Edgar Filing: BANC CORP

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 2002

REGISTRATION NO. 333-82428

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE BANC CORPORATION
(Exact Name of Registrant as Specified in its Charter)

DELAWARE 6022 63-1201350
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)

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17 NORTH 20TH STREET
BIRMINGHAM, ALABAMA 35203
(205) 327-3600
(Address, including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)

F. HAMPTON MCFADDEN, JR.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
THE BANC CORPORATION, 17 NORTH 20TH STREET
BIRMINGHAM, ALABAMA 35203
(205) 327-3600
(Name, Address, including Zip Code, and Telephone Number, including Area Code,
of Agent for Service)

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COPIES TO:

ROBERT E. LEE GARNER KEVIN M. HOULIHAN
HASKELL SLAUGHTER YOUNG & REDIKER, L.L.C. ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
1200 AMSOUTH/HARBERT PLAZA 12TH FLOOR
1901 SIXTH AVENUE NORTH 734 15TH STREET, N.W.
BIRMINGHAM, ALABAMA 35203 WASHINGTON, D.C. 20005
(205) 251-1000 (202) 347-0300

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
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(MAP)

TABLE OF CONTENTS

PAGE
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Prospectus Summary.......................................... 1
Risk Factors................................................ 8
Forward-Looking Statements.................................. 12
Use of Proceeds............................................. 13
Price Range of Our Common Stock............................. 14
Dividend Policy............................................. 14
Dilution.................................................... 15
Capitalization.............................................. 16
Selected Financial Data..................................... 17
Unaudited Pro Forma Condensed Consolidated Financial
Statements................................................ 19
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 24
Business.................................................... 42
Supervision and Regulation.................................. 47
Management.................................................. 52
Principal Stockholders...................................... 64
Description of Capital Stock................................ 66
Underwriting................................................ 69
Experts..................................................... 71
Legal Matters............................................... 71
Where You Can Find More Information......................... 71
Index to Financial Statements............................... F-1

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You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations and prospects may have changed since that date.

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UNTIL , ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

PROSPECTUS SUMMARY

This summary highlights selected information from this document and may not
contain all of the information that is important to you. You should read
carefully this entire document.

THE BANC CORPORATION

The Banc Corporation is a Delaware-chartered financial holding company
headquartered in Birmingham, Alabama. We provide banking and other financial
services in Alabama and the panhandle of Florida through The Bank, our wholly
owned subsidiary. The Bank is an Alabama-chartered bank with 21 locations in
Alabama and 13 in the panhandle of Florida operating under a single charter. We
believe that we are the largest independent community bank covering markets in
both Alabama and the panhandle of Florida. As of December 31, 2001, we had
assets of approximately $1.2 billion, loans of approximately $1.0 billion,
deposits of approximately $952 million and stockholders' equity of approximately
$77 million.

Background. We were founded in 1998 by our Chairman and Chief Executive
Officer, James A. Taylor. Mr. Taylor began his banking career in 1981 through
the acquisition of a single bank with total assets of approximately $17 million.
Mr. Taylor has been successful in acquiring community banks, many of which were
underperforming, then managing and growing these banks into profitable banking
operations. Mr. Taylor accomplished this through a business model that
emphasized strong asset quality as well as local deposit and lending decisions
supported by centralized management oversight. Mr. Taylor also opened de novo
banks in attractive high growth markets. By 1986, Mr. Taylor had assimilated six
community banks into one holding company, Alabama National BanCorporation. Mr.
Taylor served as Chairman and Chief Executive Officer of Alabama National,
expanding the company through a combination of acquisitions and internal growth
to $807 million in assets and total equity of $56 million after giving effect to
the merger of Alabama National with National Commerce Corporation in 1995. Mr.
Taylor remained with Alabama National as Chairman and Chief Executive Officer
through his retirement in April of 1996.

After his retirement, various investors approached Mr. Taylor about
reentering the banking business in Alabama or other southeastern states. He
decided to return to banking in the fall of 1997 when he identified and
purchased a building in downtown Birmingham, which had been the original
headquarters of AmSouth Bank. In October 1997, Mr. Taylor and 26 investors, many
of whom were investors in Alabama National BanCorporation, acquired interests in
Warrior Capital Corporation, the bank holding company for Warrior Savings Bank.
Warrior Savings Bank was a commercial bank with $69 million in assets and three
branches in northern Jefferson County as of September 30, 1997. In February
1998, Warrior Savings Bank changed its name to The Bank. In September 1998,
Warrior Capital Corporation merged into The Banc Corporation. Following the
purchase of the headquarters building and the acquisition of Warrior Capital
Corporation, Mr. Taylor began the process of assembling his management team and
pursuing acquisition opportunities.

During the fall of 1998, The Banc Corporation acquired four financial
institutions: City National Corporation ($84 million in assets), Commerce Bank
of Alabama, Inc. ($105 million in assets), First Citizens Bancorp, Inc. ($35
million in assets) and Commercial Bancshares of Roanoke, Inc. ($42 million in
assets). Our plan was to initially acquire smaller banks located in communities
that offered modest growth opportunities but provided earnings, low cost
deposits and high yielding loans. As a result of these acquisitions and our de
novo branches in Birmingham and Decatur, we grew from $69 million in assets and
three branches as of September 30, 1997 to $441 million in assets ($630 million
after giving effect to acquisitions completed in 1999 accounted for as poolings
of interest) and 16 branches by December 31, 1998. These transactions provided
us with the earnings, market presence and asset size to support our initial
public offering in December of 1998, which raised gross proceeds of $12.6
million.

In 1999, we began to focus on higher growth markets in Alabama and the
panhandle of Florida. In Alabama, we concentrated on the Huntsville and
Birmingham markets. As of December 31, 2001, approximately 22% of our loans and
12% of our deposits were located in Birmingham. We also acquired BankersTrust of
Alabama, Inc. ($35 million in assets)in July 1999, moving us into the
Huntsville,

Alabama market. As of December 31, 2001, approximately 9% of our loans and 11%
of our deposits were located in the Huntsville market. We acquired Emerald Coast
Bancshares, Inc. in February 1999 ($92 million in assets) and both C&L Banking
Corporation ($49 million in assets) and C&L Bank of Blountstown ($56 million in
assets) in June 1999. As of December 31, 2001, approximately 32% of our loans
and 30% of our deposits were located in Florida.

In addition to our expansion into higher growth areas in Alabama and the
panhandle of Florida, we also acquired three branches in Southeast Alabama and
opened a de novo branch in Andalusia, Alabama in November of 1999. These
transactions are consistent with our strategy of pursuing opportunistic
transactions in contiguous markets where we believe we can attract experienced
management and generate profitable returns. As a result of this activity, we
grew from $630 million in assets and 16 branches as of December 31, 1998 to $827
million in assets and 27 branches as of December 31, 1999.

From December 31, 1999 to December 31, 2001, we did not complete any
acquisitions but focused on internal growth and opened new branches in Destin,
Santa Rosa Beach and Panama City, Florida in the fall of 2001. We also closed
three redundant branches which we acquired in our smaller community markets in
Alabama. Overall, we grew assets by more than $379 million from $827 million at
December 31, 1999 to $1.2 billion on December 31, 2001.

On February 15, 2002, we closed our acquisition of CF Bancshares, Inc., a
unitary thrift holding company. As of September 30, 2001, CF Bancshares had
approximately $105 million in assets with offices in Port St. Joe, Apalachicola
and Mexico Beach, Florida. We are opening a branch in Carrabelle, Florida in the
summer of 2002. We acquired all of CF Bancshares' common stock for aggregate
consideration of $15.5 million to be paid in a combination (to be determined) of
cash and common stock of The Banc Corporation. As a result of the CF Bancshares
acquisition, we now have over $456 million in assets in Florida.

Assimilation of Banking Operations. Since completing our acquisition of
BankersTrust in July of 1999, we have concentrated on supplementing our
management team, generating internal growth and integrating our acquisitions. We
have assembled a team of seasoned financial services professionals, with our top
six senior executives having over 120 years of professional banking experience.
This team has focused on (1) standardizing our credit review process, (2)
centralizing our operations and upgrading our management information systems and
(3) instilling a sales culture throughout The Bank.

- Standardizing credit review process. We have strengthened credit
administration and internal loan review by hiring additional experienced
personnel from two regional banks and enhancing policies, procedures and
systems with respect to all aspects of lending. We have standardized our
loan underwriting process, including documentation and key qualification
criteria, and implemented this process throughout our lending operations.
See "Business -- Lending Activities" for a discussion of our loan
underwriting process.

- Centralizing operations and upgrading management information systems. We
have consolidated all of our operations into a centralized data
processing center, and we believe that we have more than sufficient
capacity to handle our current operations and other foreseeable growth.
We have significantly strengthened our internal reporting and management
information systems to provide senior management access to more timely
and complete data regarding all aspects of our operations.

- Instilling a sales culture throughout The Bank. In 2001, all local
presidents and branch managers received formal training on creating and
embedding a sales culture in their respective branches. Each of these
individuals has prepared a sales program for their branch which has been
reviewed by senior management of The Bank. All branch managers and their
employees are entitled to receive additional cash and stock compensation
based upon their performance.

With the significant investment in infrastructure, personnel and systems in
2000 and 2001, we believe we have substantially addressed our credit review
process, centralized our operations and instilled a sales culture. As a result,
we intend to focus more intently on enhancing asset quality and improving
operating efficiency.
2

- Enhancing asset quality. In conjunction with strengthening our credit
administration and internal loan review, we have reviewed substantially
all of our loans. Due in large part to this analysis and current economic
conditions, our fourth quarter of 2001 provision for loan losses was $4.9
million and charged off loans were $2.7 million. For the year ended
December 31, 2001, the provision for loan losses was $7.5 million. As a
result of this provision of $7.5 million, the ratio of the allowance for
loan losses to loans net of unearned income was 1.26% as of December 31,
2001.

- Improving Operating Efficiency. Since our inception, we have grown
through acquisitions, internal growth and branching. Following each of
our acquisitions, we have expended substantial managerial, operating,
financial and other resources to integrate these entities. In addition,
we have typically maintained the acquired entity's management and staff.
As a result of this increase in personnel and the corresponding
investment in infrastructure and systems, our efficiency ratio has been
negatively impacted. As we are just over three years old and still in the
early stages of the execution of our business plan, we have not yet
reached economies of scale that a mature banking company would expect. In
addition, in 2001, we incurred approximately $1.7 million in
non-recurring noninterest expense related to data processing conversion,
write-offs of obsolete equipment and litigation. We believe that we now
have substantial capacity to grow our operations without significant
further investment in infrastructure. As such, as we continue to expand
our franchise in our targeted market areas, we anticipate that our
efficiency ratio will improve toward our goal of 65% in three to four
years.

Market Areas. Our primary markets are located throughout the northern half
of Alabama and the panhandle of Florida. A number of once independent community
banks in our market areas have been acquired by larger bank holding companies.
We believe that consolidation of local banks into these larger institutions
provides us with an excellent opportunity to expand our market share.

We have specifically targeted Birmingham and Huntsville, Alabama and the
panhandle of Florida as our best opportunities for internal growth. Birmingham
is the largest city in Alabama and one of the largest banking centers in the
country as measured by domiciled deposits. Birmingham is a recognized leader in
medical research and is well situated to take advantage of Alabama's growing
auto manufacturing industry which includes Mercedes Benz of North America and
Honda Corporation. Birmingham has a median family income of $51,100 and an
unemployment rate of 3.1% for 2001, substantially better than the Alabama
average. (Sources: U.S. Department of Housing and Urban Development and Alabama
Department of Industrial Relations).

Huntsville is the third largest city in Alabama and is home to the Marshall
Space Flight Center, the Redstone Arsenal and attendant defense and technology
businesses. Huntsville has 14% employment in high-tech manufacturing and
services and a well educated population. Huntsville plays a key role in the
development of missile defense systems with Boeing employing about 1,300 people
in this work in Huntsville. Huntsville was ranked third among top high-tech
cities in 2001 and had the fifth highest concentration of software employment
nationwide (Source: Center for Business and Economic Research, The University of
Alabama). Huntsville has a median family income of $60,600 and an unemployment
rate of 3.1% for 2001. (Sources: U.S. Department of Housing and Urban
Development and Alabama Department of Industrial Relations).

Our Florida community bank franchise stretches along Florida's "Emerald
Coast," from Destin to Apalachicola Bay, with approximately $456 million in
assets (including the CF Bancshares acquisition). This is one of the fastest
growing areas in Florida, a state known for its tourism industry and high
population growth rate. We focused on the panhandle of Florida because of its
potential for economic growth, attractive tourism industry, retiree population,
and construction and other lending opportunities. We have three branches serving
the Port St. Joe, Mexico Beach and Apalachicola markets and a fourth is planned
for the summer of 2002. We believe Port St. Joe is the only undeveloped deep
water port on the Gulf Coast. The St. Joe Company, which we believe is one of
the largest property owners in the State of Florida, has begun to develop its
extensive real estate holdings in that area.

Management. We believe we have assembled a seasoned management team with
particular experience in the southeastern banking market. Our senior management
team, with over 120 years of professional banking experience, consists of the
following individuals: James A. Taylor, Chairman of the Board and Chief
Executive Officer and Chairman of the Board of The Bank; James A. Taylor, Jr.,
President and Chief Operating Officer; David R. Carter, Executive Vice President
and Chief Financial Officer; Don J. Giardina, President and Chief Executive
Officer of The Bank; John S. Meriwether, Executive Vice President and Chief
Credit Officer of The Bank; and William Morgan, Senior Vice
President -- Operations of The Bank. We believe our current management team
provides us with the experience to grow substantially without requiring
significant additions to our senior management team.

As part of our acquisition strategy, we have traditionally retained local
management and advisory directors to capitalize on their knowledge of the local
community. Presently, we have 13 individual presidents who act as regional
executives responsible for the day to day operations and decisions for between
one and five branches. We require our presidents to live in their specific
market area and encourage them to be an active member of their community. This
approach permits The Bank to target individuals and small to medium-sized
regional businesses that prefer local decision-making and personalized service.
In addition, we believe that the history of achievement and leadership of these
presidents and advisory directors gives us a competitive advantage relative to
the larger bank holding companies in our market areas.

Our executive officers and directors have a substantial ownership interest
in our common stock. At December 31, 2001, these individuals owned or controlled
approximately 31% of our outstanding shares.

Current Business Strategy. Having grown to $1.2 billion in assets as of
December 31, 2001 and developed an infrastructure capable of managing and
operating a larger institution, we believe The Bank is now poised to deliver
expanded services to its customers and attractive financial returns to our
shareholders. Our near term business strategy includes the following:

- Improve profitability. Now that The Bank's investment in infrastructure
is largely complete, we believe that we can substantially grow our
franchise without material additional expenditures or hiring of senior
management personnel. We intend to focus on enhancing asset quality,
improving efficiency, increasing noninterest income and asset growth. As
such, we believe that our profitability will improve as we grow The
Bank's revenues going forward.

- Expand products and services. The Bank currently offers a wide range of
products and services, including a variety of deposit and loan products,
cash management services, internet banking, and telephone banking. In
2002, The Bank intends to enhance brokerage and investment products, as
well as introduce life and health insurance and annuity products.

- Continue to build customer relationships. We intend to build our core
business of generating and maintaining profitable banking relationships
with small and medium sized businesses, professional firms and
individuals through local decision-making, effective customer response
time and strong relationships with local civic and community
organizations.

- Market expansion. We will also look for opportunities to expand our
franchise into high growth markets in the Southeast on a selective and
opportunistic basis. Additionally, we believe we have a tremendous
opportunity to increase our market share through selective branching,
retention of local management and enhanced marketing efforts utilizing
common branding identification.

The primary purpose of this offering is to increase our capital base to
permit growth. The additional capital will enable us to pursue a unique
opportunity to build market share in one of our target markets created by the
acquisition of CF Bancshares.

Our principal executive offices are located at 17 North 20th Street
Birmingham, Alabama 35203, and our telephone number is (205) 327-3600.

THE OFFERING

Common stock offered.......... 3,000,000 shares(1)

Common stock outstanding after
this offering................. 17,716,445(2)

Net proceeds.................. We anticipate that our net proceeds from this
offering, without the exercise of the
over-allotment option, will be approximately
$ .

Use of proceeds............... We will use the proceeds to repay approximately
$ million of outstanding debt which was
incurred in the $15.5 million acquisition of CF
Bancshares. We will use the remainder as
working capital for future internal growth,
possible acquisitions and general corporate
purposes.

Nasdaq National Market
symbol........................ TBNC

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(1) This number assumes the underwriters' over-allotment option is not
exercised. If the over-allotment option is exercised in full, we will issue
and sell an additional 450,000 shares.

(2) The number of shares outstanding after the offering excludes 1,500,000
shares reserved for issuance under our stock option plans, of which options
to purchase 1,032,009 shares at an average option price of $6.44 have been
granted as of December 31, 2001. Assumes that 470,000 shares are issued in
connection with the acquisition of CF Bancshares.

RISK FACTORS

See "Risk Factors" on page 8 for a discussion of certain risks related to
an investment in our common stock.

SUMMARY CONSOLIDATED FINANCIAL DATA

The following table sets forth selected financial data from our
consolidated financial statements and should be read in conjunction with our
consolidated financial statements including the related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
beginning on page 24. The selected historical financial data as of December 31,
2001 and 2000 and for each of the three years ended December 31, 2001 is derived
from our audited consolidated financial statements and related notes included in
this prospectus. See "The Banc Corporation and Subsidiaries Consolidated
Financial Statements."

AT OR FOR THE YEAR ENDED DECEMBER 31, (1)
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2001 2000 1999 1998 1997
---------- ---------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

STATEMENT OF FINANCIAL CONDITION
DATA:
Total assets......................... $1,206,405 $1,029,215 $827,427 $630,089 $461,956
Loans, net of unearned income........ 999,156 808,145 632,777 431,931 282,902
Allowance for loan losses............ 12,546 8,959 8,065 6,466 3,741
Investment securities................ 68,847 95,705 70,916 98,208 98,885
Deposits............................. 952,235 827,304 682,517 531,070 395,222
Advances from FHLB................... 135,900 104,300 62,500 23,160 --
Guaranteed preferred beneficial
interest in The Banc Corporation's
subordinated debentures............ 31,000 15,000 -- -- --
Stockholders' equity................. 76,853 74,875 68,848 65,967 53,716

INCOME STATEMENT DATA:
Interest income...................... $ 90,351 $ 75,035 $ 55,557 $ 42,472 $ 33,705
Interest expense..................... 48,359 39,921 26,749 20,206 15,793
---------- ---------- -------- -------- --------
Net interest income................ 41,992 35,114 28,808 22,266 17,912
Provision for loan losses............ 7,454 4,961 2,850 4,657 2,685
---------- ---------- -------- -------- --------
Net interest income after provision
for loan losses.................... 34,538 30,153 25,958 17,609 15,227
Noninterest income................... 9,773 7,822 6,164 4,081 3,019
Merger related costs................. -- -- 744 1,466 --
Other noninterest expense............ 38,497 32,118 27,938 20,663 14,776
Distributions on guaranteed preferred
beneficial interest in our
subordinated debentures............ 2,159 504 -- -- --
---------- ---------- -------- -------- --------
Income (loss) before income
taxes........................... 3,655 5,353 3,440 (439) 3,470
Income tax expense (benefit)......... 966 996 520 (724) 1,074
---------- ---------- -------- -------- --------
Net income........................... $ 2,689 $ 4,357 $ 2,920 $ 285 $ 2,396
========== ========== ======== ======== ========
PER SHARE DATA:
Earnings per share -- basic.......... $ 0.19 $ 0.30 $ 0.20 $ 0.02 $ 0.23
Earnings per share -- diluted........ $ 0.19 $ 0.30 $ 0.20 $ 0.02 $ 0.22
Weighted average shares
outstanding -- basic............... 14,272 14,384 14,335 13,115 10,553
Weighted average shares
outstanding -- diluted............. 14,302 14,387 14,362 13,210 10,672
Book value per share................. $ 5.41 $ 5.22 $ 4.79 $ 4.69 $ 4.30
Tangible book value per share........ $ 4.98 $ 4.76 $ 4.28 $ 4.63 $ 4.27
Common shares outstanding at end of
period............................. 14,217 14,345 14,385 14,077 12,478

(See footnotes on following page.)

AT OR FOR THE YEAR ENDED DECEMBER 31, (1)
--------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- -------- -------- --------

PERFORMANCE RATIOS AND OTHER DATA:
Return on average assets............. 0.23% 0.48% 0.41% 0.05% 0.58%
Return on average stockholders'
equity............................. 3.53 6.03 4.33 0.51 5.57
Net interest margin(2)(3)............ 4.04 4.36 4.55 4.73 4.84
Net interest spread(3)(4)............ 3.54 3.83 3.98 3.96 3.98
Noninterest income to average
assets............................. 0.85 0.86 0.86 0.77 0.74
Noninterest expense to average
assets(5)(6)....................... 3.53 3.58 3.98 4.17 3.60
Efficiency ratio(6)(7)............... 78.17 75.31 80.91 82.50 69.40
Average loan to average deposit
ratio.............................. 100.40 95.64 89.71 74.77 70.37
Average interest-earning assets to
average interest-bearing
liabilities........................ 110.83 110.54 113.73 118.45 120.44
ASSET QUALITY RATIOS:
Allowance for loan losses to
nonperforming loans................ 100.99% 90.85% 216.22% 172.93% 146.42%
Allowance for loan losses to loans,
net of unearned income............. 1.26 1.11 1.27 1.50 1.32
Nonperforming loans to loans, net of
unearned income.................... 1.24 1.22 0.59 0.56 0.89
Nonaccrual loans to loans, net of
unearned income.................... 0.79 1.16 0.49 0.35 0.41
Net loan charge-offs to average
loans.............................. 0.42 0.57 0.90 0.67 0.58
Net charge-offs as a percentage of:
Provision for loan losses.......... 51.88 81.98 169.89 49.39 54.60
Allowance for loan losses.......... 30.82 45.40 60.04 35.57 39.19
CAPITAL RATIOS:
Tier-1 risk-based capital............ 9.44% 10.26% 9.41% 13.92% 13.80%
Total risk-based capital............. 11.41 11.36 10.61 15.05 15.00
Leverage............................. 7.92 8.47 7.74 10.59 11.05

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(1) Information for the years ended December 31, 1998 and 1997 has been restated
for the poolings of interests completed during 1999.

(2) Net interest income divided by average earning assets.

(3) Calculated on a tax equivalent basis.

(4) Yield on average interest-earning assets less rate on average
interest-bearing liabilities.

(5) Includes merger related expenses of $744,000 and $1.5 million in 1999 and
1998, respectively.

(6) Distributions on guaranteed preferred beneficial interest in our
subordinated debentures are included in noninterest expense.

(7) Efficiency ratio is calculated by dividing noninterest expense by the sum of
noninterest income plus net interest income on a fully tax equivalent basis.

RISK FACTORS

You should be aware of the risks and uncertainties associated with an
investment in our common stock. Specifically, there are risks and uncertainties
that could affect our future financial results and that may cause our future
earnings and financial condition to be less favorable than our expectations.

WE MAY NOT BE ABLE TO MAINTAIN OUR HISTORICAL GROWTH RATE, WHICH MAY ADVERSELY
IMPACT OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

We have grown substantially in the past few years from $441 million ($630
million after giving effect to acquisitions completed in 1999 accounted for as
poolings of interest) in total assets at December 31, 1998 to $1.2 billion in
total assets at December 31, 2001. This growth has been achieved through a
combination of internal growth and acquisitions. Our future profitability will
depend in part on our continued ability to grow. In recent years, we have
incurred substantial expenses to centralize our operations, hire additional
employees to supplement our management team and upgrade our management
information systems to build an infrastructure to support our future growth. We
may not be able to sustain our historical rate of growth or may not even be able
to grow at all. We may not be able to obtain the financing necessary to fund
additional growth and may not be able to find suitable candidates for
acquisition. Various factors, such as economic conditions, regulatory and
legislative considerations and competition, may impede or prohibit our opening
of new branch offices. If we experience a significant decrease in our historical
rate of growth, our results of operations and financial condition may be
adversely affected due to existing high levels of operating costs in relation to
our current asset base.

WE MAY BE UNABLE TO COMPLETE ACQUISITIONS, AND ONCE COMPLETE, WE MAY NOT BE ABLE
TO INTEGRATE OUR ACQUISITIONS SUCCESSFULLY.

Our growth strategy includes our ability to acquire other financial
institutions. We may not be able to complete any future acquisitions and, if
completed, we may not be able to successfully integrate the operations,
management, products and services of the entities we acquire. Following each
acquisition, we must expend substantial managerial, operating, financial and
other resources to integrate these entities. Our failure to successfully
integrate the entities we acquire into our existing operations may adversely
affect our results of operations and financial condition.

IF OUR ALLOWANCE FOR LOAN LOSSES IS NOT SUFFICIENT TO COVER ACTUAL LOAN LOSSES,
OUR EARNINGS WOULD DECREASE.

Our loan customers may not repay their loans according to the terms of
these loans, and the collateral securing the payment of these loans may be
insufficient to assure repayment. We may experience significant loan losses
which could have a material adverse effect on our operating results. Management
makes various assumptions and judgments about the collectibility of our loan
portfolio, including the creditworthiness of our borrowers and the value of the
real estate and other assets serving as collateral for the repayment of many of
our loans. We maintain an allowance for loan losses in an attempt to cover any
loan losses which may occur. In determining the size of the allowance, we rely
on an analysis of our loan portfolio based on historical loss experience, 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. If our assumptions are wrong, our current allowance may
not be sufficient to cover future loan losses, and adjustments may be necessary
to allow for different economic conditions or adverse developments in our loan
portfolio. Material additions to our allowance would materially decrease our net
income. Our provisions for loan losses were $7.5 million, $5.0 million and $2.9
million for the years ended December 31, 2001, 2000 and 1999, respectively.

In addition, federal and state regulators periodically review our allowance
for loan losses and may require us to increase our provision for loan losses or
recognize further loan charge-offs, based on judgments different than those of
our management. Any increase in our allowance for loan losses or loan
charge-offs as required by these regulatory agencies could have a negative
effect on our operating results.

GEOGRAPHIC CONCENTRATION AND LOCAL ECONOMIC CONDITIONS MAY AFFECT OUR
PROFITABILITY.

Substantially all of The Bank's deposits and assets at December 31, 2001
were derived either from operations in Alabama or from operations in markets in
Florida. As of December 31, 2001, approximately 70.9% of total assets and 69.9%
of total deposits were derived from operations in Alabama, and 29.1% of total
assets and 30.1% of total deposits were derived from operations in Florida.
Consequently, our profitability may be negatively affected by factors that have
a significant impact on general economic conditions in each of these states.
Adverse changes in economic or other conditions in our geographic markets may
impair The Bank's ability to collect loans and could otherwise negatively affect
our financial condition and results of operations.

OUR SIGNIFICANT INCREASE IN CONSTRUCTION AND LAND DEVELOPMENT LENDING ADVERSELY
AFFECTED ASSET QUALITY.

The Bank's expansion in the Florida market area as well as Birmingham and
Huntsville, Alabama has provided us with significant opportunities to increase
our loan portfolio, particularly in construction and land development loans.
Accordingly, from December 31, 2000 to December 31, 2001, our construction and
land development loans increased from $100.4 million to $200.3 million. Although
construction and land development loans generally provide for higher interest
rates and shorter terms than single-family residential mortgage loans, such
loans generally have a relatively higher degree of credit risk. Nonperforming
construction and land development loans have increased from $867,000 at December
31, 2000 to $2.9 million at December 31, 2001.

OUR SMALL TO MEDIUM-SIZED BUSINESS CUSTOMERS MAY HAVE FEWER FINANCIAL RESOURCES
TO WEATHER A DOWNTURN IN THE ECONOMY.

One of the primary focal points of our business development and marketing
strategy is serving the banking and financial services needs of small to
medium-sized businesses. At December 31, 2001, approximately $261.2 million, or
26.1% of our total loan portfolio consisted of commercial and industrial loans,
$200.3 million, or 20.0% were construction and land development loans, and
$194.5 million, or 19.5% were commercial real estate loans. Small to
medium-sized businesses generally have fewer financial resources in terms of
capital or borrowing capacity than larger entities. If general economic
conditions are unfavorable for Alabama or the Florida panhandle, the businesses
of our customers and their ability to repay outstanding loans may be negatively
affected. As a consequence, our results of operations and financial condition
may be adversely affected.

FLUCTUATIONS IN INTEREST RATES COULD REDUCE OUR PROFITABILITY. WE REALIZE INCOME
PRIMARILY FROM THE DIFFERENCE BETWEEN INTEREST EARNED ON LOANS AND INVESTMENTS
AND THE INTEREST PAID ON DEPOSITS AND BORROWINGS.

Our earnings are significantly dependent on our net interest income. We
expect that we will periodically experience "gaps" in the interest rate
sensitivities of our assets and liabilities, meaning that either our
interest-bearing liabilities will be more sensitive to changes in market
interest rates than our interest-earning assets, or vice versa. In either event,
if market interest rates should move contrary to our position, this "gap" may
work against us, and our earnings may be negatively affected. We are unable to
predict fluctuations of market interest rates, which are affected by many
factors, including the following:

- inflation;

- recession;

- a rise in unemployment;

- tightening money supply; and

- domestic and international disorder and instability in domestic and
foreign financial markets.

Although our asset/liability management strategy is designed to control our
risk from changes in market interest rates, we may not be able to prevent
changes in interest rates from having a material
9

adverse effect on our results of operations and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Market Risk -- Interest Rate Sensitivity."

LOSS OF OUR SENIOR EXECUTIVE OFFICERS OR OTHER KEY EMPLOYEES COULD IMPAIR OUR
RELATIONSHIP WITH OUR CUSTOMERS AND ADVERSELY AFFECT OUR BUSINESS.

Our success is dependent upon the continued service and skills of James A.
Taylor, our Chairman of the Board and Chief Executive Officer, and other senior
officers. Loss of the services of any of these key personnel could have a
negative impact on our business because of their skills, years of industry
experience and the difficulty of promptly finding qualified replacement
personnel.

OUR BUSINESS IS DEPENDENT ON TECHNOLOGY, AND AN INABILITY TO INVEST IN
TECHNOLOGICAL IMPROVEMENTS MAY ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.

The financial services industry is undergoing rapid technological changes
with frequent introductions of new technology-driven products and services. In
addition to better serving customers, the effective use of technology increases
efficiency and enables financial institutions to reduce costs. We have
consolidated all of our operations into a centralized data processing network
and have recently upgraded our management information systems. Our future
success will depend in part upon our ability to create additional efficiencies
in our operations, particularly in light of our past and projected growth
strategy. Many of our competitors have substantially greater resources to invest
in technological improvements. There can be no assurance that our technological
improvements will increase our operational efficiency or that we will be able to
effectively implement new technology-driven products and services or be
successful in marketing these products and services to our customers.

ALTHOUGH PUBLICLY TRADED, OUR COMMON STOCK HAS SUBSTANTIALLY LESS LIQUIDITY THAN
THE AVERAGE TRADING MARKET FOR A STOCK QUOTED ON THE NASDAQ NATIONAL MARKET, AND
OUR PRICE MAY FLUCTUATE IN THE FUTURE.

Although our common stock is listed for trading on the National Market of
the Nasdaq Stock Market, the trading market in our common stock has
substantially less liquidity than the average trading market for companies
quoted on the Nasdaq National Market. A public trading market having the desired
characteristics of depth, liquidity and orderliness depends on the presence in
the marketplace of willing buyers and sellers of our common stock at any given
time. This presence depends on the individual decisions of investors and general
economic and market conditions over which we have no control. Although we
believe that this offering will improve the liquidity of the market for our
common stock, no assurance can be given that the offering will increase the
volume of trading in our common stock.

The market price of our common stock may fluctuate in the future, and these
fluctuations may be unrelated to our performance. General market price declines
or overall market volatility in the future could adversely affect the price of
our common stock, and the current market price may not be indicative of future
market prices.

COMPETITION WITH OTHER FINANCIAL INSTITUTIONS COULD ADVERSELY AFFECT OUR
PROFITABILITY.

We face vigorous competition from banks and other financial institutions,
including savings and loan associations, savings banks, finance companies and
credit unions. A number of these banks and other financial institutions have
substantially greater resources and lending limits, larger branch systems and a
wider array of banking services. To a limited extent, we also compete with other
providers of financial services, such as money market mutual funds, brokerage
firms, consumer finance companies, insurance companies and governmental
organizations which may offer more favorable financing than we can. Some of our
nonbank competitors are not subject to the same extensive regulations that
govern us. This competition may reduce or limit our margins on banking services,
reduce our market share and adversely affect our results of operations and
financial condition.

IF A CHANGE IN CONTROL OR CHANGE IN MANAGEMENT IS DELAYED OR PREVENTED, THE
MARKET PRICE OF OUR COMMON STOCK COULD BE NEGATIVELY AFFECTED.

Provisions in our corporate documents, as well as certain federal and state
regulations, may make it difficult, and expensive, to pursue a tender offer,
change in control or takeover attempt that our board of directors opposes. As a
result, our stockholders may not have an opportunity to participate in such a
transaction, and the trading price of our stock may not rise to the level of
other institutions that are more vulnerable to hostile takeovers. Anti-takeover
provisions contained in our Restated Certificate of Incorporation also will make
it more difficult for an outsider to remove our current board of directors or
management.

THERE ARE RESTRICTIONS ON THE BANK'S ABILITY TO PAY DIVIDENDS WHICH MAY BE
NECESSARY TO FUND OUR OPERATIONS.

We conduct our principal business operations through our subsidiaries. We
will derive cash available to pay dividends and fund our operations primarily,
if not entirely, from dividends paid by our subsidiaries. The Bank is regulated
by Alabama laws restricting the declaration and payment of dividends to 90% of
annual net income until its surplus funds equal at least 20% of its capital
stock. The Bank has surplus in excess of this amount as of December 31, 2001. As
a member of the Federal Reserve System, The Bank is also subject to dividend
limitations imposed by the Federal Reserve. Federal law further prohibits an
insured institution from making any capital distribution, including dividends,
if after making the distribution, the institution would not satisfy one or more
of its minimum capital requirements. Moreover, the federal bank regulatory
agencies also have the general authority to limit dividends paid by insured
banks if such payments may be deemed to constitute an unsafe or unsound banking
practice.

THE AMOUNT OF OUR COMMON STOCK OWNED BY AND OTHER COMPENSATION ARRANGEMENTS WITH
OUR OFFICERS AND DIRECTORS MAY IMPEDE POTENTIAL TAKEOVERS.

As of December 31, 2001, directors and executive officers owned or
controlled approximately 31% of the outstanding shares of our common stock. See
"Principal Stockholders." Accordingly, if the directors and executive officers
were to act in concert, they would likely have the ability to control the board
of directors and therefore, our business and policies. As a result, our
management has significant control. In addition, our Executive Incentive
Compensation Plan provides that participants will receive a one-time cash bonus
equal to 3% of the amount that the total market capitalization (as defined in
the plan) on the determination date exceeds the total market capitalization on
January 5, 2000. Currently, there is only one participant in this plan. The
determination date is the earlier of January 5, 2003 or the date we cease to be
a public company. Employment agreements with our senior management also provide
for significant payments under certain circumstances following a change in
control. These compensation arrangements, common stock ownership of our board
and management, along with the potential exercises of stock options, could make
it difficult or expensive to obtain majority support for stockholder proposals
or potential acquisitions of us that our directors and officers oppose. See
"Management -- Employment Agreements" and " -- Incentive Plans" beginning on
pages 59 and 61, respectively.

THE MARKET PRICE OF OUR SHARES MAY DECLINE AS A RESULT OF SUBSTANTIAL SALES OF
OUR COMMON STOCK.

Upon completion of this offering, we will have outstanding 17,716,445
shares of common stock. The 3,000,000 shares of common stock sold in this
offering and the 470,000 shares that we assume are issuable by us in connection
with our acquisition of CF Bancshares will be freely tradeable without
restriction or further registration under the federal securities laws unless
held by our "affiliates" as that term is defined in Rule 144 under the
Securities Act. We and our directors and executive officers have agreed that we
will not, for a period of 180 days following the date of this prospectus,
without the prior written consent of Sandler O'Neill & Partners, L.P., dispose
of or hedge any of our common stock. Following this offering, based on the share
ownership of such persons as of December 31, 2001 and assuming no exercise of
the underwriters' over-allotment option and assuming that 470,000 shares will be
issued by us in connection with our acquisition of CF Bancshares, our directors
and officers will in the aggregate hold approximately

23% of our common stock, not including shares issuable upon the exercise of
options and warrants. Future sales or the perception that such sales could occur
at the expiration of the 180 day period by us or our directors or our executive
officers could adversely affect the prevailing market price of our common stock.

RECENT TERRORIST ATTACKS IN THE UNITED STATES HAVE AFFECTED THE STOCK MARKET AND
THE GENERAL ECONOMY.

On September 11, 2001, terrorists carried out attacks that destroyed the
World Trade Center in New York and badly damaged the Pentagon outside
Washington, D.C. In the wake of these attacks, stock prices broadly declined
from the prices that existed prior to the attacks. In addition to affecting the
stock markets, the terrorist attacks may affect the national and international
economies because of the uncertainties that exist as to how the United States
will respond in the future and as to whether additional attacks will be carried
out against the United States. These uncertainties contributed to a slowdown in
economic activity in the United States in the fourth quarter of 2001. The
weakened economy did have and may in the future have the effect of decreasing
our loan demand and increasing our loan delinquencies.

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. The presentations,
and certain of the other disclosures in this prospectus, including any
statements preceded by, followed by or which include the words "may," "could,"
"should," "will," "would," "hope," "might," "believe," "expect," "anticipate,"
"estimate," "intend," "plan," "assume" or similar expressions constitute
forward-looking statements.

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

Although we believe that the expectations reflected in our forward-looking
statements are reasonable, these statements involve risks and uncertainties
which are subject to change based on various important factors (some of which
are beyond our control). The following factors, among others, could cause our
financial performance to differ materially from our goals, plans, objectives,
intentions, expectations, and other forward-looking statements:

- the strength of the United States economy in general and the strength of
the regional and local economies in which we conduct operations;

- the effects of, and changes in, trade, monetary and fiscal policies and
laws, including interest rate policies of the Board of Governors of the
Federal Reserve System;

- inflation, interest rate, market and monetary fluctuations;

- our ability to successfully integrate the assets, liabilities, customers,
systems and management we acquire or merge into our operations;

- our timely development of new products and services to a changing
environment, including the features, pricing and quality compared to the
products and services of our competitors;

- the willingness of users to substitute competitors' products and services
for our products and services;

- the impact of changes in financial services policies, laws and
regulations, including laws, regulations and policies concerning taxes,
banking, securities and insurance, and the application thereof by
regulatory bodies;

- technological changes;

- changes in consumer spending and savings habits;

- regulatory or judicial proceedings; and

- the other risks set forth under "Risk Factors" beginning on page 8.

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

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.

USE OF PROCEEDS

We estimate that the net proceeds from the sale of 3,000,000 shares of our
common stock in this offering will be approximately $ million (approximately
$ million if the underwriters' over-allotment option is exercised in full),
assuming a public offering price of $ per share, and after deducting the
underwriting discounts and commissions and our estimated offering expenses.

We intend to use approximately $ million of the net proceeds to
discharge indebtedness incurred in the CF Bancshares acquisition under a $15.0
million line of credit maturing on May 1, 2005 with an interest rate of LIBOR
plus 1.75 basis points ( % as of , 2002). We intend to use the
balance of the proceeds for general corporate purposes and working capital to
position The Banc Corporation for future internal growth and possible
acquisitions of other financial institutions or their assets and related
liabilities. We frequently evaluate acquisition opportunities and from time to
time enter into discussions regarding possible acquisitions. However, we do not
have any specific plans, arrangements, agreements or understandings with any
other person for any acquisitions at the current time.

We will invest a portion of the remaining net proceeds in The Bank, where
such proceeds would be available for general corporate purposes, including
funding of The Bank's lending and investment activities. Pending such uses, the
net proceeds will be invested in a variety of short-term assets, including
federal funds, interest-bearing deposits in other banks and similar investments.

PRICE RANGE OF OUR COMMON STOCK

Our common stock trades on the Nasdaq National Market under the symbol
"TBNC." As of February 27, 2002, there were approximately 915 record holders of
our common stock.

The following table sets forth, for the indicated periods, the high and low
sales prices of our common stock as reported by the Nasdaq National Market.

HIGH LOW
----- -----

2000
First Quarter............................................... $8.00 $6.00
Second Quarter.............................................. 6.63 4.63
Third Quarter............................................... 8.00 5.00
Fourth Quarter.............................................. 7.75 4.94

2001
First Quarter............................................... $6.38 $5.00
Second Quarter.............................................. 7.10 5.00
Third Quarter............................................... 7.35 6.51
Fourth Quarter.............................................. 7.30 6.15

2002
First Quarter (through February 27, 2002)................... $6.98 $5.76

On February 27, 2002, the last reported sale price of our common stock
reported on the Nasdaq National Market was $6.55 per share.

DIVIDEND POLICY

Holders of our common stock are entitled to receive dividends when, as and
if declared by our board of directors out of funds legally available for
dividends. We have never declared or paid any dividends on our common stock. We
will derive cash available to pay dividends, primarily, if not entirely, from
dividends paid by our subsidiaries. There are certain restrictions on The Bank's
ability to pay dividends or otherwise transfer funds to us and on our ability to
pay dividends. Regulatory restrictions on dividends paid by The Bank and by The
Banc Corporation are discussed under "Supervision and Regulation -- >Dividends."
Our ability to pay dividends to our stockholders will depend on our earnings and
financial condition, liquidity and capital requirements, the general economic
and regulatory climate, our ability to service any equity or debt obligations
senior to our common stock and other factors deemed relevant by our board of
directors. We currently intend to retain any future earnings to fund the
development and growth of our business. Therefore, we do not anticipate paying
any cash dividends on our common stock in the foreseeable future.

DILUTION

The net tangible book value of our common stock as of December 31, 2001 was
$70.8 million, or $4.98 per share. Net tangible book value per share represents
the equity of our stockholders, less intangible assets, divided by the number of
shares of our common stock outstanding. The dilution of the net tangible book
value per share represents the difference between the amount per share paid by
purchasers of our common stock in this offering and the pro forma net tangible
book value per share of our common stock immediately after completion of this
offering. After (i) giving effect to the sale by us of shares of our
common stock offered hereby at an assumed price to public of $ per share and
the application of the estimated net proceeds therefrom, not including possible
issuance of an additional shares pursuant to the underwriters'
over-allotment, and (ii) deducting the estimated underwriting discounts and
commissions and offering expenses payable by us, our pro forma net tangible book
value as of December 31, 2001, would have been $ million, or $ per
share. This represents an immediate increase in proforma net tangible book value
of $ per share to existing investors and an immediate dilution in net
tangible book value of $ per share to new investors purchasing our common
stock in this offering, as illustrated in the following table:

Assumed price to public per share........................... $
Net tangible book value per share at December 31,
2001(1)................................................ 4.98
Increase in net tangible book value per share attributable
to new investors(2)(3).................................
-----
Net tangible book value per share after this offering.......
-----
Dilution per share to new investors....................... $
=====

The following table summarizes, on a pro forma basis, as of December 31,
2001, the tangible book value of the outstanding shares and the total
consideration and average price paid per share by the new investors for the
shares purchased in this offering (amounts in thousands, except per share data).

SHARES TANGIBLE EQUITY AVERAGE
---------------- ----------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------ ------- ------- ------- -------

Equity at December 31, 2001(1)............ 14,217 $70,767 $4.98
New investors(2)(3).......................
Total................................

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

(1) Does not include total shares of our common stock issuable upon exercise of
options under our Second Amended and Restated 1998 Stock Incentive Plan. See
"Management -- Incentive Plans."

(2) Net of underwriting discounts of $ and estimated offering expenses
of approximately $ .

(3) Assumes 470,000 shares are issued in connection with the acquisition of CF
Bancshares.

CAPITALIZATION

The following table sets forth our capitalization and certain capital
ratios as of December 31, 2001. Our capitalization is presented:

- on an actual basis;

- on a pro forma basis to reflect the effect of the acquisition of CF
Bancshares. See "Unaudited Pro Forma Condensed Consolidated Financial
Statements."

- on a pro forma basis to reflect the sale of the shares of common stock
offered by us in this offering and the acquisition of CF Bancshares and
our receipt of the estimated net proceeds, after deducting the estimated
underwriting discounts and the estimated offering expenses that we expect
to pay in connection with the offering.

You should read the information in this table along with "Management's
Discussion and Analysis of Financial Condition and Results of Operations", our
consolidated financial statements and the related notes and the other financial
information included in this prospectus.

DECEMBER 31, 2001
-------------------------------------------
PRO FORMA
--------------------------------
ACQUISITION AND
ACTUAL ACQUISITION OFFERING
-------- ------------- ----------------
(DOLLARS IN THOUSANDS)

Note payable................................... $ -- $ 12,400 $ --
Guaranteed preferred beneficial interest in The
Banc Corporation's subordinated debentures... 31,000 31,000 31,000
Stockholders' equity:
Preferred Stock, $.001 par value, 5,000,000
shares authorized, no shares issued and
outstanding............................... -- -- --
Common Stock, $.001 par value, 25,000,000
shares authorized, 14,385,021 shares
issued and 14,217,371 shares
outstanding -- actual; 14,855,021 shares
issued and 14,687,371 shares
outstanding -- pro forma (acquisition);
shares issued and shares
outstanding -- pro forma (acquisition and
offering)................................. 14 14
Surplus...................................... 47,756 50,856
Retained earnings............................ 30,329 30,329 30,329
Accumulated other comprehensive loss......... (322) (322) (322)
Treasury Stock, at cost, 167,650 shares...... (924) (924) (924)
-------- -------- -------
Total stockholders' equity................ 76,853 79,953
-------- -------- -------
Total capitalization...................... $107,853 $123,353
======== ======== =======
Capital ratios:
Leverage(1).................................. 7.92% 6.91% %
Risk-based capital(2)
Tier 1.................................... 9.44 8.32
Total..................................... 11.41 10.33

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

(1) Leverage ratio is defined as Tier 1 capital (using risk-based capital
guidelines) as a percent of adjusted average assets. See "Supervision and
Regulation -- Capital Adequacy Requirements."

(2) The pro forma risk-based capital ratios have been computed assuming that the
net proceeds of this offering, after payment of our indebtedness incurred in
the acquisition of CF Bancshares, are invested in assets carrying a
risk-weight that is equivalent to our average risk-weight at December 31,
2001. See "Supervision and Regulation -- Capital Adequacy Requirements."

SELECTED FINANCIAL DATA

AT OR FOR THE YEAR ENDED DECEMBER 31,(1)
--------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

STATEMENT OF FINANCIAL CONDITION DATA (AT
PERIOD END):
Total assets.............................. $1,206,405 $1,029,215 $827,427 $630,089 $461,956
Loans, net of unearned income............. 999,156 808,145 632,777 431,931 282,902
Allowance for loan losses................. 12,546 8,959 8,065 6,466 3,741
Investment securities..................... 68,847 95,705 70,916 98,208 98,885
Deposits.................................. 952,235 827,304 682,517 531,070 395,222
Advances from FHLB........................ 135,900 104,300 62,500 23,160 --
Guaranteed preferred beneficial interest
in The Banc Corporation's subordinated
debentures.............................. 31,000 15,000 -- -- --
Stockholders' equity...................... 76,853 74,875 68,848 65,967 53,716

INCOME STATEMENT DATA:
Interest income........................... $ 90,351 $ 75,035 $ 55,557 $ 42,472 $ 33,705
Interest expense.......................... 48,359 39,921 26,749 20,206 15,793
---------- ---------- -------- -------- --------
Net interest income..................... 41,992 35,114 28,808 22,266 17,912
Provision for loan losses................. 7,454 4,961 2,850 4,657 2,685
---------- ---------- -------- -------- --------
Net interest income after provision for
loan losses............................. 34,538 30,153 25,958 17,609 15,227
Noninterest income........................ 9,773 7,822 6,164 4,081 3,019
Merger related costs...................... -- -- 744 1,466 --
Other noninterest expense................. 38,497 32,118 27,938 20,663 14,776
Distributions on guaranteed preferred
beneficial interest in our subordinated
debentures.............................. 2,159 504 -- -- --
---------- ---------- -------- -------- --------
Income (loss) before income taxes....... 3,655 5,353 3,440 (439) 3,470
Income tax expense (benefit).............. 966 996 520 (724) 1,074
---------- ---------- -------- -------- --------
Net income................................ $ 2,689 $ 4,357 $ 2,920 $ 285 $ 2,396
========== ========== ======== ======== ========
PER SHARE DATA:
Earnings per share -- basic............... $ 0.19 $ 0.30 $ 0.20 $ 0.02 $ 0.23
Earnings per share -- diluted............. $ 0.19 $ 0.30 $ 0.20 $ 0.02 $ 0.22
Weighted average shares
outstanding -- basic.................... 14,272 14,384 14,335 13,115 10,553
Weighted average shares
outstanding -- diluted.................. 14,302 14,387 14,362 13,210 10,672
Book value per share...................... $ 5.41 $ 5.22 $ 4.79 $ 4.69 $ 4.30
Tangible book value per share............. $ 4.98 $ 4.76 $ 4.28 $ 4.63 $ 4.27
Common shares outstanding at end of
period.................................. 14,217 14,345 14,385 14,077 12,478

(See footnotes on following page.)

AT OR FOR THE YEAR ENDED DECEMBER 31,(1)
--------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- -------- -------- --------

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

(1) Information for the years ended December 31, 1998 and 1997 has been restated
for the poolings of interests completed during 1999.

(2) Net interest income divided by average earning assets.

(3) Calculated on a tax equivalent basis.

(4) Yield on average interest-earning assets less rate on average
interest-bearing liabilities.

(5) Includes merger related expenses of $744,000 and $1.5 million in 1999 and
1998, respectively.

(6) Distributions on guaranteed preferred beneficial interest in our
subordinated debentures are included in noninterest expense.

(7) Efficiency ratio is calculated by dividing noninterest expense by the sum of
noninterest income plus net interest income on a fully tax equivalent basis.

UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We are providing the following unaudited pro forma condensed consolidated
financial statements to aid you in your analysis of the financial aspects of our
recent acquisition of CF Bancshares accounted for as a purchase. The unaudited
pro forma condensed consolidated statement of financial condition gives effect
to the purchase transaction as if it had occurred on December 31, 2001. The
unaudited pro forma condensed consolidated statements of income for the year
ended December 31, 2001 give effect to the merger of The Banc Corporation and CF
Bancshares, as if the purchase transaction had occurred January 1, 2001. The
statements include pro forma adjustments as described in the notes accompanying
the financial statements.

We derived this information from our audited consolidated financial
statements for the year ended December 31, 2001 and the unaudited consolidated
financial statements of CF Bancshares for the twelve months ended September 30,
2001. The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the audited and unaudited historical consolidated
financial statements and related notes of The Banc Corporation and CF Bancshares
which are included in this prospectus.

The unaudited pro forma condensed consolidated financial information is
presented for illustrative purposes only and does not purport to be indicative
of the operating results or financial position that would have actually occurred
or existed if the consolidation had been in effect on the dates indicated, nor
is it indicative of the future operating results or financial position of the
consolidated company. The pro forma adjustments are based on the information and
assumptions available at the time of the date of this prospectus.

THE BANC CORPORATION AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(UNAUDITED)

HISTORICAL
----------------------------------------------------
AS OF
--------------------------------------
DECEMBER 31, 2001 SEPTEMBER 30, 2001
----------------- ------------------ PRO FORMA ADJUSTMENTS
THE CF --------------------------- PRO FORMA
BANC CORPORATION BANCSHARES DR. CR. COMBINED
----------------- ------------------ ----------- ----------- ----------
(IN THOUSANDS)

ASSETS
Cash and due from banks........... $ 31,682 $ 3,800 $ 35,482
Interest bearing deposits in other
banks........................... 495 5,809 6,304
Federal funds sold................ 20,000 -- 20,000
Investment securities available
for sale........................ 68,847 -- 68,847
Investment securities held to
maturity........................ -- 2,673 $ 7(a) 2,680
Mortgage loans held for sale...... 1,131 -- 1,131
Loans, net of unearned income..... 999,156 88,097 1,087,253
Less: Allowance for loan losses... (12,546) (358) (12,904)
---------- -------- ----------
Net loans..................... 986,610 87,739 1,074,349
---------- -------- ----------
Premises and equipment, net....... 47,829 2,335 505(a) 50,669
Accrued interest receivable....... 7,562 604 8,166
Stock in FHLB and Federal Reserve
Bank............................ 8,505 813 9,318
Other assets...................... 33,744 1,163 7,357(b) 42,264
---------- -------- ----------
Total assets.................. $1,206,405 $104,936 $1,319,210
========== ======== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Deposits
Non interest-bearing............ $ 94,655 $ 6,415 $ 101,070
Interest-bearing................ 857,580 72,603 $ 736(a) 930,919
---------- -------- ----------
Total deposits.............. 952,235 79,018 1,031,989
Advances from FHLB................ 135,900 16,250 152,150
Other borrowed funds.............. 813 -- 813
Note payable...................... -- -- 12,400(c) 12,400
Accrued expenses and other
liabilities..................... 9,604 1,301 10,905
---------- -------- ----------
Total liabilities............. 1,098,552 96,569 1,208,257
Guaranteed preferred beneficial
interest in our subordinated
debentures...................... 31,000 -- 31,000
Stockholders' equity
Common stock...................... 14 2 2(e) 14
Surplus........................... 47,756 1,436 1,436(e) 3,100(d) 50,856

Retained earnings................. 30,329 6,929 6,929(e) 30,329
Accumulated other comprehensive
loss............................ (322) -- (322)
Treasury stock, at cost........... (924) -- (924)
---------- -------- ----------
Total stockholders' equity.... 76,853 8,367 79,953
---------- -------- ----------
Total liabilities and
stockholders' equity........ $1,206,405 $104,936 $1,319,210
========== ======== ==========

See notes to unaudited pro forma condensed consolidated financial statements.
20

THE BANC CORPORATION AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)

HISTORICAL
------------------------------------------------------
FOR THE TWELVE MONTHS ENDING
--------------------------------------
DECEMBER 31, 2001 SEPTEMBER 30, 2001
----------------- ------------------ PRO FORMA ADJUSTMENTS
THE CF ----------------------------- PRO FORMA
BANC CORPORATION BANCSHARES DR. CR. COMBINED
----------------- ------------------ ------------ ----------- ---------
(IN THOUSANDS)

INTEREST INCOME
Interest and fees on loans...... $83,207 $7,364 $90,571
Interest on investment
securities
Taxable....................... 4,736 255 4,991
Exempt from Federal income
tax......................... 476 -- 476
Interest on federal funds
sold.......................... 1,310 -- 1,310
Interest and dividends on other
investments................... 622 233 855
------- ------ -------
Total interest income....... 90,351 7,852 98,203
INTEREST EXPENSE
Interest on deposits............ 40,525 3,731 $500(f) 43,756
Interest on other borrowed
funds......................... 7,834 866 $ 74(g) 8,774
------- ------ -------
Total interest expense...... 48,359 4,597 52,530
------- ------ -------
Net interest income......... 41,992 3,255 45,673
Provision for loan losses....... 7,454 175 7,629
------- ------ -------
Net interest income after
provision for loan
losses.................... 34,538 3,080 38,044
Noninterest income.............. 8,390 533 8,923
Gain on sale of securities...... 1,383 -- 1,383
------- ------ -------
Total noninterest income.... 9,773 533 10,306
NONINTEREST EXPENSES
Salaries and employee
benefits...................... 19,451 1,028 20,479
Occupancy, furniture and
equipment expense............. 6,864 467 13(f) 7,344
Other operating expenses........ 12,182 612 167(h) 12,961
------- ------ -------
Total noninterest
expenses.................. 38,497 2,107 40,784
------- ------ -------
Distributions on guaranteed
preferred beneficial interest
in our subordinated
debentures.................... 2,159 -- 2,159
------- ------ -------
Income before income
taxes..................... 3,655 1,506 5,407
Income tax expense.............. 966 562 84(i) 1,612
------- ------ -------
Net income.................. $ 2,689 $ 944 $ 3,795
======= ====== =======
Basic and diluted net income per
share......................... $ 0.19 $ 5.59 $ 0.26
======= ====== =======
Average common stock
outstanding................... 14,272 169 14,742
Average common stock
outstanding, assuming
dilution...................... 14,302 169 14,772

See notes to unaudited pro forma condensed consolidated financial statements.
21

THE BANC CORPORATION

NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

The Unaudited Pro Forma Condensed Consolidated Statements of Financial
Condition and Income give effect to the merger of The Banc Corporation and CF
Bancshares in a business combination accounted for as a purchase. The merger
agreement provides that each share of CF Bancshares will be converted into the
right to receive either shares of our common stock or cash.

The pro forma financial statements shown assume that 80% of the CF
Bancshares stockholders choose an all cash exchange and that 20% choose to
receive shares of our common stock. If more than 80% of the CF Bancshares
stockholders choose all cash consideration, the note payable will increase
proportionately and the stockholders' equity will decrease proportionately. The
pro forma financial statements assume an exchange ratio of 13.868 shares of our
common stock for one share of CF Bancshares stock. The exchange ratio was
estimated for pro forma purposes based on total consideration of $15.5 million
and a closing date trading price of $6.60.

Described below is the pro forma estimate of the total purchase price of
the transaction as well as the adjustments to allocate the purchase price based
on preliminary estimates of the fair values of the assets and liabilities of CF
Bancshares. (In thousands, except per share amounts)

Total consideration (stock and cash)........................ $15,500
Percentage of shares to be acquired by exchange of stock.... 20%
-------
Fair value of estimated shares to be issued to CF Bancshares
stockholders.............................................. $ 3,100
The Banc Corporation closing date trading price............. 6.60
-------
Total number of The Banc Corporation shares to be issued to
CF Bancshares stockholders................................ 470
=======
Equity of CF Bancshares..................................... $ 8,367
-------
Excess of cost over book value.............................. $ 7,133
Adjustments to carrying values of:
Premises and equipment.................................... 505
Investment securities held-to-maturity.................... 7
Interest-bearing deposits................................. (736)
-------
Goodwill and other intangible assets........................ $ 7,357
=======

NOTE 2. ADJUSTMENTS

The purchase accounting and pro forma adjustments related to the unaudited
pro forma condensed consolidated financial statements are described below.

(a) Purchase adjustments will be recorded to increase the carrying value of
investment securities held-to-maturity, premises and equipment, and
interest-bearing deposits to the extent that the fair value of the net
assets acquired exceeds the carrying value.

(b) Goodwill resulting from the purchase of CF Bancshares is calculated as the
difference between the purchase price and the fair value of CF Bancshares'
net assets as of September 30, 2001. Included in goodwill is the core
deposit intangible, which management estimates to be approximately 2.1% of
CF Bancshares total deposits or $1.67 million. We will amortize the core
deposit intangible on a straight-line basis over 10 years.

(c) The estimated $12.4 million of the cash needed for the purchase will be
borrowed on an existing line of credit. The actual amount of the cash
required will vary depending on the elections of CF Bancshares
shareholders. If the actual cash election is greater than 80%, the amount
of cash borrowed will increase proportionately.

(d) Assuming a stock election of 20%, approximately 470,000 shares of The Banc
Corporation common stock will be issued at a par value of $.001 per share
assuming an exchange ratio of 13.868 and a measurement date value of $6.60
for each of our shares issued. If the actual stock election is less than
20%, the actual number of shares of our common stock issued will decrease
proportionately.

(e) Elimination of CF Bancshares historical stockholders' equity accounts.

(f) Amortization or depreciation relating to the CF Bancshares' fair value
adjustments.

(g) Increase in interest expense related to increased borrowings of $12.4
million to finance the purchase of CF Bancshares, which will be paid-off
when the offering is completed. Management assumes a rate of 3.6% based on
the terms of our line of credit. If the actual cash election is greater
than 80%, our interest expense related to increased borrowings will
increase proportionately.

(h) Amortization of the core deposit intangible. We will amortize the core
deposit intangible of $1.67 million on a straight-line basis over 10 years.
In accordance with the provisions of Statement of Financial Accounting
Standards No. 141 and 142, the goodwill will not be amortized.

(i) The income tax effect of the proforma adjustments is reflected in the
income statements at the federal statutory rate of 34%.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

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

Our principal subsidiary is The Bank, a financial institution organized and
existing under the laws of Alabama and headquartered in Birmingham, Alabama. The
Bank operates 34 banking offices throughout Alabama and the panhandle of
Florida. Other subsidiaries include TBC Capital Statutory Trust II ("TBC Capital
II"), a Connecticut statutory trust, TBC Capital Statutory Trust III ("TBC
Capital III"), a Delaware business trust, and Morris Avenue Management Group,
Inc. ("MAMG"), an Alabama corporation, all of which are wholly owned. TBC
Capital II and TBC Capital III are consolidated special purpose entities formed
solely to issue cumulative trust preferred securities. MAMG is a real estate
management company that manages our real properties.

The acquisition of other banking organizations during 1998 and 1999
contributed significantly to our development. During the fourth quarter of 1998,
Commerce Bank of Alabama, Inc. and the banking subsidiaries of Commercial
Bancshares of Roanoke, Inc., City National Corporation and First Citizens
Bancorp, Inc. were merged with and into The Bank. Emerald Coast Bank became our
subsidiary in February 1999, as a result of our merger with Emerald Coast
Bancshares, Inc. C&L Bank became our subsidiary in June 1999 as a result of our
acquisitions of C&L Bank of Blountstown and C&L Banking Corporation and its bank
subsidiary, C&L Bank of Bristol. The banking subsidiary of BankersTrust of
Alabama, Inc., was merged into The Bank in July 1999. The Bank also acquired
three new branches in Southeast Alabama in November of 1999. In June 2000,
Emerald Coast Bank and C&L Bank merged into The Bank.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2001 COMPARED TO THE YEAR ENDED DECEMBER 31, 2000

Our net income decreased $1.7 million, or 38.3% to $ 2.7 million in the
year ended December 31, 2001, from $4.4 million in the year ended December 31,
2000. This decrease was due primarily to increases in our provision for loan
losses and noninterest expenses which were offset by increases in net interest
income and noninterest income. Our return on average assets in 2001 was .23%,
compared to .48% in 2000. Return on average equity was 3.53% in 2001 compared to
6.03% in 2000. Average equity to average assets was 6.62% in 2001 compared to
7.92% in 2000.

Net interest income increased $6.9 million, or 19.6% to $42.0 million for
the year ended December 31, 2001, from $35.1 million for the year ended December
31, 2000 due to an increase in interest income of $15.3 million, or 20.4%,
offset by an increase in interest expense of $8.4 million, or 21.1%. These
increases in net interest income and interest income were primarily attributable
to a $203.6 million, or 28.7% increase in average loans to $914.0 million during
2001, from $710.4 million during 2000. The growth in the loan portfolio was
primarily attributable to increases in real estate construction and mortgage
loans generated in the Birmingham, Alabama and Florida markets. This increase
was offset by a $206.9 million, or 28.1% increase in average interest-bearing
liabilities to $944.1 million during 2001, from $737.2 million during 2000.

Our net interest spread and net interest margin were 3.54% and 4.04%,
respectively, in 2001, compared to 3.83% and 4.36% in 2000. During 2001, the
average interest rate earned on interest-earning assets decreased due to the
decline in interest rates during the year. This, combined with an increase in
the volume of higher cost sources of funds, such as certificates of deposit and
Federal Home Loan Bank ("FHLB") borrowings, resulted in the decrease in our net
interest margin and spread during the year. These funds were utilized to meet
strong loan demand, which accounted for the increase in average

interest-earning assets during 2001. The ratio of average interest-earning
assets to average interest-bearing liabilities was 110.83% and 110.54% during
2001 and 2000, respectively. The average rate paid on time deposits and FHLB
advances were 5.91% and 5.82%, respectively, during the year which was higher
than interest rates paid on other sources of deposit funding; however, these
funds were utilized to meet increased loan demand. The average yield of our loan
portfolio was 9.10% during the year.

The provision for loan losses represents the amount determined by
management necessary to maintain the allowance for loan losses at a level
capable of absorbing inherent losses in the loan portfolio. Management reviews
the adequacy of the allowance for loan losses on a quarterly basis. The
allowance for loan losses is established based on risk ratings assigned by loan
officers. Loans are risk rated using a seven point scale, and loan officers are
responsible for the timely reporting of changes in the risk ratings. This
process and the assigned risk ratings are subject to review by our internal Loan
Review Department. Based on the assigned risk ratings, the loan portfolio is
segregated into the regulatory classifications of: Special Mention, Substandard,
Doubtful or Loss. Recommended regulatory reserve percentages are applied to
these categories to estimate the amount of loan loss. Reserve percentages
assigned to non-rated loans are based on historical charge-off experience
adjusted for geographic location 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
non-accruals, national and local economic conditions and other pertinent
information. Based on future evaluations, additional provisions for loan losses
may be necessary to maintain the allowance for loan losses at an appropriate
level.

The provision for loan losses was $7.5 million for the year ended December
31, 2001 compared to $5.0 million in 2000. Net charge-offs decreased $200,000,
or 4.9% from $4.1 million in 2000 to $3.9 million in 2001. The ratio of net
charge-offs to average loans averaged .60% for the five year period ended
December 31, 2001, with a ratio of .42% in 2001 and .57% in 2000. Net
charge-offs, as a percentage of the provision for loan losses, were 51.88% in
2001, compared to 81.98% in 2000. During the fourth quarter of 2001, our
provision for loan losses was $4.9 million, an increase of $4.0 million from the
third quarter of 2001 and an increase of $3.4 million from the fourth quarter of
2000. During the fourth quarter of 2001, we charged off $2.7 million in loans,
which represents a 161.0% increase from the nine-month period ended September
30, 2001. Management's assessment of the allowance for loan losses at December
31, 2001 resulted in an increase in the provision for loan losses, bringing the
allowance for loan losses to 1.26% of loans, net of unearned income, compared to
1.05% at September 30, 2001 and 1.11% at December 31, 2000. The allowance for
loan losses was increased based on management's assessment of historical loss
experience, 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. See "Financial Condition -- Allowance for Loan
Losses" section for additional discussion.

Noninterest income increased $2.0 million, or 24.9% to $9.8 million in 2001
from $7.8 million in 2000, primarily as the result of investment securities
gains which totaled $1.4 million in 2001 compared to $131,000 in 2000. During
the third quarter of 2001, we entered into and settled an interest rate swap
that was not designated as a hedging instrument. A gain of approximately
$610,000 was realized and recognized currently in earnings as investment
securities gains. We did not enter into any other derivative transactions during
the year. Income from mortgage banking operations for the year ended December
31, 2001 remained level compared to 2000 at $1.7 million. Income from customer
service charges and fees increased to $4.1 million from $4.0 million in 2000.
Other noninterest income was $2.6 million, an increase of $545,000, or 26.6%
from $2.1 million in 2000. The increase in other noninterest income was
primarily due to an increase in rental income of $180,000 and gains on the sale
of real estate of $141,000.

Noninterest expense increased $6.4 million, or 19.9% to $38.5 million in
2001 from $32.1 million in 2000. Salaries and employee benefits increased $3.4
million, or 20.8% to $19.5 million in 2001 compared to $16.1 million in 2000.
The increase in salaries and benefits primarily resulted from the addition of
personnel in the administration and operation areas, specifically, legal, loan
review, internal audit and credit administration. All other noninterest expenses
increased $3.0 million, or 18.9% to $19.0 million, compared to $16.0 million in
2000. This increase in other noninterest expenses consists primarily of a
25

$971,000 increase in occupancy and equipment expenses, a $936,000 charge related
to fraud and litigation settlement, a $295,000 charge related to the data
processing conversion of the Florida operations and a $474,000 charge related to
obsolete furniture and equipment. Occupancy expenses increased during 2001 as a
result of increased depreciation and maintenance related to our headquarters and
The Bank's operations center. During 2001 and 2000, other operating expenses
included goodwill amortization of $562,000 per year. In accordance with FASB
Statement No. 142, "Goodwill and Other Intangible Assets," no amortization of
goodwill will be recorded in future periods.

Distributions on guaranteed preferred beneficial interest in our
subordinated debentures during 2001 totaled $2.2 million, an increase of $1.7
million from $504,000 during 2000. The increase is related to $16.0 million
principal amount of cumulative preferred trust securities issued during the year
through our wholly-owned trust subsidiary, TBC Capital III, in addition to the
$15.0 million issued by TBC Capital II in September 2000. See "Guaranteed
Preferred Beneficial Interest in Our Subordinated Debentures" for a more
detailed discussion.

Our income tax expense was $966,000 and $996,000 in 2001 and 2000,
respectively, resulting in effective tax rates of 26.4% and 18.6%, respectively.
The primary difference in the effective tax rate and the federal statutory rate
(34%) for 2001 and 2000 arose from the recognition of a rehabilitation tax
credit of $522,000 and $1.3 million, respectively, generated from the
restoration of our headquarters, the John A. Hand building. In future periods,
we expect our effective tax rate to increase to a level that is closer to the
federal statutory rate.

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

YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED DECEMBER 31, 1999

Our net income increased $1.5 million, or 49.2% to $4.4 million in the year
ended December 31, 2000, from $2.9 million in the year ended December 31, 1999.
This increase is due primarily to increases in our net interest income and
noninterest income, which was offset, by increases in the provision for loan
losses and noninterest expenses. Our return on average assets in 2000 was .48%,
compared to .41% in 1999. Return on average equity was 6.03% in 2000 compared to
4.33% in 1999. Average equity to average assets was 7.92% in 2000 compared to
9.36% in 1999.

Net interest income increased $6.3 million, or 21.9% to $35.1 million for
the year ended December 31, 2000, from $28.8 million for the year ended December
31, 1999 as a result of an increase in interest income of $19.5 million, or
35.1% offset by an increase in interest expense of $13.2 million, or 49.2%. The
increase in net interest income is primarily attributable to a $174.7 million,
or 32.6% increase in average loans to $710.4 million during 2000, from $535.8
million during 1999. This increase was offset by a $171.6 million, or 30.3%
increase in average interest-bearing liabilities to $737.2 million during 2000,
from $565.6 million during 1999.

Our net interest spread and net interest margin were 3.83% and 4.36%,
respectively, in 2000, compared to 3.98% and 4.55% in 1999. The 15 basis point
decline in net interest spread is primarily the result of an increase in volume
and rates of interest-bearing liabilities during 2000, offset in part by
increased volume and yields in the loan portfolio. The increase in volume and
rates of interest-bearing liabilities is primarily the result of an increase in
time and brokered deposits, which provided a significant source of funding for
the increase in loan volume during the year. A significant portion of these
deposits were generated through brokers, with the remaining funds generated from
our branch offices. The average rate paid on time deposits during the year was
6.17% which was higher than interest rates paid on other

sources of deposit funding; however, these funds were utilized to meet the
increased loan demand in our new market areas. The average yield of our loan
portfolio was 9.64% during the year.

The provision for loan losses was $5.0 million for the year ended December
31, 2000 compared to $2.9 million in 1999. The provision for loan losses
represents the amount determined by management necessary to maintain the
allowance for loan losses at a level capable of absorbing inherent losses in the
loan portfolio. We had net charge-offs of $4.1 million in 2000, resulting in a
ratio of net charge-offs to average loans of .57%, compared to $4.8 million, or
..90% in 1999. Net charge-offs, as a percentage of the provision for loan losses,
were 81.98% in 2000, compared to 169.89% in 1999. Net charge-offs during 2000
were more reflective of historical averages because net charge-offs during 1999
included the charge-off of loans acquired in a purchase business combination and
a significant loss from a single commercial loan customer.

Noninterest income increased $1.7 million, or 26.9% to $7.8 million in
2000, from $6.1 million in 1999, primarily as the result of increased income
from additional customer service charges, mortgage banking operations and other
income. Income from customer service charges and fees was $4.0 million, an
increase of $636,000, or 19.0% from $3.4 million in 1999, primarily due to the
increase in the volume of customer deposits. Income from mortgage banking
operations was $1.7 million, an increase of $245,000 from $1.4 million in 1999.
Other noninterest income was $2.1 million, an increase of $729,000, or 55.1%
from $1.3 million in 1999. The increase in other noninterest income is primarily
due to an increase in the cash surrender value of single premium life insurance
and miscellaneous fees and commissions.

Noninterest expenses increased $3.4 million, or 12.0% to $32.1 million in
2000 from $28.7 million in 1999. The acquisition of new banks and branches
during 1999, and our resulting growth, caused an increase in our noninterest
expenses during the year 2000. However, the impact is not fully reflected in the
financial information because the results of operations for 1999 only include
the noninterest expense incurred by these new acquisitions from the date of
purchase. Salaries and employee benefits increased $2.7 million, or 20.0% to
$16.1 million in 2000 compared to $13.4 million in 1999. The increase in
salaries and benefits primarily resulted from the acquisition of new banks and
branches and the addition of personnel in the administration and operation
areas. As of December 31, 2000, we had 394 employees compared to 364 as of
December 31, 1999. All other noninterest expenses increased $756,000, or 5.0% to
$16.0 million, compared to $15.3 million in 1999. This increase in other
expenses included a $651,000 increase in occupancy expenses, a $170,000 increase
in professional fees and a $338,000 increase in goodwill amortization. Occupancy
expenses increased during 2000 as a result of increased depreciation and
maintenance related to our headquarters and The Bank's operations center. The
increase in goodwill amortization relates to the 1999 bank and branch
acquisitions which closed in the third and fourth quarters of 1999. Professional
fees increased primarily due to increased auditing, consulting and legal
services necessary for a growing financial institution.

Distributions on guaranteed preferred beneficial interest in our debentures
during 2000 totaled $504,000. These distributions are related to $15.0 million
principal amount of cumulative preferred trust securities issued during the year
through our wholly-owned trust subsidiary, TBC Capital II. See "Guaranteed
Preferred Beneficial Interest in Our Subordinated Debentures" for a more
detailed discussion.

Our income tax expense was $996,000 and $520,000 in 2000 and 1999,
respectively, resulting in effective tax rates of 18.6% and 15.7%, respectively.
The primary difference in the effective tax rate and the federal statutory rate
(34%) for 2000 and 1999 arose from the recognition of a rehabilitation tax
credit of $1.3 million and $731,000, respectively, generated from the
restoration of our headquarters, the John A. Hand building.

NET INTEREST INCOME

The largest component of our net income is net interest income, which is
the difference between the income earned on interest-earning assets and interest
paid on deposits and borrowings. Net interest income is determined by the rates
earned on our interest-earning assets, rates paid on our interest-bearing
liabilities, the relative amounts of interest-earning assets and
interest-bearing liabilities, the degree of

mismatch, and the maturity and repricing characteristics of our interest-earning
assets and interest-bearing liabilities. Net interest income divided by average
interest-earning assets represents our net interest margin.

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

YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------
2001 2000 1999
------------------------------- ----------------------------- -----------------------------
INTEREST AVERAGE INTEREST AVERAGE INTEREST AVERAGE
AVERAGE EARNED/ YIELD/ AVERAGE EARNED/ YIELD/ AVERAGE EARNED/ YIELD/
BALANCE PAID RATE BALANCE PAID RATE BALANCE PAID RATE
---------- -------- ------- -------- -------- ------- -------- -------- -------
(DOLLARS IN THOUSANDS)

ASSETS
Interest-earning assets:
Loans, net of unearned
income(1)............... $ 914,006 $83,207 9.10% $710,414 $68,467 9.64% $535,754 $49,244 9.19%
Investment securities
Taxable................. 80,773 4,736 5.86 66,028 4,314 6.53 68,240 4,141 6.07
Tax-exempt(2)........... 9,711 721 7.42 14,930 1,117 7.48 18,373 1,400 7.62
---------- ------- -------- ------- -------- -------
Total investment
securities.......... 90,484 5,457 6.03 80,958 5,431 6.71 86,613 5,541 6.40
Federal funds sold...... 31,426 1,310 4.17 14,618 930 6.36 15,136 763 5.04
Other investments....... 10,419 622 5.97 8,886 587 6.61 5,701 485 8.51
---------- ------- -------- ------- -------- -------
Total
interest-earning
assets............ 1,046,335 90,596 8.66 814,876 75,415 9.25 643,204 56,033 8.71
Noninterest-earning assets:
Cash and due from banks... 29,324 28,836 32,771
Premises and equipment.... 45,416 41,598 28,738
Accrued interest and other
assets.................. 40,570 34,718 21,583
Allowance for loan
losses.................. (9,728) (8,524) (6,361)
---------- -------- --------
Total assets........ $1,151,917 $911,504 $719,935
========== ======== ========

LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing
liabilities:
Demand deposits........... $ 230,098 7,523 3.27 $172,579 6,541 3.79 $149,755 5,129 3.42
Savings deposits.......... 30,823 575 1.87 35,141 1,052 2.99 32,248 938 2.91
Time deposits............. 548,445 32,427 5.91 443,686 27,374 6.17 333,720 18,034 5.40
Other borrowings.......... 134,745 7,834 5.82 85,783 4,954 5.78 49,850 2,648 5.31
---------- ------- -------- ------- -------- -------
Total
interest-bearing
liabilities....... 944,111 48,359 5.12 737,189 39,921 5.42 565,573 26,749 4.73
Noninterest-bearing
liabilities:
Demand deposits........... 100,968 91,420 81,500
Accrued interest and other
liabilities............. 8,147 5,696 5,454
---------- -------- --------
Total liabilities... 1,053,226 834,305 652,527
Guaranteed preferred
beneficial interest in
debentures................ 22,408 5,000 --
Stockholders' equity........ 76,283 72,199 67,408
---------- -------- --------
Total liabilities
and stockholders'
equity............ $1,151,917 $911,504 $719,935
========== ======== ========
Net interest income/net
interest spread........... 42,237 3.54% 35,494 3.83% 29,284 3.98%
==== ==== ====
Net yield on earning
assets.................... 4.04% 4.36% 4.55%
==== ==== ====
Taxable equivalent
adjustment:
Investment
securities(2)........... 245 380 476
------- ------- -------
Net interest income... $41,992 $35,114 $28,808
======= ======= =======

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

(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.

Analysis of Changes in Net Interest Income. The following table sets
forth, on a taxable equivalent basis, the effect which the varying levels of
interest-earning assets and interest-bearing liabilities and the applicable
rates have had on changes in net interest income for the years ended December
31, 2001 and 2000.

YEAR ENDED DECEMBER 31, (1)
--------------------------------------------------------------
2001 VS 2000 2000 VS 1999
------------------------------ -----------------------------
CHANGES DUE TO CHANGES DUE TO
INCREASE ----------------- INCREASE ----------------
(DECREASE) RATE VOLUME (DECREASE) RATE VOLUME
---------- ------- ------- ---------- ------ -------
(DOLLARS IN THOUSANDS)

Income from earning assets:
Interest and fees on loans...... $14,740 $(4,008) $18,748 $19,223 $2,510 $16,713
Interest on securities:
Taxable................. 422 (473) 895 173 309 (136)
Tax-exempt.............. (396) (9) (387) (283) (25) (258)
Interest on federal funds......... 380 (405) 785 167 194 (27)
Interest on other investments..... 35 (60) 95 102 (126) 228
------- ------- ------- ------- ------ -------
Total interest income... 15,181 (4,955) 20,136 19,382 2,862 16,520
------- ------- ------- ------- ------ -------
Expense from interest-bearing
liabilities:
Interest on demand deposits..... 982 (985) 1,967 1,412 586 826
Interest on savings deposits.... (477) (359) (118) 114 27 87
Interest on time deposits....... 5,053 (1,191) 6,244 9,340 2,821 6,519
Interest on other borrowings.... 2,880 33 2,847 2,306 252 2,054
------- ------- ------- ------- ------ -------
Total interest
expense............... 8,438 (2,502) 10,940 13,172 3,686 9,486
------- ------- ------- ------- ------ -------
Net interest income..... $ 6,743 $(2,453) $ 9,196 $ 6,210 $ (824) $ 7,034
======= ======= ======= ======= ====== =======

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

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

MARKET RISK -- INTEREST RATE SENSITIVITY

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

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

The primary objective of asset/liability management is to manage interest
rate risk and achieve reasonable stability in net interest income throughout
interest rate cycles. This is achieved by maintaining the proper balance of
interest rate sensitive earning assets and interest rate sensitive liabilities.
In general, management's strategy is to match asset and liability balances
within maturity categories to limit our exposure to earnings variations and
variations in the value of assets and liabilities as interest rates change over
time. Our asset and liability management strategy is formulated and monitored by
our Asset/Liability Management Committee, which is comprised of senior officers
and directors, in accordance with policies approved by the board of directors.
The committee meets weekly to review, among other things, the

sensitivity of our assets and liabilities to interest rate changes, the book and
market values of assets and liabilities, unrealized gains and losses, including
those attributable to purchase and sale activity, and maturities of investments
and borrowings. The committee also approves and establishes pricing and funding
decisions with respect to overall asset and liability composition and reports
regularly to the full board of directors.

One of the primary goals of the committee is to effectively manage the
duration of our assets and liabilities so that the respective durations are
matched as closely as possible. This duration adjustment can be accomplished
either internally by restructuring our balance sheet, or externally by adjusting
the duration of our assets and/or liabilities through the use of interest rate
contracts, such as interest rate swaps, corridors, caps and floors. Our current
strategy is to hedge internally through the use of core deposit accounts, which
are not as rate sensitive as other deposit instruments, and FHLB advances,
together with an emphasis on investing in shorter-term or adjustable rate assets
which are more responsive to changes in interest rates, such as adjustable rate
U.S. Government agency mortgage-backed securities, short-term U.S. Government
agency securities and commercial business, real estate and consumer loans.

During the next twelve months approximately $39.0 million more
interest-bearing liabilities than interest-earning assets can be repriced to
current market rates. As a result, the one-year cumulative gap (the ratio of
rate sensitive assets to rate sensitive liabilities) at December 31, 2001, was
..94, indicating a liability sensitive position. For the period ending December
31, 2002, our interest rate risk model, which relies on management's growth
assumptions, indicates that projected net interest income will increase on an
annual basis by 8.42%, or approximately $4.1 million, assuming an instantaneous
increase in interest rates of 200 basis points. Assuming an instantaneous
decrease of 200 basis points, projected net interest income is expected to
increase on an annual basis by .03%, or approximately $14,000. The effect on net
interest income produced by these scenarios is within our asset and liability
management policy, which allows the level of interest rate sensitivity to affect
net interest income plus or minus fifteen
percent (+/-15%).

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

Although interest rate sensitivity gap is a useful measurement and
contributes toward effective asset and liability management, it is difficult to
predict the effect of changing interest rates based solely on that measure. As a
result, the committee also regularly reviews interest rate risk by forecasting
the impact of alternative interest rate environments on our economic value of
equity ("EVE"). EVE is defined as the net present value of our balance sheet's
cash flows or the residual value of future cash flows. While EVE does not
represent actual market liquidation or replacement value, it is a useful tool
for estimating our balance sheet's existing earning capacity. When EVE is
greater, our earnings capacity is greater. The following table sets forth our
EVE as of December 31, 2001:

CHANGE
CHANGE (IN BASIS POINTS) ------------------
IN INTEREST RATES EVE AMOUNT PERCENT
------------------------ ------------ -------- -------
(DOLLARS IN THOUSANDS)

+200 BP $120,900 $ 6,500 5.68%
+100 BP 118,100 3,700 3.23
0 BP 114,400 -- --
-100 BP 117,200 2,800 2.45
-200 BP 118,300 3,900 3.41

The above table is based on a prime rate of 4.75% and assumes an
instantaneous uniform change in interest rates at all maturities.

LIQUIDITY

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

Historically, we have maintained a high loan-to-deposit ratio. To meet our
short-term liquidity needs, we maintain core deposits and have borrowing
capacity through the FHLB, federal funds lines and a line of credit with a
regional bank. Long-term liquidity needs are met primarily through these
sources, the repayment of loans, sales of loans and the maturity or sale of
investment securities, including short-term investments.

We have entered into certain contractual obligations and commercial
commitments which arise in the normal course of business and involve elements of
credit risk, interest rate risk and liquidity risk. The following tables
summarize these by contractual cash obligations and commercial commitments:

PAYMENTS DUE BY PERIOD
------------------------------------------------------------
LESS THAN ONE TO FOUR TO AFTER FIVE
TOTAL ONE YEAR THREE YEARS FIVE YEARS YEARS
-------- --------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS)

CONTRACTUAL OBLIGATIONS
Advances from FHLB(1).......................... $135,900 $ -- $40,660 $32,400 $62,840
Operating leases(2)............................ 2,182 708 632 278 564
Guaranteed preferred beneficial interest in The
Banc Corporation's subordinated
debentures(3)................................ 31,000 -- -- -- 31,000
-------- ------- ------- ------- -------
Total Contractual Cash Obligations.... $169,082 $ 708 $41,292 $32,678 $94,404
======== ======= ======= ======= =======

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

(1)See Note 7 to the Consolidated Financial Statements.

(2)See Note 5 to the Consolidated Financial Statements.

(3)See Note 8 to the Consolidated Financial Statements.

AMOUNT OF COMMITMENT BY EXPIRATION PER PERIOD
------------------------------------------------------------
LESS THAN ONE TO FOUR TO AFTER FIVE
TOTAL ONE YEAR THREE YEARS FIVE YEARS YEARS
-------- --------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS)

COMMERCIAL COMMITMENTS
Commitments to extend credit(1)................ $134,768 $29,104 $55,834 $17,166 $32,664
Standby letters of credit(1)................... 6,706 4,441 2,265 -- --
-------- ------- ------- ------- -------
Total Commercial Commitments.......... $141,474 $33,545 $58,099 $17,166 $32,664
======== ======= ======= ======= =======

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

(1) See Note 13 to the Consolidated Financial Statements.

FINANCIAL CONDITION

Our total assets were $1.21 billion at December 31, 2001, an increase of
$177.2 million, or 17.2% from $1.03 billion as of December 31, 2000. The
increase in total assets primarily related to an increase in net loans of $191.0
million and federal funds sold of $16.9 million offset by a decrease in
investment securities of $26.7 million. The increase in total assets was funded
primarily by an increase in deposits and borrowings from the FHLB.

Loans. Loans are the largest category of interest-earning assets and
typically provide higher yields than other types of interest-earning assets.
Loans involve inherent credit and liquidity risks which management attempts to
control and mitigate. At December 31, 2001, total loans net of unearned income
were $999.2 million, an increase of $191.0 million from $808.2 million at
December 31, 2000. This compares to increases of $175.4 million during 2000 from
$632.8 million at December 31, 1999 and $200.9 million during 1999 from $431.9
million at December 31, 1998. The average yield of the loan portfolio was 9.10%,
9.64% and 9.19% for the years ended December 31, 2001, 2000 and 1999,
respectively. Loan growth during the four-year period ended December 31, 2001
was generated primarily through internal growth in the Birmingham, Alabama and
Florida markets as we implemented an asset substitution strategy of replacing an
acquired company's cash and short term investments with loans.

DISTRIBUTION OF LOANS BY CATEGORY

DECEMBER 31,
--------------------------------------------------------
2001 2000 1999 1998 1997
---------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)

Commercial and industrial...................... $ 261,196 $245,154 $209,349 $141,884 $ 83,625
Real estate -- construction and land
development(1)............................... 200,250 100,448 72,253 44,799 23,985
Real estate -- mortgages
Single-family................................ 224,736 183,747 138,238 101,872 79,950
Commercial................................... 194,535 172,319 122,821 56,518 34,669
Other........................................ 24,140 17,443 9,203 5,085 2,778
Consumer....................................... 91,421 84,129 72,934 73,251 55,608
Other.......................................... 3,784 5,725 8,606 9,766 4,154
---------- -------- -------- -------- --------
Total loans........................... 1,000,062 808,965 633,404 433,175 284,769
Unearned income................................ (906) (820) (627) (1,244) (1,867)
Allowance for loan losses...................... (12,546) (8,959) (8,065) (6,466) (3,741)
---------- -------- -------- -------- --------
Net loans............................. $ 986,610 $799,186 $624,712 $425,465 $279,161
========== ======== ======== ======== ========

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

(1) At December 31, 2001, approximately $111.5 million of these loans were 1-4
family residential loans, approximately $54.9 million were commercial loans
and approximately $33.8 million were land development loans.

The repayment of loans as they mature is a source of liquidity for us. The
following table sets forth our loans by category maturing within specified
intervals at December 31, 2001. The information presented is based on the
contractual maturities of the individual loans, including loans which may be
subject to renewal at their contractual maturity. Renewal of such loans is
subject to review and credit approval, as well as modification of terms upon
their maturity. Consequently, management believes this treatment presents fairly
the maturity and repricing structure of the loan portfolio.

SELECTED LOAN MATURITY AND INTEREST RATE SENSITIVITY

RATE STRUCTURE FOR LOANS
MATURING
OVER ONE YEAR
OVER ONE YEAR -------------------------------
ONE YEAR OR THROUGH FIVE PREDETERMINED FLOATING OR
LESS YEARS OVER FIVE YEARS TOTAL INTEREST RATE ADJUSTABLE RATE
---------------- ------------- --------------- ---------- ------------- ---------------
(DOLLARS IN THOUSANDS)

Commercial and
industrial........... $131,103 $122,197 $ 7,896 $ 261,196 $ 95,665 $ 34,428
Real
estate -- construction
and land
development.......... 116,391 72,078 11,781 200,250 38,342 45,517
Real
estate -- mortgages
Single-family........ 37,657 104,131 82,948 224,736 120,269 66,810
Commercial........... 25,867 127,344 41,324 194,535 112,816 55,852
Other................ 3,479 15,018 5,643 24,140 13,748 6,913
Consumer............... 40,901 49,179 1,341 91,421 48,545 1,975
Other.................. 953 1,990 841 3,784 2,593 238
-------- -------- -------- ---------- -------- --------
Total loans...... $356,351 $491,937 $151,774 $1,000,062 $431,978 $211,733
======== ======== ======== ========== ======== ========
Percent to total
loans................ 35.7% 49.2% 15.1% 100.0% 43.2% 21.1%
======== ======== ======== ========== ======== ========

Allowance for Loan Losses. We maintain an allowance for loan losses at a
level 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 the results of our specific loan
reviews and other factors, such as historical loss experience based on volume
and types of loans, trends in classifications, volume and trends in
delinquencies and non-accruals, national and local economic conditions and other
pertinent information. The level of the allowance for loan losses to net loans
will vary depending on the quarterly analysis.

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

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

The quarterly allowance for loan loss calculation is segregated into
various segments that include classified loans, loans with specific allocations
and homogeneous pass rated loans. A pass rated loan is generally characterized
by a very low to average risk of default and, in which management perceives
there is a minimal risk of loss. 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 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 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 loans observable market price or the fair
value of the collateral if the loan is collateral dependent. A valuation
allowance is provided to the extent that the measure of the impaired loans is
less than the recorded investment. A loan is not considered impaired during a
period of delay in payment if the ultimate collectibility of all amounts due is
expected. Larger groups of homogenous loans such as consumer installment and
residential real estate mortgage loans are collectively evaluated for
impairment.

Reserve percentages assigned to pass rated homogeneous loans are based on
historical charge-off experience adjusted for geographic location, current
trends in the portfolio 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.

We historically have allocated our allowance for loan losses to specific
loan categories. Although the allowance is allocated, it is available to absorb
losses in the entire loan portfolio. This allocation is made for estimation
purposes only and is not necessarily indicative of the allocation between
categories in which future losses may occur.

ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES

DECEMBER 31,
---------------------------------------------------------------------------
2001 2000 1999 1998
-------------------- ------------------- ------------------- --------
PERCENT PERCENT PERCENT
OF LOANS OF LOANS OF LOANS
IN EACH IN EACH IN EACH
CATEGORY CATEGORY CATEGORY
TO TOTAL TO TOTAL TO TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT
------- -------- ------ -------- ------ -------- ------
(DOLLARS IN THOUSANDS)

Commercial and
industrial.......... $6,536 26.1% $5,689 30.3% $4,460 33.1% $3,119
Real estate --
construction and
land development.... 919 20.0 392 12.4 223 11.4 181
Real estate --
mortgages
Single-family....... 1,273 22.5 500 22.7 500 21.8 500
Commercial.......... 1,315 19.5 400 21.3 350 19.4 300
Other............... 333 2.4 16 2.2 21 1.5 26
Consumer.............. 2,129 9.1 1,822 10.4 2,452 11.5 2,295
Other................. 41 .4 50 .7 -- 1.3 --
Unallocated........... -- -- 90 -- 59 -- 45
------- ----- ------ ----- ------ ----- ------
$12,546 100.0% $8,959 100.0% $8,065 100.0% $6,466
======= ===== ====== ===== ====== ===== ======

DECEMBER 31,
------------------------------
1998 1997
-------- -------------------
PERCENT PERCENT
OF LOANS OF LOANS
IN EACH IN EACH
CATEGORY CATEGORY
TO TOTAL TO TOTAL
LOANS AMOUNT LOANS
-------- ------ --------
(DOLLARS IN THOUSANDS)

Commercial and
industrial.......... 32.8% $1,583 29.4%
Real estate --
construction and
land development.... 10.3 151 8.4
Real estate --
mortgages
Single-family....... 23.5 700 28.1
Commercial.......... 13.1 500 12.2
Other............... 1.2 96 .9
Consumer.............. 16.9 686 19.5
Other................. 2.2 -- 1.5
Unallocated........... -- 25 --
----- ------ -----
100.0% $3,741 100.0%
===== ====== =====

The allowance as a percentage of loans, net of unearned income, at December
31, 2001 was 1.26%, which equals the average of the allowance as a percent of
loans for the five-year period ended December 31, 2001. The allowance for loan
losses as a percentage of non-performing loans increased to 100.99% at December
31, 2001 from 90.85% at December 31, 2000.

Net charge-offs decreased $200,000 or 4.9% from $4.1 million in 2000 to
$3.9 million in 2001. The ratio of net charge-offs to average loans averaged
..60% for the five year period ended December 31, 2001,

with a ratio of .42%, .57% and .90% in 2001, 2000 and 1999, respectively. Net
charge-offs during 2001 and 2000 are more reflective of historical averages
because net charge-offs during 1999 included the charge-off of loans acquired in
a purchase business combination and a significant loss from a single commercial
loan customer. Historically, net charge-offs have been more significant for
commercial and consumer loans. Net charge-offs of commercial loans decreased
$596,000 from $2.9 million in 2000 to $2.3 million in 2001. Net charge-offs of
real estate loans decreased $379,000 from $669,000 in 2000 to $290,000 in 2001.
These declines were offset by an increase in consumer loan net charge-offs of
$769,000 from $458,000 in 2000 to $1.2 million in 2001. Net charge-offs as a
percentage of the provision for loan losses was 51.88% in 2001, a decrease from
81.98% in 2000. Net charge-offs as a percentage of the allowance for loan losses
was 30.82% in 2001, a decrease from 45.40% in 2000.

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

YEAR
----------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)

Allowance for loan losses at beginning of year.............. $ 8,959 $ 8,065 $ 6,466 $ 3,741 $ 2,522
Allowance of acquired bank.................................. -- -- 3,591 368 --
Charge-offs:
Commercial and industrial................................. 2,415 3,133 4,531 1,256 795
Real estate -- construction and land development.......... 48 524 -- -- --
Real estate -- mortgages
Single-family........................................... 184 223 197 359 81
Commercial.............................................. 130 9 53 -- --
Other................................................... 20 -- 36 -- --
Consumer.................................................. 1,517 726 975 1,291 883
-------- -------- -------- -------- --------
Total charge-offs................................... 4,314 4,615 5,792 2,906 1,759
Recoveries:
Commercial and industrial................................. 65 193 418 108 42
Real estate -- construction and land development.......... 65 -- -- -- --
Real estate -- mortgages
Single-family........................................... -- 83 62 81 23
Commercial.............................................. 27 4 67 5 --
Other................................................... -- -- 43 -- --
Consumer.................................................. 290 268 360 412 228
-------- -------- -------- -------- --------
Total recoveries.................................... 447 548 950 606 293
Net charge-offs............................................. 3,867 4,067 4,842 2,300 1,466
Provision for loan losses................................... 7,454 4,961 2,850 4,657 2,685
-------- -------- -------- -------- --------
Allowance for loan losses at end of year.................... $ 12,546 $ 8,959 $ 8,065 $ 6,466 $ 3,741
======== ======== ======== ======== ========
Loans at end of year, net of unearned income................ $999,156 $808,145 $632,777 $431,931 $282,902
Average loans, net of unearned income....................... 914,006 710,414 535,754 340,813 254,146
Ratio of ending allowance to ending loans................... 1.26% 1.11% 1.27% 1.50% 1.32%
Ratio of net charge-offs to average loans................... .42 .57 0.90 0.67 0.58
Net charge-offs as a percentage of:
Provision for loan losses................................. 51.88 81.98 169.89 49.39 54.60
Allowance for loan losses................................. 30.82 45.40 60.04 35.57 39.19
Allowance for loan losses as a percentage of nonperforming
loans..................................................... 100.99 90.85 216.22 172.93 146.42

Nonperforming Loans. Nonperforming loans increased $2.5 million to $12.4
million as of December 31, 2001 from $9.9 million as of December 31, 2000. As a
percent of net loans, nonperforming loans increased from 1.22% at December 31,
2000 to 1.24% at December 31, 2001. The following table represents our
nonperforming loans for the dates indicated.

NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS

DECEMBER 31,
-------------------------------------------
2001 2000 1999 1998 1997
------- ------ ------ ------ ------
(DOLLARS IN THOUSANDS)

Nonaccrual....................................... $ 7,941 $9,340 $3,097 $1,496 $1,169
Accruing loans 90 days or more delinquent........ 4,482 334 575 934 1,344
Restructured..................................... -- 187 58 -- --
------- ------ ------ ------ ------
$12,423 $9,861 $3,730 $2,430 $2,513
======= ====== ====== ====== ======
Nonperforming loans as a percent of loans........ 1.24% 1.22% .59% .56% .89%
======= ====== ====== ====== ======

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

DECEMBER 31,
-------------------------------------------
2001 2000 1999 1998 1997
------- ------ ------ ------ ------
(DOLLARS IN THOUSANDS)

Commercial and industrial........................ $ 3,078 $6,580 $1,780 $ 560 $ 262
Real estate -- construction and land
development.................................... 2,895 867 288 158 104
Real estate -- mortgages
Single-family.................................. 3,089 551 333 735 517
Commercial..................................... 2,400 1,284 893 526 1,097
Other.......................................... 145 -- 80 -- 4
Consumer......................................... 669 389 298 387 529
Other............................................ 147 190 58 64 --
------- ------ ------ ------ ------
Total nonperforming loans.............. $12,423 $9,861 $3,730 $2,430 $2,513
======= ====== ====== ====== ======

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. 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
process of collection.

Potential Problem Loans. In addition to nonperforming loans, management
has identified $4.0 million in potential problem loans as of December 31, 2001.
Potential problem loans are loans where known information about possible credit
problems of the borrowers causes management to have doubts as to the ability of
such borrowers to comply with the present repayment terms and may result in
disclosure of such loans as nonperforming. Approximately $2.4 million of this
amount consists of loans to two customers of which $1.2 million is secured by
equipment and the remaining $1.2 million is secured by residential real estate.
Management has allocated in the allowance for loan losses approximately $798,000
to absorb any losses through substandard and doubtful classifications that may
result from these loans. Approximately $1.7 million of these loans are
considered impaired as discussed below.

Impaired Loans. At December 31, 2001, our recorded investment in impaired
loans totaled $10.1 million, a decrease of $7.9 million from $18.0 million at
December 31, 2000. The decline in the amount of impaired loans is attributable
to several commercial loans and commercial real estate loans that are now
current, have been paid-off or the collateral has been foreclosed. At December
31, 2001 and 2000, there was approximately $3.1 million in allowance for loan
losses specifically allocated to impaired loans. We have no commitments to loan
additional funds to the borrowers whose loans are impaired.

Of the $10.1 million in impaired loans, $6.8 million, or 67% are secured by
real estate, of which, 1-4 family residential properties comprise $2.9 million,
and various commercial buildings and lots comprise $3.9 million. The remaining
$3.3 million, or 33% is secured by commercial assets and consumer personal
property. Of the $3.1 million in allowance specifically allocated to impaired
loans, $1.1 million has been allocated to loans secured by real estate, and the
remaining has been allocated to commercial and consumer loans.

Investment Securities. The investment securities portfolio comprised 6.27%
of our total interest-earning assets as of December 31, 2001. Total securities
averaged $90.5 million in 2001, compared to $81.0 million in 2000 and $86.6
million in 1999. The investment securities portfolio produced average tax
equivalent yields of 6.03%, 6.71% and 6.40% for the years ended December 31,
2001, 2000 and 1999, respectively. At December 31, 2001, our investment
securities portfolio had an amortized cost of $69.4 million and an estimated
fair value of $68.9 million.

The $26.9 million decrease in investment securities during 2001 provided
additional funding for our loan growth and increased our investment in
short-term federal funds sold which enhanced our liquidity.

The transition provisions of FAS No. 133 provide that at the date of
initial application (January 1, 2001), debt securities categorized as
held-to-maturity may be transferred into the available-for-sale category without
calling into question our intent to hold other debt securities until maturity.
As such, on January 1, 2001, we transferred debt securities with a carrying
value of $4,389,000 and a market value of $4,317,000 to the available-for-sale
category and the $72,000 unrealized loss on the transfer was recorded in other
comprehensive income.

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

INVESTMENT PORTFOLIO

DECEMBER 31,
----------------------------------------------------
HELD TO MATURITY AVAILABLE FOR SALE
---------------------- ---------------------------
2001 2000 1999 2001 2000 1999
---- ------ ------ ------- ------- -------
(DOLLARS IN THOUSANDS)

U.S. Treasury and agencies.............. $-- $ -- $ -- $18,807 $39,407 $11,645
State and political subdivisions........ -- 2,867 3,711 8,749 12,844 13,991
Mortgage-backed securities.............. -- 1,522 1,766 39,313 38,091 42,292
Other securities........................ -- -- -- 2,512 1,516 1,090
--- ------ ------ ------- ------- -------
Total investment securities... $-- $4,389 $5,477 $69,381 $91,858 $69,018
=== ====== ====== ======= ======= =======

The following table shows the scheduled maturities and average yields of
securities held at December 31, 2001.

MATURITY DISTRIBUTION OF INVESTMENT SECURITIES

MATURING
------------------------------------------------------------------------------------------
AFTER ONE BUT AFTER FIVE BUT
WITHIN ONE WITHIN FIVE WITHIN TEN
YEAR YEARS YEARS AFTER TEN YEARS TOTAL
--------------- --------------- ----------------- ---------------- ---------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
------- ----- ------- ----- ------ ----- ------- ----- ------- -----
(DOLLARS IN THOUSANDS)

Securities available
for sale:
U.S. Treasury and
agencies......... $12,746 1.84% $ 5,609 4.67% $ 452 4.31% $ -- --% $18,807 2.74%
State and political
subdivision...... 420 7.58 2,164 5.93 360 5.81 5,805 4.94 8,749 5.31
Mortgage-backed
securities....... 57 6.10 2,623 7.63 1,379 5.74 35,254 4.58 39,313 4.83
Other securities... 100 5.18 299 6.85 264 5.51 1,849 7.29 2,512 6.97
------- ---- ------- ---- ------ ---- ------- ---- ------- ----
Total....... $13,323 2.06% $10,695 5.70% $2,455 5.30% $42,908 4.75% $69,381 4.40%
======= ==== ======= ==== ====== ==== ======= ==== ======= ====

Short-Term Investments. Short-term investments as of December 31, 2001
consisted of federal funds sold of $20.0 million compared to $3.1 million as of
December 31, 2000. Federal funds sold averaged $31.4 million during 2001,
compared to $14.6 million in 2000 and $15.1 million in 1999 and produced average
yields of 4.17%, 6.36% and 5.04%, respectively. Federal funds are a primary
source of our liquidity and are generally invested on an overnight basis. In
addition to federal funds sold, we will also invest in short-term commercial
paper. As of December 31, 2001, we did not hold any commercial paper.

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

Deposits. During 2001, average total deposits increased $167.5 million, or
22.6% to $910.3 million, from $742.8 million in 2000. During 2000, average total
deposits increased $145.6 million, or 24.4% from $597.2 million in 1999, which
increased $141.4 million, or 31.0% from $455.8 million in 1998. Deposit growth
has been generated primarily through internal growth in our various markets.

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

AVERAGE DEPOSITS

AVERAGE FOR THE YEAR
---------------------------------------------------------------------------
2001 2000 1999
----------------------- ----------------------- -----------------------
AVERAGE AVERAGE AVERAGE
AMOUNT AVERAGE AMOUNT AVERAGE AMOUNT AVERAGE
OUTSTANDING RATE PAID OUTSTANDING RATE PAID OUTSTANDING RATE PAID
----------- --------- ----------- --------- ----------- ---------
(DOLLARS IN THOUSANDS)

Noninterest bearing demand
deposits................... $100,968 --% $ 91,420 --% $ 81,500 --%
Interest-bearing demand
deposits................... 230,098 3.27 172,579 3.79 149,755 3.42
Savings deposits............. 30,823 1.87 35,141 2.99 32,248 2.91
Time deposits................ 548,445 5.91 443,686 6.17 333,720 5.40
-------- ---- -------- ---- -------- ----
Total average
deposits......... $910,334 4.45% $742,826 4.71% $597,223 4.77%
======== ==== ======== ==== ======== ====

Noninterest bearing deposits totaled $94.6 million at December 31, 2001, an
increase of 6.5%, or $5.7 million from $88.9 million at December 31, 2000. Of
the $5.7 million increase in noninterest bearing

deposits, 71.0%, or $4.1 million were generated in branches located in the
Alabama region, the other 29.0%, or $1.6 million were generated in branches in
the Florida region. Noninterest bearing deposits comprised 9.9% of total
deposits at December 31, 2001, compared to 10.8% at December 31, 2000.

Interest bearing deposits totaled $857.6 million at December 31, 2001, an
increase of 16.1%, or $119.2 million from $738.4 million at December 31, 2000.
Of the $119.2 million increase in interest-bearing deposits, 52.4%, or $62.5
million were generated in branches located in the Alabama region, the other
47.6%, or $56.7 million were generated in branches in the Florida region.

During 2001, average interest-bearing deposits increased $158.0 million, or
24.2% to $809.4 million, from $651.4 million in 2000, compared to an increase
during 2000 of $135.7 million, or 26.3% from $515.7 million in 1999, which
increased $121.5 million, or 30.8% from $394.2 million in 1998. Interest-
bearing deposits comprised 90.1% of total deposits at December 31, 2001,
compared to 89.2% at December 31, 2000 and carried an average rate of 4.45%,
4.71% and 4.77% for the years ended December 31, 2001, 2000 and 1999,
respectively.

Deposits, particularly core deposits, have historically been our primary
source of funding and have enabled us to meet successfully both our short-term
and long-term liquidity needs. Our core deposits, which exclude our time
deposits greater than $100,000, represent 72.8% of our total deposits at
December 31, 2001 compared to 71.4% at December 31, 2000. We anticipate that
such deposits will continue to be our primary source of funding in the future.
Our loan-to-deposit ratio was 104.9% at December 31, 2001, compared to 97.7% at
December 31, 2000. The maturity distribution of our time deposits over $100,000
at December 31, 2001 is shown in the following table.

MATURITIES OF TIME DEPOSITS OF $100,000 OR MORE

AT DECEMBER 31, 2001
---------------------------------------------------
UNDER 3-6 6-12 OVER
3 MONTHS MONTHS MONTHS 12 MONTHS TOTAL
-------- ------- ------- --------- --------
(DOLLARS IN THOUSANDS)

$82,500 $78,205 $56,605 $41,833 $259,143
======= ======= ======= ======= ========

Approximately 31.8% of our time deposits over $100,000 had scheduled
maturities within three months. We believe customers who hold a large
denomination certificate of deposit tend to be extremely sensitive to interest
rate levels, making these deposits a less reliable source of funding for
liquidity planning purposes than core deposits.

Borrowed Funds. During 2001, average borrowed funds increased $49.0
million, or 57.1% to $134.8 million, from $85.8 million during 2000, which
increased $35.9 million, or 72.1% from $49.9 million during 1999. The average
rate paid on borrowed funds during 2001, 2000 and 1999 was 5.82%, 5.78% and
5.31%, respectively. Because of a relatively high loan-to-deposit ratio, the
existence and stability of these funding sources are important to our
maintenance of short-term and long-term liquidity.

Borrowed funds as of December 31, 2001 consisted primarily of advances from
the FHLB. The following is a summary, by year of contractual maturity, of
advances from the FHLB as of December 31, 2001 and 2000:

2001 2000
----------------------- -----------------------
WEIGHTED WEIGHTED
YEAR AVERAGE RATE BALANCE AVERAGE RATE BALANCE
---- ------------ -------- ------------ --------
(DOLLARS IN THOUSANDS)

2003.................................... 4.99% $ 15,660 4.99% $ 15,660
2004.................................... 5.21 25,000 5.21 25,000
2005.................................... 6.31 32,400 6.31 32,800
2008.................................... 5.51 2,500 5.51 2,500
2009.................................... 5.26 2,000 5.26 2,000
2010.................................... 6.18 26,340 6.18 26,340
2011.................................... 4.97 32,000 -- --
-------- --------
Total................................... 5.58% $135,900 5.78% $104,300
======== ========

Certain advances are subject to call by the FHLB as follows: 2002, $114.3
million; 2003, $2.5 million; and 2004 $2.0 million. The $114.3 million in FHLB
advances subject to call during 2002 carry a weighted average interest rate of
5.65%, ranging from 4.97% to 7.07%. We do not expect the FHLB to call these
advances considering the current interest rate environment.

The advances are secured by FHLB stock, agency securities and a blanket
lien on certain residential real estate loans, all with a carrying value of
approximately $231.0 million at December 31, 2001. We have remaining
approximately $88.0 million in unused lines of credit with the FHLB subject to
the availability of qualified collateral.

As of December 31, 2001, we have available $15.0 million under a $15.0
million line of credit with a regional bank. Interest is one and three quarters
(1.75%) percentage points in excess of the applicable LIBOR Index Rate. The line
matures May 1, 2002. As of December 31, 2001 and 2000, there were no outstanding
balances on this line of credit. Subsequent to year end, we negotiated an
extension of the maturity on this line of credit to May 1, 2005.

We also have available approximately $25.0 million in unused federal funds
lines of credit with regional banks, subject to certain restrictions and
collateral requirements.

Guaranteed Preferred Beneficial Interest in Our Subordinated
Debentures. On September 7, 2000, 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 used the proceeds to
purchase an equal principal amount of our 10.6% subordinated debentures.

On July 16, 2001, 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 six-month LIBOR plus 375 basis points.
The interest rate on the securities reprices every six months and has a 12.5%
per annum ceiling for the first ten years. As of the date of issuance, the
interest rate on the securities was 7.57%. In January 2002, these securities
repriced to 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. We account for TBC Capital II and TBC Capital III as minority
interests. 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 us. Both the preferred
securities of TBC Capital II and TBC Capital III and our subordinated debentures
each have 30-year lives. However, The Banc Corporation, TBC Capital II and TBC
Capital III have call options with a premium after five years through ten years
and call options at par, after ten years, subject to regulatory approval, or
earlier depending upon certain changes in tax or investment company laws, or
regulatory capital requirements.

A portion of the proceeds from the offerings were used to repay borrowings
under our line of credit with the balance to be used for general corporate
purposes including additional capital investment in our bank subsidiary.

Stockholders' Equity. Stockholders' equity increased $2.0 million during
2001 to $76.9 million at December 31, 2001 from $74.9 million at December 31,
2000. The increase in stockholders' equity during 2001 primarily consisted of
$2.7 million in net income offset by $714,000 in treasury stock transactions. In
September of 2000, our board of directors approved a stock buyback plan in an
amount not to exceed $10,000,000. During 2001 and 2000, 177,650 shares of common
stock were repurchased, of which 10,000 shares were reissued during 2001. As
December 31, 2001, there were 167,650 shares held in treasury at a total cost of
$924,000. During 2001, we repurchased 137,650 shares at a total cost of
$780,000.

Regulatory Capital. The table below represents our and our subsidiary's
actual regulatory and minimum regulatory capital requirements at December 31,
2001 (dollars in thousands):

FOR CAPITAL
ADEQUACY TO BE WELL
ACTUAL PURPOSES CAPITALIZED
---------------- --------------- ----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
-------- ----- ------- ----- -------- -----

Total Risk-Based Capital
The Banc Corporation.................. $114,538 11.41% $80,326 8.00% $100,408 10.00%
The Bank.............................. 103,521 10.40 79,668 8.00 99,585 10.00
Tier 1 Risk-Based Capital
The Banc Corporation.................. 94,785 9.44 40,163 4.00 60,245 6.00
The Bank.............................. 91,072 9.15 39,834 4.00 59,751 6.00
Leverage Capital
The Banc Corporation.................. 94,785 7.92 47,856 4.00 59,820 5.00
The Bank.............................. 91,072 7.61 47,864 4.00 59,830 5.00

IMPACT OF INFLATION

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

BUSINESS

GENERAL

We are a Delaware-chartered financial holding company headquartered in
Birmingham, Alabama. We offer a broad range of banking and related services in
34 locations in Alabama and the Florida panhandle through The Bank, our
principal subsidiary. We had assets of approximately $1.2 billion, loans of
approximately $1.0 billion, deposits of approximately $952 million and
stockholders' equity of approximately $77 million at December 31, 2001. Our
principal executive offices are located at 17 North 20th Street, Birmingham,
Alabama 35203, and our telephone number is (205) 327-3600.

STRATEGY

Operations. The Bank targets individuals and local and regional businesses
that prefer local decision-making and personalized service. As a result, we
conduct our business on a decentralized basis with respect to deposit gathering
and most credit decisions, emphasizing local knowledge and authority to make
these decisions. We supplement this decentralized management approach with
centralized risk management, policy oversight, credit review, audit and
asset/liability and risk management systems. We implement these standardized
administrative and operational policies at each of our locations while retaining
local management and advisory directors to capitalize on their knowledge of the
local community. We believe this strategy enables The Bank to generate high
yielding loans and to attract and retain low cost core deposits that provide a
large portion of our funding requirements. Core deposits comprised approximately
72.8% of our total deposits at December 31, 2001.

Management. We believe we have assembled a seasoned management team with
particular experience in the southeastern banking market. Our senior management
has over 120 years of professional banking experience. We believe our current
management team provides us with the experience to grow substantially without
requiring significant additions to our senior management team.

Presently, we have 13 individual presidents who act as regional executives
responsible for the day to day operations and decisions for between one and five
branches. We require our presidents to live in their specific market area and
encourage them to be an active member of their community. This approach permits
The Bank to target individuals and small to medium-sized regional businesses
that prefer local decision-making and personalized service. In addition, we
believe that the history of achievement and leadership of these presidents and
advisory directors gives us a competitive advantage relative to the larger bank
holding companies in our market areas.

Products and Services. We focus on commercial, consumer, residential
mortgage and real estate construction lending to customers in our local markets.
Our retail loan products include mortgage banking services, home equity lines of
credit, consumer loans, including automobile loans, and loans secured by
certificates of deposit and savings accounts. Our commercial loan products
include working capital lines of credit, term loans for both real estate and
equipment, letters of credit and SBA loans. We also offer a variety of deposit
programs to individuals and to businesses and other organizations, including a
variety of personal checking, savings, money market and NOW accounts, as well as
business checking and savings accounts, investment sweep accounts and credit
line sweep accounts. In addition, we offer individual retirement accounts and
investment services, safe deposit and night depository facilities and additional
services such as commercial cash management services, internet banking and the
sale of traveler's checks, money orders and cashier's checks.

In 2002, The Bank intends to enhance its brokerage and investment products
through a relationship with a third-party registered broker-dealer. The Bank
also intends to introduce life, health and annuity products.

We believe that our delivery model gives us a competitive advantage in
relation to large regional banks and that our diverse product offering gives us
a competitive advantage in relation to other community banking organizations.

Market Areas. Our primary markets are located throughout the northern half
of Alabama and the panhandle of Florida. A number of once independent community
banks in our market areas have been acquired by larger bank holding companies.
We believe that consolidation of local banks into these larger institutions
provides an excellent opportunity for us to expand our market share.

We have specifically targeted Birmingham and Huntsville, Alabama and the
panhandle of Florida as our best opportunities for internal growth. Birmingham
is the largest city in Alabama and one of the largest banking centers in the
country as measured by domiciled deposits. Birmingham is a recognized leader in
medical research and is well situated to take advantage of Alabama's growing
auto manufacturing industry including Mercedes Benz of North America and Honda
Corporation. Birmingham has a median family income of $51,100 and an
unemployment rate of 3.1% for 2001, substantially better than the Alabama
average. (Sources: U.S. Department of Housing and Urban Development and Alabama
Department of Industrial Relations).

Huntsville is the third largest city in Alabama and is home to the Marshall
Space Flight Center, the Redstone Arsenal and the attendant defense and
technology businesses. Huntsville has 14% employment in high-tech manufacturing
and services and a well educated population. Huntsville plays a key role in the
development of missile defense systems with Boeing employing about 1,300 people
in this work in Huntsville. Huntsville was ranked third among top high-tech
cities in 2001 and had the fifth highest concentration of software employment
nationwide (Source: Center for Business and Economic Research, The University of
Alabama). Huntsville has a median family income of $60,600 and an unemployment
rate of 3.1% for 2001. (Sources: U.S. Department of Housing and Urban
Development and Alabama Department of Industrial Relations).

Our Florida community bank franchise stretches along Florida's "Emerald
Coast," from Destin to Apalachicola Bay, with approximately $456 million in
assets (including the CF Bancshares acquisition). This is one of the fastest
growing areas in Florida, a state known for its tourism industry and growth rate
in general. We focused on the panhandle of Florida because of its potential for
economic growth, attractive tourism industry, retiree population, and
construction and other lending opportunities. We have three branches serving the
Port St. Joe, Mexico Beach and Apalachicola markets and a fourth is planned for
the summer of 2002. We believe Port St. Joe is the only undeveloped deep water
port on the Gulf Coast. The St. Joe Company, which we believe is one of the
largest property owners in the State of Florida, has begun to develop its
extensive real estate holdings in that area.

In addition to Birmingham and Huntsville, our branches are located in:
Albertville, Andalusia, Boaz, Childersburg, Decatur, Frisco City, Gadsden,
Guntersville, Kinston, Madison, Monroeville, Morris, Mt. Olive, Opp, Rainbow
City, Roanoke, Samson, Sylacauga and Warrior, Alabama. In the panhandle region
of Florida, we have branches in Altha, Apalachicola, Bay Point, Blountstown,
Bristol, Destin (2), Mexico Beach, Panama City, Panama City Beach, Port St. Joe,
Santa Rosa Beach and Seagrove. In addition, we are opening a branch in
Carrabelle, Florida in the summer of 2002.

Growth. Since our inception, we have grown through acquisitions, internal
growth and branching. Following each of our acquisitions, we have expended
substantial managerial, operating, financial and other resources to integrate
these entities. In addition, we have typically maintained the acquired entity's
management and staff. As a result of this increase in personnel and the
corresponding investment in infrastructure and systems, our efficiency ratio has
been negatively impacted. As we are only three years old and still in the early
stages of the execution of our business plan, we have not yet reached economies
of scale that a mature banking company would expect. However, we believe that we
now have substantial capacity to grow our operations without significant further
investment in infrastructure.

Our future growth depends primarily on the expansion of the business of The
Bank through internal growth and the opening of new branch offices in new and
existing markets. The Bank will also consider the

strategic acquisition of other financial institutions and branches with
relatively high earnings or exceptional growth potential. Our ability to grow
profitably from internal growth depends primarily on our ability to attract and
retain low cost and core deposits coupled with the continued opportunity to
generate high yielding, quality loans. Our ability to grow profitably through
the opening or acquisition of new branches will depend primarily on, among other
things, our ability to identify profitable, growing markets and branch locations
within such markets, attract necessary deposits to operate such branches
profitably and to locate lending and investment opportunities within such
markets.

We evaluate business combination opportunities and conduct discussions, due
diligence activities and negotiations in connection with those opportunities. As
a result, business combination transactions involving cash, debt or equity
securities might occur from time to time. Any future business combination or
series of business combinations that we might undertake may be material, in
terms of assets acquired or liabilities assumed, to our financial condition. Any
future acquisition is subject to approval by the appropriate bank regulatory
agencies. See "Supervision and Regulation."

LENDING ACTIVITIES

General. We offer a range of lending services, including real estate,
consumer and commercial loans, primarily to individuals and businesses and other
organizations that are located in or conduct a substantial portion of their
business in our market areas. Our total loans at December 31, 2001 were $1.0
billion, or 92% of total earning assets. The interest rates we charge on loans
vary with the risk, maturity and amount of the loan and are subject to
competitive pressures, money market rates, availability of funds and government
regulations. We do not have any foreign loans or loans for highly leveraged
transactions.

The lending activities of The Bank are subject to the written underwriting
standards and loan origination procedures established by The Bank's board of
directors and management. Loan originations are obtained from a variety of
sources, including referrals, existing customers, walk-in customers and
advertising. In our marketing efforts, we emphasize our community ties,
customized personal service, competitive rates, and an efficient underwriting
and approval process. Loan applications are initially processed by loan officers
who have approval authority up to designated limits. Certain of our presidents
and senior lenders have additional approval authority of not greater than
$250,000. Any loan in excess of $250,000 must be approved by the regional
executive for north Alabama, the regional executive for Florida or the Chief
Credit Officer or Chief Executive Officer of The Bank who each have a $1 million
secured lending limit. The Bank's Corporate Loan Committee has approval
authority for all loans and overall credit relationships in excess of $1 million
and up to $4 million. The Bank's Corporate Loan Committee as well as the Loan
Committee of the Board of Directors of The Bank must approve any loan or overall
credit relationship over $4 million, and the Board of Directors of The Bank must
approve any loan or overall credit relationship in excess of $6 million.

We use generally recognized loan underwriting criteria and attempt to
minimize loan losses through various means. In particular, on larger credits, we
generally rely on the cash flow of a debtor as the source of repayment and
secondarily on the value of the underlying collateral. In addition, we attempt
to utilize shorter loan terms in order to reduce the risk of a decline in the
value of such collateral. As of December 31, 2001, 52% of our loan portfolio
consisted of loans that had initial terms of one year or less or repriced at
least annually.

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

LOAN PORTFOLIO

Real Estate Loans. Loans secured by real estate are a significant
component of our loan portfolio, constituting $643.6 million, or 64.4% of total
loans at December 31, 2001. Our largest category of real
44

estate loan is single-family mortgage loans, typically structured with fixed or
adjustable interest rates, based on market conditions. At December 31, 2001,
$224.7 million, or 22.5% of our total loan portfolio consisted of these loans.
The weighted average interest rate for such loans was 7.93% with an average loan
balance of $58,000 and a maximum loan balance of $1.4 million. On average, these
loans had 20.5 months seasoning and an average loan to value ratio of 51%. Fixed
rate loans usually have terms of five years or less, with payments through the
date of maturity generally based on a 15 to 30-year amortization schedule.
Adjustable rate loans generally have a term of 15 years. We typically charge an
origination fee on these loans.

Nonresidential mortgage loans include commercial, industrial and raw land
loans. At December 31, 2001, $194.5 million, or 19.5% of our total loan
portfolio consisted of these loans. The weighted average interest rate for such
loans was 7.69% with an average loan balance of $257,000 and a maximum loan
balance of $8.1 million. On average, these loans had 19.6 months seasoning and
an average loan to value ratio of 68%. The commercial real estate loans
primarily provide financing for income producing properties such as shopping
centers, apartments and office buildings and for owner occupied properties
(primarily light industrial facilities, office buildings and farm or timber
land). These loans are underwritten with loan to value ratios ranging from 65%
to 85% based upon the type of property being financed and the financial strength
of the borrower. For owner occupied commercial buildings, we underwrite the
financial capability of the owner, with an 85% maximum loan-to-value ratio. For
income producing improved real estate, we underwrite the strength of the leases,
especially those of any anchor tenants, with minimum debt service coverage of
1.2:1 and an 85% maximum loan-to-value ratio. While evaluation of collateral
value is an essential part of the underwriting process for these loans,
repayment ability is determined from analysis of the borrower's earnings and
cash flow. Terms are typically three to five years and may have payments through
the date of maturity based on a 15 to 30 year amortization schedule.

We make loans to finance the construction of and improvements to
single-family and multi-family housing and commercial structures as well as
loans for land development. At December 31, 2001, $200.3 million, or 20.0% of
our total portfolio consisted of such loans. The weighted average interest rate
for such loans was 6.66% with an average loan balance of $156,000 and a maximum
loan balance of $6.5 million. On average, these loans had 13.2 months seasoning
and an average loan to value ratio of 69%. Our construction lending is divided
into three general categories: owner occupied commercial buildings; income
producing improved real estate; and single-family residential construction. For
construction loans related to income producing properties, the underwriting
criteria are the same as outlined in the preceding paragraph. For single family
residential construction, we underwrite the financial strength and reputation of
the builder factoring in the general state of the economy and interest rates and
the location of the home, with an 85% maximum loan-to-value ratio. Construction
loans usually have a term of twelve months and generally require personal
guarantees. The majority of land development loans consist of loans to convert
raw land into residential subdivisions.

Commercial and Industrial Loans. We make loans for commercial purposes in
various lines of business. These loans are typically made on terms up to five
years at fixed or variable rates and are secured by accounts receivable,
inventory or, in the case of equipment loans, the financed equipment. We attempt
to reduce our credit risk on commercial loans by limiting the loan to value
ratio to 85% on loans secured by accounts receivable, 50% on loans secured by
inventory and 75% on loans secured by equipment. We also, from time to time,
make unsecured commercial loans. Commercial and industrial loans constituted
$261.2 million, or 26.1% of our loan portfolio at December 31, 2001. The
weighted average interest rate for such loans was 7.39% with an average loan
balance of $75,000 and a maximum loan balance of $4.9 million. On average, these
loans had 17.1 months seasoning.

Consumer Loans. Consumer lending includes installment lending to
individuals in our market areas and consists primarily of loans to purchase
automobiles, recreational vehicles, mobile homes and consumer goods. Consumer
loans constituted $91.4 million, or 9.1% of our loan portfolio at December 31,
2001. The weighted average interest rate for such loans was 8.69% with an
average loan balance of $8,100 and a maximum loan balance of $1.0 million. On
average, these loans have 13.9 months seasoning. Consumer loans are underwritten
based on the borrower's income, current debt, credit history and collateral.
Terms

generally range from four to five years on automobile loans and one to three
years on other consumer loans.

CREDIT REVIEW AND PROCEDURES

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

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

DEPOSITS

Core deposits are our principal source of funds, constituting approximately
72.8% of our total deposits as of December 31, 2001. Core deposits consist of
demand deposits, interest-bearing transaction accounts, savings deposits and
certificates of deposit (excluding certificates of deposits over $100,000).
Transaction accounts include checking, money market and NOW accounts that
provide The Bank with a source of fee income and cross-marketing opportunities,
as well as a low-cost source of funds. Time and savings accounts also provide a
relatively stable and low-cost source of funding. The largest source of funds
for The Bank is certificates of deposit. Certificates of deposit in excess of
$100,000 are held primarily by customers in our market areas.

Deposit rates are set periodically by the Asset Liability Management
Committee, which includes senior management of The Bank and The Banc
Corporation. We believe our rates are competitive with those offered by
competing institutions in our market areas; however, we focus on customer
service, not high rates, to attract and retain deposits.

COMPETITION

The banking industry is highly competitive, and our profitability depends
principally on our ability to compete in our market areas. In our market areas,
we face competition from both regional banks and smaller community banks. We
encounter strong competition both in making loans and attracting deposits.
Competition among financial institutions is based upon interest rates offered on
deposit accounts, interest rates charged on loans and other credit and service
charges. Customers also consider the quality and scope of the services rendered,
the convenience of banking facilities and, in the case of loans to commercial
borrowers, relative lending limits, and may also consider the fact that other
banks offer different services. Many of the large regional banks against which
we compete have significantly greater lending limits and may offer additional
products; however, we believe we have been able to compete effectively with
other financial institutions, regardless of their size, by emphasizing customer
service and by providing a wide array of services. In addition, most of our
non-bank competitors are not subject to the same extensive federal regulations
that govern bank holding companies and federally insured banks. See "Supervision
and Regulation." Competition may further intensify if additional financial
services companies enter markets in which we conduct business.

EMPLOYEES

As of December 31, 2001, we employed approximately 390 individuals
primarily at The Bank. We believe that our employee relations have been and
continue to be good.
46

PROPERTIES

Our corporate headquarters are located at 17 North 20th Street, Birmingham,
Alabama. As of December 21, 1999, The Banc Corporation and The Bank, who jointly
own the building, converted the building into condominiums known as The Bank
Condominiums. The Banc Corporation owns The Bank Unit, which consists of 4
floors of the building, including a branch of The Bank and our headquarters. We
intend to sell or lease the remaining condominium units for commercial or
residential use.

We operate through 35 office facilities, including our operations center.
We own 27 of these facilities and lease eight of these facilities. Rental
expense on the leased properties totaled approximately $570,000 in 2001.

LEGAL PROCEEDINGS

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

SUPERVISION AND REGULATION

We are a financial holding company under the Gramm-Leach-Bliley Act
("GLBA"). We are subject to the supervision, examination and reporting
requirements of the Federal Reserve Board, the Bank Holding Company Act ("BHCA")
and the GLBA. The BHCA and other federal laws subject bank holding companies to
particular restrictions on the types of activities in which they may engage and
to a range of supervisory requirements and activities, including regulatory
enforcement actions for violations of laws and regulations.

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

The Bank, an Alabama state chartered bank and member of the Federal Reserve
System, is subject to the regulation, supervision and examination by the Federal
Reserve Board and the Alabama Banking Department.

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

To become a financial holding company, a bank holding company must provide
notice to the Federal Reserve Board of its desire to become a financial holding
company, and certify to the Federal Reserve Board that each of its bank
subsidiaries is "well-capitalized," "well-managed" and has at least a
"satisfactory" rating under the CRA. These requirements are also necessary to
maintain financial holding company status. On February 12, 2000, we filed our
election to become a financial holding company with the Federal Reserve Board.
Our election was effective as of March 13, 2000.

Regulatory Restrictions on Dividends. Various federal and state statutory
provisions limit the amount of dividends The Bank can pay to us without
regulatory approval. Approval of the Federal Reserve Board is required for
payment of any dividend by a state chartered bank that is a member of the
Federal Reserve System if the total of all dividends declared by the bank in any
calendar year would exceed the total of its net profits (as defined by
regulatory agencies) for that year combined with its retained net profits for
the proceeding two years. In addition, a state member bank may not pay a
dividend in an amount greater than its net profits. State member banks may also
be subject to similar restrictions imposed by the laws of the states in which
they are chartered.

Under Alabama law, a bank may not pay a dividend in excess of 90% of its
net earnings until the bank's surplus is equal to at least 20% of its capital.
The Bank is also required by Alabama law to obtain the prior approval of the
Superintendent of the State Banking Department of Alabama for its payment of
dividends if the total of all dividends declared by The Bank in any calendar
year will exceed the total of (1) the Bank's net earnings (as defined by
statute) for that year, plus (2) its retained net earnings for the preceding two
years, less any required transfers to surplus. In addition, no dividends may be
paid from The Bank's surplus without the prior written approval of the
Superintendent.

In addition, federal bank regulatory authorities have authority to prohibit
the payment of dividends by bank holding companies if their actions constitute
unsafe or unsound practices. The Federal Reserve Board has issued a policy
statement on the payment of cash dividends by bank holding companies, which
expresses the Federal Reserve Board's view that a bank holding company
experiencing earnings weaknesses should not pay cash dividends that exceed its
net income or that could only be funded in ways that weaken the bank holding
company's financial health, such as by borrowing. Our ability and The Bank's
ability to pay dividends in the future is currently, and could be further,
influenced by bank regulatory policies and capital guidelines.

As of December 31, 2001, an aggregate of approximately $14.4 million was
available for payment of dividends by The Bank to us under applicable
restrictions, without obtaining regulatory approval.

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

Under the Federal Deposit Insurance Act ("FDIA"), an FDIC-insured
depository institution can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC in connection with (1) the
default of a commonly controlled FDIC-insured depository institution or (2) any
assistance provided by the FDIC to any commonly controlled FDIC-insured
depository institution "in danger of default." "Default" is defined generally as
the appointment of a conservator or receiver and "in danger of default" is
defined generally as the existence of certain conditions indicating that a
default is likely to occur in the absence of regulatory assistance. The FDIC's
claim for damages is superior to claims of stockholders of the insured
depository institution or its holding company but is subordinate to claims of
depositors, secured creditors and holders of subordinated debt (other than
affiliates) of the commonly controlled insured depository institution.

Safe and Sound Banking Practices. Bank holding companies are not permitted
to engage in unsafe or unsound banking practices. The Federal Reserve Board has
broad authority to prohibit activities of bank holding companies and their
non-banking subsidiaries which represent unsafe or unsound banking practices or
which constitute violations of laws or regulations, and can assess civil money
penalties for certain activities conducted on a knowing and reckless basis, if
those activities caused a substantial loss to a depository institution. The
penalties can be as high as $1,000,000 for each day the activity continues.

Capital Adequacy Requirements. We are required to comply with the capital
adequacy standards established by the Federal Reserve Board, and The Bank is
subject to additional requirements of the FDIC and the Alabama Banking
Department. The Federal Reserve Board has adopted two basic measures of capital
adequacy for bank holding companies: a risk-based measure and a leverage
measure. All applicable capital standards must be satisfied for a bank holding
company to be in compliance.

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

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

In addition, the Federal Reserve Board has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less
goodwill and certain other intangible assets, of 3% for bank holding companies
that meet certain specified criteria, including having the highest regulatory
rating. All other bank holding companies generally are required to maintain a
Leverage Ratio of at least 3%, plus an additional cushion of 100 to 200 basis
points. Our Leverage Ratio was 7.92% at December 31, 2001. The guidelines also
provide that bank holding companies experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels without significant reliance on intangible
assets. Furthermore, the Federal Reserve Board has indicated that it will
consider a tangible Tier 1 Capital Leverage Ratio (deducting all intangibles)
and other indicia of capital strength in evaluating proposals for expansion or
new activities.

The federal bank regulatory agencies' risk-based and leverage ratios are
minimum supervisory ratios generally applicable to banking organizations that
meet certain specified criteria, assuming that they have the highest regulatory
rating. Banking organizations not meeting these criteria are expected to operate
with capital positions well above the minimum ratios. The federal and state bank
regulatory agencies may set capital requirements for a particular banking
organization that are higher than the minimum ratios when circumstances warrant.

The Bank was in compliance with the applicable minimum capital requirements
as of December 31, 2001. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Failure to meet capital guidelines could
subject The Bank to a variety of enforcement remedies by federal bank regulatory
agencies, including termination of deposit insurance by the FDIC, and to certain
restrictions on business.

As of December 31, 2001, both The Banc Corporation and The Bank were "well
capitalized."

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

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

Alabama and other states have laws relating specifically to acquisitions of
banks, bank holding companies and other types of financial institutions. Alabama
law sets five years as the minimum age of banks which may be acquired.

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

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

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

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

Community Reinvestment Act. The Bank is subject to the CRA. The CRA and
the regulations issued thereunder are intended to encourage banks to help meet
the credit needs of their service area, including low and moderate income
neighborhoods, consistent with the safe and sound operations of the banks. These
regulations also provide for regulatory assessment of a bank's record in meeting
the needs of its service area when considering applications to establish
branches, merger applications and applications to acquire the assets and assume
the liabilities of another bank. The Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") requires federal banking agencies to make
public a rating of a bank's performance under the CRA. In the case of a bank
holding company, the CRA performance record
50

of the banks involved in the transaction are reviewed by federal banking
agencies in connection with the filing of an application to acquire ownership or
control of shares or assets of a bank or thrift or to merge with any other bank
holding company. An unsatisfactory record can substantially delay or block the
transaction. The Bank has, and previously C&L Bank and Emerald Coast Bank had,
received a satisfactory CRA rating from federal banking agencies.

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

INSTABILITY OF REGULATORY STRUCTURE

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

EFFECT ON ECONOMIC ENVIRONMENT

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

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

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the name, age and positions of each of our
executive officers and directors as of February 27, 2002:

NAME AGE POSITION WITH CORPORATION
---- --- -------------------------

James R. Andrews, M.D................. 59 Director
Neal R. Berte, Ed. D.................. 61 Director
W. T. Campbell, Jr.................... 55 Director
David R. Carter....................... 50 Executive Vice President, Chief
Financial Officer and Director
Peter N. DiChiara(2).................. 45 Director
K. Earl Durden(2)..................... 65 Director
Don J. Giardina....................... 52 President and Chief Executive Officer
of The Bank and Director
John F. Gittings...................... 55 Director
Steven C. Hays........................ 44 Director
Thomas E. Jernigan, Jr.(2)............ 36 Director
Randall E. Jones...................... 48 Director
James Mailon Kent, Jr.(1)............. 61 Vice Chairman
F. Hampton McFadden, Jr............... 39 Executive Vice President, General
Counsel and Secretary
Mayer Mitchell........................ 69 Director
Ronald W. Orso, M.D.(1)............... 55 Director
Harold W. Ripps....................... 63 Director
Richard M. Scrushy(3)................. 49 Director
Jerry M. Smith........................ 62 Director
Michael E. Stephens................... 58 Director
Larry D. Striplin, Jr.(1)............. 72 Vice Chairman
Marie Swift........................... 60 Director
James A. Taylor....................... 59 Chairman and Chief Executive Officer
James A. Taylor, Jr................... 36 President, Chief Operating Officer and
Director
T. Mandell Tillman.................... 53 Director
Johnny Wallis......................... 72 Director

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

(1) Member of the Compensation Committee.

(2) Member of the Audit Committee

(3) Mr. Scrushy serves as an advisory director, a non-voting position.

James R. Andrews, M.D. has been a director since September 1998 and served
as a director of Warrior Capital Corporation from October 1997 until it was
merged into The Banc Corporation on September 24, 1998. Dr. Andrews served as a
director of Alabama National BanCorporation from 1989 until 1996. Dr. Andrews
has practiced as an orthopedic surgeon specializing in sports-related injuries
for over 25 years.

Neal R. Berte, Ed.D. has been a director since September 1998. Dr. Berte
has been the President of Birmingham-Southern College since 1975.

W. T. Campbell, Jr. has been a director since October 30, 1998. Mr.
Campbell served as President of City National Corporation and Chairman of the
Board of Directors of City National from 1984 until it was merged into The Banc
Corporation on October 30, 1998. Mr. Campbell is a practicing attorney in
Sylacauga, Alabama with the firm of Campbell and Douglas.

David R. Carter has been Executive Vice President and Chief Financial
Officer since September 1998. Mr. Carter has served as a Director of The Banc
Corporation since December 1998. Mr. Carter served as Executive Vice President
and Chief Financial Officer of Warrior Capital Corporation from April 1998 until
September 1998. Mr. Carter served as a consultant to Warrior Capital Corporation
from January 1998 until April 1998. From June 1995 through December 1997, Mr.
Carter served as the Chief Financial Officer of Roxco, Ltd., a regional
construction company. From February 1981 through January 1995, Mr. Carter served
in various capacities with Trustmark, a publicly-traded bank holding company
based in Jackson, Mississippi, including Chief Financial Officer from September
1988 until January 1995.

Peter N. DiChiara has been a director since September 1998 and served as a
director of Warrior Capital Corporation from 1984 until it was merged into The
Banc Corporation on September 24, 1998. Mr. Dichiara has been the President of
City Wholesale Grocery, a grocery supply company based in Birmingham, Alabama
since October 1983.

K. Earl Durden has been a director since December 5, 1998. Mr. Durden
served as a Director of Emerald Coast Bancshares, Inc. from its inception in
1996 until it was merged into The Banc Corporation on February 12, 1999. Mr.
Durden is the President, Chief Executive Officer and a director of Rail
Management Corporation. Mr. Durden also serves as President and a director of
the following companies: Copper Basin Railway, Inc., KWT Railway, Galveston
Railway, Inc. and Grizzard Transfer, Inc., a small trucking company. Mr. Durden
also served as Chairman, Executive Committee member and a director of the
American Short Line and Regional Railroad Association. Mr. Durden has been
heavily involved in the acquisition, ownership, start up and operation of short
line railroads for the past twenty years.

Don J. Giardina has been a director since September 2001. Mr. Giardina
serves as President and Chief Executive Officer of The Bank. Mr. Giardina joined
The Bank as President in July 2000, and was named Chief Executive Officer in
August 2001. Mr. Giardina served as President and CEO of Colonial Bank,
Birmingham, Alabama, from June 1989 until July 2000. Mr. Giardina also served in
the United States Army as a finance officer. Mr. Giardina is a certified public
accountant.

John F. Gittings has been a director since September 1999. Mr. Gittings
also serves as President of The Bank-Monroeville. Mr. Gittings served as
President, Chief Executive Officer, and director of First Citizens Bancorp,
Inc., from 1996 until it was merged into The Banc Corporation on October 31,
1998. Mr. Gittings served as President, Chief Executive Officer and Director of
First Bank & Trust in Grove Hill, Alabama, from 1990 to 1996.

Steven C. Hays has been a director since November 6, 1998. Mr. Hays served
as a director of Commerce Bank of Alabama, Inc. from April 1995 until it was
merged into The Bank on November 6, 1998. Mr. Hays also served as Executive Vice
President of Steel Processing Services, Inc. from 1981 until the sale of the
company in 1993. He presently manages a number of personal investments.

Thomas E. Jernigan, Jr. has been a director since September 1998 and served
as a director of Warrior Capital Corporation from December 1997 until it was
merged into The Banc Corporation on September 24, 1998. Mr. Jernigan has been
the President of Marathon Corporation, a privately-held investment management
company based in Birmingham, Alabama for over two years. Mr. Jernigan has held
various positions with Marathon Corporation since 1989. Mr. Jernigan's father,
Thomas E. Jernigan, holds the title of "Director Emeritus," a non-voting
position.

Randall E. Jones has been a director since November 6, 1998. Mr. Jones
served as a director of Commerce Bank of Alabama, Inc. from April 1995 until it
was merged into The Bank on November 6, 1998. Mr. Jones is the owner and
President of Randy Jones Insurance Agency, Inc., representing Nationwide
Insurance Company since 1978. He is a past president of the Albertville Rotary
Club and the Albertville Chamber of Commerce.
53

James Mailon Kent, Jr. has been a director since September 1998 and served
as a director of Warrior Capital Corporation from October 1997 until it was
merged into The Banc Corporation on September 24, 1998. Mr. Kent has served as
Vice Chairman of The Banc Corporation since December 1998. Mr. Kent served as a
director of Alabama National BanCorporation from 1988 until 1996 and served as
Vice Chairman of Alabama National BanCorporation from 1988 until 1994. Mr. Kent
has been the owner of Mailon Kent Insurance Agency in Birmingham, Alabama for
over 20 years.

F. Hampton McFadden, Jr. has served as Executive Vice President, General
Counsel and Secretary of The Banc Corporation and The Bank since January 2000.
For more than five years prior to joining us, Mr. McFadden was engaged in the
private practice of law in Birmingham, Alabama, most recently as a member of the
law firm now known as Haskell Slaughter Young & Rediker, L.L.C.

Mayer Mitchell has been a director since September 1998 and served as a
director of Warrior Capital Corporation from December 1997 until it was merged
into The Banc Corporation on September 24, 1998. He served as Chairman and Chief
Executive Officer of The Mitchell Company, a real estate development firm based
in Mobile, Alabama, from September 1955 until his retirement from the company on
December 31, 1986. He is currently a co-owner of Mitchell Brothers, Inc., a
private investment company. Mr. Mitchell is a former National President and
Chairman of the Board of Directors of the American Israel Public Affairs
Committee ("AIPAC") and a past member of the Board of Directors of AmSouth Bank
N.A. of Mobile and Altus Bank of Mobile.

Ronald W. Orso, M.D. has been a director since September 1998 and served as
a director of Warrior Capital Corporation from October 1997 until it was merged
into The Banc Corporation on September 24, 1998. Dr. Orso served as a director
of Alabama National BanCorporation from 1988 until 1997. Dr. Orso has practiced
in the field of obstetrics and gynecology for over 23 years. He is the past
Chairman of the Department of Obstetrics and Gynecology and the past president
of the Medical Staff at Baptist Medical Center in Birmingham.

Harold W. Ripps has been a director since September 1998 and served as a
director of Warrior Capital Corporation from December 1997 until it was merged
into The Banc Corporation on September 24, 1998. He has served as a trustee of
Colonial Properties Trust Diversified REIT since 1995. In 1969, Mr. Ripps
founded The Rime Companies, a real estate development, construction and
management firm, headquartered in Birmingham, Alabama, specializing in the
development of multi-family properties. Mr. Ripps has served The Rime Companies
in an executive capacity since that time.

Richard M. Scrushy has been a director since September 1998. Mr. Scrushy is
currently an advisory director, a non-voting position. Since 1984, Mr. Scrushy
has been Chairman of the Board and Chief Executive Officer of HEALTHSOUTH
Corporation. Mr. Scrushy has been a director of Caremark Rx, Inc., formerly
MedPartners, Inc., since January 1993 and served as its Chairman of the Board of
Directors from January 1998 through October 1998.

Jerry M. Smith has been a director since September, 1999. Mr. Smith served
as a member of the Board of Directors of C&L Bank of Bristol from 1975 until it
was acquired by The Banc Corporation on June 30, 1999, and as a member of the
Board of Directors of C&L Bank of Blountstown from 1987 until it was acquired by
The Banc Corporation and merged into C&L Bank of Bristol on June 30, 1999. Mr.
Smith has been Chairman and President of First National Bank of Alachua in
Alachua, Florida since 1971.

Michael Stephens has been a director since September 1998 and served as a
director of Warrior Capital Corporation from December 1997 until it was merged
into The Banc Corporation on September 24, 1998. He founded ReLife, Inc., a
publicly-traded rehabilitation company based in Birmingham, Alabama, and was its
Chairman and Chief Executive Officer from 1986 until 1994. He is currently the
Chairman and Chief Executive Officer of S Enterprises, Inc.

Larry D. Striplin, Jr. has been a director since September 1998 and served
as a director of Warrior Capital Corporation from October 1997 until it was
merged into The Banc Corporation on September 24, 1998. Mr. Striplin has served
as Vice Chairman of The Banc Corporation since December 1998. Since
54

October 1995, Mr. Striplin has been the Chairman and Chief Executive Officer of
Nelson-Brantley Glass Contractors, Inc. and Chairman and Chief Executive Officer
of Clearview Properties, Inc. Until October 1995, Mr. Striplin had been Chairman
of the Board and Chief Executive Officer of Circle 'S' Industries, Inc., a
privately-owned bonding wire manufacturer. Mr. Striplin is a member of the board
of directors of HEALTHSOUTH Corporation, a publicly-traded provider of
rehabilitative health care services, Kulicke & Soffa Industries, Inc., a
publicly-traded manufacturer of electronic equipment.

Marie Swift has been a director since September 1998 and served as a
director of Warrior Capital Corporation from its incorporation in 1982 until it
was merged into The Banc Corporation on September 24, 1998. Ms. Swift served as
Secretary of The Banc Corporation from September 1998 to December 1998. Ms.
Swift has been President of The Bank-Warrior since January 1998. Prior to that,
she served as Senior Vice President of Warrior Savings Bank from 1982 until
1998.

James A. Taylor has been Chairman of the Board and Chief Executive Officer
since our incorporation in 1998. Mr. Taylor served as President of The Banc
Corporation from April 1998 until November 1998 and from February 1999 until
September 2000. Mr. Taylor served as Chairman of the Board, President and Chief
Executive Officer of Warrior Capital Corporation from October 1997 until it was
merged into The Banc Corporation on September 24, 1998. Mr. Taylor was Founder,
Chairman of the Board and Chief Executive Officer of Alabama National
BanCorporation, a publicly-traded bank holding company based in Birmingham,
Alabama, from its incorporation in 1986 until his retirement in April 1996. From
1981 until 1996, Mr. Taylor served as Chairman of the Board and Chief Executive
Officer of various banks and bank holding companies that ultimately comprised
Alabama National BanCorporation. Mr. Taylor is also on the board of directors of
Southern Energy Homes, Inc., a producer of manufactured housing, and the
American Sports Medicine Institute and SAL Trust Preferred Fund I, a closed-end
investment company.

James A. Taylor, Jr. has been President and Chief Operating Officer since
September 2000. Mr. Taylor has served as a director since December 1998. Mr.
Taylor served as Executive Vice President, General Counsel and Secretary of The
Banc Corporation from September 1998 until September 2000. Mr. Taylor served as
Executive Vice President, General Counsel and Secretary of The Bank from
December 1998 until November 1999. Mr. Taylor was a director of Warrior Capital
Corporation from October 1997 until it was merged into The Banc Corporation on
September 24, 1998 and served as Executive Vice President and General Counsel of
Warrior Capital Corporation from April 1998 until September 1998. From June 1996
until April 1998, Mr. Taylor served as Vice President -- Legal Services for
MedPartners, Inc., now Caremark Rx, Inc. From July 1994 until December 1996, Mr.
Taylor served as outside general counsel to Alabama National BanCorporation.
From August 1990 until March 1996, Mr. Taylor was in private practice with a law
firm in Birmingham, Alabama. Mr. Taylor is the son of James A. Taylor. From
November 1, 1999 until April 2000, Mr. Taylor also served as a Senior Vice
President of Vesta Insurance Group, Inc.

T. Mandell Tillman has been a director since November 6, 1998. Mr. Tillman
was a director of Commerce Bank of Alabama from April 1995 until it was merged
into The Bank on November 6, 1998. Mr. Tillman has served as Chairman of the
Board of Real Property Services, Inc. since 1985. He holds the MAI designation.

Johnny Wallis has been a director since September 1998 and served as
director of Warrior Capital Corporation from its incorporation in 1982 until it
was merged into The Banc Corporation on September 24, 1998. Mr. Wallis served as
the Chairman of the Board, President and Chief Executive Officer of Warrior
Capital Corporation until October 1997. Mr. Wallis served as President of The
Bank until January 1998 and served as Chairman of the Board of The Bank-Warrior
until June 30, 2000.

CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES

Our directors are divided into three classes, with each class being as
nearly equal in number as reasonably possible. The classes are:

Class 1 Class 2 Class 3
(Term Expires in 2002) (Term Expires in 2003) (Term Expires in 2004)
---------------------- ---------------------- ----------------------

W. T. Campbell, Jr. Peter N. DiChiara James N. Andrews
K. Earl Durden Don J. Giardina Neal R. Berte
John F. Gittings Steven C. Hays David R. Carter
Thomas E. Jernigan, Jr. Randall E. Jones James Mailon Kent, Jr.
Mayer Mitchell Jerry M. Smith Ronald W. Orso
Harold Ripps Michael E. Stephens Larry D. Striplin, Jr.
James A. Taylor, Jr. Johnny Wallis James A. Taylor
T. Mandell Tillman Marie Swift

Each director holds office for the three-year term to which he or she is
elected and until his or her successor is duly elected and qualified. At each
annual meeting of our stockholders, the successors to the class of directors
whose terms expire at such meeting will be elected to hold office for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election. The board of directors elects officers annually.
Those officers serve at the discretion of the board of directors. During 2001,
the board of directors held five meetings and acted by unanimous written consent
one time.

Our board of directors currently has two committees: the Audit Committee
and the Compensation Committee. The board of directors as a whole acts in place
of a nominating committee.

The Audit Committee is responsible for reviewing and supervising our
financial controls. The Audit Committee makes recommendations to the board of
directors with respect to our financial statements and the appointment of
independent auditors, reviews significant audit and accounting policies and
practices, meets with our independent public accountants concerning, among other
things, the scope of audits and reports, and reviews our performance of overall
accounting and financial controls. The Audit Committee consists of Messrs.
Dichiara, Durden and Jernigan as well as two directors of The Bank. During 2001,
there were four meetings of the Audit Committee.

The Compensation Committee is responsible for reviewing the performance of
all officers and recommending to the board of directors annual salary and bonus
amounts for all or our officers. The Compensation Committee also administers the
Second Amended and Restated 1998 Incentive Stock Plan of The Banc Corporation
and the Commerce Bank of Alabama Stock Option Plan. The Compensation Committee
consists of Messrs. Kent and Striplin and Dr. Orso. During 2001, the
Compensation Committee held two meetings and acted by unanimous written consent
one time. See "Executive Compensation and Other Information."

The board of directors as a whole acts in place of a nominating committee.
Our bylaws provide that nomination for the office of director may be made by
stockholders only if written notice of such proposed nominations are delivered
to or mailed and received at our principal executive offices not less than 60
days nor more than 90 days prior to the meeting at which the election is to be
held; provided, however, that in the event that less than 70 days' notice, or
prior public disclosure of the date of the meeting, is given, or made, to
stockholders, then, notice by the stockholders, to be timely, must be so
delivered or mailed and received not later than the close of business on the
tenth day following the day on which such notice of

the date of the meeting was mailed or such public disclosure was made. The
stockholder's notice must set forth:

(a) as to each person the stockholder proposes to nominate for
election or re-election as a director,

- the person's name, age, business address, and residence address,

- the person's principal occupation or employment,

- the class and number of shares of The Banc Corporation that the person
beneficially owns, and

- any other information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors
pursuant to Section 14 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder; and

(b) as to the stockholder giving the notice,

- the name and record address of the stockholder,

- the class or series and number of shares of capital stock of The Banc
Corporation that are owned beneficially or of record by the
stockholder,

- a description of all arrangements or understandings between the
stockholder and each proposed nominee and any other person or persons
(including their names) pursuant to which the nomination(s) are to be
made by the stockholder

- a representation that such stockholder intends to appear in person or
by proxy at the meeting to nominate the persons named in such notice,
and

- any other information relating to the stockholder that would be
required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for
the election of directors pursuant to Section 14 of the Exchange Act
and the rules and regulations promulgated thereunder.

The notice must be accompanied by a written consent of each proposed
nominee to be named as a nominee and to serve as a director, if elected. We may
require any proposed nominee to furnish such other information as may reasonably
be required to determine the eligibility of such proposed nominee to serve as a
director.

EXECUTIVE COMPENSATION

Executive Officer Compensation. The following table presents certain
information concerning compensation paid or accrued for services rendered to The
Banc Corporation in all capacities during the years ended December 31, 2001,
2000 and 1999, for our chief executive officer and our four other most highly
compensated executive officers whose total annual salary and bonus in the last
fiscal year exceeded $100,000. These executive officers are referred to
collectively as the "named executive officers."

SUMMARY COMPENSATION TABLE

LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION HELD YEAR SALARY($) BONUS($) COMPENSATION(1) OPTIONS(#)
-------------------------------- ---- --------- -------- --------------- ------------

James A. Taylor...................... 2001 $469,120 $ -- $ 95,488 200,000
Chairman of the Board and 2000 400,000 -- 188,029 15,000
Chief Executive Officer 1999 250,000 150,000 72,909 75,000
James A. Taylor, Jr.................. 2001 $336,750 $ -- $ 16,053 65,000
President and Chief 2000 221,291 -- 19,648 15,000
Operating Officer and 1999 164,742 -- 57,760 15,000
Director
David R. Carter...................... 2001 $282,625 $ -- $ 8,807 65,000
Executive Vice President, 2000 188,822 -- 11,159 15,000
Chief Financial Officer and 1999 162,000 -- 56,604 15,000
Director
Don J. Giardina (2).................. 2001 $254,000 $ -- $ 7,697 25,000
President and Chief Executive 2000 110,500 -- 50,000
Officer of The Bank and Director
F. Hampton McFadden, Jr. (3)......... 2001 $228,000 $ -- $ 13,240 70,000
Executive Vice President,
General Counsel and Secretary

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

(1) Represents the dollar value of board fees received and insurance premiums we
paid with respect to life, health, dental and disability insurance, housing
and automobile allowance for the benefit of the named executive officer.

(2) Mr. Giardina has served as Chief Executive Officer of The Bank since August
2001. He joined The Bank as President and Chief Operating Officer in July
2000.

(3) Mr. McFadden has served as Executive Vice President, General Counsel and
Secretary since January 2001.

Option Grants in 2001. The following table contains information concerning
the grant of stock options under the Second Amended and Restated 1998 Stock
Incentive Plan to the named executive officers.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

ALTERNATIVE TO
(F) AND (G):
GRANT DATE
INDIVIDUAL GRANTS VALUE
--------------------------------------------------- --------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS
UNDERLYING GRANTED TO
OPTIONS/ EMPLOYEES EXERCISE OF GRANT DATE
SARS IN FISCAL BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED (#) YEAR (1) ($/SH) DATE $ (2)
---- ----------- ---------- ----------- ---------- --------------

James A. Taylor..................... 200,000 27% $6.65 6/19/11 $548,000
James A. Taylor, Jr................. 65,000 9 6.65 6/19/11 178,100
David R. Carter..................... 65,000 9 6.65 6/19/11 178,100
Don J. Giardina..................... 25,000 3 6.65 6/19/11 68,500
F. Hampton McFadden, Jr............. 50,000 7 5.85 1/16/11 117,000
20,000 3 6.65 6/19/11 54,800

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

(1) We granted options to purchase 735,000 shares of common stock to our
employees and directors during 2001.

(2) The fair value of the options granted was based upon the Black-Scholes
pricing model. The Banc Corporation used the following weighted average
assumptions for 2001: A risk free interest rate of 4.60%, a volatility
factor of .29%, a weighted average life of options of 6 years and a dividend
yield of 0%.

Aggregated Option Exercises in 2001 and Option Values at Year End. The
following table provides information with respect to options exercised by the
named executive officers during the year ended December 31, 2001 and the number
and value of securities underlying unexercised options held by the named
executive officers at December 31, 2001.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
YEAR-END OPTION/SAR VALUES

NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED VALUE FISCAL YEAR-END FISCAL YEAR-END
ON REALIZED (#) EXERCISABLE/ ($) EXERCISABLE/
NAME EXERCISE(#) ($) UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- -------------------- ----------------

James A. Taylor....................... -- $-- 46,000/169,000 $17,700/56,550
James A. Taylor, Jr................... -- -- 19,000/61,000 9,600/24,150
David R. Carter....................... -- -- 19,000/61,000 9,600/24,150
Don J. Giardina....................... -- -- 25,000/50,000 14,300/25,200
F. Hampton McFadden, Jr............... -- -- 14,000/56,000 12,200/48,800

EMPLOYMENT AGREEMENTS

James A. Taylor. We entered into an employment agreement with Mr. Taylor
dated as of November 1, 1997. Under the terms of his employment agreement, Mr.
Taylor will serve as our Chairman of the Board and Chief Executive Officer and
Chairman of the Board of The Bank. In addition,

Mr. Taylor will be nominated to serve as a director of The Banc Corporation and
as a director of each of its subsidiaries. Mr. Taylor will receive a minimum
annual base compensation of $250,000 plus an incentive payment of 15% of the
base amount per quarter. In addition, he is entitled to receive other benefits
including a car allowance and country club dues and may participate in other
executive compensation plans. The term of the agreement is for five years which
is renewable daily for an additional five-year term. If Mr. Taylor is terminated
for any reason other than "cause" as defined in the agreement (including
constructive termination), he shall receive five years base compensation,
director's fees and all benefits or their cash equivalents. In addition, he
would be entitled to a "gross-up" payment to cover any excise tax imposed on any
severance payment to him. Mr. Taylor's employment agreement includes as part of
his compensation the rental payments for the condominium we provide for Mr.
Taylor as a residence.

We entered into a deferred compensation agreement with Mr. Taylor on July
23, 1998. That agreement provides that we will fund the premium of two life
insurance policies on Mr. Taylor's life which will provide a split dollar
benefit to The Banc Corporation and Mr. Taylor's estate in the event of his
death. Upon the termination of Mr. Taylor's employment for reasons other than
death or Cause (as defined in the agreement), Mr. Taylor will become entitled to
receive 15 annual payments in the approximate amount of $140,000 commencing
April 15, 2007.

James A. Taylor, Jr. We entered into an employment agreement with James A.
Taylor, Jr., dated as of September 19, 2000. Under his employment agreement, Mr.
Taylor, Jr. will serve as our President and Chief Operating Officer. In
addition, Mr. Taylor, Jr. will be nominated to serve as a director of The Banc
Corporation and its subsidiaries. Mr. Taylor, Jr. will receive a base salary of
$216,500 per year plus an incentive payment of 10% of the base amount per
quarter. In addition, he is entitled to receive other benefits including a car
allowance and country club or athletic club dues and may participate in all
other executive compensation plans. The term of the agreement is three years
which is renewable daily for an additional three-year period. If Mr. Taylor, Jr.
is terminated for any reason other than "cause" as defined in the agreement
(including constructive termination), he shall receive three years base
compensation fees and all benefits or their cash equivalents. In addition, he
would be entitled to a "gross up" payment to cover any excise tax imposed on any
severance payment to him.

David R. Carter. We have entered into an employment agreement with David
R. Carter, effective as of September 19, 2000. Under his employment agreement,
Mr. Carter will serve as our Executive Vice President and Chief Financial
Officer and Executive Vice President and Chief Financial Officer of The Bank. In
addition, Mr. Carter will receive a base salary of $216,500 per year plus an
incentive payment of 5% of the base amount per quarter. In addition, he is
entitled to receive other benefits including a car allowance and country club or
athletic club dues and may participate in all other executive compensation
plans. The term of the agreement is three years which is renewable daily for an
additional three-year period. If Mr. Carter is terminated for any reason other
than "cause" as defined in the agreement (including constructive termination),
he shall receive three years base compensation, director's fees and all benefits
or their cash equivalents. In addition, he would be entitled to a "gross up"
payment to cover any excise tax imposed on any severance payment to him.

Don J. Giardina. We have entered into an employment agreement with Don J.
Giardina effective as of July 14, 2000. Under his employment agreement, Mr.
Giardina will serve as the President and Chief Operating Officer of The Bank. In
addition, Mr. Giardina will receive a base salary of $200,000 per year plus an
incentive payment of 5% of the base amount per quarter. In addition, he is
entitled to receive other benefits including a car allowance and country club or
athletic club dues and may participate in all other executive compensation
plans. The term of the agreement is three years which is renewable daily for an
additional three-year period. If Mr. Giardina is terminated for any reason other
than "cause" as defined in the agreement (including constructive termination),
he shall receive three years base compensation, director's fees and all benefits
or their cash equivalents. In addition, he would be entitled to a "gross up"
payment to cover any excise tax imposed on any severance payment to him.

F. Hampton McFadden, Jr. We have entered into an employment agreement with
F. Hampton McFadden, Jr. effective as of January 16, 2001. Under his employment
agreement, Mr. McFadden will

serve as the Executive Vice President and General Counsel and Secretary of The
Banc Corporation and The Bank. In addition, Mr. McFadden will receive a base
salary of $205,000 per year plus an incentive payment of 5% of the base amount
per quarter. In addition, he is entitled to receive other benefits including a
car allowance and country club or athletic club dues and may participate in all
other executive compensation plans. The term of the agreement is three years
which is renewable daily for an additional three-year period. If Mr. McFadden is
terminated for any reason other than "cause" as defined in the agreement
(including constructive termination), he shall receive three years base
compensation and all benefits or their cash equivalents. In addition, he would
be entitled to a "gross up" payment to cover any excise tax imposed on any
severance payment to him.

W. T. Campbell, Jr. We have entered into a three year employment agreement
with Mr. Campbell dated as of October 30, 1999. Under his employment agreement,
Mr. Campbell will serve as the Chairman of the Board for The Bank of Sylacauga.
Mr. Campbell will receive a minimum annual salary of $135,000. The agreement
provides that Mr. Campbell will be entitled to receive other benefits including
a life insurance policy and may participate in other executive compensation
plans. We can terminate the agreement only upon prior notice for a period equal
to the remaining term. If Mr. Campbell is terminated for any reason other than
"cause" as defined in this agreement, Mr. Campbell shall receive his annual
compensation for three years following termination and may not, directly or
indirectly, carry on, engage in or solicit similar business with any of our
customers in any county where we do business.

Marie Swift. The Bank has entered into a three year employment agreement
with Ms. Swift dated as of January 1, 2001. Ms. Swift serves as President of The
Bank -- Warrior. The term of the agreement is for three years and will be
reviewed annually by the board of directors. Ms. Swift receives a base salary of
$100,000 per year plus any bonus which may be approved by The Bank's board of
directors. In addition, The Bank must provide Ms. Swift an automobile.

INCENTIVE PLANS

The Banc Corporation Incentive Plan. The objectives of the Second Amended
and Restated 1998 Stock Incentive Plan of The Banc Corporation are to further
the growth and development of The Banc Corporation and its subsidiaries by (1)
encouraging selected participants who contribute or are expected to contribute
materially to our success to obtain shares of our common stock and to encourage
them to promote our best interests and (2) affording The Banc Corporation a
means of attracting qualified personnel. The Second Amended and Restated 1998
Stock Incentive Plan covers 1,500,000 shares of our common stock. Those shares
may be, in whole or in part, authorized but unissued shares or issued shares
that we have reacquired. The Second Amended and Restated 1998 Stock Incentive
Plan authorizes the grant of options to purchase our common stock. The options
may be qualified as incentive stock options under Section 422 of the Internal
Revenue Code of 1986 (the "Code") if so determined at the time of grant. The
Second Amended and Restated 1998 Stock Incentive Plan authorizes incentive stock
options, nonqualified stock options and other awards, including stock
appreciation rights, restricted stock and performance shares.

The Second Amended and Restated 1998 Stock Incentive Plan is administered
by the Compensation Committee. The Compensation Committee, subject to the
approval of the board of directors and the provisions of the Second Amended and
Restated 1998 Stock Incentive Plan, has full power to determine the types of
awards to be granted, to select the individuals to whom awards will be granted,
to fix the number of shares that each optionee may purchase, to set the terms
and conditions of each option, and to determine all other matters relating to
the Second Amended and Restated 1998 Stock Incentive Plan. The Compensation
Committee may award grant options or other awards to employees, officers,
directors, consultants, agents, independent contractors and other persons who
contributed or are expected to contribute materially to our success.

The option exercise price of each option is determined by the Compensation
Committee, but shall not be less than 100% of the fair market value of the
shares on the date of grant in the case of incentive options. No incentive
option may be granted to any employee who owns, on the date of grant, stock

representing in excess of 10% of the combined voting power of all classes of
stock of The Banc Corporation or a subsidiary unless the exercise price for
stock subject to such options is at least 110% of the fair market value of such
stock at the time of grant and the option term does not exceed five years. The
aggregate fair market value of stock with regard to which incentive options are
exercisable by an individual for the first time during any calendar year may not
exceed $100,000. The terms and conditions of each option are fixed from time to
time by the Compensation Committee. As of December 31, 2001, the Compensation
Committee has approved grants of options to purchase 1,003,000 shares at an
exercise price equal to "Fair Market Value" (as defined in the Second Amended
and Restated 1998 Stock Incentive Plan) on the date of the grant.

The Commerce Bank of Alabama Option Plan. On May 4, 1995, the Commerce
Bank of Alabama, Inc. shareholders adopted the Commerce Bank of Alabama
Incentive Stock Option Plan for the benefit of key employees of Commerce Bank of
Alabama. The Commerce Option Plan authorizes the grant of options to purchase
Commerce common stock intended to qualify as incentive options and the grant of
non-qualified options. The Commerce Option Plan was assumed by The Banc
Corporation pursuant to the merger of Commerce Bancshares of Alabama with and
into The Bank. As of December 31, 2001, there were outstanding options under the
Commerce Option Plan to purchase 29,009 shares of our common stock at a price of
$6.24 per share.

The Banc Corporation Executive Incentive Compensation Plan. We have
adopted the Executive Incentive Compensation Plan. Under this plan, we will pay
to the participants of the plan a one-time cash bonus in the aggregate amount
equal to three percent of the amount that the total market capitalization (as
defined in the plan) on the determination date exceeds the total market
capitalization on January 5, 2000, which was $107.9 million. The determination
date is defined as the earlier of (1) January 5, 2003, or (2) the date on which
our common stock ceases to be publicly traded. Currently, James A. Taylor is the
only participant of the Executive Incentive Compensation Plan. If the
determination date was the date of this prospectus, no payments would be due
under this plan. However, after giving effect to the offering, if the
determination date was the date of this prospectus, the payment due under this
plan would be approximately $ . We intend to establish an appropriate
accrual for any anticipated payment, and therefor, we do not believe that any
payout under this plan will have a material adverse effect on our results of
operations or financial condition.

DIRECTOR COMPENSATION

Our directors receive $1,500 compensation for each meeting of the board
attended and a retainer of $1,500 per quarter for serving as directors. In
addition, all nonemployee director members of standing or ad hoc committees of
the board of directors receive $100 per committee meeting. Directors are
eligible to receive the grant of stock options or other awards under the Second
Amended and Restated 1998 Stock Incentive Plan. Directors who are also officers
or employees waive receipt of all fees, including the quarterly returns, for
attending board meetings.

The following directors have entered into Deferred Compensation Agreements
with us effective as of September 1, 1999; Andrews, Berte, Campbell, Carter,
DiChiara, Durden, Gittings, Hays, Jernigan, Jones, Kent, Orso, Ripps, Scrushy,
Stephens, Swift, Taylor, Taylor, Jr., Tillman. Directors Taylor, Kent and
Jernigan also have Deferred Compensation Agreements with The Bank. These
agreements provide that we will establish and fund investments and a Deferral
Account for the director as provided in the agreement. Upon termination of a
director's employment other than death or following a change in control, we will
pay the director within 60 days of termination the amount equal to the Deferral
Account Balance. If the director is terminated following a change in control, we
must pay the director the primary and secondary benefits. The primary benefit is
the Deferral Account balance at the end of the Plan year immediately preceding
the directors termination of service which is payable to the director in ten
equal annual installments. The secondary benefit is the amount equal to the
growth in the Deferred Account and must be paid within 60 days of the end of
each plan year.

MANAGEMENT MATTERS

There are no arrangements or understandings known to us between any of our
directors, nominees for director or executive officers and any other person
pursuant to which any such person was or is to be nominated or elected as a
director or an executive officer except as otherwise disclosed below. The
following directors were elected or nominated to the board of directors in
connection with certain acquisitions: Steven C. Hays, Randall E. Jones and T.
Mandell Tillman -- Commerce Bank of Alabama, Inc.; W. T. Campbell, Jr. -- City
National Corporation; Earl Durden -- Emerald Coast Bancshares Inc.; and Jerry M.
Smith -- C&L Banking Corporation and C&L Bank of Blountstown. See "Management --
Directors and Executive Officers" and "-- Employment Agreements".

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Messrs. Kent, Jr., Striplin, Jr. and Dr. Orso comprise the Compensation
Committee. None of the members of the Compensation Committee is a former or
current officer or employee of The Banc Corporation or any of its subsidiaries.

CERTAIN TRANSACTIONS AND RELATIONSHIPS

The Bank has entered into transactions with their directors, executive
officers, significant stockholders and their affiliates. Such transactions were
made in the ordinary course of business on substantially the same terms and
conditions, including interest rates and collateral, as those prevailing at the
same time for comparable transactions with other customers, and did not, in the
opinion of management of The Bank involve more than normal credit risk or
present other unfavorable features.

Emerald Coast Land Management leases 4 branches to Emerald Coast Bank. The
rent payments in 2001 totaled $473,000. Emerald Coast Land Management is owned
by certain former directors and officers of Emerald Coast Bank including K. Earl
Durden, a current director.

PRINCIPAL STOCKHOLDERS

The following table sets forth, to the best of our knowledge, certain
information regarding beneficial stock ownership of our common stock as of
December 31, 2001 by: (a) each of our directors and named executive officers,
(b) all directors and executive officers as a group, and (c) each stockholder we
know to be the beneficial owner of more than 5% of our outstanding common stock.
Except as otherwise indicated, each person or entity listed below has sole
voting and investment power with respect to all shares shown to be beneficially
owned by him or it except to the extent such power is shared by a spouse under
applicable law.

NUMBER OF SHARES OF PERCENTAGE(1)(2)
THE BANC CORPORATION OF COMMON
NAME POSITION HELD COMMON STOCK STOCK OWNED
---- ------------- -------------------- ----------------

James A. Taylor...................... Chairman of the Board and 714,902(3)(4) 5.01%
Chief Executive Officer
James Mailon Kent, Jr................ Vice Chairman 219,002(5) 1.54%
Larry D. Striplin, Jr................ Vice Chairman 233,002(5)(6) 1.64%
James A. Taylor, Jr.................. President, Chief Operating 200,402(7) 1.41%
Officer and Director
David R. Carter...................... Executive Vice President, 39,002(7) *
Chief Financial Officer and
Director
James R. Andrews, M.D................ Director 299,500(8) 2.11%
Neal R. Berte, Ed.D. ................ Director 28,500(8) *
W. T. Campbell, Jr................... Director 424,967(8)(9) 2.99%
Peter N. DiChiara.................... Director 214,500(8)(10) 1.51%
K. Earl Durden....................... Director 428,568(8)(11) 3.01%
Don J. Giardina...................... Director 28,500(12) *
John F. Gittings..................... Director 61,013(13)(14) *
Steven C. Hays....................... Director 78,596(8)(15) *
Thomas E. Jernigan, Jr............... Director 29,002(5) *
Randall E. Jones..................... Director 52,579(8) *
F. Hampton McFadden, Jr.............. Executive Vice President, 34,000(16) *
General Counsel and Secretary
Mayer Mitchell....................... Director 109,500(8)(17)
Ronald W. Orso, M.D.................. Director 228,500(8)(18) 1.61%
Harold W. Ripps...................... Director 214,500(8) 1.51%
Richard M. Scrushy................... Director 229,500(8)(22) 1.61%
Jerry M. Smith....................... Director 180,000(19) 1.27%
Michael E. Stephens.................. Director 239,853(8) 1.69%
Marie Swift.......................... Director 58,100(8) *
T. Mandell Tillman................... Director 58,374(8)(20) *
Johnny Wallis........................ Director 104,620(8)
All executive officers and directors 4,327,067(21) 31.31%
as a group (25 persons)............

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

(1) Except as otherwise noted herein, the percentage is determined on the basis
of 14,217,371 shares of our common stock outstanding plus securities deemed
outstanding pursuant to Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Under Rule 13d-3, a
person is deemed to be a beneficial owner of any security owned by certain
family members and any security of which that person has the right to
acquire beneficial ownership within 60 days, including, without limitation,
shares of our common stock subject to currently exercisable options. An
asterisk indicates beneficial ownership of less than one percent.

(2) Percent for each named individual is calculated by treating any shares
subject to options that are held by the named individual and that are
exercisable within the next 60 days as if outstanding, but treating such
option shares held by others and treating shares subject to options held by
the named individual but not exercisable within 60 days as not outstanding.

(3) Does not include 32,100 shares owned by his wife, or 30,000 shares owned by
his son, Brett Taylor of which he disclaims ownership.

(4) Includes 46,100 shares subject to options.

(5) Includes 4,000 shares subject to options.

(6) Includes 6,000 shares as custodian for minor children.

(7) Includes 19,000 shares subject to options.

(8) Includes 2,000 shares subject to options.

(9) Includes 17,143 shares held by wife and 42,432 shares held by his minor
children.

(10) Includes 210,000 shares held by City Wholesale Grocery, Inc. of which he is
President.

(11) Includes 203,534 shares held as co-trustee.

(12) Includes 25,000 shares subject to options.

(13) Includes 4,000 shares subject to options.

(14) Includes 900 shares held by wife.

(15) Includes 4,046 shares held for benefit of his minor children.

(16) Includes 24,000 shares subject to options.

(17) Includes 105,000 shares held by Mitchell Holdings, L.P., of which Mr.
Mitchell is president of a general partner, Mitchell Investment Holdings,
Inc.

(18) Includes 210,000 shares held by Birmingham OB/GYN Pension Plan of which he
is Trustee.

(19) Includes 2,000 shares subject to options.

(20) Includes 4,670 shares held for benefit of children and 2,785 shares held by
spouse.

(21) Includes 182,000 shares subject to options.

(22) Mr. Scrushy serves as an advisory director.

DESCRIPTION OF CAPITAL STOCK

AUTHORIZED CAPITAL STOCK

Our Restated Certificate of Incorporation provides that we may issue
5,000,000 shares of preferred stock, par value $.001 per share, and 25,000,000
shares of common stock, par value $.001 per share.

OUR COMMON STOCK

Holders of our common stock are entitled to one vote for each share held of
record on all matters to be submitted to a vote of the stockholders and do not
have pre-emptive rights. Cumulative voting is not permitted. This means that the
holders of shares entitled to exercise more than 50 percent of the voting rights
in the election of directors, for example, will be able to elect all of our
directors.

The holders of our common stock are entitled to dividends and other
distributions as and if declared by the board of directors out of funds legally
available. See "Dividend Policy." All outstanding shares of our common stock are
fully paid and nonassessable. Upon the liquidation, dissolution or winding up of
The Banc Corporation, the holders of our common stock would be entitled to share
pro rata in the distribution of all our assets, if any, remaining after payment
or provision for payment of all our debts and obligations and preferred
liquidation payments, if any, to holders of any outstanding shares of our
preferred stock. Shares of our common stock are not subject to any redemption
provisions and are not convertible into any other security or other property. No
share of our common stock is subject to any call or assessment.

OUR PREFERRED STOCK

Our board of directors, without stockholder authorization, is authorized to
issue shares of our preferred stock in one or more series. The board of
directors shall determine and fix the rights, preferences and privileges of each
series, including dividend rights and preferences over dividends on our common
stock and one or more series of our preferred stock, conversion rights, voting
rights (in addition to those provided by law), redemption rights and the terms
of any sinking fund therefore, and rights upon liquidation, dissolution or
winding up, including preferences over our common stock and one or more series
of our preferred stock. Although we have no present plans to issue any shares of
preferred stock, the issuance of shares of our preferred stock, or the issuance
of rights to purchase such shares, may have the effect of delaying, deferring or
preventing a change in control or an unsolicited acquisition proposal.

CERTAIN PROVISIONS OF OUR RESTATED CERTIFICATE OF INCORPORATION AND DELAWARE LAW

Classified Board of Directors. Our Restated Certificate of Incorporation
and the Bylaws provide for the board of directors to be divided into three
classes of directors, as nearly equal in number as is reasonably possible, with
staggered three-year terms. One class of directors is elected every year. See
"Management -- Classified Board of Directors."

We believe that classification of the board of directors into three classes
helps to assure the continuity and stability of the board of directors and the
business strategies and policies as determined by the board of directors, since,
generally, a majority of the directors at any given time will have had prior
experience as our directors. We believe that this, in turn, permits the board of
directors to more effectively represent the interests of stockholders.

With three classes, at least two annual meetings of stockholders, instead
of one, will generally be required to effect a change in the majority of the
board of directors. This classification may discourage proxy contests for the
election of directors or purchases of a substantial block of our common stock
because classification tends to prevent a change in control in a relatively
short period of time. This classification could also have the effect of
discouraging a third party from making a tender offer or otherwise attempting to
obtain control of The Banc Corporation. Under Delaware law, unless the

certificate of incorporation otherwise provides, a director on a classified
board may be removed by our stockholders only for cause. Our Restated
Certificate of Incorporation does not provide otherwise.

Advance Notice Provisions for Stockholder Proposals and Stockholder
Nominations of Directors. Our Restated Certificate of Incorporation provides
that at an annual meeting of stockholders, only such business shall be conducted
as shall have been properly brought before the meeting. To be properly brought
before an annual meeting business must be (1) specified in the notice of posting
(or any supplement thereof, given by or at the direction of the board of
directors), (2) otherwise properly brought before the meeting by or at the
direction of the board of directors, or (3) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of The Banc Corporation.

Delaware Takeover Statute. We are subject to Section 203 of Delaware law
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any of a broad range of business combinations with any "interested
stockholder" for a period of three years following the date that such
stockholder became an interested stockholder, unless:

- before that date, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder;

- upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned;

- by persons who are directors and also officers; and

- by employee stock plans in which employee participants do not have the
right to determine confidentially whether shares held subject to the plan
will be tendered in a tender or exchange offer; or

- on or after such date, the business combination is approved by the board
of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder. An "interested stockholder" is defined as any
person that is (a) the owner of 15% or more of the outstanding voting
stock of the corporation or (b) an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting
stock of the corporation at any time within the three-year period
immediately prior to the date on which it is sought to be determined
whether such person is an interested stockholder.

LIMITATIONS ON LIABILITY OF OFFICERS AND DIRECTORS

Our Restated Certificate of Incorporation contains a provision eliminating
or limiting director liability to us and our stockholders for monetary damages
arising from acts or omissions in the director's capacity as a director. The
provision does not, however, eliminate or limit the personal liability of a
director:

- for any breach of such director's duty of loyalty to us or our
stockholders.

- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law.

- under the Delaware statutory provision making directors personally
liable, under a negligence standard, for unlawful dividends or unlawful
stock purchases or redemptions.

- for any transaction from which the director derived an improper personal
benefit.

This provision offers persons who serve on our board of directors
protection against awards of monetary damages resulting from breaches of their
duty of care except as indicated above. As a result of

this provision, our ability or the ability of our stockholders to successfully
prosecute an action against a director for a breach of his duty of care is
limited. However, the provision does not affect the availability of equitable
remedies such as an injunction or rescission based upon a director's breach of
his duty of care. The SEC has taken the position that the provision will have no
effect on claims arising under the federal securities laws.

In addition, our Restated Certificate of Incorporation and the Bylaws
provide for mandatory indemnification rights, subject to limited exceptions, to
any director, officer, employee or agent who by reason of the fact that he or
she is a director, officer, employee or agent, is involved in a legal proceeding
of any nature. Such indemnification rights include reimbursement for expenses
incurred by such director, officer, employee or agent in advance of the final
disposition of such proceeding in accordance with the applicable provisions of
Delaware law.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is SunTrust Bank,
Atlanta, 58 Edgewood Avenue Room 275, Atlanta, Georgia 30303, 404-588-7831.

UNDERWRITING

Under the terms and subject to the conditions in an underwriting agreement
dated the date of this prospectus, the underwriters named below, for whom
Sandler O'Neill & Partners, L.P. is acting as representative, have severally
agreed to purchase, and we have agreed to sell to them, severally, the number of
shares indicated below:

NAME NUMBER OF SHARES
---- ----------------

Sandler O'Neill & Partners, L.P.............................
Trident Securities, a division of McDonald Investments
Inc.......................................................
------
Total.............................................
======

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in this offering if any are purchased,
other than those shares covered by the over-allotment option described below.

We have granted to the underwriters an option, exercisable no later than 30
days after the date of this prospectus, to purchase up to additional
shares of our common stock at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this prospectus. To the
extent that the underwriters exercise this option, each underwriter will have a
firm commitment to purchase a number of shares that reflects the same percentage
of total shares the underwriter purchased as reflected in the above table. We
will be obligated to sell additional shares to the underwriters to the extent
the option is exercised. The underwriters may exercise this option only to cover
over-allotments made in connection with the sale of common stock offered by this
prospectus.

The underwriters propose to offer the shares of common stock directly to
the public at the public offering price set forth on the cover page of this
prospectus and to dealers at the public offering price less a concession not in
excess of $ per share. The underwriters may allow and the dealers may
reallow a concession not in excess of $ per share to other dealers. After
the public offering of the shares, the underwriters may change the offering
price and other selling items.

The following table shows the per share and total underwriting discounts
and commissions that we will pay to the underwriters and the proceeds we will
receive before expenses. These amounts are shown assuming both no exercise and
full exercise of the underwriters' over-allotment option to purchase additional
shares.

WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
--------- -------------- --------------

Public offering price........................... $ $ $
Underwriting discounts and commissions..........
Proceeds, before expenses, to us................

The expenses of the offering, exclusive of the underwriting discount, are
estimated at $ and payable by us.

The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the underwriters and certain
other conditions. The underwriters reserve the right to withdraw, cancel or
modify this offer and to reject orders in whole or in part.

We, and our executive officers and directors, have agreed, for a period of
180 days after the date of this prospectus, not to offer, sell, contract to
sell, pledge or otherwise dispose of, directly or indirectly, any shares of our
common stock or securities convertible into or exchangeable or exercisable for
any shares of our common stock, enter into a transaction that would have the
same effect, or enter into any swap, hedge or other arrangement that transfers,
in whole or in part, any of the economic consequences of ownership of our common
stock, whether any of these transactions is to be settled by delivery of our
common stock or other securities, in cash or otherwise, or publicly disclose the
intention to make any such offer, sale, pledge

or disposition, or to enter into any such transaction, swap, hedge or other
arrangement, without, in each case, the prior written consent of Sandler O'Neill
& Partners, L.P.

We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
the underwriters may be required to make in respect of those liabilities.

Our common stock is traded on the Nasdaq National Market under the symbol
"TBNC."

In connection with this offering, the underwriters may engage in
stabilizing transactions, over-allotment transactions, syndicate covering
transactions and penalty bids.

- Stabilizing transactions permit bids to purchase shares of common stock
so long as the stabilizing bids do not exceed a specified maximum.

- Over-allotment transactions involve sales by the underwriters of shares
of common stock in excess of the number of shares the underwriters are
obligated to purchase. This creates a syndicate short position which may
be either a covered short position or a naked short position. In a
covered short position, the number of shares over-alloted by the
underwriters is not greater than the number of shares that they may
purchase in the over-allotment option. In a naked short position, the
number of shares involved is greater than the number of shares in the
over-allotment option. The underwriters may close out any short position
by either exercising their over-allotment option and/or purchasing shares
in the open market.

- Syndicate covering transactions involve purchases of common stock in the
open market after the distribution has been completed in order to cover
syndicate short positions. In determining the source of shares to close
out the short position, the underwriters will consider, among other
things, the price of shares available for purchase in the open market as
compared with the price at which they may purchase shares through
exercise of the over-allotment option. If the underwriters sell more
shares than could be covered by exercise of the over-allotment option
and, therefore, have a naked short position, the position can be closed
out only by buying shares in the open market. A naked short position is
more likely to be created if the underwriters are concerned that after
pricing there could be downward pressure on the price of the shares in
the open market that could adversely affect investors who purchase in the
offering.

- Penalty bids permit the representative to reclaim a selling concession
from a syndicate member when the common stock originally sold by that
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty
bids may have the effect of raising or maintaining the market price of our
common stock or preventing or retarding a decline in the market price of our
common stock. As a result, the price of our common stock in the open market may
be higher than it would otherwise be in the absence of these transactions. These
transactions may be effected on the Nasdaq National Market or otherwise and, if
commenced, may be discontinued at any time.

In connection with this offering, some underwriters and any selling group
members who are qualified market makers on the Nasdaq National Market may engage
in passive market making transactions in our common stock on the Nasdaq National
Market in accordance with Rule 103 of Regulation M under the Securities Act.
Rule 103 permits passive market making during the period when Regulation M would
otherwise prohibit market making activity by the participants in our common
stock offering. Passive market making may occur during the business day before
the pricing of our offering, before the commencement of offers or sales of the
common stock. Passive market makers must comply with applicable volume and price
limitations and must be identified as a passive market maker. In general, a
passive market maker must display its bid at a price not in excess of the
highest independent bid for the security. If all independent bids are lowered
below the bid of the passive market maker, however, the bid must then be lowered
when purchase limits are exceeded. Net purchases by a passive market maker on
each day are limited to a specified percentage of the passive market maker's
average daily trading volume

in the common stock during a specified period and must be discontinued when that
limit is reached. The underwriters and other dealers are not required to engage
in passive market making and may end passive market making activities at any
time.

From time to time, certain of the underwriters have provided, and may
continue to provide, investment banking services to us.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 2001 and 2000, and for each of the three
years in the period ended December 31, 2001, as set forth in their report. We
have included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.

Hacker, Johnson and Smith PA served as the independent accountants for CF
Bancshares, Inc.

LEGAL MATTERS

The validity of the shares of our common stock to be issued in this
offering will be passed upon by Haskell Slaughter Young & Rediker, L.L.C.,
Birmingham, Alabama. As of December 31, 2001, representatives of Haskell
Slaughter Young & Rediker, L.L.C., beneficially owned 53,850 shares of our
common stock. Certain legal matters with respect to the common stock offered by
this prospectus will be passed upon for the underwriters by Elias, Matz, Tiernan
& Herrick L.L.P., Washington, D.C.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the
Securities Act for the common stock sold in this offering. This prospectus,
which is part of the registration statement, does not contain all of the
information set forth in the registration statement and accompanying exhibits.
This prospectus contains descriptions of the contents of certain agreements or
documents that are exhibits to the registration statement. The statements as to
the contents of such exhibits, however, are brief descriptions and are not
necessarily complete, and each statement is qualified in all respects by
reference to such agreement or document. In addition, we file annual, quarterly
and other reports, proxy statements and other information with the SEC. Our
current SEC filings and the registration statement and accompanying exhibits may
be inspected without charge at the public reference facilities of the SEC
located at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain copies
of this information at prescribed rates. The SEC also maintains a website that
contains reports, proxy statements, registration statements and other
information. The SEC website address is www.sec.gov. You may call the SEC at 1-
800-SEC-0330 to obtain further information on the operations of the public
reference room.

INDEX TO FINANCIAL STATEMENTS

PAGE
----

The Banc Corporation and subsidiaries
Report of Independent Auditors............................ F-2
Consolidated Statements of Financial Condition for the
years ended December 31, 2001 and 2000................. F-3
Consolidated Statements of Income for the years ended
December 31, 2001, 2000 and 1999....................... F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 2001, 2000 and 1999....................... F-5
Consolidated Statements of Changes in Stockholders'
Equity................................................. F-6
Notes to Consolidated Financial Statements................ F-7
CF Bancshares, Inc. and subsidiaries
Independent Auditors' Report.............................. F-32
Consolidated Balance Sheets for the years ended December
31, 2000 and 1999...................................... F-33
Consolidated Statements of Earnings for the years ended
December 31, 2000, 1999 and 1998....................... F-34
Consolidated Statements of Stockholder's Equity for the
years ended December 31, 2000, 1999 and 1998........... F-35
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998....................... F-36
Notes to Consolidated Financial Statements for the years
ended December 31, 2000, 1999 and 1998................. F-37
Condensed Consolidated Balance Sheets (unaudited) for the
nine months ended September 30, 2001................... F-50
Condensed Consolidated Statements of Earnings (unaudited)
for the nine months ended September 30, 2001 and
2000................................................... F-51
Condensed Consolidated Statements of Stockholders' Equity
(unaudited) for the nine months ended September 30,
2001................................................... F-52
Condensed Consolidated Statement of Cash Flows (unaudited)
for the nine months ended September 30, 2001 and
2000................................................... F-53

F-1

REPORT OF INDEPENDENT AUDITORS

Board of Directors
The Banc Corporation

We have audited the accompanying consolidated statements of financial
condition of The Banc Corporation and Subsidiaries (the "Corporation") as of
December 31, 2001 and 2000, and the related consolidated statements of income,
changes in stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 2001. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The Banc
Corporation and Subsidiaries at December 31, 2001 and 2000, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States.

/s/ Ernst & Young LLP

Birmingham, Alabama

January 31, 2002,

except for the second paragraph of Note 22, as to which the date is February 8,
2002

F-2

THE BANC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

DECEMBER 31,
-----------------------
2001 2000
---------- ----------
(AMOUNTS IN THOUSANDS)

ASSETS
Cash and due from banks..................................... $ 31,682 $ 36,691
Interest bearing deposits in other banks.................... 495 2,427
Federal funds sold.......................................... 20,000 3,120
Securities available for sale............................... 68,847 91,316
Securities held to maturity (fair value of $4,317,000 in
2000)..................................................... -- 4,389
Mortgage loans held for sale................................ 1,131 4,324
Loans....................................................... 1,000,062 808,965
Unearned income............................................. (906) (820)
---------- ----------
Loans, net of unearned income............................... 999,156 808,145
Allowance for loan losses................................... (12,546) (8,959)
---------- ----------
Net loans................................................. 986,610 799,186
Premises and equipment, net................................. 47,829 43,957
Accrued interest receivable................................. 7,562 8,615
Stock in FHLB and Federal Reserve Bank...................... 8,505 6,922
Other assets................................................ 33,744 28,268
---------- ----------
$1,206,405 $1,029,215
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest bearing demand................................ $ 94,655 $ 88,910
Interest bearing demand................................... 250,947 178,221
Savings................................................... 28,517 33,886
Time deposits $100,000 and over........................... 259,143 236,647
Other time................................................ 318,973 289,640
---------- ----------
Total deposits............................................ 952,235 827,304
Advances from FHLB.......................................... 135,900 104,300
Other borrowed funds........................................ 813 534
Accrued expenses and other liabilities...................... 9,604 7,202
---------- ----------
Total liabilities........................................... 1,098,552 939,340
Guaranteed preferred beneficial interests in the
Corporation's subordinated debentures..................... 31,000 15,000
Stockholders' equity:
Preferred stock, par value $.001 per share; shares
authorized 5,000,000; shares issued -0-................. -- --
Common stock, par value $.001 per share; shares authorized
25,000,000; shares issued 14,385,021; outstanding
14,217,371 in 2001 and 14,345,021 in 2000............... 14 14
Surplus................................................... 47,756 47,756
Retained earnings......................................... 30,329 27,640
Accumulated other comprehensive loss...................... (322) (325)
Treasury stock, at cost -- 167,650 and 40,000 shares,
respectively............................................ (924) (210)
---------- ----------
Total stockholders' equity.................................. 76,853 74,875
---------- ----------
$1,206,405 $1,029,215
========== ==========

See notes to consolidated financial statements.
F-3

THE BANC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

YEAR ENDED DECEMBER 31,
---------------------------
2001 2000 1999
------- ------- -------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA)

Interest income:
Interest and fees on loans................................ $83,207 $68,467 $49,244
Interest on taxable securities............................ 4,736 4,314 4,141
Interest on tax exempt securities......................... 476 737 924
Interest on federal funds sold............................ 1,310 930 763
Interest and dividends on other investments............... 622 587 485
------- ------- -------
Total interest income..................................... 90,351 75,035 55,557
Interest expense:
Interest on deposits...................................... 40,525 34,967 24,101
Interest expense on advances from FHLB and other borrowed
funds.................................................. 7,834 4,954 2,648
------- ------- -------
Total interest expense...................................... 48,359 39,921 26,749
------- ------- -------
Net interest income......................................... 41,992 35,114 28,808
Provision for loan losses................................... 7,454 4,961 2,850
------- ------- -------
Net interest income after provision for loan losses......... 34,538 30,153 25,958
Noninterest income:
Service charges and fees.................................. 4,102 3,986 3,350
Mortgage banking income................................... 1,692 1,654 1,409
Securities gains.......................................... 1,383 131 83
Other..................................................... 2,596 2,051 1,322
------- ------- -------
Total noninterest income.................................. 9,773 7,822 6,164
Noninterest expense:
Salaries and employee benefits............................ 19,451 16,101 13,421
Occupancy and equipment................................... 6,864 5,893 5,242
Merger related costs...................................... -- -- 744
Other..................................................... 12,182 10,124 9,275
------- ------- -------
Total noninterest expenses................................ 38,497 32,118 28,682
------- ------- -------
Distributions on guaranteed preferred beneficial interest in
our subordinated debentures............................... 2,159 504 --
------- ------- -------
Income before income taxes.................................. 3,655 5,353 3,440
Income tax expense.......................................... 966 996 520
------- ------- -------
Net income.................................................. $ 2,689 $ 4,357 $ 2,920
======= ======= =======
Average common shares outstanding........................... 14,272 14,384 14,335
Average common shares outstanding, assuming dilution........ 14,302 14,387 14,362
Basic net income per common share........................... $ .19 $ .30 $ .20
Diluted net income per common share......................... .19 .30 .20

See notes to consolidated financial statements.
F-4

THE BANC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31,
---------------------------------
2001 2000 1999
--------- --------- ---------
(AMOUNTS IN THOUSANDS)

OPERATING ACTIVITIES
Net income.................................................. $ 2,689 $ 4,357 $ 2,920
Adjustments to reconcile net income to net cash provided by
operations:
Depreciation.............................................. 3,017 2,598 2,194
Net discount accretion on securities...................... (31) (371) (69)
Gain on sale of securities available for sale............. (1,383) (131) (83)
Provision for loan losses................................. 7,454 4,961 2,850
Decrease (increase) in accrued interest receivable........ 1,053 (2,329) (1,055)
Deferred income tax (benefit) expense..................... (1,800) (1,286) 46
Other operating activities, net........................... 1,566 2,429 (826)
Decrease (increase) in mortgage loans held for sale....... 3,194 (2,197) 2,772
--------- --------- ---------
Net cash provided by operating activities................... 15,759 8,031 8,749
INVESTING ACTIVITIES
Decrease (increase) in interest bearing deposits in other
banks..................................................... 1,932 (565) (814)
(Increase) decrease in federal funds sold................... (16,880) 2,723 22,422
Decrease (increase) in short-term commercial paper.......... -- 14,719 (14,151)
Proceeds from sale of subsidiary's net assets............... -- -- 3,392
Proceeds from sales of securities available for sale........ 68,786 4,578 18,283
Proceeds from maturities of securities available for sale... 96,406 13,244 19,426
Proceeds from maturities of securities held to maturity..... -- 1,076 1,231
Purchase of securities available for sale................... (136,916) (40,385) (12,499)
Net increase in loans....................................... (199,143) (179,647) (178,349)
Net cash received in business combinations.................. -- -- 11,893
Purchase of premises and equipment.......................... (7,617) (9,605) (8,312)
Other investing activities, net............................. 568 (3,461) (9,804)
--------- --------- ---------
Net cash used in investing activities....................... (192,864) (197,323) (147,282)
FINANCING ACTIVITIES
Net increase in demand and savings deposits................. 73,102 23,242 6,450
Net increase in time deposits............................... 51,829 121,545 87,392
Increase in FHLB advances................................... 31,600 41,800 39,340
Net (decrease) increase in note payable..................... -- (7,104) 7,104
Net increase (decrease) in other borrowed funds............. 279 (115) (3,405)
Proceeds from guaranteed preferred beneficial interests in
the Corporation's subordinated debentures................. 16,000 15,000 --
Proceeds from issuance and reissuance of common stock....... 66 -- 2,170
Purchase of treasury stock.................................. (780) (210) --
--------- --------- ---------
Net cash provided by financing activities................... 172,096 194,158 139,051
--------- --------- ---------
(Decrease) increase in cash and due from banks.............. (5,009) 4,866 518
Cash and due from banks at beginning of year................ 36,691 31,825 31,307
--------- --------- ---------
Cash and due from banks at end of year...................... $ 31,682 $ 36,691 $ 31,825
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest.................................................. $ 48,339 $ 38,132 $ 25,888
Income taxes.............................................. 2,794 1,523 1,168
Sale of subsidiary's net assets financed by the
Corporation............................................... -- -- 2,202
Assets acquired in business combinations.................... -- -- 60,097
Liabilities assumed in business combinations................ -- -- 58,353
Minority interest in subsidiary acquired by issuing common
stock..................................................... -- -- 95
Transfer of held-to-maturity securities to available for
sale...................................................... 4,389 -- --

See notes to consolidated financial statements.
F-5

THE BANC CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

ACCUMULATED
OTHER
COMPREHENSIVE TOTAL
COMMON RETAINED INCOME TREASURY STOCKHOLDERS'
STOCK SURPLUS EARNINGS (LOSS) STOCK EQUITY
------ ------- -------- ------------- -------- -------------
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)

Balance at January 1, 1999.......... $14 $45,492 $20,363 $ 98 $ -- $65,967
Comprehensive income:
Net income........................ -- -- 2,920 -- -- 2,920
Other comprehensive loss net of
tax benefit of $1,459;
unrealized losses on securities
available for sale, arising
during the period, net of
reclassification adjustment..... -- -- -- (2,303) -- (2,303)
-------
Comprehensive income................ 617
Issuance of 174,500 shares of common
stock, net of direct costs........ -- 1,628 -- -- -- 1,628
Stock options exercised............. -- 636 -- -- -- 636
--- ------- ------- ------- ----- -------
Balance at December 31, 1999........ 14 47,756 23,283 (2,205) -- 68,848
Comprehensive income:
Net income........................ -- -- 4,357 -- -- 4,357
Other comprehensive loss net of
tax benefit of $1,155;
unrealized gains on securities
available for sale, arising
during the period, net of
reclassification adjustment..... -- -- -- 1,880 -- 1,880
-------
Comprehensive income................ 6,237
Purchase of 40,000 shares of
treasury stock.................... -- -- -- -- (210) (210)
--- ------- ------- ------- ----- -------
Balance at December 31, 2000........ 14 47,756 27,640 (325) (210) 74,875
Comprehensive income:
Net income........................ -- -- 2,689 -- -- 2,689
Other comprehensive income net of
tax of $2; unrealized gain on
securities available for sale,
arising during the period, net
of reclassification
adjustment...................... -- -- 3 -- 3
-------
Comprehensive income................ 2,692
Purchase of 137,650 shares of
treasury stock.................... -- -- -- -- (780) (780)
Sale of 10,000 shares of treasury
stock............................. -- -- -- -- 66 66
--- ------- ------- ------- ----- -------
Balance at December 31, 2001........ $14 $47,756 $30,329 $ (322) $(924) $76,853
=== ======= ======= ======= ===== =======

See notes to consolidated financial statements.
F-6

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

BASIS OF PRESENTATION

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

On July 13, 1999, the Corporation acquired BankersTrust of Alabama, Inc.
("BankersTrust") in a business combination accounted for as a purchase. As such,
the Corporation's consolidated financial statements include the results of
operations of BankersTrust only from its date of acquisition. See Note 14 for
more disclosure regarding the Corporation's business combinations.

In June, 2000, the Corporation combined its three banking subsidiaries to
form a single bank. This merger did not have any effect on the current or prior
year consolidated financial statements.

PRINCIPLES OF CONSOLIDATION

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

USE OF ESTIMATES

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

CASH AND CASH EQUIVALENTS

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

The Corporation's banking subsidiary is required to maintain minimum
average reserve balances by the Federal Reserve Bank which is based on a
percentage of deposits. The amount of the reserves at December 31, 2001 was
approximately $1,523,000.

INVESTMENT SECURITIES

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

F-7

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

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

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

LOANS AND ALLOWANCE FOR LOAN LOSSES

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

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

Under the provisions of Statement of Financial Accounting Standards No.
114, "Accounting for Creditors for Impairment of a Loan," impaired loans are
specifically reviewed loans for which it is probable that the Corporation will
be unable to collect all amounts due according to the terms of the loan
agreement. Impairment is measured by comparing the recorded investment in the
loan with the present value of expected future cash flows discounted at the
loan's effective interest rate, at the loans observable market price, or the
fair value of the collateral if the loan is collateral dependent. A valuation
allowance is provided to the extent that the measure of the impaired loans is
less than the recorded investment. A loan is not considered impaired during a
period of delay in payment if the ultimate collectibility of all amounts due is
expected. Larger groups of homogenous loans such as consumer installment and
residential real estate mortgage loans are collectively evaluated for
impairment. Payments received on impaired loans for which the ultimate
collectibility of principal is uncertain are generally applied first as
principal reductions.

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

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

F-8

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

To evaluate the overall adequacy of the allowance to absorb losses inherent
in the Corporation's loan portfolio, the Corporation considers general economic
conditions, geographic concentrations, and changes in the nature and volume of
the loan portfolio.

MORTGAGE LOANS HELD FOR SALE

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

PREMISES AND EQUIPMENT

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

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

INTANGIBLE ASSETS

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

The Corporation reviews on a quarterly basis the carrying value of goodwill
to determine if any impairment has occurred or if the period of recoverability
has changed based on undiscounted cash flow analysis. If this review indicates
that goodwill will not be recoverable, the carrying value of the goodwill will
be written off in the current period. At December 31, 2001 and 2000 goodwill,
net of accumulated amortization totaled $6,086,000 and $6,648,000, respectively.

OTHER REAL ESTATE

Other real estate, acquired through partial or total satisfaction of loans,
is carried at the lower of cost or fair value, less estimated selling expenses,
in other assets. At the date of acquisition, losses are charged to the allowance
for loan losses. Subsequent gains or losses on the sale or losses from the
valuation of other real estate are included in other expense. Other real estate
totaled $3,608,000 and $2,706,000 at December 31, 2001 and 2000, respectively.

INCOME TAXES

The consolidated financial statements are prepared on the accrual basis.
The Corporation accounts for income taxes using the liability method pursuant to
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes. Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are

F-9

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

measured using the enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to reverse.

OFF BALANCE SHEET FINANCIAL INSTRUMENTS

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

PER SHARE AMOUNTS

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

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

STOCK-BASED COMPENSATION

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

Statement 123 requires the disclosure of pro forma net income and earnings
per share determined as if the Corporation had accounted for its employee stock
options under the fair value method of that statement. The fair value for these
options was estimated at the date of grant using a Black-Scholes option pricing
model. Option valuation models require the input of subjective assumptions.
Because these assumptions are subjective, the effects of applying Statement 123
for pro forma disclosures are not likely to be representative of the effects on
reported net income for future years (see Note 9).

RECENT ACCOUNTING PRONOUNCEMENTS

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

The Corporation adopted the provisions of this statement, as amended, on
January 1, 2001, the statement's effective date. During the third quarter of
2001, the Corporation entered into and settled an interest rate swap that was
not designated as a hedging instrument. A gain of approximately $610,000 was
realized and recognized currently in earnings as investment securities gains.
The Corporation did not enter
F-10

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

into any other derivative transactions during the year. Therefore, the adoption
of this statement did not have a material impact on the financial statements.

In September 2000, Statement of Financial Accounting Standards No. 140,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" (Statement 140), was issued by the FASB. Statement 140 replaces
Statement 125, issued in June 1996. Statement 140 revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures. Statement 140 is effective for
transfers occurring after March 31, 2001. However, the expanded disclosures
about securitizations and collateral are effective for fiscal years ending after
December 15, 2000. The adoption of Statement 140 did not have a material impact
on the Corporation's financial condition or results of operations.

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 will require 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 will
also require 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 is required to adopt the provisions of Statement 141
immediately and Statement 142 effective January 1, 2002. Furthermore, 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, but 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 prior to the adoption of Statement 142.

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 December 31, 2001, the Corporation had unamortized goodwill in the
amount of $6,086,000, which will be subject to the transition provisions of
Statements 141 and 142. The adoption of Statement 142 is expected to result in
an increase in income before taxes of $562,000 and an increase in net income of
approximately $393,000 or approximately $.03 per share in 2002. During the first
quarter of 2002, the Corporation will perform the first of the required
impairment tests of goodwill and intangible assets with indefinite lives. The
Corporation does not anticipate that this statement will have a material impact
on its financial condition or results of operations.

On October 3, 2001, the FASB issued Statement of Financial Accounting
Statement 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
(Statement 144). Statement 144

F-11

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

2. INVESTMENT SECURITIES

The amounts at which investment securities are carried and their
approximate fair values at December 31, 2001 are as follows:

GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(IN THOUSANDS)

Investment securities available for sale:
U.S. agency securities.................... $18,807 $ 65 $ -- $18,872
State, county and municipal securities.... 8,749 117 193 8,673
Mortgage-backed securities................ 39,313 204 739 38,778
Corporate debt............................ 399 14 -- 413
Other securities.......................... 2,113 -- 2 2,111
------- ---- ---- -------
Total............................. $69,381 $400 $934 $68,847
======= ==== ==== =======

The amounts at which investment securities are carried and their
approximate fair values at December 31, 2000 are as follows:

GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(IN THOUSANDS)

Investment securities available for sale:
U.S. Treasury and agency securities....... $39,407 $ 33 $196 $39,244
State, county and municipal securities.... 12,844 69 91 12,822
Mortgage-backed securities................ 38,091 109 462 37,738
Corporate debt............................ 401 3 -- 404
Other securities.......................... 1,115 -- 7 1,108
------- ---- ---- -------
Total............................. $91,858 $214 $756 $91,316
======= ==== ==== =======
Investment securities held to maturity:
State, county and municipal securities.... $ 2,867 $ 38 $ -- $ 2,905
Mortgage-backed securities................ 1,522 5 115 1,412
------- ---- ---- -------
Total............................. $ 4,389 $ 43 $115 $ 4,317
======= ==== ==== =======

Securities with an amortized cost of $62,744,000 and $77,427,000 at
December 31, 2001 and 2000, respectively, were pledged to secure United States
government deposits and other public funds and for other purposes as required or
permitted by law.

F-12

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The transition provisions of FAS No. 133 provide that at the date of
initial application (January 1, 2001), debt securities categorized as
held-to-maturity may be transferred into the available-for-sale category without
calling into question the Corporation's intent to hold other debt securities
until maturity. As such, on January 1, 2001, the Corporation transferred debt
securities with a carrying value of $4,389,000 and a market value of $4,317,000
to the available-for-sale category and the $72,000 unrealized loss on the
transfer was recorded in other comprehensive income.

The amortized cost and estimated fair values of investment securities at
December 31, 2001, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.

SECURITIES AVAILABLE
FOR SALE
----------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
(IN THOUSANDS)

Due in one year or less..................................... $13,266 $13,280
Due after one year through five years....................... 8,072 8,207
Due after five years through ten years...................... 1,076 1,093
Due after ten years......................................... 7,654 7,490
Mortgage-backed securities.................................. 39,313 38,777
------- -------
$69,381 $68,847
======= =======

Gross realized gains on sales of investment securities available for sale
in 2001, 2000 and 1999 were $1,461,000, $169,000 and $170,000, respectively, and
gross realized losses for the same periods were $78,000, $38,000 and $87,000,
respectively.

The components of other comprehensive income (loss) for the years ended
December 31, 2001 and 2000 are as follows:

INCOME TAX
PRE-TAX EXPENSE NET OF INCOME
AMOUNT (BENEFIT) TAX
------- ---------------- -----------------
(IN THOUSANDS)

2001
Unrealized gain on available for sale
securities................................ $ 1,388 $ 527 $ 861
Less: reclassification adjustment for gains
realized in net income.................... 1,383 525 858
------- ------- -------
Net unrealized gain............... $ 5 $ 2 $ 3
======= ======= =======
2000
Unrealized gain on available for sale
securities................................ $ 3,166 $ 1,205 $ 1,961
Less: reclassification adjustment for gains
realized in net income.................... 131 50 81
------- ------- -------
Net unrealized gain............... $ 3,035 $ 1,155 $ 1,880
======= ======= =======
1999
Unrealized loss on available for sale
securities................................ $(3,679) $(1,427) $(2,252)
Less: reclassification adjustment for gains
realized in net income.................... 83 32 51
------- ------- -------
Net unrealized loss............... $(3,762) $(1,459) $(2,303)
======= ======= =======

F-13

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. LOANS

At December 31, 2001 and 2000 the composition of the loan portfolio was as
follows:

2001 2000
---------- --------
(IN THOUSANDS)

Commercial and industrial................................... $ 261,196 $245,154
Real estate -- construction and land development............ 200,250 100,448
Real estate -- mortgage
Single-family............................................. 224,736 183,747
Commercial................................................ 194,535 172,319
Other..................................................... 24,140 17,443
Consumer.................................................... 91,421 84,129
All other loans............................................. 3,784 5,725
---------- --------
Total loans................................................. $1,000,062 $808,965
========== ========

At December 31, 2001 and 2000 the Corporation's recorded investment in
loans considered to be impaired under SFAS No. 114 was $10,100,000 and
$18,000,000, respectively. At December 31, 2001 and 2000, there was
approximately $3,100,000 and $3,000,000, respectively in the allowance for loan
losses specifically allocated to impaired loans. The average recorded investment
in impaired loans during 2001, 2000 and 1999 was approximately $12,500,000,
$15,100,000 and $6,484,000, respectively. Interest income recognized on loans
considered impaired totaled approximately $385,000, $857,000 and $431,000 for
the years ended December 31, 2001, 2000 and 1999, respectively.

The Corporation has no commitments to loan additional funds to the
borrowers whose loans are on nonaccrual.

4. ALLOWANCE FOR LOAN LOSSES

A summary of the allowance for loan losses for the years ended December 31,
2001, 2000 and 1999 follows:

2001 2000 1999
------- ------- -------
(IN THOUSANDS)

Balance at beginning of year............................ $ 8,959 $ 8,065 $ 6,466
Allowance of acquired bank.............................. -- -- 3,591
Provision for loan losses............................... 7,454 4,961 2,850
Loan charge-offs........................................ (4,314) (4,615) (5,792)
Recoveries.............................................. 447 548 950
------- ------- -------
Balance at end of year.................................. $12,546 $ 8,959 $ 8,065
======= ======= =======

F-14

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. PREMISES AND EQUIPMENT

Components of premises and equipment at December 31, 2001 and 2000 are as
follows:

2001 2000
------- --------
(IN THOUSANDS)

Land........................................................ $ 5,244 $ 5,371
Premises.................................................... 38,819 34,154
Furniture and equipment..................................... 12,570 13,607
------- --------
56,633 53,132
Less accumulated depreciation and amortization.............. (9,947) (10,470)
------- --------
Net book value of premises and equipment in service......... 46,686 42,662
Real estate under renovation or held for sale............... 1,143 1,295
------- --------
Total....................................................... $47,829 $ 43,957
======= ========

Depreciation expense for the years ended December 31, 2001, 2000 and 1999
was $3,017,000, $2,598,000 and $2,194,000, respectively.

During 2001, the Corporation disposed of various furniture and equipment
that had become obsolete either through age, data process conversion or the
closing of a branch facility. The obsolete assets had an original cost of
$3,886,000 and accumulated depreciation of $3,412,000, which resulted in a loss,
included as a part of other operating expense, totaling $474,000. Of this
$474,000 loss, $181,000 was recognized in the Alabama segment and $293,000 was
recognized in the Florida segment.

The Corporation leases certain Florida branch buildings under operating
leases expiring through 2003. The leases require payment of taxes, insurance and
maintenance costs in addition to rental payments. In addition, three of the four
building leases have two five-year renewal options. The Corporation has other
operating leases for property and equipment in various locations with remaining
terms between two and nineteen years.

Future minimum lease payments under the operating leases are summarized as
follows:

YEAR ENDING DECEMBER 31, PROPERTY EQUIPMENT TOTAL
------------------------ -------- --------- ------

2002................................................... $ 582 $126 $ 708
2003................................................... 380 78 458
2004................................................... 174 -- 174
2005................................................... 153 -- 153
2006................................................... 125 -- 125
2007 and thereafter.................................... 768 -- 768
------ ---- ------
Total minimum lease payments................... $2,182 $204 $2,386
====== ==== ======

Rental expense relating to operating leases amounted to approximately
$918,000, $757,003 and $734,000 for the years ended December 31, 2001, 2000 and
1999, respectively.

F-15

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. DEPOSITS

The following schedule details interest expense on deposits:

YEAR ENDED DECEMBER 31,
---------------------------
2001 2000 1999
------- ------- -------
(IN THOUSANDS)

Interest-bearing demand................................. $ 7,523 $ 6,541 $ 5,129
Savings................................................. 575 1,052 938
Time deposits $100,000 and over......................... 9,955 8,257 7,275
Other time.............................................. 22,472 19,117 10,759
------- ------- -------
Total................................................... $40,525 $34,967 $24,101
======= ======= =======

At December 31, 2001, the scheduled maturities of time deposits are as
follows (in thousands):

2002........................................................ $466,559
2003........................................................ 67,769
2004........................................................ 15,081
2005........................................................ 17,220
2006 and thereafter......................................... 11,487
--------
$578,116
========

7. BORROWED FUNDS

The following is a summary, by year of maturity, of advances from the
Federal Home Loan Bank ("FHLB") as of December 31, 2001 and 2000 (in thousands):

2001 2000
----------------------- -----------------------
WEIGHTED WEIGHTED
YEAR AVERAGE RATE BALANCE AVERAGE RATE BALANCE
---- ------------ -------- ------------ --------

The above schedule is by contractual maturity. Call dates for the above are
as follows: 2002, $114,340,000; 2003, $2,500,000; and 2004 $2,000,000.

The advances are secured by FHLB stock, agency securities and a blanket
lien on certain residential real estate loans all with a carrying value of
approximately $230,696,000 at December 31, 2001.

As of December 31, 2001 the Corporation had available a $15,000,000 line of
credit with a regional bank. Interest is one and three-quarters (1.75%)
percentage points in excess of the applicable LIBOR Index Rate and the line
matures May 1, 2002. The loan agreement contains various covenants pertaining to
the maintenance of regulatory capital, specified levels of classified assets and
the amount of

F-16

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

stockholders' equity. As of December 31, 2001 and 2000 there were no outstanding
balances under this line.

8. GUARANTEED PREFERRED BENEFICIAL INTEREST IN THE CORPORATION'S SUBORDINATED
DEBENTURES

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 12.5% per annum ceiling for the
first ten years. As of the date of issuance and as of December 31, 2001, the
interest rate on the securities was 7.57%.

The Corporation has fully and unconditionally guaranteed all obligations of
TBC Capital II and III on a subordinated basis with respect to the preferred
securities. The Corporation accounts for TBC Capital II and III as minority
interests. 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 the Corporation's
subordinated debentures." The sole assets of TBC Capital II and III are the
subordinated debentures issued by the Corporation. Both the preferred securities
of TBC Capital II and III and the subordinated debentures of the Corporation
each have 30-year lives. However, both the Corporation and TBC Capital II and
III have call options, with a premium after five years through ten years and
call options at par after ten years, subject to regulatory approval, or earlier
depending upon certain changes in tax or investment company laws, or regulatory
capital requirements.

A portion of the proceeds from the offering were used to repay borrowings
under the Corporation's line of credit with the balance to be used for general
corporate purposes including additional capital investment in the Corporation's
bank subsidiary.

9. CASH AND STOCK INCENTIVE PLANS

The Corporation has established a stock incentive plan for directors and
certain key employees that provide for the granting of restricted stock and
incentive and nonqualified options to purchase up to 1,500,000 shares of the
Corporation's common stock. The compensation committee of the Board of Directors
determines the term of the restricted stock and options granted.

All options granted have a maximum term of ten years from the grant date,
and the option price per share of options granted cannot be less than the fair
market value of the Corporation's common stock on

F-17

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the grant date. All options granted under this plan vest 20% on the grant date
and an additional 20% annually on the anniversary of the grant date.

DECEMBER 31,
----------------------------------------------------------------------
2001 2000 1999
---------------------- --------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
NUMBER PRICE NUMBER PRICE NUMBER PRICE
---------- --------- --------- --------- --------- ---------

Under option,
beginning of
year............... 981,509 $8.99 715,669 $10.68 620,806 $ 9.52
Granted............ 735,000 6.58 376,000 6.13 239,000 10.64
Exercised.......... -- -- -- -- (134,137) 4.74
Cancelled.......... (566,000) 10.87 -- -- -- --
Forfeited.......... (118,500) 7.25 (110,160) 10.19 (10,000) 11.00
---------- --------- ---------
Under option, end of
year............... 1,032,009 6.44 981,509 8.99 715,669 10.68
========== ========= =========
Exercisable at end of
year............... 283,209 425,809 256,569
========== ========= =========
Weighted-average fair
value per option of
options granted
during the year.... $ 2.71 $ 2.69 $ 5.40
========== ========= =========

On December 31, 2001, the Corporation cancelled previously issued stock
options totaling 566,000. The most recent option grant date prior to the
cancellation was June 19, 2001, the Corporation's normal timing for grants.

A further summary about options outstanding at December 31, 2001 is as
follows:

OPTIONS OUTSTANDING
---------------------------------------------------------------------------------------------
WEIGHTED-
AVERAGE
NUMBER CONTRACTUAL NUMBER
EXERCISE PRICE OUTSTANDING LIFE IN YEARS EXERCISABLE
-------------- ----------- ------------- -----------

$5.68............................................. 50,000 9.00 10,000
5.94............................................. 2,500 9.25 500
6.00............................................. 210,000 8.55 84,000
6.24............................................. 29,009 4.50 29,009
6.31............................................. 50,000 8.46 20,000
6.65............................................. 682,500 9.55 136,500
7.00............................................. 8,000 8.80 3,200
--------- -------
1,032,009 283,209
========= =======

As of December 31, 2001 the Corporation had available 307,991 shares of the
Corporation's common stock available for future grants which excludes 160,000
shares of restricted stock approved by the compensation committee on December
19, 2001 to be granted to directors and certain key employees during the first
quarter of 2002. The restricted stock has a five-year vesting period with
one-third vesting in the third, fourth and fifth years.

F-18

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Corporation has an Executive Incentive Compensation Plan for certain
key executives. Under the plan, a one-time cash bonus in the aggregate amount
equal to three percent of the amount that the total market capitalization, as
defined by the plan, on January 5, 2003 (or the date which our common stock
ceases to be publicly traded) exceeds the total market capitalization on January
5, 2000.

The Corporation recognizes compensation cost for stock-based employee
compensation awards in accordance with APB Opinion No. 25, Accounting for Stock
Issued to Employees. The Corporation recognized no compensation cost for
stock-based employee compensation awards for the years ended December 31, 2001,
2000 and 1999. If the Corporation had recognized compensation cost in accordance
with SFAS No. 123, net income and earnings per share would have been reduced as
follows (amounts in thousands, except per share data):

DECEMBER 31,
------------------------------
2001 2000 1999
------ ------------ ------

Net income (loss):
As reported.......................................... $2,689 $4,357 $2,920
Pro forma............................................ 2,254 3,344 2,379
Basic net income (loss) per share:
As reported.......................................... $ .19 $ .30 $ .20
Pro forma............................................ .16 .23 .17
Diluted net income (loss) per share:
As reported.......................................... .19 .30 .20
Pro forma............................................ .16 .23 .17

The fair value of the options granted was based upon the Black-Scholes
pricing model. The Corporation used the following weighted-average assumptions
for:

2001 2000 1999
---- ---- ----

Risk free interest rate..................................... 4.60% 5.34% 6.12%
Volatility factory.......................................... .29% .30% .39%
Weighted average life of options (in years)................. 6.00 6.00 6.50
Dividend yield.............................................. 0.00% 0.00% 0.00%

10. RETIREMENT PLANS

The Corporation sponsors a profit-sharing plan that permits participants to
make contributions by salary reduction pursuant to Section 401(k) of the
Internal Revenue Code. This plan covers substantially all employees who meet
certain age and length of service requirements. The Corporation matches
contributions at its discretion. The Corporation's contributions to the plan
were $243,000, $108,000 and $108,000 in 2001, 2000 and 1999, respectively.

The Corporation has nonqualified benefit plans that are designed to provide
retirement and death benefits to certain executive officers and directors. The
benefit amounts are based on the excess amount earned on single premium life
insurance policies owned by the Corporation. Under the plan, the Corporation
recovers both its investment and opportunity costs before allocating any
benefits to the participants. Benefit payments to participants are not
guaranteed since they are dependent on the excess earnings generated by the life
insurance policies. Payments under these plans are scheduled to begin in 2003
for some participants who will reach retirement age. In connection with the
plans, the Corporation has purchased single premium life insurance policies with
cash surrender values of approximately

F-19

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$13,704,000 and $12,200,000 at December 31, 2001 and 2000, respectively.
Compensation expense related to these plans totaled $378,000, $401,000 and
$140,000 for 2001, 2000 and 1999, respectively.

11. INCOME TAXES

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

2001 2000 1999
------ ------ ----

Current:
Federal................................................... $2,335 $1,768 $320
State..................................................... 431 514 154
------ ------ ----
Total current expense....................................... 2,766 2,282 474
Deferred tax (benefit) expense.............................. (1,800) (1,286) 46
------ ------ ----
Total income tax expense.................................... $ 966 $ 996 $520
====== ====== ====

Significant components of the Corporation's deferred tax assets and
liabilities as of December 31, 2001 and 2000 are as follows (in thousands):

2001 2000
------ ------

Deferred tax assets:
Rehabilitation tax credit................................. $1,986 $2,823
Provision for loan losses................................. 4,321 2,633
Alternative minimum tax credit carryover.................. 228 143
Unrealized loss on securities............................. 215 217
Other..................................................... 1,480 464
------ ------
Total deferred tax assets................................... 8,230 6,280
Deferred tax liabilities:
Difference in book and tax basis of premises and
equipment.............................................. 2,604 2,186
Depreciation.............................................. 434 586
Other..................................................... 68 182
------ ------
Total deferred tax liabilities.............................. 3,106 2,954
------ ------
Net deferred tax asset...................................... $5,124 $3,326
====== ======

F-20

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

2001 2000 1999
------ ------ ------

Expected tax expense at 34% of income before taxes......... $1,243 $1,820 $1,170
Add (deduct):
Rehabilitation tax credit................................ (522) (1,259) (731)
State income taxes, net of federal tax benefit........... 106 351 102
Effect of interest income exempt from Federal income
taxes................................................. (214) (267) (346)
Nondeductible merger costs............................... -- -- 253
Basis reduction.......................................... 178 428 251
Increase in cash surrender value of life insurance....... (202) (190) (117)
Valuation allowance...................................... -- -- (200)
Other items -- net....................................... 377 113 138
------ ------ ------
Income tax expense......................................... $ 966 $ 996 $ 520
====== ====== ======

The Corporation has available at December 31, 2001 unused rehabilitation
tax credits that can be carried forward and utilized against future taxable
income. Unused credits and expiration dates are as follows:

YEAR OF EXPIRATION AMOUNT
------------------ ------

2020........................................................ $ 209
2021........................................................ 1,255
2022........................................................ 522
------
$1,986
======

This credit was established as a result of the restoration and enhancement
of the John A. Hand building, which is designated as an historical structure and
serves as the corporate headquarters for the Corporation. This credit is equal
to 20% of certain qualified expenditures incurred by the Corporation prior to
December 31, 2001. The Corporation is required to reduce its tax basis in the
John A. Hand building by the amount of the credit.

Applicable income tax expense of $525,000, $50,000 and $32,000 on
securities gains for the years ended December 31, 2001, 2000 and 1999,
respectively, is included in income taxes.

12. RELATED PARTY TRANSACTIONS

The Corporation has entered into transactions with its directors, executive
officers, significant stockholders and their affiliates (related parties). Such
transactions were made in the ordinary course of business on substantially the
same terms and conditions, including interest rates and collateral, as those
prevailing at the same time for comparable transactions with other customers,
and did not, in the opinion of management, involve more than normal credit risk
or present other unfavorable features. The aggregate amount of loans to such
related parties at December 31, 2001 and 2000 were $14,888,000 and $19,900,000,
respectively. Activity during the year ended December 31, 2001 is summarized as
follows (in thousands):

BALANCE OTHER BALANCE
DECEMBER 31, 2000 ADVANCES REPAYMENTS CHANGES DECEMBER 31, 2001
----------------- -------- ---------- ------- -----------------

19,90$0...... $2,765 $(8,501) $724 $14,888
------------- ------- ---------- ------- -------------
------------- ------- ---------- ------- -------------

F-21

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, 2001, the deposits of such related parties in the
subsidiary banks amounted to approximately $12,515,000.

In July 1998, Emerald sold the land and building of its main office
building and two branch offices to an entity under the control of certain
members of Emerald's Board of Directors for their fair value of approximately
$3,794,700. The sales were accounted for under a sale-leaseback arrangement. The
deferred gain on the sales amounted to $87,000 and is being amortized into
income over the lease terms. At December 31, 2001, the deferred gain amounted to
approximately $27,000. Terms of the leases are described in Note 5. Rental
expense under these operating leases amounted to approximately $473,000 in 2001
and 2000, respectively.

The Corporation sold commercial real estate to certain directors realizing
gains of $305,000, $161,000, and $340,000 in 2001, 2000 and 1999, respectively.
The Corporation received consideration of $650,000, $250,000, and $500,000 in
2001, 2000 and 1999, respectively, for the commercial real estate sales.

During 2001, the Corporation, through the parent company and its real
estate management subsidiary, received from an affiliated company $180,000 in
rental income and $96,000 in personnel and management related fees. As of
December 31, 2001, approximately $112,000 in receivables were due from the
affiliated company.

13. COMMITMENTS AND CONTINGENCIES

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

DECEMBER 31,
-------------------
2001 2000
-------- --------

Commitments to extend credit................................ $134,768 $109,872
Standby letters of credit................................... 6,706 6,454

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

During 2001 and subsequent to year end, the Corporation settled various
litigation matters. Additionally, Preston Peete v. The Bank et al Case No.
CV-00-804, Circuit Court of Morgan County, Alabama, was tried to a jury verdict
on November 16, 2001, resulting in a judgment against The Bank for approximately
$211,000 in compensatory damages and $422,000 in punitive damages and a judgment
in favor of The Bank against Mr. Peete in the amount of $105,000. The net amount
awarded to Mr. Peete totaled approximately $528,000. The Corporation adequately
provided for estimated loss exposure from these settlements and judgments in the
accompanying consolidated financial statements.

The Corporation is also a defendant or co-defendant in various lawsuits
incidental to the banking business. Management, after consultation with legal
counsel, believes that liabilities, if any, arising from such litigation and
claims will not result in a material adverse effect on the consolidated
financial statements of the Corporation.

F-22

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. MERGERS AND ACQUISITIONS

The Corporation completed the following business combinations during 1999:

TOTAL ASSETS ACCOUNTING
DATE INSTITUTION (IN MILLIONS) CONSIDERATION TREATMENT
---- ----------- ------------- ------------- ----------

February 12, 1999.... Emerald Coast Bancshares, $92 1,379,978 shares of Pooling
Inc. common stock
June 30, 1999........ C&L Banking Corporation 49 1,289,454 shares of Pooling
common stock
June 30, 1999........ C&L Bank of Blountstown 56 838,902 shares of Pooling
common stock
July 13, 1999........ BankersTrust of Alabama, Inc. 35 $1,584,000 cash Purchase

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

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

NET INTEREST
INCOME NET INCOME
------------ ----------

Emerald..................................................... $ 474 $ 58
C&L......................................................... 1,162 319
Blountstown................................................. 989 166

On July 13, 1999, the Corporation acquired BankersTrust of Alabama, Inc.
("BankersTrust") in a business combination accounted for as a purchase.
BankersTrust was a one-bank holding company operating in north Alabama. The net
assets of BankersTrust included loans of $25,000,000 and deposits of
$36,000,000. The total cost of the acquisition was $1,624,000, which exceeded
the fair value of the net assets of BankersTrust by $5,125,000. The excess is
being amortized on a straight-line basis over 15 years.

15. REGULATORY RESTRICTIONS

A source of funds available to the Corporation is the payment of dividends
by its subsidiary. Banking regulations limit the amount of dividends that may be
paid without prior approval of the subsidiary's regulatory agency. Approximately
$14,390,000 in retained earnings are available to be paid as dividends by the
subsidiary at December 31, 2001.

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

Quantitative measures established by regulation to ensure capital adequacy
require the Corporation and its subsidiary to maintain minimum amounts and
ratios (set forth in the table below) of total and Tier I capital (as defined in
the regulations) to risk-weighted assets (as defined), and of Tier I capital (as

F-23

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

defined) to average assets (as defined). Management believes, as of December 31,
2001 and 2000 that the Corporation and its subsidiary meet all capital adequacy
requirements to which they are subject.

As of December 31, 2001, the most recent notification from the Federal
Reserve Bank categorized the Corporation and its subsidiary as well capitalized
under the regulatory framework for prompt corrective action. To be categorized
as well capitalized the Corporation and its subsidiary must maintain minimum
total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in
the table. There are no conditions or events since that notification that
management believes have changed the institution's category:

TO BE WELL
FOR CAPITAL CAPITALIZED
ADEQUACY UNDER PROMPT
ACTUAL PURPOSES CORRECTIVE ACTION
----------------- --------------- ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
-------- ------ ------- ----- --------- ------

AS OF DECEMBER 31, 2001:
Total Capital (to Risk Weighted
Assets)
Corporation.................. $114,538 11.41% $80,326 8.00% $100,408 10.00%
The Bank..................... 103,521 10.40 79,668 8.00 99,585 10.00
Tier I Capital (to Risk
Weighted Assets)
Corporation.................. 94,785 9.44 40,163 4.00 60,245 6.00
The Bank..................... 91,072 9.15 39,834 4.00 59,751 6.00
Tier I Capital (to Average
Assets)
Corporation.................. 94,785 7.92 47,856 4.00 59,820 5.00
The Bank..................... 91,072 7.61 47,864 4.00 59,830 5.00
AS OF DECEMBER 31, 2000:
Total Capital (to Risk Weighted
Assets)
Corporation.................. $ 92,534 11.36% $65,173 8.00% $ 81,466 10.00%
The Bank..................... 83,457 10.22 65,302 8.00 81,627 10.00
Tier I Capital (to Risk
Weighted Assets)
Corporation.................. 83,577 10.26 32,587 4.00 48,880 6.00
The Bank..................... 74,500 9.13 32,651 4.00 48,976 6.00
Tier I Capital (to Average
Assets)
Corporation.................. 83,577 8.47 39,490 4.00 49,362 5.00
The Bank..................... 74,500 7.61 39,180 4.00 48,974 5.00

16. FAIR VALUES OF FINANCIAL INSTRUMENTS

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

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

F-24

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

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

Net loans. Fair values for variable-rate loans that reprice frequently and
have no significant change in credit risk are based on carrying values. Fair
values for all other loans are estimated using discounted cash flow analyses
using interest rates currently being offered for loans with similar terms to
borrowers of similar credit quality. Fair values for impaired loans are
estimated using discounted cash flow analyses or underlying collateral values,
where applicable.

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

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

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

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

Guaranteed preferred beneficial interest in the Corporation's subordinated
debentures. Rates currently available to the Corporation for preferred
offerings with similar terms and maturities are used to estimate fair value.

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

F-25

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

DECEMBER 31, 2001 DECEMBER 31, 2000
--------------------- -------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ---------- -------- --------
(IN THOUSANDS)

Financial assets:
Cash and due from banks................ $ 31,682 $ 31,682 $ 36,691 $ 36,691
Interest bearing deposits in other
banks............................... 495 495 2,427 2,427
Federal funds sold..................... 20,000 20,000 3,120 3,120
Securities available for sale.......... 68,847 68,847 91,316 91,316
Securities held to maturity............ -- -- 4,389 4,317
Mortgage loans held for sale........... 1,131 1,131 4,324 4,324
Net loans.............................. 986,610 1,012,939 799,186 800,614
Stock in FHLB and Federal Reserve
Bank................................ 8,505 8,505 6,922 6,922
Accrued interest receivable............ 7,562 7,562 8,615 8,615
Financial liabilities:
Deposits............................... 952,235 962,971 827,304 834,915
Advances from FHLB..................... 135,900 144,957 104,300 105,359
Other borrowed funds................... 813 813 534 534
Guaranteed preferred beneficial
interest in the Corporation's
subordinated debentures............. 31,000 33,500 15,000 14,285

17. OTHER NONINTEREST EXPENSE

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

YEAR ENDED DECEMBER 31,
--------------------------
2001 2000 1999
------- ------- ------

Professional fees........................................ $ 1,984 $ 2,366 $2,196
Directors fees........................................... 475 653 789
Insurance and assessments................................ 800 638 478
Postage, stationery and supplies......................... 1,250 1,100 1,161
Advertising.............................................. 555 562 372
Foreclosure losses....................................... 1,033 910 907
Fraud loss and litigation settlement..................... 936 12 29
Other operating expense.................................. 5,149 3,883 3,343
------- ------- ------
Total.................................................... $12,182 $10,124 $9,275
======= ======= ======

18. CONCENTRATIONS OF CREDIT RISK

All of the Corporation's loans, commitments and standby letters of credit
have been granted to customers in the Corporation's market area. The
concentrations of credit by type of loan or commitment are set forth in Notes 3
and 13, respectively.

The Corporation maintains cash balances and federal funds sold at several
financial institutions. Cash balances at each institution are insured by the
Federal Deposit Insurance Corporation (the "FDIC") up to $100,000. At various
times throughout the year cash balances held at these institutions will exceed

F-26

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

federally insured limits. The Bank's management monitors these institutions on a
quarterly basis in order to determine that the institutions meet
"well-capitalized" guidelines as established by the FDIC.

19. NET INCOME PER SHARE

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

2001 2000 1999
------- ------- -------

Numerator:
For basic and diluted, net income..................... $ 2,689 $ 4,357 $ 2,920
======= ======= =======
Denominator:
For basic, weighted average common shares
outstanding........................................ 14,272 14,384 14,335
Effect of dilutive stock options...................... 30 3 27
------- ------- -------
Average common shares outstanding, assuming
dilution........................................... 14,302 14,387 14,362
======= ======= =======
Basic net income per common share....................... $ .19 $ .30 $ .20
======= ======= =======
Diluted net income per common share..................... $ .19 $ .30 $ .20
======= ======= =======

20. PARENT COMPANY

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

DECEMBER 31,
------------------
2001 2000
-------- -------

STATEMENTS OF FINANCIAL CONDITION:
Assets:
Cash...................................................... $ 3,283 $ 1,844
Investment in subsidiaries................................ 97,709 81,117
Loans..................................................... 200 --
Intangibles, net.......................................... 214 245
Premises and equipment -- net............................. 6,423 6,514
Other assets.............................................. 2,618 1,649
-------- -------
$110,447 $91,369
======== =======
Liabilities:
Accrued expenses and other liabilities.................... $ 1,635 $ 1,030
Subordinated debentures................................... 31,959 15,464
Stockholders' equity........................................ 76,853 74,875
-------- -------
$110,447 $91,369
======== =======

F-27

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

YEAR ENDED DECEMBER 31,
---------------------------
2001 2000 1999
------- ------- -------

STATEMENTS OF INCOME:
Income:
Dividends from subsidiaries........................... $ 67 $ 16 $ --
Interest.............................................. 80 50 133
Other income.......................................... 2,366 1,278 837
------- ------- -------
2,513 1,344 970
Expense:
Directors' fees....................................... 42 54 140
Salaries and benefits................................. 2,147 1,103 965
Occupancy expense..................................... 355 240 439
Interest expense...................................... 2,353 930 210
Other................................................. 844 1,173 1,302
------- ------- -------
5,741 3,500 3,056
------- ------- -------
Loss before income taxes and equity in undistributed
earnings of subsidiaries.............................. (3,228) (2,156) (2,086)
Income tax benefit...................................... 850 1,072 1,100
------- ------- -------
Loss before equity in undistributed earnings of
subsidiaries.......................................... (2,378) (1,084) (986)
Equity in undistributed earnings of subsidiaries........ 5,067 5,441 3,906
------- ------- -------
Net income.............................................. $ 2,689 $ 4,357 $ 2,920
======= ======= =======

YEAR ENDED DECEMBER 31,
----------------------------
2001 2000 1999
-------- ------- -------

STATEMENTS OF CASH FLOWS:
Operating activities:
Net income............................................. $ 2,689 $ 4,357 $ 2,920
Adjustments to reconcile net income to net cash used by
operating activities:
Amortization and depreciation expense................ 219 148 275
Equity in undistributed earnings of subsidiaries..... (5,067) (5,441) (3,906)
Gain on sale of property............................. (305) (165) (342)
Increase (decrease) in other liabilities............. 605 842 (1,587)
Increase in other assets............................. (996) (1,324) (21)
-------- ------- -------
Net cash used by operating activities.................. (2,855) (1,583) (2,661)
Investing activities:
Purchases of premises and equipment.................... (442) (3,387) (3,810)
Proceeds from sale of property......................... 450 450 300
Net cash paid in acquisition........................... -- -- (1,372)
Capital contribution to subsidiaries................... (11,495) (2,064) (3,995)
-------- ------- -------
Net cash used in investing activities.................. (11,487) (5,001) (8,877)

F-28

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

YEAR ENDED DECEMBER 31,
----------------------------
2001 2000 1999
-------- ------- -------

Financing activities:
Proceeds from issuance of common stock................. $ 66 $ -- $ 2,170
Purchase of treasury stock............................. (780) (210) --
(Decrease) increase in notes payable................... -- (7,104) 7,104
Proceeds from issuance of subordinated debentures...... 16,495 15,464 --
-------- ------- -------
Net cash provided by financing activities.............. 15,781 8,150 9,274
Net increase (decrease) in cash........................ 1,439 1,566 (2,264)
Cash at beginning of year.............................. 1,844 278 2,542
-------- ------- -------
Cash at end of year.................................... $ 3,283 $ 1,844 $ 278
======== ======= =======

21. SELECTED QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

A summary of the unaudited results of operations for each quarter of 2001
and 2000 follows (in thousands, except per share data):

FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------

2001
Total interest income.......................... $22,561 $23,047 $22,823 $21,920
Total interest expense......................... 12,925 12,715 11,882 10,837
Net interest income............................ 9,636 10,332 10,941 11,083
Provision for loan losses...................... 795 835 925 4,899
Securities gains............................... 37 120 993 233
Distributions on trust preferred securities.... 398 397 657 707
Income (loss) before income taxes.............. 2,207 1,927 2,296 (2,775)
Net income (loss).............................. 1,579 1,395 1,575 (1,860)
Basic and diluted net income (loss) per
share........................................ .11 .10 .11 (.13)
2000
Total interest income.......................... $16,649 $17,917 $19,515 $20,954
Total interest expense......................... 8,284 9,220 10,835 11,582
Net interest income............................ 8,365 8,697 8,680 9,372
Provision for loan losses...................... 888 709 1,869 1,495
Securities gains (losses)...................... -- (3) 76 58
Distributions on trust preferred securities.... -- -- -- 504
Income before income taxes..................... 1,273 1,590 1,330 1,160
Net income..................................... 902 1,194 1,367 894
Basic and diluted net income per share......... .06 .08 .10 .06

22. SUBSEQUENT EVENTS

On August 30, 2001 the Corporation and CF Bancshares, Inc. ("CF"), Port St.
Joe, Florida signed a Reorganization Agreement and Plan of Merger ("Agreement").
The Agreement was approved by the shareholders of CF on November 28, 2001,
subject to regulatory approvals and other conditions. The

F-29

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

agreement provides that each CF common shareholder may receive cash or shares of
the Corporation's common stock based on the Corporation's stock price of $6.60
per share; the total transaction value will be approximately $15.5 million or
approximately $91.27 per share of CF stock. On January 31, 2002, approval was
received from the Corporation's primary regulator. On September 30, 2001, CF had
approximately $105 million in assets. Post-merger the Corporation's assets will
total approximately $1.3 billion on a pro forma basis. The transaction is
expected to close in February 2002.

On February 8, 2002, the Corporation filed a registration statement on Form
S-1 for the registration of approximately 3,450,000 shares of common stock to be
offered in a secondary public offering. The proceeds from the offering are
expected to repay approximately $14,000,000 in outstanding debt, with the
remainder used for working capital for future internal growth, possible
acquisitions and general corporate purposes. The offering is expected to close
during the first quarter of 2002.

23. SEGMENT REPORTING

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

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

FLORIDA
ALABAMA REGION REGION COMBINED
-------------- ------- ----------

2001
Net interest income.............................. $26,878 $15,114 $ 41,992
Provision for loan losses........................ 5,093 2,361 7,454
Noninterest income............................... 8,364 1,409 9,773
Noninterest expense(1)........................... 28,687 9,810 38,497
Distributions on guaranteed preferred beneficial
interest in our subordinated debentures........ 2,159 -- 2,159
Income tax (benefit) expense..................... (349) 1,315 966
Net (loss) income...................... (348) 3,037 2,689
Total assets..................................... 855,346 351,059 1,206,405

F-30

THE BANC CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FLORIDA
ALABAMA REGION REGION COMBINED
-------------- ------- ----------

2000
Net interest income.............................. $22,807 $12,307 $ 35,114
Provision for loan losses........................ 3,526 1,435 4,961
Noninterest income............................... 6,326 1,496 7,822
Noninterest expense(1)........................... 25,324 6,794 32,118
Distributions on guaranteed preferred beneficial
interest in our subordinated debentures........ 504 -- 504
Income tax (benefit) expense..................... (778) 1,774 996
Net income............................. 557 3,800 4,357
Total assets..................................... 767,559 261,656 1,029,215

1999
Net interest income.............................. $19,321 $ 9,487 $ 28,808
Provision for loan losses........................ 3,186 (336) 2,850
Noninterest income............................... 4,606 1,558 6,164
Noninterest expense(1)........................... 21,646 7,036 28,682
Income tax (benefit) expense..................... (1,068) 1,588 520
Net income............................. 163 2,757 2,920
Total assets..................................... 590,751 236,676 827,427

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

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

F-31

INDEPENDENT AUDITORS' REPORT

The Board of Directors
CF Bancshares, Inc.
Port St. Joe, Florida:

We have audited the consolidated balance sheets of CF Bancshares, Inc. and
Subsidiaries (the "Company") at December 31, 2000 and 1999, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
at December 31, 2000 and 1999, and the results of its operations and cash flows
for each of the years in the three-year period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States of
America.

/s/ HACKER, JOHNSON & SMITH PA
---------------------------------------------------------
HACKER, JOHNSON & SMITH PA
Tampa, Florida
February 23, 2001

F-32

CF BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AT DECEMBER 31,
-------------------------
2000 1999
----------- -----------

ASSETS
Cash and due from banks..................................... $ 2,784,258 $ 2,280,765
Interest-bearing deposits with banks........................ 1,709,783 940,950
----------- -----------
Total cash and cash equivalents................... 4,494,041 3,221,715
Securities held to maturity (fair value of $3,351,714 and
$1,884,030)............................................... 3,209,308 1,813,696
Loans, net of allowance for loan losses of $289,041 and
$282,257.................................................. 82,241,009 66,419,097
Federal Home Loan Bank stock, at cost....................... 662,500 386,900
Premises and equipment, net................................. 2,467,718 2,121,061
Foreclosed real estate...................................... 135,000 135,000
Accrued interest receivable................................. 566,915 408,354
Income taxes receivable..................................... 105,349 --
Deferred income taxes....................................... 151,000 188,000
Other assets................................................ 687,256 527,781
----------- -----------
Total............................................. $94,720,096 $75,221,604
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Noninterest-bearing demand deposits....................... 3,451,583 2,931,691
Savings and NOW deposits.................................. 14,943,816 14,868,503
Money-market deposits..................................... 6,543,800 5,862,963
Time deposits............................................. 48,164,193 36,483,276
----------- -----------
Total deposits.................................... 73,103,392 60,146,433
Federal Home Loan Bank advances........................... 13,250,000 7,250,000
Income taxes payable...................................... 143,029
Other liabilities......................................... 624,197 496,684
----------- -----------
Total liabilities................................. 86,977,589 68,036,146
----------- -----------
Commitments and contingencies (Notes 8 and 14)
Stockholders' equity
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued or outstanding................. -- --
Common stock, $.01 par value, 5,000,000 shares authorized,
169,015 and 168,555 shares issued and outstanding...... 1,690 1,686
Additional paid-in capital................................ 1,432,258 1,427,662
Retained earnings......................................... 6,308,559 5,756,110
----------- -----------
Total stockholders' equity........................ 7,742,507 7,185,458
----------- -----------
Total............................................. $94,720,096 $75,221,604
=========== ===========

See accompanying Notes to Consolidated Financial Statements.
F-33

CF BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

YEAR ENDED DECEMBER 31,
------------------------------------
2000 1999 1998
---------- ---------- ----------

Interest income:
Loans.................................................. $6,519,499 $5,173,047 $5,214,357
Securities held to maturity............................ 202,675 59,557 5,598
Other.................................................. 209,814 182,278 280,714
---------- ---------- ----------
Total interest income.......................... 6,931,988 5,414,882 5,500,669
---------- ---------- ----------
Interest expense:
Deposits............................................... 3,403,613 2,606,362 2,853,694
Federal Home Loan Bank advances........................ 599,285 350,085 169,494
---------- ---------- ----------
Total interest expense......................... 4,002,898 2,956,447 3,023,188
---------- ---------- ----------
Net interest income............................ 2,929,090 2,458,435 2,477,481
Provision for loan losses................................ 100,470 173,043 73,585
---------- ---------- ----------
Net interest income after provision for loan
losses....................................... 2,828,620 2,285,392 2,403,896
---------- ---------- ----------
Noninterest income:
Service charges on deposit accounts.................... 298,427 255,678 233,209
Other service charges and fees......................... 163,085 137,519 112,608
Gain on sale of developed real estate.................. 22,762 614,414 --
Other.................................................. 19,539 34,909 17,875
---------- ---------- ----------
Total noninterest income....................... 503,813 1,042,520 363,692
---------- ---------- ----------
Noninterest expenses:
Salaries and employee benefits......................... 1,019,589 1,096,100 897,469
Occupancy expense...................................... 422,642 381,915 261,700
Data processing........................................ 112,329 103,521 98,788
Legal and professional................................. 48,376 69,169 60,709
Federal deposit insurance premium...................... 12,971 33,535 37,030
Stationary and office supplies......................... 71,200 59,161 51,033
Other.................................................. 363,445 311,487 343,263
---------- ---------- ----------
Total noninterest expenses..................... 2,050,552 2,054,888 1,749,992
---------- ---------- ----------
Earnings before income taxes............................. 1,281,881 1,273,024 1,017,596
Income taxes................................... 475,909 472,497 379,065
---------- ---------- ----------
Net earnings............................................. $ 805,972 $ 800,527 $ 638,531
========== ========== ==========
Earnings per share:
Basic.................................................. $ 4.77 $ 4.75 $ 3.82
========== ========== ==========
Diluted................................................ $ 4.76 $ 4.74 $ 3.78
========== ========== ==========

See accompanying Notes to Consolidated Financial Statements.
F-34

CF BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

COMMON STOCK ADDITIONAL TOTAL
---------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------- ------ ---------- ---------- -------------

Balance at December 31, 1997.......... 167,053 $1,671 $1,412,657 $4,862,377 $6,276,705
Net earnings.......................... -- -- -- 638,531 638,531
Cash dividends paid, at $2 per
share............................... -- -- -- (334,657) (334,657)
Shares issued......................... 325 3 3,247 -- 3,250
------- ------ ---------- ---------- ----------
Balance at December 31, 1998.......... 167,378 1,674 1,415,904 5,166,251 6,583,829
Net earnings.......................... -- -- -- 800,527 800,527
Cash dividends paid, at $1.25 per
share............................... -- -- -- (210,668) (210,668)
Shares issued......................... 1,177 12 11,758 -- 11,770
------- ------ ---------- ---------- ----------
Balance at December 31, 1999.......... 168,555 1,686 1,427,662 5,756,110 7,185,458
Net earnings.......................... -- -- -- 805,972 805,972
Cash dividends paid, at $1.50 per
share............................... -- -- -- (253,523) (253,523)
Shares issued......................... 460 4 4,596 -- 4,600
------- ------ ---------- ---------- ----------
Balance at December 31, 2000.......... 169,015 $1,690 $1,432,258 $6,308,559 $7,742,507
======= ====== ========== ========== ==========

See accompanying Notes to Consolidated Financial Statements.
F-35

CF BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31,
----------------------------------------
2000 1999 1998
------------ ----------- -----------

Cash flows from operating activities:
Net earnings.............................................. $ 805,972 $ 800,527 $ 638,531
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation............................................ 246,310 231,093 159,699
Provision for loan losses............................... 100,470 173,043 73,585
Amortization of premiums on securities held to
maturity.............................................. 25,575 4,875 --
Deferred income tax provision (credit).................. 37,000 (145,000) (118,000)
(Increase) decrease in accrued interest receivable and
other assets.......................................... (318,036) (120,601) 16,632
Proceeds from sale of development lots.................. 59,092 1,616,500 --
Cost of development of real estate...................... (36,330) (1,002,086) --
Gain on sale of developed lots.......................... (22,762) (614,414) --
Gains on sale of foreclosed real estate................. (6,866) (21,550) (8,079)
Increase in other liabilities........................... 127,513 219,620 178,537
(Decrease) increase in income taxes payable............. (143,029) 143,029 (173,718)
(Increase) decrease in income taxes receivable.......... (105,349) 42,194 (42,194)
------------ ----------- -----------
Net cash provided by operating activities........... 769,560 1,327,230 724,993
------------ ----------- -----------
Cash flows from investing activities:
Principal paydowns of securities held to maturity......... 354,352 94,146 --
Net decrease in interest-bearing deposits with banks...... -- 450,000 425,000
Purchase of securities held to maturity................... (1,775,539) (1,912,717) --
Proceeds from maturities of securities held to maturity... -- -- 385,000
Net (increase) decrease in loans.......................... (15,928,104) (6,404,580) 198,288
(Purchase) sale of Federal Home Loan Bank stock........... (275,600) 31,500 --
Net purchases of premises and equipment................... (592,967) (701,890) (667,125)
Proceeds from the sale of foreclosed real estate.......... 10,000 128,874 1,000
Net expenditures on foreclosed real estate................ 2,588 39,233 (4,680)
------------ ----------- -----------
Net cash provided by (used in) investing
activities........................................ (18,205,270) (8,275,434) 337,483
------------ ----------- -----------
Cash flows from financing activities:
Net increase (decrease) in deposits....................... 12,956,959 4,210,603 (5,724,080)
Cash dividends paid....................................... (253,523) (210,668) (334,657)
Net increase in Federal Home Loan Bank advances........... 6,000,000 1,000,000 5,400,000
Issuance of common stock.................................. 4,600 11,770 3,250
------------ ----------- -----------
Net cash provided by (used in) financing
activities........................................ 18,708,036 5,011,705 (655,487)
------------ ----------- -----------
Net increase (decrease) in cash and cash
equivalents....................................... 1,272,326 (1,936,499) 406,989
Cash and cash equivalents at beginning of year............ 3,221,715 5,158,214 4,751,225
------------ ----------- -----------
Cash and cash equivalents at end of year.................. $ 4,494,041 $ 3,221,715 $ 5,158,214
============ =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.................... $ 3,947,715 $ 2,956,385 $ 3,023,325
============ =========== ===========
Cash paid during the year for income taxes................ $ 687,287 $ 432,274 $ 712,977
============ =========== ===========
Supplemental disclosure of noncash investing activity:
Transfers from loans to foreclosed real estate............ $ 49,222 $ 292,581 $ 195,726
============ =========== ===========
Transfers from foreclosed real estate to loans............ $ 43,500 $ 101,849 $ 176,659
============ =========== ===========

See accompanying Notes to Consolidated Financial Statements.
F-36

CF BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2000 AND 1999 AND FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD
ENDED DECEMBER 31, 2000

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization. CF Bancshares, Inc. (the "Holding Company") is a unitary
thrift holding company and its current business is the ownership and operation
of Citizens Federal Savings Bank of Port St. Joe (the "Savings Bank") and
Citizens Properties, Inc. Collectively the entities are referred to as the
"Company." The Savings Bank provides a variety of community banking services to
small and middle-market businesses and individuals through its three banking
offices located in Bay, Gulf and Franklin Counties, Florida. Citizens
Properties, Inc. was formed for the purpose of holding and managing foreclosed
real estate and to purchase and develop real estate.

Principles of Consolidation. The consolidated financial statements include
the accounts of the Holding Company and its subsidiaries. All significant
intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates. In preparing consolidated financial statements in
conformity with accounting principles generally accepted in the United States of
America, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities as of the date of the balance
sheet and reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Material estimates that are
particularly susceptible to significant change in the near term relate to the
determination of the allowance for loan losses and deferred tax assets.

Cash and Cash Equivalents. For purposes of the consolidated statements of
cash flows, cash and cash equivalents include cash and balances due from banks
and interest-bearing deposits with banks, both of which mature within ninety
days.

Securities Held to Maturity. Securities for which the Company has the
positive intent and ability to hold to maturity are reported at cost, adjusted
for premiums and discounts that are recognized in interest income using the
interest method over the period to maturity.

Loans. Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-off are reported at their
outstanding principal adjusted for any charge-offs, the allowance for loan
losses, and any deferred fees or costs on originated loans and unamortized
premiums or discounts on purchased loans.

Discounts and premiums on purchased residential real estate loans are
amortized to income using the interest method over the remaining period to
contractual maturity, adjusted for anticipated prepayments.

Loan origination fees and certain direct origination costs are capitalized
and recognized as an adjustment of the yield of the related loan.

The accrual of interest on loans is discontinued at the time the loan is
ninety days delinquent unless the loan is well-collateralized and in process of
collection. In all cases, loans are placed on nonaccrual or charged-off at an
earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on
nonaccrual or charged-off is reversed against interest income. The interest on
these loans is accounted for on the cash-basis or cost-recovery method, until
qualifying for return to accrual. Loans are returned to accrual status when all
the principal and interest amounts contractually due are brought current and
future payments are reasonably assured.

Allowance for Loan Losses. The allowance for loan losses is established as
losses are estimated to have occurred through a provision for loan losses
charged to earnings. Loan losses are charged against the

F-37

CF BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2000 AND 1999 AND FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD
ENDED DECEMBER 31, 2000 -- (CONTINUED)

allowance when management believes the uncollectibility of a loan balance is
confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management
and is based upon management's periodic review of the collectibility of the
loans in light of historical experience, the nature and volume of the loan
portfolio, adverse situations that may affect the borrower's ability to repay,
estimated value of any underlying collateral and prevailing economic conditions.
This evaluation is inherently subjective as it requires estimates that are
susceptible to significant revision as more information becomes available.

A loan is considered impaired when, based on current information and
events, it is probable that the Company will be unable to collect the scheduled
payments of principal or interest when due according to the contractual terms of
the loan agreement. Factors considered by management in determining impairment
include payment status, collateral value, and the probability of collecting
scheduled principal and interest payments when due. Loans that experience
insignificant payment delays and payment shortfalls generally are not classified
as impaired. Management determines the significance of payment delays and
payment shortfalls on a case-by-case basis, taking into consideration all of the
circumstances surrounding the loan and the borrower, including the length of the
delay, the reasons for the delay, the borrower's prior payment record, and the
amount of the shortfall in relation to the principal and interest owed.
Impairment is measured on a loan by loan basis for commercial loans by either
the present value of expected future cash flows discounted at the loan's
effective interest rate, the loan's obtainable market price, or the fair value
of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively
evaluated for impairment. Accordingly, the Company does not separately identify
individual consumer and residential loans for impairment disclosures.

Foreclosed Real Estate. Real estate acquired through, or in lieu of,
foreclosure, is initially recorded at the lower of fair value or the loan
balance plus acquisition costs at the date of foreclosure. After foreclosure,
valuations are periodically performed by management and the real estate is
carried at the lower of carrying amount or fair value less cost to sell. Revenue
and expenses from operations and changes in the valuation allowance are included
in earnings.

Income Taxes. Deferred income tax assets and liabilities are recorded to
reflect the tax consequences on future years of temporary differences between
revenues and expenses reported for financial statement and those reported for
income tax purposes. Deferred tax assets and liabilities are measured using the
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be realized or settled. Valuation
allowances are provided against assets which are not likely to be realized.

Premises and Equipment. Land is carried at cost. Buildings and
improvements and furniture, fixtures and equipment are stated at cost less
accumulated depreciation. Depreciation is computed on the straight-line method
over the estimated useful lives of the assets.

Transfer of Financial Assets. Transfers of financial assets are accounted
for as sales, when control over the assets has been surrendered. Control over
transferred assets is deemed to be surrendered when (1) the assets have been
isolated from the Company, (2) the transferee obtains the right (free of
conditions that constrain it from taking advantage of that right) to pledge or
exchange the transferred assets, and (3) the Company does not maintain effective
control over the transferred assets through an agreement to repurchase them
before their maturity.

F-38

CF BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2000 AND 1999 AND FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD
ENDED DECEMBER 31, 2000 -- (CONTINUED)

Off-Balance-Sheet Instruments. In the ordinary course of business the
Company has entered into off-balance-sheet financial instruments consisting of
commitments to extend credit, unused lines of credit and standby letters of
credit. Such financial instruments are recorded in the financial statements when
they are funded.

Stock Compensation Plans. Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock-Based Compensation, encourages all entities
to adopt a fair value based method of accounting for employee stock compensation
plans, whereby compensation cost is measured at the grant date based on the
value of the award and is recognized over the service period, which is usually
the vesting period. However, it also allows an entity to continue to measure
compensation cost for those plans using the intrinsic value based method of
accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, whereby compensation cost is the excess, if any,
of the quoted market price of the stock at the grant date (or other measurement
date) over the amount an employee must pay to acquire the stock. Stock options
issued under the Company's stock option plan have no intrinsic value at the
grant date, and under Opinion No. 25 no compensation cost is recognized for
them. The Company has elected to continue with the accounting methodology in
Opinion No. 25.

Earnings Per Share. Basic earnings per share is computed on the basis of
the weighted-average number of common shares outstanding. Diluted earnings per
share is computed based on the weighted-average number of shares outstanding
plus the effect of outstanding stock options, computed using the treasury stock
method.

Fair Values of Financial Instruments. The following methods and
assumptions were used by the Company in estimating fair values of financial
instruments:

Cash and Cash Equivalents. The carrying amounts of cash and cash
equivalents approximate their fair value.

Securities. Fair values for securities are based on quoted market
prices.

Loans. For variable-rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying
values. Fair values for fixed-rate mortgage, consumer, commercial real
estate and commercial loans are estimated using discounted cash flow
analyses, using Office of Thrift Supervision ("OTS") pricing model. Fair
values for impaired loans are estimated using discounted cash flow analyses
or underlying collateral values, where applicable.

Federal Home Loan Bank Stock. Fair value of the Company's investment
in Federal Home Loan Bank stock is based on its redemption value, which is
its cost of $100 per share.

Deposit Liabilities. The fair values disclosed for demand, NOW,
money-market and savings deposits are, by definition, equal to the amount
payable on demand at the reporting date (that is, their carrying amounts).
Fair values for fixed-rate certificates of deposit are estimated using the
OTS pricing model.

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

Off-Balance-Sheet Instruments. Fair values for off-balance-sheet
lending commitments are based on fees currently charged to enter into
similar agreements, taking into account the remaining terms of the
agreements and the counterparties' credit standing.

F-39

CF BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2000 AND 1999 AND FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD
ENDED DECEMBER 31, 2000 -- (CONTINUED)

Future Accounting Requirements. Financial Accounting Standards
133 -- Accounting for Derivative Investments and Hedging Activities (as amended)
requires companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivatives and whether they qualify for hedge accounting. The key criterion
for hedge accounting is that the hedging relationship must be highly effective
in achieving offsetting changes in fair value or cash flows. The Company will be
required to adopt this Statement January 1, 2001. Management does not anticipate
that this Statement will have a material impact on the Company.

Reclassification. For comparability, certain amounts in the 1999 and 1998
financial statements have been reclassified to conform to the 2000 presentation.

2. SECURITIES HELD TO MATURITY

Securities have been classified according to management's intent. The
carrying amount of securities and their approximate fair values are summarized
as follows:

GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------

AT DECEMBER 31, 2000 --
Mortgage-backed securities............ $3,209,308 $142,406 -- $3,351,714
========== ======== === ==========
AT DECEMBER 31, 1999 --
Mortgage-backed securities............ $1,813,696 $ 70,334 -- $1,884,030
========== ======== === ==========

There were no sales of securities during 2000, 1999 or 1998.

The Company has pledged certain securities and deposits as collateral for
public deposits. At December 31, 2000 securities with a carrying value of
$4,620,000 were pledged for such purposes.

F-40

CF BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2000 AND 1999 AND FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD
ENDED DECEMBER 31, 2000 -- (CONTINUED)

3. LOANS

The components of loans consist of the following:

AT DECEMBER 31,
-------------------------
2000 1999
----------- -----------

Residential real estate.................................... $42,517,348 $41,414,925
Commercial real estate..................................... 23,249,864 15,787,883
Consumer................................................... 12,230,819 5,283,495
Commercial................................................. 4,355,328 2,568,660
Real estate construction................................... 3,806,831 3,806,300
----------- -----------
Subtotal................................................. 86,160,190 68,861,263
Deduct:
Net deferred loan fees, premiums and discounts........... (107,519) (80,270)
Undisbursed portion of loans in process.................. (3,522,621) (2,079,639)
Allowance for loan losses................................ (289,041) (282,257)
----------- -----------
$82,241,009 $66,419,097
=========== ===========

An analysis of the change in the allowance for loan losses is summarized as
follows:

YEAR ENDED DECEMBER 31,
---------------------------------
2000 1999 1998
--------- --------- ---------

Balance at beginning of year...................... $ 282,257 $ 206,152 $ 192,893
Provision charged to earnings..................... 100,470 173,043 73,585
Loans charged off................................. (115,401) (117,749) (75,013)
Recoveries........................................ 21,715 20,811 14,687
--------- --------- ---------
Balance at end of year............................ $ 289,041 $ 282,257 $ 206,152
========= ========= =========

There were no impaired loans during 2000, 1999 or 1998.

4. PREMISES AND EQUIPMENT, NET

Premises and equipment consist of the following:

AT DECEMBER 31,
-------------------------
2000 1999
----------- -----------

Land....................................................... $ 706,849 $ 246,320
Buildings and improvements................................. 1,778,527 1,778,527
Furniture, fixtures and equipment.......................... 1,009,244 892,911
----------- -----------
Total at cost.................................... 3,494,620 2,917,758
Less accumulated depreciation.............................. (1,026,902) (796,697)
----------- -----------
Premises and equipment, net...................... $ 2,467,718 $ 2,121,061
=========== ===========

F-41

CF BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2000 AND 1999 AND FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD
ENDED DECEMBER 31, 2000 -- (CONTINUED)

5. LOAN SERVICING

Loans serviced for others are not included in the accompanying consolidated
balance sheets and totaled approximately $767,000 and $912,000 at December 31,
2000 and 1999, respectively. There are no custodial escrow balances maintained
in connection with the loan servicing.

6. DEPOSIT ACCOUNTS

The aggregate amount of time deposits with a minimum denomination of
$100,000 was approximately $16.4 million and $9.3 million at December 31, 2000
and 1999, respectively.

At December 31, 2000, the scheduled maturities of time deposits are as
follows:

MATURING IN THE YEAR ENDING AMOUNT
--------------------------- -----------

2001........................................................ $30,618,674
2002........................................................ 9,269,605
2003........................................................ 2,798,627
2004........................................................ 1,900,136
2005........................................................ 3,577,151
-----------
$48,164,193
===========

7. FEDERAL HOME LOAN BANK ADVANCES

Federal Home Loan Bank of Atlanta ("FHLB") advances are collateralized by
all of the Company's FHLB stock and a blanket lien on mortgage loans and are as
follows:

DECEMBER 31,
WEIGHTED-AVERAGE ------------------------
MATURING IN THE YEAR ENDING INTEREST RATE 2000 1999
--------------------------- ---------------- ----------- ----------

2000........................................ 6.22% $ -- $1,000,000
2003........................................ 4.79% 3,000,000 3,000,000
2005........................................ 7.07% 2,000,000 --
2006........................................ 6.70% 250,000 250,000
2008........................................ 5.95% 3,000,000 3,000,000
2010........................................ 6.41% 5,000,000 --
----------- ----------
$13,250,000 $7,250,000
=========== ==========

8. FINANCIAL INSTRUMENTS

The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments are commitments to extend credit, unused lines of
credit and standby letters of credit and may involve, to varying degrees,
elements of credit and interest-rate risk in excess of the amount recognized in
the consolidated balance sheet. The contract amounts of these instruments
reflect the extent of involvement the Company has in these financial
instruments.

The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit is
represented by the contractual amount of those

F-42

CF BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2000 AND 1999 AND FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD
ENDED DECEMBER 31, 2000 -- (CONTINUED)

instruments. The Company uses the same credit policies in making commitments as
it does for on-balance-sheet instruments.

Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. The credit risk
involved in issuing letters of credit to customers is essentially the same as
that involved in extending loan facilities to customers.

Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since some of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained if deemed
necessary by the Company upon extension of credit is based on management's
credit evaluation of the counterparty.

The estimated fair values of the Company's financial instruments at
December 31, were as follows (in thousands):

2000 1999
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------ -------- ------

Financial assets:
Cash and cash equivalents...................... $ 4,494 $4,494 $3,222 $3,222
Securities held to maturity.................... 3,209 3,352 1,814 1,884
Loans.......................................... 82,241 82,669 66,419 66,326
Federal Home Loan Bank stock................... 135 135 135 135
Accrued interest receivable.................... 567 567 408 408
Financial liabilities:
Deposit liabilities............................ 73,103 73,393 60,146 60,414
Federal Home Loan Bank advances................ 13,250 13,343 7,250 7,043

A summary of the amounts of the Company's financial instruments with off
balance sheet risk follows:

AT DECEMBER 31,
2000
---------------

Commitments to extend credit................................ $1,990,000
----------
Unused lines of credit...................................... $2,989,000
----------
Standby letters of credit................................... $ 90,000
==========

9. CREDIT RISK

The Company grants real estate and consumer loans to customers primarily in
Bay, Gulf and Franklin Counties, Florida. Therefore, the Company's exposure to
credit risk is significantly affected by changes in the economies of Bay, Gulf
and Franklin Counties.

F-43

CF BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2000 AND 1999 AND FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD
ENDED DECEMBER 31, 2000 -- (CONTINUED)

10. INCOME TAXES

Allocations of Federal and state income taxes between current and deferred
portions is as follows:

CURRENT DEFERRED TOTAL
--------- --------- --------

YEAR ENDED DECEMBER 31, 2000:
Federal.......................................... $ 374,598 $ 32,000 $406,598
State............................................ 64,311 5,000 69,311
--------- --------- --------
Total.................................... $ 438,909 $ 37,000 $475,909
========= ========= ========
YEAR ENDED DECEMBER 31, 1999:
Federal.......................................... 539,512 (124,000) 415,512
State............................................ 77,985 (21,000) 56,985
--------- --------- --------
Total.................................... $ 617,497 $(145,000) $472,497
========= ========= ========
YEAR ENDED DECEMBER 31, 1998:
Federal.......................................... 438,470 (101,000) 337,470
State............................................ 58,595 (17,000) 41,595
--------- --------- --------
Total.................................... $ 497,065 $(118,000) $379,065
========= ========= ========

The reasons for the differences between the statutory Federal income tax
rate and the effective tax rates are summarized as follows:

2000 1999 1998
------------------- ------------------- -------------------
% OF % OF % OF
PRETAX PRETAX PRETAX
AMOUNT EARNINGS AMOUNT EARNINGS AMOUNT EARNINGS
-------- -------- -------- -------- -------- --------

Tax provision at statutory
rate.................... $435,839 34.0% $432,828 34.0% $345,983 34.0%
Increases (reductions)
in taxes resulting
from:
State taxes, net of
Federal benefit.... 45,745 3.6 37,611 3.0 27,453 2.7
Other, net........... (5,675) (.5) 2,058 .1 5,629 .6
-------- ---- -------- ---- -------- ----
Income tax provision.... $475,909 37.1% $472,497 37.1% $379,065 37.3%
======== ==== ======== ==== ======== ====

The tax effects of temporary differences that give rise to a significant
portion of the deferred tax assets and deferred tax liabilities are presented
below.

AT DECEMBER 31,
-------------------
2000 1999
-------- --------

Deferred tax assets:
Allowance for loan losses................................. $ 60,000 $138,000
Deferred compensation..................................... 169,000 143,000
Other..................................................... 2,000 2,000
-------- --------
Gross deferred tax assets.............................. 231,000 283,000
-------- --------

F-44

CF BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2000 AND 1999 AND FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD
ENDED DECEMBER 31, 2000 -- (CONTINUED)

AT DECEMBER 31,
-------------------
2000 1999
-------- --------

Deferred tax liabilities:
FHLB stock dividends...................................... (55,000) (55,000)
Premises and equipment.................................... (20,000) (35,000)
Charitable contributions.................................. -- (1,000)
Other..................................................... (5,000) (4,000)
-------- --------
Gross deferred tax liabilities......................... (80,000) (95,000)
-------- --------
Net deferred tax asset................................. $151,000 $188,000
======== ========

11. EARNINGS PER SHARE ("EPS")

The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations ($ in thousands, except per
share amounts).

FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------
2000 1999 1998
----------------------------- ----------------------------- -----------------------------
WEIGHTED- PER WEIGHTED- PER WEIGHTED- PER
AVERAGE SHARE AVERAGE SHARE AVERAGE SHARE
EARNINGS SHARES AMOUNT EARNINGS SHARES AMOUNT EARNINGS SHARES AMOUNT
-------- --------- ------ -------- --------- ------ -------- --------- ------

Basic EPS:
Net earnings
available to
common
stockholders..... $806 168,947 $4.77 $801 168,504 $4.75 $639 167,350 $3.82
===== ===== =====
Effect of dilutive
securities --
Incremental shares
from assumed
exercise of
options.......... 258 597 1,548
------- ------- -------
Diluted EPS:
Net earnings
available to
common
stockholders and
assumed
conversions...... $806 169,205 $4.76 $801 169,101 $4.74 $639 168,898 $3.78
==== ======= ===== ==== ======= ===== ==== ======= =====

12. EMPLOYEE STOCK OWNERSHIP PLAN

The Company has a employee stock ownership plan ("ESOP") for the benefit of
its employees. The plan was amended to include a 401(k) plan ("KSOP"), eligible
for all persons employed by the Company at least one year who are twenty-one
years of age. For the years ended December 31, 2000, 1999 and 1998, the
Company's contributions to the plan were $36,340, $30,215 and $28,116,
respectively.

F-45

CF BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2000 AND 1999 AND FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD
ENDED DECEMBER 31, 2000 -- (CONTINUED)

13. RELATED PARTIES

All loans involving directors and officers were made in the ordinary course
of business. Activity with respect to these loans was as follows:

YEAR ENDED DECEMBER 31,
------------------------
2000 1999
---------- -----------

Balance at beginning of year................................ $283,609 $ 249,507
Additions................................................... 180,657 319,877
Payments.................................................... (73,337) (285,775)
-------- ---------
Balance at end of year...................................... $390,929 $ 283,609
======== =========

14. COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, the Company has various outstanding
commitments and contingent liabilities that are not reflected in the
accompanying consolidated financial statements.

15. STOCK OPTION PLANS

The Company has an Incentive Stock Option Plan ("Incentive Plan") and a
Stock Option Plan for Outside Directors ("Directors Plan"). Options are granted
for a period of ten years and vest at the time of grant. All options granted
under the Directors Plan were exercised during the year ending December 31,
1999. A summary of the activity for both the Incentive Plan and the Directors
Plan follows:

PER
SHARE NUMBER AGGREGATE
EXERCISE OF OPTION
PRICE SHARES PRICE
-------- ------ ---------

Outstanding at December 31, 1997.......................... $10.00 2,292 $22,920
Options exercised......................................... 10.00 (325) 3,250
------ -------
Outstanding at December 31, 1998.......................... 10.00 1,967 19,670
Options exercised......................................... 10.00 (1,177) (11,770)
------ -------
Outstanding at December 31, 1999.......................... 10.00 790 7,900
Options exercised......................................... 10.00 (460) (4,600)
------ -------
Outstanding at December 31, 2000.......................... $10.00 330 $ 3,300
====== ------ =======
Available to be granted at December 31, 2000.............. 2,820
======

The weighted-average remaining contractual life of the outstanding stock
options at December 31, 2000 and 1999 was three months and fifteen months,
respectively.

16. EMPLOYEE BENEFIT PLANS

The Company provides a supplemental executive retirement plan for certain
of its officers. The terms of the plan agreements provide for a specific
percentage of the participants compensation to be accrued for deferred
compensation. The Company is accruing interest on these amounts at a rate of 8%.
The benefits vest at various times and will be paid upon retirement, death or
disability. During 2000, 1999 and 1998 expense relating to this plan amounted to
$16,958, $15,658 and $20,832, respectively.

F-46

CF BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2000 AND 1999 AND FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD
ENDED DECEMBER 31, 2000 -- (CONTINUED)

17. DIRECTORS RETIREMENT PLAN

The Company provides a nonfunded retirement plan for its directors. The
plan agreement provides for a specific amount to be accrued for deferred
compensation. The Company is accruing interest on these amounts at 8%. During
2000, 1999 and 1998 expense relating to this plan amounted to $73,222, $199,272
and $120,864, respectively.

18. REGULATORY MATTERS

Banking regulations place certain restrictions on dividends and loans or
advances made by the Savings Bank to the Holding Company.

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

Quantitative measures established by regulation to ensure capital adequacy
require the Savings Bank to maintain minimum amounts and percentages (set forth
in the following table) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as
defined) to assets (as defined). Management believes, as of December 31, 2000
and 1999, the Savings Bank met all capital adequacy requirements to which they
are subject.

As of December 31, 2000, the most recent notification from the regulatory
authorities categorized the Savings Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, an institution must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage percentages as set forth in the following
tables. There are no conditions or events since that notification that
management believes have changed the Savings Bank's category. The Savings Bank's
actual capital amounts and percentages are also presented in the table (dollars
in thousands).

MINIMUM TO BE
WELL CAPITALIZED
FOR CAPITAL UNDER PROMPT
ADEQUACY CORRECTIVE ACTION
ACTUAL PURPOSES PROVISIONS
-------------- ------------- ------------------
AMOUNT % AMOUNT % AMOUNT %
------ ----- ------ ---- -------- -------

AS OF DECEMBER 31, 2000:
Total capital to Risk-Weighted
assets......................... $7,507 12.66% $4,742 8.00% $5,928 10.00%
Tier I Capital to Risk-Weighted
Assets......................... 7,218 12.18 2,371 4.00 3,557 6.00
Tier I Capital to Total Assets.... 7,218 7.69 3,756 4.00 4,695 5.00
AS OF DECEMBER 31, 1999:
Total capital to Risk-Weighted
assets......................... 6,945 14.83 3,746 8.00 4,682 10.00
Tier I Capital to Risk-Weighted
Assets......................... 6,663 14.23 1,873 4.00 2,809 6.00
Tier I Capital to Total Assets.... 6,663 8.90 2,993 4.00 3,742 5.00

F-47

CF BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2000 AND 1999 AND FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD
ENDED DECEMBER 31, 2000 -- (CONTINUED)

19. PARENT COMPANY ONLY FINANCIAL STATEMENTS

Condensed financial statements of the Holding Company are presented below.

CONDENSED BALANCE SHEETS

AT DECEMBER 31,
-----------------------
2000 1999
---------- ----------

ASSETS
Cash and cash equivalents................................... $ 119,016 $ 117,554
Investment in wholly-owned subsidiaries..................... 7,564,554 7,003,175
Other assets................................................ 58,937 64,729
---------- ----------
Total..................................................... $7,742,507 $7,185,458
========== ==========
STOCKHOLDERS' EQUITY
Stockholders' equity........................................ $7,742,507 $7,185,458
========== ==========

CONDENSED STATEMENTS OF EARNINGS

YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------

Revenues............................................. $ -- $ -- $ 1,415
Expenses............................................. (15,407) (23,450) (22,771)
-------- -------- --------
Loss before earnings of subsidiaries............... (15,407) (23,450) (21,356)
Earnings of subsidiaries............................. 821,379 823,977 659,887
-------- -------- --------
Net earnings....................................... $805,972 $800,527 $638,531
======== ======== ========

CONDENSED STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31,
---------------------------------
2000 1999 1998
--------- --------- ---------

Cash flows from operation activities:
Net earnings.................................... $ 805,972 $ 800,527 $ 638,531
Adjustments to reconcile net earnings to net
cash used in operating activities:
Equity in undistributed earnings of
subsidiaries............................... (821,379) (823,977) (659,887)
Net decrease (increase) in other assets...... 5,792 (1,783) 24,114
--------- --------- ---------
Net cash (used in) provided by operating
activities............................ (9,615) (25,233) 2,758
--------- --------- ---------

F-48

CF BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2000 AND 1999 AND FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD
ENDED DECEMBER 31, 2000 -- (CONTINUED)

YEAR ENDED DECEMBER 31,
---------------------------------
2000 1999 1998
--------- --------- ---------

Cash flows from investing activity --
Investment in subsidiary........................ $ -- $ -- $ (20,000)
--------- --------- ---------
Cash flows from financing activities:
Dividends from subsidiary....................... 260,000 275,000 400,001
Shares issued................................... 4,600 11,770 3,250
Cash dividends paid............................. (253,523) (210,668) (334,657)
--------- --------- ---------
Net cash provided by financing
activities............................ 11,077 76,102 68,594
--------- --------- ---------
Net increase in cash and cash equivalents......... 1,462 50,869 51,352
Cash and cash equivalents at beginning of the
year............................................ 117,554 66,685 15,333
--------- --------- ---------
Cash and cash equivalents at end of year.......... $ 119,016 $ 117,554 $ 66,685
========= ========= =========

20. MERGER (UNAUDITED)

On August 30, 2001, the Company entered into a definitive agreement (the
"Agreement") to merge with The Banc Corporation. Under the terms of the
Agreement, The Banc Corporation will pay cash or exchange shares of its common
stock for all outstanding shares of the Company. The merger is subject to both
regulatory and stockholder approval.

F-49

CF BANCSHARES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

SEPTEMBER 30,
2001
-------------
(UNAUDITED)

ASSETS
Cash and due from banks..................................... $ 3,800,325
Interest-bearing deposits with banks........................ 5,808,520
------------
Total cash and cash equivalents................... 9,608,845
Securities held to maturity (fair value of $2,679,987)...... 2,672,585
Loans, net of allowance for loan losses of $357,895......... 87,739,125
Federal Home Loan Bank stock, at cost....................... 812,500
Premises and equipment, net................................. 2,335,058
Foreclosed real estate...................................... 172,976
Accrued interest receivable................................. 603,888
Income taxes receivable..................................... 99,318
Deferred income taxes....................................... 151,000
Other assets................................................ 740,848
------------
Total................................................ $104,936,143
============

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Noninterest-bearing demand deposits....................... 6,415,000
Savings and NOW deposits.................................. 16,675,439
Money-market deposits..................................... 11,189,649
Time deposits............................................. 44,737,453
------------
Total deposits.................................... 79,017,541
Federal Home Loan Bank advances........................... 16,250,000
Other liabilities......................................... 1,302,151
------------
Total liabilities................................. 96,569,692
------------
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued or outstanding................. --
Common stock, $.01 par value 5,000,000 shares authorized;
169,345 shares issued and outstanding.................. 1,693
Additional paid-in capital................................ 1,435,555
Retained earnings......................................... 6,929,203
------------
Total stockholders' equity........................ 8,366,451
------------
Total liabilities and stockholders' equity........ $104,936,143
============

See Accompanying Notes to Condensed Consolidated Financial Statements.
F-50

CF BANCSHARES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
2001 2000
---------- ----------
(UNAUDITED)

Interest income:
Loans..................................................... $5,613,339 $4,768,713
Securities held to maturity............................... 163,947 112,093
Other..................................................... 168,728 145,128
---------- ----------
Total interest income............................. 5,946,014 5,025,934
---------- ----------
Interest expense:
Deposits.................................................. 2,770,321 2,442,598
Federal Home Loan Bank advances........................... 674,820 408,839
---------- ----------
Total interest expense............................ 3,445,141 2,851,437
---------- ----------
Net interest income............................... 2,500,873 2,174,497
Provision for loan losses................................... 145,425 69,760
---------- ----------
Net interest income after provision for loan
losses.......................................... 2,355,448 2,104,737
---------- ----------
Noninterest income:
Service charges on deposit accounts....................... 249,671 218,805
Other service charges and fees............................ 139,016 126,087
Gain on sale of developed real estate..................... -- 22,761
Other..................................................... 22,623 14,236
---------- ----------
Total noninterest income.......................... 411,310 381,889
---------- ----------
Noninterest expenses:
Salaries and employee benefits............................ 761,532 753,896
Occupancy expense......................................... 354,085 316,012
Data processing........................................... 90,977 84,843
Legal and professional.................................... 44,977 43,916
Federal deposit insurance premium......................... 10,443 9,452
Stationery and office supplies............................ 68,276 52,199
Other expense............................................. 242,569 256,329
---------- ----------
Total noninterest expenses........................ 1,572,859 1,516,647
---------- ----------
Earnings before income taxes................................ 1,193,899 969,979
Income taxes...................................... 446,306 360,091
---------- ----------
Net earnings................................................ $ 747,593 $ 609,888
========== ==========
Basic earnings per share.................................... $ 4.42 $ 3.61
========== ==========
Diluted earnings per share.................................. $ 4.42 $ 3.61
========== ==========
Dividends per share......................................... $ 0.75 $ 1.50
========== ==========

See Accompanying Notes to Condensed Consolidated Financial Statements.
F-51

CF BANCSHARES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

NINE MONTHS ENDED SEPTEMBER 30, 2001

COMMON STOCK ADDITIONAL TOTAL
---------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------- ------ ---------- --------- -------------

Balance at December 31, 2000............ 169,015 $1,690 1,432,258 6,308,559 7,742,507
Net earnings for the nine months ended
September 30, 2001 (unaudited)........ -- -- -- 747,593 747,593
Cash dividends (unaudited).............. -- -- -- (126,949) (126,949)
Shares issued from exercise of stock
options (unaudited)................... 330 3 3,297 -- 3,300
------- ------ --------- --------- ---------
Balance at September 30, 2001
(unaudited)........................... 169,345 $1,693 1,435,555 6,929,203 8,366,451
======= ====== ========= ========= =========

See Accompanying Notes to Condensed Consolidated Financial Statements.
F-52

CF BANCSHARES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS
ENDED SEPTEMBER 30,
--------------------------
2001 2000
----------- ------------
(UNAUDITED)

Cash flows from operating activities:
Net earnings.............................................. $ 747,593 $ 609,888
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation............................................ 192,057 185,772
Provision for loan losses............................... 145,425 69,760
Amortization of premiums on securities held to
maturity............................................... 23,018 17,689
Increase in accrued interest receivable and other
assets................................................. (90,565) (369,040)
Proceeds from sale of development lots.................. -- 59,092
Cost of development of real estate...................... -- (36,330)
Gain on sale of developed lots.......................... -- (22,762)
Write down of foreclosed real estate.................... -- 1,672
Gain on sale of foreclosed real estate.................. (12,128) (4,711)
Increase in other liabilities........................... 677,954 948,716
Decrease in income taxes payable........................ -- (143,029)
Decrease (increase) in income taxes receivable.......... 6,031 (24,880)
----------- ------------
Net cash provided by operating activities.......... 1,689,385 1,291,837
----------- ------------
Cash flows from investing activities:
Principal paydowns of securities held to maturity......... 513,705 165,936
Purchase of securities held to maturity................... -- (1,431,871)
Net increase in loans..................................... (5,680,689) (12,623,064)
Purchase of Federal Home Loan Bank stock.................. (150,000) (175,600)
Net purchases of premises and equipment................... (59,397) (515,343)
Proceeds from the sale of foreclosed real estate.......... 11,300 --
----------- ------------
Net cash used in investing activities.............. (5,365,081) (14,579,942)
----------- ------------
Cash flows from financing activities:
Net increase in deposits.................................. 5,914,149 12,178,487
Cash dividends paid....................................... (126,949) (253,523)
Net increase in Federal Home Loan Bank advances........... 3,000,000 4,000,000
Issuance of common stock.................................. 3,300 4,600
Net cash provided by financing activities.......... 8,790,500 15,929,564
----------- ------------
Net increase in cash and cash equivalents.......... 5,114,804 2,641,459
Cash and cash equivalents at beginning of period.......... 4,494,041 3,221,715
----------- ------------
Cash and cash equivalents at end of period................ $ 9,608,845 $ 5,863,174
=========== ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest.................. $ 3,443,360 $ 2,816,027
=========== ============
Cash paid during the period for income taxes.............. $ 440,097 $ 403,000
=========== ============
Supplemental disclosure of noncash investing activity:
Transfer from loans to foreclosed real estate............. $ 424,054 $ 47,398
=========== ============
Transfer from foreclosed real estate to loans............. $ 386,906 $ 52,591
=========== ============

See Accompanying Notes to Condensed Consolidated Financial Statements.
F-53

CF BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General. In the opinion of management, the accompanying condensed
consolidated financial statements of CF Bancshares, Inc. (the "Company") contain
all adjustments (consisting principally of normal recurring accruals) necessary
to present fairly the financial position at September 30, 2001, and the results
of operations and the cash flows for the nine-month periods ended September 30,
2001 and 2000. The results of operations for the nine months ended September 30,
2001 are not necessarily indicative of the results to be expected for the full
year.

2. LOAN IMPAIRMENT AND LOSSES

At September 30, 2001 and 2000 management had not identified any impaired
loans. The activity in the allowance for loan losses is as follows:

SEPTEMBER 30,
--------------------
2001 2000
-------- --------

Balance at beginning of period.............................. $289,041 $282,257
Provision for loan losses................................... 145,425 69,760
Loan charge-offs............................................ (89,571) (84,193)
Recoveries.................................................. 13,000 7,000
-------- --------
Balance at end of period.................................... $357,895 $274,824
======== ========

3. EARNINGS PER SHARE ("EPS")

The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations ($ in thousands, except per
share amounts).

NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------------------
2001 2000
----------------------------- -----------------------------
WEIGHTED- PER WEIGHTED- PER
AVERAGE SHARE AVERAGE SHARE
EARNINGS SHARES AMOUNT EARNINGS SHARES AMOUNT
-------- --------- ------ -------- --------- ------

Basic EPS:
Net earnings available to
common stockholders..... $748 169,070 $4.42 $610 168,923 $3.61
==== ===== ==== =====
Effect of dilutive
securities:
Incremental shares from
assumed exercise of
options................. -- 248
------- -------
Diluted EPS:
Net earnings available to
common stockholders and
assumed conversions..... $748 169,070 $4.42 $610 169,171 $3.61
==== ======= ===== ==== ======= =====

4. REGULATORY MATTERS

The Savings Bank is subject to various regulatory capital requirements
administered by various regulatory banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Company's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Savings Bank must meet specific capital guidelines that

F-54

CF BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED) -- (CONTINUED)

involve quantitative measures of the Savings Bank's assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Savings Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Savings Bank to maintain minimum amounts and percentages (set forth
in the table below) of total and Tier I capital (as defined in the regulations)
to risk-weighted assets (as defined), and of Tier I capital (as defined) to
average assets (as defined). Management believes, at September 30, 2001, that
the Savings Bank meets all capital adequacy requirements to which it is subject.

As of September 30, 2001, the most recent notification from the regulatory
authorities categorized the Savings Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Savings Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage percentages as set forth in the table. There are
no conditions or events since that notification that management believes have
changed the Savings Bank's category. The Savings Bank's actual capital amounts
and percentages are also presented in the table (dollars in thousands).

TO BE
WELL CAPITALIZED
MINIMUM FOR UNDER PROMPT
CAPITAL ADEQUACY CORRECTIVE ACTION
ACTUAL PURPOSES PROVISIONS
-------------- ----------------- ------------------
AMOUNT % AMOUNT % AMOUNT %
------ ----- -------- ------ -------- -------

AT SEPTEMBER 30, 2001:
Total capital (to Risk-Weighted
Assets).......................... $8,080 12.13% $5,330 8.00% $6,662 10.00%
Tier I Capital (to Risk-Weighted
Assets).......................... 7,722 11.59 2,665 4.00 3,997 6.00
Tier I Capital (to Average
Assets).......................... 7,722 7.75 3,985 4.00 4,981 5.00

5. MERGER

F-55

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

SUBJECT TO COMPLETION, DATED FEBRUARY 28, 2002

3,000,000 SHARES

(BANCORP LOGO)

COMMON STOCK

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

PROSPECTUS
--------------------------------

Sandler O'Neill & Partners, L.P. Trident Securities

, 2002

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

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The estimated expenses of the sale of shares of The Banc Corporation common
stock, excluding underwriting expenses, are as follows:

Registration fee............................................ $
Printing costs..............................................
Legal fees and expenses.....................................
Accounting fees and expenses................................
Miscellaneous...............................................
------
Total.................................................. $
======

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

THE BANC CORPORATION

Section 102(b)(7) of Delaware law grants corporations the right to limit or
eliminate the personal liability of their directors in certain circumstances in
accordance with provisions therein set forth. The Banc Corporation's Restated
Certificate of Incorporation contains a provision eliminating or limiting
director liability to The Banc Corporation and its stockholders for monetary
damages arising from acts or omissions in the director's capacity as a director.
The provision does not, however, eliminate or limit the personal liability of a
director

- for any breach of such director's duty of loyalty to The Banc Corporation
or its stockholders.

- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law.

- under the Delaware statutory provision making directors personally
liable, under a negligence standard, for unlawful dividends or unlawful
stock purchases or redemptions.

- for any transaction from which the director derived an improper personal
benefit. This provision offers persons who serve on the board of
directors of The Banc Corporation protection against awards of monetary
damages resulting from breaches of their duty of care (except as
indicated above). As a result of this provision, the ability of The Banc
Corporation or a stockholder thereof to successfully prosecute an action
against a director for a breach of his duty of care is limited. However,
the provision does not affect the availability of equitable remedies such
as an injunction or rescission based upon a director's breach of his duty
of care. The SEC has taken the position that the provision will have no
effect on claims arising under the federal securities laws.

Section 145 of Delaware law grants corporations the right to indemnify
their directors, officers, employees and agents in accordance with the
provisions therein set forth. The Banc Corporation's Bylaws provide for
mandatory indemnification rights, subject to limited exceptions, to any
director, officer, employee, or agent of The Banc Corporation who, by reason of
the fact that he or she is a director, officer, employee, or agent of The Banc
Corporation, is involved in a legal proceeding of any nature. Such
indemnification rights include reimbursement for expenses incurred by such
director, officer, employee, or agent in advance of the final disposition of
such proceeding in accordance with the applicable provisions of Delaware law.

The Banc Corporation has entered into agreements with all of its directors
and its executive officers pursuant to which The Banc Corporation has agreed to
indemnify such directors and executive officers against liability incurred by
them by reason of their services of a director to the fullest extent allowable
under applicable law.
II-1

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Effective February 12, 1999, The Banc Corporation issued 1,379,958 shares
of its common stock in a transaction not registered under the Securities Act of
1933. Such shares were issued to the former shareholders of Emerald Coast
Bancshares, Inc. in connection with The Banc Corporation's acquisition by merger
of Emerald Coast Bancshares. Such shares were issued in reliance upon the
exemption provided by Section 4(2) of the Securities Act in a transaction not
involving a public offering due to, among other things, the sophistication,
particularly with respect to financial institutions, of the former Emerald
shareholders, their relatively small number, and the fact that the offering, by
its very nature, was limited to the Emerald Coast Bancshares shareholders. The
former Emerald Coast Bancshares shareholders received approximately 2.03534
shares of The Banc Corporation common stock for each share of Emerald Coast
Bancshares common stock they owned, the aggregate value of which was
approximately $15,179,538 at the time of the closing of the transaction.

ITEM 16. EXHIBITS

Exhibits:

EXHIBIT NO. EXHIBIT
----------- -------

(1)-1 -- Form of Underwriting Agreement by and between The Banc
Corporation and Sandler O'Neill & Partners, LP.
(2)-1 -- Reorganization Agreement and Plan of Merger, dated as of
August 30, 2001, by and between The Banc Corporation, TBC
Merger Corporation, The Bank, Citizens Federal Savings Bank
of Port St. Joe and CF Bancshares, Inc., filed as Annex A to
The Banc Corporation's Registration Statement on Form S-4
(Registration No. 333-69734) is hereby incorporated herein
by reference.
(3)-1 -- Restated Certificate of Incorporation of The Banc
Corporation, filed as Exhibit (3)-1 to the Corporation's
Registration Statement on Form S-4 (Registration No.
333-58493), is hereby incorporated herein by reference.
(3)-2 -- Bylaws of The Banc Corporation, filed as Exhibit (3)-2 to
The Banc Corporation's Registration Statement on Form S-4
(Registration No. 333-58493), is hereby incorporated herein
by reference.
(4)-1 -- Amended and Restated Declaration of Trust, dated as of
September 7, 2000, by and among State Street Bank and Trust
Company of Connecticut, National Association, as
Institutional Trustee, The Banc Corporation, as Sponsor,
David R. Carter and James A. Taylor, as Administrators,
filed as Exhibit (4)-1 to The Banc Corporation's Annual
Report on Form 10-K for the year ended December 31, 2000, is
hereby incorporated herein by reference.
(4)-2 -- Guarantee Agreement, dated as of September 7, 2000, by and
between The Banc Corporation and State Street Bank and Trust
Company of Connecticut, National Association, filed as
Exhibit (4)-2 to The Banc Corporation's Annual Report on
Form 10-K for the year ended December 31, 2000, is hereby
incorporated herein by reference.
(4)-3 -- Indenture, dated as of September 7, 2000, by and among The
Banc Corporation as issuer and State Street Bank and Trust
Company of Connecticut, National Association, as Trustee,
filed as Exhibit (4)-3 to The Banc Corporation's Annual
Report on Form 10-K for the year ended December 31, 2000, is
hereby incorporated herein by reference.
(4)-4 -- Placement Agreement, dated as of August 31, 2000, by and
among The Banc Corporation, TBC Capital Statutory Trust II,
Keefe Bruyette & Woods, Inc., and First Tennessee Capital
Markets, filed as Exhibit (4)-4 to The Banc Corporation's
Annual Report on Form 10-K for the year ended December 31,
2000, is hereby incorporated herein by reference.
(4)-5 -- Amended and Restated Declaration of Trust, dated as of July
16, 2001, by and among The Banc Corporation, The Bank of New
York, David R. Carter, and James A. Taylor, Jr. filed as
Exhibit (4)-5 to The Banc Corporation's Registration
Statement on Form S-4 (Registration No. 333-69734) is hereby
incorporated herein by reference.

II-2

EXHIBIT NO. EXHIBIT
----------- -------

(4)-6 -- Guarantee Agreement, dated as of July 16, 2001, by The Banc
Corporation and The Bank of New York filed as Exhibit (4)-6
to The Banc Corporation's Registration Statement on Form S-4
(Registration No. 333-69734) is hereby incorporated herein
by reference.
(4)-7 -- Indenture, dated as of July 16, 2001, by The Banc
Corporation and The Bank of New York filed as Exhibit (4)-7
to The Banc Corporation's Registration Statement on Form S-4
(Registration No. 333-69734) is hereby incorporated herein
by reference.
(4)-8 -- Placement Agreement, dated as of June 28, 2001, among TBC
Capital Statutory Trust III, and The Banc Corporation and
Sandler O'Neill & Partners, L.P. filed as Exhibit (4)-8 to
The Banc Corporation's Registration Statement on Form S-4
(Registration No. 333-69734) is hereby incorporated herein
by reference.
(5) -- Opinion of Haskell Slaughter Young & Rediker, L.L.C. as to
the legality of the shares of The Banc Corporation common
stock being registered.
10-1 -- Second Amended and Restated 1998 Stock Incentive Plan of The
Banc Corporation, filed as Annex A to The Banc Corporation's
Proxy Statement for the 2000 Annual Meeting of Shareholders
is hereby incorporated herein by reference.
10-2 -- Commerce Bank of Alabama Incentive Stock Compensation Plan,
filed as Exhibit (4)-3 to The Banc Corporation's
Registration Statement on Form S-8, dated February 22, 1999
(Registration No. 333-72747), is hereby incorporated herein
by reference.
(10)-3 -- The Banc Corporation 401(k) Plan, filed as Exhibit (4)-2 to
The Banc Corporation's Registration Statement on Form S-8,
dated January 21, 1999 (Registration No. 333-7953), is
hereby incorporated herein by reference.
(10)-4 -- Employment Agreement by and between The Banc Corporation and
James A. Taylor, filed as Exhibit (10)-1 to The Banc
Corporation's Registration Statement on Form S-1
(Registration No. 333-67011), is hereby incorporated herein
by reference.
(10)-5 -- Deferred Compensation Agreement by and between The Banc
Corporation and James A. Taylor, filed as Exhibit (10)-2 to
The Banc Corporation's Registration Statement on Form S-1
(Registration No. 333-67011), is hereby incorporated herein
by reference.
(10)-6 -- Employment Agreement between the Corporation and W. T.
Campbell, Jr., dated as of October 30, 1999, filed as
Exhibit (10)-4 to The Banc Corporation's Registration
Statement on Form S-1 (Registration No. 333-67011), is
hereby incorporated herein by reference.
(10)-7 -- Employment Agreement, dated as of September 19, 2000, by and
between The Banc Corporation and James A. Taylor, Jr., filed
as Exhibit (10)-8 to The Banc Corporation's Annual Report on
Form 10-K for the year ended December 31, 2001, is hereby
incorporated herein by reference.
(10)-8 -- Employment Agreement, dated as of January 1, 1999, by and
between The Bank and Marie Swift filed as Exhibit (10)-9 to
The Banc Corporation's Annual Report on Form 10-K for the
year ended December 31, 1998, is hereby incorporated herein
by reference.
(10)-9 -- Form of Deferred Compensation Agreement by and between The
Banc Corporation and the individuals listed on Schedule A
attached thereto filed as Exhibit (10)-11 to The Banc
Corporation's Annual Report on Form 10-K for the year ended
December 31, 1999, is hereby incorporated herein by
reference.
(10)-10 -- Form of Deferred Compensation Agreement by and between The
Bank and the individuals listed on Schedule A attached
thereto filed as Exhibit (10)-11 to The Banc Corporation's
Annual Report on Form 10-K for the year ended December 31,
1999, is hereby incorporated by reference herein.
(10)-11 -- Employment Agreement dated as of September 19, 2000, by and
between The Banc Corporation and David R. Carter, filed as
Exhibit (10)-14 to The Banc Corporation's Annual Report on
Form 10-K for the year ended December 31, 2001, is hereby
incorporated herein by reference.

II-3

EXHIBIT NO. EXHIBIT
----------- -------

(10)-12 -- Employment Agreement, dated as of July 13, 2000 by and
between The Banc Corporation and Don J. Giardina, filed as
Exhibit 10 to The Banc Corporation's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2001, is
hereby incorporated herein by reference.
(10)-13 -- Employment Agreement, dated as of January 16, 2001, by and
between The Banc Corporation and F. Hampton McFadden, Jr.+
(21) -- Subsidiaries of The Banc Corporation.+
(23)-1 -- Consent of Ernst & Young LLP.
(23)-2 -- Consent of Hacker, Johnson & Smith, P.A.
(24) -- Powers of Attorney. See the signature page to this
Registration Statement.

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

+Previously filed.

ITEM 17. UNDERTAKINGS

(1) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

(2) The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Birmingham, State of
Alabama on February 28, 2002.

THE BANC CORPORATION

By: /s/ JAMES A. TAYLOR
------------------------------------
James A. Taylor
Chairman of the Board and
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

SIGNATURE TITLE DATE
--------- ----- ----

* Chairman of the Board and Chief February 28, 2002
------------------------------------------------ Executive Officer (Principal Executive
James A. Taylor Officer)

* Executive Vice President, Chief February 28, 2002
------------------------------------------------ Financial Officer and Director
David R. Carter (Principal Financial and Accounting
Officer)

* Vice Chairman February 28, 2002
------------------------------------------------
James Mailon Kent, Jr.

* Vice Chairman February 28, 2002
------------------------------------------------
Larry D. Striplin, Jr.

* Director February 28, 2002
------------------------------------------------
James R. Andrews, M.D.

* Director February 28, 2002
------------------------------------------------
Neal R. Berte, Ed.D

* Director February 28, 2002
------------------------------------------------
W. T. Campbell, Jr.

* Director February 28, 2002
------------------------------------------------
Peter N. DiChiara

* Director February 28, 2002
------------------------------------------------
K. Earl Durden

* Director February 28, 2002
------------------------------------------------
Don J. Giardina

* Director February 28, 2002
------------------------------------------------
John F. Gittings

II-5

SIGNATURE TITLE DATE
--------- ----- ----

* Director February 28, 2002
------------------------------------------------
Steven C. Hays

* Director February 28, 2002
------------------------------------------------
Thomas E. Jernigan, Jr.

* Director February 28, 2002
------------------------------------------------
Randall E. Jones

* Director February 28, 2002
------------------------------------------------
Mayer Mitchell

* Director February 28, 2002
------------------------------------------------
Ronald W. Orso, M.D.

* Director February 28, 2002
------------------------------------------------
Harold W. Ripps

* Director February 28, 2002
------------------------------------------------
Jerry M. Smith

* Director February 28, 2002
------------------------------------------------
Michael E. Stephens

* Director February 28, 2002
------------------------------------------------
Marie Swift

* Director February 28, 2002
------------------------------------------------
James A. Taylor, Jr.

* Director February 28, 2002
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T. Mandell Tillman

* Director February 28, 2002
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Johnny Wallis

*By: /s/ JAMES A. TAYLOR, JR.
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James A. Taylor, Jr.
Attorney-in-fact

II-6