Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________________ TO _________________
Commission File number 0-25033
The Banc Corporation
---------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 63-1201350
------------------------------- --------------------------------
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation)
17 North 20th Street, Birmingham, Alabama 35203
-----------------------------------------------
(Address of Principal Executive Offices)
(205) 327-3600
---------------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of March 31, 2004
- ---------------------------------- ---------------------------------------
Common stock, $.001 par value 17,714,657
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE BANC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS)
MARCH 31, DECEMBER 31,
2004 2003
------------------------------
(UNAUDITED)
ASSETS
Cash and due from banks $ 40,192 $ 31,679
Interest-bearing deposits in other banks 48,460 11,869
Federal funds sold 9,000 -
Investment securities available for sale 170,334 141,601
Mortgage loans held for sale 5,288 6,408
Loans, net of unearned income 844,749 856,941
Less: Allowance for loan losses (22,611) (25,174)
----------- ------------
Net loans 822,138 831,767
----------- ------------
Premises and equipment, net 58,427 57,979
Accrued interest receivable 5,159 5,042
Stock in FHLB and Federal Reserve Bank 10,249 8,499
Other assets 79,490 76,782
----------- ------------
TOTAL ASSETS $ 1,248,737 $ 1,171,626
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 86,753 $ 86,100
Interest-bearing 843,820 803,835
----------- ------------
TOTAL DEPOSITS 930,573 889,935
Advances from FHLB 156,090 121,090
Other borrowed funds 14,971 10,829
Long term debt 1,873 1,925
Subordinated debentures 31,959 31,959
Accrued expenses and other liabilities 11,184 15,766
----------- ------------
TOTAL LIABILITIES 1,146,650 1,071,504
Stockholders' Equity
Preferred stock, par value $.001 per share; authorized 5,000,000 shares;
shares issued 62,000 at March 31, 2004 and December 31, 2003 - -
Common stock, par value $.001 per share; authorized 25,000,000 shares;
shares issued 18,018,202 and 18,018,202, respectively; outstanding
17,714,657 and 17,694,595, respectively 18 18
Surplus - preferred 6,193 6,193
- common stock 68,397 68,363
Retained Earnings 30,079 28,851
Accumulated other comprehensive income (loss) 349 (180)
Treasury stock, at cost (430) (501)
Unearned ESOP stock (1,920) (1,974)
Unearned restricted stock (599) (648)
----------- ------------
TOTAL STOCKHOLDERS' EQUITY 102,087 100,122
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,248,737 $ 1,171,626
=========== ============
See Notes to Condensed Consolidated Financial Statements.
THE BANC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
MARCH 31,
---------------------
2004 2003
------- -------
INTEREST INCOME
Interest and fees on loans $13,567 $19,844
Interest on investment securities
Taxable 1,713 718
Exempt from Federal income tax 15 92
Interest on federal funds sold 34 103
Interest and dividends on other investments 165 196
------- -------
Total interest income 15,494 20,953
INTEREST EXPENSE
Interest on deposits 4,277 6,754
Interest on other borrowed funds 1,666 2,186
Interest on subordinated debentures 626 636
------- -------
Total interest expense 6,569 9,576
------- -------
NET INTEREST INCOME 8,925 11,377
Provision for loan losses - 1,200
------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 8,925 10,177
NONINTEREST INCOME
Service charges and fees on deposits 1,391 1,623
Mortgage banking income 404 875
Gain on sale of securities 391 26
Gain on sale of branches 739 2,246
Other income 1,049 874
------- -------
TOTAL NONINTEREST INCOME 3,974 5,644
NONINTEREST EXPENSES
Salaries and employee benefits 5,586 6,318
Occupancy, furniture and equipment expense 2,164 2,008
Other 3,602 3,104
------- -------
TOTAL NONINTEREST EXPENSES 11,352 11,430
------- -------
Income before income taxes 1,547 4,391
INCOME TAX EXPENSE 319 1,377
------- -------
NET INCOME $ 1,228 $ 3,014
======= =======
BASIC NET INCOME PER SHARE $ 0.07 $ 0.17
======= =======
DILUTED NET INCOME PER SHARE $ 0.07 $ 0.17
======= =======
AVERAGE COMMON SHARES OUTSTANDING 17,559 17,450
AVERAGE COMMON SHARES OUTSTANDING, ASSUMING DILUTION 18,572 17,618
See Notes to Condensed Consolidated Financial Statements.
THE BANC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31
--------------------------
2004 2003
--------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 4,169 $ (9,882)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in interest-bearing deposits in other banks (36,591) (21,978)
Net increase in federal funds sold (9,000) (25,000)
Proceeds from sales of securities available for sale 59,269 13,419
Proceeds from maturities of investment securities available for sale 23,434 8,331
Purchases of investment securities available for sale (111,104) (18,411)
Net decrease (increase) in loans 5,209 (13,277)
Purchases of premises and equipment (1,426) (654)
Net cash paid in branch sale (6,626) (31,949)
Other investments (6,750) -
--------- ---------
Net cash used by investing activities (83,585) (89,519)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposit accounts 48,839 86,789
Net increase (decrease) in FHLB advances and other borrowed funds 39,142 (255)
Proceeds received on long term debt - 2,100
Payments made on long term debt (52) (17)
Proceeds from sale of common stock - 24
--------- ---------
Net cash provided by financing activities 87,929 88,641
--------- ---------
Net increase(decrease) in cash and due from banks 8,513 (10,760)
Cash and due from banks at beginning of period 31,679 45,365
--------- ---------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 40,192 $ 34,605
========= =========
See Notes to Condensed Consolidated Financial Statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions for Form 10-Q, and, therefore, do
not include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. For a summary of significant
accounting policies that have been consistently followed, see Note 1 to the
Consolidated Financial Statements included in the Corporation's Annual Report on
Form 10-K for the year ended December 31, 2003. It is management's opinion that
all adjustments, consisting of only normal and recurring items necessary for a
fair presentation, have been included. Operating results for the three-month
period ended March 31, 2004, are not necessarily indicative of the results that
may be expected for the year ending December 31, 2004.
The statement of financial condition at December 31, 2003, 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.
NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS
In November 2002, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others
(Interpretation 45). Interpretation 45 requires certain guarantees to be
recorded at fair value. In general, Interpretation 45 applies to contracts or
indemnification agreements that contingently require the guarantor to make
payments to the guaranteed party based on changes in an underlying that is
related to an asset, liability or equity security of the guaranteed party. The
initial recognition and measurement provisions of Interpretation 45 are
applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. On January 1, 2003, the Corporation began recording a
liability and an offsetting asset for the fair value of any standby letters of
credit issued by the Corporation beginning January 1, 2003. The impact of this
new accounting standard was not material to the financial condition or results
of operations of the Corporation. Interpretation 45 also requires new
disclosures, even when the likelihood of making any payments under the guarantee
is remote. These disclosure requirements were effective for financial statements
of interim or annual periods ending after December 15, 2002.
The Corporation, as part of its ongoing business operations, issues financial
guarantees through its banking subsidiary in the form of financial and
performance standby letters of credit. Standby letters of credit are contingent
commitments issued by the Corporation generally to guarantee the performance of
a customer to a third party. A financial standby letter of credit is a
commitment by the Corporation to guarantee a customer's repayment of an
outstanding loan or debt instrument. In a performance standby letter of credit,
the Corporation guarantees a customer's performance under a contractual
nonfinancial obligation and receives a fee for this guarantee. The Corporation
has recourse against the customer for any amount it is required to pay to a
third party under a standby letter of credit. Revenues are recognized ratably
over the life of the standby letter of credit. At March 31, 2004 and December
31, 2003, the Corporation had standby letters of credit outstanding with
maturities ranging from less than one year to three years. The maximum potential
amount of future payments the Corporation could be required to make under its
standby letters of credit were $18,800,000 and $19,100,000 at March 31, 2004 and
December 31, 2003, which represents the Corporation's maximum credit risk. At
March 31, 2004 and December 31, 2003, the Corporation had no significant
liabilities or receivables associated with standby letter of credit agreements
entered into subsequent to December 31, 2002 as a result of the Corporation's
adoption of Interpretation 45 at January 1, 2003. Standby letter of credit
agreements entered into prior to January 1, 2003, have a carrying value of
zero. The Corporation holds collateral to support standby letters of credit when
deemed necessary.
In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51 ("FIN 46"). FIN 46
addresses whether business enterprises must consolidate the financial statements
of entities known as "variable interest entities." A variable interest entity is
defined by Interpretation 46 to be a business entity which has one or both of
the following characteristics: (1) the equity investment at risk is not
sufficient to permit the entity to finance its activities without additional
support from other parties, which is provided through other interests that will
absorb some or all of the expected losses at the entity; and (2) the equity
investors lack one or more of the following essential characteristics of a
controlling financial interest: (a) direct or indirect ability to make decisions
about the entity's activities through voting rights or similar rights, (b) the
obligation to absorb the expected losses of the entity if they occur, which
makes it possible for the entity to finance its activities, or (c) the right to
receive the expected residual returns of the entity if they occur, which is the
compensation for risk of absorbing expected losses.
In previous financial statements, the Corporation had consolidated two trusts
through which it had issued trust preferred securities ("TPS") and reported the
TPS as "guaranteed preferred beneficial interests in the Corporation's
subordinated debentures" in the statements of financial condition. In December
2003, the FASB issued a revision to FIN 46 to clarify certain provisions which
affected the accounting for TPS. As a result of the provisions in revised FIN
46, the trusts should be deconsolidated, with the Corporation accounting for its
investment in the trusts as assets, its subordinated debentures as debt, and the
interest paid thereon as interest expense. The Corporation had always classified
the TPS as debt and the dividends as interest but eliminated its common stock
investment and dividends received from the trust. FIN 46 permits and encourages
restatement of prior period results, and accordingly, all financial statements
presented have been adjusted to give effect to the revised provisions of FIN 46.
While these changes had no effect on previously reported net interest margin,
net income or earnings per share, they increased total interest income and
interest expense, as well as total assets and total liabilities. (See Note 8)
NOTE 3 - BRANCH SALES
On February 6, 2004, the Corporation's banking subsidiary sold its Morris,
Alabama branch, which had assets of approximately $1,037,000 and liabilities of
$8,217,000. The Corporation realized a $739,000 pre-tax gain on the sale.
In August 2003, the Corporation sold seven branches of The Bank, known as the
Emerald Coast branches of the Bank, serving the markets from Destin to Panama
City, Florida for a $46,800,000 deposit premium. These branches had assets of
approximately $234,000,000 and liabilities of $209,000,000. The Corporation
realized a $46,018,000 pre-tax gain on the sale.
On March 13, 2003, the Corporation's banking subsidiary sold its Roanoke,
Alabama branch, which had assets of approximately $9,800,000 and liabilities of
$44,672,000. The Corporation realized a $2,246,000 pre-tax gain on the sale.
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 eastern
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.
The Corporation evaluates performance and allocates resources based on profit or
loss from operations. There are no material intersegment sales or transfers. Net
interest revenue is used as the basis for performance evaluation rather than its
components, total interest revenue and total interest expense. The accounting
policies used by each reportable segment are the same as those discussed in Note
1 to the Consolidated Financial Statements included in the Form 10-K for the
year ended December 31, 2003. All costs have been allocated to the reportable
segments. Therefore, combined amounts agree to the consolidated totals (in
thousands).
Florida
Alabama Region Region Combined
--------------------------------------------------
Three months ended March 31, 2004
Net interest income $ 6,327 $ 2,598 $ 8,925
Provision for loan losses 972 (972) -
Noninterest income(1) 3,604 370 3,974
Noninterest expense(2) 8,875 2,477 11,352
Income tax (benefit) expense (104) 423 319
Net income 188 1,040 1,228
Total assets(1) 1,034,729 214,008 1,248,737
Three months ended March 31, 2003
Net interest income $ 6,089 $ 5,288 $ 11,377
Provision for loan losses 1,106 94 1,200
Noninterest income(1) 4,742 902 5,644
Noninterest expense(2) 7,578 3,852 11,430
Income tax expense 686 691 1,377
Net income 1,461 1,553 3,014
Total assets(1) 945,827 500,172 1,446,999
(1) See Note 3 concerning branch sales. Also, in January 2004, certain loans
were transferred from the Florida segment to our special assets department
which is included in the Alabama segment.
(2) Noninterest expense for the Alabama region includes all expenses for the
holding company, which have not been prorated to the Florida region.
NOTE 5 - NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted net income
per common share (in thousands, except per share amounts):
Three Months Ended
March 31
---------------------
2004 2003
---------------------
Numerator:
For basic and diluted, net income $ 1,228 $ 3,014
=====================
Denominator:
For basic, weighted average common shares
outstanding 17,559 17,450
Effect of dilutive stock options and convertible preferred 1,013 168
---------------------
Average diluted common shares outstanding 18,572 17,618
=====================
Basic and diluted net income per share $ .07 $ .17
=====================
NOTE 6 - COMPREHENSIVE INCOME
Total comprehensive income was $1,756,000 and $2,850,000 for the three-month
periods ended March 31, 2004 and 2003, respectively. Total comprehensive income
consists of net income and the unrealized gain or loss on the Corporation's
available for sale securities portfolio arising during the period.
NOTE 7 - INCOME TAXES
The primary difference between the effective tax rate and the federal statutory
rate in 2004 and 2003 is due to certain tax-exempt income.
NOTE 8 - JUNIOR SUBORDINATED DEBENTURES
The Corporation has sponsored two trusts, TBC Capital Statutory Trust II ("TBC
Capital II") and TBC Capital Statutory Trust III ("TBC Capital III"), of which
100% of the common equity is owned by the Corporation. The trusts were formed
for the purpose of issuing Corporation-obligated mandatory redeemable trust
preferred securities to third-party investors and investing the proceeds from
the sale of such trust preferred securities solely in junior subordinated debt
securities of the Corporation (the debentures). The debentures held by each
trust are the sole assets of that trust. Distributions on the trust preferred
securities issued by each trust are payable semi-annually at a rate per annum
equal to the interest rate being earned by the trust on the debentures held by
that trust. The trust preferred securities are subject to mandatory redemption,
in whole or in part, upon repayment of the debentures. The Corporation has
entered into agreements which, taken collectively, fully and unconditionally
guarantee the trust preferred securities subject to the terms of each of the
guarantees. The debentures held by the TBC Capital II and TBC Capital III
capital trusts are first redeemable, in whole or in part, by the Corporation on
September 7, 2007 and July 25, 2006, respectively.
As a result of applying the provisions of FIN 46, governing when an equity
interest should be consolidated, the Corporation was required to deconsolidate
these subsidiary trusts from its financial statements in the fourth quarter of
2003. The deconsolidation of the net assets and results of operations of the
trusts had virtually no impact on the Corporation's financial statements or
liquidity position, since the Corporation continues to be
NOTE 8 - JUNIOR SUBORDINATED DEBENTURES - CONTINUED
obligated to repay the debentures held by the trusts and guarantees repayment of
the trust preferred securities issued by the trusts. The consolidated debt
obligation related to the trusts increased from $31,000,000 to $31,959,000 upon
deconsolidation, with the difference representing the Corporation's common
ownership interest in the trusts.
The trust preferred securities held by the trusts qualify as Tier 1 capital for
the Corporation under Federal Reserve Board guidelines. As a result of the
issuance of FIN 46, the Federal Reserve Board is currently evaluating whether
deconsolidation of the trusts will affect the qualification of the capital
securities as Tier 1 capital. If it were determined that the capital securities
no longer qualify as Tier 1 capital, the effect would be material to the
Corporation's regulatory capital levels. However, this would not lower the
Corporation's Tier 1 capital levels below the minimum standards to be considered
"well capitalized" under regulatory capital standards.
Consolidated debt obligations related to subsidiary trusts holding solely
debentures of the Corporation follow:
March 31, 2004 December 31, 2003
----------------------------------
(In thousands)
10.6% junior subordinated debentures owed to TBC Capital Statutory
Trust II due September 7, 2030 $15,464 $15,464
6-month LIBOR plus 3.75% junior subordinated debentures owed to TBC Capital
Statutory Trust III due July 25, 2031 16,495 16,495
------- -------
Total junior subordinated debentures owed to unconsolidated
subsidiary trusts $31,959 $31,959
======= =======
As of March 31, 2004 and December 31, 2003, the interest rate on the $16,495,000
subordinated debentures was 4.96% and 4.90%, respectively.
Currently, the Corporation must obtain regulatory approval prior to paying any
dividends on these trust preferred securities. The Federal Reserve approved the
timely payment of the Corporation's semi-annual distributions on its trust
preferred securities in January and March 2004.
NOTE 9 - STOCKHOLDERS' EQUITY
In September 2000, the Corporation's board of directors approved a stock buyback
plan in an amount not to exceed $10,000,000. As of March 31, 2004, there were
65,448 shares held in treasury at a cost of $430,000.
On April 1, 2002, the Corporation issued 157,500 shares of restricted common
stock to certain directors and key employees pursuant to the Second Amended and
Restated 1998 Stock Incentive Plan. Under the Restricted Stock Agreements, the
stock may not be sold or assigned in any manner for a five-year period that
began on April 1, 2002. During this restricted period, the participant is
eligible to receive dividends and exercise voting privileges. The restricted
stock also has a corresponding vesting period, with one-third vesting at the end
of each of the third, fourth and fifth years. The restricted stock was issued at
$7.00 per share, or $1,120,000, and classified as a contra-equity account,
"Unearned restricted stock", in stockholders' equity. During 2003, 15,000 shares
of this restricted common stock were forfeited. Restricted shares outstanding as
of March 31, 2004 were 142,500 and the remaining amount in the unearned
restricted stock account is $599,000. This balance is being amortized as expense
as the stock is earned during the restricted period. The amounts of restricted
shares are included in the diluted earnings per share calculation, using the
treasury stock method, until the shares vest.
NOTE 9 - STOCKHOLDERS' EQUITY - (CONTINUED)
Once vested, the shares become outstanding for basic earnings per share. For the
periods ended March 31, 2004 and 2003, the Corporation recognized $50,000 and
$56,000, respectively, 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 March 31, 2004,
the ESOP has been internally leveraged with 273,400 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.
On January 29, 2003, the ESOP trustees finalized a $2,100,000 promissory note to
reimburse the Corporation for the funds used to leverage the ESOP. The
unreleased shares and a guarantee of the Corporation secure the promissory note,
which has been classified as long-term debt on the Corporation's statement of
financial condition. As the debt is repaid, shares are released from collateral
based on the proportion of debt service. Principal payments on the debt are
$17,500 per month for 120 months. The interest rate is adjusted annually to the
Wall Street Journal prime rate. 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 during the period as the shares are earned and committed to be released.
As shares are committed to be released and compensation expense is recognized,
the shares become outstanding for basic and diluted earnings per share
computations. The amount of compensation expense reported by the Corporation is
equal to the average fair value of the shares earned and committed to be
released during the period. Compensation expense that the Corporation recognized
during the periods ended March 31, 2004 and 2003 was $52,000 and $15,000,
respectively. The ESOP shares as of March 31, 2004 were as follows:
March 31,
2004
----------
Allocated shares 28,628
Estimated shares committed to be released 6,675
Unreleased shares 238,097
----------
Total ESOP shares 273,400
==========
Fair value of unreleased shares $1,707,155
==========
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 determines the terms 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 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.
The Corporation has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (Statement 123) which allows an entity to continue to measure
compensation costs for those plans using the intrinsic value-based method of
accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees." The Corporation has elected to follow APB Opinion 25 and related
interpretations in accounting for its employee stock options. Accordingly,
compensation cost for fixed and variable stock-based awards is measured by the
excess, if any, of the fair market price of the
NOTE 9 - STOCKHOLDERS' EQUITY - (CONTINUED)
underlying stock over the amount the individual is required to pay. Compensation
cost for fixed awards is measured at the grant date, while compensation cost for
variable awards is estimated until both the number of shares an individual is
entitled to receive and the exercise or purchase price are known (measurement
date). No option-based employee compensation cost is reflected in net income, as
all options granted had an exercise price equal to the market value of the
underlying common stock on the date of grant. The pro forma information below
was determined as if the Corporation had accounted for its employee stock
options under the fair value method of Statement 123. For purposes of pro forma
disclosures, the estimated fair value of the options is amortized to expense
over the options' vesting period. The Corporation's pro forma information
follows (in thousands except earnings per share information):
For the three-months ended
--------------------------
March 31, March 31,
2004 2003
----------- -----------
Net income:
As reported $ 1,228 $ 3,014
Pro forma 1,121 2,913
Earnings per common share:
As reported $ .07 $ .17
Pro forma .06 .17
Diluted earnings per common share:
As reported $ .07 $ .17
Pro forma .06 .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
options granted during the quarter ended:
March 31,
-------------------
2004 2003
---- ----
Risk free interest rate 3.84% 3.94%
Volatility factor .32 .33
Weighted average life of options 7.0 7.0
Dividend yield 0.00 0.00
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Basis of Presentation
The following is a discussion and analysis of our March 31, 2004 consolidated
financial condition and results of operations for the three-month periods ended
March 31, 2004 (first quarter of 2004) and 2003 (first quarter of 2003). All
significant intercompany accounts and transactions have been eliminated. Our
accounting and reporting policies conform to generally accepted accounting
principles.
This information should be read in conjunction with our unaudited condensed
consolidated financial statements and related notes appearing elsewhere in this
report and the audited consolidated financial statements and related notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", appearing in our Annual Report on Form 10-K for the year ended
December 31, 2003.
Overview
Our principal subsidiary is The Bank, an Alabama-chartered financial institution
headquartered in Birmingham, Alabama which operates 26 banking offices in
Alabama and the eastern 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 unconsolidated
special purpose entities formed solely to issue cumulative trust preferred
securities. MAMG is a real estate management company that manages our
headquarters, our branch facilities and certain other real estate owned by The
Bank.
Our total assets were $1.249 billion at March 31, 2004, an increase of $77
million, or 6.58%, from $1.172 billion as of December 31, 2003. Our total loans,
net of unearned income, were $845 million at March 31, 2004, a decrease of $12
million, or 1.42%, from $857 million as of December 31, 2003. Our total deposits
were $931 million at March 31, 2004, an increase of $41 million, or 4.57%, from
$890 million as of December 31, 2003. Our total stockholders' equity was $102
million at March 31, 2004, an increase of $2 million, or 1.96%, from $100
million as of December 31, 2003.
In March 2003, we sold our branch in Roanoke, Alabama, which had assets of
approximately $9.8 million and liabilities of approximately $44.7 million. We
realized a $2.3 million pre-tax gain on the sale. In August 2003, we sold seven
branches of The Bank, known as the Emerald Coast branches of the Bank, serving
the markets from Destin to Panama City, Florida for a $46.8 million deposit
premium. These branches had assets of approximately $234 million and liabilities
of approximately $209 million. We realized a $46.0 million pre-tax gain on the
sale. On February 6, 2004, we sold our Morris, Alabama branch, which had assets
of approximately $1.0 million and liabilities of $8.2 million, for a $739,000
pre-tax gain. Because of the impact of these sales on our interest-bearing
deposits and our loan portfolio, as well as the impact of the gains on sale on
our net income, there are variations in the comparability between 2004 and 2003
of our financial position and results of operations. Where appropriate, we have
tried to quantify these effects in the discussion that follows.
In January of 2004, we transferred the majority of our nonperforming loans and
approximately $7 million of other problem loans to our special assets
department. Approximately $41.0 million in loans were transferred with the
related allowance for loan loss of $9.8 million. This department is staffed with
nine employees, and is managed by our special assets executive, who has over 18
years of experience in dealing with special assets. By segregating these
relationships, we believe we can better monitor and control our collection
efforts. Segregating these relationships also allows us to accurately monitor
the performance of our individual branches on an ongoing basis without the
influence of these nonperforming and problem relationships. Management is
vigorously pursuing appropriate collection efforts and expects these
nonperforming and problem relationships to decline over the next nine months.
Management reviews the adequacy of the allowance for loan losses on a quarterly
basis. 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's
determination of the adequacy of the allowance for loan losses, which is based
on the factors and risk identification procedures discussed in the following
pages, requires the use of judgments and estimates that may change in the
future. Changes in the factors used by management to determine the adequacy of
the allowance or the availability of new information could cause the allowance
for loan losses to be increased or decreased in future periods. In addition,
bank regulatory agencies, as part of their examination process, may require that
additions or reductions be made to the allowance for loan losses based on their
judgments and estimates.
Results of Operations
Our net income decreased $1.79 million, or 59.26%, to $1.23 million for the
first quarter of 2004 from $3.0 million for the first quarter of 2003. Basic and
diluted net income per share was $.07 and $.17, respectively, for the first
quarter of 2004 and 2003, based on weighted average shares outstanding for the
respective periods. Return on average assets, on an annualized basis, was .41%
for the first quarter of 2004 compared to .85% for the first quarter of 2003.
Return on average stockholders' equity, on an annualized basis, was 4.91% for
the first quarter of 2004 compared to 15.85% for the first quarter of 2003. Book
value per share at March 31, 2004 was $5.41, compared to $5.31 as of December
31, 2003. Tangible book value per share at March 31, 2004 was $4.70, compared to
$4.59 as of December 31, 2003.
The decrease in our net income during the first quarter of 2004 compared to the
first quarter of 2003 is the result of a decline in our net interest margin and
other noninterest income offset by a decline in the provision for loan losses.
The reasons underlying these declines are discussed in the following paragraphs.
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 decreased $2.5 million, or 21.6%, to
$8.9 million for the first quarter of 2004 compared to $11.4 million for the
first quarter of 2003. Net interest income decreased primarily due to a $5.5
million decrease in total interest income offset by a $3.0 decrease in total
interest expense. The decline in total interest income is primarily due to a
$284 million decline in the average volume of loans which is primarily the
result of the sale of certain branches during 2003.
The decline in total interest expense is attributable to a 53 basis point
decline in the average interest rate paid on interest-bearing liabilities and a
$226 million decline in the volume of average interest-bearing liabilities. The
decline in the average interest-bearing liabilities is due to the decline in
deposit volume related to the sale of certain branches during 2003. The average
rate paid on interest-bearing liabilities was 2.60% for the first quarter of
2004, compared to 3.13% for the first quarter of 2003. Our net interest spread
and net interest margin were 3.22% and 3.35%, respectively, for the first
quarter of 2004, compared to 3.51% and 3.61% for the first quarter of 2003.
Average interest-earning assets for the first quarter of 2004 decreased $211
million, or 16.5%, to $1.071 billion from $1.282 billion in the first quarter of
2003. This decrease in average interest-earning assets was offset by a $226
million, or 18.2%, decrease in average interest-bearing liabilities to $1.016
billion for the first quarter of 2004 from $1.242 billion for the first quarter
of 2003. Average interest-earning assets and liabilities decreased due to the
sale of certain branches during 2003. The ratio of average interest-earning
assets to average interest-bearing liabilities was 105.4% and 103.2% for the
first quarters of 2004 and 2003, respectively. Average
interest-bearing assets produced a taxable equivalent yield of 5.82% for the
first quarter of 2004 compared to 6.64% for the first quarter of 2003. The 82
basis point decline in the yield was partially offset by a 53 basis point
decline in the average rate paid on interest-bearing liabilities.
Average Balances, Income, Expense and Rates. The following table depicts, on a
taxable equivalent basis for the periods indicated, certain information related
to our average balance sheet and average yields on assets and average costs of
liabilities. Average yields are calculated by dividing income or expense by the
average balance of the corresponding assets or liabilities. Average balances
have been calculated on a daily basis.
THREE MONTHS ENDED MARCH 31,
----------------------------------------------------------------------------------------
2004 2003
----------------------------------------------------------------------------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE BALANCE EXPENSE RATE
---------- ---------- ---- ---------- ---------- -----
(Dollars in thousands)
ASSETS
Interest-earning assets:
Loans, net of unearned income(1)..... $ 858,225 $ 13,567 6.36% $1,142,333 $ 19,844 7.05%
Investment securities
Taxable............................ 160,538 1,713 4.29 57,982 718 5.02
Tax-exempt(2)...................... 1,316 23 7.03 7,966 139 7.10
--------------------------- ---------------------------
Total investment securities.... 161,854 1,736 4.31 65,948 857 5.27
Federal funds sold................. 14,440 34 .95 35,555 103 1.17
Other investments.................. 36,570 165 1.81 38,598 196 2.06
--------------------------- ---------------------------
Total interest-earning assets.. 1,071,089 15,502 5.82 1,282,434 21,000 6.64
Noninterest-earning assets:
Cash and due from banks.............. 25,852 37,361
Premises and equipment............... 58,018 61,025
Accrued interest and other assets.... 78,153 80,920
Allowance for loan losses............ (25,492) (27,965)
---------- ----------
Total assets................... $1,207,600 $1,433,775
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits...................... $ 237,751 681 1.15 $ 288,826 694 0.97
Savings deposits..................... 30,397 13 0.17 35,928 41 0.46
Time deposits........................ 544,141 3,583 2.65 710,900 6,019 3.43
Other borrowings .................... 172,047 1,666 3.89 174,807 2,186 5.07
Subordinated debentures 31,959 626 7.88 31,959 617 8.07
--------------------------- ---------------------------
Total interest-bearing
liabilities.................. 1,016,295 6,569 2.60 1,242,420 9,576 3.13
Noninterest-bearing liabilities:
Demand deposits...................... 81,250 105,802
Accrued interest and other
liabilities........................ 9,468 8,432
Stockholders' equity................. 100,587 77,121
---------- ----------
Total liabilities and
stockholders' equity......... $1,207,600 $1,433,775
========== ==========
Net interest income/net interest
spread............................... 8,933 3.22% 11,424 3.51%
==== ====
Net yield on earning assets............ 3.35% 3.61%
==== ====
Taxable equivalent adjustment:
Investment securities(2)............. 8 47
---------- ----------
Net interest income............ $ 8,925 $ 11,377
========== ==========
(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.
The following table sets forth, on a taxable equivalent basis, the effect which
the varying levels of interest-earning assets and interest-bearing liabilities
and the applicable rates have had on changes in net interest income for the
three months ended March 31, 2004 and 2003.
THREE MONTHS ENDED MARCH 31 (1)
--------------------------------------
2004 VS 2003
--------------------------------------
INCREASE CHANGES DUE TO
(DECREASE) RATE VOLUME
---------- -------- -------
(Dollars in thousands)
Increase (decrease) in:
Income from interest-earning assets:
Interest and fees on loans......................... $(6,277) $ (1,773) $ (4,504)
Interest on securities:
Taxable....................................... 995 (119) 1,114
Tax-exempt.................................... (116) (1) (115)
Interest on federal funds.......................... (69) (17) (52)
Interest on other investments...................... (31) (22) (9)
--------------------------------------
Total interest income......................... (5,498) (1,932) (3,566)
======================================
Expense from interest-bearing liabilities:
Interest on demand deposits........................... (13) 119 (132)
Interest on savings deposits.......................... (28) (23) (5)
Interest on time deposits............................. (2,436) (1,199) (1,237)
Interest on other borrowings.......................... (520) (487) (33)
Interest subordinated debentures...................... (10) (10) -
--------------------------------------
Total interest expense........................ (3,007) (1,600) (1,407)
======================================
Net interest income........................... $(2,491) $ (332) $ (2,159)
======================================
- ---------------
(1) The change in interest due to both rate and volume has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the changes in each.
Noninterest income. Noninterest income decreased $1.7 million, or 29.6%, to $4.0
million for the first quarter of 2004 from $5.7 million for the first quarter of
2003, primarily due to the $2.2 million gain we realized in 2003 on the sale of
our Roanoke branch. This decrease was partially offset by a $739,000 gain we
realized on the sale of our Morris branch during the first quarter of 2004.
Service charges on deposits decreased $232,000, or 14.3%, to $1.4 million in the
first quarter of 2004 from $1.6 million in the first quarter of 2003. Mortgage
banking income decreased $471,000, or 53.8%, to $404,000 in the first quarter of
2004 from $875,000 in the first quarter of 2003. The decline in service charges
is related to the decline in deposit accounts which resulted from the sale of
certain branches during 2003. The decline in mortgage banking income is the
result of the lessening demand for refinancing that has occurred in 2004 and the
sale of the Emerald Coast branches.
Noninterest expense. Noninterest expense remained level at $11.4 million for the
first quarters of each of 2004 and 2003. Salaries and benefits decreased
$732,000, or 11.6%, to $5.6 million for the first quarter of 2004 from $6.3
million for the first quarter of 2003. All other noninterest expenses increased
$654,000, or 12.8%, to $5.8 million for the first quarter of 2004 from $5.2
million for the first quarter of 2003. The increase in other noninterest
expenses is primarily due to increases in professional fees, insurance and costs
associated with the activities of our special assets department. During the
first quarter of 2004, we incurred approximately $1.8 million in certain
expenses, including $449,000 for the special asset department related to
increased foreclosure and repossession activity, $269,000 in valuation
write-downs, $399,000 in legal fees, $305,000 in audit and accounting fees and
$416,000 in FDIC premiums. Management does not expect these expenses to be at
these levels in the future. FDIC premiums for the same period last year were
$46,000; while in the first quarter of 2003 audit and accounting fees were
$180,000. Many of the legal fees were incurred by the special assets department
and reflect the increased activity in this area, which has produced significant
recoveries in the first quarter of 2004.
Income tax expense. Income tax expense was $319,000 for the first quarter of
2004, compared to $1.4 million for the first quarter of 2003. The primary
difference in the effective rate and the federal statutory rate (34%) for the
first quarter of 2004 and 2003 is due to certain tax-exempt income from
investments and insurance policies.
Provision for Loan Losses. The provision for loan losses represents the amount
determined by management necessary to maintain the allowance for loan losses at
a level capable of absorbing inherent losses in the loan portfolio. Management
reviews the adequacy of the allowance for loan losses on a quarterly basis. The
allowance for loan loss calculation is segregated into various segments that
include classified loans, loans with specific allocations and pass rated loans.
A pass rated loan is generally characterized by a very low to average risk of
default and is a loan in which management perceives there is a minimal risk of
loss. Loans are rated using an eight-point scale, with loan officers 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 function and senior
management. Based on the assigned risk ratings, the criticized and classified
loans in the portfolio are 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 allowance, adjusted for previously mentioned risk factors.
Impaired loans are reviewed specifically and separately under Statement of
Financial Accounting Standards ("SFAS") No. 114 to determine the appropriate
reserve allocation. Management compares the investment in an impaired loan
against the present value of expected future cash flow discounted at the loan's
effective interest rate, the loan's observable market price, or the fair value
of the collateral if the loan is collateral dependent, to determine the specific
reserve allowance. Reserve percentages assigned to non-rated loans are based on
historical charge-off experience adjusted for 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, 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. See "Financial
Condition -- Allowance for Loan Losses" for additional discussion.
As a result of a decline in loans of $12.2 million from December 31, 2003, the
collection of certain classified loans of approximately $6.0 million and
increased recoveries of charged-off loans of $744,000, no provision for loan
losses was posted for the first quarter of 2004; a $1.2 million provision for
loan losses was posted for the first quarter of 2003. During the first quarter
of 2004, we had net charged-off loans totaling $2.6 million, compared to net
charged-off loans of $195,000 in the first quarter of 2003. The net amount of
charged-off loans during the first quarter of 2004 was covered by specific and
standard allocations of allowance for loan losses which had been provided in
previous periods. The annualized ratio of net charged-off loans to average loans
was 1.20% in the first quarter of 2004, compared to .07% for the first quarter
of 2003 and 2.21% for the year 2003. The allowance for loan losses totaled $22.6
million, or 2.68% of loans, net of unearned income at March 31, 2004, compared
to $25.2 million, or 2.94% of loans, net of unearned income at December 31,
2003. See "Financial Condition - Allowance for Loan Losses" for additional
discussion.
Financial Condition
Total assets were $1.249 billion at March 31, 2004, an increase of $77 million,
or 6.6%, from $1.171 billion as of December 31, 2003. Average total assets for
the first quarter of 2004 were $1.207 billion, which was supported by average
total liabilities of $1.107 billion and average total stockholders' equity of
$100 million.
Short-term liquid assets. Short-term liquid assets (cash and due from banks,
interest-bearing deposits in other banks and federal funds sold) increased $54.1
million, or 124.2%, to $97.6 million at March 31, 2004 from $43.5 million at
December 31, 2003. This increase resulted primarily from excess funds invested
in federal funds sold and interest-bearing deposits at the FHLB. These excess
funds were attributable primarily to an increase in deposits. These deposits
were invested in short-term liquid assets primarily to improve our liquidity
position and position us for future investment and loan growth. At March 31,
2004, short-term liquid assets comprised 7.8% of total assets, compared to 3.7%
at December 31, 2003. We continually monitor our liquidity position and will
increase or decrease our short-term liquid assets as necessary.
Investment Securities. Total investment securities increased $28.7 million, or
20.3%, to $170.3 million at March 31, 2004, from $141.6 million at December 31,
2003. Mortgage-backed securities, which comprised 20.4% of the total investment
portfolio at March 31, 2004, decreased $7.5 million, or 17.8%, to $34.8 million
from $42.3 million at December 31, 2003. Investments in U.S. agency securities,
which comprised 56.7% of the total investment portfolio at March 31, 2004,
increased $24.1 million, or 33.2%, to $96.6 million from $72.5 million at
December 31, 2003. The increase in our agency securities improved our liquidity,
and we expect that our investment in these securities will provide reasonable
returns over a five- to six-year period. The total investment portfolio at March
31, 2004 comprised 15.6% of all interest-earning assets compared to 12.1% at
December 31, 2003 and produced an average taxable equivalent yield of 4.3% for
the first quarter of 2004 compared to 5.3% for the first quarter of 2003.
Loans. Loans, net of unearned income, totaled $844.7 million at March 31, 2004,
a decrease of 1.4%, or $12.2 million, from $856.9 million at December 31, 2003.
Mortgage loans held for sale totaled $5.3 million at March 31, 2004, a decrease
of $1.1 million from $6.4 million at December 31, 2003. Average loans, including
mortgage loans held for sale, totaled $858 million for the first quarter of 2004
compared to $1.142 billion for the first quarter of 2003. Loans, net of unearned
income, comprised 77.6% of interest-earning assets at March 31, 2004, compared
to 83.6% at December 31, 2003. Mortgage loans held for sale comprised .5% of
interest-earning assets at March 31, 2004, compared to .6% at December 31, 2003.
The loan portfolio produced an average yield of 6.4% for the first quarter of
2004, compared to 7.1% for the first quarter of 2003. This decline in yield was
substantially offset by a 53 basis point decline in the average cost of the
funds that support the loan portfolio. The following table details the
distribution of the loan portfolio by category as of March 31, 2004 and December
31, 2003:
DISTRIBUTION OF LOANS BY CATEGORY
MARCH 31, 2004 DECEMBER 31, 2003
-------------- -----------------
PERCENT OF PERCENT OF
AMOUNT TOTAL AMOUNT TOTAL
-------- ---------- --------- -----------
Commercial and industrial................................. $131,438 15.5% $ 142,072 16.6%
Real estate -- construction and land development.......... 153,301 18.1 147,917 17.2
Real estate -- mortgage
Single-family (1)...................................... 233,019 27.6 231,064 27.0
Commercial............................................. 250,639 29.6 250,032 29.1
Other.................................................. 29.108 3.4 31,645 3.7
Consumer.................................................. 40.998 4.8 46,201 5.4
Other..................................................... 7,070 1.0 8,923 1.0
------------------------------------------
Total loans..................................... 845,573 100.0% 857,854 100.0%
===== =====
Unearned income........................................... (824) (913)
Allowance for loan losses................................. (22,611) (25,174)
-------- --------
Net loans....................................... $822,138 $831,767
======== ========
Deposits. Noninterest-bearing deposits totaled $86.8 million at March 31, 2004,
an increase of .8%, or $653,000, from $86.1 million at December 31, 2003.
Noninterest-bearing deposits comprised 9.3% of total deposits at March 31, 2004,
compared to 9.7% at December 31, 2003. Of total noninterest-bearing deposits
$65.5 million, or 75.5%, were in the Alabama branches while $21.3 million, or
24.5%, were in the Florida branches.
Interest-bearing deposits totaled $843.8 million at March 31, 2004, an increase
of 4.97%, or $40.0 million, from $803.8 million at December 31, 2003.
Interest-bearing deposits averaged $812 million for the first quarter of 2004
compared to $1.035 billion for the first quarter of 2003. The average rate paid
on all interest-bearing deposits during the first quarter of 2004 was 2.1%,
compared to 2.6% for the first quarter of 2003. Of total interest-bearing
deposits, $634.8 million, or 75.2%, were in the Alabama branches while $209.0
million, or 24.8%, were in the Florida branches.
Borrowings. Advances from the Federal Home Loan Bank ("FHLB") totaled $156.0
million at March 31, 2004 and $121.1 million at December 31, 2003. Borrowings
from the FHLB were used primarily to fund growth in the loan portfolio and have
a weighted average rate of approximately 4.1% at March 31, 2004; the current
rate on these borrowings is approximately 3.4%. The advances are secured by FHLB
stock, agency securities and a blanket lien on certain residential real estate
loans and commercial loans.
Junior Subordinated Debentures. We have sponsored two trusts, TBC Capital
Statutory Trust II ("TBC Capital II") and TBC Capital Statutory Trust III ("TBC
Capital III"), of which we own 100% of the common securities. The trusts were
formed for the purpose of issuing mandatory redeemable trust preferred
securities to third-party investors and investing the proceeds from the sale of
such trust preferred securities solely in our junior subordinated debt
securities (the debentures). The debentures held by each trust are the sole
assets of that trust. Distributions on the trust preferred securities issued by
each trust are payable semi-annually at a rate per annum equal to the interest
rate being earned by the trust on the debentures held by that trust. The trust
preferred securities are subject to mandatory redemption, in whole or in part,
upon repayment of the debentures. We have entered into agreements which, taken
collectively, fully and unconditionally guarantee the trust preferred securities
subject to the terms of each of the guarantees. The debentures held by the TBC
Capital II and TBC Capital III capital trusts are first redeemable, in whole or
in part, by us on September 7, 2007 and July 25, 2006, respectively.
As a result of applying the provisions of FIN 46, governing when an equity
interest should be consolidated, we were required to deconsolidate these
subsidiary trusts from our financial statements in the fourth quarter of 2003.
The deconsolidation of the net assets and results of operations of the trusts
had virtually no impact on our financial statements or liquidity position, since
we continue to be obligated to repay the debentures held by the trusts and
guarantee repayment of the trust preferred securities issued by the trusts. The
consolidated debt obligation related to the trusts increased from $31,000,000 to
$31,959,000 upon deconsolidation, with the difference representing our common
ownership interest in the trusts.
The trust preferred securities held by the trusts qualify as Tier 1 capital
under Federal Reserve Board guidelines. As a result of the issuance of FIN 46,
the Federal Reserve Board is currently evaluating whether deconsolidation of the
trusts will affect the qualification of the capital securities as Tier 1
capital. If it were determined that the capital securities no longer qualify as
Tier 1 capital, the effect would be material to our regulatory capital levels.
However, this would not lower our Tier 1 capital levels below the minimum
standards to be considered "well capitalized" under regulatory capital
standards.
Consolidated debt obligations related to subsidiary trusts holding solely our
debentures follow:
March 31, 2004 December 31, 2003
------------------------------------
(In thousands)
10.6% junior subordinated debentures owed to TBC Capital Statutory
Trust II due September 7, 2030 $15,464 $15,464
6-month LIBOR plus 3.75% junior subordinated debentures owed to TBC Capital
Statutory Trust III due July 25, 2031 16,495 16,495
====================================
Total junior subordinated debentures owed to unconsolidated
subsidiary trusts $31,959 $31,959
====================================
As of March 31, 2004 and December 31, 2003, the interest rate on the $16,495,000
subordinated debentures was 4.96% and 4.90%, respectively.
Currently, we must obtain regulatory approval prior to paying any dividends on
these trust preferred securities. The Federal Reserve approved the timely
payment of our semi-annual distributions on our trust preferred securities in
January and March 2004.
Allowance for Loan Losses. We maintain an allowance for loan losses within a
range 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 specific reserves for impaired loans,
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, economic conditions and other pertinent information. The level of
allowance for loan losses to net loans will vary depending on the quarterly
analysis.
We manage and control risk in the loan portfolio through adherence to credit
standards established by the board of directors and implemented by senior
management. These standards are set forth in a formal loan policy, which
establishes loan underwriting and approval procedures, sets limits on credit
concentration and enforces regulatory requirements. In addition, we have engaged
Credit Risk Management, LLC, an independent loan review firm, to supplement our
existing independent loan review function.
Loan portfolio concentration risk is reduced through concentration limits for
borrowers, collateral types and geographic diversification. Concentration risk
is measured and reported to senior management and the board of directors on a
regular basis.
The allowance for loan loss calculation is segregated into various segments that
include classified loans, loans with specific allocations and pass rated loans.
A pass rated loan is generally characterized by a very low to average risk of
default and is a loan in which management perceives there is a minimal risk of
loss. Loans are rated
using an eight-point scale with the loan officer having the primary
responsibility for assigning risk ratings and for the timely reporting of
changes in the risk ratings. These processes, and the assigned risk ratings, are
subject to review by our internal loan review function and senior management.
Based on the assigned risk ratings, the criticized and classified loans in the
portfolio are segregated into the following regulatory classifications: Special
Mention, Substandard, Doubtful or Loss. Generally, regulatory reserve
percentages (5%, Special Mention; 15%, Substandard; 50%, Doubtful; 100%, Loss)
are applied to these categories to estimate the amount of loan loss allowance
required, adjusted for previously mentioned risk factors.
Pursuant to SFAS No. 114, impaired loans are specifically reviewed loans for
which it is probable that we will be unable to collect all amounts due according
to the terms of the loan agreement. Impairment is measured by comparing the
recorded investment in the loan with the present value of expected future cash
flows discounted at the loan's effective interest rate, at the loan's observable
market price or the fair value of the collateral if the loan is collateral
dependent. A valuation allowance is provided to the extent that the measure of
the impaired loans is less than the recorded investment. A loan is not
considered impaired during a period of delay in payment if the ultimate
collectibility of all amounts due is expected. Larger groups of homogenous loans
such as consumer installment and residential real estate mortgage loans are
collectively evaluated for impairment.
Reserve percentages assigned to pass rated homogeneous loans are based on
historical charge-off experience adjusted for current trends in the portfolio
and other risk factors.
As stated above, risk ratings are subject to independent review by internal loan
review, which also performs ongoing, independent review of the risk management
process. The risk management process includes underwriting, documentation and
collateral control. Loan review 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 have also established a centralized
loan administration services department to serve our entire bank. This
department will provide standardized oversight for compliance with loan approval
authorities and bank lending policies and procedures, as well as centralized
supervision, monitoring and accessibility.
The following table summarizes certain information with respect to our allowance
for loan losses and the composition of charge-offs and recoveries for the
periods indicated.
SUMMARY OF LOAN LOSS EXPERIENCE
THREE-MONTH
PERIOD ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
2004 2003
------------------------------
(Dollars in thousands)
Allowance for loan losses at beginning of period.... $ 25,174 $ 27,266
Allowance of branch sold............................. - (102)
Charge-offs:
Commercial and industrial.......................... 957 10,823
Real estate -- construction and land development... 51 630
Real estate -- mortgage
Single-family.................................. 43 1,505
Commercial..................................... 1,779 6,696
Other.......................................... 40 1,187
Consumer........................................... 437 3,092
Other.............................................. - 517
------------------------------
Total charge-offs.......................... 3,307 24,450
Recoveries:
Commercial and industrial.......................... 226 554
Real estate -- construction and land development... - 23
Real estate -- mortgage
Single-family.................................. 8 23
Commercial..................................... 15 49
Other.......................................... 17 48
Consumer........................................... 170 282
Other.............................................. 308 6
------------------------------
Total recoveries........................... 744 985
------------------------------
Net charge-offs...................................... 2,563 23,465
Provision for loan losses - 20,975
------------------------------
Allowance for loan losses at end of period........... $ 22,611 $ 25,174
==============================
Loans at end of period, net of unearned income ...... $ 844,749 $ 856,941
Average loans, net of unearned income................ 858,225 1,063,451
Ratio of ending allowance to ending loans............ 2.68% 2.94%
Ratio of net charge-offs to average loans (1) 1.20% 2.21%
Net charge-offs as a percentage of:
Provision for loan losses - 111.87%
Allowance for loan losses (1) 45.59% 93.21%
Allowance for loan losses as a percentage
of nonperforming loans............................. 94.08% 78.59%
(1) Annualized.
The allowance for loan losses as a percentage of loans, net of unearned income,
at March 31, 2004 was 2.68%, compared to 2.94% as of December 31, 2003. The
allowance for loan losses as a percentage of nonperforming loans increased to
94.08% at March 31, 2004 from 78.59% at December 31, 2003 due to a decrease in
nonperforming loans of $8.0 million (See nonperforming loan section below).
Net charge-offs were $2.6 million for the first quarter of 2004. Net charge-offs
to average loans on an annualized basis totaled 1.20% for the first quarter of
2004. Net commercial loan charge-offs totaled $731,000, or 28.5% of total net
charge-off loans, for the first quarter of 2004 compared to 43.8% of total net
charge-off loans for the year 2003. Net commercial real estate loan charge-offs
totaled $1.8 million, or 68.9% of total net charge-off loans, for the first
quarter of 2004 compared to 28.3% of total net charge-off loans for the year
2003. Net consumer loan charge-offs totaled $267,000, or 10.4% of total net
charge-off loans, for the first quarter of 2004 compared with 12% of total net
charge-off loans for the year 2003. Net commercial real estate loan charge-offs
as a percentage of total net charge-offs were higher in the first quarter of
2004 because of continued foreclosure activity on certain commercial real estate
loans on which estimated losses had been provided to the allowance for loan
losses during 2003.
Nonperforming Loans. In January of 2004, we transferred the majority of our
nonperforming loans and approximately $7.0 million of other problem loans to our
special assets department. Approximately $41.0 million in loans were transferred
with the related allowance for loan loss of $9.8 million. This department is
staffed with nine employees and is managed by our special assets executive, who
has over 18 years of experience in dealing with special assets. By segregating
these relationships, we believe we can better monitor and control our collection
efforts. Segregating these relationships also allows us to accurately monitor
the performance of our individual branches on an ongoing basis without the
influence of these nonperforming and problem relationships. Management is
vigorously pursuing appropriate collection efforts and expects the nonperforming
and problem relationships to decline over the following nine months.
Nonperforming loans decreased $8.0 million, to $24.0 million as of March 31,
2004 from $32.0 million as of December 31, 2003. As a percentage of net loans,
nonperforming loans decreased from 3.74% at December 31, 2003 to 2.85% at March
31, 2004. The decrease in nonperforming loans primarily resulted from
collections, charge-offs and the transfer of certain loans to other real estate
and foreclosed assets. Other real estate and foreclosed assets increased $3.4
million to $9.4 million at March 31, 2004 from $6.0 million at December 31,
2003. The following table represents our nonperforming loans for the dates
indicated.
NONACCRUAL, PAST DUE AND RESTRUCTURED LOANS
MARCH 31, 2004 DECEMBER 31, 2003
--------------------------------------- -----------------
OPERATING
BRANCHES SPECIAL ASSETS TOTAL TOTAL
--------------------------------------------------------
(Dollars in Thousands)
Nonaccrual......................................... $ 4,123 $ 17,752 $ 21,875 $ 29,630
Past due (contractually past due 90 days or more).. 505 1,654 2,159 1,438
Restructured....................................... - - - 966
--------------------------------------------------------
Total nonperforming loans $ 4,628 $ 19,406 $ 24,034 $ 32,034
========================================================
Loans, net of unearned $ 813,482 $ 31,267 $844,749 $856,941
========================================================
Nonperforming loans as a percent of loans 0.57% 62.1% 2.85% 3.74%
========================================================
Loans past due 30 days or more, net of non-accruals, improved to 1.52% at March
31, 2004 from 2.28% at December 31, 2003. Exclusive of the loans in the special
assets portfolio, loans past due more than 30 days, net of non-accruals, were
1.00%.
The following is a summary of nonperforming loans by category for the dates
shown:
MARCH 31 DECEMBER 31,
-------- ------------
2004 2003
-------- ------------
(Dollars in thousands)
Commercial and industrial................................. $ 6,959 $ 11,621
Real estate -- construction and land development.......... 1,459 1,735
Real estate -- mortgages..................................
Single-family........................................ 5,162 5,472
Commercial........................................... 9,443 12,378
Other................................................ 222 162
Consumer.................................................. 789 465
Other..................................................... - 201
------------------------
Total nonperforming loans....................... $ 24,034 $ 32,034
========================
A delinquent loan is placed on nonaccrual status when it becomes 90 days or more
past due and management believes, after considering economic and business
conditions and collection efforts, that the borrower's financial condition is
such that the collection of interest is doubtful. When a loan is placed on
nonaccrual status, all interest which has been accrued on the loan during the
current period but remains unpaid is reversed and deducted from earnings as a
reduction of reported interest income; any prior period accrued and unpaid
interest is reversed and charged against the allowance for loan losses. No
additional interest income is accrued on the loan balance until the collection
of both principal and interest becomes reasonably certain. When a problem loan
is finally resolved, there may ultimately be an actual write-down or charge-off
of the principal balance of the loan to the allowance for loan losses, which may
necessitate additional charges to earnings.
Impaired Loans. At March 31, 2004, the recorded investment in impaired loans
totaled $18.4 million, with approximately $6.8 million in allowance for loan
losses specifically allocated to impaired loans. This represents an decrease of
$7.0 million from $25.4 million at December 31, 2003. A significant portion of
our impaired loans have been transferred to our special assets department. The
following is a summary of impaired loans and the specifically allocated
allowance for loan losses by category as of March 31, 2004:
OPERATING BRANCHES SPECIAL ASSETS TOTAL
----------------------- ------------------------ -----------------------
OUTSTANDING SPECIFIC OUTSTANDING SPECIFIC OUTSTANDING SPECIFIC
BALANCE ALLOWANCE BALANCE ALLOWANCE BALANCE ALLOWANCE
----------- --------- ----------- ----------- ----------- -----------
Commercial and industrial.......................... $ 1,808 $ 1,143 $ 5,164 $ 2,104 $ 6,972 $ 3,247
Real estate -- construction and land development... 110 17 1,332 356 1,442 373
Real estate -- mortgages...........................
Commercial.................................... 1,422 286 8,468 2,876 9,890 3,162
Other......................................... 27 3 80 33 107 36
------------------------------------------------------------------------------
Total.................................... $ 3,367 $ 1,449 $ 15,044 $ 5,369 $ 18,411 $ 6,818
==============================================================================
Potential Problem Loans. In addition to nonperforming loans, management has
identified $4.1 million in potential problem loans as of March 31, 2004.
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 $1.6 million or 39% of
this amount consists of a single construction loan relationship secured by
single-family homes. Management believes that foreclosure of these properties is
a possibility, however, the homes are substantially complete and management does
not believe any losses will be incurred. In addition, approximately $1.0 million
or 24% of the potential problem loans are part of the portfolio that was
transferred to our special assets department in January, 2004. Overall, $3.4
million or 84% of our potential problem loans are secured by real estate.
Management has allocated in the allowance for loan losses approximately $486,000
to absorb any losses that may result from these loans.
Stockholders' Equity. At March 31, 2004, total stockholders' equity was $102
million, an increase of $2.0 million from $100 million at December 31, 2003. The
increase in stockholders' equity during the first quarter of 2004 resulted
primarily from net income of $1.2 million and a $529,000 increase in the
unrealized gain on available for sale investment securities. As of March 31,
2004, we had 18,018,202 shares of common stock issued and 17,714,657
outstanding. In September of 2000, our board of directors approved a stock
buyback plan
in an amount not to exceed $10,000,000. As of March 31, 2004, there were 65,448
shares held in treasury at a cost of $430,000.
On April 1, 2002, we issued 157,500 shares of restricted common stock to certain
directors and key employees pursuant to the Second Amended and Restated 1998
Stock Incentive Plan. Under the Restricted Stock Agreements, the stock may not
be sold or assigned in any manner for a five-year period that began on April 1,
2002. During this restricted period, the participant is eligible to receive
dividends and exercise voting privileges. The restricted stock also has a
corresponding vesting period with one-third vesting at the end of each of the
third, fourth and fifth years. The restricted stock was issued at $7.00 per
share, or $1,120,000, and classified as a contra-equity account, "Unearned
restricted stock", in stockholders' equity. During 2003, 15,000 shares of this
restricted common stock were forfeited. Restricted shares outstanding as of
March 31, 2004 were 142,500 and the remaining amount in the unearned restricted
stock account is $599,000. This balance is being amortized as expense as the
stock is earned during the restricted period. The amounts of restricted shares
are included in the diluted earnings per share calculation, using the treasury
stock method, until the shares vest. Once vested, the shares become outstanding
for basic earnings per share. For the periods ended March 31, 2004 and 2003, we
recognized $50,000 and $56,000, respectively, in restricted stock expense.
We adopted a leveraged employee stock ownership plan (the "ESOP") effective May
15, 2002 that covers all eligible employees who are at least 21 years old and
have completed a year of service. As of March 31, 2003, the ESOP has been
internally leveraged with 273,400 shares of the our common stock purchased in
the open market and classified as a contra-equity account, "Unearned ESOP
shares," in stockholders' equity.
On January 29, 2003, the ESOP trustees finalized a $2,100,000 promissory note to
reimburse us for the funds used to leverage the ESOP. The unreleased shares and
our guarantee secure the promissory note, which has been classified as long-term
debt on our statement of financial condition. As the debt is repaid, shares are
released from collateral based on the proportion of debt service. Principal
payments on the debt are $17,500 per month for 120 months. The interest rate is
adjusted annually to the Wall Street Journal prime rate. Released shares are
allocated to eligible employees at the end of the plan year based on the
employee's eligible compensation to total compensation. We recognize
compensation expense during the period as the shares are earned and committed to
be released. As shares are committed to be released and compensation expense is
recognized, the shares become outstanding for basic and diluted earnings per
share computations. The amount of compensation expense we report is equal to the
average fair value of the shares earned and committed to be released during the
period. Compensation expense that we recognized during the periods ended March
31, 2004 and 2003 was $52,000 and $15,000, respectively. The ESOP shares as of
March 31, 2004 were as follows:
March 31,
2004
--------------
Allocated shares 28,628
Estimated shares committed to be released 6,675
Unreleased shares 238,097
--------------
Total ESOP shares 273,400
==============
Fair value of unreleased shares $ 1,707,155
==============
Regulatory Capital. The table below represents our and our subsidiary's
regulatory and minimum regulatory capital requirements at March 31, 2004
(dollars in thousands):
FOR CAPITAL
ADEQUACY TO BE WELL
ACTUAL PURPOSES CAPITALIZED
----------------------- -----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
-------- ----- -------- ----- ------- ------
Total Risk-Based Capital
Corporation $132,298 14.02% $ 75,491 8.00% $94,363 10.00%
The Bank 127,729 13.65% 74,844 8.00% 93,555 10.00%
Tier 1 Risk-Based Capital
Corporation 119,149 12.63% 37,745 4.00% 56,618 6.00%
The Bank 115,893 12.39% 37,422 4.00% 56,133 6.00%
Leverage Capital
Corporation 119,149 9.97% 47,809 4.00% 59,761 5.00%
The Bank 115,893 9.78% 47,407 4.00% 59,259 5.00%
Liquidity
Our principal sources of funds are deposits, principal and interest payments on
loans, federal funds sold and maturities and sales of investment securities. In
addition to these sources of liquidity, we have access to purchased funds from
several regional financial institutions, brokered and internet deposits, and may
borrow from the Federal Home Loan Bank under a blanket floating lien on certain
commercial loans and residential real estate loans. Also, we have established
certain repurchase agreements with a large financial institution. While
scheduled loan repayments and maturing investments are relatively predictable,
interest rates, general economic conditions and competition primarily influence
deposit flows and early loan payments. Management places constant emphasis on
the maintenance of adequate liquidity to meet conditions that might reasonably
be expected to occur. Management believes it has established sufficient sources
of funds to meet its anticipated liquidity needs.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements made by us or on our behalf. Some of the disclosures
in this Quarterly Report on Form 10-Q, including any statements preceded by,
followed by or which include the words "may," "could," "should," "will,"
"would," "hope," "might," "believe," "expect," "anticipate," "estimate,"
"intend," "plan," "assume" or similar expressions constitute forward-looking
statements.
These forward-looking statements, implicitly and explicitly, include the
assumptions underlying the statements and other information with respect to our
beliefs, plans, objectives, goals, expectations, anticipations, estimates,
intentions, financial condition, results of operations, future performance and
business, including our expectations and estimates with respect to our revenues,
expenses, earnings, return on equity, return on assets, efficiency ratio, asset
quality, the adequacy of our allowance for loan losses 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: (1) the strength
of the United States economy in general and the strength of the regional and
local economies in which we conduct operations; (2) 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; (3) inflation,
interest rate, market and monetary fluctuations; (4) our ability to successfully
integrate the assets, liabilities, customers, systems and management we acquire
or merge into our operations; (5) our timely development of new products and
services in a changing environment, including the features, pricing and quality
compared to the products and services of our competitors; (6) the willingness of
users to substitute competitors' products and services for our products and
services; (7) 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; (8)
our ability to resolve any legal proceeding on acceptable terms and its effect
on our financial condition or results of operations; (9) technological changes;
(10) changes in consumer spending and savings habits; and (11) regulatory, legal
or judicial proceedings.
If one or more of the factors affecting our forward-looking information and
statements proves incorrect, then our actual results, performance or
achievements could differ materially from those expressed in, or implied by,
forward-looking information and statements contained in this annual report.
Therefore, we caution you not to place undue reliance on our forward-looking
information and statements.
We do not intend to update our forward-looking information and statements,
whether written or oral, to reflect change. All forward-looking statements
attributable to us are expressly qualified by these cautionary statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
The information set forth under the caption "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations-Market Risk-Interest
Rate Sensitivity" included in our Annual Report on Form 10-K for the year ended
December 31, 2003, is hereby incorporated herein by reference.
ITEM 4. CONTROLS AND PROCEDURES
CEO AND CFO CERTIFICATION
Appearing as exhibits to this report are Certifications of our Chief Executive
Officer ("CEO") and our Chief Financial Officer ("CFO"). The Certifications are
required to be made by Rule 13a - 14 of the Securities Exchange Act of 1934, as
amended. This Item contains the information about the evaluation that is
referred to in the Certifications, and the information set forth below in this
Item 4 should be read in conjunction with the Certifications for a more complete
understanding of the Certifications.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms, and that such information is accumulated and communicated
to our management, including our CEO and CFO, as appropriate, to allow timely
decisions regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives.
We conducted an evaluation (the "Evaluation") of the effectiveness of the design
and operation of our disclosure controls and procedures under the supervision
and with the participation of our management, including our CEO and CFO. Based
upon the Evaluation, our CEO and CFO have concluded that, as of the end of the
period covered by this report, our disclosure controls and procedures are
effective to ensure that material information relating to The Banc Corporation
and its subsidiaries is made known to management, including the CEO and CFO,
particularly during the period when our periodic reports are being prepared.
There have not been any changes in our internal control over financial reporting
(as defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as
amended) during the fiscal quarter to which this report relates that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
While we are a party to various legal proceedings arising in the ordinary course
of business, we believe that there are no proceedings threatened or pending
against us at this time that will individually, or in the aggregate, materially
adversely affect our business, financial condition or results of operations. We
believe that we have strong claims and defenses in each lawsuit in which we are
involved. While we believe that we will prevail in each lawsuit, there can be no
assurance that the outcome of the pending, or any future, litigation, either
individually or in the aggregate, will not have a material adverse effect on our
financial condition or our results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit:
31.01 Certification of principal executive officer pursuant to Rule
13a-14(a).
31.02 Certification of principal financial officer pursuant to 13a-14(a).
32.01 Certification of principal executive officer pursuant to 18 U.S.C.
Section 1350.
32.02 Certification of principal financial officer pursuant to 18 U.S.C.
Section 1350.
(b) Reports on Form 8-K:
We furnished a Current Report on Form 8-K dated February 12, 2004 under
Item 7 and 12 of Form 8-K containing as an Exhibit a press release dated
February 12, 2004.
We furnished a Current Report on Form 8-K dated April 22, 2004 under Item
7 and 12 of Form 8-K containing as an Exhibit a press release dated April
22, 2004.
SIGNATURE
Pursuant with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Banc Corporation
(Registrant)
Date: May 10, 2004 By: /s/ James A. Taylor, Jr.
-------------------------------------------------
James A. Taylor, Jr.
President and Chief Operating Officer
Date: May 10, 2004 By: /s/ David R. Carter
------------------------------------------
David R. Carter
Executive Vice President and Chief Financial Officer
(Principal Accounting Officer)