
               Exhibit (2)-3 to the Corporation's Registration Statement on
               Form S-4 (Registration No. 333-77513), is hereby
               incorporated by reference.
   (2)-4   --  Share Exchange Agreement, dated as of February 25, 1999, by
               and among The Banc Corporation, Bristol Acquisition
               Corporation, C&L Banking Corporation and C&L Bank of
               Bristol, filed as Exhibit (2)-2 to the Corporation's
               Registration Statement on Form S-4 (Registration No.
               333-77513), is hereby incorporated by reference.
   (3)-1   --  Restated Certificate of Incorporation of The Banc
               Corporation, filed as Exhibit (3)-1 to the Corporation's
               Registration Statement on Form S-4 (Registration No.
               333-58493), is hereby incorporated herein by reference.
   (3)-2   --  Bylaws of The Banc Corporation, filed as Exhibit (3)-2 to
               the Corporation's Registration Statement on Form S-4
               (Registration No. 333-58493), is hereby incorporated herein
               by reference.
  10-(1)   --  Amended and Restated 1998 Stock Incentive Plan of The Banc
               Corporation, filed as Exhibit (4)-2 to the Corporation's
               Registration Statement on Form S-8, dated February 22, 1999
               (Registration No. 333-72747), is hereby incorporated herein
               by reference.
  10-(2)   --  Commerce Bank of Alabama Incentive Stock Compensation Plan,
               filed as Exhibit (4)-3 to The Corporation's Registration
               Statement on Form S-8, dated February 22, 1999 (Registration
               No. 333-72747), is hereby incorporated herein by reference.
  (10)-3   --  The Banc Corporation 401(k) Plan, filed as Exhibit (4)-2 to
               the Corporation's Registration Statement on Form S-8, dated
               January 21, 1999 (Registration No. 333-7953), is hereby
               incorporated herein by reference.
  (10)-4   --  Employment Agreement by and between The Banc Corporation and
               James A. Taylor, filed as Exhibit (10)-1 to the
               Corporation's Registration Statement on Form S-1
               (Registration No. 333-67011), is hereby incorporated herein
               by reference.
  (10)-5   --  Deferred Compensation Agreement by and between The Banc
               Corporation and James A. Taylor, filed as Exhibit (10)-2 to
               the Corporation's Registration Statement on Form S-1
               (Registration No. 333-67011), is hereby incorporated herein
               by reference.
  (10)-6   --  Employment Agreement between the Corporation and W. T.
               Campbell, Jr., dated as of October 30, 1998, filed as
               Exhibit (10)-4 to the Corporation's Registration Statement
               on Form S-1 (Registration No. 333-67011), is hereby
               incorporated herein by reference.
  (10)-7   --  Employment Agreement between The Banc Corporation and Terry
               DuBose, dated as of February 12, 1999, filed as Exhibit
               (10)-7 to the Corporation's Annual Report on Form 10-K for
               the year ended December 31, 1998, is hereby incorporated by
               reference herein.
  (10)-8   --  Employment Agreement, dated as of January 1, 1999, by and
               between The Banc Corporation and James A. Taylor, Jr., filed
               as Exhibit (10)-8 to the Corporation's Annual Report on Form
               10-K for the year ended December 31, 1998, is hereby
               incorporated by reference herein.
</TABLE>

                                       64
<PAGE>   66

<TABLE>
<CAPTION>
EXHIBIT
NO.                                      EXHIBIT
-------                                  -------
<C>       <C>  <S>
  (10)-9   --  Employment Agreement, dated as of January 1, 1999, by and
               between The Bank and Marie Swift filed as Exhibit (10)-9 to
               the Corporation's Annual Report on Form 10-K for the year
               ended December 31, 1998, is hereby incorporated by reference
               herein.
 (10)-10   --  Employment Agreement, dated as of January 1, 1999, by and
               between The Bank and Johnny Wallis filed as Exhibit (10)-10
               to the Corporation's Annual Report on Form 10-K for the year
               ended December 31, 1998, is hereby incorporated by reference
               herein.
 (10)-11   --  Form of Deferred Compensation Agreement by and between The
               Banc Corporation and the individuals listed on Schedule A
               attached thereto.
 (10)-12   --  Form of Deferred Compensation Agreement by and between The
               Bank and the individuals listed on Schedule A attached
               thereto.
      16   --  Letter from Dudley, Hopton-Jones, Sims & Freeman, PLLP,
               filed as Exhibit 16 to the Corporation's Registration
               Statement on Form S-1 (Registration No. 333-67011), is
               hereby incorporated by reference.
      21   --  Subsidiaries of the Corporation.
  (23)-1   --  Consent of Ernst & Young LLP.
  (23)-2   --  Consent of Saltmarsh Cleaveland & Gund.
  (23)-3   --  Consent of Williams, Cox, Weidner & Cox.
  (23)-4   --  Consent of Williams, Cox, Weidner & Cox.
      24   --  Powers of Attorney. See the signature page to this Annual
               Report on Form 10-K.
  (27)-1   --  Financial Data Schedule (for SEC use only).
  (27)-2   --  Restated Financial Data Schedule.
  (27)-3   --  Restated Financial Data Schedule.
</TABLE>

(b) Reports on Form 8-K.

     The Corporation did not file any reports on Form 8-K during the fourth
quarter of 1999.

(c) Exhibits.

     The exhibits required to be filed with this Annual Report on Form 10-K
pursuant to Item 601, of Regulation S-K are listed under "Exhibits" in Part IV,
Item 14(a) (3) of this Annual Report on Form 10-K, and are incorporated herein
by reference.

(d) Financial Statement Schedules.

     The Financial Statement Schedules required to be filed with this Annual
Report on Form 10-K are listed under "Financial Statement Schedules" in Part IV,
Item 14(a) (2) of this Annual Report on Form 10-K, and are incorporated herein
by reference.

                                       65
<PAGE>   67

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                          THE BANC CORPORATION

                                          By:      /s/ JAMES A. TAYLOR
                                            ------------------------------------
                                                      James A. Taylor
                                             Chairman, Chief Executive Officer
                                                       and President

March 27, 2000

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James A. Taylor, Jr. and David R. Carter, and
each of them, the true and lawful agents and his attorneys-in-fact with full
power and authority in each said agents and attorneys-in-fact, acting singly, to
sign for the undersigned as Director or an officer of the Corporation, or as
both, the Corporation's 1999 Annual Report on Form 10-K to be filed with the
Securities and Exchange Commission, Washington, D.C. under the Securities
Exchange Act of 1934, and to sign any amendment or amendments to such Annual
Report, including an Annual Report pursuant to 11-K to be filed as an amendment
to the Form 10-K; hereby ratifying and confirming all acts taken by such agents
and attorneys-in-fact as herein authorized.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.

<TABLE>
<CAPTION>
                      SIGNATURE                                     TITLE                    DATE
                      ---------                                     -----                    ----
<C>                                                    <S>                              <C>
                 /s/ JAMES A. TAYLOR                   Chairman of the Board, Chief      March 27, 2000
-----------------------------------------------------    Executive Officer and
                   James A. Taylor                       President (Principal
                                                         Executive Officer)

                 /s/ DAVID R. CARTER                   Financial Officer and Director    March 27, 2000
-----------------------------------------------------    (Principal Financial and
                   David R. Carter                       Accounting Officer)

                  /s/ TERRY DUBOSE                     Vice Chairman                     March 27, 2000
-----------------------------------------------------
                    Terry DuBose

             /s/ JAMES MAILON KENT, JR.                Vice Chairman                     March 27, 2000
-----------------------------------------------------
               James Mailon Kent, Jr.

             /s/ LARRY D. STRIPLIN, JR.                Vice Chairman                     March 27, 2000
-----------------------------------------------------
               Larry D. Striplin, Jr.

             /s/ JAMES R. ANDREWS, M.D.                Director                          March 27, 2000
-----------------------------------------------------
               James R. Andrews, M.D.

               /s/ NEAL R. BERTE, ED.D                 Director                          March 27, 2000
-----------------------------------------------------
                 Neal R. Berte, Ed.D
</TABLE>

                                       66
<PAGE>   68

<TABLE>
<CAPTION>
                      SIGNATURE                                     TITLE                    DATE
                      ---------                                     -----                    ----
<C>                                                    <S>                              <C>
               /s/ W.T. CAMPBELL, JR.                  Director                          March 27, 2000
-----------------------------------------------------
                 W.T. Campbell, Jr.

                /s/ PETER N. DICHIARA                  Director                          March 27, 2000
-----------------------------------------------------
                  Peter N. Dichiara

                 /s/ K. EARL DURDEN                    Director                          March 27, 2000
-----------------------------------------------------
                   K. Earl Durden

                 /s/ STEVEN C. MAYS                    Director                          March 27, 2000
-----------------------------------------------------
                   Steven C. Mays

                /s/ JOHN F. GITTINGS                   Director                          March 27, 2000
-----------------------------------------------------
                  John F. Gittings

                 /s/ LARRY R. HOUSE                    Director                          March 27, 2000
-----------------------------------------------------
                   Larry R. House

             /s/ THOMAS E. JERNIGAN, JR.               Director                          March 27, 2000
-----------------------------------------------------
               Thomas E. Jernigan, Jr.

                /s/ RANDALL E. JONES                   Director                          March 27, 2000
-----------------------------------------------------
                  Randall E. Jones

                 /s/ MAYER MITCHELL                    Director                          March 27, 2000
-----------------------------------------------------
                   Mayer Mitchell

              /s/ RONALD W. ORSO, M.D.                 Director                          March 27, 2000
-----------------------------------------------------
                Ronald W. Orso, M.D.

                 /s/ HAROLD W. RIPPS                   Director                          March 27, 2000
-----------------------------------------------------
                   Harold W. Ripps

               /s/ RICHARD M. SCRUSHY                  Director                          March 27, 2000
-----------------------------------------------------
                 Richard M. Scrushy

                 /s/ JERRY M. SMITH                    Director                          March 27, 2000
-----------------------------------------------------
                   Jerry M. Smith

               /s/ MICHAEL E. STEPHENS                 Director                          March 27, 2000
-----------------------------------------------------
                 Michael E. Stephens

                   /s/ MARIE SWIFT                     Director                          March 27, 2000
-----------------------------------------------------
                     Marie Swift

              /s/ JAMES A. TAYLOR, JR.                 Director                          March 27, 2000
-----------------------------------------------------
                James A. Taylor, Jr.
</TABLE>

                                       67
<PAGE>   69

<TABLE>
<CAPTION>
                      SIGNATURE                                     TITLE                    DATE
                      ---------                                     -----                    ----
<C>                                                    <S>                              <C>
                 /s/ MANDELL TILLMAN                   Director                          March 27, 2000
-----------------------------------------------------
                   Mandell Tillman

                  /s/ JOHNNY WALLIS                    Director                          March 27, 2000
-----------------------------------------------------
                    Johnny Wallis
</TABLE>

                                       68
<PAGE>   70

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
  NO.                                    EXHIBIT
-------                                  -------
<C>       <C>  <S>
   (2)-1   --  Reorganization Agreement and Plan of Merger, dated as of
               June 2, 1998, by and between The Banc Corporation and
               Emerald Coast Bancshares. Inc., filed as Exhibit (2)-5 to
               the Corporation's Registration Statement on Form S-4
               (Registration No. 333-58493), is hereby incorporated herein
               by reference.
   (2)-2   --  Plan and Agreement of Merger, dated as of February 25, 1999,
               by and among The Banc Corporation and C&L Banking
               Corporation, file as Exhibit (2)-1 to the Corporation's
               Registration Statement on Form S-4 (Registration No.
               333-77513), is hereby incorporated by reference.
   (2)-3   --  Plan and Agreement of Merger, dated as of February 25, 1999,
               by and among The Banc Corporation, C&L Banking Corporation,
               C&L Bank of Bristol and C&L Bank of Blountstown, filed as
               Exhibit (2)-3 to the Corporation's Registration Statement on
               Form S-4 (Registration No. 333-77513), is hereby
               incorporated by reference.
   (2)-4   --  Share Exchange Agreement, dated as of February 25, 1999, by
               and among The Banc Corporation, Bristol Acquisition
               Corporation, C&L Banking Corporation and C&L Bank of
               Bristol, filed as Exhibit (2)-2 to the Corporation's
               Registration Statement on Form S-4 (Registration No.
               333-77513), is hereby incorporated by reference.
   (3)-1   --  Restated Certificate of Incorporation of The Banc
               Corporation, filed as Exhibit (3)-1 to the Corporation's
               Registration Statement on Form S-4 (Registration No.
               333-58493), is hereby incorporated herein by reference.
   (3)-2   --  Bylaws of The Banc Corporation, filed as Exhibit (3)-2 to
               the Corporation's Registration Statement on Form S-4
               (Registration No. 333-58493), is hereby incorporated herein
               by reference.
  10-(1)   --  Amended and Restated 1998 Stock Incentive Plan of The Banc
               Corporation, filed as Exhibit (4)-2 to the Corporation's
               Registration Statement on Form S-8, dated February 22, 1999
               (Registration No. 333-72747), is hereby incorporated herein
               by reference.
  10-(2)   --  Commerce Bank of Alabama Incentive Stock Compensation Plan,
               filed as Exhibit (4)-3 to The Corporation's Registration
               Statement on Form S-8, dated February 22, 1999 (Registration
               No. 333-72747), is hereby incorporated herein by reference.
  (10)-3   --  The Banc Corporation 401(k) Plan, filed as Exhibit (4)-2 to
               the Corporation's Registration Statement on Form S-8, dated
               January 21, 1999 (Registration No. 333-7953), is hereby
               incorporated herein by reference.
  (10)-4   --  Employment Agreement by and between The Banc Corporation and
               James A. Taylor, filed as Exhibit (10)-1 to the
               Corporation's Registration Statement on Form S-1
               (Registration No. 333-67011), is hereby incorporated herein
               by reference.
  (10)-5   --  Deferred Compensation Agreement by and between The Banc
               Corporation and James A. Taylor, filed as Exhibit (10)-2 to
               the Corporation's Registration Statement on Form S-1
               (Registration No. 333-67011), is hereby incorporated herein
               by reference.
  (10)-6   --  Employment Agreement between the Corporation and W. T.
               Campbell, Jr., dated as of October 30, 1998, filed as
               Exhibit (10)-4 to the Corporation's Registration Statement
               on Form S-1 (Registration No. 333-67011), is hereby
               incorporated herein by reference.
  (10)-7   --  Employment Agreement between The Banc Corporation and Terry
               DuBose, dated as of February 12, 1999, filed as Exhibit
               (10)-7 to the Corporation's Annual Report on Form 10-K for
               the year ended December 31, 1998, is hereby incorporated by
               reference herein.
</TABLE>

                                       69
<PAGE>   71

<TABLE>
<CAPTION>
EXHIBIT
NO.                                      EXHIBIT
-------                                  -------
<C>       <C>  <S>
  (10)-8   --  Employment Agreement, dated as of January 1, 1999, by and
               between The Banc Corporation and James A. Taylor, Jr., filed
               as Exhibit (10)-8 to the Corporation's Annual Report on Form
               10-K for the year ended December 31, 1998, is hereby
               incorporated by reference herein.
  (10)-9   --  Employment Agreement, dated as of January 1, 1999, by and
               between The Bank and Marie Swift filed as Exhibit (10)-9 to
               the Corporation's Annual Report on Form 10-K for the year
               ended December 31, 1998, is hereby incorporated by reference
               herein.
 (10)-10   --  Employment Agreement, dated as of January 1, 1999, by and
               between The Bank and Johnny Wallis filed as Exhibit (10)-10
               to the Corporation's Annual Report on Form 10-K for the year
               ended December 31, 1998, is hereby incorporated by reference
               herein.
 (10)-11   --  Form of Deferred Compensation Agreement by and between The
               Banc Corporation and the individuals listed on Schedule A
               attached thereto.
 (10)-12   --  Form of Deferred Compensation Agreement by and between The
               Bank and the individuals listed on Schedule A attached
               thereto.
      16   --  Letter from Dudley, Hopton-Jones, Sims & Freeman, PLLP,
               filed as Exhibit 16 to the Corporation's Registration
               Statement on Form S-1 (Registration No. 333-67011), is
               hereby incorporated by reference.
      21   --  Subsidiaries of the Corporation.
  (23)-1   --  Consent of Ernst & Young LLP.
  (23)-2   --  Consent of Saltmarsh Cleaveland & Gund.
  (23)-3   --  Consent of Williams, Cox, Weidner & Cox.
  (23)-4   --  Consent of Williams, Cox, Weidner & Cox.
      24   --  Powers of Attorney. See the signature page to this Annual
               Report on Form 10-K.
  (27)-1   --  Financial Data Schedule (for SEC use only).
  (27)-2   --  Restated Financial Data Schedule.
  (27)-3   --  Restated Financial Data Schedule.
</TABLE>

                                       70