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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

Commission file number 0-25033

The Banc Corporation

17 North 20th Street, Birmingham, Alabama 35203

(205) 326-2265

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

Yes [X]        No [   ]

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

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

See Notes to Consolidated Financial Statements.

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

See Notes to Consolidated Financial Statements.

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

See Notes to Consolidated Financial Statements.

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Notes to Consolidated Financial Statements

NOTE 1 — BASIS OF PRESENTATION

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

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

Reclassification

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

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

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

At June 30, 2002, the Corporation had unamortized goodwill in the amount of $6,189,000, which is subject to the provisions of Statements 141 and 142. The adoption of Statement 142 is expected to result in an annual increase in income before income taxes of $192,000 and an increase in net income of approximately $127,000, or approximately $.01 per share in 2002. During the first quarter of 2002, the Corporation performed the first of the required impairment tests of goodwill and intangible assets with indefinite lives. No impairment was noted. The following table sets forth the reconcilement of net income and earnings per share excluding goodwill amortization for the six-month period ended June 30, 2001 compared to the six-month period ended June 30, 2002 (in thousands, except per share data):

NOTE 3 — BUSINESS COMBINATION

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

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

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The following unaudited summary information presents the consolidated results of operations of the Corporation on a pro forma basis, as if CF Bancshares had been acquired on January 1, 2001. The pro forma summary does not necessarily reflect the results of operations that would have occurred if the acquisition had occurred as of the beginning of the period presented, or the results that may occur in the future (in thousands, except per share data).

NOTE 4 — SEGMENT REPORTING

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

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The Corporation evaluates performance and allocates resources based on profit or loss from operations. There are no material intersegment sales or transfers. Net interest income is used as the basis for performance evaluation rather than its components, total interest income and total interest expense. The accounting policies used by each reportable segment are the same as those discussed in Note 1 to the Consolidated Financial Statements included in the Form 10-K for the year ended December 31, 2001. All costs have been allocated to the reportable segments. Therefore, combined amounts agree to the consolidated totals (in thousands).

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NOTE 5 — NET INCOME PER SHARE

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

NOTE 6 — COMPREHENSIVE INCOME

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

NOTE 7 — INCOME TAXES

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

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

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

On July 16, 2001, TBC Capital Statutory Trust III (“TBC Capital III”), a Delaware business trust established by the Corporation, received $16,000,000 in proceeds in exchange for $16,000,000 principal amount of TBC Capital III’s variable rate cumulative trust preferred securities in a pooled trust preferred private placement. The proceeds were used to purchase an equal principal amount of variable rate subordinated debentures of the Corporation. The stated interest rate is the six-month LIBOR plus 375 basis points. The interest rate on the securities reprices every six months and has a 12% per annum ceiling for the first ten years. As of the date of

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issuance, the interest rate on the securities was 7.57%. As of June 30, 2002, the interest rate on these securities was 5.74%.

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

NOTE 9 — STOCKHOLDERS’ EQUITY

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

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

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

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

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

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Basis of Presentation

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

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

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

Financial Overview

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

Results of Operations

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

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

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

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

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

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

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