<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE PERIOD ENDED MARCH 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________________ to _________________
Commission File number 0-25033
THE BANC CORPORATION
--------------------
(Exact name of registrant as specified in its charter)
Delaware 63-1201350
- --------------------------------------------- ----------------------
(State or other jurisdiction of incorporation) (I.R.S. Employer ID No.)
17 North 20th Street, Birmingham, Alabama 35203
-----------------------------------------------
(Address of principal executive offices)
(205) 326-2265
--------------
(Issuer's Telephone Number)
Indicate whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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.
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities and
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by the court. Yes 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, 1999
- ----------------------------- --------------------------------
Common stock, $.001 par value 12,205,733
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE BANC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
------------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and due from banks $ 27,425 $ 25,595
Interest bearing deposits in other banks 685 158
Federal funds sold 2,445 14,435
Investment securities available for sale 59,687 77,442
Mortgage loans held for sale 4,514 4,899
Loans, net of unearned income 404,687 365,379
Less: Allowance for loan losses (4,743) (4,533)
--------- ---------
Net loans 399,944 360,846
--------- ---------
Premises and equipment, net 29,384 28,515
Accrued interest receivable 3,741 3,791
Stock in FHLB and Federal Reserve Bank 1,786 1,760
Other assets 7,286 6,953
--------- ---------
TOTAL ASSETS $ 536,897 $ 524,394
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 67,644 $ 67,963
Interest-bearing 380,986 367,403
--------- ---------
TOTAL DEPOSITS 448,630 435,366
Advances from FHLB 23,160 23,160
Other borrowed funds 2,417 3,700
Accrued expenses and other liabilities 3,150 4,957
--------- ---------
TOTAL LIABILITIES 477,357 467,183
Stockholders' Equity
Preferred stock, par value $.001 per share; authorized 5,000,000 shares;
shares issued -0- -- --
Common stock, par value $.001 per share; authorized 25,000,000 shares;
12,205,733 shares issued in 1999 and 11,973,180 in 1998 12 12
Surplus 44,829 42,888
Retained Earnings 14,737 14,233
Accumulated other comprehensive (loss) income (38) 78
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 59,540 57,211
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 536,897 $ 524,394
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE> 3
THE BANC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1999 1998
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Interest income $ 10,124 $ 7,309
Interest expense 4,525 3,508
-------- -------
Net interest income 5,599 3,801
Provision for loan losses 224 410
-------- -------
Net interest income after provision for loan losses 5,375 3,391
Noninterest income 902 804
(Loss) gain on sale of securities (20) 68
Noninterest expenses 5,735 3,380
-------- -------
Income before income taxes 522 883
Income tax expense 18 231
-------- -------
Net income $ 504 $ 652
======== =======
Basic and diluted net income per common share $ 0.04 $ 0.06
Average common shares outstanding 12,149 10,804
Average common shares outstanding, assuming dilution 12,197 10,829
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE> 4
THE BANC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------------------
1999 1998
----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Net cash provided by operating activities $ 570 $ 1,565
-------- --------
Cash flows from investing activities:
Net increase in interest bearing deposits in other banks (527) --
Net decrease in federal funds sold 11,990 14,966
Proceeds from sales of securities available for sale 10,393 5,457
Proceeds from maturities of investment securities available for sale 9,883 11,380
Purchases of investment securities available for sale (2,780) (21,950)
Proceeds from maturities of investment securities held to maturity -- 7,913
Purchases of investment securities held to maturity -- (11,218)
Net increase in loans (39,322) (20,798)
Purchase of stock in FHLB (26) (199)
Purchases of premises and equipment (2,273) (866)
-------- --------
Net cash used by investing activities (12,662) (15,315)
-------- --------
Cash flows from financing activities:
Net increase in deposit accounts 13,264 23,645
Net decrease in other borrowings (1,283) (5,587)
Proceeds from issuance of common stock 1,941 877
Dividends paid by pooled subsidiary -- (40)
-------- --------
Net cash provided by financing activities 13,922 18,895
-------- --------
Net increase in cash and due from banks 1,830 5,145
Cash and due from banks at beginning of period 25,595 15,020
-------- --------
Cash and due from banks at end of period $ 27,425 $ 20,165
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE> 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements 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
Supplemental Consolidated Financial Statements included in the Current Report on
Form 8-K filed April 15 as Exhibit 99.3. It is management's opinion that all
adjustments, consisting of only normal and recurring items necessary for a fair
presentation, have been included.
Prior period financial information has been restated for a business combination
with Emerald Coast Bancshares, Inc. ("Emerald") of Panama City Beach, Florida,
which was consummated in the first quarter of 1999 and accounted for as a
pooling of interests.
NOTE 2 - BUSINESS COMBINATION
On February 12, 1999 the Corporation issued 1,379,958 shares of common stock in
exchange for all of the outstanding common stock of Emerald. This transaction
added approximately $92 million in assets.
As explained in Note 1 the Corporation restated prior period financial
information for the Emerald transaction, which was closed in the first quarter
of 1999. The following table presents financial information as reported by the
Corporation and Emerald on a combined basis for the three months ended March 31,
1998.
<TABLE>
<S> <C>
Net interest income:
Corporation $ 3,246
Emerald 555
--------
Combined $ 3,801
========
Net income (loss):
Corporation $ 696
Emerald (44)
--------
Combined $ 652
========
Net income (loss) per equivalent share of Corporation:
Corporation $ .07
Emerald (.04)
Combined .06
</TABLE>
NOTE 3 - SEGMENT REPORTING
The Corporation has two reportable segments, the Alabama Region and the Florida
Region. The Alabama Region consists of operations located throughout the state
of Alabama. The Florida Region consists of operations located in the panhandle
of Florida. The Corporation's reportable segments are managed as separate
business units because they are located in different geographic areas. Both
segments derive revenues from the delivery of financial services. These services
include commercial loans, mortgage loans, consumer loans, deposit accounts, and
other financial services.
The Corporation evaluates performance and allocates resources based on profit or
loss from operations. There are no material intersegment sales or transfers. Net
interest revenue is used as the basis for performance evaluation rather than its
components, total interest revenue and total interest expense. The accounting
policies used by each reportable segment are the same as those discussed in Note
1 to the Supplemental Consolidated Financial Statements included in the Current
Report on Form 8-K filed April 15 as Exhibit 99.3. All costs have been allocated
to the reportable segments. Therefore, combined amounts agree to the
consolidated totals.
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
<TABLE>
<CAPTION>
Alabama Florida
Region Region Combined
--------- --------- --------
<S> <C> <C> <C>
Three months ended March 31, 1999
Net interest income $ 4,610 $ 989 $ 5,599
Provision for loan losses 122 102 224
Noninterest income 647 235 882
Noninterest expense 4,838 897 5,735
Income tax (benefit) expense (65) 83 18
Net income 362 142 504
Total assets 444,589 92,308 536,897
Three months ended March 31, 1998
Net interest income $ 3,246 $ 555 $ 3,801
Provision for loan losses 332 78 410
Noninterest income 740 132 872
Noninterest expense 2,702 678 3,380
Income tax (benefit) expense 256 (25) 231
Net income 696 (44) 652
Total assets 318,723 66,233 384,956
</TABLE>
NOTE 4 - 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):
<TABLE>
<CAPTION>
For the three-month period ended March 31
-----------------------------------------
1999 1998
---- ----
<S> <C> <C>
Numerator:
For basic and diluted, net income $ 504 $ 652
======= =======
Denominator:
For basic, weighted average common
shares outstanding 12,149 10,804
Effect of dilutive stock options 48 25
------- -------
Average diluted common shares outstanding 12,197 10,829
======= =======
Basic and diluted net income per share $ .04 $ .06
</TABLE>
NOTE 5 - COMPREHENSIVE INCOME
Total comprehensive income for the three-month periods ended March 31, 1999 and
1998 was $388,000 and $605,000, respectively, and consists of net income and the
change in the unrealized gain or loss on the Corporation's available for sale
security portfolio arising during the period.
NOTE 6 - INCOME TAXES
Differences in effective tax rates from 1998 to 1999 relate to the recognition
of rehabilitation tax credits generated from the restoration of the
Corporation's headquarters, the John Hand Building, in the first quarter of
1999.
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
Total assets of the Corporation were $536.9 million at March 31, 1999, an
increase of $12.5 million, as compared to December 31, 1998. On March 31, 1999,
total stockholders' equity was $59.5, an increase of $2.3 million when compared
to total stockholder's equity at December 31, 1998. The increase in total assets
was due to the growth of the loan portfolio, which was funded primarily by the
sale of investment securities and federal funds. The increase in stockholders
equity is primarily due to $1.9 million in proceeds from the issuance of
common stock.
Cash and due from banks, federal funds sold and investment securities decreased
$27.4 million to $90.2 million at March 31, 1999, from $117.6 million at
December 31, 1998. On March 31, 1999, cash and due from banks, federal funds
sold and investment securities comprised 16.8% of total assets as compared to
22.4% at December 31, 1998.
Loans, net of unearned income totaled $404.7 million at March 31, 1999, an
increase of $39.3 million from $365.4 million at December 31, 1998. Loans, net
of unearned income, comprised 75.4% of total assets at March 31, 1999, as
compared to 69.7% at December 31, 1998.
Deposits totaled $448.6 million at March 31, 1999, an increase of $13.3 million
from $435.4 million at December 31, 1998. The increase is primarily due to time
deposits which increased $9.0 million from December 31, 1998.
Results of Operations
Net income was $504,000 for the three-month period ended March 31, 1999,
compared to $652,000 for the three-month period ended March 31, 1998. The
decrease in net income was primarily due to an increase in total noninterest
expenses offset by an increase in noninterest income and decrease in income
taxes.
Net interest income after provision for loan losses was $5.4 million for the
three-month period ended March 31, 1999, compared to $3.4 for the three-month
period ended March 31, 1998. The increase in net interest income was primarily
due to an increase in earning assets funded by an increase in deposits and
advances from the Federal Home Loan Bank.
Noninterest income was $902,000 for the three-month period ended March 31, 1999,
compared to $804,000 for the three-month period ended March 31, 1998. The
increase in noninterest income was primarily due to an increase in service
charge income on deposits.
Noninterest expenses were $5.7 million for the three-month period ended March
31, 1999, compared to $3.4 million for the three-month period ended March 31,
1998. The increase in noninterest expense was primarily due to an increase in
salary and employee benefits and other operating expenses which resulted from
the opening of new branches and the creation of new departments.
Income tax expense was $18,000 for the three-month period ended March 31, 1999,
compared to $231,000 for the three-month period ended March 31, 1998. The
effective tax rates were 3% and 26%, respectively. The primary difference in the
effective rates is due to the recognition of rehabilitation tax credits
generated from the restoration of the Corporation's headquarters, the John Hand
Building, in the first quarter of 1999.
Provision for Loan Losses
The provision for loan losses is based on the periodic analysis of the loan
portfolio by management. In establishing the provision, management considers
numerous factors including general economic conditions, loan portfolio
condition, prior loan loss experience, and independent analysis. The provision
for loan losses for the three-month period ended March 31, 1999 was $224,000 as
compared to $410,000 for the three-month period ended March 31, 1998. The
allowance for loan losses was $4.7 million or 1.17% of total loans at March 31,
1999, compared to $4.5 million or 1.24% at December 31, 1998. Based upon the
analysis of the addition to established allowances and the composition of the
loan portfolio, management concluded that the allowance is adequate. While
current economic conditions in the Corporation's market are stable, future
conditions will dictate the level of future provisions for loan losses.
<PAGE> 8
Liquidity
The Corporation's 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, the
Corporation has access to purchased funds from several regional financial
institutions and may borrow from the Federal Home Loan Bank under a blanket
floating lien on certain residential real estate loans. While scheduled loan
repayments and maturing investments are relatively predictable, deposit flows
and early loan payments are influenced by interest rates, general economic
conditions and competition. The management of the Corporation places constant
emphasis on the maintenance of adequate liquidity to meet conditions that might
reasonably be expected to occur.
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None.
ITEM 2 - CHANGES IN SECURITIES
During the three months ended March 31, 1999, the Corporation issued
1,379,958 shares of its common stock in a transaction not registered under the
Securities Act of 1933. Such shares were issued effective February 12, 1999, to
the former shareholders of Emerald Coast Bancshares, Inc. ("Emerald") in
connection with the Corporation's acquisition by merger of Emerald. Such shares
were issued in reliance upon the exemption provided by Section 4(2) of the
Securities Act in a transaction not involving a public offering due to, among
other things, the sophistication, particularly with respect to financial
institutions, of the former Emerald shareholders, their relatively small number,
and the fact that the offering, by its very nature, was limited to the Emerald
shareholders. The former Emerald shareholders received approximately 2.03534
shares of Corporation common stock for each share of Emerald common stock they
owned. The aggregate value of which was approximately $15,179,538.
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 27 - Financial Data Schedule (SEC use only)
(b) Report on 8-K:
During the three months ended March 31, 1999, a Current Report on Form
8-K was filed on February 25, 1999, reporting under Item 2 the consummation of
the Corporation's acquisition by merger of Emerald Coast Bancshares, Inc. and
reporting under Item 7 certain audited and unaudited consolidated financial
statements and pro forma consolidated financial information for the Corporation
and Emerald Coast Bancshares, Inc.
<PAGE> 9
SIGNATURES
In accordance with the requirements of the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
The Banc Corporation
(Registrant)
Date: May 14, 1999 Signature: /s/ James A. Taylor, Jr.
- ------------------ ----------------------------------------------
James A. Taylor, Jr.
Executive Vice President, General Counsel and
Secretary
Date: May 14, 1999 Signature: /s/ David R. Carter
- ------------------ ----------------------------------------------
David R. Carter
Executive Vice President and Chief Financial
Officer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BANC CORPORATION FOR THE THREE MONTHS ENDED MARCH 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 27,425
<INT-BEARING-DEPOSITS> 685
<FED-FUNDS-SOLD> 2,445
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 59,687
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 404,687
<ALLOWANCE> 4,743
<TOTAL-ASSETS> 536,897
<DEPOSITS> 448,630
<SHORT-TERM> 2,417
<LIABILITIES-OTHER> 3,150
<LONG-TERM> 23,160
0
0
<COMMON> 12
<OTHER-SE> 59,528
<TOTAL-LIABILITIES-AND-EQUITY> 536,897
<INTEREST-LOAN> 9,041
<INTEREST-INVEST> 950
<INTEREST-OTHER> 133
<INTEREST-TOTAL> 10,124
<INTEREST-DEPOSIT> 4,240
<INTEREST-EXPENSE> 4,525
<INTEREST-INCOME-NET> 5,599
<LOAN-LOSSES> 224
<SECURITIES-GAINS> (20)
<EXPENSE-OTHER> 5,735
<INCOME-PRETAX> 522
<INCOME-PRE-EXTRAORDINARY> 522
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 504
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
<YIELD-ACTUAL> 4.84
<LOANS-NON> 1,596
<LOANS-PAST> 986
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,533
<CHARGE-OFFS> 200
<RECOVERIES> 186
<ALLOWANCE-CLOSE> 4,743
<ALLOWANCE-DOMESTIC> 4,743
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
