<PAGE> 1
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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 JUNE 30, 2000
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)
<TABLE>
<S> <C>
DELAWARE 63-1201350
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation)
</TABLE>
17 NORTH 20TH STREET, BIRMINGHAM, ALABAMA 35203
(Address of Principal Executive Offices)
(205) 326-2265
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AS OF JUNE 30, 2000
----- -------------------------------
<S> <C>
Common stock, $.001 par value 14,385,021
</TABLE>
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<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE BANC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
(UNAUDITED) (NOTE 1)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 30,759 $ 31,825
Interest bearing deposits in other banks.................... 1,791 1,862
Federal funds sold.......................................... 5,308 5,843
Short-term commercial paper................................. -- 14,484
Investment securities available for sale.................... 74,174 65,439
Investment securities held-to-maturity...................... 4,944 5,477
Mortgage loans held for sale................................ 4,165 2,127
Loans, net of unearned income............................... 713,912 632,777
Less: Allowance for loan losses............................. (8,918) (8,065)
-------- --------
Net loans......................................... 704,994 624,712
-------- --------
Premises and equipment, net................................. 42,369 37,734
Accrued interest receivable................................. 7,501 6,286
Stock in FHLB and Federal Reserve Bank...................... 5,361 3,461
Other assets................................................ 26,739 28,177
-------- --------
Total assets...................................... $908,105 $827,427
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing....................................... $101,139 $ 83,733
Interest-bearing.......................................... 641,791 598,784
-------- --------
Total deposits.................................... 742,930 682,517
Advances from FHLB.......................................... 77,840 62,500
Other borrowed funds........................................ 590 295
Note payable................................................ 9,684 7,104
Accrued expenses and other liabilities...................... 6,024 6,163
-------- --------
Total liabilities................................. 837,068 758,579
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; 14,385,021 shares issued and
outstanding............................................ 14 14
Surplus................................................... 47,756 47,756
Retained Earnings......................................... 25,379 23,283
Accumulated other comprehensive loss...................... (2,112) (2,205)
-------- --------
Total stockholders' equity........................ 71,037 68,848
-------- --------
Total liabilities and stockholders' equity........ $908,105 $827,427
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE> 3
THE BANC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -----------------
2000 1999 2000 1999
-------- -------- ------- -------
(AMOUNTS IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans.............................. $16,446 $11,360 $31,647 $21,745
Interest on investment securities
Taxable.............................................. 948 945 1,902 1,951
Exempt from Federal income tax....................... 184 237 375 487
Interest on federal funds sold.......................... 170 168 372 387
Interest and dividends on other investments............. 169 141 270 196
------- ------- ------- -------
Total interest income........................... 17,917 12,851 34,566 24,766
Interest expense:
Interest on deposits.................................... 8,035 5,427 15,291 10,751
Interest on advances from FHLB and other borrowed
funds................................................ 1,185 651 2,213 936
------- ------- ------- -------
Total interest expense.......................... 9,220 6,078 17,504 11,687
------- ------- ------- -------
Net interest income....................................... 8,697 6,773 17,062 13,079
Provision for loan losses................................. 709 298 1,597 542
------- ------- ------- -------
Net interest income after provision for loan
losses........................................ 7,988 6,475 15,465 12,537
Noninterest income........................................ 1,877 1,241 3,524 2,674
Gain on sale of securities................................ -- 79 -- 59
------- ------- ------- -------
Total noninterest income........................ 1,877 1,320 3,524 2,733
Noninterest expenses:
Salaries and employee benefits.......................... 4,031 3,160 7,827 6,383
Occupancy, furniture and equipment expense.............. 1,451 1,224 2,891 2,408
Merger related expenses................................. -- 622 -- 691
Other operating expenses................................ 2,793 1,973 5,408 3,992
------- ------- ------- -------
Total noninterest expenses...................... 8,275 6,979 16,126 13,474
------- ------- ------- -------
Income before income taxes.............................. 1,590 816 2,863 1,796
Income tax expense...................................... 396 237 767 405
------- ------- ------- -------
Net income...................................... $ 1,194 $ 579 $ 2,096 $ 1,391
======= ======= ======= =======
Basic and diluted net income per share.................... $ 0.08 $ 0.04 $ 0.14 $ 0.10
Average common shares outstanding......................... 14,385 14,315 14,385 14,284
Average common shares outstanding, assuming dilution...... 14,386 14,353 14,387 14,327
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 4
THE BANC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------
2000 1999
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES................... $ 3,201 $ 2,972
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net decrease (increase) in interest bearing deposits in
other banks............................................ 71 (1,291)
Net decrease in federal funds sold........................ 535 17,248
Net decrease in short-term investments.................... 14,499 --
Proceeds from sales of securities available for sale...... -- 12,309
Proceeds from maturities of investment securities
available for sale..................................... 4,062 15,838
Purchases of investment securities available for sale..... (12,692) (10,471)
Proceeds from maturities of investment securities held to
maturity............................................... 532 1,084
Net increase in loans..................................... (81,316) (83,266)
Proceeds from sales of subsidiary's net assets............ -- 3,392
Purchases of premises and equipment....................... (6,686) (3,885)
Other investing activities................................ (1,900) (4,475)
-------- --------
Net cash used by investing activities............. (82,895) (53,517)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposit accounts.......................... 60,413 23,496
Net increase in FHLB advance and other borrowings......... 15,635 26,109
Proceeds from note payable................................ 2,580 1,004
Proceeds from issuance of common stock.................... -- 2,170
-------- --------
Net cash provided by financing activities......... 78,628 52,779
-------- --------
Net (decrease) increase in cash and due from banks.......... (1,066) 2,234
Cash and due from banks at beginning of period.............. 31,825 31,307
-------- --------
CASH AND DUE FROM BANKS AT END OF PERIOD.................... $ 30,759 $ 33,541
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 5
THE BANC CORPORATION AND SUBSIDIARIES
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 Form 10-K for the year ended
December 31, 1999. It is management's opinion that all adjustments, consisting
of only normal and recurring items necessary for a fair presentation, have been
included. Operating results for the three and six-month periods ended June 30,
2000 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2000.
The statement of financial condition at December 31, 1999, 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.
Prior period financial information has been restated for business
combinations with C&L Banking Corporation ("C&L") and C&L Bank of Blountstown
("Blountstown"), which were consummated in the second quarter of 1999. These
business combinations were accounted for as poolings of interests. Additionally,
Blountstown was immediately merged into C&L's subsidiary, C&L Bank of Bristol.
NOTE 2. BUSINESS COMBINATIONS
On June 30, 1999, the Corporation issued 1,289,454 shares of common stock
in exchange for all of the outstanding common stock of C&L, headquartered in
Bristol, Florida. This transaction, accounted for as a pooling of interests,
added approximately $49 million in assets.
On June 30, 1999, the Corporation issued 838,902 shares of common stock in
exchange for all of the outstanding common stock of Blountstown, headquartered
in Blountstown, Florida. This transaction, accounted for as a pooling of
interests, added approximately $56 million in assets. As explained above, the
Corporation has restated prior period financial information for the C&L and
Blountstown transactions.
The following table presents financial information as reported by the
Corporation, C&L and Blountstown and on a combined basis for the three and six
months ended June 30, 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1999
------------------ ----------------
<S> <C> <C>
Net interest income:
Corporation....................................... $5,663 $10,928
C&L............................................... 606 1,162
Blountstown....................................... 504 989
------ -------
Combined.......................................... $6,773 $13,079
====== =======
Net income:
Corporation....................................... $ 402 $ 906
C&L............................................... 138 319
Blountstown....................................... 39 166
------ -------
Combined.......................................... $ 579 $ 1,391
====== =======
</TABLE>
4
<PAGE> 6
THE BANC CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. BUSINESS COMBINATIONS (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1999
------------------ ----------------
<S> <C> <C>
Net income per equivalent share of Corporation:
Corporation....................................... $ .03 $ .07
C&L............................................... .11 .25
Blountstown....................................... .05 .20
Combined.......................................... .04 .10
</TABLE>
On July 13, 1999, the Corporation acquired BankersTrust of Alabama, Inc.
("BankersTrust") in a business combination accounted for as a purchase.
BankersTrust was a one-bank holding company operating in north Alabama. The
total cost of the acquisition was $1,624,000, which exceeded the fair value of
the net assets of BankersTrust by $5,125,000. The excess is being amortized on a
straight-line basis over 15 years. The Corporation's condensed consolidated
financial statements include the results of operations of BankersTrust only for
the six months ended June 30, 2000. The following unaudited summary information
presents the consolidated results of operations of the Corporation on a pro
forma basis, as if BankersTrust had been acquired on January 1, 1999. The pro
forma summary does not necessarily reflect the results of operations that would
have occurred if the acquisition had occurred as of the beginning of the period
presented, or results of operations that may occur in the future.
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS ENDED
JUNE 30, 1999
----------------
<S> <C>
Interest income............................................. $26,326
Interest expense............................................ 12,586
-------
Net interest income............................... 13,740
Provision for loan losses................................... 3,539
Noninterest income.......................................... 2,918
Noninterest expense......................................... 15,468
-------
Loss before income taxes.......................... (2,349)
Income tax expense.......................................... 326
-------
Net loss.................................................... $(2,675)
=======
Basic and diluted net loss per share........................ $ (0.19)
=======
</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 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, 1999. All costs have been allocated to
the reportable segments; therefore, combined amounts agree with the consolidated
totals.
5
<PAGE> 7
THE BANC CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. SEGMENT REPORTING (CONTINUED)
<TABLE>
<CAPTION>
ALABAMA FLORIDA
REGION REGION COMBINED
-------------- -------- --------
<S> <C> <C> <C>
Three months ended June 30, 2000
Net interest income...................................... $ 5,612 $ 3,085 $ 8,697
Provision for loan losses................................ 450 259 709
Noninterest income....................................... 1,424 453 1,877
Noninterest expense...................................... 6,296 1,979 8,275
Income tax (benefit) expense............................. (103) 499 396
-------- -------- --------
Net income............................................ $ 393 $ 801 $ 1,194
======== ======== ========
Total assets..................................... $647,202 $260,903 $908,105
======== ======== ========
Three months ended June 30, 1999
Net interest income...................................... $ 4,537 $ 2,236 $ 6,773
Provision for loan losses................................ 185 113 298
Noninterest income....................................... 925 395 1,320
Noninterest expense...................................... 5,068 1,911 6,979
Income tax (benefit) expense............................. (10) 247 237
-------- -------- --------
Net income............................................ $ 219 $ 360 $ 579
======== ======== ========
Total assets..................................... $470,607 $210,738 $681,345
======== ======== ========
Six months ended June 30, 2000
Net interest income...................................... $ 11,263 $ 5,799 $ 17,062
Provision for loan losses................................ 1,054 543 1,597
Noninterest income....................................... 2,726 798 3,524
Noninterest expense...................................... 12,534 3,592 16,126
Income tax (benefit) expense............................. (138) 905 767
-------- -------- --------
Net income............................................ $ 539 $ 1,557 $ 2,096
======== ======== ========
Six months ended June 30, 1999
Net interest income...................................... $ 8,813 $ 4,266 $ 13,079
Provision for loan losses................................ 307 235 542
Noninterest income....................................... 1,906 827 2,733
Noninterest expense...................................... 9,906 3,568 13,474
Income tax (benefit) expense............................. (75) 480 405
-------- -------- --------
Net income............................................ $ 581 $ 810 $ 1,391
======== ======== ========
</TABLE>
6
<PAGE> 8
THE BANC CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -----------------
2000 1999 2000 1999
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Numerator:
For basic and diluted, net income....................... $ 1,194 $ 579 $ 2,096 $ 1,391
======= ======= ======= =======
Denominator:
For basic, weighted average common shares outstanding... 14,385 14,315 14,385 14,284
Effect of dilutive stock options........................ 1 38 2 43
------- ------- ------- -------
Average diluted common shares outstanding............... 14,386 14,353 14,387 14,327
======= ======= ======= =======
Basic and diluted net income per share.................... $ .08 $ .04 $ .14 $ .10
======= ======= ======= =======
</TABLE>
NOTE 5. COMPREHENSIVE INCOME (LOSS)
Total comprehensive income (loss) was $1,337,000 and $2,189,000 for the
three and six-month periods ended June 30, 2000 and $(532,000) and $ 18,000 for
the three and six-month periods ended June 30, 1999. Total comprehensive income
consists of net income and the unrealized gain or loss on the Corporation's
available for sale security portfolio arising during the period.
NOTE 6. INCOME TAXES
The primary difference between the effective tax rate and the federal
statutory rate in 2000 and 1999 is the recognition of rehabilitation tax credits
generated from the restoration of the Corporation's headquarters, the John A.
Hand Building.
NOTE 7. STOCKHOLDERS' EQUITY
During 1999, the Corporation received approximately $2,170,000 in proceeds,
before costs, from the issuance of common stock, of which, $636,000 was received
from 134,000 shares issued upon the exercise of stock options. The remaining
proceeds were received from the sale of 150,000 shares of common stock issued to
satisfy the exercise of the underwriter's overallotment option in connection
with the Corporation's underwritten public offering, which closed on January 10,
1999.
7
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Banc Corporation is a financial holding company incorporated under the
laws of Delaware and headquartered in Birmingham, Alabama. Through its banking
subsidiary The Bank, the Corporation offers a broad range of services in 29
locations throughout Alabama and the Florida panhandle.
FINANCIAL CONDITION
The Corporation had total assets of $908.1 million at June 30, 2000, an
increase of $80.7 million, or 9.8% from $827.4 million at December 31, 1999. The
increase in total assets was primarily due to the growth of the loan portfolio,
which was funded by an increase in deposits and borrowings from the Federal Home
Loan Bank ("FHLB"). The Corporation believes that FHLB borrowings are a reliable
and relatively inexpensive source of funding when compared to market deposit
rates in the Birmingham, Alabama market.
Short-term liquid assets (cash and due from banks, interest-bearing
deposits due, short-term commercial paper and federal funds sold) decreased
$16.2 million, or 29.9% to $37.9 million at June 30, 2000 from $54.0 million at
December 31, 1999. This decrease resulted primarily from the maturity of $14.5
million in short-term commercial paper. At June 30, 2000, these assets comprised
4.2% of total assets compared with 6.5% at December 31, 1999.
Total investment securities increased $8.2 million, or 11.6% to $79.1
million at June 30, 2000 from $70.9 million at December 31, 1999.
Mortgage-backed securities, which comprised 50.8% of the total investment
portfolio at June 30, 2000, decreased $1.9 million or 4.5% to $40.2 million from
$42.1 million at December 31, 1999. Investments in U.S. Treasury and agency
securities, which comprised 20.9% of the total investment portfolio at June 30,
2000 increased $11.4 million, or 103.6% to $22.4 million from $11.0 million at
December 31, 1999. The total investment portfolio at June 30, 2000 comprised
9.8% of all interest-earning assets compared to 8.6% at December 31, 1999 and
produced an average yield of 6.2% and 5.9% for the six months ended June 30,
2000 and 1999, respectively.
Loans, net of unearned income, totaled $713.9 million at June 30, 2000, an
increase of 12.8%, or $81.1 million from $632.8 million at December 31, 1999
with loans averaging $669.5 million for the six months ended June 30, 2000. Of
the $81.1 million increase in loans, 71.4%, or $57.9 million was produced by
branches located in the Alabama region, the other 28.6%, or $23.2 million was
produced by branches in the northern panhandle and gulf coast of Florida. Loans,
net of unearned income, comprised 88.2% of interest-earning assets at June 30,
2000, compared to 86.5% at December 31, 1999, and produced an average yield of
9.5% and 9.3% for the six months ended June 30, 2000 and 1999, respectively.
Noninterest bearing deposits totaled $101.1 million at June 30, 2000, an
increase of 20.8%, or $17.4 million from $83.7 million at December 31, 1999. Of
the $17.4 million increase in noninterest bearing deposits, 53.7%, or $9.3
million was acquired in branches located in the Alabama region, the other 46.3%,
or $8.1 million was acquired in branches in the northern panhandle and gulf
coast of Florida. Noninterest bearing deposits comprised 13.6% of total deposits
at June 30, 2000, compared to 12.3% at December 31, 1999.
Interest bearing deposits totaled $641.8 million at June 30, 2000, an
increase of 7.2%, or $43.0 million from $598.8 million at December 31, 1999,
with interest bearing deposits averaging $610.5 million for the six months ended
June 30, 2000. The $43.0 million increase in interest bearing deposits was
primarily in branches located in the Alabama region and includes brokered
deposits of $38.9 million. These brokered deposits carry an average rate of 6.8%
and mature as follows: fourth quarter 2000, $5.0 million; second quarter 2001,
$13.6 million; fourth quarter 2001 $14.9 million; and second quarter 2002, $5.3
million. Interest bearing deposits comprised 86.4% of total deposits at June 30,
2000, compared to 87.7% at December 31, 1999 and carried an average rate of 5.0%
and 4.7% for the six months ended June 30, 2000 and 1999, respectively.
Advances from the Federal Home Loan Bank ("FHLB") increased $15.3 million
to $77.8 million at June 30, 2000 from $62.5 million at December 31, 1999, and
the note payable to a regional bank increased $2.6 million to $9.7 million at
June 30, 2000 from $7.1 million at December 31, 1999. These increases in
borrowings were used primarily to fund growth in the loan portfolio. Total
borrowings averaged $76.7 million
8
<PAGE> 10
FINANCIAL CONDITION (CONTINUED)
for the six months ended June 30, 2000 and carried an average rate of 5.8%
compared to 5.3% for the six months ended June 30, 1999.
At June 30, 2000, total stockholders' equity was $71.0 million, an increase
of $2.2 million from December 31, 1999. The increase in stockholders' equity
resulted primarily from earnings for the first six months of 2000.
RESULTS OF OPERATIONS
Net income increased $615,000, or 106.2% to $1.2 million for the three
months ended June 30, 2000 compared to $579,000 over the same period in 1999.
Net income also increased 705,000, or 50.7% to $2.1 million for the six months
ended June 30, 2000 compared to $1.4 million for the six months ended June 30,
1999. The increase in net income was primarily due to increases in net interest
income and other noninterest income offset by increases in the provision for
loan losses and noninterest expenses. The return on average assets was 0.55% and
0.49%, respectively for the three and six-month periods ended June 30, 2000
compared to 0.35 % and 0.41%, respectively, for the three and six-month periods
ended June 30, 1999.
Net interest income increased $1.9 million, or 28.4% to $8.7 million for
the three months ended June 30, 2000 compared to $6.8 million for the three
months ended June 30, 1999. Net interest income increased $4.0 million, or 30.5%
to $17.1 million for the six months ended June 30, 2000 compared to $13.1
million for the six months ended June 30, 1999. The increase in net interest
income was primarily due to the increased volume of and yield on loans which
were funded by the maturity of short-term commercial paper and increases in
deposits and borrowings from the FHLB. Total interest earning assets and
interest bearing liabilities averaged $765.0 million and $687.2 million,
respectively, for the six-month period ended June 30, 2000 compared to $578.8
million and $499.6 million, respectively for the six-month period ended June 30,
1999. The combination of interest earning assets and liabilities has produced a
net interest spread of 3.97% for the first six months of 2000 as compared to
3.91% during the same period in 1999. The net interest margin decreased to 4.49%
for the first six months of 2000 from 4.55% for the first half of 1999.
Noninterest income increased $557,000, or 42.2% to $1.9 million for the
three months ended June 30, 2000 compared to $1.3 million for the second quarter
of 1999. For the six month period ending June 30, 2000, noninterest income
increased $791,000, or 28.9% to $3.5 million compared to $2.7 million for the
six-month period ended June 30, 1999. These increases were primarily due to
enhanced service charge income related to the increase in the volume of deposits
and earnings related to the cash surrender value of single premium life
insurance policies.
Noninterest expense increased $1.3 million, or 18.6% to $8.3 million for
the three months ended June 30, 2000 compared to $7.0 million for the same
period in 1999. Noninterest expense increased $2.7 million, or 19.7% to $16.1
million for the first six months of 2000 compared to $13.5 million for the first
six months of 1999. Salaries and benefits increased $871,000, or 27.6% to $4.0
million for the three months ended June 30, 2000 from $3.2 million for the same
period in 1999. Salaries and benefits increased $1.4 million, or 22.6% to $7.8
million for the six months ended June 30, 2000 compared to $6.4 million for the
corresponding 1999 period. The increase in salaries and benefits primarily
resulted from the acquisition of new banks and branches and the addition of
personnel in the administrative and operations area.
All other noninterest expenses increased $425,000, or 11.1% to $4.2 million
for the three months ended June 30, 2000 and $1.2 million, or 17.0% to $8.3
million for the six months ended June 30, 2000. This compared to $3.8 million
and $7.1 million for the three and six-month periods ended June 30, 1999. This
increase in other expenses for the six-month period includes a $483,000 increase
in occupancy, furniture and equipment expenses, a $261,000 increase in goodwill
amortization and $169,000 in foreclosure losses. Occupancy expenses increased
during 2000 as a result of increased depreciation and maintenance related to the
Corporation's headquarters and The Bank's operations center. The increase in
goodwill amortization relates to purchase acquisitions closed in the third and
fourth quarters of 1999. The foreclosure losses
9
<PAGE> 11
RESULTS OF OPERATIONS (CONTINUED)
represent writedowns, or losses incurred on sales, of properties acquired in
foreclosure from a single commercial account.
Income tax expense was $396,000 and $767,000 for the three and six-month
periods ended June 30, 2000, respectively, compared to $237,000 and $405,000 for
the three and six-month periods ended June 30, 1999. The primary difference in
the effective rate and the federal statutory rate (34%) is the recognition of a
rehabilitation tax credit generated from the restoration of the Corporation's
headquarters.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $709,000 and $1.6 million, for the three
and six-month periods ended June 30, 2000, respectively, compared to $298,000
and $542,000 for the three and six-month periods ended June 30, 1999. The
provision for loan losses represents the amount determined by senior management
necessary to maintain the allowance for loan losses at a level capable of
absorbing inherent losses in the loan portfolio, plus estimated losses
associated with off-balance sheet credit instruments such as letters of credit
and unfunded lines of credit. The allowance for loan losses at June 30, 2000,
totaled $8.9 million, or 1.25% of total loans, compared to $8.1 million, or
1.27% of total loans at December 31, 1999. The Corporation prepares an analysis
to assess the risk in the loan portfolio and to determine the adequacy of the
allowance for loan losses. Generally, the Corporation estimates the allowance
using factors such as historical loss experience based on volume and types of
loans, volume and trends in delinquencies and non-accruals, national and local
economic conditions and other pertinent information.
The Corporation has a risk management process to control risk in the loan
portfolio through adherence to credit standards established by the Board of
Directors and implemented by senior management. These standards are set forth in
a formal loan policy, which establishes loan underwriting/approval procedure,
sets limits on credit concentration and enforces regulatory requirements.
Loan portfolio concentration risk is reduced through concentration limits
for both borrowers and types of collateral and through geographical
diversification. Concentration risk is measured and reported to senior
management and the Board of Directors on a regular basis.
A risk rating system is employed whereby each loan is assigned a rating
which corresponds to the perceived credit risk. Risk ratings are subject to
independent review by the Corporation's Loan Review Department, which also
performs ongoing, independent review of the risk management process that
includes underwriting, documentation and collateral control. Regular reports are
made to senior management and the Board of Directors regarding credit quality as
measured by assigned risk ratings and other measures, including, but not limited
to, the level of past due percentages and nonperforming assets.
The loan review function is centralized and independent of the lending
function. Review results are reported to the Audit Committee of the Board of
Directors as well as to the Corporation's independent auditors.
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 funds, the Corporation
has access to purchased funds from several regional financial institutions and
may borrow from a regional financial institution under a line of credit, and
from the 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, interest rates, general economic
conditions and competition primarily influence deposit flows and early loan
payments. The Corporation has a policy to constantly monitor liquidity needs to
insure maintenance of adequate liquidity to meet conditions that might
reasonably be expected to occur.
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<PAGE> 12
FORWARD-LOOKING STATEMENTS
Statements contained in this Quarterly Report on Form 10-Q which are not
historical facts are forward-looking statements. In addition, the Corporation,
through its senior management, from time to time makes forward-looking public
statements concerning its expected future operations and performance and other
developments. Such forward-looking statements are made pursuant to the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
Additionally, such forward-looking statements are based on the Corporation's
belief as well as certain assumptions made by management and information
currently available with respect to the Corporation's ability to achieve the
operating results it expects relating to completed acquisitions; anticipated
cost savings and revenue enhancements; the ability to successfully assimilate
acquired operations by the Corporation, including installing the Corporation's
centralized policy oversight, credit review and management systems at the
acquired institutions; the absence of material contingencies related to the
acquired operations; the adequacy of the allowance for loan losses; the effect
of legal proceedings on the Corporation's financial condition, results of
operations and liquidity; and market risk disclosures, as well as other
information.
The risks and uncertainties that may affect operations, performance, growth
projections and the results of the Corporation's business include, but are not
limited to, fluctuations in the economy, the relative strength and weakness in
the commercial and consumer sector and in the real estate market, the actions
taken by the Federal Reserve Board for the purpose of managing the economy,
interest rate movements, the impact of competitive products, services and
pricing, timely development by the Corporation of technology enhancements for
its products and operating systems, legislation and similar matters. Although
management of the Corporation believes that the expectations reflected in such
forward-looking statements are reasonable, management can give no assurance that
such expectations will prove to be correct. Prospective investors are cautioned
that any such forward-looking statements are not guaranties of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking 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 Sensitivity" included in the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1999, is hereby
incorporated herein by reference.
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<PAGE> 13
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 20, 2000, the Annual Meeting of Stockholders of the Corporation was
held at which shares of common stock represented at the Annual Meeting were
voted in favor of the election of the directors listed below as follows:
<TABLE>
<CAPTION>
DIRECTOR FOR WITHHELD
-------- --------- ---------
<S> <C> <C> <C>
1. Peter N. Dichiara........................................... 9,833,464 813,585
2. Steven C. Hays.............................................. 9,677,156 969,893
3. Larry R. House.............................................. 9,646,594* 1,000,455
4. Randall E. Jones............................................ 9,677,356 969,693
5. Richard M. Scrushy.......................................... 9,649,144 997,905
6. Jerry M. Smith.............................................. 9,695,856 951,193
7. Michael E. Stephens......................................... 9,668,519 978,530
8. Marie Swift................................................. 9,834,381 812,668
9. Johnny Wallis............................................... 9,677,006 970,043
</TABLE>
---------------
* Each Director received at least this many votes for election.
Shares of common stock represented at the Annual Meeting were voted in
favor of the approval and ratification of the Second Amended and Restated 1998
Stock Incentive Plan of The Banc Corporation as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C> <C>
9,655,073 981,846 10,130
</TABLE>
In addition, shares of common stock represented at the Annual Meeting were
voted in favor of the ratification of Ernst & Young LLP as independent auditors
as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C> <C>
9,972,726 673,123 1,200
</TABLE>
ITEM 5. OTHER INFORMATION
On June 30, 2000, the Corporation filed a Registration Statement on Form
S-1 with respect to certain trust preferred securities to be issued by a
subsidiary of the Corporation.
12
<PAGE> 14
On July 14, 2000, Larry R. Matthews was appointed Chairman and Chief
Executive Officer and Don J. Giardina was appointed as President and Chief
Operating Officer of The Bank, the principal subsidiary of the Corporation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K:
None.
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<PAGE> 15
SIGNATURES
Pursuant with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Banc Corporation
(Registrant)
<TABLE>
<S> <C>
By: /s/ JAMES A. TAYLOR, JR.
----------------------------------------------------
James A. Taylor, Jr.
Date: August 11, 2000 Executive Vice President, General Counsel and Secretary
By: /s/ DAVID R. CARTER
----------------------------------------------------
David R. Carter
Executive Vice President and Chief Financial Officer
Date: August 11, 2000 (Principal Accounting Officer)
</TABLE>
14
