##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC

Form 10-Q

|           |  |                                                                                         
|---------- |  | ----------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                         
|[X]        |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|           |  |                                                                                         
|           |  | FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002                                       
|           |  |                                                                                         
|OR        
|           |  |                                                                                         
|[  ]       |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|           |  |                                                                                         
|           |  | FOR THE TRANSITION PERIOD FROM      TO                                                  

Commission File number 0-25033

The Banc Corporation
(Exact Name of Registrant as Specified in its Charter)

|                                               |  |                                  
|---------------------------------------------- |  | ---------------------------------
|Delaware                                       |  | 63-1201350                       
|                                               |  |                                  
|(State or Other Jurisdiction of Incorporation) |  | (IRS Employer Identification No.)

17 North 20th Street, Birmingham, Alabama 35203
(Address of Principal Executive Offices)

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

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 the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.

|                              |  |                                     
|----------------------------- |  | ------------------------------------
|Class                         |  | Outstanding as of September 30, 2002
|                              |  |                                     
|Common stock, $.001 par value |  | 17,672,949                          





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TABLE OF CONTENTS



|                                             |                                                                                                |  |  |  |  |  |  | 
|-------------------------------------------- | ---------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                                             | PART I. FINANCIAL INFORMATION                                                                 
|                                             | Item 1. Financial Statements                                                                  
|                                             | Condensed Consolidated Statements of Financial Condition                                      
|                                             | Condensed Consolidated Statements of Income (Unaudited)                                       
|                                             | Condensed Consolidated Statements of Cash Flow (Unaudited)                                    
|                                             | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                          
|                                             | Item 2.  Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                             | Item 3.  Quantitative and Qualitative Disclosure about Market Risk                            
|                                             | Item 4.  Controls and Procedures                                                              
|                                             | Part II.  Other Information                                                                   
|                                             | Item 1.  Legal Proceedings                                                                    
|                                             | Item 2.  Changes in Securities and Use of Proceeds                                            
|                                             | Item 3.  Defaults Upon Senior Securities                                                      
|                                             | Item 4.  Submission of Matters to a Vote of Security Holders                                  
|                                             | Item 5.  Other Information                                                                    
|                                             | Item 6.  Exhibits and Reports on Form 8-K                                                     
|                                             | Signatures                                                                                    
|                                             | CERTIFICATIONS                                                                                
|SECTION 906 CERTIFICATION OF THE CEO AND CFO



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##### Table of Contents






PART I. FINANCIAL INFORMATION




Item 1. Financial Statements




The Banc Corporation and Subsidiaries
Condensed Consolidated Statements of Financial Condition
(Dollars In Thousands)

|                                                                                                                |                                                                                                                                                                                       |                |                                            |         |               |           |              |         |         |           | 
|--------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------- | ------------------------------------------ | ------- | ------------- | --------- | ------------ | ------- | ------- | --------- | 
|                                                                                                                |                                                                                                                                                                                       |                |                                            |         | September 30, |           | December 31,
|                                                                                                                |                                                                                                                                                                                       |                |                                            |         | 2002          |           | 2001        
|                                                                                                                |                                                                                                                                                                                       |                |                                            |         |               |           |             
|                                                                                                                |                                                                                                                                                                                       |                |                                            |         | (Unaudited)   |           | (Note 1)    
|Assets                                                                                                          |                                                                                                                                                                                       |                |                                            |         |               |           |              |        
|Cash and due from banks                                                                                         |                                                                                                                                                                                       | $              | 35,121                                     |         |               | $         | 31,682       |        
|Interest-bearing deposits in other banks                                                                        |                                                                                                                                                                                       |                | 13,491                                     |         |               |           | 495          |        
|Federal funds sold                                                                                              |                                                                                                                                                                                       |                | 32,000                                     |         |               |           | 20,000       |        
|Investment securities available for sale                                                                        |                                                                                                                                                                                       |                | 61,329                                     |         |               |           | 68,847       |        
|Mortgage loans held for sale                                                                                    |                                                                                                                                                                                       |                | 3,306                                      |         |               |           | 1,131        |        
|Loans, net of unearned income                                                                                   |                                                                                                                                                                                       |                | 1,151,747                                  |         |               |           | 999,156      |        
|Less: Allowance for loan losses                                                                                 |                                                                                                                                                                                       |                | (15,573                                    | )       |               |           | (12,546      | )      
|                                                                                                                |                                                                                                                                                                                       |                |                                            |         |               |           |              |        
|                                                                                                                |                                                                                                                                                                                       |                | Net loans                                  |         |               | 1,136,174 |              |         |         | 986,610   | 
|                                                                                                                |                                                                                                                                                                                       |                |                                            |         |               |           |              |        
|Premises and equipment, net                                                                                     |                                                                                                                                                                                       |                | 58,871                                     |         |               |           | 47,829       |        
|Accrued interest receivable                                                                                     |                                                                                                                                                                                       |                | 7,333                                      |         |               |           | 7,562        |        
|Stock in FHLB and Federal Reserve Bank                                                                          |                                                                                                                                                                                       |                | 9,843                                      |         |               |           | 8,505        |        
|Other assets                                                                                                    |                                                                                                                                                                                       |                | 56,390                                     |         |               |           | 33,744       |        
|                                                                                                                |                                                                                                                                                                                       |                |                                            |         |               |           |              |        
|                                                                                                                |                                                                                                                                                                                       |                | Total assets                               |         | $             | 1,413,858 |              |         | $       | 1,206,405 | 
|                                                                                                                |                                                                                                                                                                                       |                |                                            |         |               |           |              |        
|Liabilities and Stockholders Equity                                                                            |                                                                                                                                                                                       |                |                                            |         |               |           |              |        
|Deposits                                                                                                        |                                                                                                                                                                                       |                |                                            |         |               |           |              |        
|                                                                                                                | Noninterest-bearing                                                                                                                                                                   |                | $                                          | 114,737 |               |           | $            | 94,655  |        
|                                                                                                                | Interest-bearing                                                                                                                                                                      |                |                                            | 999,656 |               |           |              | 857,580 |        
|                                                                                                                |                                                                                                                                                                                       |                |                                            |         |               |           |              |        
|                                                                                                                |                                                                                                                                                                                       | Total deposits |                                            |         | 1,114,393     |           |              |         | 952,235 |          
|Advances from FHLB                                                                                              |                                                                                                                                                                                       |                | 148,750                                    |         |               |           | 135,900      |        
|Other borrowed funds                                                                                            |                                                                                                                                                                                       |                | 6,172                                      |         |               |           | 813          |        
|Guaranteed preferred beneficial interests in our
subordinated debentures (trust preferred securities)           |                                                                                                                                                                                       |                | 31,000                                     |         |               |           | 31,000       |        
|Accrued expenses and other liabilities                                                                          |                                                                                                                                                                                       |                | 10,544                                     |         |               |           | 9,604        |        
|                                                                                                                |                                                                                                                                                                                       |                |                                            |         |               |           |              |        
|                                                                                                                |                                                                                                                                                                                       |                | Total liabilities                          |         |               | 1,310,859 |              |         |         | 1,129,552 | 
|Stockholders
Equity
Preferred stock, par value $.001 per share; authorized 5,000,000 shares;
shares issued -0- |                                                                                                                                                                                       |                |                                           |         |               |           |             |        
|                                                                                                                | Common stock, par value $.001 per share; authorized 25,000,000 shares;
shares issued 18,011,502 in 2002 and 14,385,021 in 2001;
outstanding 17,672,949 in 2002 and 14,217,371 in 2001 |                |                                            | 18      |               |           |              | 14      |        
|                                                                                                                | Surplus                                                                                                                                                                               |                |                                            | 68,317  |               |           |              | 47,756  |        
|                                                                                                                | Retained Earnings                                                                                                                                                                     |                |                                            | 37,567  |               |           |              | 30,329  |        
|                                                                                                                | Accumulated other comprehensive income (loss)                                                                                                                                         |                |                                            | 589     |               |           |              | (322    | )      
|                                                                                                                | Treasury stock, at cost                                                                                                                                                               |                |                                            | (669    | )             |           |              | (924    | )      
|                                                                                                                | Unearned ESOP stock                                                                                                                                                                   |                |                                            | (1,815  | )             |           |              |        |        
|                                                                                                                | Unearned restricted stock                                                                                                                                                             |                |                                            | (1,008  | )             |           |              |        |        
|                                                                                                                |                                                                                                                                                                                       |                |                                            |         |               |           |              |        
|                                                                                                                |                                                                                                                                                                                       |                | Total stockholders equity                 |         |               | 102,999   |              |         |         | 76,853    | 
|                                                                                                                |                                                                                                                                                                                       |                |                                            |         |               |           |              |        
|                                                                                                                |                                                                                                                                                                                       |                | Total liabilities and stockholders equity |         | $             | 1,413,858 |              |         | $       | 1,206,405 | 
|                                                                                                                |                                                                                                                                                                                       |                |                                            |         |               |           |              |        

See Notes to Condensed Consolidated Financial Statements.

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The Banc Corporation and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(Amounts In Thousands, Except Per Share Data)

|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                   |        |       |        |        |        |        |        |        |        |        |        | 
|---------------------------------------------------------------------------------------------------------------- | ------------------------------ | --------------------- | -------------------------- | --------------------------------------------------- | ------ | ------------------ | ------ | ----------------- | ------ | ----- | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ------ | ------ | 
|                                                                                                                 |                                |                       |                            |                                                     |        | Three Months Ended |        | Nine Months Ended
|                                                                                                                 |                                |                       |                            |                                                     |        | September 30       |        | September 30     
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                  
|                                                                                                                 |                                |                       |                            |                                                     |        | 2002               |        | 2001              |        | 2002  |        | 2001  
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                   |        |       |        |       
|Interest income                                                                                                  |                                |                       |                            |                                                     |        |                    |        |                   |        |       |        |        |        |        |        |       
|Interest and fees on loans                                                                                       |                                | $                     | 22,085                     |                                                     |        | $                  | 21,253 |                   |        | $     | 65,026 |        |        | $      | 62,463 |       
|Interest
on investment securities                                                                                |                                |                       |                            |                                                     |        |                    |        |                   |        |       |        |        |        |        |        |       
|                                                                                                                 | Taxable                        |                       |                            | 742                                                 |        |                    |        | 1,086             |        |       |        | 2,157  |        |        |        | 3,910  |       
|                                                                                                                 | Exempt from Federal income tax |                       |                            | 104                                                 |        |                    |        | 88                |        |       |        | 308    |        |        |        | 382    |       
|Interest on federal funds sold                                                                                   |                                |                       | 114                        |                                                     |        |                    | 275    |                   |        |       | 270    |        |        |        | 1,178  |       
|Interest and dividends on other investments                                                                      |                                |                       | 151                        |                                                     |        |                    | 121    |                   |        |       | 381    |        |        |        | 498    |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                   |        |       |        |        |        |        |        |       
|                                                                                                                 |                                | Total interest income |                            |                                                     | 23,196 |                    |        |                   | 22,823 |       |        |        | 68,142 |        |        |        | 68,431 |       
|Interest expense                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                   |        |       |        |        |        |        |        |       
|Interest on deposits                                                                                             |                                |                       | 7,460                      |                                                     |        |                    | 9,925  |                   |        |       | 22,281 |        |        |        | 31,673 |       
|Interest on other borrowed funds                                                                                 |                                |                       | 2,171                      |                                                     |        |                    | 1,957  |                   |        |       | 6,452  |        |        |        | 5,849  |       
|Interest on guaranteed preferred beneficial interest in our
subordinated debentures (trust preferred securities) |                                |                       | 626                        |                                                     |        |                    | 657    |                   |        |       | 1,902  |        |        |        | 1,452  |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                   |        |       |        |        |        |        |        |       
|                                                                                                                 | Total interest expense         |                       |                            | 10,257                                              |        |                    |        | 12,539            |        |       |        | 30,635 |        |        |        | 38,974 |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                   |        |       |        |        |        |        |        |       
|Net interest income                                                                                              |                                |                       | 12,939                     |                                                     |        |                    | 10,284 |                   |        |       | 37,507 |        |        |        | 29,457 |       
|Provision for loan losses                                                                                        |                                |                       | 2,530                      |                                                     |        |                    | 925    |                   |        |       | 5,647  |        |        |        | 2,555  |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                   |        |       |        |        |        |        |        |       
|                                                                                                                 |                                |                       |                            | Net interest income after provision for loan losses |        |                    | 10,409 |                   |        |       | 9,359  |        |        |        | 31,860 |        |        |        | 26,902 | 
|Noninterest income                                                                                               |                                |                       |                            |                                                     |        |                    |        |                   |        |       |        |        |        |        |        |       
|Service charges and fees on deposits                                                                             |                                |                       | 1,660                      |                                                     |        |                    | 993    |                   |        |       | 4,541  |        |        |        | 3,055  |       
|Mortgage banking income                                                                                          |                                |                       | 843                        |                                                     |        |                    | 331    |                   |        |       | 2,225  |        |        |        | 985    |       
|Gain on sale of securities                                                                                       |                                |                       | 240                        |                                                     |        |                    | 993    |                   |        |       | 264    |        |        |        | 1,150  |       
|Other income                                                                                                     |                                |                       | 1,429                      |                                                     |        |                    | 520    |                   |        |       | 3,073  |        |        |        | 2,100  |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                   |        |       |        |        |        |        |        |       
|                                                                                                                 |                                |                       | Total noninterest income   |                                                     |        | 4,172              |        |                   |        | 2,837 |        |        |        | 10,103 |        |        |        | 7,290  |       
|Noninterest
expenses                                                                                             |                                |                       |                            |                                                     |        |                    |        |                   |        |       |        |        |        |        |        |       
|Salaries and employee benefits                                                                                   |                                |                       | 6,225                      |                                                     |        |                    | 4,700  |                   |        |       | 17,846 |        |        |        | 14,258 |       
|Occupancy, furniture and equipment expense                                                                       |                                |                       | 1,931                      |                                                     |        |                    | 1,691  |                   |        |       | 5,709  |        |        |        | 5,163  |       
|Other                                                                                                            |                                |                       | 2,800                      |                                                     |        |                    | 3,509  |                   |        |       | 7,920  |        |        |        | 8,341  |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                   |        |       |        |        |        |        |        |       
|                                                                                                                 |                                |                       | Total noninterest expenses |                                                     |        | 10,956             |        |                   |        | 9,900 |        |        |        | 31,475 |        |        |        | 27,762 |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                   |        |       |        |        |        |        |        |       
|                                                                                                                 |                                |                       |                            | Income before income taxes                          |        |                    | 3,625  |                   |        |       | 2,296  |        |        |        | 10,488 |        |        |        | 6,430  | 
|Income tax expense                                                                                               |                                |                       | 1,075                      |                                                     |        |                    | 721    |                   |        |       | 3,250  |        |        |        | 1,881  |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                   |        |       |        |        |        |        |        |       
|                                                                                                                 |                                |                       |                            | Net income                                          |        | $                  | 2,550  |                   |        | $     | 1,575  |        |        | $      | 7,238  |        |        | $      | 4,549  | 
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                   |        |       |        |        |        |        |        |       
|Basic net income per share                                                                                       |                                | $                     | 0.15                       |                                                     |        | $                  | 0.11   |                   |        | $     | 0.44   |        |        | $      | 0.32   |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                   |        |       |        |        |        |        |        |       
|Diluted net income per share                                                                                     |                                | $                     | 0.14                       |                                                     |        | $                  | 0.11   |                   |        | $     | 0.43   |        |        | $      | 0.32   |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                   |        |       |        |        |        |        |        |       
|Average common shares outstanding                                                                                |                                |                       | 17,532                     |                                                     |        |                    | 14,248 |                   |        |       | 16,612 |        |        |        | 14,288 |       
|Average common shares outstanding, assuming dilution                                                             |                                |                       | 17,861                     |                                                     |        |                    | 14,311 |                   |        |       | 16,850 |        |        |        | 14,310 |       

See Notes to Condensed Consolidated Financial Statements.

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The Banc Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flow (Unaudited)
(Dollars In Thousands)

|                                               |                                                                      |                                           |        |                   |          |      |        |          |          |  
|---------------------------------------------- | -------------------------------------------------------------------- | ----------------------------------------- | ------ | ----------------- | -------- | ---- | ------ | -------- | -------- | -
|                                               |                                                                      |                                           |        | Nine Months Ended
|                                               |                                                                      |                                           |        | September 30     
|                                               |                                                                      |                                           |        |                  
|                                               |                                                                      |                                           |        | 2002              |          | 2001
|                                               |                                                                      |                                           |        |                   |          |     
|Net cash provided by operating activities      |                                                                      | $                                         | 14,572 |                   |          | $    | 8,227  |         
|                                               |                                                                      |                                           |        |                   |          |      |        |         
|Cash flows from investing activities:          |                                                                      |                                           |        |                   |          |      |        |         
|                                               | Net (increase)decrease in interest-bearing deposits in other banks   |                                           |        | (12,996           | )        |      |        | 1,834    |         
|                                               | Net increase in federal funds sold                                   |                                           |        | (12,000           | )        |      |        | (15,880  | )       
|                                               | Proceeds from sales of securities available for sale                 |                                           |        | 13,729            |          |      |        | 49,461   |         
|                                               | Proceeds from maturities of investment securities available for sale |                                           |        | 32,023            |          |      |        | 44,920   |         
|                                               | Purchases of investment securities available for sale                |                                           |        | (33,900           | )        |      |        | (67,753  | )       
|                                               | Net increase in loans                                                |                                           |        | (68,512           | )        |      |        | (169,414 | )       
|                                               | Purchases of premises and equipment                                  |                                           |        | (10,392           | )        |      |        | (5,103   | )       
|                                               | Net cash paid in business combination                                |                                           |        | (8,619            | )        |      |        |         |         
|                                               | Other investing activities                                           |                                           |        | (15,525           | )        |      |        | (1,537   | )       
|                                               |                                                                      |                                           |        |                   |          |      |        |         
|                                               |                                                                      | Net cash used by investing activities     |        |                   | (116,192 | )    |        |          | (163,472 | )
|                                               |                                                                      |                                           |        |                   |          |      |        |         
|Cash flows from financing activities:          |                                                                      |                                           |        |                   |          |      |        |         
|                                               | Net increase in deposit accounts                                     |                                           |        | 84,667            |          |      |        | 117,646  |         
|                                               | Net increase in FHLB advance and other borrowings                    |                                           |        | 2,959             |          |      |        | 32,059   |         
|                                               | Proceeds from note payable                                           |                                           |        | 14,000            |          |      |        |         |         
|                                               | Principal payment on note payable                                    |                                           |        | (14,000           | )        |      |        |         |         
|                                               | Proceeds from trust preferred securities                             |                                           |        |                  |          |      |        | 16,000   |         
|                                               | Proceeds from sale of common stock                                   |                                           |        | 19,292            |          |      |        |         |         
|                                               | Purchase of ESOP shares                                              |                                           |        | (1,835            | )        |      |        |         |         
|                                               | Purchase of treasury stock                                           |                                           |        | (24               | )        |      |        | (543     | )       
|                                               |                                                                      |                                           |        |                   |          |      |        |         
|                                               |                                                                      | Net cash provided by financing activities |        |                   | 105,059  |      |        |          | 165,162  |  
|                                               |                                                                      |                                           |        |                   |          |      |        |         
|Net increase in cash and due from banks        |                                                                      |                                           | 3,439  |                   |          |      | 9,917  |         
|Cash and due from banks at beginning of period |                                                                      |                                           | 31,682 |                   |          |      | 36,691 |         
|                                               |                                                                      |                                           |        |                   |          |      |        |         
|Cash and due from banks at end of period       |                                                                      | $                                         | 35,121 |                   |          | $    | 46,608 |         
|                                               |                                                                      |                                           |        |                   |          |      |        |         

See Notes to Condensed Consolidated Financial Statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1  BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions for Form 10-Q, and,
therefore, do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. For a summary of
significant accounting policies that have been consistently followed, see Note
1 to the Consolidated Financial Statements included in Form 10-K for the year
ended December 31, 2001. It is managements opinion that all adjustments,
consisting of only normal and recurring items necessary for a fair
presentation, have been included. Operating results for the three and
nine-month periods ended September 30, 2002 are not necessarily indicative of
the results that may be expected for the year ending December 31, 2002.

The condensed statement of financial condition at December 31, 2001 has been
derived from the audited financial statements at that date but does not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements.

Reclassification

Certain reclassifications have been made in the
prior period Condensed Consolidated
Financial Statement to conform to the September 30, 2002 presentation. The
guaranteed preferred beneficial interests in the Corporations subordinated
debentures (trust preferred securities) have been reclassified as long-term
debt and the related distributions have been reclassified as interest expense.
These trust preferred securities were previously classified as minority
interest in the condensed consolidated statement of financial condition with the
associated distributions classified as noninterest expense in the condensed consolidated
statement of income.

NOTE 2  RECENT ACCOUNTING PRONOUNCEMENT

In July 2001, the FASB issued Statement No. 141, Business Combinations
(Statement 141), and Statement No. 142, Goodwill and Other Intangible Assets
(Statement 142). Statement 141 requires that the purchase method of accounting
be used for all business combinations initiated after June 30, 2001. Statement
141 also specifies the criteria for intangible assets acquired in a purchase
method business combination to be recognized and reported apart from goodwill.
Statement 142 requires goodwill and intangible assets with indefinite useful
lives to no longer be amortized but instead tested for impairment at least
annually in accordance with the provisions of Statement 142. Statement 142
requires intangible assets with definite useful lives to be amortized over
their respective estimated useful lives to their estimated residual values and
reviewed for impairment in accordance with the FASBs Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of (Statement 121).

The Corporation adopted the provisions of Statement 141 in 2001 and the
provisions of Statement 142 on January 1, 2002. Any goodwill and any intangible
assets determined to have an indefinite useful life that are acquired in a
purchase business combination completed after June 30, 2001, are not to be
amortized (See Note 3) but are to be evaluated for impairment in accordance
with the appropriate pre-Statement 142 accounting literature. Goodwill and
intangible assets acquired in business combinations completed before July 1,
2001 were to continue to be amortized until the adoption of Statement 142.

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Statement 141 required, upon adoption of Statement 142, that the Corporation
evaluate its existing intangible assets and goodwill that were acquired in
previous purchase business combinations and make any necessary
reclassifications to conform to the new criteria in Statement 141. Upon
adoption of Statement 142, the Corporation is required to reassess the useful
lives and residual values of all intangible assets acquired in purchase
business combinations and make any necessary amortization period adjustments by
the end of the first interim period after adoption. In addition, to the extent
an intangible asset is identified as having an indefinite useful life, the
Corporation is required to test the intangible asset for impairment in
accordance with the provisions of Statement 142 within the first interim
period. Any impairment loss will be measured as of the date of adoption and
recognized as the cumulative effect of a change in accounting principle in the
first interim period.

On October 3, 2001, the FASB issued Statement of Financial Accounting Statement
144, Accounting for the Impairment or Disposal of Long-Lived Assets
(Statement 144). Statement 144 supersedes Statement 121 and provides a single
accounting model for long-lived assets to be disposed of. Although retaining
many of the fundamental recognition and measurement provisions of Statement
121, the new rules significantly change the criteria that would have to be met
to classify an asset as held-for-sale. Statement 144 also supersedes the
provisions of APB Opinion 30 with regard to reporting the effects of a disposal
of a segment of a business and will require expected future operating losses
from discontinued operations to be displayed in discontinued operations in the
period(s) in which the losses are incurred (rather than as of the measurement
date as presently required by APB 30). In addition, more dispositions will
qualify for discontinued operations treatment in the income statement. This
statement was effective in January 2002 and did not have a material impact on
the Corporations financial condition or results of operations.

In October of 2002, the FASB released statement,
SFAS No. 147, Acquisitions of
Certain Financial Institutions amending FASB statements No. 72 and 144 and FASB
Interpretation No. 9 allowing financial institutions meeting certain criteria
to reclassify unidentifiable intangible asset balances to goodwill and cease
amortization beginning as of January 1, 2002. Except for transactions between
two or more mutual enterprises, this Statement removes acquisitions of
financial institutions from the scope of both Statement 72 and Interpretation 9
and requires that those transactions be accounted for in accordance with Statements No. 141, and No. 142. In addition, this Statement amends Statement No. 144,
to include in
its scope long-term customer-relationship intangible assets of financial
institutions such as depositor- and borrower-relationship intangible assets and
credit cardholder intangible assets. Consequently, those intangible assets are
subject to the same undiscounted cash flow recoverability test and impairment
loss recognition and measurement provisions that Statement 144 requires for
other long-lived assets that are held and used.

This Statement is effective for acquisitions which occur after September 30,
2002; the transition provisions for previously recognized unidentifiable
intangibles are effective after September 30, 2002 with earlier application
permitted. As such, the Corporation has reclassified to goodwill approximately
$5.1 million in unidentifiable intangible assets which arose from a business
combination in North Alabama. Amortization expense of $113,000, net after-tax,
has been reversed from the third quarter 2002 income statement. The after-tax
effect of the reversal is not considered material; therefore, the Corporation
has not restated its previously issued financial statements.

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At September 30, 2002, the Corporation had unamortized goodwill in the amount
of $10,672,000, which is subject to the provisions of Statements 141 and 142.
The adoption of Statement 142 and 147 is expected to result in an annual
increase in income before income taxes of approximately $562,000 and an
increase in net income of approximately $393,000, or approximately $.02 per
share in 2002. During the first quarter of 2002,
the Corporation performed the first of the required impairment tests of
goodwill and intangible assets with indefinite lives. No impairment was noted.
The following table sets forth the reconciliation of net income and earnings per
share excluding goodwill amortization for the nine-month period ended September
30, 2001 compared to the nine-month period ended September 30, 2002 (in
thousands, except per share data):

|                                               |                                 |   |                           |     |      |   |       |     | 
|---------------------------------------------- | ------------------------------- | - | ------------------------- | --- | ---- | - | ----- | --- | 
|                                               |                                 |   | For the nine-month period
|                                               |                                 |   | ended September 30,      
|                                               |                                 |   |                          
|                                               |                                 |   | 2002                      |     | 2001
|                                               |                                 |   |                           |     |     
|Reported net income                            |                                 | $ | 7,238                     |     |      | $ | 4,549 |    
|Add back: goodwill amortization                |                                 |   |                          |     |      |   | 278   |    
|                                               |                                 |   |                           |     |      |   |       |    
|Adjusted net income                            |                                 | $ | 7,238                     |     |      | $ | 4,827 |    
|                                               |                                 |   |                           |     |      |   |       |    
|Basic and diluted net income per
common share: |                                 |   |                           |     |      |   |       |    
|                                               | Reported net income             |   | $                         | .44 |      |   | $     | .32 | 
|                                               | Add back: goodwill amortization |   |                           |    |      |   |       | .02 | 
|                                               |                                 |   |                           |     |      |   |       |    
|                                               | Adjusted net income             |   | $                         | .44 |      |   | $     | .34 | 
|                                               |                                 |   |                           |     |      |   |       |    

NOTE 3  BUSINESS COMBINATION

On February 15, 2002, the Corporation acquired one-hundred percent (100%) of
the outstanding common shares of CF Bancshares, Inc. (CF Bancshares) in a
business combination accounted for as a purchase. CF Bancshares was a unitary
thrift holding company operating in the panhandle of Florida. As a result of
this acquisition, the Corporation expanded its market in the panhandle of
Florida and increased its assets in Florida by approximately $100,000,000.

The total cost of the acquisition was $15,636,000, which included 16,449
shares of common stock valued at $108,563. The value of common stock issued was
determined based on the average of the closing sales price for the 20
consecutive trading days ending three days prior to the special meeting of CF
Bancshares shareholders held on November 28, 2001. The purchase price exceeded
the fair value of the net assets of CF Bancshares by $7,445,000. Of this
amount, approximately $2,900,000 consisted of a core deposit intangible which
is being amortized over a ten-year period on the straight-line basis. The
remaining $4,545,000 is goodwill (See Note 2). The Corporations consolidated
financial statements include the results of operations of CF Bancshares only
for the period February 15, 2002 to September 30, 2002.

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The following unaudited summary information presents the consolidated
results of operations of the Corporation on a pro forma basis, as if CF
Bancshares had been acquired on January 1, 2001. 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 period presented, or
the results that may occur in the future (in thousands, except per share data).

|                                    |                            |   |                           |        |      |   |        |        | 
|----------------------------------- | -------------------------- | - | ------------------------- | ------ | ---- | - | ------ | ------ | 
|                                    |                            |   | For the nine-month period
|                                    |                            |   | ended September 30,      
|                                    |                            |   |                          
|                                    |                            |   | 2002                      |        | 2001
|                                    |                            |   |                           |        |     
|Interest income                     |                            | $ | 69,037                    |        |      | $ | 74,420 |       
|Interest expense                    |                            |   | 31,062                    |        |      |   | 42,425 |       
|                                    |                            |   |                           |        |      |   |        |       
|                                    | Net interest income        |   |                           | 37,975 |      |   |        | 31,995 | 
|Provision for loan losses           |                            |   | 6,464                     |        |      |   | 2,700  |       
|Noninterest income                  |                            |   | 10,273                    |        |      |   | 7,743  |       
|Noninterest expense                 |                            |   | 32,711                    |        |      |   | 29,624 |       
|                                    |                            |   |                           |        |      |   |        |       
|                                    | Income before income taxes |   |                           | 9,073  |      |   |        | 7,414  | 
|Income tax expense                  |                            |   | 2,810                     |        |      |   | 2,410  |       
|                                    |                            |   |                           |        |      |   |        |       
|Net income                          |                            | $ | 6,263                     |        |      | $ | 5,004  |       
|                                    |                            |   |                           |        |      |   |        |       
|Basic net income per common share   |                            | $ | .38                       |        |      | $ | .35    |       
|                                    |                            |   |                           |        |      |   |        |       
|Diluted net income per common share |                            | $ | .37                       |        |      | $ | .35    |       
|                                    |                            |   |                           |        |      |   |        |       

NOTE 4  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.

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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 to the Consolidated Financial Statements included in the
Form 10-K for the year ended December 31, 2001. All costs have been allocated
to the reportable segments; therefore, combined amounts agree with the
consolidated totals (in thousands).

|                                      |                           |            |   |         |       |         |   |          |       |  |   |           |       | 
|------------------------------------- | ------------------------- | ---------- | - | ------- | ----- | ------- | - | -------- | ----- |  | - | --------- | ----- | 
|                                      |                           |            |   | Alabama |       | Florida |   |          |       | 
|                                      |                           |            |   | Region  |       | Region  |   | Combined
|                                      |                           |            |   |         |       |         |   |         
|Three months ended September 30, 2002 |                           |            |   |         |       |         |   |          |       |  |   |          
|                                      | Net interest income       |            | $ | 7,020   |       |         | $ | 5,919    |       |  | $ | 12,939    |      
|                                      | Provision for loan losses |            |   | 2,066   |       |         |   | 464      |       |  |   | 2,530     |      
|                                      | Noninterest income        |            |   | 3,329   |       |         |   | 843      |       |  |   | 4,172     |      
|                                      | Noninterest expense(1)    |            |   | 7,825   |       |         |   | 3,131    |       |  |   | 10,956    |      
|                                      | Income tax expense        |            |   | 124     |       |         |   | 951      |       |  |   | 1,075     |      
|                                      |                           | Net income |   |         | 334   |         |   |          | 2,216 |  |   |           | 2,550 | 
|                                      | Total assets              |            |   | 934,659 |       |         |   | 479,199  |       |  |   | 1,413,858 |      
|                                     
|Three months ended September 30, 2001 |                           |            |   |         |       |         |   |          |       |  |   |          
|                                      | Net interest income       |            | $ | 6,326   |       |         | $ | 3,958    |       |  | $ | 10,284    |      
|                                      | Provision for loan losses |            |   | 673     |       |         |   | 252      |       |  |   | 925       |      
|                                      | Noninterest income        |            |   | 2,571   |       |         |   | 266      |       |  |   | 2,837     |      
|                                      | Noninterest expense(1)    |            |   | 7,063   |       |         |   | 2,837    |       |  |   | 9,900     |      
|                                      | Income tax expense        |            |   | 380     |       |         |   | 341      |       |  |   | 721       |      
|                                      |                           | Net income |   |         | 781   |         |   |          | 794   |  |   |           | 1,575 | 
|                                      | Total assets              |            |   | 868,737 |       |         |   | 332,070  |       |  |   | 1,200,807 |      
|                                     
|Nine months ended September 30, 2002  |                           |            |   |         |       |         |   |          |       |  |   |          
|                                      | Net interest income       |            | $ | 20,833  |       |         | $ | 16,674   |       |  | $ | 37,507    |      
|                                      | Provision for loan losses |            |   | 4,392   |       |         |   | 1,255    |       |  |   | 5,647     |      
|                                      | Noninterest income        |            |   | 7,868   |       |         |   | 2,235    |       |  |   | 10,103    |      
|                                      | Noninterest expense(1)    |            |   | 21,827  |       |         |   | 9,648    |       |  |   | 31,475    |      
|                                      | Income tax expense        |            |   | 838     |       |         |   | 2,412    |       |  |   | 3,250     |      
|                                      |                           | Net income |   |         | 1,644 |         |   |          | 5,594 |  |   |           | 7,238 | 
|                                     
|Nine months ended September 30, 2001  |                           |            |   |         |       |         |   |          |       |  |   |          
|                                      | Net interest income       |            | $ | 18,567  |       |         | $ | 10,890   |       |  | $ | 29,457    |      
|                                      | Provision for loan losses |            |   | 1,773   |       |         |   | 782      |       |  |   | 2,555     |      
|                                      | Noninterest income        |            |   | 6,312   |       |         |   | 978      |       |  |   | 7,290     |      
|                                      | Noninterest expense(1)    |            |   | 20,730  |       |         |   | 7,032    |       |  |   | 27,762    |      
|                                      | Income tax expense        |            |   | 580     |       |         |   | 1,301    |       |  |   | 1,881     |      
|                                      |                           | Net income |   |         | 1,796 |         |   |          | 2,753 |  |   |           | 4,549 | 



---

|(1) |  | Noninterest expense for the Alabama region includes all expenses for the
holding company, which have not been prorated to the Florida region.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------

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NOTE 5  NET INCOME PER SHARE

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

|                                          |                                                       |   |                    |        |                   |   |        |        |      |   |        |        |  |   |        |        | 
|----------------------------------------- | ----------------------------------------------------- | - | ------------------ | ------ | ----------------- | - | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                                          |                                                       |   | Three Months Ended |        | Nine Months Ended
|                                          |                                                       |   | September 30,      |        | September 30,    
|                                          |                                                       |   |                    |        |                  
|                                          |                                                       |   | 2002               |        | 2001              |   | 2002   |        | 2001
|                                          |                                                       |   |                    |        |                   |   |        |        |     
|Numerator:                                |                                                       |   |                    |        |                   |   |        |        |      |   |        |        |  |   |        |       
|                                          | For basic and diluted, net income                     |   | $                  | 2,550  |                   |   | $      | 1,575  |      |   | $      | 7,238  |  |   | $      | 4,549  | 
|                                          |                                                       |   |                    |        |                   |   |        |        |      |   |        |        |  |   |        |       
|Denominator:                              |                                                       |   |                    |        |                   |   |        |        |      |   |        |        |  |   |        |       
|                                          | For basic, weighted average common shares
outstanding |   |                    | 17,532 |                   |   |        | 14,248 |      |   |        | 16,612 |  |   |        | 14,288 | 
|                                          | Effect of dilutive stock options and
restricted stock |   |                    | 329    |                   |   |        | 63     |      |   |        | 238    |  |   |        | 22     | 
|                                          |                                                       |   |                    |        |                   |   |        |        |      |   |        |        |  |   |        |       
|Average diluted common shares outstanding |                                                       |   | 17,861             |        |                   |   | 14,311 |        |      |   | 16,850 |        |  |   | 14,310 |       
|                                          |                                                       |   |                    |        |                   |   |        |        |      |   |        |        |  |   |        |       
|Basic net income per share                |                                                       | $ | .15                |        |                   | $ | .11    |        |      | $ | .44    |        |  | $ | .32    |       
|                                          |                                                       |   |                    |        |                   |   |        |        |      |   |        |        |  |   |        |       
|Diluted net income per share              |                                                       | $ | .14                |        |                   | $ | .11    |        |      | $ | .43    |        |  | $ | .32    |       
|                                          |                                                       |   |                    |        |                   |   |        |        |      |   |        |        |  |   |        |       

NOTE 6  COMPREHENSIVE INCOME

Total comprehensive income was $2,617,000 and $8,149,000, respectively, for the
three and nine-month periods ended September 30, 2002, and $1,979,000 and
$5,366,000, respectively, for the three and nine-month periods ended September
30, 2001. Total comprehensive income consists of net income and the unrealized
gain or loss on the Corporations available for sale securities portfolio
arising during the period.

NOTE 7  INCOME TAXES

The primary difference between the effective tax rate and the federal statutory
rate in 2002 is due to certain tax-exempt income. The primary difference
between the effective tax rate and the federal statutory rate in 2001 is due to
the recognition of rehabilitation tax credits generated from the restoration of
the Corporations headquarters, the John A. Hand Building.

NOTE 8  GUARANTEED PREFERRED BENEFICIAL INTEREST IN THE CORPORATIONS
SUBORDINATED DEBENTURES (TRUST PREFERRED SECURITIES)

On September 7, 2000, TBC Capital Statutory Trust II (TBC Capital II), a
Connecticut statutory trust established by the Corporation, received
$15,000,000 in proceeds in exchange for $15,000,000 principal amount of TBC
Capital IIs 10.6% cumulative trust preferred securities in a pooled trust
preferred private placement. The proceeds were used to purchase an equal
$15,000,000 principal amount of 10.6% subordinated debentures of the
Corporation.

On July 16, 2001, TBC Capital Statutory Trust III (TBC Capital III), a
Delaware business trust established by the Corporation, received $16,000,000 in
proceeds in exchange for $16,000,000 principal amount of TBC Capital IIIs
variable rate cumulative trust preferred securities in a pooled trust preferred
private placement. The proceeds were used to purchase an equal $16,000,000
principal amount of variable rate subordinated debentures of the Corporation. The stated interest rate is six-month LIBOR plus 375 basis
points.

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The interest rate on the securities reprices every six months and has a
12% ceiling for the first ten years. As of the date of issuance, the interest
rate on the securities was 7.57%. As of September 30, 2002, the interest rate
on these securities was 5.61%.

The Corporation has fully and unconditionally guaranteed all obligations of TBC
Capital II and TBC Capital III on a subordinated basis with respect to the
preferred securities. Subject to certain limitations, the preferred securities
qualify as Tier 1 capital and are presented in the Consolidated Statement of
Financial Condition as Guaranteed preferred beneficial interests in our
subordinated debentures. The sole assets of TBC Capital II and TBC Capital III
are the subordinated debentures issued by the Corporation. The preferred
securities of TBC Capital II and TBC Capital III and the subordinated
debentures of the Corporation each have 30-year lives. However, the
Corporation, TBC Capital II and TBC Capital III have call options, with a
premium after five years through ten years and call options at par after ten
years subject to regulatory approval, or earlier depending upon certain changes
in tax or investment company laws, or regulatory capital requirements.

NOTE 9  STOCKHOLDERS EQUITY

In September of 2000, the Corporations board of directors approved a stock
buyback plan in an amount not to exceed $10,000,000. As of September 30, 2002,
there were 118,032 shares held in treasury at a cost of $669,000.

During March 2002, the Corporation received $19.3 million in proceeds, net of
$1.8 million underwriting discount and other costs, from the sale of 3,450,000
shares of common stock in a secondary offering priced at $6.125 per share. The
Corporation used $14.0 million of these proceeds to repay debt incurred in the
acquisition of CF Bancshares.

On April 1, 2002, the Corporation issued 160,000 shares of restricted common
stock to certain directors and key employees. Under the Restricted Stock
Agreements, the stock may not be sold or assigned in any manner for a five-year
period that began on April 1, 2002. During this restricted period, the
participant is eligible to receive dividends and exercise voting privileges.
The restricted stock also has a corresponding vesting period with one-third
vesting in the third, fourth and fifth years. The restricted stock was issued
at $7.00 per share, or $1,120,000, and classified as a contra-equity account,
Unearned restricted stock, in stockholders equity. The $1,120,000 is being
amortized as expense as the stock is earned during the restricted period. For
the period ended September 30, 2002, the Corporation has recognized $112,000 in
restricted stock expense.

The Corporation adopted a leveraged employee stock ownership plan (the ESOP)
effective May 15, 2002 that covers all eligible employees that have attained
the age of 21 and have completed a year of service. As of September 30,
2002, the ESOP has been internally leveraged with 223,000 shares of the
Corporations common stock purchased in the open market and classified as a
contra-equity account, Unearned ESOP shares, in stockholders equity.

As of September 30, 2002, the ESOP trustees were in the process of finalizing a
promissory note to reimburse the Corporation for the funds used to leverage the
ESOP. The unreleased shares, a guaranty of the Corporation and a
guaranty of The Bank will secure the
promissory note, which will be classified as long-term debt on the
Corporations statement of financial condition. As the ESOP repays the debt,
with quarterly contributions from the Corporation, shares are released from
collateral based on the proportion of debt service. Released shares are
allocated to eligible employees at the end of the plan year based on
an
employees eligible compensation to total compensation. The Corporation
recognizes compensation expense during the period as the shares are earned and
committed to be

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released. As shares are committed to be released and
compensation expense is recognized, the shares become outstanding for basic and
diluted earnings per share computations. The amount of compensation expense
reported by the Corporation is equal to the average fair value of the shares
earned and committed to be released during the period. Compensation expense
that the Corporation recognized during the period ended September 30, 2002 was
$21,000. The ESOP shares as of September 30, 2002 were as follows:

|                                          |  |                    |           | 
|----------------------------------------- |  | ------------------ | --------- | 
|                                          |  | September 30, 2002
|                                          |  |                   
|Allocated shares                          |  |                    |          | 
|Estimated shares committed to be released |  |                    | 2,479     | 
|Unreleased shares                         |  |                    | 220,521   | 
|                                          |  |                    |           | 
|Total ESOP shares                         |  |                    | 223,000   | 
|                                          |  |                    |           | 
|Fair value of unreleased shares           |  | $                  | 1,726,000 | 
|                                          |  |                    |           | 

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Item 2.  Managements Discussion and Analysis of Financial Condition and
Results of Operations

Basis of Presentation

The following is a discussion and analysis of our September 30, 2002
consolidated financial condition and our results of operations for the three
and nine-month periods ended September 30, 2002 and 2001. All significant
intercompany accounts and transactions have been eliminated. Our accounting and
reporting policies conform to generally accepted accounting principles.

This information should be read in conjunction with
our unaudited condensed consolidated
financial statements and related notes appearing elsewhere in this report and
the audited consolidated financial statements and related notes and
Managements Discussion and Analysis of Financial Condition and Results of
Operations, appearing in our Annual Report on Form 10-K for the year ended
December 31, 2001.

Certain reclassifications have been made in our
prior period condensed consolidated
financial statements and financial data to conform to the September 30, 2002
presentation. The guaranteed preferred beneficial interests in our subordinated
debentures (trust preferred securities) have been reclassified as long-term
debt and the related distributions as interest expense. These trust preferred
securities were previously classified as minority interest in the
condensed consolidated
statement of financial condition with the associated distributions classified
as noninterest expense in the condensed consolidated statement of income.

Financial Overview

Total assets were $1.414 billion at September 30, 2002, an increase of $207
million, or 17.2% from $1.207 billion as of December 31, 2001. Total loans, net
of unearned income were $1.152 billion at September 30, 2002, an increase of
$153 million, or 15.3% from $999 million as of December 31, 2001. Total
deposits were $1.114 billion at September 30, 2002, an increase of $162
million, or 17.0% from $952 million as of December 31, 2001. Total
stockholders equity was $103 million at September 30, 2002, an increase of $26
million, or 34.0% from $77 million as of December 31, 2001. The acquisition of
CF Bancshares, Inc., headquartered in Port St. Joe, Florida (CF Bancshares)
on February 15, 2002 added approximately $100 million in total assets, $88
million in total loans and $77 million in total deposits.

Results of Operations

Our net income for the three-month period ended September 30, 2002 was $2.6
million compared to $1.6 million for the three-month period ended September 30,
2001, an increase of $1.0 million, or 61.9%. Our basic net income per share was
$.15 for the third quarter of 2002 which represents a 36.4% increase from $.11
per share for the third quarter of 2001.

Our net income for the nine-month period ended September 30, 2002 was $7.2
million compared to $4.5 million for the nine-month period ended September 30,
2001, an increase of $2.7 million, or 59.1%. Our basic net income per share was
$.44 for the first nine months of 2002, which represents a 37.5% increase from
$.32 per share for the first nine months of 2001. Our return on average
assets, on an annualized basis, was .72% for the first nine months of 2002
compared to .54% for the first nine months of 2001. Our return on average
stockholders equity, on an annualized basis, was 10.34% for the first nine
months of 2002 compared to 7.87% for the first nine months of 2001. Our book
value per share at September 30, 2002 was $5.83 compared to $5.60 as of
December 31, 2001, and our tangible book value per share at September 30, 2002
was $5.07 compared to $5.16 as of December 31, 2001.

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The growth in our net income during the third quarter of 2002 compared with the
third quarter of 2001 is primarily the result of an increase in net interest
income. Net interest income is the difference between the income earned on
interest-earning assets and interest paid on interest-bearing liabilities used
to support such assets. Net interest income increased $2.7 million, or 25.8% to
$12.9 million for the third quarter of 2002 from $10.3 million for the third
quarter of 2001. The increase in net interest income was primarily due to a
$2.3 million, or 18.2% decrease in total interest expense. The decline in total
interest expense is primarily attributable to a 159 basis point decline in the
average interest rate paid on interest-bearing liabilities. The average rate
paid on interest-bearing liabilities was 3.44% for the third quarter of 2002
compared to 5.03% for the third quarter of 2001. Our net interest spread and
net interest margin were 3.85% and 4.07%, respectively, for the third quarter
of 2002, compared to 3.49% and 3.85% for the third quarter of 2001.

Our average interest-earning assets for the third quarter of 2002 increased
$200 million, or 18.8% to $1.265 billion from $1.065 billion in the third
quarter of 2001. Our average loans increased $209 million to $1.152 billion for
the third quarter of 2002 from $943 million for the third quarter of
2001. Approximately $84 million of this loan growth is attributable to the CF
Bancshares acquisition. The growth in our average interest-earning assets was
primarily funded by a $195 million, or 19.7% increase in our average
interest-bearing liabilities to $1.184 billion for the third quarter of 2002
from $989 million for the third quarter of 2001. Our ratio of average
interest-earning assets to average interest-bearing liabilities was 106.9% and
107.6% for the third quarters of 2002 and 2001, respectively. Our average
interest-bearing assets produced a tax equivalent yield of 7.29% for the third
quarter of 2002 compared to 8.52% for the third quarter of 2001. The 123 basis
point decline in the yield was offset by both a 159 basis point decline in the
average rate paid on interest-bearing liabilities and a $209 million, or 22.2 %
increase in the average volume of loans from $943 million in the third quarter
of 2001 to $1.152 billion in the third quarter of 2002.

The growth in our net income during the first nine months of 2002 compared with
the first nine months of 2001 is primarily the result of an increase in net
interest income. Net interest income increased $8.0 million, or 27.3% to $37.5
million for the first nine months of 2002 from $29.5 million for the first nine
months of 2001. The increase in net interest income was primarily due to an
$8.3 million, or 21.4% decrease in total interest expense. The decline in total
interest expense is primarily attributable to a 189-basis point decline in the
average interest rate paid on interest-bearing liabilities. The average rate
paid on interest-bearing liabilities was 3.62% for the first nine months of
2002 compared to 5.51% for the first nine months of 2001. Our net interest
spread and net interest margin were 3.88% and 4.13%, respectively, for the
first nine months of 2002, compared to 3.42% and 3.86% for the first nine
months of 2001.

Our average interest-earning assets for the first nine months of 2002 increased
$191 million, or 18.6% to $1.218 billion from $1.027 billion in the first nine
months of 2001. Our average loans increased $233 million to $1.120 billion for
the first nine months of 2002 from $887 million for the first nine months of
2001. Approximately $70 million of this loan growth is attributable to the CF
Bancshares acquisition. The growth in our average interest-earning assets was
primarily funded by a $186 million, or 19.7 % increase in our average interest
bearing liabilities to $1.133 billion for the first nine months of 2002 from
$947 million for the first nine months of 2001. The ratio of our average
interest-earning assets to average interest-bearing liabilities was 107.5% and
108.5% for the first nine months of 2002 and 2001, respectively. Our average
interest-bearing assets produced a tax equivalent yield of 7.50% for the first
nine months of 2002 compared to 8.93% for the first nine months of 2001. The
143-basis point decline in the yield was offset by both a 189-basis point
decline in the average rate paid on interest-bearing liabilities and a $233
million, or 26.3 % increase in the average volume of loans from $887 million in
the first nine months of 2001 to $1.120 billion in the first nine months of
2002.

14



---



##### Table of Contents



Average Balances, Income, Expense and Rates.The following table depicts, on a
tax-equivalent basis for the periods indicated, certain information related to
our average balance sheet and our average yields on assets and average costs of
liabilities. Average yields are calculated by dividing income or expense by the
average balance of the corresponding assets or liabilities. Average balances
have been calculated on a daily basis.

|                                        |                                                                          |                    |                                            |           |                                  |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |     |        |      |      |      |      | 
|--------------------------------------- | ------------------------------------------------------------------------ | ------------------ | ------------------------------------------ | --------- | -------------------------------- | --------- | ------- | ------ | ------ | ------ | ------- | ---- | ------- | ---- | ------ | ------- | ------ | --------- | ------ | ------ | --- | ------ | ---- | ---- | ---- | ---- | 
|                                        |                                                                          |                    |                                            |           | Three Months Ended September 30,
|                                        |                                                                          |                    |                                            |           |                                 
|                                        |                                                                          |                    |                                            |           |                                  |           |         |        | 2002   |        |         |      |         |      |        |         |        |           | 2001   |        |     |        |     
|                                        |                                                                          |                    |                                            |           |                                  |           |        
|                                        |                                                                          |                    |                                            |           | Average                          |           | Income/ |        | Yield/ |        | Average |      | Income/ |      | Yield/
|                                        |                                                                          |                    |                                            |           | Balance                          |           | Expense |        | Rate   |        | Balance |      | Expense |      | Rate  
|                                        |                                                                          |                    |                                            |           |                                  |           |         |        |        |        |         |      |         |      |       
|                                        |                                                                          |                    |                                            |           | (Dollars in thousands)          
|ASSETS                                  |                                                                          |                    |                                            |           |                                  |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |     |        |      |     
|Interest- earning assets:               |                                                                          |                    |                                            |           |                                  |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |     |        |      |     
|                                        | Loans, net of unearned income(1)                                         |                    | $                                          | 1,152,101 |                                  |           | $       | 22,085 |        |        |         | 7.61 | %       |      | $      | 942,692 |        |           | $      | 21,253 |     |        |      | 8.94 | %   
|                                        | Investment
securities
Taxable                                            |                    |                                            | 56,819    |                                  |           |         | 742    |        |        |         | 5.18 |         |      |        | 73,422  |        |           |        | 1,086  |     |        |      | 5.87 |     
|                                        |                                                                          | Tax-exempt(2)      |                                            |           | 8,646                            |           |         |        | 158    |        |         |      | 7.23    |      |        |         | 7,136  |           |        |        | 133 |        |      |      | 7.39 |     
|                                        |                                                                          |                    |                                            |           |                                  |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |     |        |      |     
|                                        |                                                                          |                    | Total investment securities                |           |                                  | 65,465    |         |        |        | 900    |         |      |         | 5.45 |        |         |        | 80,558    |        |        |     | 1,219  |      |      |      | 6.00 | 
|                                        |                                                                          | Federal funds sold |                                            |           | 26,223                           |           |         |        | 114    |        |         |      | 1.72    |      |        |         | 32,453 |           |        |        | 275 |        |      |      | 3.36 |     
|                                        |                                                                          | Other investments  |                                            |           | 21,399                           |           |         |        | 151    |        |         |      | 2.80    |      |        |         | 9,092  |           |        |        | 121 |        |      |      | 5.28 |     
|                                        |                                                                          |                    |                                            |           |                                  |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |     |        |      |     
|                                        |                                                                          |                    | Total interest-earning assets              |           |                                  | 1,265,188 |         |        |        | 23,250 |         |      |         | 7.29 |        |         |        | 1,064,795 |        |        |     | 22,868 |      |      |      | 8.52 | 
|Noninterest-earning assets:             |                                                                          |                    |                                            |           |                                  |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |     |        |      |     
|                                        | Cash and due from banks                                                  |                    |                                            | 30,540    |                                  |           |         |        |        |        |         |      |         |      |        | 31,612  |        |           |        |        |     |        |      |      |     
|                                        | Premises and equipment                                                   |                    |                                            | 58,412    |                                  |           |         |        |        |        |         |      |         |      |        | 45,787  |        |           |        |        |     |        |      |      |     
|                                        | Accrued interest and other assets                                        |                    |                                            | 65,745    |                                  |           |         |        |        |        |         |      |         |      |        | 35,547  |        |           |        |        |     |        |      |      |     
|                                        | Allowance for loan losses                                                |                    |                                            | (14,309   | )                                |           |         |        |        |        |         |      |         |      |        | (9,767  | )      |           |        |        |     |        |      |      |     
|                                        |                                                                          |                    |                                            |           |                                  |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |     |        |      |     
|                                        |                                                                          |                    | Total assets                               |           | $                                | 1,405,576 |         |        |        |        |         |      |         |      |        |         | $      | 1,167,974 |        |        |     |        |      |      |      |      | 
|                                        |                                                                          |                    |                                            |           |                                  |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |     |        |      |     
|LIABILITIES AND STOCKHOLDERS EQUITY    |                                                                          |                    |                                            |           |                                  |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |     |        |      |     
|Interest-bearing liabilities:           |                                                                          |                    |                                            |           |                                  |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |     |        |      |     
|                                        | Demand deposits                                                          |                    | $                                          | 275,506   |                                  |           |         | 780    |        |        |         | 1.12 |         |      | $      | 264,818 |        |           |        | 2,000  |     |        |      | 3.00 |     
|                                        | Savings deposits                                                         |                    |                                            | 35,978    |                                  |           |         | 68     |        |        |         | 0.75 |         |      |        | 29,907  |        |           |        | 123    |     |        |      | 1.63 |     
|                                        | Time deposits                                                            |                    |                                            | 688,281   |                                  |           |         | 6,612  |        |        |         | 3.81 |         |      |        | 528,107 |        |           |        | 7,802  |     |        |      | 5.86 |     
|                                        | Other borrowings                                                         |                    |                                            | 152,766   |                                  |           |         | 2,171  |        |        |         | 5.64 |         |      |        | 139,229 |        |           |        | 1,957  |     |        |      | 5.58 |     
|                                        | Guaranteed preferred beneficial
interests in our subordinated debentures |                    |                                            | 31,000    |                                  |           |         | 626    |        |        |         | 8.01 |         |      |        | 27,000  |        |           |        | 657    |     |        |      | 9.65 |     
|                                        |                                                                          |                    |                                            |           |                                  |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |     |        |      |     
|                                        |                                                                          |                    | Total interest-bearing liabilities         |           |                                  | 1,183,531 |         |        |        | 10,257 |         |      |         | 3.44 |        |         |        | 989,061   |        |        |     | 12,539 |      |      |      | 5.03 | 
|Noninterest-bearing liabilities:        |                                                                          |                    |                                            |           |                                  |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |     |        |      |     
|                                        | Demand deposits                                                          |                    |                                            | 110,274   |                                  |           |         |        |        |        |         |      |         |      |        | 92,378  |        |           |        |        |     |        |      |      |     
|                                        | Accrued interest and other liabilities                                   |                    |                                            | 10,145    |                                  |           |         |        |        |        |         |      |         |      |        | 7,843   |        |           |        |        |     |        |      |      |     
|                                        | Stockholders equity                                                     |                    |                                            | 101,626   |                                  |           |         |        |        |        |         |      |         |      |        | 78,692  |        |           |        |        |     |        |      |      |     
|                                        |                                                                          |                    |                                            |           |                                  |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |     |        |      |     
|                                        |                                                                          |                    | Total liabilities and
stockholders equity |           | $                                | 1,405,576 |         |        |        |        |         |      |         |      |        |         | $      | 1,167,974 |        |        |     |        |      |      |      |      | 
|                                        |                                                                          |                    |                                            |           |                                  |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |     |        |      |     
|Net interest income/net interest spread |                                                                          |                    |                                            |           |                                  |           | 12,993  |        |        |        | 3.85    | %    |         |      |        |         |        |           | 10,329 |        |     |        | 3.49 | %   
|                                        |                                                                          |                    |                                            |           |                                  |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |     |        |      |     
|Net yield on earning assets             |                                                                          |                    |                                            |           |                                  |           |         |        |        |        | 4.07    | %    |         |      |        |         |        |           |        |        |     |        | 3.85 | %   
|                                        |                                                                          |                    |                                            |           |                                  |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |     |        |      |     
|Taxable equivalent adjustment:          |                                                                          |                    |                                            |           |                                  |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |     |        |      |     
|                                        | Investment securities(2)                                                 |                    |                                            |           |                                  |           |         | 54     |        |        |         |      |         |      |        |         |        |           |        | 45     |     |        |      |      |     
|                                        |                                                                          |                    |                                            |           |                                  |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |     |        |      |     
|                                        |                                                                          |                    | Net interest income                        |           |                                  |           |         |        | $      | 12,939 |         |      |         |      |        |         |        |           |        |        | $   | 10,284 |      |      |      |      | 
|                                        |                                                                          |                    |                                            |           |                                  |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |     |        |      |     



---

|(1) |  | Nonaccrual loans 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.                             

15



---



##### Table of Contents



The following table sets forth, on a taxable equivalent basis, the effect
that the varying levels of our interest-earning assets and interest-bearing
liabilities and the applicable rates have had on the changes in net interest
income for the three months ended September 30, 2002 and 2001.

|                                           |                                                                                     |                               |                        |        |                                     |        |      |        |                |        |   |       |       |       |  
|------------------------------------------ | ----------------------------------------------------------------------------------- | ----------------------------- | ---------------------- | ------ | ----------------------------------- | ------ | ---- | ------ | -------------- | ------ | - | ----- | ----- | ----- | -
|                                           |                                                                                     |                               |                        |        | Three Months Ended September 30 (1)
|                                           |                                                                                     |                               |                        |        |                                    
|                                           |                                                                                     |                               |                        |        | 2002 vs 2001                       
|                                           |                                                                                     |                               |                        |        |                                    
|                                           |                                                                                     |                               |                        |        |                                     |        |      |        | Changes Due to
|                                           |                                                                                     |                               |                        |        | Increase                            |        |     
|                                           |                                                                                     |                               |                        |        | (Decrease)                          |        | Rate |        | Volume        
|                                           |                                                                                     |                               |                        |        |                                     |        |      |        |               
|                                           |                                                                                     |                               |                        |        | (Dollars in thousands)             
|Increase (decrease) in:                    |                                                                                     |                               |                        |        |                                     |        |      |        |                |        |   |      
|                                           | Income from interest-earning assets:                                                |                               |                        |        |                                     |        |      |        |                |        |   |       |      
|                                           |                                                                                     | Interest and fees on loans    |                        | $      | 832                                 |        |      | $      | (3,452         | )      |   | $     | 4,284 |      
|                                           |                                                                                     | Interest on securities:       |                        |        |                                     |        |      |        |                |        |   |       |       |      
|                                           |                                                                                     |                               | Taxable                |        |                                     | (344   | )    |        |                | (118   | ) |       |       | (226  | )
|                                           |                                                                                     |                               | Tax-exempt             |        |                                     | 25     |      |        |                | (3     | ) |       |       | 28    |  
|                                           |                                                                                     | Interest on federal funds     |                        |        | (161                                | )      |      |        | (116           | )      |   |       | (45   | )    
|                                           |                                                                                     | Interest on other investments |                        |        | 30                                  |        |      |        | (77            | )      |   |       | 107   |      
|                                           |                                                                                     |                               |                        |        |                                     |        |      |        |                |        |   |      
|                                           |                                                                                     |                               | Total interest income  |        |                                     | 382    |      |        |                | (3,766 | ) |       |       | 4,148 |  
|                                           |                                                                                     |                               |                        |        |                                     |        |      |        |                |        |   |      
|Expense from interest-bearing liabilities: |                                                                                     |                               |                        |        |                                     |        |      |        |                |        |   |      
|                                           | Interest on demand deposits                                                         |                               |                        | (1,220 | )                                   |        |      | (1,298 | )              |        |   | 78    |      
|                                           | Interest on savings deposits                                                        |                               |                        | (55    | )                                   |        |      | (76    | )              |        |   | 21    |      
|                                           | Interest on time deposits                                                           |                               |                        | (1,190 | )                                   |        |      | (3,172 | )              |        |   | 1,982 |      
|                                           | Interest on other borrowings                                                        |                               |                        | 214    |                                     |        |      | 21     |                |        |   | 193   |      
|                                           | Interest on guaranteed preferred beneficial interest
in our subordinated debentures |                               |                        | (31    | )                                   |        |      | (121   | )              |        |   | 90    |      
|                                           |                                                                                     |                               |                        |        |                                     |        |      |        |                |        |   |      
|                                           |                                                                                     |                               | Total interest expense |        |                                     | (2,282 | )    |        |                | (4,646 | ) |       |       | 2,364 |  
|                                           |                                                                                     |                               |                        |        |                                     |        |      |        |                |        |   |      
|                                           |                                                                                     |                               | Net interest income    |        | $                                   | 2,664  |      |        | $              | 880    |   |       | $     | 1,784 |  
|                                           |                                                                                     |                               |                        |        |                                     |        |      |        |                |        |   |      



---

|(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.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

16



---



##### Table of Contents



The following table depicts, on a tax-equivalent basis for the periods
indicated, certain information related to our average balance sheet and our
average yields on assets and average costs of liabilities. Average yields are
calculated by dividing income or expense by the average balance of the
corresponding assets or liabilities. Average balances have been calculated on a
daily basis.

|                                        |                                                                          |                    |                                            |           |                                 |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |      |      |      | 
|--------------------------------------- | ------------------------------------------------------------------------ | ------------------ | ------------------------------------------ | --------- | ------------------------------- | --------- | ------- | ------ | ------ | ------ | ------- | ---- | ------- | ---- | ------ | ------- | ------ | --------- | ------ | ------ | ----- | ------ | ---- | ---- | ---- | ---- | 
|                                        |                                                                          |                    |                                            |           | Nine Months Ended September 30,
|                                        |                                                                          |                    |                                            |           |                                
|                                        |                                                                          |                    |                                            |           |                                 |           |         |        | 2002   |        |         |      |         |      |        |         |        |           | 2001   |        |       |        |     
|                                        |                                                                          |                    |                                            |           |                                 |           |         |       
|                                        |                                                                          |                    |                                            |           | Average                         |           | Income/ |        | Yield/ |        | Average |      | Income/ |      | Yield/
|                                        |                                                                          |                    |                                            |           | Balance                         |           | Expense |        | Rate   |        | Balance |      | Expense |      | Rate  
|                                        |                                                                          |                    |                                            |           |                                 |           |         |        |        |        |         |      |         |      |       
|                                        |                                                                          |                    |                                            |           | (Dollars in thousands)         
|ASSETS                                  |                                                                          |                    |                                            |           |                                 |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |     
|Interest- earning assets:               |                                                                          |                    |                                            |           |                                 |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |     
|                                        | Loans, net of unearned income(1)                                         |                    | $                                          | 1,120,293 |                                 |           | $       | 65,026 |        |        |         | 7.76 | %       |      | $      | 887,191 |        |           | $      | 62,463 |       |        |      | 9.41 | %   
|                                        | Investment
securities
Taxable                                            |                    |                                            | 53,972    |                                 |           |         | 2,157  |        |        |         | 5.34 |         |      |        | 85,008  |        |           |        | 3,910  |       |        |      | 6.15 |     
|                                        |                                                                          | Tax-exempt(2)      |                                            |           | 8,353                           |           |         |        | 467    |        |         |      | 7.47    |      |        |         | 10,394 |           |        |        | 579   |        |      |      | 7.45 |     
|                                        |                                                                          |                    |                                            |           |                                 |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |     
|                                        |                                                                          |                    | Total investment securities                |           |                                 | 62,325    |         |        |        | 2,624  |         |      |         | 5.63 |        |         |        | 95,402    |        |        |       | 4,489  |      |      |      | 6.29 | 
|                                        |                                                                          | Federal funds sold |                                            |           | 20,949                          |           |         |        | 270    |        |         |      | 1.72    |      |        |         | 33,830 |           |        |        | 1,178 |        |      |      | 4.66 |     
|                                        |                                                                          | Other investments  |                                            |           | 14,405                          |           |         |        | 381    |        |         |      | 3.54    |      |        |         | 10,866 |           |        |        | 498   |        |      |      | 6.13 |     
|                                        |                                                                          |                    |                                            |           |                                 |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |     
|                                        |                                                                          |                    | Total interest-earning assets              |           |                                 | 1,217,972 |         |        |        | 68,301 |         |      |         | 7.50 |        |         |        | 1,027,289 |        |        |       | 68,628 |      |      |      | 8.93 | 
|Noninterest-earning assets:             |                                                                          |                    |                                            |           |                                 |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |     
|                                        | Cash and due from banks                                                  |                    |                                            | 30,852    |                                 |           |         |        |        |        |         |      |         |      |        | 34,891  |        |           |        |        |       |        |      |      |     
|                                        | Premises and equipment                                                   |                    |                                            | 54,381    |                                 |           |         |        |        |        |         |      |         |      |        | 44,779  |        |           |        |        |       |        |      |      |     
|                                        | Accrued interest and other assets                                        |                    |                                            | 51,839    |                                 |           |         |        |        |        |         |      |         |      |        | 37,359  |        |           |        |        |       |        |      |      |     
|                                        | Allowance for loan losses                                                |                    |                                            | (13,840   | )                               |           |         |        |        |        |         |      |         |      |        | (9,498  | )      |           |        |        |       |        |      |      |     
|                                        |                                                                          |                    |                                            |           |                                 |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |     
|                                        |                                                                          |                    | Total assets                               |           | $                               | 1,341,204 |         |        |        |        |         |      |         |      |        |         | $      | 1,134,820 |        |        |       |        |      |      |      |      | 
|                                        |                                                                          |                    |                                            |           |                                 |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |     
|LIABILITIES AND STOCKHOLDERS EQUITY    |                                                                          |                    |                                            |           |                                 |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |     
|Interest-bearing liabilities:           |                                                                          |                    |                                            |           |                                 |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |     
|                                        | Demand deposits                                                          |                    | $                                          | 277,248   |                                 |           |         | 2,638  |        |        |         | 1.27 |         |      | $      | 223,843 |        |           |        | 6,267  |       |        |      | 3.74 |     
|                                        | Savings deposits                                                         |                    |                                            | 36,870    |                                 |           |         | 193    |        |        |         | 0.70 |         |      |        | 31,456  |        |           |        | 509    |       |        |      | 2.16 |     
|                                        | Time deposits                                                            |                    |                                            | 636,115   |                                 |           |         | 19,450 |        |        |         | 4.09 |         |      |        | 537,173 |        |           |        | 24,897 |       |        |      | 6.20 |     
|                                        | Other borrowings                                                         |                    |                                            | 151,607   |                                 |           |         | 6,452  |        |        |         | 5.69 |         |      |        | 134,589 |        |           |        | 5,849  |       |        |      | 5.81 |     
|                                        | Guaranteed preferred beneficial
interests in our subordinated
debentures |                    |                                            | 31,000    |                                 |           |         | 1,902  |        |        |         | 8.20 |         |      |        | 19,467  |        |           |        | 1,452  |       |        |      | 9.97 |     
|                                        |                                                                          |                    |                                            |           |                                 |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |      |      |     
|                                        |                                                                          |                    | Total interest-bearing liabilities         |           |                                 | 1,132,840 |         |        |        | 30,635 |         |      |         | 3.62 |        |         |        | 946,528   |        |        |       | 38,974 |      |      |      | 5.51 | 
|Noninterest-bearing liabilities:        |                                                                          |                    |                                            |           |                                 |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |     
|                                        | Demand deposits                                                          |                    |                                            | 105,352   |                                 |           |         |        |        |        |         |      |         |      |        | 103,106 |        |           |        |        |       |        |      |      |     
|                                        | Accrued interest and other liabilities                                   |                    |                                            | 9,394     |                                 |           |         |        |        |        |         |      |         |      |        | 7,900   |        |           |        |        |       |        |      |      |     
|                                        | Stockholders equity                                                     |                    |                                            | 93,618    |                                 |           |         |        |        |        |         |      |         |      |        | 77,286  |        |           |        |        |       |        |      |      |     
|                                        |                                                                          |                    |                                            |           |                                 |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |     
|                                        |                                                                          |                    | Total liabilities and
stockholders equity |           | $                               | 1,341,204 |         |        |        |        |         |      |         |      |        |         | $      | 1,134,820 |        |        |       |        |      |      |      |      | 
|                                        |                                                                          |                    |                                            |           |                                 |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |     
|Net interest income/net interest
spread |                                                                          |                    |                                            |           |                                 |           | 37,666  |        |        |        | 3.88    | %    |         |      |        |         |        |           | 29,654 |        |       |        | 3.42 | %   
|                                        |                                                                          |                    |                                            |           |                                 |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |     
|Net yield on earning assets             |                                                                          |                    |                                            |           |                                 |           |         |        |        |        | 4.13    | %    |         |      |        |         |        |           |        |        |       |        | 3.86 | %   
|                                        |                                                                          |                    |                                            |           |                                 |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |     
|Taxable equivalent adjustment:          |                                                                          |                    |                                            |           |                                 |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |     
|                                        | Investment securities(2)                                                 |                    |                                            |           |                                 |           |         | 159    |        |        |         |      |         |      |        |         |        |           |        | 197    |       |        |      |      |     
|                                        |                                                                          |                    |                                            |           |                                 |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |     
|                                        |                                                                          |                    | Net interest income                        |           |                                 |           |         |        | $      | 37,507 |         |      |         |      |        |         |        |           |        |        | $     | 29,457 |      |      |      |      | 
|                                        |                                                                          |                    |                                            |           |                                 |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |     



---

|(1) |  | Nonaccrual loans 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.                             

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The following table sets forth, on a taxable equivalent basis, the effect
that the varying levels of our interest-earning assets and interest-bearing
liabilities and the applicable rates have had on changes in net interest income
for the nine months ended September 30, 2002 and 2001.

|                                           |                                                                                     |                               |                        |        |                                    |        |      |        |                |         |   |       |        |        |  
|------------------------------------------ | ----------------------------------------------------------------------------------- | ----------------------------- | ---------------------- | ------ | ---------------------------------- | ------ | ---- | ------ | -------------- | ------- | - | ----- | ------ | ------ | -
|                                           |                                                                                     |                               |                        |        | Nine Months Ended September 30 (1)
|                                           |                                                                                     |                               |                        |        |                                   
|                                           |                                                                                     |                               |                        |        | 2002 vs 2001                      
|                                           |                                                                                     |                               |                        |        |                                   
|                                           |                                                                                     |                               |                        |        |                                    |        |      |        | Changes Due to
|                                           |                                                                                     |                               |                        |        | Increase                           |        |     
|                                           |                                                                                     |                               |                        |        | (Decrease)                         |        | Rate |        | Volume        
|                                           |                                                                                     |                               |                        |        |                                    |        |      |        |               
|                                           |                                                                                     |                               |                        |        | (Dollars in thousands)            
|Increase (decrease) in:                    |                                                                                     |                               |                        |        |                                    |        |      |        |                |         |   |      
|                                           | Income from interest-earning assets:                                                |                               |                        |        |                                    |        |      |        |                |         |   |       |       
|                                           |                                                                                     | Interest and fees on loans    |                        | $      | 2,563                              |        |      | $      | (12,107        | )       |   | $     | 14,670 |       
|                                           |                                                                                     | Interest on securities:       |                        |        |                                    |        |      |        |                |         |   |       |        |       
|                                           |                                                                                     |                               | Taxable                |        |                                    | (1,753 | )    |        |                | (465    | ) |       |        | (1,288 | )
|                                           |                                                                                     |                               | Tax-exempt             |        |                                    | (112   | )    |        |                | 2       |   |       |        | (114   | )
|                                           |                                                                                     | Interest on federal funds     |                        |        | (908                               | )      |      |        | (566           | )       |   |       | (342   | )     
|                                           |                                                                                     | Interest on other investments |                        |        | (117                               | )      |      |        | (249           | )       |   |       | 132    |       
|                                           |                                                                                     |                               |                        |        |                                    |        |      |        |                |         |   |      
|                                           |                                                                                     |                               | Total interest income  |        |                                    | (327   | )    |        |                | (13,385 | ) |       |        | 13,058 |  
|                                           |                                                                                     |                               |                        |        |                                    |        |      |        |                |         |   |      
|Expense from interest-bearing liabilities: |                                                                                     |                               |                        |        |                                    |        |      |        |                |         |   |      
|                                           | Interest on demand deposits                                                         |                               |                        | (3,629 | )                                  |        |      | (4,861 | )              |         |   | 1,232 |       
|                                           | Interest on savings deposits                                                        |                               |                        | (316   | )                                  |        |      | (391   | )              |         |   | 75    |       
|                                           | Interest on time deposits                                                           |                               |                        | (5,447 | )                                  |        |      | (9,488 | )              |         |   | 4,041 |       
|                                           | Interest on other borrowings                                                        |                               |                        | 603    |                                    |        |      | (123   | )              |         |   | 726   |       
|                                           | Interest on guaranteed preferred beneficial interest
in our subordinated debentures |                               |                        | 450    |                                    |        |      | (293   | )              |         |   | 743   |       
|                                           |                                                                                     |                               |                        |        |                                    |        |      |        |                |         |   |      
|                                           |                                                                                     |                               | Total interest expense |        |                                    | (8,339 | )    |        |                | (15,156 | ) |       |        | 6,817  |  
|                                           |                                                                                     |                               |                        |        |                                    |        |      |        |                |         |   |      
|                                           |                                                                                     |                               | Net interest income    |        | $                                  | 8,012  |      |        | $              | 1,771   |   |       | $      | 6,241  |  
|                                           |                                                                                     |                               |                        |        |                                    |        |      |        |                |         |   |      



---

|(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.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Noninterest income.Our noninterest income increased $1.3 million, or 47.1% to
$4.2 million for the third quarter of 2002 from $2.9 million for the third
quarter of 2001, primarily due to an increase in deposit service charge income
and mortgage banking income. Our service charges on deposits increased
$667,000, or 67.2% to $1.7 million in the third quarter of 2002 from $1.0
million in the third quarter of 2001. Our mortgage banking income increased
$512,000, or 154.7% to $843,000 in the third quarter of 2002 from $331,000 in
the third quarter of 2001.

Our noninterest income increased $2.8 million, or 38.6% to $10.1 million for
the first nine months of 2002 from $7.3 million for the first nine months of
2001, primarily due to an increase in deposit service charge income and
mortgage banking income. Our service charges on deposits increased $1.5
million, or 48.6% to $4.5 million in the first nine months of 2002 from $3.0
million in the first nine months of 2001. Our mortgage banking income increased
$1.2 million, or 125.9% to $2.2 million in the first nine months of 2002 from
$985,000 in the first nine months of 2001. Other increases in noninterest
income during the first nine months of 2002 include $133,000 in credit life
insurance premiums and $322,000 from the increase in the cash surrender value
of single-premium life insurance policies.

Noninterest expense.Our noninterest expense increased $1.1 million, or 10.7%
to $11.0 million for third quarter of 2002 from $9.9 million for the third
quarter of 2001. As a percentage of our net interest income, noninterest
expenses declined from 96.3% during the third quarter of 2001 to 84.7% during
the third quarter of 2002. This relative decline in noninterest expenses and
the increase in noninterest income improved our efficiency ratio to 64.1%
during the third quarter of 2002 compared to 75.2% during the third quarter of
2001 and 77.2% for the year 2001. Salaries and benefits increased $1.5 million,
or 32.5% to $6.2 million for the third quarter of 2002 from $4.7 million for
the third quarter of 2001. The increase in our salaries and benefits primarily
resulted from the opening of new branches and the acquisition of CF Bancshares. All other
noninterest expenses decreased $469,000, or 9.0% to $4.7 million for the third
quarter of 2002 from $5.2 million for the third quarter of 2001.

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Our noninterest expense increased $3.7 million, or 13.4% to $31.5 million for
first nine months of 2002 from $27.8 million for the first nine months of 2001.
As a percentage of our net interest income, noninterest expenses declined from
94.2% during the first nine months of 2001 to 83.9% during the first nine
months of 2002. This relative decline in noninterest expenses and the increase
in noninterest income improved our efficiency ratio to 65.9% during the first
nine months of 2002 compared to 75.2% during the first nine months of 2001 and
77.2% for the year 2001. Salaries and benefits increased $3.6 million, or 25.2%
to $17.9 million for the first nine months of 2002 from $14.3 million for the
first nine months of 2001. The increase in our salaries and benefits primarily
resulted from the opening of new branches and the acquisition of CF Bancshares.
All other noninterest expenses increased $125,000 or .09% to $13.6 million for
the first nine months of 2002 from $13.5 million for the first nine months of
2001.

Income tax expense.Our income tax expense was $1.1 million for the third
quarter of 2002, compared to $721,000 for the third quarter of 2001 and $3.3
million for the first nine months of 2002, compared to $1.9 million for the
first nine months of 2001. The primary difference in our effective rate and the
federal statutory rate (34%) for the three and nine-month periods ended
September 30, 2002 is due to certain tax-exempt income from investments and
insurance policies. The primary difference in the three and nine-month periods
ended September 30, 2001 is due to the recognition of a rehabilitation tax
credit generated from the restoration of the Corporations headquarters, the
John A. Hand Building.

Provision for Loan Losses. Our 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. Management
reviews the adequacy of the allowance on a quarterly basis. The allowance for
loan losses consists primarily of valuation allowances for impaired and
classified loans. The valuation allowances for impaired loans are assigned
based on specific analyses of individual loans and the underlying collateral.
The allowance for classified loans is established based on risk ratings
assigned by loan officers. Loans are risk rated using an eight-point scale,
with the loan officers having the primary responsibility for assigning the risk
ratings and for the timely reporting of changes in the risk ratings. This
process and the assigned risk ratings are subject to review by our internal
Loan Review Department and senior management. Based on the assigned risk
ratings, the loan portfolio is segregated into the following regulatory
classifications: Special Mention, Substandard, Doubtful or Loss. Generally,
regulatory reserve percentages are applied to these categories to estimate the
amount of loan loss, adjusted for previously mentioned factors. Reserve
percentages assigned to non-rated loans are based on historical charge-off
experience adjusted for geographic location and other risk factors. To evaluate
the overall adequacy of the allowance to absorb losses inherent in our loan
portfolio, management considers historical loss experience based on volume and
types of loans, trends in classifications, volume and trends in delinquencies
and nonaccruals, national and local economic conditions, and other pertinent
information. Based on future evaluations, additional provision for loan losses
may be necessary to maintain the allowance for loan losses at an appropriate
level.

The provision for loan losses was $2.5 million for the third quarter of 2002
compared to $925,000 for the third quarter of 2001 and $5.7 million for the
first nine months of 2002 compared to $2.6 million for the first nine months of
2001. During the first nine months of 2002, the Corporation had net charged-off
loans totaling $3.7 million compared to net charged-off loans of $1.3 million
in the first nine months of 2001. The ratio of net charged-off loans to the
provision for loan losses was 65.1% in the first nine months of 2002 compared
to 50.3% for the first nine months of 2001 and 51.9% for the year 2001. The
annualized ratio of net charged-off loans to average loans was .44% in the first nine months of 2002 compared to
..19% for the first nine months of 2001 and .42% for the year 2001. The
allowance for loan losses totaled $15.6 million, or 1.35% of loans, net of
unearned income at September 30, 2002 compared to $12.6 million, or 1.26% of
loans, net of unearned income at December 31, 2001. See Allowance for Loan
Losses for additional discussion.

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Financial Condition

Our total assets were $1.414 billion at September 30, 2002, an increase of $207
million, or 17.2% from $1.207 billion as of December 31, 2001. The increase in
total assets includes approximately $100 million in assets from the CF
Bancshares acquisition of which approximately $88 million were loans. Our
average total assets for the first nine months of 2002 totaled $1.341 billion,
which was supported by average total liabilities of $1.247 billion and average
total stockholders equity of $94 million.

Short-term liquid assets. Our short-term liquid assets (cash and due from
banks, interest-bearing deposits in other banks and federal funds sold)
increased $28.4 million, or 54.5% to $80.5 million at September 30, 2002 from
$52.1 million at December 31, 2001. This increase resulted primarily from
excess funds invested in federal funds sold and interest-bearing deposits at
the FHLB. These excess funds were created from the sale and maturity of
investment securities and an increase in deposits. At September 30, 2002, our
short-term liquid assets comprised 5.7% of total assets compared to 4.3% at
December 31, 2001. We continually monitor our liquidity position and will
increase or decrease our short-term liquid assets as necessary.

Investment Securities.Our total investment securities decreased $7.6 million,
or 10.9% to $61.3 million at September 30, 2002, from $68.9 million at December
31, 2001. Mortgage-backed securities, which comprised 52.1% of the total
investment portfolio at September 30, 2002, decreased $6.4 million, or 16.5%,
to $32.4 million from $38.8 million at December 31, 2001. Investments in U.S.
Treasury and agency securities, which comprised 22.1% of the total investment
portfolio at September 30, 2002, decreased $5.4 million, or 28.6% to $13.5
million from $18.9 million at December 31, 2001. The total investment portfolio
at September 30, 2002 comprised 4.8% of all interest-earning assets compared to
6.3% at December 31, 2001 producing an average tax equivalent yield of 5.5% for
the third quarter of 2002 compared to 6.0% for the third quarter of 2001 and
5.6% for the first nine months of 2002 compared to 6.3% for the first nine
months of 2001.

Loans, net of unearned income.Our loans, net of unearned income, totaled
$1.152 billion at September 30, 2002, an increase of 15.3%, or $153 million
from $999 million at December 31, 2001. Our average loans totaled $1.120
billion for the first nine months of 2002 compared to $887 million for the
first nine months of 2001. Our average loans totaled $1.152 billion for the
third quarter of 2002 compared to $943 million for the third quarter of 2001.
Approximately $88 million of our loans were acquired in the CF Bancshares
acquisition. Of the approximately $65 million increase in our loans, exclusive
of the CF Bancshares acquisition, 26.2%, or $17 million were produced by
branches in the Alabama region, the other $48 million, or 73.8% were produced
by branches in the Florida region.

20



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Our loans, net of unearned income, comprised 90.6% of our interest-earning
assets at September 30, 2002, compared to 91.0% at December 31, 2001. Our loan
portfolio produced an average yield of 7.6% for the third quarter of 2002
compared to 8.9% for the third quarter of 2001 and 7.8% for the first nine
months of 2002 compared to 9.4% for the first nine months of 2001. This decline in yield was offset by
respective basis point declines of 159 and 189 in the average cost of the funds
that support our loan portfolio for the three and nine-month periods ended
September 30, 2002, respectively. The following table details the distribution
of our loan portfolio by category as of September 30, 2002 and December 31,
2001:

Distribution of Loans by Category

|                                                |                   |             |         |                    |           |                   |      |            |       |       |         |         |           |            |      |      |       |  
|----------------------------------------------- | ----------------- | ----------- | ------- | ------------------ | --------- | ----------------- | ---- | ---------- | ----- | ----- | ------- | ------- | --------- | ---------- | ---- | ---- | ----- | -
|                                                |                   |             |         | September 30, 2002 |           | December 31, 2001
|                                                |                   |             |         |                    |           |                  
|                                                |                   |             |         |                    |           |                   |      | Percent of |       |       |         |         |           | Percent of
|                                                |                   |             |         | Amount             |           | Total             |      | Amount     |       | Total
|                                                |                   |             |         |                    |           |                   |      |            |       |      
|Commercial and industrial                       |                   | $           | 287,531 |                    |           |                   | 24.9 | %          |       | $     | 261,196 |         |           |            | 26.1 | %   
|Real estate  construction and land development |                   |             | 211,718 |                    |           |                   | 18.4 |            |       |       | 200,250 |         |           |            | 20.0 |     
|Real estate  mortgage                          |                   |             |         |                    |           |                   |      |            |       |       |         |         |           |            |      |     
|                                                | Single-family (1) |             |         | 280,440            |           |                   |      | 24.3       |       |       |         | 224,736 |           |            |      | 22.5 |      
|                                                | Commercial        |             |         | 248,504            |           |                   |      | 21.6       |       |       |         | 194,535 |           |            |      | 19.5 |      
|                                                | Other             |             |         | 31,948             |           |                   |      | 2.8        |       |       |         | 24,140  |           |            |      | 2.4  |      
|Consumer                                        |                   |             | 85,161  |                    |           |                   | 7.4  |            |       |       | 91,421  |         |           |            | 9.1  |     
|Other                                           |                   |             | 7,599   |                    |           |                   | .6   |            |       |       | 3,784   |         |           |            | .4   |     
|                                                |                   |             |         |                    |           |                   |      |            |       |       |         |         |           |            |      |     
|                                                |                   | Total loans |         |                    | 1,152,901 |                   |      |            | 100.0 | %     |         |         | 1,000,062 |            |      |      | 100.0 | %
|                                                |                   |             |         |                    |           |                   |      |            |       |       |         |         |           |            |      |     
|Unearned income                                 |                   |             | (1,154  | )                  |           |                   |      |            |       |       | (906    | )       |           |            |      |     
|Allowance for loan losses                       |                   |             | (15,573 | )                  |           |                   |      |            |       |       | (12,546 | )       |           |            |      |     
|                                                |                   |             |         |                    |           |                   |      |            |       |       |         |         |           |            |      |     
|                                                |                   | Net loans   |         | $                  | 1,136,174 |                   |      |            |       |       |         | $       | 986,610   |            |      |      |       |  
|                                                |                   |             |         |                    |           |                   |      |            |       |       |         |         |           |            |      |     



---

|(1) |  | The increase in single-family loans is primarily attributable to the CF
Bancshares acquisition.
|--- |  | -----------------------------------------------------------------------------------------------

Deposits.Our noninterest-bearing deposits totaled $114.7 million at
September 30, 2002, an increase of 21.2%, or $20.1 million from $94.6 million
at December 31, 2001. Approximately $5.0 million in our noninterest-bearing
deposits were acquired in the CF Bancshares acquisition. Our
noninterest-bearing deposits comprised 10.3% of total deposits at September 30,
2002, compared to 9.9% at December 31, 2001. Of our total noninterest-bearing
deposits $73.3 million, or 63.9% were in our Alabama branches while $41.4
million, or 36.1% were in our Florida branches.

Our interest-bearing deposits totaled $999.7 million at September 30, 2002, an
increase of 16.6%, or $142.1 million from $857.6 million at December 31, 2001.
Approximately $72.0 million of our interest-bearing deposits were acquired in
the CF Bancshares acquisition. Our interest bearing deposits averaged $950.2
million for the first nine months of 2002 compared to $792.5 million for the
first nine months of 2001, an increase of $157.7 million, or 19.9%. Our average
interest-bearing deposits for the third quarter of 2002 totaled $999.8 million
compared to $822.8 million for the third quarter of 2001, an increase of $177.0
million, or 21.5%. This increase was comprised of lower yielding demand deposit
accounts and higher yielding certificates of deposit.

The average rate paid on our interest-bearing deposits during the first nine
months of 2002 was 3.1% compared to 5.3% for the first nine months of 2001 and
3.0% for the third quarter of 2002 compared to 4.8% for the third quarter of
2001. Our loan portfolio which was funded by these deposits produced an average
yield of 7.8% for the first nine months and 7.6% for the third quarter of 2002,
compared to 9.4% for the first nine months of 2001 and 8.9% for the third
quarter of 2001. Of our total interest bearing deposits $623.3 million, or
62.4% were in the Alabama branches while $376.4 million, or 37.6% were in the
Florida branches.

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Borrowings.Our advances from the Federal Home Loan Bank (FHLB) increased
$13.0 million to $149.0 million at September 30, 2002 from $136.0 million at
December 31, 2001. The $13.0 million increase represents FHLB advances assumed
in the CF Bancshares acquisition. Our borrowings from the FHLB were used
primarily to fund growth in the loan portfolio and have a weighted average rate
of approximately 5.7%. Our advances are secured by FHLB stock, agency
securities and a blanket lien on certain commercial loans and real estate
loans.

Guaranteed Preferred Beneficial Interests in Our Subordinated Debentures.On
September 7, 2000, TBC Capital Statutory Trust II (TBC Capital II), a
Connecticut statutory trust established by us, received $15,000,000 in proceeds
in exchange for $15,000,000 principal amount of TBC Capital IIs 10.6%
cumulative trust preferred securities in a pooled trust preferred private
placement. TBC Capital II used the proceeds to purchase an equal principal
amount of our 10.6% subordinated debentures.

On July 16, 2001, TBC Capital Statutory Trust III (TBC Capital III), a
Delaware business trust established by us, received $16,000,000 in proceeds in
exchange for $16,000,000 principal amount of TBC Capital IIIs variable rate
cumulative trust preferred securities in a pooled trust preferred private
placement. TBC Capital III used the proceeds to purchase an equal principal
amount of our variable rate subordinated debentures. The stated interest rate
is the six-month LIBOR plus 375 basis points. The interest rate on the
securities reprices every six months and has a 12% ceiling for the first ten
years. As of the date of issuance, the interest rate on the securities was
7.57%, and as of September 30, 2002, the interest rate is 5.61%.

We have fully and unconditionally guaranteed all obligations of TBC Capital II
and TBC Capital III on a subordinated basis with respect to the preferred
securities. Subject to certain limitations, the preferred securities qualify as
Tier 1 capital and are presented in the Consolidated Statement of Financial
Condition as Guaranteed preferred beneficial interests in our subordinated
debentures. The sole assets of TBC Capital II and TBC Capital III are our
subordinated debentures. The preferred securities of TBC Capital II and TBC
Capital III and our subordinated debentures each have 30-year lives. However,
we, TBC Capital II and TBC Capital III have call options, with a premium after
five years through ten years and call options at par after ten years, subject
to regulatory approval, or earlier depending upon certain changes in tax or
investment company laws, or regulatory capital requirements.

Allowance for Loan Losses. We maintain an allowance for loan losses within a
range that we believe is adequate to absorb estimated losses inherent in the
loan portfolio. We prepare a quarterly analysis to assess the risk in the loan
portfolio and to determine the adequacy of the allowance for loan losses.
Generally, we estimate the allowance using factors such as historical loss
experience based on volume and types of loans, trends in classifications,
volume and trends in delinquencies and non-accruals, national and local
economic conditions and other pertinent information. In addition, our estimate
also includes valuation allowances on loans which have been specifically
reviewed for impairment. The level of allowance for loan losses to net loans
will vary depending on the quarterly analysis.

We manage and control risk in the loan portfolio through adherence to credit
standards established 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 procedures, set limits on credit
concentration and enforces regulatory requirements.

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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.

The quarterly allowance for loan loss calculation is segregated into various
segments that include classified loans, loans with specific allocations and
homogeneous pass rated loans. Loans are rated using a eight-point scale with
the loan officer having the primary responsibility for assigning risk ratings
and for the timely reporting of changes in the risk ratings. These processes,
and the assigned risk ratings, are subject to review by the internal loan
review function and senior management. Based on the assigned risk ratings, the
loan portfolio is segregated into the following regulatory classifications:
Special Mention, Substandard, Doubtful or Loss. Generally, regulatory reserve
percentages are applied to these categories to estimate the amount of loan
loss, adjusted for previously mentioned risk factors.

Impaired loans are specifically reviewed loans for which it is probable that we
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: (a) the present value of expected future cash flows discounted at
the loans effective interest rate, (b) the observable
market price of the loan or (c) 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
loan 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.

Reserve percentages assigned to homogeneous non-rated loans are based on
historical charge-off experience adjusted for geographic location and other
risk factors.

As stated above, risk ratings are subject to independent review by the Loan
Review Department, which also performs ongoing, independent review of the risk
management process, which includes underwriting, documentation and collateral
control. The Loan Review Department is centralized and independent of the
lending function. The loan review results are reported to the Audit Committee
of the board of directors and senior management.

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##### Table of Contents



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

Summary of Loan Loss Experience

|                                                                 |                                                 |               |                   |       |                        |       |              |       |     |       | 
|---------------------------------------------------------------- | ----------------------------------------------- | ------------- | ----------------- | ----- | ---------------------- | ----- | ------------ | ----- | --- | ----- | 
|                                                                 |                                                 |               |                   |       | Nine-month period      |       |              |       |    
|                                                                 |                                                 |               |                   |       | Ended                  |       | Year Ended  
|                                                                 |                                                 |               |                   |       | September 30,          |       | December 31,
|                                                                 |                                                 |               |                   |       | 2002                   |       | 2001        
|                                                                 |                                                 |               |                   |       |                        |       |             
|                                                                 |                                                 |               |                   |       | (Dollars in thousands)
|Allowance for loan losses at beginning of period                 |                                                 | $             | 12,546            |       |                        | $     | 8,959        |      
|Allowance of acquired bank                                       |                                                 |               | 1,058             |       |                        |       |             |      
|Charge-offs:                                                     |                                                 |               |                   |       |                        |       |              |      
|                                                                 | Commercial and industrial                       |               |                   | 1,443 |                        |       |              | 2,415 |    
|                                                                 | Real estate  construction and land development |               |                   | 532   |                        |       |              | 48    |    
|                                                                 | Real
estate  mortgage                          |               |                   |       |                        |       |              |       |    
|                                                                 |                                                 | Single-family |                   | 187   |                        |       |              | 184   |    
|                                                                 |                                                 | Commercial    |                   |       | 407                    |       |              |       | 130 |      
|                                                                 |                                                 | Other         |                   |       | 48                     |       |              |       | 20  |      
|                                                                 | Consumer                                        |               |                   | 1,356 |                        |       |              | 1,517 |    
|                                                                 |                                                 |               |                   |       |                        |       |              |      
|                                                                 |                                                 |               | Total charge-offs |       |                        | 3,973 |              |       |     | 4,314 | 
|Recoveries:                                                      |                                                 |               |                   |       |                        |       |              |      
|                                                                 | Commercial and industrial                       |               |                   | 55    |                        |       |              | 65    |    
|                                                                 | Real estate  construction and land development |               |                   | 14    |                        |       |              | 65    |    
|                                                                 | Real
estate  mortgage                          |               |                   |       |                        |       |              |       |    
|                                                                 |                                                 | Single-family |                   | 17    |                        |       |              | 27    |    
|                                                                 |                                                 | Commercial    |                   |       |                       |       |              |       |    |      
|                                                                 |                                                 | Other         |                   |       | 28                     |       |              |       |    |      
|                                                                 | Consumer                                        |               |                   | 181   |                        |       |              | 290   |    
|                                                                 |                                                 |               |                   |       |                        |       |              |      
|                                                                 |                                                 |               | Total recoveries  |       |                        | 295   |              |       |     | 447   | 
|                                                                 |                                                 |               |                   |       |                        |       |              |      
|Net charge-offs                                                  |                                                 |               | 3,678             |       |                        |       | 3,867        |      
|Provision for loan losses                                        |                                                 |               | 5,647             |       |                        |       | 7,454        |      
|                                                                 |                                                 |               |                   |       |                        |       |              |      
|Allowance for loan losses at end of period                       |                                                 | $             | 15,573            |       |                        | $     | 12,546       |      
|                                                                 |                                                 |               |                   |       |                        |       |              |      
|Loans at end of period, net of unearned income                   |                                                 | $             | 1,151,747         |       |                        | $     | 999,156      |      
|Average loans, net of unearned income                            |                                                 |               | 1,120,293         |       |                        |       | 914,006      |      
|Ratio of ending allowance to ending loans                        |                                                 |               | 1.35              | %     |                        |       | 1.26         | %    
|Ratio of net charge-offs to average loans (1)                    |                                                 |               | 0.44              | %     |                        |       | .42          | %    
|Net charge-offs as a percentage of:                              |                                                 |               |                   |       |                        |       |              |      
|                                                                 | Provision for loan losses                       |               |                   | 65.13 | %                      |       |              | 51.88 | %  
|                                                                 | Allowance for loan losses (1)                   |               |                   | 31.58 | %                      |       |              | 30.82 | %  
|Allowance for loan losses as a percentage
of nonperforming loans |                                                 |               | 142.22            | %     |                        |       | 100.99       | %    



---

|(1) |  | Annualized.
|--- |  | -----------

The allowance for loan losses as a percentage of loans, net of unearned income,
at September 30, 2002 was 1.35% compared to 1.26% as of December 31, 2001,
which is the approximate average allowance as a percentage of loans for the
five-year period ending December 31, 2001. The allowance for loan losses as a
percentage of nonperforming loans increased to 142.22% at September 30, 2002
from 101.0% at December 31, 2001.

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Net charge-offs were $3.7 million for the first nine months of 2002. The ratio
of net charge-offs to average loans on an annualized basis totaled .44% for the
first nine months of 2001. The ratio of net charge-offs to average loans
averaged .60% for the five year period ended December 31, 2001, with a ratio of
..42% in 2001 and .57% in 2000. Historically, net charge-offs have primarily
consisted of commercial and consumer loans. Net commercial loan charge-offs
totaled $1.4 million, or 37.7% of total net charge-off loans for the first nine
months of 2002 compared to 60.8% of total net charge-off loans for the year
2001. Net consumer loan charge-offs totaled $1.2 million, or 31.4% of total net
charge-off loans for the first nine months of 2002 compared with 31.7% of total
net charge-off loans for the year 2001. The net charge-offs of real estate
construction loans totaled $518,000, or 14.1% of total net charge-off loans for
the first nine months of 2002 compared to net recoveries in 2001. This increase
is due to charge-offs related to a single loan relationship in North Alabama in
the second quarter of 2002.

Nonperforming Loans.Nonperforming loans decreased $1.4 million to $11.0
million as of September 30, 2002 from $12.4 million as of December 31, 2001. As
a percentage of net loans, nonperforming loans decreased from 1.24% at December
31, 2001 to .95% at September 30, 2002. The following table represents our
nonperforming loans for the dates indicated.

Nonaccrual, Past Due and Restructured Loans

|                                                  |  |                        |        |              |  |   |        |  
|------------------------------------------------- |  | ---------------------- | ------ | ------------ |  | - | ------ | -
|                                                  |  | September 30,          |        | December 31,
|                                                  |  | 2002                   |        | 2001        
|                                                  |  |                        |        |             
|                                                  |  | (Dollars in thousands)
|Nonaccrual                                        |  | $                      | 8,445  |              |  | $ | 7,941  |  
|Past due (contractually past due 90 days or more) |  |                        | 2,505  |              |  |   | 4,482  |  
|Restructured                                      |  |                        |       |              |  |   |       |  
|                                                  |  |                        |        |              |  |   |        |  
|                                                  |  | $                      | 10,950 |              |  | $ | 12,423 |  
|                                                  |  |                        |        |              |  |   |        |  
|Nonperforming loans as a percent of loans         |  |                        | .95    | %            |  |   | 1.24   | %
|                                                  |  |                        |        |              |  |   |        |  

The following is a summary of nonperforming loans by category for the dates
shown:

|                                                |            |                           |       |                        |        |              |       |       |        | 
|----------------------------------------------- | ---------- | ------------------------- | ----- | ---------------------- | ------ | ------------ | ----- | ----- | ------ | 
|                                                |            |                           |       | September 30           |        | December 31,
|                                                |            |                           |       | 2002                   |        | 2001        
|                                                |            |                           |       |                        |        |             
|                                                |            |                           |       | (Dollars in thousands)
|Commercial and industrial                       |            | $                         | 4,535 |                        |        | $            | 3,078 |      
|Real estate  construction and land development |            |                           | 1,028 |                        |        |              | 2,895 |      
|Real
estate  mortgages
Single-family           |            |                           | 2,123 |                        |        |              | 3,089 |      
|                                                | Commercial |                           |       | 2,147                  |        |              |       | 2,400 |       
|                                                | Other      |                           |       | 435                    |        |              |       | 145   |       
|Consumer                                        |            |                           | 682   |                        |        |              | 669   |      
|Other                                           |            |                           |      |                        |        |              | 147   |      
|                                                |            |                           |       |                        |        |              |       |      
|                                                |            | Total nonperforming loans |       | $                      | 10,950 |              |       | $     | 12,423 | 
|                                                |            |                           |       |                        |        |              |       |      

A delinquent loan is 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 to the allowance
for loan losses, which may necessitate additional charges to earnings. The
accrual of interest on loans is discontinued at the time the loan is 90 days
delinquent unless the loan is well-collateralized and in the process of
collection.

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In addition to non-performing loans, management has identified $8.3 million in
potential problem loans as of September 30, 2002. Potential problem loans are
loans where known information about possible credit problems of the borrowers
causes management to have doubts as to the ability of such borrowers to comply
with the present repayment terms and may result in disclosure of such loans as
non-performing in future periods. Of the $8.3 million in potential problem
loans, $6.7 million or 80% are attributable to seven relationships concentrated
in one geographic location. Of this $6.7 million in loans, $5.2 million are
secured by residential and commercial real estate with $4.2 of this amount
having a loan to value ratio below 85%. The remaining $1.6 million in
potential problem loans outside this concentration are secured primarily by
residential real estate. As of September 30, 2002, the bank has allocated $2.3
million in loan loss reserve primarily through substandard and doubtful
classification to absorb potential losses on these accounts. Approximately
$3.2 million of these loans are considered impaired as discussed below.

Impaired Loans.At September 30, 2002, the recorded investment in impaired loans
totaled $14.8 million with approximately $3.9 million in allowance for loan
losses specifically allocated to impaired loans. Approximately $5.8 million was
added to impaired loans in the second quarter of 2002 from three relationships
in North Alabama. We have no commitments to lend additional funds to the
borrowers whose loans are impaired.

The following is a summary of impaired loans and the specifically allocated
allowance for loan losses by category as of September 30, 2002:

|                                                |            |       |       |                        |        |           |       |     |       | 
|----------------------------------------------- | ---------- | ----- | ----- | ---------------------- | ------ | --------- | ----- | --- | ----- | 
|                                                |            |       |       | Outstanding            |        | Specific 
|                                                |            |       |       | Balance                |        | Allowance
|                                                |            |       |       |                        |        |          
|                                                |            |       |       | (Dollars in thousands)
|Commercial and industrial                       |            | $     | 8,620 |                        |        | $         | 2,359 |    
|Real estate  construction and land development |            |       | 2,210 |                        |        |           | 590   |    
|Real
estate  mortgages                         |            |       | 3,790 |                        |        |           | 891   |    
|                                                | Commercial |       |       | 3,790                  |        |           |       | 891 |      
|                                                | Other      |       |       | 142                    |        |           |       | 57  |      
|Other                                           |            |       |      |                        |        |           |      |    
|                                                |            |       |       |                        |        |           |       |    
|                                                |            | Total |       | $                      | 14,762 |           |       | $   | 3,897 | 
|                                                |            |       |       |                        |        |           |       |    

Stockholders Equity. At September 30, 2002, total stockholders equity was
$103.0 million, an increase of $26.1 million from $76.9 million at December 31,
2001. The increase in stockholders equity resulted primarily from total
comprehensive income of $8.1 million for the first nine months of 2002 and
$19.3 million in net proceeds from the sale of common stock. During March 2002,
we received $19.3 million in proceeds, net of $1.8 million underwriting
discounts and other costs, from the sale of 3,450,000 shares of common stock in
a secondary offering priced at $6.125 per share. We used $14.0 million of these
proceeds to repay debt incurred in the acquisition of CF Bancshares. In
September of 2000, our board of directors approved a stock buyback plan in an
amount not to exceed $10,000,000. As of September 30, 2002, there were 118,032
shares held in treasury at a cost of $669,000.

On April 1, 2002, we issued 160,000 shares of restricted common stock to
certain directors and key employees. Under the Restricted Stock Agreements, the
stock may not be sold or assigned in any manner for a five-year period that
began on April 1, 2002. During this restricted period, the participant is
eligible to receive dividends and exercise voting privileges. The restricted
stock also has a corresponding vesting period with one-third vesting at the end
of the third, fourth and fifth year. The restricted stock was issued at $7.00
per share, or $1,120,000 and classified as a contra-equity account, Unearned
restricted stock, in stockholders equity. The

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$1,120,000 is being amortized
as expense as the stock is earned during the restricted period. For the period
ended September 30, 2002, we have recognized $112,000 in restricted stock
expense.

We adopted a leveraged employee stock ownership plan (the ESOP) effective May
15, 2002 that covers all eligible employees that have attained the age of
21 and have completed a year of service. As of September 30, 2002, the
ESOP has been internally leveraged with 223,000 shares of our common stock
purchased in the open market and classified as a contra-equity account,
Unearned ESOP shares, in stockholders equity.

As of September 30, 2002, the ESOP trustees were in the process of finalizing a
promissory note to reimburse us for the funds used to leverage the ESOP. The
unreleased shares, our guaranty and the guaranty of The Bank will secure the
promissory note, which will be classified as long-term debt on our consolidated
statement of financial condition. As the ESOP repays the debt with our
quarterly contributions, shares are released from collateral based on the
proportion of debt service. Released shares are allocated to eligible employees
at the end of the plan year based on the employees eligible compensation to
total compensation. We recognize compensation expense as the shares are earned
and committed to be released during the period. As shares are committed to be
released and compensation expense is recognized, the shares become outstanding
for basic and diluted earnings per share computations. The amount of
compensation expense we report is equal to the average fair value of the shares
earned and committed to be released during the period. Compensation expense
that the Corporation recognized during the period ended September 30, 2002 was
$21,000. The ESOP shares as of September 30, 2002 were as follows:

|                                          |  |                    |           | 
|----------------------------------------- |  | ------------------ | --------- | 
|                                          |  | September 30, 2002
|                                          |  |                   
|Allocated shares                          |  |                    |          | 
|Estimated shares committed to be released |  |                    | 2,479     | 
|Unreleased shares                         |  |                    | 220,521   | 
|                                          |  |                    |           | 
|Total ESOP shares                         |  |                    | 223,000   | 
|                                          |  |                    |           | 
|Fair value of unreleased shares           |  | $                  | 1,726,000 | 
|                                          |  |                    |           | 

Regulatory Capital.The table below represents the regulatory and minimum
regulatory capital requirements at September 30, 2002 for us and our subsidiary
(dollars in thousands):

|                          |             |  |        |         |          |  |             |       |       |  |             |        |            |  |  |      |   |  |   |         |  |  |  |       |  
|------------------------- | ----------- |  | ------ | ------- | -------- |  | ----------- | ----- | ----- |  | ----------- | ------ | ---------- |  |  | ---- | - |  | - | ------- |  |  |  | ----- | -
|                          |             |  |        |         |          |  |             |       |       |  | For Capital |        |            |  |  |      |   |  |  
|                          |             |  |        |         |          |  |             |       |       |  | Adequacy    |        | To Be Well
|                          |             |  | Actual |         | Purposes |  | Capitalized
|                          |             |  |        |         |          |  |            
|                          |             |  | Amount |         | Ratio    |  | Amount      |       | Ratio |  | Amount      |        | Ratio     
|                          |             |  |        |         |          |  |             |       |       |  |             |        |           
|Total Risk-Based Capital  |             |  |        |         |          |  |             |       |       |  |             |        |            |  |  |      |   |  |   |         |  |  |  |      
|                          | Corporation |  | $      | 134,624 |          |  |             | 11.58 | %     |  | $           | 93,022 |            |  |  | 8.00 | % |  | $ | 116,277 |  |  |  | 10.00 | %
|                          | The Bank    |  |        | 122,893 |          |  |             | 10.67 |       |  |             | 92,155 |            |  |  | 8.00 |   |  |   | 115,193 |  |  |  | 10.00 |  
|                         
|Tier 1 Risk-Based Capital |             |  |        |         |          |  |             |       |       |  |             |        |            |  |  |      |   |  |   |         |  |  |  |      
|                          | Corporation |  |        | 118,740 |          |  |             | 10.21 |       |  |             | 46,511 |            |  |  | 4.00 |   |  |   | 69,766  |  |  |  | 6.00  |  
|                          | The Bank    |  |        | 108,458 |          |  |             | 9.42  |       |  |             | 46,077 |            |  |  | 4.00 |   |  |   | 69,116  |  |  |  | 6.00  |  
|                         
|Leverage Capital          |             |  |        |         |          |  |             |       |       |  |             |        |            |  |  |      |   |  |   |         |  |  |  |      
|                          | Corporation |  |        | 118,740 |          |  |             | 8.53  |       |  |             | 55,689 |            |  |  | 4.00 |   |  |   | 69,611  |  |  |  | 5.00  |  
|                          | The Bank    |  |        | 108,458 |          |  |             | 7.85  |       |  |             | 55,271 |            |  |  | 4.00 |   |  |   | 69,089  |  |  |  | 5.00  |  

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##### Table of Contents



Liquidity

Our principal sources of funds are deposits, principal and interest payments on
loans, federal funds sold and maturities and sales of investment securities. In
addition to these sources of liquidity, we have access to purchased funds from
several regional financial institutions and may borrow from a regional
financial institution under a line of credit, and from the Federal Home Loan
Bank under a blanket floating lien on certain commercial loans and residential
real estate loans. While scheduled loan repayments and maturing investments are
relatively predictable, interest rates, general economic conditions and
competition primarily influence deposit flows and early loan payments.
Management places constant emphasis on the maintenance of adequate liquidity to
meet conditions that might reasonably be expected to occur.

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements made by us or on our behalf. Some of the disclosures
in this Quarterly Report on Form 10-Q, including any statements preceded by,
followed by or which include the words may, could, should, will,
would, hope, might, believe, expect, anticipate, estimate,
intend, plan, assume or similar expressions constitute forward-looking
statements.

These forward-looking statements, implicitly and explicitly, include the
assumptions underlying the statements and other information with respect to our
beliefs, plans, objectives, goals, expectations, anticipations, estimates,
intentions, financial condition, results of operations, future performance and
business, including our expectations and estimates with respect to our
revenues, expenses, earnings, return on equity, return on assets, efficiency
ratio, asset quality and other financial data and capital and performance
ratios.

Although we believe that the expectations reflected in our forward-looking
statements are reasonable, these statements involve risks and uncertainties
which are subject to change based on various important factors (some of which
are beyond our control). The following factors, among others, could cause our
financial performance to differ materially from our goals, plans, objectives,
intentions, expectations, and other forward-looking statements: the strength of
the United States economy in general and the strength of the regional and local
economies in which we conduct operations; the effects of, and changes in,
trade, monetary and fiscal policies and laws, including interest rate policies
of the Board of Governors of the Federal Reserve System; inflation, interest
rate, market and monetary fluctuations; our ability to successfully integrate
the assets, liabilities, customers, systems and management we acquire or merge
into our operations; our timely development of new products and services to a
changing environment, including the features, pricing and quality compared to
the products and services of our competitors; the willingness of users to
substitute competitors products and services for our products and services;
the impact of changes in financial services policies, laws and regulations,
including laws, regulations and policies concerning taxes, banking, securities
and insurance, and the application thereof by regulatory bodies; our ability to
resolve any legal proceeding on acceptable terms and its effect on our
financial condition or results of operations; technological changes; changes in
consumer spending and savings habits; and regulatory, legal or judicial
proceedings;

If one or more of the factors affecting our forward-looking information and
statements proves incorrect, then our actual results, performance or
achievements could differ materially from those expressed in, or implied by,
forward-looking information and statements contained in this quarterly report.
Therefore, we caution you not to place undue reliance on our forward-looking
information and statements.

We do not intend to update our forward-looking information and statements,
whether written or oral, to reflect change. All forward-looking statements
attributable to us are expressly qualified by these cautionary statements.

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##### Table of Contents






Item 3.  Quantitative and Qualitative Disclosure about Market Risk

The information set forth under the caption Item 7. Managements Discussion
and Analysis of Financial Condition and Results of Operations-Market
Risk-Interest Rate Sensitivity included in our Annual Report on Form 10-K for
the year ended December 31, 2001, is hereby incorporated herein by reference.




Item 4.  Controls and Procedures

Within 90 days prior to the filing of this quarterly report, we conducted an
evaluation, under the supervision and with the participation of our management,
including our Chief Executive Officer and our Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as defined in Rule 13a-14 of the Securities Exchange Act of 1934
(the Exchange Act). Based on and at the time of the evaluation, our
management, including our Chief Executive Officer and our Chief Financial
Officer, concluded that our disclosure controls and procedures were effective
in timely alerting them to material information relating to the Corporation and
its consolidated subsidiaries required to be included in this quarterly report.

There have been no significant changes in our internal controls or in other
factors that would significantly affect internal controls subsequent to the
date that we carried out our evaluation.




Part II.  Other Information




Item 1.  Legal Proceedings

While we may from time to time be a party to various legal proceedings arising
in the ordinary course of business, we believe that there are no proceedings
threatened or pending against us at this time that will individually, or in the
aggregate, materially adversely affect our business, financial condition or
results of operations.




Item 2.  Changes in Securities and Use of Proceeds

None.




Item 3.  Defaults Upon Senior Securities

None




Item 4.  Submission of Matters to a Vote of Security Holders

None




Item 5.  Other Information

None




Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibit:

99  Certification of Periodic
Financial Report Pursuant to 18 U.S.C. Section 1350

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##### Table of Contents



(b)  Report on Form 8-K:

We filed a Current Report on Form 8-K dated August 14, 2002 pursuant to
Item 9 Regulation FD Disclosure of Form 8-K containing as an exhibit the
certification by our chief executive and chief financial officers of our report
on Form 10-Q for the quarter ended June 30, 2002.




Signatures

Pursuant to the requirements 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
(Registrant)                                                                  
|                          |  |     |  |                                                                                                    
|Date:   November 13, 2002 |  | By: |  | /s/ James A. Taylor                                                                                
|                          |  |     |  |                                                                                                    
|                          |  |     |  | James A. Taylor
Chief Executive Officer                                                            
|                          |  |     |  |                                                                                                    
|Date:   November 13, 2002 |  | By: |  | /s/ David R. Carter                                                                                
|                          |  |     |  |                                                                                                    
|                          |  |     |  | David R. Carter
Executive Vice President and Chief Financial Officer
(Principal Accounting Officer)

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##### Table of Contents






CERTIFICATIONS

I, James A. Taylor, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of The Banc
Corporation;                                                                                                                                                                                                                                                   
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                        



| | a) |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the Evaluation
Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors (or persons
performing the equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation
of internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data
and have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in
this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        
|------------------------
|Date:  November 13, 2002

|    |  |                                         | 
|--- |  | --------------------------------------- | 
|By: |  | /s/  James A. Taylor                    | 
|    |  |                                         | 
|    |  | James A. Taylor
Chief Executive Officer | 

31



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##### Table of Contents



CERTIFICATIONS

I, David R. Carter, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of The Banc
Corporation;                                                                                                                                                                                                                                                   
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                        



| | a. |  | designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the Evaluation
Date); and                                                                                                  
|
| | c. |  | presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors and
the audit committee of registrants board of directors (or persons
performing the equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | all significant deficiencies in the design or operation
of internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data
and have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in
this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                         |                                        
|------------------------ | ---------------------------------------
|Date:  November 13, 2002
|                         |                                        
|By:                      | /s/ David R. Carter                    
|                         |                                        
|                         | David R. Carter
Chief Financial Officer

32