##### 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 MARCH 31, 2002
|           |  |                                                                                                                                      
|           |  | OR                                                                                                                                   
|           |  |                                                                                                                                      
|o          |  | 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  o

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 March 31, 2002
|                              |  |                                 
|Common stock, $.001 par value |  | 17,706,342                      





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TABLE OF CONTENTS



|                                           |                                                                                               |                                                            |  |  |  |  |  | 
|------------------------------------------ | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION             
|                                           | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                                           |                                                                                               | Consolidated Statements of Financial Condition            
|                                           |                                                                                               | Consolidated Statements of Income (Unaudited)             
|                                           |                                                                                               | Condensed Consolidated Statements of Cash Flow (Unaudited)
|                                           |                                                                                               | NOTES TO 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                            
|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                                
|Employment Agreement dated January 1, 2002



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##### Table of Contents






PART I. FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS


The Banc Corporation and Subsidiaries




Consolidated Statements of Financial Condition


(Dollars In Thousands)


|                                                                                                      |  |                                                                                                                                                                                       |                |                                            |         |             |           |              |         |         |           | 
|----------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------- | ------------------------------------------ | ------- | ----------- | --------- | ------------ | ------- | ------- | --------- | 
|                                                                                                      |  |                                                                                                                                                                                       |                |                                            |         | March 31,   |           | December 31,
|                                                                                                      |  |                                                                                                                                                                                       |                |                                            |         | 2002        |           | 2001        
|                                                                                                      |  |                                                                                                                                                                                       |                |                                            |         | (Unaudited) |           | (Note 1)    
|Assets                                                                                                |  |                                                                                                                                                                                       |                |                                            |         |             |           |             
|Cash and due from banks                                                                               |  | $                                                                                                                                                                                     | 37,018         |                                            |         | $           | 31,682    |             
|Interest bearing deposits in other banks                                                              |  |                                                                                                                                                                                       | 495            |                                            |         |             | 495       |             
|Federal funds sold                                                                                    |  |                                                                                                                                                                                       | 21,500         |                                            |         |             | 20,000    |             
|Investment securities available for sale                                                              |  |                                                                                                                                                                                       | 55,237         |                                            |         |             | 68,847    |             
|Mortgage loans held for sale                                                                          |  |                                                                                                                                                                                       | 2,050          |                                            |         |             | 1,131     |             
|Loans, net of unearned income                                                                         |  |                                                                                                                                                                                       | 1,115,494      |                                            |         |             | 999,156   |             
|Less: Allowance for loan losses                                                                       |  |                                                                                                                                                                                       | (13,844        | )                                          |         |             | (12,546   | )           
|                                                                                                      |  |                                                                                                                                                                                       |                |                                            |         |             |           |              |         |         |           | 
|                                                                                                      |  |                                                                                                                                                                                       |                | Net loans                                  |         |             | 1,101,650 |              |         |         | 986,610   | 
|                                                                                                      |  |                                                                                                                                                                                       |                |                                            |         |             |           |              |         |         |           | 
|Premises and equipment, net                                                                           |  |                                                                                                                                                                                       | 52,237         |                                            |         |             | 47,829    |             
|Accrued interest receivable                                                                           |  |                                                                                                                                                                                       | 7,162          |                                            |         |             | 7,562     |             
|Stock in FHLB and Federal Reserve Bank                                                                |  |                                                                                                                                                                                       | 9,318          |                                            |         |             | 8,505     |             
|Other assets                                                                                          |  |                                                                                                                                                                                       | 42,068         |                                            |         |             | 33,744    |             
|                                                                                                      |  |                                                                                                                                                                                       |                |                                            |         |             |           |              |         |         |           | 
|                                                                                                      |  |                                                                                                                                                                                       |                |                                            |         |             |           |             
|                                                                                                      |  |                                                                                                                                                                                       |                | Total assets                               |         | $           | 1,328,735 |              |         | $       | 1,206,405 | 
|                                                                                                      |  |                                                                                                                                                                                       |                |                                            |         |             |           |              |         |         |           | 
|                                                                                                      |  |                                                                                                                                                                                       |                |                                            |         |             |           |             
|Liabilities and Stockholders Equity                                                                  |  |                                                                                                                                                                                       |                |                                            |         |             |           |             
|Deposits                                                                                              |  |                                                                                                                                                                                       |                |                                            |         |             |           |             
|                                                                                                      |  | Noninterest-bearing                                                                                                                                                                   |                | $                                          | 106,621 |             |           | $            | 94,655  |        
|                                                                                                      |  | Interest-bearing                                                                                                                                                                      |                |                                            | 930,139 |             |           |              | 857,580 |        
|                                                                                                      |  |                                                                                                                                                                                       |                |                                            |         |             |           |              |         |         |           | 
|                                                                                                      |  |                                                                                                                                                                                       | Total deposits |                                            |         | 1,036,760   |           |              |         | 952,235 |          
|                                                                                                      |  |                                                                                                                                                                                       |                |                                            |         |             |           |             
|Advances from FHLB                                                                                    |  |                                                                                                                                                                                       | 150,950        |                                            |         |             | 135,900   |             
|Other borrowed funds                                                                                  |  |                                                                                                                                                                                       | 1,433          |                                            |         |             | 813       |             
|Guaranteed preferred beneficial interests in our
subordinated debentures (trust preferred securities) |  |                                                                                                                                                                                       | 31,000         |                                            |         |             | 31,000    |             
|Accrued expenses and other liabilities                                                                |  |                                                                                                                                                                                       | 9,932          |                                            |         |             | 9,604     |             
|                                                                                                      |  |                                                                                                                                                                                       |                |                                            |         |             |           |              |         |         |           | 
|                                                                                                      |  |                                                                                                                                                                                       |                | Total liabilities                          |         |             | 1,230,075 |              |         |         | 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 17,845,420 in 2002 and 14,385,021 in 2001;
outstanding 17,706,342 in 2002 and 14,217,371 in 2001 |                |                                            | 18      |             |           |              | 14      |        
|                                                                                                      |  | Surplus                                                                                                                                                                               |                |                                            | 67,149  |             |           |              | 47,756  |        
|                                                                                                      |  | Retained Earnings                                                                                                                                                                     |                |                                            | 32,515  |             |           |              | 30,329  |        
|                                                                                                      |  | Accumulated other comprehensive loss                                                                                                                                                  |                |                                            | (243    | )           |           |              | (322    | )      
|                                                                                                      |  | Treasury stock, at cost - 139,078 and 167,650 shares, respectively                                                                                                                    |                |                                            | (779    | )           |           |              | (924    | )      
|                                                                                                      |  |                                                                                                                                                                                       |                |                                            |         |             |           |              |         |         |           | 
|                                                                                                      |  |                                                                                                                                                                                       |                | Total stockholders equity                 |         |             | 98,660    |              |         |         | 76,853    | 
|                                                                                                      |  |                                                                                                                                                                                       |                |                                            |         |             |           |              |         |         |           | 
|                                                                                                      |  |                                                                                                                                                                                       |                |                                            |         |             |           |             
|                                                                                                      |  |                                                                                                                                                                                       |                | Total liabilities and stockholders equity |         | $           | 1,328,735 |              |         | $       | 1,206,405 | 
|                                                                                                      |  |                                                                                                                                                                                       |                |                                            |         |             |           |              |         |         |           | 

See Notes to Consolidated Financial Statements.





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The Banc Corporation and Subsidiaries




Consolidated Statements of Income (Unaudited)


(Amounts In Thousands, Except Per Share Data)


|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |        |        |       |       | 
|---------------------------------------------------------------------------------------------------------------- | ------------------------------ | --------------------- | -------------------------- | --------------------------------------------------- | ------ | ------------------ | ------ | ------ | ------ | ----- | ----- | 
|                                                                                                                 |                                |                       |                            |                                                     |        | Three Months Ended
|                                                                                                                 |                                |                       |                            |                                                     |        | March 31          
|                                                                                                                 |                                |                       |                            |                                                     |        | 2002               |        | 2001  
|Interest income                                                                                                  |                                |                       |                            |                                                     |        |                    |        |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |       
|Interest and fees on loans                                                                                       |                                | $                     | 20,835                     |                                                     |        | $                  | 20,281 |       
|Interest on investment securities                                                                                |                                |                       |                            |                                                     |        |                    |        |       
|                                                                                                                 | Taxable                        |                       |                            | 648                                                 |        |                    |        | 1,457  |       
|                                                                                                                 | Exempt from Federal income tax |                       |                            | 94                                                  |        |                    |        | 174    |       
|Interest on federal funds sold                                                                                   |                                |                       | 87                         |                                                     |        |                    | 462    |       
|Interest and dividends on other investments                                                                      |                                |                       | 117                        |                                                     |        |                    | 187    |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |        |        |       |       | 
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |       
|                                                                                                                 |                                | Total interest income |                            |                                                     | 21,781 |                    |        |        | 22,561 |      
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |       
|Interest expense                                                                                                 |                                |                       |                            |                                                     |        |                    |        |       
|Interest on deposits                                                                                             |                                |                       | 7,622                      |                                                     |        |                    | 11,060 |       
|Interest on other borrowed funds                                                                                 |                                |                       | 2,120                      |                                                     |        |                    | 1,865  |       
|Interest on guaranteed preferred beneficial interest in our
subordinated debentures (trust preferred securities) |                                |                       | 647                        |                                                     |        |                    | 398    |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |        |        |       |       | 
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |       
|                                                                                                                 | Total interest expense         |                       |                            | 10,389                                              |        |                    |        | 13,323 |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |        |        |       |       | 
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |       
|                                                                                                                 |                                |                       |                            | Net interest income                                 |        |                    | 11,392 |        |        |       | 9,238 | 
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |       
|Provision for loan losses                                                                                        |                                |                       | 1,115                      |                                                     |        |                    | 795    |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |        |        |       |       | 
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |       
|                                                                                                                 |                                |                       |                            | Net interest income after provision for loan losses |        |                    | 10,277 |        |        |       | 8,443 | 
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |       
|Noninterest income                                                                                               |                                |                       |                            |                                                     |        |                    |        |       
|Service charges and fees on deposits                                                                             |                                |                       | 1,196                      |                                                     |        |                    | 1,030  |       
|Mortgage banking income                                                                                          |                                |                       | 714                        |                                                     |        |                    | 352    |       
|Gain on sale of securities                                                                                       |                                |                       |                           |                                                     |        |                    | 37     |       
|Other income                                                                                                     |                                |                       | 848                        |                                                     |        |                    | 811    |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |        |        |       |       | 
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |       
|                                                                                                                 |                                |                       | Total noninterest income   |                                                     |        | 2,758              |        |        |        | 2,230 |      
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |        |        |       |       | 
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |       
|Noninterest expenses                                                                                             |                                |                       |                            |                                                     |        |                    |        |       
|Salaries and employee benefits                                                                                   |                                |                       | 5,552                      |                                                     |        |                    | 4,593  |       
|Occupancy, furniture and equipment expense                                                                       |                                |                       | 1,804                      |                                                     |        |                    | 1,726  |       
|Other                                                                                                            |                                |                       | 2,441                      |                                                     |        |                    | 2,147  |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |        |        |       |       | 
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |       
|                                                                                                                 |                                |                       | Total noninterest expenses |                                                     |        | 9,797              |        |        |        | 8,466 |      
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |        |        |       |       | 
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |       
|                                                                                                                 |                                |                       |                            | Income before income taxes                          |        |                    | 3,238  |        |        |       | 2,207 | 
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |       
|Income tax expense                                                                                               |                                |                       | 1,052                      |                                                     |        |                    | 628    |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |        |        |       |       | 
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |       
|                                                                                                                 |                                |                       |                            | Net income                                          |        | $                  | 2,186  |        |        | $     | 1,579 | 
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |        |        |       |       | 
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |       
|Basic and diluted net income per share                                                                           |                                | $                     | 0.15                       |                                                     |        | $                  | 0.11   |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |        |        |       |       | 
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |       
|Average common shares outstanding                                                                                |                                |                       | 14,583                     |                                                     |        |                    | 14,345 |       
|Average common shares outstanding, assuming dilution                                                             |                                |                       | 14,614                     |                                                     |        |                    | 14,347 |       

See Notes to Consolidated Financial Statements.





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The Banc Corporation and Subsidiaries




Condensed Consolidated Statements of Cash Flow (Unaudited)


(Dollars In Thousands)


|                                                 |                                                                      |                                           |        |                    |         |      |        |         |          |  
|------------------------------------------------ | -------------------------------------------------------------------- | ----------------------------------------- | ------ | ------------------ | ------- | ---- | ------ | ------- | -------- | -
|                                                 |                                                                      |                                           |        | Three Months Ended
|                                                 |                                                                      |                                           |        | March 31          
|                                                 |                                                                      |                                           |        |                   
|                                                 |                                                                      |                                           |        | 2002               |         | 2001
|                                                 |                                                                      |                                           |        |                    |         |     
|Net cash provided (used) by operating activities |                                                                      | $                                         | 4,080  |                    |         | $    | (241   | )      
|                                                 |                                                                      |                                           |        |                    |         |      |        |        
|                                                 |                                                                      |                                           |        |                    |         |      |        |        
|Cash flows from investing activities:            |                                                                      |                                           |        |                    |         |      |        |        
|                                                 | Net increase in interest bearing deposits in other banks             |                                           |        |                   |         |      |        | (3,121  | )       
|                                                 | Net increase in federal funds sold                                   |                                           |        | (1,500             | )       |      |        | (40,890 | )       
|                                                 | Proceeds from sales of securities available for sale                 |                                           |        |                   |         |      |        | 3,101   |         
|                                                 | Proceeds from maturities of investment securities available for sale |                                           |        | 18,475             |         |      |        | 12,969  |         
|                                                 | Purchases of investment securities available for sale                |                                           |        | (2,557             | )       |      |        | (32,609 | )       
|                                                 | Net increase in loans                                                |                                           |        | (29,444            | )       |      |        | (46,910 | )       
|                                                 | Purchases of premises and equipment                                  |                                           |        | (2,027             | )       |      |        | (908    | )       
|                                                 | Net cash paid in business combination                                |                                           |        | (8,619             | )       |      |        |        |         
|                                                 | Other investing activities                                           |                                           |        |                   |         |      |        | (1,328  | )       
|                                                 |                                                                      |                                           |        |                    |         |      |        |        
|                                                 |                                                                      |                                           |        |                    |         |      |        |        
|                                                 |                                                                      | Net cash used by investing activities     |        |                    | (25,672 | )    |        |         | (109,696 | )
|                                                 |                                                                      |                                           |        |                    |         |      |        |        
|                                                 |                                                                      |                                           |        |                    |         |      |        |        
|Cash flows from financing activities:            |                                                                      |                                           |        |                    |         |      |        |        
|                                                 | Net increase in deposit accounts                                     |                                           |        | 7,034              |         |      |        | 72,891  |         
|                                                 | Net increase in FHLB advance and other borrowings                    |                                           |        | 420                |         |      |        | 32,135  |         
|                                                 | Net proceeds received under line of credit                           |                                           |        |                   |         |      |        | 5,000   |         
|                                                 | Proceeds from note payable                                           |                                           |        | 14,000             |         |      |        |        |         
|                                                 | Principal payment on note payable                                    |                                           |        | (14,000            | )       |      |        |        |         
|                                                 | Proceeds from sale of common stock                                   |                                           |        | 19,498             |         |      |        |        |         
|                                                 | Purchase of treasury stock                                           |                                           |        | (24                | )       |      |        |        |         
|                                                 |                                                                      |                                           |        |                    |         |      |        |        
|                                                 |                                                                      |                                           |        |                    |         |      |        |        
|                                                 |                                                                      | Net cash provided by financing activities |        |                    | 26,928  |      |        |         | 110,026  |  
|                                                 |                                                                      |                                           |        |                    |         |      |        |        
|                                                 |                                                                      |                                           |        |                    |         |      |        |        
|Net increase in cash and due from banks          |                                                                      |                                           | 5,336  |                    |         |      | 89     |        
|                                                 |                                                                      |                                           |        |                    |         |      |        |        
|Cash and due from banks at beginning of period   |                                                                      |                                           | 31,682 |                    |         |      | 36,691 |        
|                                                 |                                                                      |                                           |        |                    |         |      |        |        
|                                                 |                                                                      |                                           |        |                    |         |      |        |        
|Cash and due from banks at end of period         |                                                                      | $                                         | 37,018 |                    |         | $    | 36,780 |        
|                                                 |                                                                      |                                           |        |                    |         |      |        |        

See Notes to Consolidated Financial Statements.





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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1  BASIS OF PRESENTATION

The accompanying unaudited 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-month period ended March 31, 2002,
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2002.


The 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 Consolidated
Financial Statement to conform to the March 31, 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 as interest expense. These trust preferred
securities were previously classified as minority interest in the consolidated
statement of financial condition with the associated distributions classified
as noninterest expense in the 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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##### Table of Contents



NOTE 2  RECENT ACCOUNTING PRONOUNCEMENT  CONTINUED

Statement 141 required, upon adoption of Statement 142, that the Corporation
evaluate its existing intangible assets and goodwill that were acquired in
prior purchase business combinations, and make any necessary reclassifications
to conform with 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.


At March 31, 2002, the Corporation had unamortized goodwill in the amount of
$10,958,000, which is subject to the provisions of Statements 141 and 142. The
adoption of Statement 142 is expected to result in an annual increase in income
before income taxes of $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 reconcilement of net income and earnings per
share excluding goodwill amortization for the three-month period ended March
31, 2001 compared to the three-month period ended March 31, 2002 (in thousands,
except per share data):

| |                                                |                                 |   |                            |     |      |   |       |     | 
| | ---------------------------------------------- | ------------------------------- | - | -------------------------- | --- | ---- | - | ----- | --- | 
| |                                                |                                 |   | For the three-month period
| |                                                |                                 |   | ended March 31,           
| |                                                |                                 |   |                           
| |                                                |                                 |   | 2002                       |     | 2001
| |                                                |                                 |   |                            |     |     
| | Reported net income                            |                                 | $ | 2,186                      |     |      | $ | 1,579 |    
| | Add back: goodwill amortization                |                                 |   |                           |     |      |   | 93    |    
| |                                                |                                 |   |                            |     |      |  
| | Adjusted net income                            |                                 | $ | 2,186                      |     |      | $ | 1,672 |    
| |                                                |                                 |   |                            |     |      |  
| |                                                |                                 |   |                            |     |      |   |      
| | Basic and diluted net income per
common share: |                                 |   |                            |     |      |   |       |    
| |                                                | Reported net income             |   | $                          | .15 |      |   | $     | .11 | 
| |                                                | Add back: goodwill amortization |   |                            |    |      |   |       | .01 | 
| |                                                |                                 |   |                            |     |      |  
| |                                                | Adjusted net income             |   | $                          | .15 |      |   | $     | .12 | 
| |                                                |                                 |   |                            |     |      |  

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 approximately $100,000,000.


The total cost of the acquisition was $15,636,000, which exceeded the fair
value of the net assets of CF Bancshares by $7,445,000. The total costs
included 16,794 shares of common stock valued at $110,840. The value of common
stock issued was determined based on the average of the last sales price for
the twenty (20) consecutive trading days ending three days prior to the special
meeting of CF Bancshares shareholders held on November 28,2001. 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 consists of 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 March 31, 2002.





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##### Table of Contents



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 three-month period
| |                                               |                            |   | ended March 31,           
| |                                               |                            |   |                           
| |                                               |                            |   | 2002                       |        | 2001
| |                                               |                            |   |                            |        |     
| | Interest income                               |                            | $ | 22,676                     |        |      | $ | 24,544 |       
| | Interest expense                              |                            |   | 10,816                     |        |      |   | 14,488 |       
| |                                               |                            |   |                            |        |      |  
| |                                               | Net interest income        |   |                            | 11,860 |      |   |        | 10,056 | 
| | Provision for loan losses                     |                            |   | 1,932                      |        |      |   | 841    |       
| | Noninterest income                            |                            |   | 2,928                      |        |      |   | 2,388  |       
| | Noninterest expense                           |                            |   | 11,033                     |        |      |   | 9,075  |       
| |                                               |                            |   |                            |        |      |  
| |                                               | Income before income taxes |   |                            | 1,823  |      |   |        | 2,528  | 
| | Income tax expense                            |                            |   | 612                        |        |      |   | 801    |       
| |                                               |                            |   |                            |        |      |  
| | Net income                                    |                            | $ | 1,211                      |        |      | $ | 1,727  |       
| |                                               |                            |   |                            |        |      |  
| |                                               |                            |   |                            |        |      |   |       
| | Basic and diluted net income per
common share |                            | $ | .08                        |        |      | $ | .12    |       
| |                                               |                            |   |                            |        |      |  

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
region 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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##### Table of Contents



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 to the
consolidated totals (in thousands).

|                                  |                           |            |   |                |     |        |   |          |       |  |   |           |       | 
|--------------------------------- | ------------------------- | ---------- | - | -------------- | --- | ------ | - | -------- | ----- |  | - | --------- | ----- | 
|                                  |                           |            |   |                |     |        |   | Florida  |       |  |   |          
|                                  |                           |            |   | Alabama Region |     | Region |   | Combined
|                                  |                           |            |   |                |     |        |   |         
|Three
months ended March 31, 2002 |                           |            |   |                |     |        |   |          |       |  |   |          
|                                  | Net interest income       |            | $ | 6,463          |     |        | $ | 4,929    |       |  | $ | 11,392    |      
|                                  | Provision for loan losses |            |   | 630            |     |        |   | 485      |       |  |   | 1,115     |      
|                                  | Noninterest income        |            |   | 2,204          |     |        |   | 554      |       |  |   | 2,758     |      
|                                  | Noninterest expense (1)   |            |   | 6,749          |     |        |   | 3,048    |       |  |   | 9,797     |      
|                                  | Income tax expense        |            |   | 458            |     |        |   | 594      |       |  |   | 1,052     |      
|                                  |                           | Net income |   |                | 830 |        |   |          | 1,356 |  |   |           | 2,186 | 
|                                  | Total assets              |            |   | 876,269        |     |        |   | 452,466  |       |  |   | 1,328,735 |      
|                                  |                           |            |   |                |     |        |   |          |       |  |   |          
|Three months ended March 31, 2001 |                           |            |   |                |     |        |   |          |       |  |   |          
|                                  | Net interest income       |            | $ | 6,115          |     |        | $ | 3,123    |       |  | $ | 9,238     |      
|                                  | Provision for loan losses |            |   | 465            |     |        |   | 330      |       |  |   | 795       |      
|                                  | Noninterest income        |            |   | 1,666          |     |        |   | 564      |       |  |   | 2,230     |      
|                                  | Noninterest expense (1)   |            |   | 6,568          |     |        |   | 1,898    |       |  |   | 8,466     |      
|                                  | Income tax expense        |            |   | 110            |     |        |   | 518      |       |  |   | 628       |      
|                                  |                           | Net income |   |                | 638 |        |   |          | 941   |  |   |           | 1,579 | 
|                                  | Total assets              |            |   | 862,313        |     |        |   | 280,170  |       |  |   | 1,142,483 |      



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

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
|                                                      |  | March 31          
|                                                      |  |                   
|                                                      |  | 2002               |        | 2001
|                                                      |  |                    |        |     
|Numerator:                                            |  |                    |        |      |  |   |        | 
|For basic and diluted, net income                     |  | $                  | 2,186  |      |  | $ | 1,579  | 
|                                                      |  |                    |        |      |  |   |       
|                                                      |  |                    |        |      |  |   |        | 
|Denominator:                                          |  |                    |        |      |  |   |        | 
|For basic, weighted average common shares
outstanding |  |                    | 14,583 |      |  |   | 14,345 | 
|Effect of dilutive stock options                      |  |                    | 31     |      |  |   | 2      | 
|                                                      |  |                    |        |      |  |   |       
|                                                      |  |                    |        |      |  |   |        | 
|Average diluted common shares outstanding             |  |                    | 14,614 |      |  |   | 14,347 | 
|                                                      |  |                    |        |      |  |   |       
|                                                      |  |                    |        |      |  |   |        | 
|Basic and diluted net income per share                |  | $                  | .15    |      |  | $ | .11    | 
|                                                      |  |                    |        |      |  |   |       





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##### Table of Contents



NOTE 6  COMPREHENSIVE INCOME

Total comprehensive income was $2,265,000 and $2,087,000 for the three-month
period ended March 31, 2002, and 2001, respectively. 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
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 principal amount
of variable rate subordinated debentures of the Corporation. 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% per annum ceiling for
the first ten years. As of the date of issuance, the interest rate on the
securities was 7.57%. As of March 31, 2002, the interest rate on these
securities had repriced to 5.74%.

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
and 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.





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##### Table of Contents






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 March 31, 2002 consolidated
financial condition and results of operations for the three-month periods ended
March 31, 2002 (first quarter of 2002) and 2001 (first quarter of 2001). All
significant intercompany accounts and transactions have been eliminated. Our
accounting and reporting policies conform with generally accepted accounting
principles.


This information should be read in conjunction with our unaudited 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 consolidated
financial statements and financial data to conform to the March 31, 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 consolidated
statement of financial condition with the associated distributions classified
as noninterest expense in the consolidated statement of income.

Financial Overview

Total assets were $1.329 billion at March 31, 2002, an increase of $122
million, or 10.1% from $1.207 billion as of December 31, 2001. Total loans, net
of unearned income, were $1.115 billion at March 31, 2002, an increase of $116
million, or 11.6% from $999 million as of December 31, 2001. Total deposits
were $1.037 billion at March 31, 2002, an increase of $85 million, or 8.9% from
$952 million as of December 31, 2001. Total stockholders equity was $99
million at March 31, 2002, an increase of $22 million, or 28.4% 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 increased $607,000, or 38.4% to $2.2 million for the first
quarter of 2002 from $1.6 million for the first quarter of 2001. Basic and
diluted net income per share was $.15 and $.11 for the first quarter of 2002
and 2001, based on average weighted shares outstanding for the respective
periods. Return on average assets, on an annualized basis, was .69% for the
first quarter 2002 compared to .59% for the first quarter of 2001. Return on
average stockholders equity, on an annualized basis, was 11.23% for the first
quarter 2002 compared to 8.43% for the first quarter of 2001. Book value per
share at March 31, 2002 was $5.57 compared to $5.41 as of December 31, 2001.
Tangible book value per share at March 31, 2002 was $4.81 compared to $4.98 as
of December 31, 2001.


The growth in net income during the first quarter of 2002 compared with the
first 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 $2.2 million, or 23.3% to
$11.4 million for the first quarter of 2002 from $9.2 million for the first
quarter of 2001. The increase in net interest income was primarily due to a
$2.9 million, or 22.0% decrease in total interest expense offset by a $780,000,
or 3.5% decrease in total interest income.





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##### Table of Contents



The decline in total
interest expense is primarily attributable to a 200 basis point decline in the
average interest rate paid on interest-bearing liabilities. The average rate
paid on interest-bearing liabilities was 3.86% for the first quarter of 2002
compared to 5.86% for the first quarter of 2001. Our net interest spread and
net interest margin were 3.76% and 3.99%, respectively, for the first quarter
of 2002, compared to 3.44% and 3.83% for the first quarter of 2001.

Average interest-earning assets for the first quarter of 2002 increased $174
million, or 17.7% to $1.162 billion from $988 million in the first quarter of
2001. This growth in average interest-earning assets was primarily funded by a
$169 million, or 18.3 % increase in average interest-bearing liabilities to
$1.091 billion for the first quarter of 2002 from $922 million for the first
quarter of 2001. The ratio of average interest-earning assets to average
interest-bearing liabilities was 106.45% and 107.01% for the first quarters of
2002 and 2001, respectively. Average interest-bearing assets produced a tax
equivalent yield of 7.62% for the first quarter of 2002 compared to 9.30% for
the first quarter of 2001. The 168 basis point decline in the yield was offset
by both a 200 basis point decline in the average rate paid on interest-bearing
liabilities and a $235 million, or 28.0 % increase in the average volume of
loans from $837 million in the first quarter of 2001 to $1.072 billion in the
first quarter of 2002.





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##### 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 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 March 31, |        |         |      |                        |      |        |         |       
|                                        |                                                                         |                    |                                            |           |        
|                                        |                                                                         |                    |                                            |           |         |           |         | 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)                                       |                    | $                                          | 1,072,233 |         |           | $       | 20,835 |                              |        |         | 7.88 | %                      |      | $      | 837,727 |        |           | $     | 20,281 |       |        |      | 9.82  | %   
|                                        | Investment securities                                                   |                    |                                            |           |         |           |         |        |                              |        |         |      |                        |      |        |         |        |           |       |        |       |        |      |       |     
|                                        |                                                                         | Taxable            |                                            |           | 51,715  |           |         |        | 648                          |        |         |      | 5.08                   |      |        |         | 91,635 |           |       |        | 1,457 |        |      |       | 6.45 |     
|                                        |                                                                         | Tax-exempt (2)     |                                            |           | 7,614   |           |         |        | 142                          |        |         |      | 7.59                   |      |        |         | 14,040 |           |       |        | 264   |        |      |       | 7.63 |     
|                                        |                                                                         |                    |                                            |           |         |           |         |        |                              |        |         |      |                        |      |        |         |       
|                                        |                                                                         |                    | Total investment securities                |           |         | 59,329    |         |        |                              | 790    |         |      |                        | 5.40 |        |         |        | 105,675   |       |        |       | 1,721  |      |       |      | 6.60 | 
|                                        |                                                                         | Federal funds sold |                                            |           | 20,839  |           |         |        | 87                           |        |         |      | 1.69                   |      |        |         | 32,745 |           |       |        | 462   |        |      |       | 5.72 |     
|                                        |                                                                         | Other investments  |                                            |           | 9,510   |           |         |        | 117                          |        |         |      | 4.99                   |      |        |         | 11,376 |           |       |        | 187   |        |      |       | 6.67 |     
|                                        |                                                                         |                    |                                            |           |         |           |         |        |                              |        |         |      |                        |      |        |         |       
|                                        |                                                                         |                    | Total interest-earning assets              |           |         | 1,161,911 |         |        |                              | 21,829 |         |      |                        | 7.62 |        |         |        | 987,523   |       |        |       | 22,651 |      |       |      | 9.30 | 
|Noninterest-earning assets:             |                                                                         |                    |                                            |           |         |           |         |        |                              |        |         |      |                        |      |        |         |        |           |       |        |       |        |      |      
|                                        | Cash and due from banks                                                 |                    |                                            | 36,278    |         |           |         |        |                              |        |         |      |                        |      |        | 31,680  |        |           |       |        |       |        |      |       |     
|                                        | Premises and equipment                                                  |                    |                                            | 50,662    |         |           |         |        |                              |        |         |      |                        |      |        | 43,862  |        |           |       |        |       |        |      |       |     
|                                        | Accrued interest and other assets                                       |                    |                                            | 41,652    |         |           |         |        |                              |        |         |      |                        |      |        | 39,632  |        |           |       |        |       |        |      |       |     
|                                        | Allowance for loan losses                                               |                    |                                            | (13,282   | )       |           |         |        |                              |        |         |      |                        |      |        | (9,221  | )      |           |       |        |       |        |      |       |     
|                                        |                                                                         |                    |                                            |           |         |           |         |        |                              |        |         |      |                        |      |        |         |        |           |       |        |       |        |      |      
|                                        |                                                                         |                    | Total assets                               |           | $       | 1,277,221 |         |        |                              |        |         |      |                        |      |        |         | $      | 1,093,476 |       |        |       |        |      |       |      |      | 
|                                        |                                                                         |                    |                                            |           |         |           |         |        |                              |        |         |      |                        |      |        |         |        |           |       |        |       |        |      |      
|                                        |                                                                         |                    |                                            |           |         |           |         |        |                              |        |         |      |                        |      |        |         |        |           |       |        |       |        |      |      
|LIABILITIES AND STOCKHOLDERS EQUITY    |                                                                         |                    |                                            |           |         |           |         |        |                              |        |         |      |                        |      |        |         |        |           |       |        |       |        |      |      
|                                        |                                                                         |                    |                                            |           |         |           |         |        |                              |        |         |      |                        |      |        |         |        |           |       |        |       |        |      |      
|Interest-bearing liabilities:           |                                                                         |                    |                                            |           |         |           |         |        |                              |        |         |      |                        |      |        |         |        |           |       |        |       |        |      |      
|                                        | Demand deposits                                                         |                    | $                                          | 271,781   |         |           |         | 946    |                              |        |         | 1.41 |                        |      | $      | 196,889 |        |           |       | 1,979  |       |        |      | 4.08  |     
|                                        | Savings deposits                                                        |                    |                                            | 38,304    |         |           |         | 57     |                              |        |         | 0.60 |                        |      |        | 33,355  |        |           |       | 230    |       |        |      | 2.80  |     
|                                        | Time deposits                                                           |                    |                                            | 599,476   |         |           |         | 6,619  |                              |        |         | 4.48 |                        |      |        | 543,979 |        |           |       | 8,851  |       |        |      | 6.60  |     
|                                        | Other borrowings                                                        |                    |                                            | 150,926   |         |           |         | 2,120  |                              |        |         | 5.70 |                        |      |        | 133,569 |        |           |       | 1,865  |       |        |      | 5.66  |     
|                                        | Guaranteed preferred beneficial
interest in our subordinated
debentures |                    |                                            | 31,000    |         |           |         | 647    |                              |        |         | 8.46 |                        |      |        | 15,000  |        |           |       | 398    |       |        |      | 10.76 |     
|                                        |                                                                         |                    |                                            |           |         |           |         |        |                              |        |         |      |                        |      |        |         |       
|                                        |                                                                         |                    | Total interest-bearing liabilities         |           |         | 1,091,487 |         |        |                              | 10,389 |         |      |                        | 3.86 |        |         |        | 922,792   |       |        |       | 13,323 |      |       |      | 5.86 | 
|Noninterest-bearing liabilities:        |                                                                         |                    |                                            |           |         |           |         |        |                              |        |         |      |                        |      |        |         |        |           |       |        |       |        |      |      
|                                        | Demand deposits                                                         |                    |                                            | 98,400    |         |           |         |        |                              |        |         |      |                        |      |        | 86,793  |        |           |       |        |       |        |      |       |     
|                                        | Accrued interest and other liabilities                                  |                    |                                            | 8,419     |         |           |         |        |                              |        |         |      |                        |      |        | 7,973   |        |           |       |        |       |        |      |       |     
|                                        | Stockholders equity                                                    |                    |                                            | 78,915    |         |           |         |        |                              |        |         |      |                        |      |        | 75,918  |        |           |       |        |       |        |      |       |     
|                                        |                                                                         |                    |                                            |           |         |           |         |        |                              |        |         |      |                        |      |        |         |        |           |       |        |       |        |      |      
|                                        |                                                                         |                    | Total liabilities and
stockholders equity |           | $       | 1,277,221 |         |        |                              |        |         |      |                        |      |        |         | $      | 1,093,476 |       |        |       |        |      |       |      |      | 
|                                        |                                                                         |                    |                                            |           |         |           |         |        |                              |        |         |      |                        |      |        |         |        |           |       |        |       |        |      |      
|Net interest income/net interest
spread |                                                                         |                    |                                            |           |         |           | 11,440  |        |                              |        | 3.76    | %    |                        |      |        |         |        |           | 9,328 |        |       |        | 3.44 | %    
|                                        |                                                                         |                    |                                            |           |         |           |         |        |                              |        |         |      |                        |      |        |         |        |           |       |        |       |        |      |      
|Net yield on earning assets             |                                                                         |                    |                                            |           |         |           |         |        |                              |        | 3.99    | %    |                        |      |        |         |        |           |       |        |       |        | 3.83 | %    
|                                        |                                                                         |                    |                                            |           |         |           |         |        |                              |        |         |      |                        |      |        |         |        |           |       |        |       |        |      |      
|Taxable equivalent adjustment:          |                                                                         |                    |                                            |           |         |           |         |        |                              |        |         |      |                        |      |        |         |        |           |       |        |       |        |      |      
|                                        | Investment securities (2)                                               |                    |                                            |           |         |           |         | 48     |                              |        |         |      |                        |      |        |         |        |           |       | 90     |       |        |      |       |     
|                                        |                                                                         |                    |                                            |           |         |           |         |        |                              |        |         |      |                        |      |        |         |        |           |       |        |       |        |      |      
|                                        |                                                                         |                    | Net interest income                        |           |         |           |         |        | $                            | 11,392 |         |      |                        |      |        |         |        |           |       |        | $     | 9,238  |      |       |      |      | 
|                                        |                                                                         |                    |                                            |           |         |           |         |        |                              |        |         |      |                        |      |        |         |        |           |       |        |       |        |      |      



|(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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##### Table of Contents



The following table sets forth, on a taxable equivalent basis, the effect
which the varying levels of interest-earning assets and interest-bearing
liabilities and the applicable rates have had on changes in net interest income
for the three months ended March 31, 2002 and 2001.

|                                           |                                                      |                                |                               |                        |     |                                 |        |        |      |                |        |     |     |       |       |  
|------------------------------------------ | ---------------------------------------------------- | ------------------------------ | ----------------------------- | ---------------------- | --- | ------------------------------- | ------ | ------ | ---- | -------------- | ------ | --- | --- | ----- | ----- | -
|                                           |                                                      |                                |                               |                        |     | Three Months Ended March 31 (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    |                        | $   | 554                             |        |        | $    | (4,469         | )      |     | $   | 5,023 |      
|                                           |                                                      |                                | Interest on securities:       |                        |     |                                 |        |        |      |                |        |     |     |       |      
|                                           |                                                      |                                |                               | Taxable                |     |                                 | (809   | )      |      |                | (265   | )   |     |       | (544  | )
|                                           |                                                      |                                |                               | Tax-exempt             |     |                                 | (122   | )      |      |                | (2     | )   |     |       | (120  | )
|                                           |                                                      |                                | Interest on federal funds     |                        |     | (375                            | )      |        |      | (247           | )      |     |     | (128  | )    
|                                           |                                                      |                                | Interest on other investments |                        |     | (70                             | )      |        |      | (42            | )      |     |     | (28   | )    
|                                           |                                                      |                                |                               |                        |     |                                 |        |        |      |                |       
|                                           |                                                      |                                |                               | Total interest income  |     |                                 | (822   | )      |      |                | (5,025 | )   |     |       | 4,203 |  
|                                           |                                                      |                                |                               |                        |     |                                 |        |        |      |                |       
|Expense from interest-bearing liabilities: |                                                      |                                |                               |                        |     |                                 |        |        |      |                |        |    
|                                           | Interest on demand deposits                          |                                |                               | (1,033                 | )   |                                 |        | (1,606 | )    |                |        | 573 |    
|                                           | Interest on savings deposits                         |                                |                               | (173                   | )   |                                 |        | (203   | )    |                |        | 30  |    
|                                           | Interest on time deposits                            |                                |                               | (2,232                 | )   |                                 |        | (3,065 | )    |                |        | 833 |    
|                                           | Interest on other borrowings                         |                                |                               | 255                    |     |                                 |        | 13     |      |                |        | 242 |    
|                                           | Interest on guaranteed preferred beneficial interest |                                |                               |                        |     |                                 |        |        |      |                |        |     |    
|                                           |                                                      | in
our subordinated debentures |                               |                        | 249 |                                 |        |        | (100 | )              |        |     | 349 |      
|                                           |                                                      |                                |                               |                        |     |                                 |        |        |      |                |       
|                                           |                                                      |                                |                               | Total interest expense |     |                                 | (2,934 | )      |      |                | (4,961 | )   |     |       | 2,027 |  
|                                           |                                                      |                                |                               |                        |     |                                 |        |        |      |                |       
|                                           |                                                      |                                |                               | Net interest income    |     | $                               | 2,112  |        |      | $              | (64    | )   |     | $     | 2,176 |  
|                                           |                                                      |                                |                               |                        |     |                                 |        |        |      |                |       



|(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.Noninterest income increased $528,000, or 23.7% to $2.8
million for the first quarter of 2002 from $2.2 million for the first quarter
of 2001, primarily due to an increase in deposit service charge income and
mortgage banking income. Service charges on deposits increased $166,000, or
16.1% to $1.2 million in the first quarter of 2002 from $1.0 million in the
first quarter of 2001. Mortgage banking income increased $362,000, or 102.8% to
$714,000 in the first quarter of 2002 from $352,000 in the first quarter of
2001.

Noninterest expense.Noninterest expense increased $1.3 million, or 15.7% to
$9.8 million for first quarter of 2002 from $8.5 million for the first quarter
of 2001. As a percentage of net interest income, noninterest expenses declined
from 91.6% during the first quarter of 2001 to 86.0% during the first quarter
of 2002. This relative decline in noninterest expenses improved our efficiency
ratio to 69.0% during the first quarter of 2002 compared to 73.3% during the
first quarter of 2001 and 77.2% for the year 2001. Salaries and benefits
increased $959,000, or 20.9% to $5.6 million for the first quarter of 2002 from
$4.6 million for the first quarter of 2001. The increase in salaries and
benefits primarily resulted from the opening of new branches and the
acquisition of CF Bancshares. All other noninterest expenses increased
$372,000, or 9.6% to $4.2 million for the first quarter of 2002 from $3.8
million for the first quarter of 2001.





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Income tax expense.Income tax expense was $1.1 million for the first quarter
of 2002, compared to $628,000 for the first quarter of 2001. The primary
difference in the effective rate and the federal statutory rate (34%) for the
first quarter of 2002 is due to certain tax-exempt income from investments and
insurance policies. The primary difference in the first quarter of 2001 is due
to the recognition of a rehabilitation tax credit generated from the
restoration of our headquarters, the John A. Hand Building.

Provision for Loan Losses.The provision for loan losses represents the amount
determined by management necessary to maintain the allowance for loan losses at
a level capable of absorbing inherent losses in the loan portfolio. Management
reviews the adequacy of the allowance on a quarterly basis. The allowance for
classified loans is established based on risk ratings assigned by loan
officers. Loans are risk rated using a seven-point scale, 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 $1.1 million for the first quarter of 2002
compared to $795,000 for the first quarter of 2001. During the first quarter of
2002, we had net charged-off loans totaling $875,000 compared to net
charged-off loans of $203,000 in the first quarter of 2001. The ratio of net
charged-off loans to the provision for loan losses was 78.5% in the first
quarter of 2002 compared to 25.5% for the first quarter of 2001 and 51.9% for
the year 2001. The annualized ratio of net charged-off loans to average loans
was .33% in the first quarter of 2002 compared to .10% for the first quarter of
2001 and .42% for the year 2001. The allowance for loan losses totaled $13.8
million, or 1.24% of loans, net of unearned income at March 31, 2002 compared
to $12.6 million, or 1.26% of loans, net of unearned income at December 31,
2001. See Allowance for Loan Losses section for additional discussion.

Financial Condition

Total assets were $1.329 billion at March 31, 2002, an increase of $122
million, or 10.1% 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. Average
total assets for the first quarter of 2002 totaled $1.278 billion, which was
supported by average total liabilities of $1.199 billion and average total
stockholders equity of $79 million.






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##### Table of Contents



Short-term liquid assets. Short-term liquid assets (cash and due from banks,
interest-bearing deposits in other banks and federal funds sold) increased $6.8
million, or 13.1%, to $59.0 million at March 31, 2002 from $52.2 million at
December 31, 2001. This increase resulted primarily from the increase in cash
and due from banks related to the CF Bancshares acquisition. At March 31, 2002,
short-term liquid assets comprised 4.5% 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.Total investment securities decreased $13.6 million, or
19.8% to $55.2 million at March 31, 2002, from $68.8 million at December 31,
2001. Mortgage-backed securities, which comprised 66.9% of the total investment
portfolio at March 31, 2002 decreased $1.8 million, or 4.7%, to $36.9 million
from $38.8 million at December 31, 2001. Investments in U.S. Treasury and
agency securities, which comprised 13.4% of the total investment portfolio at
March 31, 2002, decreased $11.5 million, or 60.8%, to $7.4 million from $18.9
million at December 31, 2001. The total investment portfolio at March 31, 2002
comprised 4.6% of all interest-earning assets compared to 6.3% at December 31,
2001 and produced an average tax equivalent yield of 5.4% for the first quarter
of 2002 compared to 6.6% for the first quarter of 2001.

Loans, net of unearned income.Loans, net of unearned income, totaled $1.115
billion at March 31, 2002, an increase of 11.6%, or $116 million from $999
million at December 31, 2001, with average loans totaling $1.072 billion for
the first quarter of 2002 compared to $838 million for the first quarter of
2001. Approximately $88 million in loans were acquired in the CF Bancshares
acquisition. Of the approximately $28 million increase in loans, exclusive of
the CF Bancshares acquisition, 18.0%, or $5 million were produced by branches
in the Alabama region, the other 82.0%, or $23 million were produced by
branches in the Florida region. Loans, net of unearned income, comprised 92.6%
of interest-earning assets at March 31, 2002, compared to 91.0% at December 31,
2001. The loan portfolio produced an average yield of 7.9% for the first
quarter of 2002, compared to 9.8% for the first quarter of 2001. This decline
in yield was offset by a 200 basis point decline in the average cost of the
funds that supports the loan portfolio. The following table details the
distribution of the loan portfolio by category as of March 31, 2002 and
December 31, 2001:

Distribution of Loans by Category

|                                                |            |             |         |                |           |                   |      |        |       |                  |         |         |           |  |      |      |       |  
|----------------------------------------------- | ---------- | ----------- | ------- | -------------- | --------- | ----------------- | ---- | ------ | ----- | ---------------- | ------- | ------- | --------- |  | ---- | ---- | ----- | -
|                                                |            |             |         | March 31, 2002 |           | December 31, 2001
|                                                |            |             |         |                |           |                  
|                                                |            |             |         | Amount         |           | Percent
of
Total  |      | Amount |       | Percent
of
Total
|                                                |            |             |         |                |           |                   |      |        |       |                 
|Commercial and industrial                       |            | $           | 266,258 |                |           |                   | 23.9 | %      |       | $                | 261,196 |         |           |  | 26.1 | %   
|Real estate  construction and land development |            |             | 215,060 |                |           |                   | 19.3 |        |       |                  | 200,250 |         |           |  | 20.0 |     
|Real estate  mortgage
Single-family (1)        |            |             | 280,731 |                |           |                   | 25.1 |        |       |                  | 224,736 |         |           |  | 22.5 |     
|                                                | Commercial |             |         | 230,449        |           |                   |      | 20.6   |       |                  |         | 194,535 |           |  |      | 19.5 |      
|                                                | Other      |             |         | 23,424         |           |                   |      | 2.1    |       |                  |         | 24,140  |           |  |      | 2.4  |      
|Consumer                                        |            |             | 94,418  |                |           |                   | 8.5  |        |       |                  | 91,421  |         |           |  | 9.1  |     
|Other                                           |            |             | 6,227   |                |           |                   | .5   |        |       |                  | 3,784   |         |           |  | .4   |     
|                                                |            |             |         |                |           |                   |      |        |       |                  |         |        
|                                                |            | Total loans |         |                | 1,116,567 |                   |      |        | 100.0 | %                |         |         | 1,000,062 |  |      |      | 100.0 | %
|                                                |            |             |         |                |           |                   |      |        |       |                  |         |         |           |  |      |     
|Unearned income                                 |            |             | (1,073  | )              |           |                   |      |        |       |                  | (906    | )       |           |  |      |     
|Allowance for loan losses                       |            |             | (13,844 | )              |           |                   |      |        |       |                  | (12,546 | )       |           |  |      |     
|                                                |            |             |         |                |           |                   |      |        |       |                  |         |         |           |  |      |     
|                                                |            | Net loans   |         | $              | 1,101,650 |                   |      |        |       |                  |         | $       | 986,610   |  |      |      |       |  
|                                                |            |             |         |                |           |                   |      |        |       |                  |         |         |           |  |      |     



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





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Deposits. Noninterest-bearing deposits totaled $106.6 million at March 31,
2002, an increase of 12.6%, or $12.0 million from $94.6 million at December 31,
2001. Approximately $5.0 million in noninterest-bearing deposits were acquired
in the CF Bancshares acquisition. Noninterest-bearing deposits comprised 10.3%
of total deposits at March 31, 2002, compared to 9.9% at December 31, 2001. Of
total noninterest-bearing deposits $69.1 million, or 64.8% were in the Alabama
branches while $37.5 million, or 35.2% were in the Florida branches.

Interest-bearing deposits totaled $930.1 million at March 31, 2002, an increase
of 8.5%, or $72.5 million from $857.6 million at December 31, 2001.
Approximately $72.0 million in interest-bearing deposits were acquired in the
CF Bancshares acquisition. Interest-bearing deposits averaged $909.6 million
for the first quarter of 2002 compared to $774.2 million for the first quarter
of 2001. The $72.5 million increase in interest-bearing deposits during the
first quarter of 2002 is comprised primarily of higher yielding certificates of
deposit issued to fund loan demand. The average rate paid on all interest
bearing deposits during the first quarter of 2002 was 3.4% compared to 5.8% for
the first quarter of 2001. The loan portfolio that was funded by these deposits
produced an average yield of 7.9% for the first quarter of 2002, compared to
9.8% for the first quarter of 2001. Of total interest-bearing deposits $596.2
million, or 64.1% were in the Alabama branches while $333.9 million, or 35.9%
were in the Florida branches.

Borrowings.Advances from the Federal Home Loan Bank (FHLB) increased $15.0
million to $151.0 million at March 31, 2002 from $136.0 million at December 31,
2001. This $15.0 million increase was FHLB advances assumed in the CF
Bancshares acquisition. Borrowings from the FHLB were used primarily to fund
growth in the loan portfolio and have a weighted average rate of approximately
5.7%. The advances are secured by FHLB stock, agency securities and a blanket
lien on certain residential real estate loans and commercial 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% per annum ceiling for the first
ten years. As of the date of issuance, the interest rate on the securities was
7.57%, as of March 31, 2002 the rate is 5.74%.

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 and 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.





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##### Table of Contents



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. 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, sets limits on credit
concentration and enforces regulatory requirements.

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

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 seven 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 the present value of expected future cash flows discounted at the
loans effective interest rate, at the loans observable
market price or at the
fair value of the collateral if the loan is collateral dependent. A valuation
allowance is provided to the extent that the measure of the impaired loans is
less than the recorded investment. A loan is not considered impaired during a
period of delay in payment if the ultimate collectibility of all amounts due is
expected. Larger groups of homogenous loans such as consumer installment and
residential real estate mortgage loans are collectively evaluated for
impairment.

Reserve percentages assigned to pass rated homogeneous 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

|                                                                 |                                                 |            |                   |       |                        |     |              |       |     |       | 
|---------------------------------------------------------------- | ----------------------------------------------- | ---------- | ----------------- | ----- | ---------------------- | --- | ------------ | ----- | --- | ----- | 
|                                                                 |                                                 |            |                   |       | Three-Month            |     |              |       |    
|                                                                 |                                                 |            |                   |       | period Ended           |     | Year Ended  
|                                                                 |                                                 |            |                   |       | March 31,              |     | 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                       |            |                   | 554   |                        |     |              | 2,415 |    
|                                                                 | Real estate  construction and land development |            |                   | 7     |                        |     |              | 48    |    
|                                                                 | Real
estate  mortgage
      Single-family      |            |                   | 34    |                        |     |              | 184   |    
|                                                                 |                                                 | Commercial |                   |       | 52                     |     |              |       | 130 |      
|                                                                 |                                                 | Other      |                   |       | 31                     |     |              |       | 20  |      
|                                                                 | Consumer                                        |            |                   | 320   |                        |     |              | 1,517 |    
|                                                                 |                                                 |            |                   |       |                        |    
|                                                                 |                                                 |            | Total charge-offs |       |                        | 998 |              |       |     | 4,314 | 
|Recoveries:                                                      |                                                 |            |                   |       |                        |     |              |      
|                                                                 | Commercial and industrial                       |            |                   | 35    |                        |     |              | 65    |    
|                                                                 | Real estate  construction and land development |            |                   | 14    |                        |     |              | 65    |    
|                                                                 | Real
estate  mortgage
      Single-family      |            |                   | 2     |                        |     |              | 27    |    
|                                                                 |                                                 | Commercial |                   |       |                       |     |              |       |    |      
|                                                                 |                                                 | Other      |                   |       | 7                      |     |              |       |    |      
|                                                                 | Consumer                                        |            |                   | 65    |                        |     |              | 290   |    
|                                                                 |                                                 |            |                   |       |                        |    
|                                                                 |                                                 |            | Total recoveries  |       |                        | 123 |              |       |     | 447   | 
|                                                                 |                                                 |            |                   |       |                        |    
|Net charge-offs                                                  |                                                 |            | 875               |       |                        |     | 3,867        |      
|Provision for loan losses                                        |                                                 |            | 1,115             |       |                        |     | 7,454        |      
|                                                                 |                                                 |            |                   |       |                        |    
|                                                                 |                                                 |            |                   |       |                        |     |              |      
|Allowance for loan losses at end of period                       |                                                 | $          | 13,844            |       |                        | $   | 12,546       |      
|                                                                 |                                                 |            |                   |       |                        |    
|                                                                 |                                                 |            |                   |       |                        |     |              |      
|Loans at end of period, net of unearned income                   |                                                 | $          | 1,115,494         |       |                        | $   | 999,156      |      
|Average loans, net of unearned income                            |                                                 |            | 1,072,233         |       |                        |     | 914,006      |      
|Ratio of ending allowance to ending loans                        |                                                 |            | 1.24              | %     |                        |     | 1.26         | %    
|Ratio of net charge-offs to average loans (1)                    |                                                 |            | .33               | %     |                        |     | .42          | %    
|Net charge-offs as a percentage of:                              |                                                 |            |                   |       |                        |     |              |      
|                                                                 | Provision for loan losses                       |            |                   | 78.48 | %                      |     |              | 51.88 | %  
|                                                                 | Allowance for loan losses (1)                   |            |                   | 25.63 | %                      |     |              | 30.82 | %  
|Allowance for loan losses as a percentage
of nonperforming loans |                                                 |            | 126.07            | %     |                        |     | 100.99       | %    



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

The allowance for loan losses as a percentage of loans, net of unearned income,
at March 31, 2002 was 1.24% 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 126.1% at March 31, 2002 from 101.0% at
December 31, 2001.





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##### Table of Contents



Net charge-offs were $875,000 for the first quarter of 2002. Net charge-offs to
average loans on an annualized basis totaled .33% for the first quarter 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 $519,000, or 59.3% of
total net charge-off loans for the first quarter of 2002 compared to 60.8% of
total net charge-off loans for the year 2001. Net consumer loan charge-offs
totaled $255,000, or 29.1% of total net charge-off loans for the first quarter
of 2002 compared with 31.7% of total net charge-off loans for the year 2001.

Nonperforming Loans.Nonperforming loans decreased $1.4 million to $11.0
million as of March 31, 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 .98% at March 31, 2002. The following table represents our
nonperforming loans for the dates indicated.

Nonaccrual, Past Due and Restructured Loans

|                                                  |  |                        |        |              |  |   |        |  
|------------------------------------------------- |  | ---------------------- | ------ | ------------ |  | - | ------ | -
|                                                  |  | March 31,              |        | December 31,
|                                                  |  | 2002                   |        | 2001        
|                                                  |  |                        |        |              |  |  
|                                                  |  | (Dollars in thousands)
|Nonaccrual                                        |  | $                      | 10,000 |              |  | $ | 7,941  |  
|Past due (contractually past due 90 days or more) |  |                        | 981    |              |  |   | 4,482  |  
|Restructured                                      |  |                        |       |              |  |   |       |  
|                                                  |  |                        |        |              |  |  
|                                                  |  | $                      | 10,981 |              |  | $ | 12,423 |  
|                                                  |  |                        |        |              |  |  
|                                                  |  |                        |        |              |  |   |        |  
|Nonperforming loans as a percent of loans         |  |                        | .98    | %            |  |   | 1.24   | %
|                                                  |  |                        |        |              |  |  

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

|                                                |               |                           |       |                        |        |              |       |       |        | 
|----------------------------------------------- | ------------- | ------------------------- | ----- | ---------------------- | ------ | ------------ | ----- | ----- | ------ | 
|                                                |               |                           |       | March
31,              |        | December 31,
|                                                |               |                           |       |                        |        |             
|                                                |               |                           |       | 2002                   |        | 2001        
|                                                |               |                           |       |                        |        |             
|                                                |               |                           |       | (Dollars in thousands)
|Commercial and industrial                       |               | $                         | 3,531 |                        |        | $            | 3,078 |      
|Real estate  construction and land development |               |                           | 1,534 |                        |        |              | 2,895 |      
|Real estate  mortgages                         |               |                           |       |                        |        |              |       |      
|                                                | Single-family |                           |       | 2,146                  |        |              |       | 3,089 |       
|                                                | Commercial    |                           |       | 2,394                  |        |              |       | 2,400 |       
|                                                | Other         |                           |       | 401                    |        |              |       | 145   |       
|Consumer                                        |               |                           | 817   |                        |        |              | 669   |      
|Other                                           |               |                           | 158   |                        |        |              | 147   |      
|                                                |               |                          
|                                                |               | Total nonperforming loans |       | $                      | 10,981 |              |       | $     | 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
during the current period but remains
unpaid is reversed and deducted from earnings as a reduction of reported
interest income; any prior period accrued and unpaid interest is
reversed and charged against the allowance for loan losses. 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.

In addition to nonperforming loans, management has identified $2.9 million in
potential problem loans as of March 31, 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
nonperforming. Approximately $719,000 of this amount consists of a single loan
secured by residential real estate. Management has allocated in the allowance
for loan losses approximately $301,000 to absorb any losses primarily through
the substandard and doubtful classifications that may result from these loans.
Approximately $51,000 of these loans are considered impaired as discussed below.





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##### Table of Contents



Impaired Loans.At March 31, 2002, the recorded investment in impaired loans
totaled $ 8.5 million with approximately $2.1 million in allowance for loan
losses specifically allocated to impaired loans. We have no commitments to loan
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 March 31, 2002:

|                                                |            |       |       |                        |       |           |       |     |       | 
|----------------------------------------------- | ---------- | ----- | ----- | ---------------------- | ----- | --------- | ----- | --- | ----- | 
|                                                |            |       |       | Outstanding            |       | Specific 
|                                                |            |       |       | Balance                |       | Allowance
|                                                |            |       |       |                        |       |          
|                                                |            |       |       | (Dollars in thousands)
|Commercial and industrial                       |            | $     | 4,219 |                        |       | $         | 1,249 |    
|Real estate  construction and land development |            |       | 1,534 |                        |       |           | 169   |    
|Real estate  mortgages                         |            |       |       |                        |       |           |       |    
|                                                | Commercial |       |       | 2,640                  |       |           |       | 617 |      
|                                                | Other      |       |       | 5                      |       |           |       | 1   |      
|Other                                           |            |       | 146   |                        |       |           | 36    |    
|                                                |            |      
|                                                |            | Total |       | $                      | 8,544 |           |       | $   | 2,072 | 
|                                                |            |      

Stockholders Equity. At March 31, 2002, total stockholders equity was $98.7
million, an increase of $21.8 million from $76.9 million at December 31, 2001.
The increase in stockholders equity resulted primarily from total
comprehensive income of $2.3 million for the first quarter 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 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. We used $14.0 million of these
proceeds to repay debt incurred in the acquisition of CF Bancshares. As of
March 31, 2002, we had 17,845,420 shares of common stock issued and 17,706,342
outstanding. In September of 2000, our board of directors approved a stock
buyback plan in an amount not to exceed $10,000,000. As of March 31, 2002 there
were 139,078 shares held in treasury at a cost of $779,000.

Regulatory Capital. The table below represents our and our subsidiarys
regulatory and minimum regulatory capital requirements at March 31, 2002
(dollars in thousands):

| |                           |             |  |        |         |          |  |             |       |       |  |             |        |            |  |  |      |   |  |   |         |  |  |  |       |  
| | ------------------------- | ----------- |  | ------ | ------- | -------- |  | ----------- | ----- | ----- |  | ----------- | ------ | ---------- |  |  | ---- | - |  | - | ------- |  |  |  | ----- | -
| |                           |             |  |        |         |          |  |             |       |       |  | For Capital |        |            |  |  |      |   |  |  
| |                           |             |  |        |         |          |  |             |       |       |  | Adequacy    |        | To Be Well
| |                           |             |  | Actual |         | Purposes |  | Capitalized
| |                           |             |  |        |         |          |  |            
| |                           |             |  | Amount |         | Ratio    |  | Amount      |       | Ratio |  | Amount      |        | Ratio     
| |                           |             |  |        |         |          |  |             |       |       |  |             |        |           
| | Total Risk-Based Capital  |             |  |        |         |          |  |             |       |       |  |             |        |            |  |  |      |   |  |   |         |  |  |  |      
| |                           | Corporation |  | $      | 130,124 |          |  |             | 11.86 | %     |  | $           | 87,778 |            |  |  | 8.00 | % |  | $ | 109,722 |  |  |  | 10.00 | %
| |                           | The Bank    |  |        | 115,084 |          |  |             | 10.59 |       |  |             | 86,943 |            |  |  | 8.00 |   |  |   | 108,679 |  |  |  | 10.00 |  
| |                           |             |  |        |         |          |  |             |       |       |  |             |        |            |  |  |      |   |  |   |         |  |  | 
| | Tier 1 Risk-Based Capital |             |  |        |         |          |  |             |       |       |  |             |        |            |  |  |      |   |  |   |         |  |  |  |      
| |                           | Corporation |  |        | 113,876 |          |  |             | 10.38 |       |  |             | 43,889 |            |  |  | 4.00 |   |  |   | 65,833  |  |  |  | 6.00  |  
| |                           | The Bank    |  |        | 101,496 |          |  |             | 9.34  |       |  |             | 43,472 |            |  |  | 4.00 |   |  |   | 65,208  |  |  |  | 6.00  |  
| |                           |             |  |        |         |          |  |             |       |       |  |             |        |            |  |  |      |   |  |   |         |  |  | 
| | Leverage Capital          |             |  |        |         |          |  |             |       |       |  |             |        |            |  |  |      |   |  |   |         |  |  |  |      
| |                           | Corporation |  |        | 113,876 |          |  |             | 9.01  |       |  |             | 50,549 |            |  |  | 4.00 |   |  |   | 63,186  |  |  |  | 5.00  |  
| |                           | The Bank    |  |        | 101,496 |          |  |             | 8.11  |       |  |             | 50,074 |            |  |  | 4.00 |   |  |   | 62,592  |  |  |  | 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 prospectus.
Therefore, we caution you not to place undue reliance on our forward-looking
information and statements.





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##### Table of Contents



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.




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.






---



##### Table of Contents






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 effect our business, financial condition or
results of operations.




Item 2. Changes in Securities and Use of Proceeds

During March 2002, we 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. We used $14.0
million of these proceeds to repay debt incurred in the acquisition of CF
Bancshares. We will use the remainder of the proceeds for general corporate
purposes.




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:



(10)-1 Employment Agreement, dated as of January
1, 2002, by and between The Banc Corporation and James A. Taylor.




(b) Report on Form 8-K:




We filed Current Report on Form 8-K dated February 12, 2002 under Item 9
announcing our offering of common stock,
       releasing earnings and the
closing date of the CF Bancshares acquisition.




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##### Table of Contents






Signatures

Pursuant with 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: May 15, 2002 |  | By: |  | /s/ James A. Taylor, Jr.                            
|                   |  |     |  |                                                     
|                   |  |     |  | James A. Taylor, Jr.                                
|                   |  |     |  | President and Chief Operating Officer               
|                   |  |     |  |                                                     
|                   |  |     |  |                                                     
|Date: May 15, 2002 |  | By: |  | /s/ David R. Carter                                 
|                   |  |     |  |                                                     
|                   |  |     |  | David R. Carter                                     
|                   |  |     |  | Executive Vice President and Chief Financial Officer
|                   |  |     |  | (Principal Accounting Officer)