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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

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 JUNE 30, 2002                                            
|           |  |                                                                                         
|OR        
|           |  |                                                                                         
|[   ]      |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|           |  |                                                                                         
|           |  | FOR THE TRANSITION PERIOD FROM 
TO                                                      

Commission file number 0-25033

The Banc Corporation

(Exact Name of Registrant as Specified in its Charter)


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

17 North 20th Street, Birmingham, Alabama 35203

(Address of Principal Executive
Offices) (Zip Code)


(205) 326-2265

(Registrants Telephone Number, Including Area Code)


Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X]        No [   ]

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

|                              |  |                                 |            | 
|----------------------------- |  | ------------------------------- | ---------- | 
|Class                         |  | Outstanding as of June 30, 2002
|                              |  |                                
|Common stock, $.001 par value |  |                                 | 17,723,959 | 





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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 Report on Form 8-K                                                      
|Signatures                   



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|        |  |                      
|------- |  | ---------------------
|PART I. |  | FINANCIAL INFORMATION




|        |  |                     
|------- |  | --------------------
|Item 1. |  | Financial Statements




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

|                                                                                                      |                                                                                                                                                                                       |   |                |                                            |   |             |           |              |   |         |           | 
|----------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | -------------- | ------------------------------------------ | - | ----------- | --------- | ------------ | - | ------- | --------- | 
|                                                                                                      |                                                                                                                                                                                       |   |                |                                            |   | June 30,    |           | December 31,
|                                                                                                      |                                                                                                                                                                                       |   |                |                                            |   | 2002        |           | 2001        
|                                                                                                      |                                                                                                                                                                                       |   |                |                                            |   |             |           |             
|                                                                                                      |                                                                                                                                                                                       |   |                |                                            |   | (Unaudited) |           | (Note 1)    
|Assets                                                                                                |                                                                                                                                                                                       |   |                |                                            |   |             |           |             
|Cash and due from banks                                                                               |                                                                                                                                                                                       | $ | 39,333         |                                            |   | $           | 31,682    |             
|Interest bearing deposits in other banks                                                              |                                                                                                                                                                                       |   | 198            |                                            |   |             | 495       |             
|Federal funds sold                                                                                    |                                                                                                                                                                                       |   | 21,000         |                                            |   |             | 20,000    |             
|Investment securities available for sale                                                              |                                                                                                                                                                                       |   | 71,063         |                                            |   |             | 68,847    |             
|Mortgage loans held for sale                                                                          |                                                                                                                                                                                       |   | 2,826          |                                            |   |             | 1,131     |             
|Loans, net of unearned income                                                                         |                                                                                                                                                                                       |   | 1,144,983      |                                            |   |             | 999,156   |             
|Less: Allowance for loan losses                                                                       |                                                                                                                                                                                       |   | (14,102        | )                                          |   |             | (12,546   | )           
|                                                                                                      |                                                                                                                                                                                       |   |                |                                            |   |             |           |             
|                                                                                                      |                                                                                                                                                                                       |   |                | Net loans                                  |   |             | 1,130,881 |              |   |         | 986,610   | 
|                                                                                                      |                                                                                                                                                                                       |   |                |                                            |   |             |           |             
|Premises and equipment, net                                                                           |                                                                                                                                                                                       |   | 57,551         |                                            |   |             | 47,829    |             
|Accrued interest receivable                                                                           |                                                                                                                                                                                       |   | 7,260          |                                            |   |             | 7,562     |             
|Stock in FHLB and Federal Reserve Bank                                                                |                                                                                                                                                                                       |   | 9,843          |                                            |   |             | 8,505     |             
|Other assets                                                                                          |                                                                                                                                                                                       |   | 42,709         |                                            |   |             | 33,744    |             
|                                                                                                      |                                                                                                                                                                                       |   |                |                                            |   |             |           |             
|                                                                                                      |                                                                                                                                                                                       |   |                | Total assets                               |   | $           | 1,382,664 |              |   | $       | 1,206,405 | 
|                                                                                                      |                                                                                                                                                                                       |   |                |                                            |   |             |           |             
|Liabilities and Stockholders Equity                                                                  |                                                                                                                                                                                       |   |                |                                            |   |             |           |             
|Deposits                                                                                              |                                                                                                                                                                                       |   |                |                                            |   |             |           |             
|                                                                                                      | Noninterest-bearing                                                                                                                                                                   |   | $              | 118,205                                    |   |             | $         | 94,655       |  
|                                                                                                      | Interest-bearing                                                                                                                                                                      |   |                | 970,832                                    |   |             |           | 857,580      |  
|                                                                                                      |                                                                                                                                                                                       |   |                |                                            |   |             |           |             
|                                                                                                      |                                                                                                                                                                                       |   | Total deposits |                                            |   | 1,089,037   |           |              |   | 952,235 |          
|                                                                                                      |                                                                                                                                                                                       |   |                |                                            |   |             |           |             
|Advances from FHLB                                                                                    |                                                                                                                                                                                       |   | 148,950        |                                            |   |             | 135,900   |             
|Other borrowed funds                                                                                  |                                                                                                                                                                                       |   | 3,023          |                                            |   |             | 813       |             
|Guaranteed preferred beneficial interests in our
subordinated debentures (trust preferred securities) |                                                                                                                                                                                       |   | 31,000         |                                            |   |             | 31,000    |             
|Accrued expenses and other liabilities                                                                |                                                                                                                                                                                       |   | 9,901          |                                            |   |             | 9,604     |             
|                                                                                                      |                                                                                                                                                                                       |   |                |                                            |   |             |           |             
|                                                                                                      |                                                                                                                                                                                       |   |                | Total liabilities                          |   |             | 1,281,911 |              |   |         | 1,129,552 | 
|                                                                                                      |                                                                                                                                                                                       |   |                |                                            |   |             |           |             
|Stockholders Equity                                                                                  |                                                                                                                                                                                       |   |                |                                            |   |             |           |             
|                                                                                                      | Preferred stock, par value $.001 per share; authorized 5,000,000 shares;
shares issued -0-                                                                                            |   |                |                                           |   |             |           |             |  
|                                                                                                      | Common stock, par value $.001 per share; authorized 25,000,000 shares;
shares issued 18,011,502 in 2002 and 14,385,021 in 2001; outstanding 17,723,959 in 2002 and 14,217,371 in 2001 |   |                | 18                                         |   |             |           | 14           |  
|                                                                                                      | Surplus                                                                                                                                                                               |   |                | 68,269                                     |   |             |           | 47,756       |  
|                                                                                                      | Retained earnings                                                                                                                                                                     |   |                | 35,017                                     |   |             |           | 30,329       |  
|                                                                                                      | Accumulated other comprehensive income (loss)                                                                                                                                         |   |                | 529                                        |   |             |           | (322         | )
|                                                                                                      | Treasury stock, at cost                                                                                                                                                               |   |                | (779                                       | ) |             |           | (924         | )
|                                                                                                      | Unearned ESOP stock                                                                                                                                                                   |   |                | (1,237                                     | ) |             |           |             |  
|                                                                                                      | Unearned restricted stock                                                                                                                                                             |   |                | (1,064                                     | ) |             |           |             |  
|                                                                                                      |                                                                                                                                                                                       |   |                |                                            |   |             |           |             
|                                                                                                      |                                                                                                                                                                                       |   |                | Total stockholders equity                 |   |             | 100,753   |              |   |         | 76,853    | 
|                                                                                                      |                                                                                                                                                                                       |   |                |                                            |   |             |           |             
|                                                                                                      |                                                                                                                                                                                       |   |                | Total liabilities and stockholders equity |   | $           | 1,382,664 |              |   | $       | 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 |        | Six Months Ended
|                                                                                                                 |                                |                       |                            |                                                     |        | June 30            |        | June 30         
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                 
|                                                                                                                 |                                |                       |                            |                                                     |        | 2002               |        | 2001             |        | 2002  |        | 2001  
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                  |        |       |        |       
|Interest income                                                                                                  |                                |                       |                            |                                                     |        |                    |        |                  |        |       |        |        |        |        |        |       
|Interest and fees on loans                                                                                       |                                | $                     | 22,106                     |                                                     |        | $                  | 20,929 |                  |        | $     | 42,941 |        |        | $      | 41,210 |       
|Interest on investment securities                                                                                |                                |                       |                            |                                                     |        |                    |        |                  |        |       |        |        |        |        |        |       
|                                                                                                                 | Taxable                        |                       |                            | 767                                                 |        |                    |        | 1,367            |        |       |        | 1,415  |        |        |        | 2,824  |       
|                                                                                                                 | Exempt from Federal income tax |                       |                            | 110                                                 |        |                    |        | 120              |        |       |        | 204    |        |        |        | 294    |       
|Interest on federal funds sold                                                                                   |                                |                       | 69                         |                                                     |        |                    | 441    |                  |        |       | 156    |        |        |        | 903    |       
|Interest and dividends on other investments                                                                      |                                |                       | 113                        |                                                     |        |                    | 190    |                  |        |       | 230    |        |        |        | 377    |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                  |        |       |        |        |        |        |        |       
|                                                                                                                 |                                | Total interest income |                            |                                                     | 23,165 |                    |        |                  | 23,047 |       |        |        | 44,946 |        |        |        | 45,608 |       
|Interest expense                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                  |        |       |        |        |        |        |        |       
|Interest on deposits                                                                                             |                                |                       | 7,199                      |                                                     |        |                    | 10,688 |                  |        |       | 14,821 |        |        |        | 21,748 |       
|Interest on other borrowed funds                                                                                 |                                |                       | 2,161                      |                                                     |        |                    | 2,027  |                  |        |       | 4,281  |        |        |        | 3,892  |       
|Interest on guaranteed preferred beneficial interest in our
subordinated debentures (trust preferred securities) |                                |                       | 629                        |                                                     |        |                    | 397    |                  |        |       | 1,276  |        |        |        | 795    |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                  |        |       |        |        |        |        |        |       
|                                                                                                                 | Total interest expense         |                       |                            | 9,989                                               |        |                    |        | 13,112           |        |       |        | 20,378 |        |        |        | 26,435 |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                  |        |       |        |        |        |        |        |       
|                                                                                                                 |                                |                       |                            | Net interest income                                 |        |                    | 13,176 |                  |        |       | 9,935  |        |        |        | 24,568 |        |        |        | 19,173 | 
|Provision for loan losses                                                                                        |                                |                       | 2,002                      |                                                     |        |                    | 835    |                  |        |       | 3,117  |        |        |        | 1,630  |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                  |        |       |        |        |        |        |        |       
|                                                                                                                 |                                |                       |                            | Net interest income after provision for loan losses |        |                    | 11,174 |                  |        |       | 9,100  |        |        |        | 21,451 |        |        |        | 17,543 | 
|Noninterest income                                                                                               |                                |                       |                            |                                                     |        |                    |        |                  |        |       |        |        |        |        |        |       
|Service charges and fees on deposits                                                                             |                                |                       | 1,685                      |                                                     |        |                    | 1,032  |                  |        |       | 2,881  |        |        |        | 2,062  |       
|Mortgage banking income                                                                                          |                                |                       | 668                        |                                                     |        |                    | 302    |                  |        |       | 1,382  |        |        |        | 654    |       
|Gain on sale of securities                                                                                       |                                |                       | 24                         |                                                     |        |                    | 120    |                  |        |       | 24     |        |        |        | 157    |       
|Other income                                                                                                     |                                |                       | 796                        |                                                     |        |                    | 769    |                  |        |       | 1,644  |        |        |        | 1,580  |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                  |        |       |        |        |        |        |        |       
|                                                                                                                 |                                |                       | Total noninterest income   |                                                     |        | 3,173              |        |                  |        | 2,223 |        |        |        | 5,931  |        |        |        | 4,453  |       
|Noninterest expenses                                                                                             |                                |                       |                            |                                                     |        |                    |        |                  |        |       |        |        |        |        |        |       
|Salaries and employee benefits                                                                                   |                                |                       | 6,069                      |                                                     |        |                    | 4,965  |                  |        |       | 11,621 |        |        |        | 9,558  |       
|Occupancy, furniture and equipment expense                                                                       |                                |                       | 1,974                      |                                                     |        |                    | 1,746  |                  |        |       | 3,778  |        |        |        | 3,472  |       
|Other                                                                                                            |                                |                       | 2,679                      |                                                     |        |                    | 2,685  |                  |        |       | 5,120  |        |        |        | 4,832  |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                  |        |       |        |        |        |        |        |       
|                                                                                                                 |                                |                       | Total noninterest expenses |                                                     |        | 10,722             |        |                  |        | 9,396 |        |        |        | 20,519 |        |        |        | 17,862 |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                  |        |       |        |        |        |        |        |       
|                                                                                                                 |                                |                       |                            | Income before income taxes                          |        |                    | 3,625  |                  |        |       | 1,927  |        |        |        | 6,863  |        |        |        | 4,134  | 
|Income tax expense                                                                                               |                                |                       | 1,123                      |                                                     |        |                    | 532    |                  |        |       | 2,175  |        |        |        | 1,160  |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                  |        |       |        |        |        |        |        |       
|                                                                                                                 |                                |                       |                            | Net income                                          |        | $                  | 2,502  |                  |        | $     | 1,395  |        |        | $      | 4,688  |        |        | $      | 2,974  | 
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                  |        |       |        |        |        |        |        |       
|Basic and diluted net income per share                                                                           |                                | $                     | 0.14                       |                                                     |        | $                  | 0.10   |                  |        | $     | 0.29   |        |        | $      | 0.21   |       
|                                                                                                                 |                                |                       |                            |                                                     |        |                    |        |                  |        |       |        |        |        |        |        |       
|Average common shares outstanding                                                                                |                                |                       | 17,684                     |                                                     |        |                    | 14,271 |                  |        |       | 16,144 |        |        |        | 14,308 |       
|Average common shares outstanding, assuming dilution                                                             |                                |                       | 18,039                     |                                                     |        |                    | 14,275 |                  |        |       | 16,337 |        |        |        | 14,311 |       

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)

|                                                  |                                                                      |                                           |        |                  |         |      |        |          |          |  
|------------------------------------------------- | -------------------------------------------------------------------- | ----------------------------------------- | ------ | ---------------- | ------- | ---- | ------ | -------- | -------- | -
|                                                  |                                                                      |                                           |        | Six Months Ended
|                                                  |                                                                      |                                           |        | June 30         
|                                                  |                                                                      |                                           |        |                 
|                                                  |                                                                      |                                           |        | 2002             |         | 2001
|                                                  |                                                                      |                                           |        |                  |         |     
|Net cash provided by operating activities         |                                                                      | $                                         | 8,897  |                  |         | $    | 6,684  |         
|                                                  |                                                                      |                                           |        |                  |         |      |        |         
|Cash flows from investing activities:             |                                                                      |                                           |        |                  |         |      |        |         
|                                                  | Net decrease in interest bearing deposits in other banks             |                                           |        | 297              |         |      |        | 1,834    |         
|                                                  | Net increase in federal funds sold                                   |                                           |        | (1,000           | )       |      |        | (45,195  | )       
|                                                  | Proceeds from sales of securities available for sale                 |                                           |        | 995              |         |      |        | 26,299   |         
|                                                  | Proceeds from maturities of investment securities available for sale |                                           |        | 20,550           |         |      |        | 34,712   |         
|                                                  | Purchases of investment securities available for sale                |                                           |        | (20,106          | )       |      |        | (38,456  | )       
|                                                  | Net increase in loans                                                |                                           |        | (62,165          | )       |      |        | (104,639 | )       
|                                                  | Purchases of premises and equipment                                  |                                           |        | (8,218           | )       |      |        | (2,923   | )       
|                                                  | Net cash paid in business combination                                |                                           |        | (8,619           | )       |      |        |         |         
|                                                  | Other investing activities                                           |                                           |        | (525             | )       |      |        | (1,328   | )       
|                                                  |                                                                      |                                           |        |                  |         |      |        |         
|                                                  |                                                                      | Net cash used by investing activities     |        |                  | (78,791 | )    |        |          | (129,696 | )
|                                                  |                                                                      |                                           |        |                  |         |      |        |         
|Cash flows from financing activities:             |                                                                      |                                           |        |                  |         |      |        |         
|                                                  | Net increase in deposit accounts                                     |                                           |        | 59,311           |         |      |        | 83,039   |         
|                                                  | Net increase in FHLB advance and other borrowings                    |                                           |        | 10               |         |      |        | 33,292   |         
|                                                  | Net proceeds received under line of credit                           |                                           |        |                 |         |      |        | 7,000    |         
|                                                  | Proceeds from note payable                                           |                                           |        | 14,000           |         |      |        |         |         
|                                                  | Principal payment on note payable                                    |                                           |        | (14,000          | )       |      |        |         |         
|                                                  | Proceeds from sale of common stock                                   |                                           |        | 19,498           |         |      |        |         |         
|                                                  | Purchase of ESOP shares                                              |                                           |        | (1,250           | )       |      |        |         |         
|                                                  | Purchase of treasury stock                                           |                                           |        | (24              | )       |      |        | (510     | )       
|                                                  |                                                                      |                                           |        |                  |         |      |        |         
|                                                  |                                                                      | Net cash provided by financing activities |        |                  | 77,545  |      |        |          | 122,821  |  
|                                                  |                                                                      |                                           |        |                  |         |      |        |         
|Net increase(decrease) in cash and due from banks |                                                                      |                                           | 7,651  |                  |         |      | (191   | )       
|Cash and due from banks at beginning of period    |                                                                      |                                           | 31,682 |                  |         |      | 36,691 |         
|                                                  |                                                                      |                                           |        |                  |         |      |        |         
|Cash and due from banks at end of period          |                                                                      | $                                         | 39,333 |                  |         | $    | 36,500 |         
|                                                  |                                                                      |                                           |        |                  |         |      |        |         

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 and six-month periods ended June 30,
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 June 30, 2002 presentation. The
guaranteed preferred beneficial interests in the Corporations subordinated
debentures (trust preferred securities) have been reclassified as long-term
debt and the related distributions 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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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 June 30, 2002, the Corporation had unamortized goodwill in the amount of
$6,189,000, 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 $192,000 and an increase in net income of approximately
$127,000, or approximately $.01 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 six-month period ended June 30,
2001 compared to the six-month period ended June 30, 2002 (in thousands, except
per share data):

|                                               |                                 |   |                          |     |      |   |       |     | 
|---------------------------------------------- | ------------------------------- | - | ------------------------ | --- | ---- | - | ----- | --- | 
|                                               |                                 |   | For the six-month period
|                                               |                                 |   | ended June 30,          
|                                               |                                 |   |                         
|                                               |                                 |   | 2002                     |     | 2001
|                                               |                                 |   |                          |     |     
|Reported net income                            |                                 | $ | 4,688                    |     |      | $ | 2,974 |    
|Add back: goodwill amortization                |                                 |   |                         |     |      |   | 64    |    
|                                               |                                 |   |                          |     |      |   |       |    
|Adjusted net income                            |                                 | $ | 4,688                    |     |      | $ | 3,038 |    
|                                               |                                 |   |                          |     |      |   |       |    
|Basic and diluted net income per common
share: |                                 |   |                          |     |      |   |       |    
|                                               | Reported net income             |   | $                        | .29 |      |   | $     | .21 | 
|                                               | Add back: goodwill amortization |   |                          |    |      |   |       |    | 
|                                               |                                 |   |                          |     |      |   |       |    
|                                               | Adjusted net income             |   | $                        | .29 |      |   | $     | .22 | 
|                                               |                                 |   |                          |     |      |   |       |    

NOTE 3  BUSINESS COMBINATION

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

The total cost of the acquisition was $15,636,000, which exceeded the fair
value of the net assets of CF Bancshares by $7,445,000. The total costs
included 16,449 shares of common stock valued at $108,563. The value of common
stock issued was determined based on the average of the 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 the
$7,445,000, 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 consisted 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 June 30, 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 six-month period
|                                              |                            |   | ended June 30,          
|                                              |                            |   |                         
|                                              |                            |   | 2002                     |        | 2001
|                                              |                            |   |                          |        |     
|Interest income                               |                            | $ | 45,841                   |        |      | $ | 49,605 |       
|Interest expense                              |                            |   | 20,805                   |        |      |   | 28,772 |       
|                                              |                            |   |                          |        |      |   |        |       
|                                              | Net interest income        |   |                          | 25,036 |      |   |        | 20,833 | 
|Provision for loan losses                     |                            |   | 3,934                    |        |      |   | 1,726  |       
|Noninterest income                            |                            |   | 6,101                    |        |      |   | 4,716  |       
|Noninterest expense                           |                            |   | 21,755                   |        |      |   | 19,046 |       
|                                              |                            |   |                          |        |      |   |        |       
|                                              | Income before income taxes |   |                          | 5,448  |      |   |        | 4,777  | 
|Income tax expense                            |                            |   | 1,735                    |        |      |   | 1,507  |       
|                                              |                            |   |                          |        |      |   |        |       
|Net income                                    |                            | $ | 3,713                    |        |      | $ | 3,270  |       
|                                              |                            |   |                          |        |      |   |        |       
|Basic and diluted net income per common
share |                            | $ | .23                      |        |      | $ | .23    |       
|                                              |                            |   |                          |        |      |   |        |       

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 income is used as the basis for performance evaluation rather
than its components, total interest income 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 June 30, 2002 |                           |            |   |                |       |        |   |          |       |  |   |          
|                                 | Net interest income       |            | $ | 7,350          |       |        | $ | 5,826    |       |  | $ | 13,176    |      
|                                 | Provision for loan losses |            |   | 1,696          |       |        |   | 306      |       |  |   | 2,002     |      
|                                 | Noninterest income        |            |   | 2,335          |       |        |   | 838      |       |  |   | 3,173     |      
|                                 | Noninterest expense(1)    |            |   | 7,253          |       |        |   | 3,469    |       |  |   | 10,722    |      
|                                 | Income tax expense        |            |   | 256            |       |        |   | 867      |       |  |   | 1,123     |      
|                                 |                           | Net income |   |                | 480   |        |   |          | 2,022 |  |   |           | 2,502 | 
|                                 | Total assets              |            |   | 912,329        |       |        |   | 470,335  |       |  |   | 1,382,664 |      
|Three months ended June 30, 2001 |                           |            |   |                |       |        |   |          |       |  |   |          
|                                 | Net interest income       |            | $ | 6,126          |       |        | $ | 3,809    |       |  | $ | 9,935     |      
|                                 | Provision for loan losses |            |   | 635            |       |        |   | 200      |       |  |   | 835       |      
|                                 | Noninterest income        |            |   | 2,075          |       |        |   | 148      |       |  |   | 2,223     |      
|                                 | Noninterest expense(1)    |            |   | 7,099          |       |        |   | 2,297    |       |  |   | 9,396     |      
|                                 | Income tax expense        |            |   | 90             |       |        |   | 442      |       |  |   | 532       |      
|                                 |                           | Net income |   |                | 377   |        |   |          | 1,018 |  |   |           | 1,395 | 
|                                 | Total assets              |            |   | 864,116        |       |        |   | 291,258  |       |  |   | 1,155,374 |      
|Six months ended June 30, 2002   |                           |            |   |                |       |        |   |          |       |  |   |          
|                                 | Net interest income       |            | $ | 13,813         |       |        | $ | 10,755   |       |  | $ | 24,568    |      
|                                 | Provision for loan losses |            |   | 2,326          |       |        |   | 791      |       |  |   | 3,117     |      
|                                 | Noninterest income        |            |   | 4,539          |       |        |   | 1,392    |       |  |   | 5,931     |      
|                                 | Noninterest expense(1)    |            |   | 14,002         |       |        |   | 6,517    |       |  |   | 20,519    |      
|                                 | Income tax expense        |            |   | 714            |       |        |   | 1,461    |       |  |   | 2,175     |      
|                                 |                           | Net income |   |                | 1,310 |        |   |          | 3,378 |  |   |           | 4,688 | 
|Six months ended June 30, 2001   |                           |            |   |                |       |        |   |          |       |  |   |          
|                                 | Net interest income       |            | $ | 12,241         |       |        | $ | 6,932    |       |  | $ | 19,173    |      
|                                 | Provision for loan losses |            |   | 1,100          |       |        |   | 530      |       |  |   | 1,630     |      
|                                 | Noninterest income        |            |   | 3,741          |       |        |   | 712      |       |  |   | 4,453     |      
|                                 | Noninterest expense(1)    |            |   | 13,667         |       |        |   | 4,195    |       |  |   | 17,862    |      
|                                 | Income tax expense        |            |   | 200            |       |        |   | 960      |       |  |   | 1,160     |      
|                                 |                           | Net income |   |                | 1,015 |        |   |          | 1,959 |  |   |           | 2,974 | 



---

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





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##### Table of Contents



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 |        | Six Months Ended
|                                          |                                                       |   | June 30            |        | June 30         
|                                          |                                                       |   |                    |        |                 
|                                          |                                                       |   | 2002               |        | 2001             |   | 2002   |        | 2001
|                                          |                                                       |   |                    |        |                  |   |        |        |     
|Numerator:                                |                                                       |   |                    |        |                  |   |        |        |      |   |        |        |  |   |        |       
|                                          | For basic and diluted, net income                     |   | $                  | 2,502  |                  |   | $      | 1,395  |      |   | $      | 4,688  |  |   | $      | 2,974  | 
|                                          |                                                       |   |                    |        |                  |   |        |        |      |   |        |        |  |   |        |       
|Denominator:                              |                                                       |   |                    |        |                  |   |        |        |      |   |        |        |  |   |        |       
|                                          | For basic, weighted average common shares
outstanding |   |                    | 17,684 |                  |   |        | 14,271 |      |   |        | 16,144 |  |   |        | 14,308 | 
|                                          | Effect of dilutive stock options and
restricted stock |   |                    | 355    |                  |   |        | 4      |      |   |        | 193    |  |   |        | 3      | 
|                                          |                                                       |   |                    |        |                  |   |        |        |      |   |        |        |  |   |        |       
|Average diluted common shares outstanding |                                                       |   | 18,039             |        |                  |   | 14,275 |        |      |   | 16,337 |        |  |   | 14,311 |       
|                                          |                                                       |   |                    |        |                  |   |        |        |      |   |        |        |  |   |        |       
|Basic and diluted net income per share    |                                                       | $ | .14                |        |                  | $ | .10    |        |      | $ | .29    |        |  | $ | .21    |       
|                                          |                                                       |   |                    |        |                  |   |        |        |      |   |        |        |  |   |        |       

NOTE 6  COMPREHENSIVE INCOME

Total comprehensive income was $3,267,000 and $5,532,000, respectively, for
the three and six-month periods ended June 30, 2002, and $1,300,000 and
$3,387,000, respectively, for the three and six-month periods ended June 30,
2001. Total comprehensive income consists of net income and the unrealized gain
or loss on the Corporations available for sale securities portfolio arising
during the period.

NOTE 7  INCOME TAXES

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

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

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





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##### Table of Contents



issuance, the interest rate on the securities was 7.57%. As of June 30, 2002,
the interest rate on these securities was 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 a call option, with a premium after
five years on TBC Capital III and after ten years on TBC Capital II.
The call options are at par after ten years for TBC Capital III and
twenty years for TBC Capital II, subject to
regulatory approval, or earlier depending upon certain changes in tax or
investment company laws, or regulatory capital requirements.

NOTE 9  STOCKHOLDERS EQUITY

In September of 2000, the Corporations board of directors approved a stock
buyback plan in an amount not to exceed $10,000,000. As of
June 30, 2002, there
were 139,078 shares held in treasury at a cost of $779,000.

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

On April 1, 2002, the Corporation issued 160,000 shares of restricted common
stock to certain directors and key employees. Under the Restricted Stock
Agreement, the stock may not be sold or assigned in any manner for a five-year
period that began on April 1, 2002. During this restricted
period, the
participant is eligible to receive dividends and exercise voting privileges.
The restricted stock also has a corresponding vesting period with one-third
vesting in the third, fourth and fifth years, respectively. The restricted stock was issued
at $7.00 per share, or $1,120,000 and classified as a contra-equity account,
Unearned restricted stock, in stockholders equity. The $1,120,000 is being
amortized as expense as the stock is earned during the restricted period. For
the period ended June 30, 2002, the Corporation has recognized $56,000 in
restricted stock expense.

The Corporation adopted a leveraged employee stock ownership plan (the ESOP)
effective May 15, 2002 that covers all eligible employees that have attained
the age of twenty-one and have completed a year of service. As of
June 30, 2002,
the ESOP has been internally leveraged with 150,000 shares of the Corporations
common stock purchased in the open market and classified as a contra-equity
account, Unearned ESOP shares, in stockholders equity.

As of June 30, 2002, the ESOP trustees were in the process of finalizing a
promissory note to reimburse the Corporation for the funds used to leverage the
ESOP. The unreleased shares and a guarantee of the Corporation will secure the
promissory note, which will be classified as long-term debt on the
Corporations statement of financial condition. As the ESOP repays the debt,
with quarterly contributions from the Corporation, shares are released from
collateral based on the proportion of debt service. Released shares are
allocated to eligible employees at the end of the plan year based on the
employees eligible compensation to total compensation. The Corporation
recognizes compensation expense as the shares are earned and committed to be
released during the period. As shares are committed to be released and compensation expense is
recognized, the shares become outstanding for basic and diluted earnings per
share computations. The amount of compensation expense reported by the Corporation is equal to the average fair value of the shares
earned and committed to be released during the period. Compensation expense
that the Corporation recognized during the period ended June 30, 2002 was
$13,000. The ESOP shares as of June 30, 2002 were as follows:

|                                          |  |               |           | 
|----------------------------------------- |  | ------------- | --------- | 
|                                          |  | June 30, 2002
|                                          |  |              
|Allocated shares                          |  |               |          | 
|Estimated shares committed to be released |  |               | 1,535     | 
|Unreleased shares                         |  |               | 148,465   | 
|                                          |  |               |           | 
|Total ESOP shares                         |  |               | 150,000   | 
|                                          |  |               |           | 
|Fair value of unreleased shares           |  | $             | 1,295,000 | 
|                                          |  |               |           | 





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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 June 30, 2002 consolidated
financial condition and results of operations for the three and six-month
periods ended June 30, 2002 and 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 June 30, 2002
presentation. The guaranteed preferred beneficial interests in our subordinated
debentures (trust preferred securities) have been reclassified as long-term
debt and the related distributions as interest expense. These trust preferred
securities were previously classified as minority interest in the consolidated
statement of financial condition with the associated distributions classified
as noninterest expense in the consolidated statement of income.

Financial Overview

Total assets were $1.383 billion at June 30, 2002, an increase of $176 million,
or 14.6% from $1.207 billion as of December 31, 2001. Total loans, net of
unearned income, were $1.146 billion at June 30, 2002, an increase of $147
million, or 14.7% from $999 million as of December 31, 2001. Total deposits
were $1.089 billion at June 30, 2002, an increase of $137 million, or 14.4%
from $952 million as of December 31, 2001. Total stockholders equity was $101
million at June 30, 2002, an increase of $24 million, or 31.1% from $77 million
as of December 31, 2001. The acquisition of CF Bancshares, Inc., headquartered
in Port St. Joe, Florida (CF Bancshares), on February 15, 2002 added
approximately $100 million in total assets, $88 million in total loans and $77
million in total deposits.

Results of Operations

Our net income for the three-month period ended June 30, 2002 was $2.5 million
compared to $1.4 million for the three-month period ended June 30, 2001, an
increase of $1.1 million, or 79.4%. Our basic and diluted net income per share
was $.14 for the second quarter of 2002 which represents a 40.0% increase from
$.10 per share for the second quarter of 2001.

Our net income for the six-month period ended June 30, 2002 was $4.7 million
compared to $3.0 million for the six-month period ended June 30, 2001, an
increase of $1.7 million, or 57.6%. Our basic and diluted net income per share
was $.29 for the first six months of 2002 which represents a 38.1% increase
from $.21 per share for the first six months of 2001. Our return on average
assets, on an annualized basis, was .72% for the first six months of 2002
compared to .54% for the first six months of 2001. Our return on average
stockholders equity, on an annualized basis, was 10.56% for the first six
months of 2002 compared to 7.87% for the first six months of 2001. Our book
value per share at June 30, 2002 was $5.68 compared to $5.41 as of December 31,
2001, and our tangible book value per share at June 30, 2002 was $4.94 compared
to $4.98 as of December 31, 2001. The decrease in tangible book
value was primarily a result of a $7.4 million addition to
intangible assets related to the CF Bancshares acquisition.





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##### Table of Contents



The growth in our net income during the second quarter of 2002 compared with
the second 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 $3.2
million, or 32.6% to $13.1 million for the second quarter of 2002 from $9.9
million for the second quarter of 2001. The increase in net interest income was
primarily due to a $3.1 million, or 23.8% decrease in total interest expense.
The decline in total interest expense is primarily attributable to a 192 basis
point decline in the average interest rate paid on interest-bearing
liabilities. The average rate paid on interest-bearing liabilities was 3.56%
for the second quarter of 2002 compared to 5.48% for the second quarter of
2001. Our net interest spread and net interest margin were 4.06% and 4.34%,
respectively, for the second quarter of 2002, compared to 3.50% and 3.88% for
the second quarter of 2001.

Our average interest-earning assets for the second quarter of 2002 increased
$189 million, or 18.3% to $1.222 billion from $1.033 billion in the second
quarter of 2001. This growth in our average interest-earning assets was
primarily funded by a $167 million, or 17.4 % increase in our
average interest-bearing liabilities to $1.127 billion for the second quarter of 2002 from $960
million for the second quarter of 2001. Our ratio of average interest-earning
assets to average interest-bearing liabilities was 108.5% and 107.6% for the
second quarters of 2002 and 2001, respectively. Our average interest-bearing
assets produced a tax equivalent yield of 7.62% for the second quarter of 2002
compared to 8.98% for the second quarter of 2001. The 136 basis point decline
in the yield was offset by both a 192 basis point decline in the average rate
paid on interest-bearing liabilities and a $250 million, or 28.3 % increase in
the average volume of loans from $880 million in the second quarter of 2001 to
$1.130 billion in the second quarter of 2002.

The growth in our net income during the first six months of 2002 compared with
the first six months of 2001 is primarily the result of an increase in net
interest income. Net interest income increased $5.4 million, or 28.1% to $24.6
million for the first six months of 2002 from $19.2 million for the first six
months of 2001. The increase in net interest income was primarily due to a $6.1
million, or 22.9% decrease in total interest expense offset by a $662,000, or
1.5% decrease in total interest income. The decline in total interest expense
is primarily attributable to a 207 basis point decline in the average interest
rate paid on interest-bearing liabilities. The average rate paid on
interest-bearing liabilities was 3.71% for the first six months of 2002
compared to 5.78% for the first six months of 2001. Our net interest spread and
net interest margin were 3.92% and 4.18%, respectively, for the first six
months of 2002, compared to 3.36% and 3.86% for the first six months of 2001.

Our average interest-earning assets for the first six months of 2002 increased
$181 million, or 17.9% to $1.191 billion from $1.010 billion in the first six
months of 2001. This growth in our average interest-earning assets was
primarily funded by a $183 million, or 19.9 % increase in our
average interest-bearing liabilities to $1.106 billion for the first six months of 2002 from
$923 million for the first six months of 2001. The ratio of our average
interest-earning assets to average interest-bearing liabilities was 107.2% and
97.2% for the first six months of 2002 and 2001, respectively. Our average
interest-bearing assets produced a tax equivalent yield of 7.63% for the first
six months of 2002 compared to 9.14% for the first six months of 2001. The 151
basis point decline in the yield was offset by both a 207 basis point decline
in the average rate paid on interest-bearing liabilities and a $242 million, or
28.3 % increase in the average volume of loans from $859 million in the first
six months of 2001 to $1.101 billion in the first six months 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 our average yields on assets and average costs of
liabilities. Average yields are calculated by dividing income or expense by the
average balance of the corresponding assets or liabilities. Average balances
have been calculated on a daily basis.

|                                        |                                                                         |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |        |         |        |           |       |        |       |        |      |       |      |      | 
|--------------------------------------- | ----------------------------------------------------------------------- | ------------------ | ------------------------------------------ | --------- | --------------------------- | --------- | ------- | ------ | ------ | ------ | ------- | ---- | ------- | ---- | ------ | ------- | ------ | --------- | ----- | ------ | ----- | ------ | ---- | ----- | ---- | ---- | 
|                                        |                                                                         |                    |                                            |           | Three Months Ended June 30,
|                                        |                                                                         |                    |                                            |           |                            
|                                        |                                                                         |                    |                                            |           | 2002                        |           | 2001   
|                                        |                                                                         |                    |                                            |           |                             |           |        
|                                        |                                                                         |                    |                                            |           | Average                     |           | Income/ |        | Yield/ |        | Average |      | Income/ |      | Yield/
|                                        |                                                                         |                    |                                            |           | Balance                     |           | Expense |        | Rate   |        | Balance |      | Expense |      | Rate  
|                                        |                                                                         |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |       
|                                        |                                                                         |                    |                                            |           | (Dollars in thousands)     
|ASSETS                                  |                                                                         |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |        |         |        |           |       |        |       |        |      |      
|Interest- earning assets:               |                                                                         |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |        |         |        |           |       |        |       |        |      |      
|                                        | Loans, net of unearned income(1)                                        |                    | $                                          | 1,129,680 |                             |           | $       | 22,106 |        |        |         | 7.85 | %       |      | $      | 880,223 |        |           | $     | 20,929 |       |        |      | 9.54  | %   
|                                        | Investment securities                                                   |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |        |         |        |           |       |        |       |        |      |       |     
|                                        |                                                                         | Taxable            |                                            |           | 52,294                      |           |         |        | 767    |        |         |      | 5.88    |      |        |         | 90,584 |           |       |        | 1,367 |        |      |       | 6.05 |     
|                                        |                                                                         | Tax-exempt(2)      |                                            |           | 8,983                       |           |         |        | 167    |        |         |      | 7.44    |      |        |         | 10,075 |           |       |        | 182   |        |      |       | 7.25 |     
|                                        |                                                                         |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |        |         |        |           |       |        |       |        |      |      
|                                        |                                                                         |                    | Total investment securities                |           |                             | 61,277    |         |        |        | 934    |         |      |         | 6.11 |        |         |        | 100,659   |       |        |       | 1,549  |      |       |      | 6.17 | 
|                                        |                                                                         | Federal funds sold |                                            |           | 20,567                      |           |         |        | 69     |        |         |      | 1.35    |      |        |         | 39,529 |           |       |        | 441   |        |      |       | 4.47 |     
|                                        |                                                                         | Other investments  |                                            |           | 10,375                      |           |         |        | 113    |        |         |      | 4.37    |      |        |         | 12,087 |           |       |        | 190   |        |      |       | 6.31 |     
|                                        |                                                                         |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |        |         |        |           |       |        |       |        |      |      
|                                        |                                                                         |                    | Total interest-earning assets              |           |                             | 1,221,899 |         |        |        | 23,222 |         |      |         | 7.62 |        |         |        | 1,032,498 |       |        |       | 23,109 |      |       |      | 8.98 | 
|Noninterest-earning assets:             |                                                                         |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |        |         |        |           |       |        |       |        |      |      
|                                        | Cash and due from banks                                                 |                    |                                            | 32,028    |                             |           |         |        |        |        |         |      |         |      |        | 40,956  |        |           |       |        |       |        |      |       |     
|                                        | Premises and equipment                                                  |                    |                                            | 54,123    |                             |           |         |        |        |        |         |      |         |      |        | 44,628  |        |           |       |        |       |        |      |       |     
|                                        | Accrued interest and other assets                                       |                    |                                            | 48,789    |                             |           |         |        |        |        |         |      |         |      |        | 37,476  |        |           |       |        |       |        |      |       |     
|                                        | Allowance for loan losses                                               |                    |                                            | (13,855   | )                           |           |         |        |        |        |         |      |         |      |        | (9,496  | )      |           |       |        |       |        |      |       |     
|                                        |                                                                         |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |        |         |        |           |       |        |       |        |      |      
|                                        |                                                                         |                    | Total assets                               |           | $                           | 1,342,984 |         |        |        |        |         |      |         |      |        |         | $      | 1,146,062 |       |        |       |        |      |       |      |      | 
|                                        |                                                                         |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |        |         |        |           |       |        |       |        |      |      
|LIABILITIES AND STOCKHOLDERS EQUITY    |                                                                         |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |        |         |        |           |       |        |      
|Interest-bearing liabilities:           |                                                                         |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |        |         |        |           |       |        |       |        |      |      
|                                        | Demand deposits                                                         |                    | $                                          | 282,990   |                             |           |         | 912    |        |        |         | 1.29 |         |      | $      | 239,728 |        |           |       | 2,288  |       |        |      | 3.83  |     
|                                        | Savings deposits                                                        |                    |                                            | 38,304    |                             |           |         | 68     |        |        |         | 0.71 |         |      |        | 31,148  |        |           |       | 156    |       |        |      | 2.01  |     
|                                        | Time deposits                                                           |                    |                                            | 619,612   |                             |           |         | 6,219  |        |        |         | 4.03 |         |      |        | 530,403 |        |           |       | 8,244  |       |        |      | 6.23  |     
|                                        | Other borrowings                                                        |                    |                                            | 154,817   |                             |           |         | 2,161  |        |        |         | 5.60 |         |      |        | 143,718 |        |           |       | 2,027  |       |        |      | 5.66  |     
|                                        | Guaranteed preferred beneficial
interest in our subordinated
debentures |                    |                                            | 31,000    |                             |           |         | 629    |        |        |         | 8.14 |         |      |        | 15,000  |        |           |       | 397    |       |        |      | 10.62 |     
|                                        |                                                                         |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |        |         |        |           |       |        |       |        |      |      
|                                        |                                                                         |                    | Total interest-bearing liabilities         |           |                             | 1,126,723 |         |        |        | 9,989  |         |      |         | 3.56 |        |         |        | 959,997   |       |        |       | 13,112 |      |       |      | 5.48 | 
|Noninterest-bearing liabilities:        |                                                                         |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |        |         |        |           |       |        |       |        |      |      
|                                        | Demand deposits                                                         |                    |                                            | 106,887   |                             |           |         |        |        |        |         |      |         |      |        | 100,952 |        |           |       |        |       |        |      |       |     
|                                        | Accrued interest and other liabilities                                  |                    |                                            | 9,312     |                             |           |         |        |        |        |         |      |         |      |        | 7,756   |        |           |       |        |       |        |      |       |     
|                                        | Stockholders equity                                                    |                    |                                            | 100,062   |                             |           |         |        |        |        |         |      |         |      |        | 77,357  |        |           |       |        |       |        |      |       |     
|                                        |                                                                         |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |        |         |        |           |       |        |       |        |      |      
|                                        |                                                                         |                    | Total liabilities and
stockholders equity |           | $                           | 1,342,984 |         |        |        |        |         |      |         |      |        |         | $      | 1,146,062 |       |        |       |        |      |       |      |      | 
|                                        |                                                                         |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |        |         |        |           |       |        |       |        |      |      
|Net interest income/net interest
spread |                                                                         |                    |                                            |           |                             |           | 13,233  |        |        |        | 4.06    | %    |         |      |        |         |        |           | 9,997 |        |       |        | 3.50 | %    
|                                        |                                                                         |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |        |         |        |           |       |        |       |        |      |      
|Net yield on earning assets             |                                                                         |                    |                                            |           |                             |           |         |        |        |        | 4.34    | %    |         |      |        |         |        |           |       |        |       |        | 3.88 | %    
|                                        |                                                                         |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |        |         |        |           |       |        |       |        |      |      
|Taxable equivalent adjustment:          |                                                                         |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |        |         |        |           |       |        |       |        |      |      
|                                        | Investment securities(2)                                                |                    |                                            |           |                             |           |         | 57     |        |        |         |      |         |      |        |         |        |           |       | 62     |       |        |      |       |     
|                                        |                                                                         |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |        |         |        |           |       |        |       |        |      |      
|                                        |                                                                         |                    | Net interest income                        |           |                             |           |         |        | $      | 13,176 |         |      |         |      |        |         |        |           |       |        | $     | 9,935  |      |       |      |      | 
|                                        |                                                                         |                    |                                            |           |                             |           |         |        |        |        |         |      |         |      |        |         |        |           |       |        |       |        |      |      



---

|(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.                             





---



##### Table of Contents



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

|                                           |                                                                                     |                               |                        |        |                                |        |      |        |                |        |   |       |       |       |  
|------------------------------------------ | ----------------------------------------------------------------------------------- | ----------------------------- | ---------------------- | ------ | ------------------------------ | ------ | ---- | ------ | -------------- | ------ | - | ----- | ----- | ----- | -
|                                           |                                                                                     |                               |                        |        | Three Months Ended June 30 (1)
|                                           |                                                                                     |                               |                        |        |                               
|                                           |                                                                                     |                               |                        |        | 2002 vs 2001                  
|                                           |                                                                                     |                               |                        |        |                               
|                                           |                                                                                     |                               |                        |        |                                |        |      |        | Changes Due to
|                                           |                                                                                     |                               |                        |        | Increase                       |        |     
|                                           |                                                                                     |                               |                        |        | (Decrease)                     |        | Rate |        | Volume        
|                                           |                                                                                     |                               |                        |        |                                |        |      |        |               
|                                           |                                                                                     |                               |                        |        | (Dollars in thousands)        
|Increase (decrease) in:                    |                                                                                     |                               |                        |        |                                |        |      |        |                |        |   |      
|                                           | Income from interest-earning assets:                                                |                               |                        |        |                                |        |      |        |                |        |   |       |      
|                                           |                                                                                     | Interest and fees on loans    |                        | $      | 1,177                          |        |      | $      | (4,112         | )      |   | $     | 5,289 |      
|                                           |                                                                                     | Interest on securities:       |                        |        |                                |        |      |        |                |        |   |       |       |      
|                                           |                                                                                     |                               | Taxable                |        |                                | (600   | )    |        |                | (37    | ) |       |       | (563  | )
|                                           |                                                                                     |                               | Tax-exempt             |        |                                | (15    | )    |        |                | 5      |   |       |       | (20   | )
|                                           |                                                                                     | Interest on federal funds     |                        |        | (372                           | )      |      |        | (220           | )      |   |       | (152  | )    
|                                           |                                                                                     | Interest on other investments |                        |        | (77                            | )      |      |        | (53            | )      |   |       | (24   | )    
|                                           |                                                                                     |                               |                        |        |                                |        |      |        |                |        |   |      
|                                           |                                                                                     |                               | Total interest income  |        |                                | 113    |      |        |                | (4,417 | ) |       |       | 4,530 |  
|                                           |                                                                                     |                               |                        |        |                                |        |      |        |                |        |   |      
|Expense from interest-bearing liabilities: |                                                                                     |                               |                        |        |                                |        |      |        |                |        |   |      
|                                           | Interest on demand deposits                                                         |                               |                        | (1,376 | )                              |        |      | (1,731 | )              |        |   | 355   |      
|                                           | Interest on savings deposits                                                        |                               |                        | (88    | )                              |        |      | (118   | )              |        |   | 30    |      
|                                           | Interest on time deposits                                                           |                               |                        | (2,025 | )                              |        |      | (3,249 | )              |        |   | 1,224 |      
|                                           | Interest on other borrowings                                                        |                               |                        | 134    |                                |        |      | (22    | )              |        |   | 156   |      
|                                           | Interest on guaranteed preferred beneficial interest
in our subordinated debentures |                               |                        | 232    |                                |        |      | (111   | )              |        |   | 343   |      
|                                           |                                                                                     |                               |                        |        |                                |        |      |        |                |        |   |      
|                                           |                                                                                     |                               | Total interest expense |        |                                | (3,123 | )    |        |                | (5,231 | ) |       |       | 2,108 |  
|                                           |                                                                                     |                               |                        |        |                                |        |      |        |                |        |   |      
|                                           |                                                                                     |                               | Net interest income    |        | $                              | 3,236  |      |        | $              | 814    |   |       | $     | 2,422 |  
|                                           |                                                                                     |                               |                        |        |                                |        |      |        |                |        |   |      



---

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





---



##### Table of Contents



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

corresponding assets or liabilities. Average balances have been calculated on a
daily basis.

|                                        |                                                                         |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |       |      |      | 
|--------------------------------------- | ----------------------------------------------------------------------- | ------------------ | ------------------------------------------ | --------- | ------------------------- | --------- | ------- | ------ | ------ | ------ | ------- | ---- | ------- | ---- | ------ | ------- | ------ | --------- | ------ | ------ | ----- | ------ | ---- | ----- | ---- | ---- | 
|                                        |                                                                         |                    |                                            |           | Six Months Ended June 30,
|                                        |                                                                         |                    |                                            |           |                          
|                                        |                                                                         |                    |                                            |           | 2002                      |           | 2001   
|                                        |                                                                         |                    |                                            |           |                           |           |        
|                                        |                                                                         |                    |                                            |           | Average                   |           | Income/ |        | Yield/ |        | Average |      | Income/ |      | Yield/
|                                        |                                                                         |                    |                                            |           | Balance                   |           | Expense |        | Rate   |        | Balance |      | Expense |      | Rate  
|                                        |                                                                         |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |       
|                                        |                                                                         |                    |                                            |           | (Dollars in thousands)   
|ASSETS                                  |                                                                         |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |      
|Interest-earning assets:                |                                                                         |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |      
|                                        | Loans, net of unearned income(1)                                        |                    | $                                          | 1,101,111 |                           |           | $       | 42,941 |        |        |         | 7.86 | %       |      | $      | 858,981 |        |           | $      | 41,210 |       |        |      | 9.67  | %   
|                                        | Investment
securities                                                   |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |       |     
|                                        |                                                                         | Taxable            |                                            |           | 52,115                    |           |         |        | 1,415  |        |         |      | 5.48    |      |        |         | 91,079 |           |        |        | 2,824 |        |      |       | 6.25 |     
|                                        |                                                                         | Tax-exempt(2)      |                                            |           | 8,302                     |           |         |        | 309    |        |         |      | 7.51    |      |        |         | 12,051 |           |        |        | 445   |        |      |       | 7.45 |     
|                                        |                                                                         |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |      
|                                        |                                                                         |                    | Total investment securities                |           |                           | 60,417    |         |        |        | 1,724  |         |      |         | 5.75 |        |         |        | 103,130   |        |        |       | 3,269  |      |       |      | 6.39 | 
|                                        |                                                                         | Federal funds sold |                                            |           | 18,268                    |           |         |        | 156    |        |         |      | 1.72    |      |        |         | 36,132 |           |        |        | 903   |        |      |       | 5.04 |     
|                                        |                                                                         | Other investments  |                                            |           | 10,886                    |           |         |        | 230    |        |         |      | 4.26    |      |        |         | 11,767 |           |        |        | 377   |        |      |       | 6.46 |     
|                                        |                                                                         |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |      
|                                        |                                                                         |                    | Total interest-earning assets              |           |                           | 1,190,682 |         |        |        | 45,051 |         |      |         | 7.63 |        |         |        | 1,010,010 |        |        |       | 45,759 |      |       |      | 9.14 | 
|Noninterest-earning assets:             |                                                                         |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |      
|                                        | Cash and due from banks                                                 |                    |                                            | 30,110    |                           |           |         |        |        |        |         |      |         |      |        | 29,618  |        |           |        |        |       |        |      |       |     
|                                        | Premises and equipment                                                  |                    |                                            | 52,337    |                           |           |         |        |        |        |         |      |         |      |        | 44,243  |        |           |        |        |       |        |      |       |     
|                                        | Accrued interest and other assets                                       |                    |                                            | 48,110    |                           |           |         |        |        |        |         |      |         |      |        | 40,704  |        |           |        |        |       |        |      |       |     
|                                        | Allowance for loan losses                                               |                    |                                            | (13,592   | )                         |           |         |        |        |        |         |      |         |      |        | (9,363  | )      |           |        |        |       |        |      |       |     
|                                        |                                                                         |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |      
|                                        |                                                                         |                    | Total assets                               |           | $                         | 1,307,647 |         |        |        |        |         |      |         |      |        |         | $      | 1,115,212 |        |        |       |        |      |       |      |      | 
|                                        |                                                                         |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |      
|LIABILITIES AND STOCKHOLDERS EQUITY    |                                                                         |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |      
|Interest-bearing liabilities:           |                                                                         |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |      
|                                        | Demand deposits                                                         |                    | $                                          | 277,437   |                           |           |         | 1,858  |        |        |         | 1.35 |         |      | $      | 201,388 |        |           |        | 4,267  |       |        |      | 4.27  |     
|                                        | Savings deposits                                                        |                    |                                            | 37,324    |                           |           |         | 125    |        |        |         | 0.68 |         |      |        | 32,243  |        |           |        | 386    |       |        |      | 2.41  |     
|                                        | Time deposits                                                           |                    |                                            | 609,660   |                           |           |         | 12,838 |        |        |         | 4.25 |         |      |        | 541,782 |        |           |        | 17,095 |       |        |      | 6.36  |     
|                                        | Other borrowings                                                        |                    |                                            | 151,018   |                           |           |         | 4,281  |        |        |         | 5.72 |         |      |        | 132,518 |        |           |        | 3,892  |       |        |      | 5.92  |     
|                                        | Guaranteed preferred beneficial
interest in our subordinated
debentures |                    |                                            | 31,000    |                           |           |         | 1,276  |        |        |         | 8.30 |         |      |        | 15,000  |        |           |        | 795    |       |        |      | 10.69 |     
|                                        |                                                                         |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |      
|                                        |                                                                         |                    | Total interest-bearing liabilities         |           |                           | 1,106,379 |         |        |        | 20,378 |         |      |         | 3.71 |        |         |        | 922,931   |        |        |       | 26,435 |      |       |      | 5.78 | 
|Noninterest-bearing liabilities:        |                                                                         |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |      
|                                        | Demand deposits                                                         |                    |                                            | 102,706   |                           |           |         |        |        |        |         |      |         |      |        | 108,301 |        |           |        |        |       |        |      |       |     
|                                        | Accrued interest and other liabilities                                  |                    |                                            | 9,016     |                           |           |         |        |        |        |         |      |         |      |        | 7,800   |        |           |        |        |       |        |      |       |     
|                                        | Stockholders equity                                                    |                    |                                            | 89,546    |                           |           |         |        |        |        |         |      |         |      |        | 76,180  |        |           |        |        |       |        |      |       |     
|                                        |                                                                         |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |      
|                                        |                                                                         |                    | Total liabilities and
stockholders equity |           | $                         | 1,307,647 |         |        |        |        |         |      |         |      |        |         | $      | 1,115,212 |        |        |       |        |      |       |      |      | 
|                                        |                                                                         |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |      
|Net interest income/net interest
spread |                                                                         |                    |                                            |           |                           |           | 24,673  |        |        |        | 3.92    | %    |         |      |        |         |        |           | 19,324 |        |       |        | 3.36 | %    
|                                        |                                                                         |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |      
|Net yield on earning assets             |                                                                         |                    |                                            |           |                           |           |         |        |        |        | 4.18    | %    |         |      |        |         |        |           |        |        |       |        | 3.86 | %    
|                                        |                                                                         |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |      
|Taxable equivalent adjustment:          |                                                                         |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |      
|                                        | Investment securities(2)                                                |                    |                                            |           |                           |           |         | 105    |        |        |         |      |         |      |        |         |        |           |        | 151    |       |        |      |       |     
|                                        |                                                                         |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |      
|                                        |                                                                         |                    | Net interest income                        |           |                           |           |         |        | $      | 24,568 |         |      |         |      |        |         |        |           |        |        | $     | 19,173 |      |       |      |      | 
|                                        |                                                                         |                    |                                            |           |                           |           |         |        |        |        |         |      |         |      |        |         |        |           |        |        |       |        |      |      



---

|(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
that the varying levels of our interest-earning assets and interest-bearing
liabilities and the applicable rates have had on changes in net interest income
for the six months ended June 30, 2002 and 2001.

|                                           |                                                                                     |                               |                        |        |                              |        |      |        |                |         |   |       |        |        |  
|------------------------------------------ | ----------------------------------------------------------------------------------- | ----------------------------- | ---------------------- | ------ | ---------------------------- | ------ | ---- | ------ | -------------- | ------- | - | ----- | ------ | ------ | -
|                                           |                                                                                     |                               |                        |        | Six Months Ended June 30 (1)
|                                           |                                                                                     |                               |                        |        |                             
|                                           |                                                                                     |                               |                        |        | 2002 vs 2001                
|                                           |                                                                                     |                               |                        |        |                             
|                                           |                                                                                     |                               |                        |        |                              |        |      |        | Changes Due to
|                                           |                                                                                     |                               |                        |        | Increase                     |        |     
|                                           |                                                                                     |                               |                        |        | (Decrease)                   |        | Rate |        | Volume        
|                                           |                                                                                     |                               |                        |        |                              |        |      |        |               
|                                           |                                                                                     |                               |                        |        | (Dollars in thousands)      
|Increase (decrease) in:                    |                                                                                     |                               |                        |        |                              |        |      |        |                |         |   |      
|                                           | Income from interest-earning assets:                                                |                               |                        |        |                              |        |      |        |                |         |   |       |       
|                                           |                                                                                     | Interest and fees on loans    |                        | $      | 1,731                        |        |      | $      | (8,576         | )       |   | $     | 10,307 |       
|                                           |                                                                                     | Interest on securities:       |                        |        |                              |        |      |        |                |         |   |       |        |       
|                                           |                                                                                     |                               | Taxable                |        |                              | (1,409 | )    |        |                | (315    | ) |       |        | (1,094 | )
|                                           |                                                                                     |                               | Tax-exempt             |        |                              | (136   | )    |        |                | 3       |   |       |        | (139   | )
|                                           |                                                                                     | Interest on federal funds     |                        |        | (747                         | )      |      |        | (427           | )       |   |       | (320   | )     
|                                           |                                                                                     | Interest on other investments |                        |        | (147                         | )      |      |        | (121           | )       |   |       | (26    | )     
|                                           |                                                                                     |                               |                        |        |                              |        |      |        |                |         |   |      
|                                           |                                                                                     |                               | Total interest income  |        |                              | (708   | )    |        |                | (9,436  | ) |       |        | 8,728  |  
|                                           |                                                                                     |                               |                        |        |                              |        |      |        |                |         |   |      
|Expense from interest-bearing liabilities: |                                                                                     |                               |                        |        |                              |        |      |        |                |         |   |      
|                                           | Interest on demand deposits                                                         |                               |                        | (2,409 | )                            |        |      | (3,627 | )              |         |   | 1,218 |       
|                                           | Interest on savings deposits                                                        |                               |                        | (261   | )                            |        |      | (314   | )              |         |   | 53    |       
|                                           | Interest on time deposits                                                           |                               |                        | (4,257 | )                            |        |      | (6,197 | )              |         |   | 1,940 |       
|                                           | Interest on other borrowings                                                        |                               |                        | 389    |                              |        |      | (136   | )              |         |   | 525   |       
|                                           | Interest on guaranteed preferred beneficial interest
in our subordinated debentures |                               |                        | 481    |                              |        |      | (211   | )              |         |   | 692   |       
|                                           |                                                                                     |                               |                        |        |                              |        |      |        |                |         |   |      
|                                           |                                                                                     |                               | Total interest expense |        |                              | (6,057 | )    |        |                | (10,485 | ) |       |        | 4,428  |  
|                                           |                                                                                     |                               |                        |        |                              |        |      |        |                |         |   |      
|                                           |                                                                                     |                               | Net interest income    |        | $                            | 5,349  |      |        | $              | 1,049   |   |       | $      | 4,300  |  
|                                           |                                                                                     |                               |                        |        |                              |        |      |        |                |         |   |      



---

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

Noninterest income.Our noninterest income increased $950,000, or 42.7% to $3.2
million for the second quarter of 2002 from $2.2 million for the second quarter
of 2001, primarily due to an increase in deposit service charge income and
mortgage banking income. Our service charges on deposits increased $653,000, or
63.3% to $1.7 million in the second quarter of 2002 from $1.0 million in the
second quarter of 2001. Our mortgage banking income increased $366,000, or
121.2% to $668,000 in the second quarter of 2002 from $302,000 in the second
quarter of 2001.

Our noninterest income increased $1.5 million, or 33.2% to $5.9 million for the
first six months of 2002 from $4.4 million for the first six months of 2001,
primarily due to an increase in deposit service charge income and mortgage
banking income. Our service charges on deposits increased $819,000, or 39.7% to
$2.9 million in the first six months of 2002 from $2.1 million in the first six
months of 2001. Our mortgage banking income increased $728,000, or 111.3% to
$1.4 million in the first six months of 2002 from $654,000 in the first six
months of 2001.

Noninterest expense.Our noninterest expense increased $1.3 million, or 14.1%
to $10.7 million for second quarter of 2002 from $9.4 million for the second
quarter of 2001. As a percentage of our net interest income, noninterest
expenses declined from 94.6% during the second quarter of 2001 to 81.4% during
the second quarter of 2002. This relative decline in noninterest expenses and
the increase in noninterest income improved our efficiency ratio to 65.4%
during the second quarter of 2002 compared to 76.9% during the second quarter
of 2001 and 77.2% for the year 2001. Salaries and benefits increased $1.1
million, or 22.2% to $6.1 million for the second quarter of 2002 from $5.0
million for the second quarter of 2001. The increase in our salaries and
benefits primarily resulted from the opening of new branches and the
acquisition of CF Bancshares. All other noninterest expenses increased $222,000, or 5.0% to $4.6 million for the second quarter of
2002 from $4.4 million for the second quarter of 2001.





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##### Table of Contents



Our noninterest expense increased $2.6 million, or 14.9% to $20.5 million for
first six months of 2002 from $17.9 million for the first six months of 2001.
As a percentage of our net interest income, noninterest expenses declined from
93.2% during the first six months of 2001 to 83.5% during the first six months
of 2002. This relative decline in noninterest expenses and the increase in
noninterest income improved our efficiency ratio to 67.0% during the first six
months of 2002 compared to 75.1% during the first six months of 2001 and 77.2%
for the year 2001. Salaries and benefits increased $2.1 million, or 21.6% to
$11.6 million for the first six months of 2002 from $9.5 million for the first
six months of 2001. The increase in our salaries and benefits primarily
resulted from the opening of new branches and the acquisition of CF Bancshares.
All other noninterest expenses increased $594,000, or 7.2% to $8.9 million for
the first six months of 2002 from $8.3 million for the first six months of
2001.

Income tax expense.Our income tax expense was $1.1 million for the second
quarter of 2002, compared to $532,000 for the second quarter of 2001 and $2.2
million for the first six months of 2002, compared to $1.2 million for the
first six months of 2001. The primary difference in our effective rate and the
federal statutory rate (34%) for the three and six-month periods
ended June 30, 2002 is due to certain tax-exempt income from investments and insurance
policies. The primary difference in the three and six-month periods ended June
30, 2001 is due to the recognition of a rehabilitation tax credit generated from
the restoration of the Corporations headquarters, the John A. Hand Building.

Provision for Loan Losses. Our provision for loan losses represents the amount
determined by management necessary to maintain the allowance for loan losses at
a level capable of absorbing inherent losses in the loan portfolio. Management
reviews the adequacy of the allowance on a quarterly basis. The
allowance for loan losses consists primarily of valuation allowances
for impaired and classified loans. The valuation allowances for
impaired loans are assigned based on specific analyses of individual
loans and the underlying collateral. The allowance for
classified loans is established based on risk ratings assigned by loan
officers. Loans are risk rated using 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 $2.0 million for the second quarter of 2002
compared to $835,000 for the second quarter of 2001 and $3.1 million for the
first six months of 2002 compared to $1.6 million for the first six months of
2001. During the first six months of 2002, the Corporation had net
charged-off loans totaling $2.6 million compared to net charged-off loans of $1.1 million
in the first six months of 2001. The ratio of net charged-off loans to the
provision for loan losses was 84.0% in the first six months of 2002 compared to
66.3% for the first six months of 2001 and 51.9% for the year 2001. The
annualized ratio of net charged-off loans to average loans was .48% in the
first six months of 2002 compared to .25% for the first six months of
2001 and .42% for the year 2001. The allowance for loan losses totaled $14.1 million, or
1.23% of loans, net of unearned income at June 30, 2002 compared to $12.6 million, or 1.26% of loans, net of
unearned income at December 31, 2001. See Allowance for Loan Losses section
for additional discussion.





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##### Table of Contents



Financial Condition

Our total assets were $1.383 billion at June 30, 2002, an increase of $176
million, or 14.6% from $1.207 billion as of December 31, 2001. The increase in
total assets includes approximately $100 million in assets from the CF
Bancshares acquisition of which approximately $88 million were loans. Our
average total assets for the first six months of 2002 totaled $1.308 billion,
which was supported by average total liabilities of $1.218 billion and average
total stockholders equity of $90 million.

Short-term liquid assets. Our short-term liquid assets (cash and due from
banks, interest-bearing deposits in other banks and federal funds sold)
increased $8.4 million, or 16.0% to $60.5 million at June 30, 2002 from $52.1
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 June 30, 2002, our short-term liquid assets comprised 4.4% of total assets
compared to 4.3% at December 31, 2001. We continually monitor our liquidity
position and will increase or decrease our short-term liquid assets as
necessary.

Investment Securities.Our total investment securities increased $2.2 million,
or 3.2% to $71.1 million at June 30, 2002, from $68.9 million at December 31,
2001. Mortgage-backed securities, which comprised 50.0% of the total investment
portfolio at June 30, 2002, decreased $3.3 million, or 8.3% to $35.5 million
from $38.8 million at December 31, 2001. Investments in U.S. Treasury and
agency securities, which comprised 30.0% of the total investment portfolio at
June 30, 2002, increased $312,000, or 1.7% to $19.2 million from $18.9 million
at December 31, 2001. The total investment portfolio at June 30, 2002 comprised
5.7% of all interest-earning assets compared to 6.3% at December 31, 2001
producing an average tax equivalent yield of 6.1% for the second quarter of
2002 compared to 6.2% for the second quarter of 2001 and 5.8% for the first six
months of 2002 compared to 6.4% for the first six months of 2001.

Loans, net of unearned income.Our loans, net of unearned income, totaled
$1.145 billion at June 30, 2002, an increase of 14.6%, or
$146 million from
$999 million at December 31, 2001. Our average loans totaled $1.101 billion for
the first six months of 2002 compared to $859 million for the first six months
of 2001. Our average loans totaled $1.130 billion for the second quarter of
2002 compared to $880.2 million for the second quarter of 2001. Approximately
$88 million of our loans were acquired in the CF Bancshares acquisition. Of the
approximately $59 million increase in our loans, exclusive of the CF Bancshares
acquisition, 36.0%, or $21 million were produced by branches in the Alabama
region and the other 64.0%, or $38 million were produced by branches in the
Florida region.

Our loans, net of unearned income, comprised 91.6% of our interest-earning
assets at June 30, 2002, compared to 91.0% at December 31, 2001. Our loan
portfolio produced an average yield of 7.9% for the second quarter of 2002
compared to 9.5% for the second quarter of 2001 and 7.9% for the first six
months of 2002 compared to 9.7% for the first six months of 2001. This decline in yield was offset by
respective basis point declines of 192 and 200 in the average cost of the funds
that support our loan portfolio.





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##### Table of Contents



The following table details the distribution
of our loan portfolio by category as of June 30, 2002 and December 31, 2001:

Distribution of Loans by Category

(Dollars in
Thousands)


|                                                |                   |             |         |               |           |                   |      |         |       |       |         |         |           |         |      |      |       |  
|----------------------------------------------- | ----------------- | ----------- | ------- | ------------- | --------- | ----------------- | ---- | ------- | ----- | ----- | ------- | ------- | --------- | ------- | ---- | ---- | ----- | -
|                                                |                   |             |         | June 30, 2002 |           | December 31, 2001
|                                                |                   |             |         |               |           |                  
|                                                |                   |             |         |               |           |                   |      | Percent |       |       |         |         |           | Percent
|                                                |                   |             |         |               |           |                   |      | of      |       |       |         |         |           | of     
|                                                |                   |             |         | Amount        |           | Total             |      | Amount  |       | Total
|                                                |                   |             |         |               |           |                   |      |         |       |      
|Commercial and industrial                       |                   | $           | 287,817 |               |           |                   | 25.1 | %       |       | $     | 261,196 |         |           |         | 26.1 | %   
|Real estate  construction and land development |                   |             | 217,201 |               |           |                   | 19.0 |         |       |       | 200,250 |         |           |         | 20.0 |     
|Real estate  mortgage                          |                   |             |         |               |           |                   |      |         |       |       |         |         |           |         |      |     
|                                                | Single-family (1) |             |         | 282,239       |           |                   |      | 24.6    |       |       |         | 224,736 |           |         |      | 22.5 |      
|                                                | Commercial        |             |         | 238,874       |           |                   |      | 20.9    |       |       |         | 194,535 |           |         |      | 19.5 |      
|                                                | Other             |             |         | 25,533        |           |                   |      | 2.2     |       |       |         | 24,140  |           |         |      | 2.4  |      
|Consumer                                        |                   |             | 87,451  |               |           |                   | 7.6  |         |       |       | 91,421  |         |           |         | 9.1  |     
|Other                                           |                   |             | 7,047   |               |           |                   | .6   |         |       |       | 3,784   |         |           |         | .4   |     
|                                                |                   |             |         |               |           |                   |      |         |       |       |         |         |           |         |      |     
|                                                |                   | Total loans |         |               | 1,146,162 |                   |      |         | 100.0 | %     |         |         | 1,000,062 |         |      |      | 100.0 | %
|                                                |                   |             |         |               |           |                   |      |         |       |       |         |         |           |         |      |     
|Unearned income                                 |                   |             | (1,179  | )             |           |                   |      |         |       |       | (906    | )       |           |         |      |     
|Allowance for loan losses                       |                   |             | (14,102 | )             |           |                   |      |         |       |       | (12,546 | )       |           |         |      |     
|                                                |                   |             |         |               |           |                   |      |         |       |       |         |         |           |         |      |     
|                                                |                   | Net loans   |         | $             | 1,130,881 |                   |      |         |       |       |         | $       | 986,610   |         |      |      |       |  
|                                                |                   |             |         |               |           |                   |      |         |       |       |         |         |           |         |      |     



---

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

Deposits.Our noninterest-bearing deposits totaled $118.2 million at June
30, 2002, an increase of 24.9%, or $23.6 million from $94.6 million at December
31, 2001. Approximately $5.0 million of our noninterest-bearing deposits were
acquired in the CF Bancshares acquisition. Our noninterest-bearing deposits
comprised 10.9% of total deposits at June 30, 2002, compared to 9.9% at
December 31, 2001. Of our total noninterest-bearing deposits, $69.1 million, or
58.4% were in our Alabama branches while $49.1 million, or 42.6% were in our
Florida branches.

Our interest-bearing deposits totaled $970.8 million at June 30, 2002, an
increase of 13.2%, or $113.2 million from $857.6 million at December 31, 2001.
Approximately $72.0 million of our interest-bearing deposits were acquired in
the CF Bancshares acquisition. Our interest-bearing deposits averaged
$924.4
million for the first six months of 2002 compared to $775.4 million for the
first six months of 2001, an increase of $144.0 million, or 18.6%. Our average
interest-bearing deposit for the second quarter of 2002 totaled $940.9 million
compared to $801.3 million for the second quarter of 2001, an increase of
$139.6 million, or 17.4%. This increase was comprised of lower yielding demand
deposit accounts and higher yielding certificates of deposit.

The average rate paid on our interest-bearing deposits during the first six
months of 2002 was 3.3% compared to 5.7% for the first six months of 2001 and
3.1% for the second quarter of 2002 compared to 5.4% for the second quarter of
2001. Our loan portfolio which was funded by these deposits produced an average
yield of 7.9% for the first six months and second quarter of 2002, compared to
9.7% for the first six months of 2001 and 9.5% for the second quarter of 2001.
Of our total interest-bearing deposits $596.1 million, or 69.5% were in the
Alabama branches while $261.5 million, or 39.5% were in the Florida branches.

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





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##### Table of Contents



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% annum ceiling for the first
ten years. As of the date of issuance the interest rate on the securities was
7.57%. As of June 30, 2002 the interest rate on the securities
was 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 a call option, with a premium
after five years on TBC Capital III and after ten years on TBC
Capital II. The call options are at par after ten years for TBC
Capital III and twenty years for TBC Capital II,
subject to regulatory approval, or earlier depending upon certain changes in
tax or investment company laws, or regulatory capital requirements.

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

We manage and control risk in the loan portfolio through adherence to credit
standards established by the board of directors and implemented by senior
management. These standards are set forth in a formal loan policy, which
establishes loan underwriting/approval procedures, 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.





---



##### Table of Contents



The quarterly allowance for loan loss calculation is segregated into various
segments that include classified loans, impaired loans with specific allocations and
homogeneous non-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 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 homogeneous non-rated loans are based on
historical charge-off experience adjusted for geographic location and other
risk factors.

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





---



##### 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

|                                                                 |                                                 |            |                   |       |                        |       |              |       |     |       | 
|---------------------------------------------------------------- | ----------------------------------------------- | ---------- | ----------------- | ----- | ---------------------- | ----- | ------------ | ----- | --- | ----- | 
|                                                                 |                                                 |            |                   |       | Six-Month Period       |       |              |       |    
|                                                                 |                                                 |            |                   |       | Ended                  |       | Year Ended  
|                                                                 |                                                 |            |                   |       | June 30,               |       | December 31,
|                                                                 |                                                 |            |                   |       | 2002                   |       | 2001        
|                                                                 |                                                 |            |                   |       |                        |       |             
|                                                                 |                                                 |            |                   |       | (Dollars in thousands)
|Allowance for loan losses at beginning of period                 |                                                 | $          | 12,546            |       |                        | $     | 8,959        |      
|Allowance of acquired bank                                       |                                                 |            | 1,058             |       |                        |       |             |      
|Charge-offs:                                                     |                                                 |            |                   |       |                        |       |              |      
|                                                                 | Commercial and industrial                       |            |                   | 1,247 |                        |       |              | 2,415 |    
|                                                                 | Real estate  construction and land development |            |                   | 532   |                        |       |              | 48    |    
|                                                                 | Real
estate  mortgage
 Single-family           |            |                   | 71    |                        |       |              | 184   |    
|                                                                 |                                                 | Commercial |                   |       | 152                    |       |              |       | 130 |      
|                                                                 |                                                 | Other      |                   |       | 31                     |       |              |       | 20  |      
|                                                                 | Consumer                                        |            |                   | 795   |                        |       |              | 1,517 |    
|                                                                 |                                                 |            |                   |       |                        |       |              |      
|                                                                 |                                                 |            | Total charge-offs |       |                        | 2,828 |              |       |     | 4,314 | 
|Recoveries:                                                      |                                                 |            |                   |       |                        |       |              |      
|                                                                 | Commercial and industrial                       |            |                   | 51    |                        |       |              | 65    |    
|                                                                 | Real estate  construction and land development |            |                   | 14    |                        |       |              | 65    |    
|                                                                 | Real
estate  mortgage
 Single-family           |            |                   | 15    |                        |       |              | 27    |    
|                                                                 |                                                 | Commercial |                   |       |                       |       |              |       |    |      
|                                                                 |                                                 | Other      |                   |       | 17                     |       |              |       |    |      
|                                                                 | Consumer                                        |            |                   | 112   |                        |       |              | 290   |    
|                                                                 |                                                 |            |                   |       |                        |       |              |      
|                                                                 |                                                 |            | Total recoveries  |       |                        | 209   |              |       |     | 447   | 
|                                                                 |                                                 |            |                   |       |                        |       |              |      
|Net charge-offs                                                  |                                                 |            | 2,619             |       |                        |       | 3,867        |      
|Provision for loan losses                                        |                                                 |            | 3,117             |       |                        |       | 7,454        |      
|                                                                 |                                                 |            |                   |       |                        |       |              |      
|Allowance for loan losses at end of period                       |                                                 | $          | 14,102            |       |                        | $     | 12,546       |      
|                                                                 |                                                 |            |                   |       |                        |       |              |      
|Loans at end of period, net of unearned income                   |                                                 | $          | 1,144,983         |       |                        | $     | 999,156      |      
|Average loans, net of unearned income                            |                                                 |            | 1,101,111         |       |                        |       | 914,006      |      
|Ratio of ending allowance to ending loans                        |                                                 |            | 1.23              | %     |                        |       | 1.26         | %    
|Ratio of net charge-offs to average loans (1)                    |                                                 |            | .48               | %     |                        |       | .42          | %    
|Net charge-offs as a percentage of:                              |                                                 |            |                   |       |                        |       |              |      
|                                                                 | Provision for loan losses                       |            |                   | 84.02 | %                      |       |              | 51.88 | %  
|                                                                 | Allowance for loan losses (1)                   |            |                   | 37.45 | %                      |       |              | 30.82 | %  
|Allowance for loan losses as a percentage
of nonperforming loans |                                                 |            | 126.33            | %     |                        |       | 100.99       | %    



---

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

The allowance for loan losses as a percentage of loans, net of unearned income,
at June 30, 2002 was 1.23% 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 126.3% at June 30, 2002 from 101.0% at
December 31, 2001.





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##### Table of Contents



Net charge-offs were $2.6 million for the
first six months of 2002. The ratio of net
charge-offs to average loans on an annualized basis totaled .48% for the first
six months of 2002. The ratio of net charge-offs to average loans averaged .60%
for the five year period ended December 31, 2001, with a ratio of .42% in 2001
and .57% in 2000. Historically, net charge-offs have primarily consisted of
commercial and consumer loans. Net commercial loan charge-offs totaled $1.2
million, or 45.7% of total net charge-off loans for the first six months of
2002 compared to 60.8% of total net charge-off loans for the year 2001. Net
consumer loan charge-offs totaled $683,000, or 26.1% of total net charge-off
loans for the first six months of 2002 compared with 31.7% of total net
charge-off loans for the year 2001. The net charge-offs of real estate
construction loans totaled $518,000, or 19.8% of total net charge-off loans for
the first six months of 2002 compared to net recoveries in 2001. This
increase is due to charge-offs related to a single loan
relationship in North Alabama in the second quarter of 2002.

Nonperforming Loans.Nonperforming loans
decreased $1.2 million to $11.2
million as of June 30, 2002 from $12.4 million as of December 31, 2001. As a
percentage of net loans, nonperforming loans decreased from 1.24% at December
31, 2001 to .97% at June 30, 2002. The following table represents our
nonperforming loans for the dates indicated:

Nonaccrual, Past Due and Restructured Loans

|                                                  |  |                        |        |              |  |   |        |  
|------------------------------------------------- |  | ---------------------- | ------ | ------------ |  | - | ------ | -
|                                                  |  | June 30,               |        | December 31,
|                                                  |  | 2002                   |        | 2001        
|                                                  |  |                        |        |             
|                                                  |  | (Dollars in thousands)
|Nonaccrual                                        |  | $                      | 9,499  |              |  | $ | 7,941  |  
|Past due (contractually past due 90 days or more) |  |                        | 1,664  |              |  |   | 4,482  |  
|Restructured                                      |  |                        |       |              |  |   |       |  
|                                                  |  |                        |        |              |  |   |        |  
|                                                  |  | $                      | 11,163 |              |  | $ | 12,423 |  
|                                                  |  |                        |        |              |  |   |        |  
|Nonperforming loans as a percent of loans         |  |                        | .97    | %            |  |   | 1.24   | %
|                                                  |  |                        |        |              |  |   |        |  

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

|                                                |            |                           |       |                        |        |              |       |       |        | 
|----------------------------------------------- | ---------- | ------------------------- | ----- | ---------------------- | ------ | ------------ | ----- | ----- | ------ | 
|                                                |            |                           |       | June 30                |        | December 31,
|                                                |            |                           |       | 2002                   |        | 2001        
|                                                |            |                           |       |                        |        |             
|                                                |            |                           |       | (Dollars in thousands)
|Commercial and industrial                       |            | $                         | 3,747 |                        |        | $            | 3,078 |      
|Real estate  construction and land development |            |                           | 971   |                        |        |              | 2,895 |      
|Real
estate  mortgages
   Single-family        |            |                           | 2,331 |                        |        |              | 3,089 |      
|                                                | Commercial |                           |       | 3,052                  |        |              |       | 2,400 |       
|                                                | Other      |                           |       | 508                    |        |              |       | 145   |       
|Consumer                                        |            |                           | 554   |                        |        |              | 669   |      
|Other                                           |            |                           |      |                        |        |              | 147   |      
|                                                |            |                           |       |                        |        |              |       |      
|                                                |            | Total nonperforming loans |       | $                      | 11,163 |              |       | $     | 12,423 | 
|                                                |            |                           |       |                        |        |              |       |      

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





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##### Table of Contents



In addition to nonperforming loans,
management has identified $3.7 million in potential problem loans as of June 30, 2002. Potential problem loans
are loans where known information about possible credit problems of the
borrowers causes management to have doubts as to the ability of such borrowers
to comply with the present repayment terms and may result in disclosure of such
loans as nonperforming in future periods. Of the $3.7 million in
potential problem loans, $2.8 million, or 75%, is attributable to
five relationships located primarily in North Alabama of which $1.9
million is secured by real estate. All potential problem loans
secured by real estate totaled $2.7 million; the remaining $1.0
million is primarily secured by commercial equipment.

Impaired Loans.At June 30, 2002, the recorded investment in impaired
loans totaled $15.0 million with approximately $3.4 million in allowance for
loan losses specifically allocated to impaired loans. Approximately
$5.8 million was added to impaired loans in the second quarter
of 2002 from three loan relationships in North Alabama. 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 June 30, 2002:

|                                                |            |       |       |                        |        |           |       |     |       | 
|----------------------------------------------- | ---------- | ----- | ----- | ---------------------- | ------ | --------- | ----- | --- | ----- | 
|                                                |            |       |       | Outstanding            |        | Specific 
|                                                |            |       |       | Balance                |        | Allowance
|                                                |            |       |       |                        |        |          
|                                                |            |       |       | (Dollars in thousands)
|Commercial and industrial                       |            | $     | 6,831 |                        |        | $         | 1,823 |    
|Real estate  construction and land development |            |       | 2,396 |                        |        |           | 150   |    
|Real estate  mortgages                         |            |       |       |                        |        |           |       |    
|                                                | Commercial |       |       | 4,708                  |        |           |       | 991 |      
|                                                | Other      |       |       | 774                    |        |           |       | 85  |      
|Other                                           |            |       | 331   |                        |        |           | 301   |    
|                                                |            |       |       |                        |        |           |       |    
|                                                |            | Total |       | $                      | 15,040 |           |       | $   | 3,350 | 
|                                                |            |       |       |                        |        |           |       |    

Stockholders Equity. At June 30, 2002, total stockholders equity was $100.8
million, an increase of $23.9 million from $76.9 million at December 31, 2001.
The increase in stockholders equity resulted primarily from total
comprehensive income of $5.5 million for the first six months of 2002 and $19.3
million in net proceeds from the sale of common stock. During March 2002 we
received $19.3 million in proceeds, net of $1.8 million underwriting 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. In
September of 2000, our board of directors approved a stock buyback plan in an
amount not to exceed $10,000,000. As of June 30, 2002 there were 139,078 shares
held in treasury at a cost of $779,000.

On April 1, 2002, we issued 160,000 shares of restricted common stock to certain
directors and key employees. Under the Restricted Stock Agreement, the stock may
not be sold or assigned in any manner for a five-year period that began on
April 1, 2002. During this restricted period, the participant is eligible to
receive dividends and exercise voting privileges. The restricted stock also has
a corresponding vesting period with one-third vesting in the third, fourth and
fifth years, respectively. The restricted stock was issued at $7.00 per share, or $1,120,000,
and classified as a contra-equity account, Unearned restricted
stock, in
stockholders equity. The $1,120,000 is being amortized as expense as the stock
is earned during the restricted period. For the period ended
June 30, 2002, we
have recognized $56,000 in restricted stock expense.

We adopted a leveraged employee stock ownership plan (the ESOP) effective May
15, 2002 that covers all eligible employees that have attained the age of
twenty-one and have completed a year of service. As of June 30,
2002, the
ESOP has been internally leveraged with 150,000 shares of our common stock
purchased in the open market and classified as a contra-equity account,
Unearned ESOP shares, in stockholders equity.





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##### Table of Contents



As of June 30, 2002, the ESOP trustees were in the process of finalizing a
promissory note to reimburse us for the funds used to leverage the ESOP. The
unreleased shares and our guarantee will secure the promissory note, which will
be classified as long-term debt on our consolidated statement of financial
condition. As the ESOP repays the debt, with our quarterly contributions,
shares are released from collateral based on the proportion of debt service.
Released shares are allocated to eligible employees at the end of the plan year
based on the employees eligible compensation to total compensation. We
recognize compensation expense as the shares are earned and committed to be
released during the period. As shares are committed to be released and
compensation expense is recognized the shares become outstanding for basic and
diluted earnings per share computations. The amount of compensation expense we
report is equal to the average fair value of the shares earned and committed to
be released during the period. Compensation expense that we
recognized during the period ended June 30, 2002 was $13,000. The ESOP shares
as of June 30, 2002 were as follows:

|                                          |  |               |           | 
|----------------------------------------- |  | ------------- | --------- | 
|                                          |  | June 30, 2002
|                                          |  |              
|Allocated shares                          |  |               |          | 
|Estimated shares committed to be released |  |               | 1,535     | 
|Unreleased shares                         |  |               | 148,465   | 
|                                          |  |               |           | 
|Total ESOP shares                         |  |               | 150,000   | 
|                                          |  |               |           | 
|Fair value of unreleased shares           |  | $             | 1,295,000 | 
|                                          |  |               |           | 

Regulatory Capital.The table below represents our and our subsidiarys
regulatory and minimum regulatory capital requirements at June 30, 2002
(dollars in thousands):

|                                      |          |   |         |         |          |  |             |       |       |   |             |        |            |  |      |      |  |   |         |         |  |  |       |       | 
|------------------------------------- | -------- | - | ------- | ------- | -------- |  | ----------- | ----- | ----- | - | ----------- | ------ | ---------- |  | ---- | ---- |  | - | ------- | ------- |  |  | ----- | ----- | 
|                                      |          |   |         |         |          |  |             |       |       |   | For Capital |        |            |  |      |      |  |   |        
|                                      |          |   |         |         |          |  |             |       |       |   | Adequacy    |        | To Be Well
|                                      |          |   | Actual  |         | Purposes |  | Capitalized
|                                      |          |   |         |         |          |  |            
|                                      |          |   | Amount  |         | Ratio    |  | Amount      |       | Ratio |   | Amount      |        | Ratio     
|                                      |          |   |         |         |          |  |             |       |       |   |             |        |           
|Total Risk-Based Capital
Corporation  |          | $ | 132,158 |         |          |  | 11.55       | %     |       | $ | 91,558      |        |            |  | 8.00 | %    |  | $ | 114,447 |         |  |  | 10.00 | %    
|                                      | The Bank |   |         | 119,281 |          |  |             | 10.52 |       |   |             | 90,689 |            |  |      | 8.00 |  |   |         | 113,362 |  |  |       | 10.00 | 
|Tier 1 Risk-Based Capital
Corporation |          |   | 115,967 |         |          |  | 10.13       |       |       |   | 45,779      |        |            |  | 4.00 |      |  |   | 68,668  |         |  |  | 6.00  |      
|                                      | The Bank |   |         | 105,098 |          |  |             | 9.27  |       |   |             | 45,345 |            |  |      | 4.00 |  |   |         | 68,017  |  |  |       | 6.00  | 
|Leverage
Capital
Corporation          |          |   | 115,967 |         |          |  | 8.72        |       |       |   | 53,189      |        |            |  | 4.00 |      |  |   | 66,486  |         |  |  | 5.00  |      
|                                      | The Bank |   |         | 105,098 |          |  |             | 7.97  |       |   |             | 52,730 |            |  |      | 4.00 |  |   |         | 65,912  |  |  |       | 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 FHLB 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; changes in the quality or
composition of our loan portfolio and the accuracy of the assumptions
which support our allowance for loan losses; 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, including the
outcome of litigation which is inherently uncertain, and its effect on our
financial condition or results of operations; technological changes; changes in
consumer spending and savings habits; and regulatory, legal or judicial
proceedings.

If one or more of the factors affecting our forward-looking information and
statements proves incorrect, then our actual results, performance or
achievements could differ materially from those expressed in, or implied by,
forward-looking information and statements contained in this
Quarterly Report on Form 10-Q. Therefore, we caution you not to place undue reliance on our forward-looking
information and statements.

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





---



##### Table of Contents






|        |  |                                                          
|------- |  | ---------------------------------------------------------
|Item 3. |  | Quantitative and Qualitative Disclosure About Market Risk

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





---



##### 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 affect our business, financial condition or
results of operations.




Item 2. Changes in Securities and Use of Proceeds

None.




Item 3. Defaults Upon Senior Securities

None.




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

On June 11, 2002 the Annual Meeting of Stockholders of the Corporation was held
at which shares of common stock represented at the Annual Meeting were voted in
favor of the directors listed below as follows:

|                           |  |     |            |          |  |  |         | 
|-------------------------- |  | --- | ---------- | -------- |  |  | ------- | 
|Director                   |  | For |            | Withhold
|1. W. T. Campbell, Jr.     |  |     | 13,636,862 |          |  |  | 276,330 | 
|2. K. Earl Durden          |  |     | 13,734,362 |          |  |  | 178,830 | 
|3. John F. Gittings        |  |     | 13,723,986 |          |  |  | 189,206 | 
|4. Thomas E. Jernigan, Jr. |  |     | 13,749,162 |          |  |  | 164,030 | 
|5. Mayer Mitchell          |  |     | 13,749,162 |          |  |  | 164,030 | 
|6.
Harold W. Ripps         |  |     | 13,749,162 |          |  |  | 164,030 | 
|7. James A. Taylor, Jr.    |  |     | 13,621,856 |          |  |  | 291,336 | 
|8. T. Mandell Tillman      |  |     | 13,005,162 |          |  |  | 908,030 | 

In addition to the directors elected at the meeting, the following individuals
will continue to serve as directors until the end of their respective terms:

|                                                                                                                                           |  |                                                                                                                                    
|------------------------------------------------------------------------------------------------------------------------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------
|James R. Andrews, M.D.
David R. Carter
Don J. Giardina
Randell E. Jones
Ronald W. Orso, M.D.
Michael E. Stephens
Marie Swift
Johnny Wallis |  | Neal R. Berte, Ed. D.
Peter N. DiChiara
Steven C. Hays
James Mailon Kent, Jr.
Jerry M. Smith
Larry D. Striplin, Jr.
James A. Taylor

In addition, shares of common stock represented at the Annual Meeting were
voted in favor of the ratification of Ernst & Young LLP as independent auditors
as follows:

|           |  |         |  |        
|---------- |  | ------- |  | -------
|For        |  | Against |  | Abstain
|           |  |         |  |        
|13,706,559 |  | 158,139 |  | 48,494 





---



##### Table of Contents






Item 5. Other Information

None.




Item 6. Exhibits and Report on Form 8-K



|(a) |  | Exhibit:           
|--- |  | -------------------
|   
|    |  | None.              
|   
|(b) |  | Report on Form 8-K:

We filed
a Current Report on Form 8-K dated April 22, 2002 pursuant to Item 9
containing as an exhibit a
news release announcing our first quarter 2002 earnings.





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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: August 14, 2002 |  | By: /s/ James A. Taylor, Jr.                        
|                      |  |                                                     
|                      |  | James A. Taylor, Jr.                                
|                      |  | President and Chief Operating Officer               
|                      |  |                                                     
|Date: August 14, 2002 |  | By: /s/ David R. Carter                             
|                      |  |                                                     
|                      |  | David R. Carter                                     
|                      |  | Executive Vice President and Chief Financial Officer
|                      |  | (Principal Accounting Officer)