##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED June 30, 2009
 OR
 o
    
    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
 Superior Bancorp
 (Exact Name of Registrant as Specified in its Charter)
 Delaware
    
    63-1201350(State or Other Jurisdiction of Incorporation)
    
    (IRS Employer Identification No.)
 17 North 20th Street, Birmingham, Alabama 35203
   (Registrants Telephone Number, Including Area Code)
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ
  Class
    
    Outstanding as of June 30, 2009Common stock, $.001 par value
    
    10,111,684




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##### 



TABLE OF CONTENTS
 PART I FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTS
    
    
    3ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
    
    
    25ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    
    
    52ITEM 4. CONTROLS AND PROCEDURES
    
    
    53PART II. OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    54ITEM 1A. RISK FACTORS
    
    
    54ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    54ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    54ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    55ITEM 5. OTHER INFORMATION
    
    
    55ITEM 6. EXHIBITS
    
    
    55SIGNATURES
    
    
    56EX-31.1EX-31.2EX-32.1EX-32.2
  2




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SUPERIOR BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
 June 30,
    
    
    December 31,2009
    
    
    2008(UNAUDITED)ASSETSCash and due from banks
    
    $
    80,589
    
    
    $
    74,237Interest-bearing deposits in other banks
    
    
    19,900
    
    
    
    10,042Federal funds sold
    
    
    2,426
    
    
    
    5,169Total cash and cash equivalents
    
    
    102,915
    
    
    
    89,448Investment securities available for sale
    
    
    315,551
    
    
    
    347,142Tax lien certificates
    
    
    25,533
    
    
    
    23,786Mortgage loans held for sale
    
    
    100,707
    
    
    
    22,040Loans, net of unearned income
    
    
    2,398,471
    
    
    
    2,314,921Allowance for loan losses
    
    
    (33,504
    )
    
    
    (28,850
    )Net loans
    
    
    2,364,967
    
    
    
    2,286,071Premises and equipment, net
    
    
    105,343
    
    
    
    104,085Accrued interest receivable
    
    
    16,210
    
    
    
    14,794Stock in FHLB
    
    
    18,212
    
    
    
    21,410Cash surrender value of life insurance
    
    
    49,174
    
    
    
    48,291Core deposit and other intangible assets
    
    
    18,873
    
    
    
    21,052Other real estate
    
    
    35,206
    
    
    
    19,971Other assets
    
    
    62,819
    
    
    
    54,611Total assets
    
    $
    3,215,510
    
    
    $
    3,052,701LIABILITIES AND STOCKHOLDERS EQUITYDeposits:Noninterest-bearing
    
    $
    246,724
    
    
    $
    212,732Interest-bearing
    
    
    2,357,834
    
    
    
    2,130,256TOTAL DEPOSITS
    
    
    2,604,558
    
    
    
    2,342,988Advances from FHLB
    
    
    228,320
    
    
    
    361,324Security repurchase agreements
    
    
    2,164
    
    
    
    3,563Notes payable
    
    
    45,688
    
    
    
    7,000Subordinated debentures, net
    
    
    60,774
    
    
    
    60,884Accrued expenses and other liabilities
    
    
    27,236
    
    
    
    25,703Total liabilities
    
    
    2,968,740
    
    
    
    2,801,462Commitments and contingenciesStockholders equity:Preferred stock, par value $.001 per share; shares authorized 5,000,000:Series A, fixed rate cumulative perpetual preferred stock, 69,000
shares issued and outstanding at June 30, 2009 and December 31, 2008,
respectively
    
    
    
    
    
    
    Common stock, par value $.001 per share; shares authorized 20,000,000;
shares issued 10,438,590 and 10,403,087 respectively; outstanding
10,111,684 and 10,074,999 respectively
    
    
    10
    
    
    
    10Surplus  preferred
    
    
    63,563
    
    
    
    62,978 warrants
    
    
    8,646
    
    
    
    8,646 common
    
    
    329,736
    
    
    
    329,461Accumulated deficit
    
    
    (136,662
    )
    
    
    (129,904
    )Accumulated other comprehensive loss
    
    
    (6,723
    )
    
    
    (7,925
    )Treasury stock, at cost  321,152 and 321,485 shares, respectively
    
    
    (11,333
    )
    
    
    (11,373
    )Unearned ESOP stock
    
    
    (353
    )
    
    
    (443
    )Unearned restricted stock
    
    
    (114
    )
    
    
    (211
    )Total stockholders equity
    
    
    246,770
    
    
    
    251,239Total liabilities and stockholders equity
    
    $
    3,215,510
    
    
    $
    3,052,701
  3




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##### Table of Contents



SUPERIOR BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in thousands, except per share data)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008INTEREST INCOMEInterest and fees on loans
    
    $
    35,959
    
    
    $
    36,708
    
    
    $
    70,911
    
    
    $
    74,053Interest on taxable securities
    
    
    3,976
    
    
    
    4,143
    
    
    
    7,985
    
    
    
    8,195Interest on tax-exempt securities
    
    
    434
    
    
    
    431
    
    
    
    863
    
    
    
    861Interest on federal funds sold
    
    
    2
    
    
    
    18
    
    
    
    7
    
    
    
    98Interest and dividends on other investments
    
    
    456
    
    
    
    732
    
    
    
    818
    
    
    
    1,376Total interest income
    
    
    40,827
    
    
    
    42,032
    
    
    
    80,584
    
    
    
    84,583INTEREST EXPENSEInterest on deposits
    
    
    14,109
    
    
    
    16,709
    
    
    
    29,002
    
    
    
    36,962Interest on other borrowed funds
    
    
    2,597
    
    
    
    3,016
    
    
    
    4,938
    
    
    
    5,808Interest on subordinated debentures
    
    
    1,206
    
    
    
    919
    
    
    
    2,400
    
    
    
    1,934Total interest expense
    
    
    17,912
    
    
    
    20,644
    
    
    
    36,340
    
    
    
    44,704NET INTEREST INCOME
    
    
    22,915
    
    
    
    21,388
    
    
    
    44,244
    
    
    
    39,879Provision for loan losses
    
    
    5,982
    
    
    
    5,967
    
    
    
    9,434
    
    
    
    7,838NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
    
    
    16,933
    
    
    
    15,421
    
    
    
    34,810
    
    
    
    32,041NONINTEREST INCOMEService charges and fees on deposits
    
    
    2,524
    
    
    
    2,192
    
    
    
    4,911
    
    
    
    4,296Mortgage banking income
    
    
    2,271
    
    
    
    1,031
    
    
    
    3,961
    
    
    
    2,297Total other-than-temporary impairment losses (OTTI) (see Note 3)
    
    
    (5,853
    )
    
    NA
    
    
    
    (7,631
    )
    
    NAPortion of OTTI recognized in other comprehensive income
    
    
    1,776
    
    
    NA
    
    
    
    3,230
    
    
    NAInvestment securities (loss) gain
    
    
    (4,077
    )
    
    
    1,068
    
    
    
    (4,401
    )
    
    
    1,470Change in fair value of derivatives
    
    
    (67
    )
    
    
    (418
    )
    
    
    (266
    )
    
    
    632Increase in cash surrender value of life insurance
    
    
    540
    
    
    
    555
    
    
    
    1,055
    
    
    
    1,107Gain on extinguishment of liabilities
    
    
    
    
    
    
    2,918
    
    
    
    
    
    
    
    2,918Other income
    
    
    1,340
    
    
    
    1,660
    
    
    
    2,557
    
    
    
    2,888TOTAL NONINTEREST INCOME
    
    
    2,531
    
    
    
    9,006
    
    
    
    7,817
    
    
    
    15,608NONINTEREST EXPENSESSalaries and employee benefits
    
    
    12,304
    
    
    
    12,058
    
    
    
    24,613
    
    
    
    24,199Occupancy, furniture and equipment expense
    
    
    4,503
    
    
    
    4,120
    
    
    
    8,907
    
    
    
    8,180Amortization of core deposit intangibles
    
    
    985
    
    
    
    896
    
    
    
    1,971
    
    
    
    1,792FDIC assessment
    
    
    1,932
    
    
    
    162
    
    
    
    2,389
    
    
    
    224Foreclosure losses
    
    
    1,748
    
    
    
    178
    
    
    
    2,317
    
    
    
    364Other expenses
    
    
    6,323
    
    
    
    5,862
    
    
    
    11,662
    
    
    
    10,781TOTAL NONINTEREST EXPENSES
    
    
    27,795
    
    
    
    23,276
    
    
    
    51,859
    
    
    
    45,540(Loss) income before income taxes
    
    
    (8,331
    )
    
    
    1,151
    
    
    
    (9,232
    )
    
    
    2,109INCOME TAX (BENEFIT) EXPENSE
    
    
    (4,569
    )
    
    
    310
    
    
    
    (4,784
    )
    
    
    572NET (LOSS) INCOME
    
    
    (3,762
    )
    
    
    841
    
    
    
    (4,448
    )
    
    
    1,537Preferred stock dividends and amortization
    
    
    1,167
    
    
    
    
    
    
    
    2,310
    
    
    
    NET (LOSS) INCOME APPLICABLE TO COMMON STOCKHOLDERS
    
    $
    (4,929
    )
    
    $
    841
    
    
    $
    (6,758
    )
    
    $
    1,537BASIC NET (LOSS) INCOME PER COMMON SHARE
    
    $
    (0.49
    )
    
    $
    0.08
    
    
    $
    (0.67
    )
    
    $
    0.15DILUTED NET (LOSS) INCOME PER COMMON SHARE
    
    $
    (0.49
    )
    
    $
    0.08
    
    
    $
    (0.67
    )
    
    $
    0.15Weighted average common shares outstanding
    
    
    10,071
    
    
    
    10,016
    
    
    
    10,062
    
    
    
    10,014Weighted average common shares outstanding, assuming dilution
    
    
    10,071
    
    
    
    10,056
    
    
    
    10,062
    
    
    
    10,051
  4




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SUPERIOR BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
(Dollars in thousands)
 Six Months EndedJune 30,2009
    
    
    2008NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES
    
    $
    (71,019
    )
    
    $
    11,446CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sales of securities available for sale
    
    
    
    
    
    
    36,142Proceeds from maturities of investment securities available for sale
    
    
    40,602
    
    
    
    92,189Purchases of investment securities available for sale
    
    
    (11,683
    )
    
    
    (127,153
    )Redemption of tax lien certificates
    
    
    18,582
    
    
    
    9,886Purchase of tax lien certificates
    
    
    (20,329
    )
    
    
    (19,303
    )Net increase in loans
    
    
    (110,932
    )
    
    
    (147,573
    )Purchases of premises and equipment
    
    
    (5,295
    )
    
    
    (8,078
    )Proceeds from sale of premises and equipment
    
    
    338
    
    
    
    7,567Proceeds from sale of repossessed assets
    
    
    5,673
    
    
    
    4,009Decrease (increase) in stock in FHLB
    
    
    3,198
    
    
    
    (9,556
    )Net cash used by investing activities
    
    
    (79,846
    )
    
    
    (161,870
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net increase in deposits
    
    
    261,784
    
    
    
    (6,666
    )Net (decrease) increase in FHLB advances and other borrowed funds
    
    
    (134,493
    )
    
    
    173,074Proceeds from notes payable
    
    
    38,575
    
    
    
    Preferred cash dividend paid
    
    
    (1,534
    )
    
    
    Net cash provided by financing activities
    
    
    164,332
    
    
    
    166,408Net increase in cash and cash equivalents
    
    
    13,467
    
    
    
    15,984CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    89,448
    
    
    
    63,351CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    102,915
    
    
    $
    79,335
  5




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Note 1  Basis of Presentation
   Note 2  Recent Accounting Pronouncements
  
    
    FSP SFAS 157-4 Determining Fair Value When the Volume and Level of Activity for the
Assets or Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly (FSP 157-4)provides guidelines for making fair value measurements more
consistent with the principles presented in SFAS No. 157, Fair Value Measurements (SFAS
157). It emphasizes that even if there has been a significant decrease in the volume and
level of activity for the asset or liability and regardless of the valuation technique used,
the objective of a fair value measurement remains the same. Fair value is the price that
would be received in a sale of an asset or paid to transfer a liability in an orderly
transaction (that is, not a forced liquidation or distressed sale), between market
participants at the measurement date under current market conditions.
    
    FSP SFAS 115-2 and SFAS 124-2, Recognition and Presentation of Other-than-temporary
impairments (FSP 115-2 and 124-2)provides additional guidance designed to create greater
clarity and consistency in accounting for and presenting impairment losses on securities. It
amends OTTI impairment guidance for debt securities to make the guidance more operational
and to improve the presentation and disclosure of OTTI on debt and equity securities in the
financial statements. It does not amend existing recognition and measurement guidance
related to OTTI of equity securities.
    
    FSP SFAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial
Instruments (FSP 107-1 and APB 28-1)enhances consistency in financial reporting by
increasing the frequency of fair value disclosures.
  6




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SFAS No. 161, Disclosures About Derivative Instruments and Hedging
Activities, an Amendment of FASB Statement No. 133 Accounting for Derivative Instruments and Hedging Activities
 SFAS No. 165, Subsequent Events (SFAS 165).
 SFAS No. 166, Accounting for Transfers of Financial Assets, an Amendment of FASB Statement
No. 140 (SFAS 166). Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities,
 SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS 167). Consolidation of Variable Interest Entities,
 SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles, a Replacement of FASB Statement No. 162
(SFAS 168). The
Hierarchy of Generally Accepted Accounting Principles
 7




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Note 3  Investment Securities
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(In Thousands)Investment securities available for sale:U.S. agency securities
    
    $
    5,548
    
    
    $
    82
    
    
    $
    
    
    
    $
    5,630Mortgage-backed securities (MBS):U.S. Agency MBS  residential
    
    
    206,168
    
    
    
    6,325
    
    
    
    12
    
    
    
    212,481U.S. Agency MBS  collateralized mortgage obligation (CMO)
    
    
    12,364
    
    
    
    352
    
    
    
    
    
    
    
    12,716Private-label  CMO
    
    
    23,133
    
    
    
    
    
    
    
    4,407
    
    
    
    18,726Total MBS
    
    
    241,665
    
    
    
    6,677
    
    
    
    4,419
    
    
    
    243,923State, county and municipal securities
    
    
    42,149
    
    
    
    584
    
    
    
    1,103
    
    
    
    41,630Corporate obligations:Corporate debt
    
    
    4,174
    
    
    
    
    
    
    
    374
    
    
    
    3,800Pooled trust preferred securities
    
    
    14,340
    
    
    
    
    
    
    
    5,687
    
    
    
    8,653Single issue trust preferred securities
    
    
    9,689
    
    
    
    
    
    
    
    3,152
    
    
    
    6,537Other collateralized debt obligations
    
    
    5,134
    
    
    
    
    
    
    
    6
    
    
    
    5,128Total corporate obligations
    
    
    33,337
    
    
    
    
    
    
    
    9,219
    
    
    
    24,118Equity securities
    
    
    563
    
    
    
    
    
    
    
    313
    
    
    
    250Total investment securities available for sale
    
    $
    323,262
    
    
    $
    7,343
    
    
    $
    15,054
    
    
    $
    315,551
   Securities AvailableFor SaleAmortized
    
    
    EstimatedCost
    
    
    Fair Value(In Thousands)Due in one year or less
    
    $
    530
    
    
    $
    533Due after one year through five years
    
    
    13,029
    
    
    
    12,780Due after five years through ten years
    
    
    5,561
    
    
    
    5,741Due after ten years
    
    
    62,477
    
    
    
    52,574Mortgage-backed securities
    
    
    241,665
    
    
    
    243,923$
    323,262
    
    
    $
    315,551
  8




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June 30, 2009Less Than 12 Months
    
    
    More Than 12 Months
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    Losses (1)
    
    
    Fair Value
    
    
    Losses (1)
    
    
    Fair Value
    
    
    Losses (1)(In thousands)Temporarily ImpairedMortgage-backed securities:U.S. Agency MBS  residential
    
    $
    107
    
    
    $
    
    
    
    $
    240
    
    
    $
    12
    
    
    $
    347
    
    
    $
    12Private-label  CMO
    
    
    299
    
    
    
    16
    
    
    
    16,679
    
    
    
    4,259
    
    
    
    16,978
    
    
    
    4,275Total MBS
    
    
    406
    
    
    
    16
    
    
    
    16,919
    
    
    
    4,271
    
    
    
    17,325
    
    
    
    4,287State, county and municipal securities
    
    
    10,839
    
    
    
    385
    
    
    
    12,260
    
    
    
    718
    
    
    
    23,099
    
    
    
    1,103Corporate obligations:Corporate debt
    
    
    3,800
    
    
    
    374
    
    
    
    
    
    
    
    
    
    
    
    3,800
    
    
    
    374Pooled trust preferred securities
    
    
    
    
    
    
    
    
    
    
    8,593
    
    
    
    3,943
    
    
    
    8,593
    
    
    
    3,943Single issue trust preferred securities
    
    
    
    
    
    
    
    
    
    
    3,202
    
    
    
    1,798
    
    
    
    3,202
    
    
    
    1,798Other collateralized debt obligations
    
    
    5,128
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    5,128
    
    
    
    6Total corporate obligations
    
    
    8,928
    
    
    
    380
    
    
    
    11,795
    
    
    
    5,741
    
    
    
    20,723
    
    
    
    6,121Equity securities
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    313
    
    
    
    250
    
    
    
    313Total temporarily impaired securities
    
    
    20,173
    
    
    
    781
    
    
    
    41,224
    
    
    
    11,043
    
    
    
    61,397
    
    
    
    11,824Other-than-temporarily ImpairedMortgage-backed securities:Private-label  CMO
    
    
    
    
    
    
    
    
    
    
    1,749
    
    
    
    132
    
    
    
    1,749
    
    
    
    132Corporate obligations:Pooled trust preferred securities
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    1,744
    
    
    
    60
    
    
    
    1,744Single issue trust preferred securities
    
    
    
    
    
    
    
    
    
    
    3,335
    
    
    
    1,354
    
    
    
    3,335
    
    
    
    1,354Total corporate obligations
    
    
    
    
    
    
    
    
    
    
    3,395
    
    
    
    3,098
    
    
    
    3,395
    
    
    
    3,098Total OTTI securities
    
    
    
    
    
    
    
    
    
    
    5,144
    
    
    
    3,230
    
    
    
    5,144
    
    
    
    3,230Total temporarily and other-than-temporarily impaired
    
    $
    20,173
    
    
    $
    781
    
    
    $
    46,368
    
    
    $
    14,273
    
    
    $
    66,541
    
    
    $
    15,054
 
 (1)
    -
    Unrealized losses are included in other comprehensive income (loss), net of unrealized gains and applicable income taxes. 9




---



##### Table of Contents



June 30, 2009Total Number of SecuritiesLess Than 12
    
    
    Greater ThanMonths
    
    
    12 Months
    
    
    TotalTemporarily ImpairedMortgage-backed securities:U.S. Agency MBS  residential
    
    
    3
    
    
    
    1
    
    
    
    4Private-label  CMO
    
    
    1
    
    
    
    8
    
    
    
    9Total MBS
    
    
    4
    
    
    
    9
    
    
    
    13State, county and municipal securities
    
    
    33
    
    
    
    33
    
    
    
    66Corporate obligations:Corporate debt
    
    
    3
    
    
    
    
    
    
    
    3Pooled trust preferred securities
    
    
    
    
    
    
    4
    
    
    
    4Single issue trust preferred securities
    
    
    
    
    
    
    1
    
    
    
    1Other collateralized debt obligations
    
    
    1
    
    
    
    
    
    
    
    1Total corporate obligations
    
    
    4
    
    
    
    5
    
    
    
    9Equity securities
    
    
    
    
    
    
    3
    
    
    
    3Total temporarily impaired securities
    
    
    41
    
    
    
    50
    
    
    
    91Other-than-temporarily ImpairedMortgage-backed securities:Private-label  CMO
    
    
    
    
    
    
    3
    
    
    
    3Corporate obligations:Pooled trust preferred securities
    
    
    
    
    
    
    1
    
    
    
    1Single issue trust preferred securities
    
    
    
    
    
    
    1
    
    
    
    1Total corporate obligations
    
    
    
    
    
    
    2
    
    
    
    2Total OTTI securities
    
    
    
    
    
    
    5
    
    
    
    5Total temporarily and other-than-temporarily impaired
    
    
    41
    
    
    
    55
    
    
    
    96
 Other-Than-Temporary-Impairment
 Accounting for Certain Investments in Debt and Equity
Securities Recognition of Interest Income and Impairment on Purchased Beneficial Interests
and Beneficial Interests that Continue to be Held by a Transfer in Securitized Financial Assets
    10




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##### Table of Contents



Credit SupportRating
    
    
    
    
    Coverage
    
    UnrealizedMoody/Fitch
    
    Count
    
    Ratios (1)
    
    LossA1/NR
    

    1
    
    3,75
    
    $
    (395
    )Aaa/AAA
    

    1
    
    12.72
    
    
    (17
    )Aaa/NR
    

    1
    
    9.05
    
    
    (46
    )NR/AAA
    

    4
    
    2.72 - 17.94
    
    
    (1,864
    )B2/NR
    

    1
    
    5.03
    
    
    (375
    )Caa1/BBB
    

    1
    
    2.19
    
    
    (1,578
    )Ca/CCC (2)
    

    3
    
    0.11 - 0.85
    
    
    (131
    )Total
    

    12
    
    
    
    $
    (4,406
    )
 (1)
    
    The Credit Support Coverage Ratio, which is the ratio that determines the multiple of credit support, based on assumptions for the performance of the
loans within the delinquency pipeline. The assumptions used are:
Current Collateral Support/ ((60 day delinquencies x.60) + (90
day delinquencies x.70) + (foreclosures x 1.00) + (other real estate x 1.00)) x .40 for loss severity.(2)
    
    Includes all private-label CMOs that have OTTI. See
discussion that follows.
  Life-to-DateOther-than-temporary Impairment (OTTI)Discount

    
    
    
    
    
    
    
    
    
    
    
    
    
    Actual
    
    Credit PortionMargin
    
    
    
    
    
    Cumulative
    
    Average
    
    60+ DaysSecurity
    
    Price (%)
    
    (Basis Points)
    
    Yield
    
    Default
    
    Severity
    
    Delinquent
    
    2008
    
    2009
    
    Other
    
    TotalCMO 1
    
    
    24.90
    
    
    
    1640
    
    
    
    18.00
    %
    
    
    56.40
    %
    
    
    50.00
    %
    
    
    25.90
    %
    
    $
    (599
    )
    
    $
    (1,231
    )
    
    $
    (43
    )
    
    $
    (1,873
    )CMO 2
    
    
    10.21
    
    
    
    1801
    
    
    
    19.00
    %
    
    
    57.85
    %
    
    
    50.00
    %
    
    
    31.02
    %
    
    
    (492
    )
    
    
    (1,341
    )
    
    
    (4
    )
    
    
    (1,837
    )CMO 3
    
    
    28.62
    
    
    
    1543
    
    
    
    17.00
    %
    
    
    42.74
    %
    
    
    40.00
    %
    
    
    19.17
    %
    
    
    (803
    )
    
    
    (1,473
    )
    
    
    (84
    )
    
    
    (2,360
    )$
    (1,894
    )
    
    $
    (4,045
    )
    
    $
    (131
    )
    
    $
    (6,070
    )
    11




---



##### Table of Contents



YTDOther-than-temporary Impairment (OTTI)Single/
    
    Class/
    
    Amortized
    
    Fair
    
    Unrealized
    
    CreditName
    
    
    
    Pooled
    
    Tranche
    
    Cost
    
    Value
    
    Loss
    
    Portion
    
    Other
    
    TotalMM Caps Funding I Ltd
    
    
    
    Pooled
    
    B
    
    $
    2,159
    
    
    $
    1,492
    
    
    $
    (667
    )
    
    $
    
    
    
    $
    
    
    
    $
    MM Community Funding Ltd
    
    (1)
    
    Pooled
    
    B
    
    
    5,000
    
    
    
    3,854
    
    
    
    (1,146
    )
    
    
    
    
    
    
    
    
    
    
    Preferred Term Securities V
    
    (2)
    
    Pooled
    
    M
    
    
    1,378
    
    
    
    862
    
    
    
    (516
    )
    
    
    
    
    
    
    
    
    
    
    Tpref Funding III Ltd
    
    
    
    Pooled
    
    B-1
    
    
    4,000
    
    
    
    2,385
    
    
    
    (1,615
    )
    
    
    
    
    
    
    
    
    
    
    Trapeza 2007-13A LLC
    
    (3)
    
    Pooled
    
    D
    
    
    1,803
    
    
    
    60
    
    
    
    (1,743
    )
    
    
    (32
    )
    
    
    (1,744
    )
    
    
    (1,776
    )New South Capital Corp
    
    (4)
    
    Single
    
    Sole
    
    
    4,689
    
    
    
    3,335
    
    
    
    (1,354
    )
    
    
    (324
    )
    
    
    (1,354
    )
    
    
    (1,678
    )Emigrant Capital Trust
    
    (5)
    
    Single
    
    Sole
    
    
    5,000
    
    
    
    3,202
    
    
    
    (1,798
    )
    
    
    
    
    
    
    
    
    
    
    $
    24,029
    
    
    $
    15,190
    
    
    $
    (8,839
    )
    
    $
    (356
    )
    
    $
    (3,098
    )
    
    $
    (3,454
    )
 Original Collateral
    
    Performing CollateralPercent of Actual
    
    Percent of Expected
    
    (6)Lowest
    
    Performing
    
    Deferrals and
    
    Deferrals and
    
    ExcessName
    
    
    
    Rating
    
    Banks
    
    Defaults
    
    Defaults
    
    SubordinationMM Caps Funding I Ltd
    
    
    
    Ca
    
    26
    
    
    9
    %
    
    
    25
    %
    
    
    8
    %MM Community Funding Ltd
    
    (1)
    
    CCC
    
    6
    
    
    10
    %
    
    
    25
    %
    
    
    0
    %Preferred Term Securities V
    
    (2)
    
    Ba3
    
    3
    
    
    2
    %
    
    
    25
    %
    
    
    25
    %Tpref Funding III Ltd
    
    
    
    CC
    
    28
    
    
    16
    %
    
    
    20
    %
    
    
    15
    %Trapeza 2007-13A LLC
    
    (3)
    
    C
    
    48
    
    
    11
    %
    
    
    20
    %
    
    
    0
    %New South Capital Corp
    
    (4)
    
    NR
    
    NA
    
    NA
    
    NA
    
    NAEmigrant Capital Trust
    
    (5)
    
    CC
    
    NA
    
    NA
    
    NA
    
    NA
 
 (1)
    -
    Although the excess subordination for this issue is zero, this tranche does not have any
projected cash flow shortfalls.(2)
    -
    This issue is no longer a subordinate tranche. The senior tranche has been retired.(3)
    -
    Actual and projected defaults increased during the second quarter of 2009 and this security
was considered OTTI.(4)
    -
    Management received notification in April 2009 that interest payments on this issue will be
deferred for up to 20 quarters. OTTI was recognized during the first quarter of 2009. A full
discussion is included below.(5)
    -
    There has been no notification of deferral or default on this issue. An analysis of the
company indicates there is adequate capital and liquidity to service the debt.(6)
    -
    Excess subordination represents the additional defaults in excess of both the current and
projected defaults the issue can absorb before the security experiences any credit impairment.
Excess subordination is calculated by determining what level of defaults an issue can experience
before the security has any credit impairment and then subtracting both the current and projected
future defaults. 12




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##### Table of Contents



For the Three-
    
    
    For the Six-Months Ended
    
    
    Months EndedJune 30, 2009
    
    
    June 30, 2009Balance at beginning of period
    
    $
    324
    
    
    $
    Amounts related to credit losses for which an OTTI was not previously recognized
    
    
    32
    
    
    
    356Reductions for securities sold during the period
    
    
    
    
    
    
    Increases in credit loss for which an OTTI was previously recognized when the
investor does not intend to sell the security and it is not more likely than not
that the entity will be required to sell the security before recovery of its
amortized cost
    
    
    4,045
    
    
    
    4,045Reductions for securities where there is an intent to sale or requirement to sale
    
    
    
    
    
    
    Reductions for increases in cash flows expected to be collected
    
    
    
    
    
    
    Balance at end of period
    
    $
    4,401
    
    
    $
    4,401
   Accounting by Certain Entities (Including Entities With Trade Receivables) That Lend to or Finance
the Activities of Others.
 13




---



##### Table of Contents




    
    The significance of the decline in net assets of FHLB Atlanta as compared to the
capital stock amount for FHLB Atlanta and the length of time this decline has
persisted.
    
    Commitments by FHLB Atlanta to make payments required by law or regulation and
the level of such payments in relation to the operating performance of FHLB Atlanta.
    
    The impact of legislative and regulatory changes on financial institutions and,
accordingly, on the customer base of FHLB Atlanta.
    
    The liquidity position of FHLB Atlanta.
   14




---



##### Table of Contents



Note 4  Notes Payable
  Note payable to bank, borrowed under $10,000,000 line of credit, due September 3, 2009;
interest is based on the lenders base rate, secured by 100% of the outstanding Superior Bank
stock
    
    $
    7,000Senior note guaranteed under the TLGP, due March 30, 2012, 2.625% fixed rate due semi-annually
    
    
    40,000Less: Discount, FDIC guarantee premium and other issuance costs
    
    
    (1,312
    )Total notes payable
    
    $
    45,688
   Note 5  Derivative Financial Instruments
   Interest Rate Swaps
   Fair Value Hedges
  15




---



##### Table of Contents



Cash Flow Hedges
  Interest Rate Lock Commitments
   June 30, 2009
    
    December 31, 2008Notional
    
    Estimated
    
    Notional
    
    EstimatedAmount
    
    Fair Value
    
    Amount
    
    Fair ValueInterest rate derivatives designated as hedges of fair value:Interest rate swap on brokered certificates of deposit
    
    $
    2,777
    
    
    $
    224
    
    
    $
    5,334
    
    
    $
    799Interest rate derivatives designated as hedges of cash flows:Interest rate swaps on subordinated debenture
    
    
    22,000
    
    
    
    (629
    )
    
    
    22,000
    
    
    
    (954
    )Non-hedging interest rate derivatives:Brokered certificates of deposit interest rate swap
    
    
    723
    
    
    
    58
    
    
    
    1,166
    
    
    
    164Mortgage loan held for sale interest rate lock commitment
    
    
    65,510
    
    
    
    170
    
    
    
    92,721
    
    
    
    (117
    )Commercial loan interest rate swap
    
    
    3,814
    
    
    
    331
    
    
    
    3,861
    
    
    
    462Commercial loan interest rate swap
    
    
    3,814
    
    
    
    (331
    )
    
    
    3,861
    
    
    
    (462
    )
  Weighted-AverageInterest
    
    InterestRate
    
    RatePaid
    
    ReceivedInterest rate swaps:Fair value hedge on brokered certificates of deposit interest rate swap
    
    
    0.99
    %
    
    
    4.70
    %Cash flow hedge interest rate swaps on subordinated debentures
    
    
    4.42
    
    
    
    1.96Non-hedging interest rate swap on commercial loan
    
    
    6.73
    
    
    
    6.73
 Gains, Losses and Derivative Cash Flows
  16




---



##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Interest rate swap on brokered certificates of deposit:Amount of gain (loss) included in interest expense on deposits
    
    $
    26
    
    
    $
    15
    
    
    $
    49
    
    
    $
    27Amount of gain (loss) included in other noninterest income
    
    
    (51
    )
    
    
    (29
    )
    
    
    (481
    )
    
    
    (4
    )
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Interest rate swap on subordinated debenture:Net gain (loss) included in interest expense on subordinated debt
    
    $
    (104
    )
    
    $
    
    
    
    $
    (159
    )
    
    $
    Amount of gain (loss) recognized in other comprehensive income
    
    
    223
    
    
    
    
    
    
    
    205
    
    
    
    
    Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Non-hedging interest rate derivatives:Brokered certificates of deposit interest rate swap
    
    $
    (27
    )
    
    $
    (95
    )
    
    $
    (72
    )
    
    $
    37Mortgage loan held for sale interest rate lock commitment
    
    
    12
    
    
    
    (327
    )
    
    
    288
    
    
    
    (112
    )Interest rate floors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    678Commercial loan interest rate swap
    
    
    
    
    
    
    34
    
    
    
    
    
    
    
    34
 Counterparty Credit Risk
   17




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##### Table of Contents



Note 6  Segment Reporting
   Total
    
    
    
    
    
    
    SuperiorAlabama
    
    
    Florida
    
    
    Alabama and
    
    
    Administrative
    
    
    BancorpRegion
    
    
    Region
    
    
    Florida
    
    
    and Other
    
    
    CombinedThree months ended June 30, 2009Net interest income
    
    $
    8,329
    
    
    $
    9,396
    
    
    $
    17,725
    
    
    $
    5,190
    
    
    $
    22,915Provision for loan losses
    
    
    1,424
    
    
    
    1,486
    
    
    
    2,910
    
    
    
    3,072
    
    
    
    5,982Noninterest income
    
    
    2,206
    
    
    
    514
    
    
    
    2,720
    
    
    
    (189
    )
    
    
    2,531Noninterest expense
    
    
    9,113
    
    
    
    5,832
    
    
    
    14,945
    
    
    
    12,850
    
    
    
    27,795Operating (loss) profit
    
    $
    (2
    )
    
    $
    2,592
    
    
    $
    2,590
    
    
    $
    (10,921
    )
    
    
    (8,331
    )Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,569
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (3,762
    )Total assets
    
    $
    1,025,040
    
    
    $
    1,171,252
    
    
    $
    2,196,292
    
    
    $
    1,019,218
    
    
    $
    3,215,510Three months ended June 30, 2008Net interest income
    
    $
    7,505
    
    
    $
    9,108
    
    
    $
    16,613
    
    
    $
    4,775
    
    
    $
    21,388Provision for loan losses
    
    
    945
    
    
    
    660
    
    
    
    1,605
    
    
    
    4,362
    
    
    
    5,967Noninterest income
    
    
    1,745
    
    
    
    490
    
    
    
    2,235
    
    
    
    6,771
    
    
    
    9,006Noninterest expense
    
    
    7,469
    
    
    
    5,406
    
    
    
    12,875
    
    
    
    10,401
    
    
    
    23,276Operating profit (loss)
    
    $
    836
    
    
    $
    3,532
    
    
    $
    4,368
    
    
    $
    (3,217
    )
    
    
    1,151Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    310Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    841Total assets
    
    $
    1,005,586
    
    
    $
    1,141,009
    
    
    $
    2,146,595
    
    
    $
    892,963
    
    
    $
    3,039,558Six months ended June 30, 2009Net interest income
    
    $
    15,875
    
    
    $
    18,467
    
    
    $
    34,342
    
    
    $
    9,902
    
    
    $
    44,244Provision for loan losses
    
    
    3,036
    
    
    
    2,964
    
    
    
    6,000
    
    
    
    3,434
    
    
    
    9,434Noninterest income
    
    
    4,277
    
    
    
    1,029
    
    
    
    5,306
    
    
    
    2,511
    
    
    
    7,817Noninterest expense
    
    
    17,425
    
    
    
    11,568
    
    
    
    28,993
    
    
    
    22,866
    
    
    
    51,859Operating (loss) profit
    
    $
    (309
    )
    
    $
    4,964
    
    
    $
    4,655
    
    
    $
    (13,887
    )
    
    
    (9,232
    )Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,784
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (4,448
    )Six months ended June 30, 2008Net interest income
    
    $
    14,502
    
    
    $
    18,728
    
    
    $
    33,230
    
    
    $
    6,649
    
    
    $
    39,879Provision for loan losses
    
    
    1,800
    
    
    
    1,518
    
    
    
    3,318
    
    
    
    4,520
    
    
    
    7,838Noninterest income
    
    
    3,607
    
    
    
    940
    
    
    
    4,547
    
    
    
    11,061
    
    
    
    15,608Noninterest expense
    
    
    15,095
    
    
    
    10,889
    
    
    
    25,984
    
    
    
    19,556
    
    
    
    45,540Operating profit (loss)
    
    $
    1,214
    
    
    $
    7,261
    
    
    $
    8,475
    
    
    $
    (6,366
    )
    
    
    2,109Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    572Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,537
 18




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##### Table of Contents



Note 7 Net (Loss) Income per Common Share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Numerator:Net (loss) income
    
    $
    (3,762
    )
    
    $
    841
    
    
    $
    (4,448
    )
    
    $
    1,537Less preferred dividends and amortization
    
    
    1,167
    
    
    
    
    
    
    
    2,310
    
    
    
    For basic and diluted, net (loss) income applicable
to common stockholders
    
    $
    (4,929
    )
    
    $
    841
    
    
    $
    (6,758
    )
    
    $
    1,537Denominator:For basic, weighted average common shares outstanding
    
    
    10,071
    
    
    
    10,016
    
    
    
    10,062
    
    
    
    10,014Effect of dilutive stock options
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    37Average common shares outstanding, assuming dilution
    
    
    10,071
    
    
    
    10,056
    
    
    
    10,062
    
    
    
    10,051Basic net (loss) income per common share
    
    $
    (0.49
    )
    
    $
    0.08
    
    
    $
    (0.67
    )
    
    $
    0.15Diluted net (loss) income per common share
    
    $
    (0.49
    )
    
    $
    0.08
    
    
    $
    (0.67
    )
    
    $
    0.15
   Note 8  Comprehensive (Loss) Income
  Pre-Tax
    
    
    
    
    
    
    Net ofAmount
    
    
    Income Tax
    
    
    Income Tax(In thousands)Three months ended June 30, 2009Unrealized loss on available for sale securities
    
    $
    (4,305
    )
    
    $
    1,593
    
    
    $
    (2,712
    )Less reclassification adjustment for OTTI realized in net loss
    
    
    4,077
    
    
    
    (1,508
    )
    
    
    2,569Unrealized gain on derivatives
    
    
    354
    
    
    
    (131
    )
    
    
    223Net unrealized gain
    
    $
    126
    
    
    $
    (46
    )
    
    $
    80Three months ended June 30, 2008Unrealized loss on available for sale securities
    
    $
    (5,449
    )
    
    $
    2,018
    
    
    $
    (3,431
    )Less reclassification adjustment for gains realized in net income
    
    
    (1,068
    )
    
    
    395
    
    
    
    (673
    )Net unrealized loss
    
    $
    (6,517
    )
    
    $
    2,413
    
    
    $
    (4,104
    )Six months ended June 30, 2009Unrealized loss on available for sale securities
    
    $
    (2,817
    )
    
    $
    1,042
    
    
    $
    (1,775
    )Less reclassification adjustment for OTTI realized in net loss
    
    
    4,401
    
    
    
    (1,628
    )
    
    
    2,773Unrealized gain on derivatives
    
    
    325
    
    
    
    (120
    )
    
    
    205Net unrealized gain
    
    $
    1,909
    
    
    $
    (706
    )
    
    $
    1,203Six months ended June 30, 2008Unrealized loss on available for sale securities
    
    $
    (3,719
    )
    
    $
    1,333
    
    
    $
    (2,386
    )Less reclassification adjustment for gains realized in net income
    
    
    (1,470
    )
    
    
    544
    
    
    
    (926
    )Net unrealized loss
    
    $
    (5,189
    )
    
    $
    1,877
    
    
    $
    (3,312
    )
 19




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##### Table of Contents



Note 9  Income Taxes
  Note 10  Stock Incentive Plan
     2009
    
    2008Risk free interest rate
    
    
    3.59
    %
    
    
    4.50
    %Volatility factor
    
    
    35.59
    %
    
    
    29.11
    %Weighted average life of options (in years)
    
    
    5.00
    
    
    
    5.00Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
  Weighted-Weighted-
    
    
    AverageAverage
    
    
    RemainingExercise
    
    
    Contractual
    
    
    AggregateNumber
    
    
    Price
    
    
    Term
    
    
    Intrinsic ValueUnder option, January 1, 2009
    
    
    848,922
    
    
    $
    29.94Granted
    
    
    2,250
    
    
    
    5.48Forfeited
    
    
    (26,750
    )
    
    
    31.47Under option, June 30, 2009
    
    
    824,422
    
    
    $
    29.82
    
    
    
    5.73
    
    
    $
    Exercisable at end of period
    
    
    625,903
    
    
    $
    31.76
    
    
    
    3.70
    
    
    $
    Weighted-average fair value per option of options granted during the period
    
    $
    2.04
 20




---



##### Table of Contents



Note 11  Fair Value Measurements
   Assets and Liabilities Recorded at Fair Value on a Recurring Basis
  Quoted Prices in
    
    
    
    
    
    
    SignificantFair Value at
    
    
    Active Markets for
    
    
    Significant Other
    
    
    UnobservableJune 30,
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    Inputs2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Available for sale securities
    
    $
    315,551
    
    
    $
    250
    
    
    $
    296,345
    
    
    $
    18,956Derivative assets
    
    
    783
    
    
    
    
    
    
    
    783
    
    
    
    Total recurring basis measured assets
    
    $
    316,334
    
    
    $
    250
    
    
    $
    297,128
    
    
    $
    18,956Derivative liabilities
    
    $
    961
    
    
    $
    
    
    
    $
    961
    
    
    $
    Total recurring basis measured liabilities
    
    $
    961
    
    
    $
    
    
    
    $
    961
    
    
    $
    
 Valuation Techniques  Recurring Basis
 Securities Available for Sale
 21




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##### Table of Contents



Derivative financial instruments
 Changes in Level 3 fair value measurements
  Level 3 assets measured at fair value on a recurring basis
 Available for(in thousands)
    
    Sale SecuritiesBalance at December 31, 2008
    
    $
    18,497Transfer into level 3 category during the second quarter
    
    
    6,181Total gains (losses) (realized and unrealized)Included in earnings  investment security loss
    
    
    (4,189
    )Included in other comprehensive loss
    
    
    (1,200
    )Other changes due to principal payments
    
    
    (333
    )Balance at June 30, 2009
    
    $
    18,956Total amount of loss for the period year-to-date included
in earnings attributable to the change in unrealized gains
(losses) related to assets held at June 30, 2009
    
    $
    (4,189
    )
 Assets Recorded at Fair Value on a Nonrecurring Basis
  Quoted PricesinFair Value
    
    
    Active Markets for
    
    
    Significant Other
    
    
    Significantat
    
    
    Identical
    
    
    Observable
    
    
    UnobservableJune 30,
    
    
    Assets
    
    
    Inputs
    
    
    Inputs2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Mortgage loans held for sale
    
    $
    100,707
    
    
    $
    
    
    
    $
    100,707
    
    
    $
    Impaired loans, net of specific allowance
    
    
    87,799
    
    
    
    
    
    
    
    
    
    
    
    87,799Other real estate
    
    
    35,206
    
    
    
    
    
    
    
    
    
    
    
    35,206Total nonrecurring basis measured assets
    
    $
    223,712
    
    
    $
    
    
    
    $
    100,707
    
    
    $
    123,005
 Valuation Techniques  Nonrecurring Basis
 Mortgage Loans Held for Sale.
 Impaired Loans.
 22




---



##### Table of Contents



Other Real Estate.
 Disclosures about Fair Value of Financial Instruments
 Tax lien certificates.
 Net loans.
 Deposits.
 Advances from FHLB.
 Federal funds borrowed and security repurchase agreements.
 Notes payable.
 Subordinated debentures.
 Limitations.
 23




---



##### Table of Contents



June 30, 2009
    
    December 31, 2008Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    Value(In thousands)Financial assets:Cash and due from banks
    
    $
    80,589
    
    
    $
    80,589
    
    
    $
    74,237
    
    
    $
    74,237Interest-bearing deposits in other banks
    
    
    19,900
    
    
    
    19,900
    
    
    
    10,042
    
    
    
    10,042Federal funds sold
    
    
    2,426
    
    
    
    2,426
    
    
    
    5,169
    
    
    
    5,169Securities available for sale
    
    
    315,551
    
    
    
    315,551
    
    
    
    347,142
    
    
    
    347,142Tax lien certificates
    
    
    25,533
    
    
    
    25,533
    
    
    
    23,786
    
    
    
    23,786Mortgage loans held for sale
    
    
    100,707
    
    
    
    100,707
    
    
    
    22,040
    
    
    
    22,040Net loans
    
    
    2,364,967
    
    
    
    2,415,208
    
    
    
    2,286,071
    
    
    
    2,374,637Stock in FHLB
    
    
    18,212
    
    
    
    18,212
    
    
    
    21,410
    
    
    
    21,410Accrued interest receivable
    
    
    16,210
    
    
    
    16,210
    
    
    
    14,794
    
    
    
    14,794Derivative assets
    
    
    783
    
    
    
    783
    
    
    
    1,427
    
    
    
    1,427Financial liabilities:Deposits
    
    
    2,604,558
    
    
    
    2,624,339
    
    
    
    2,342,988
    
    
    
    2,363,270Advances from FHLB
    
    
    228,320
    
    
    
    243,423
    
    
    
    361,324
    
    
    
    382,547Security repurchase agreements
    
    
    2,164
    
    
    
    2,164
    
    
    
    3,563
    
    
    
    3,563Note payable
    
    
    45,688
    
    
    
    45,688
    
    
    
    7,000
    
    
    
    7,000Subordinated debentures
    
    
    60,774
    
    
    
    35,248
    
    
    
    60,884
    
    
    
    46,839Derivative liabilities
    
    
    961
    
    
    
    961
    
    
    
    1,534
    
    
    
    1,534
 Note 12  Subsequent Event
  24




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Basis of Presentation
   Overview
        25




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##### Table of Contents



Recent Accounting Pronouncements
  
    
    FSP SFAS 157-4 Determining Fair Value When the Volume and Level of Activity for the
Assets or Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly (FSP 157-4)provides guidelines for making fair value measurements more
consistent with the principles presented in SFAS No. 157, Fair Value Measurements(SFAS
157). It emphasizes that even if there has been a significant decrease in the volume and
level of activity for the asset or liability and regardless of the valuation technique used,
the objective of a fair value measurement remains the same. Fair value is the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction
(that is, not a forced liquidation or distressed sale), between market participants at the
measurement date under current market conditions.
    
    FSP SFAS 115-2 and SFAS 124-2, Recognition and Presentation of Other-than-temporary
impairments (FSP 115-2 and 124-2)provides additional guidance designed to create greater
clarity and consistency in accounting for and presenting impairment losses on securities. It
amends OTTI impairment guidance for debt securities to make the guidance more operational and to improve the
 26




---



##### Table of Contents



presentation and disclosure of OTTI on debt and equity
securities in the financial statements. It does not amend existing recognition and measurement
guidance related to OTTI of equity securities.
 
    
    FSP SFAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial
Instruments (FSP 107-1 and APB 28-1)enhances consistency in financial reporting by
increasing the frequency of fair value disclosures.
  Statement of Financial Accounting Standards No. 161
 Disclosures About Derivative Instruments and Hedging
Activities, an Amendment of FASB Statement No. 133 Accounting for Derivative Instruments and Hedging Activities
  Results of Operations
  Three Months
    
    Six MonthsEnded June 30,
    
    Ended June 30,2009
    
    2008
    
    2009
    
    2008(Dollars in thousands, except per share data)Net (loss) income
    
    $
    (3,762
    )
    
    $
    841
    
    
    $
    (4,448
    )
    
    $
    1,537Net (loss) income applicable to common shareholders
    
    
    (4,929
    )
    
    
    841
    
    
    
    (6,758
    )
    
    
    1,537Net (loss) income per common share (diluted)
    
    
    (0.49
    )
    
    
    0.08
    
    
    
    (0.67
    )
    
    
    0.15Net interest margin
    
    
    3.24
    %
    
    
    3.39
    %
    
    
    3.18
    %
    
    
    3.21
    %Net interest spread
    
    
    3.04
    %
    
    
    3.17
    %
    
    
    2.98
    %
    
    
    2.96
    %Return on average assets
    
    
    (0.47
    )%
    
    
    0.11
    %
    
    
    (0.29
    )%
    
    
    0.10
    %Return on average tangible assets
    
    
    (0.48
    )%
    
    
    0.12
    %
    
    
    (0.29
    )%
    
    
    0.11
    %Return on average stockholders equity
    
    
    (5.99
    )%
    
    
    0.96
    %
    
    
    (3.56
    )%
    
    
    0.88
    %Return on average tangible equity
    
    
    (6.49
    )%
    
    
    2.04
    %
    
    
    (3.87
    )%
    
    
    1.87
    %Common book value per share
    
    $
    17.26
    
    
    $
    34.68
    
    
    $
    17.26
    
    
    $
    34.68Tangible common book value per share
    
    
    15.40
    
    
    
    16.24
    
    
    
    15.40
    
    
    
    16.24
  27




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##### Table of Contents



Net Interest Income.
 Increase (Decrease) inSecond Quarter 2009 vs 2008
    
    
    First Six Months of 2009 vs 2008Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in thousands)ASSETSInterest-earning assets:Loans, net of unearned income
    
    $
    304,943
    
    
    $
    (749
    )
    
    
    (0.98
    )%
    
    $
    313,573
    
    
    $
    (3,142
    )
    
    
    (1.14
    )%Investment securitiesTaxable
    
    
    (23,097
    )
    
    
    (167
    )
    
    
    0.17
    
    
    
    (14,138
    )
    
    
    (210
    )
    
    
    0.14Tax-exempt
    
    
    226
    
    
    
    5
    
    
    
    
    
    
    
    270
    
    
    
    2
    
    
    
    0.00Total investment
securities
    
    
    (22,871
    )
    
    
    (162
    )
    
    
    0.16
    
    
    
    (13,868
    )
    
    
    (208
    )
    
    
    0.13Federal funds sold
    
    
    121
    
    
    
    (16
    )
    
    
    (1.91
    )
    
    
    (1,101
    )
    
    
    (91
    )
    
    
    (2.78
    )Other investments
    
    
    21,773
    
    
    
    (276
    )
    
    
    (3.35
    )
    
    
    16,998
    
    
    
    (558
    )
    
    
    (3.22
    )Total interest
-earning assets
    
    $
    303,966
    
    
    
    (1,203
    )
    
    
    (0.89
    )
    
    $
    315,602
    
    
    
    (3,999
    )
    
    
    (1.00
    )Interest-bearing liabilities:Demand deposits
    
    $
    9,766
    
    
    
    (1,607
    )
    
    
    (0.99
    )
    
    $
    (12,339
    )
    
    
    (4,490
    )
    
    
    (1.31
    )Savings deposits
    
    
    149,108
    
    
    
    518
    
    
    
    (0.24
    )
    
    
    145,539
    
    
    
    1,207
    
    
    
    (0.03
    )Time deposits
    
    
    169,606
    
    
    
    (1,511
    )
    
    
    (0.93
    )
    
    
    139,928
    
    
    
    (4,677
    )
    
    
    (1.11
    )Other borrowings
    
    
    (69,564
    )
    
    
    (419
    )
    
    
    0.21
    
    
    
    (2,140
    )
    
    
    (870
    )
    
    
    (0.52
    )Subordinated debentures
    
    
    7,182
    
    
    
    287
    
    
    
    1.06
    
    
    
    7,163
    
    
    
    466
    
    
    
    0.73Total
interest-bearing
liabilities
    
    $
    266,099
    
    
    
    (2,732
    )
    
    
    (0.76
    )
    
    $
    278,151
    
    
    
    (8,364
    )
    
    
    (1.02
    )Net interest income/net
interest spread
    
    
    
    
    
    
    1,529
    
    
    
    (0.13
    )%
    
    
    
    
    
    
    4,365
    
    
    
    0.02
    %Net yield on earning assets
    
    
    
    
    
    
    
    
    
    
    (0.15
    )%
    
    
    
    
    
    
    
    
    
    
    (0.03
    )%Taxable equivalent adjustment:Investment securities
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    1Net interest income
    
    
    
    
    
    $
    1,527
    
    
    
    
    
    
    
    
    
    
    $
    4,364
  Three Months Ended June 30,2009
    
    
    2008Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in thousands)ASSETSInterest-earning assets:Loans, net of unearned income (1)
    
    $
    2,459,020
    
    
    $
    35,959
    
    
    
    5.87
    %
    
    $
    2,154,077
    
    
    $
    36,708
    
    
    
    6.85
    %Investment securitiesTaxable
    
    
    290,329
    
    
    
    3,976
    
    
    
    5.49
    
    
    
    313,426
    
    
    
    4,143
    
    
    
    5.32Tax-exempt (2)
    
    
    41,510
    
    
    
    658
    
    
    
    6.36
    
    
    
    41,284
    
    
    
    653
    
    
    
    6.36Total investment securities
    
    
    331,839
    
    
    
    4,634
    
    
    
    5.60
    
    
    
    354,710
    
    
    
    4,796
    
    
    
    5.44Federal funds sold
    
    
    3,498
    
    
    
    2
    
    
    
    0.23
    
    
    
    3,377
    
    
    
    18
    
    
    
    2.14Other investments
    
    
    71,714
    
    
    
    456
    
    
    
    2.55
    
    
    
    49,941
    
    
    
    732
    
    
    
    5.90Total interest-earning assets
    
    
    2,866,071
    
    
    
    41,051
    
    
    
    5.74
    
    
    
    2,562,105
    
    
    
    42,254
    
    
    
    6.63Noninterest-earning assets:Cash and due from banks
    
    
    81,886
    
    
    
    
    
    
    
    
    
    
    
    61,729Premises and equipment
    
    
    105,519
    
    
    
    
    
    
    
    
    
    
    
    102,445Accrued interest and other assets
    
    
    158,795
    
    
    
    
    
    
    
    
    
    
    
    289,167Allowance for loan losses
    
    
    (29,889
    )
    
    
    
    
    
    
    
    
    
    
    (24,104
    )Total assets
    
    $
    3,182,382
    
    
    
    
    
    
    
    
    
    
    $
    2,991,342
 28




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##### Table of Contents



Three Months Ended June 30,2009
    
    
    2008Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in thousands)LIABILITIES AND STOCKHOLDERS EQUITYInterest-bearing liabilities:Demand deposits
    
    $
    672,869
    
    
    $
    2,173
    
    
    
    1.30
    %
    
    $
    663,103
    
    
    $
    3,780
    
    
    
    2.29
    %Savings deposits
    
    
    235,946
    
    
    
    903
    
    
    
    1.54
    
    
    
    86,838
    
    
    
    385
    
    
    
    1.78Time deposits
    
    
    1,402,255
    
    
    
    11,033
    
    
    
    3.16
    
    
    
    1,232,648
    
    
    
    12,544
    
    
    
    4.09Other borrowings
    
    
    292,474
    
    
    
    2,597
    
    
    
    3.56
    
    
    
    362,038
    
    
    
    3,016
    
    
    
    3.35Subordinated debentures
    
    
    60,795
    
    
    
    1,206
    
    
    
    7.95
    
    
    
    53,613
    
    
    
    919
    
    
    
    6.89Total interest-bearing liabilities
    
    
    2,664,339
    
    
    
    17,912
    
    
    
    2.70
    
    
    
    2,398,240
    
    
    
    20,644
    
    
    
    3.46Noninterest-bearing liabilities:Demand deposits
    
    
    245,819
    
    
    
    
    
    
    
    
    
    
    
    219,647Accrued interest and other liabilities
    
    
    20,286
    
    
    
    
    
    
    
    
    
    
    
    21,701Stockholders equity
    
    
    251,938
    
    
    
    
    
    
    
    
    
    
    
    351,754Total liabilities and stockholders equity
    
    $
    3,182,382
    
    
    
    
    
    
    
    
    
    
    $
    2,991,342Net interest income/net interest spread
    
    
    
    
    
    
    23,139
    
    
    
    3.04
    %
    
    
    
    
    
    
    21,610
    
    
    
    3.17
    %Net yield on earning assets
    
    
    
    
    
    
    
    
    
    
    3.24
    %
    
    
    
    
    
    
    
    
    
    
    3.39
    %Taxable equivalent adjustment:Investment securities (2)
    
    
    
    
    
    
    224
    
    
    
    
    
    
    
    
    
    
    
    222Net interest income
    
    
    
    
    
    $
    22,915
    
    
    
    
    
    
    
    
    
    
    $
    21,388
 
 (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%. 29




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##### Table of Contents



Three Months Ended June 30,2009 vs. 2008 (1)Increase
    
    
    Changes Due To(Decrease)
    
    
    Rate
    
    
    Volume(Dollars in thousands)Increase (decrease) in:Income from interest-earning assets:Interest and fees on loans
    
    $
    (749
    )
    
    $
    (5,612
    )
    
    $
    4,863Interest on securitiesTaxable
    
    
    (167
    )
    
    
    135
    
    
    
    (302
    )Tax-exempt
    
    
    5
    
    
    
    
    
    
    
    5Interest on federal funds
    
    
    (16
    )
    
    
    (17
    )
    
    
    1Interest on other investments
    
    
    (276
    )
    
    
    (518
    )
    
    
    242Total interest income
    
    
    (1,203
    )
    
    
    (6,012
    )
    
    
    4,809Expense from interest-bearing liabilities:Interest on demand deposits
    
    
    (1,607
    )
    
    
    (1,662
    )
    
    
    55Interest on savings deposits
    
    
    519
    
    
    
    (59
    )
    
    
    578Interest on time deposits
    
    
    (1,510
    )
    
    
    (3,096
    )
    
    
    1,586Interest on other borrowings
    
    
    (419
    )
    
    
    183
    
    
    
    (602
    )Interest on subordinated debentures
    
    
    286
    
    
    
    153
    
    
    
    133Total interest expense
    
    
    (2,731
    )
    
    
    (4,481
    )
    
    
    1,750Net interest income
    
    $
    1,528
    
    
    $
    (1,531
    )
    
    $
    3,059
 
 (1)
    
    The change in interest due to both rate and volume has been allocated to rate and volume
changes in proportion to the relationship of the absolute dollar amounts of the changes in
each. 30




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##### Table of Contents



Six Months Ended June 30,2009
    
    
    2008Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in thousands)ASSETSInterest-earning assets:Loans, net of unearned income (1)
    
    $
    2,425,767
    
    
    $
    70,911
    
    
    
    5.89
    %
    
    $
    2,112,194
    
    
    $
    74,053
    
    
    
    7.03
    %Investment securities:Taxable
    
    
    296,173
    
    
    
    7,985
    
    
    
    5.44
    
    
    
    310,311
    
    
    
    8,195
    
    
    
    5.30Tax-exempt (2)
    
    
    40,898
    
    
    
    1,308
    
    
    
    6.44
    
    
    
    40,628
    
    
    
    1,305
    
    
    
    6.44Total investment securities
    
    
    337,071
    
    
    
    9,293
    
    
    
    5.56
    
    
    
    350,939
    
    
    
    9,500
    
    
    
    5.43Federal funds sold
    
    
    5,359
    
    
    
    7
    
    
    
    0.26
    
    
    
    6,459
    
    
    
    98
    
    
    
    3.04Other investments
    
    
    64,803
    
    
    
    818
    
    
    
    2.55
    
    
    
    47,805
    
    
    
    1,376
    
    
    
    5.77Total interest -earning assets
    
    
    2,833,000
    
    
    
    81,029
    
    
    
    5.77
    
    
    
    2,517,397
    
    
    
    85,027
    
    
    
    6.77Noninterest-earning assets:Cash and due from banks
    
    
    76,039
    
    
    
    
    
    
    
    
    
    
    
    59,193Premises and equipment
    
    
    105,300
    
    
    
    
    
    
    
    
    
    
    
    103,035Accrued interest and other assets
    
    
    156,162
    
    
    
    
    
    
    
    
    
    
    
    288,300Allowance for loan losses
    
    
    (29,508
    )
    
    
    
    
    
    
    
    
    
    
    (23,459
    )Total assets
    
    $
    3,140,993
    
    
    
    
    
    
    
    
    
    
    $
    2,944,466LIABILITIES AND STOCKHOLDERS EQUITYInterest-bearing liabilities:Demand deposits
    
    $
    657,286
    
    
    $
    4,366
    
    
    
    1.34
    %
    
    $
    669,625
    
    
    $
    8,856
    
    
    
    2.65
    %Savings deposits
    
    
    217,655
    
    
    
    1,825
    
    
    
    1.69
    
    
    
    72,116
    
    
    
    618
    
    
    
    1.72Time deposits
    
    
    1,380,972
    
    
    
    22,811
    
    
    
    3.33
    
    
    
    1,241,044
    
    
    
    27,488
    
    
    
    4.44Other borrowings
    
    
    312,812
    
    
    
    4,938
    
    
    
    3.18
    
    
    
    314,952
    
    
    
    5,808
    
    
    
    3.70Subordinated debentures
    
    
    60,823
    
    
    
    2,400
    
    
    
    7.96
    
    
    
    53,660
    
    
    
    1,934
    
    
    
    7.23Total interest -bearing liabilities
    
    
    2,629,548
    
    
    
    36,340
    
    
    
    2.79
    
    
    
    2,351,397
    
    
    
    44,704
    
    
    
    3.81Noninterest-bearing liabilities:Demand deposits
    
    
    238,722
    
    
    
    
    
    
    
    
    
    
    
    218,196Accrued interest and other liabilities
    
    
    20,927
    
    
    
    
    
    
    
    
    
    
    
    23,321Stockholders equity
    
    
    251,796
    
    
    
    
    
    
    
    
    
    
    
    351,552Total liabilities and stockholders equity
    
    $
    3,140,993
    
    
    
    
    
    
    
    
    
    
    $
    2,944,466Net interest income/net interest spread
    
    
    
    
    
    
    44,689
    
    
    
    2.98
    %
    
    
    
    
    
    
    40,323
    
    
    
    2.96
    %Net yield on earning assets
    
    
    
    
    
    
    
    
    
    
    3.18
    %
    
    
    
    
    
    
    
    
    
    
    3.21
    %Taxable equivalent adjustment:Investment securities (2)
    
    
    
    
    
    
    445
    
    
    
    
    
    
    
    
    
    
    
    444Net interest income
    
    
    
    
    
    $
    44,244
    
    
    
    
    
    
    
    
    
    
    $
    39,879
 
 (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%. 31




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##### Table of Contents



Six Months Ended June 30,2009 vs. 2008 (1)Increase
    
    
    Changes Due To(Decrease)
    
    
    Rate
    
    
    Volume(Dollars in thousands)Increase (decrease) in:Income from interest-earning assets:Interest and fees on loans
    
    $
    (3,142
    )
    
    $
    (13,054
    )
    
    $
    9,912Interest on securities:Taxable
    
    
    (210
    )
    
    
    196
    
    
    
    (406
    )Tax-exempt
    
    
    2
    
    
    
    
    
    
    
    2Interest on federal funds
    
    
    (91
    )
    
    
    (77
    )
    
    
    (14
    )Interest on other investments
    
    
    (558
    )
    
    
    (935
    )
    
    
    377Total interest income
    
    
    (3,999
    )
    
    
    (13,870
    )
    
    
    9,871Expense from interest-bearing liabilities:Interest on demand deposits
    
    
    (4,490
    )
    
    
    (4,329
    )
    
    
    161Interest on savings deposits
    
    
    1,207
    
    
    
    (11
    )
    
    
    1,218Interest on time deposits
    
    
    (4,677
    )
    
    
    (7,471
    )
    
    
    2,794Interest on other borrowings
    
    
    (870
    )
    
    
    (830
    )
    
    
    (40
    )Interest on subordinated debentures
    
    
    466
    
    
    
    201
    
    
    
    265Total interest expense
    
    
    (8,364
    )
    
    
    (12,440
    )
    
    
    4,076Net interest income
    
    $
    4,365
    
    
    $
    (1,430
    )
    
    $
    5,795
 32




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##### Table of Contents



Noninterest income
 Three Months Ended June 30,2009
    
    
    2008
    
    

%Change(Dollars in thousands)Service charges and fees on deposits
    
    $
    2,524
    
    
    $
    2,192
    
    
    
    15.2
    %Mortgage banking income
    
    
    2,271
    
    
    
    1,031
    
    
    
    120.3Investment securities (loss) gain
    
    
    (4,077
    )
    
    
    1,068
    
    
    NCMChange in fair value of derivatives
    
    
    (67
    )
    
    
    (418
    )
    
    
    (83.9
    )Increase in cash surrender value of life insurance
    
    
    540
    
    
    
    555
    
    
    
    2.7Gain on extinguishment of liabilities
    
    
    
    
    
    
    2,918
    
    
    NCMOther noninterest income
    
    
    1,340
    
    
    
    1,660
    
    
    
    (19.3
    )Total
    
    $
    2,531
    
    
    $
    9,006
    
    
    
    (71.9
    )%
 
 NCM  not considered meaningful. Six Months Ended June 30,2009
    
    
    2008
    
    

%Change(Dollars in thousands)Service charges and fees on deposits
    
    $
    4,911
    
    
    $
    4,296
    
    
    
    14.3
    %Mortgage banking income
    
    
    3,961
    
    
    
    2,297
    
    
    
    72.4Investment securities (loss) gain
    
    
    (4,401
    )
    
    
    1,470
    
    
    NCMChange in fair value of derivatives
    
    
    (266
    )
    
    
    632
    
    
    
    (142.1
    )Increase in cash surrender value of life insurance
    
    
    1,055
    
    
    
    1,107
    
    
    
    (4.7
    )Gain on extinguishment of liabilities
    
    
    
    
    
    
    2,918
    
    
    
    (100
    )Other noninterest income
    
    
    2,557
    
    
    
    2,888
    
    
    
    (11.5
    )Total
    
    $
    7,817
    
    
    $
    15,608
    
    
    
    (49.9
    )%
  33




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##### Table of Contents



Noninterest expenses
 Three Months Ended June 30,2009
    
    
    2008
    
    

%Change(Dollars in thousands)Noninterest ExpensesSalaries and employee benefits
    
    $
    12,304
    
    
    $
    12,058
    
    
    
    2.04
    %Occupancy, furniture and equipment expense
    
    
    4,503
    
    
    
    4,120
    
    
    
    9.30Amortization of core deposit intangibles
    
    
    985
    
    
    
    896
    
    
    
    9.93FDIC assessment
    
    
    1,932
    
    
    
    162
    
    
    NCMForeclosure losses
    
    
    1,748
    
    
    
    178
    
    
    NCMProfessional fees
    
    
    1,027
    
    
    
    701
    
    
    
    46.55Insurance expense
    
    
    612
    
    
    
    598
    
    
    
    2.42Postage, stationery and supplies
    
    
    760
    
    
    
    750
    
    
    
    1.23Communications expense
    
    
    760
    
    
    
    735
    
    
    
    3.37Advertising expense
    
    
    787
    
    
    
    1,098
    
    
    
    (28.31
    )Other operating expense
    
    
    2,377
    
    
    
    1,980
    
    
    
    20.05Total
    
    $
    27,795
    
    
    $
    23,276
    
    
    
    19.41
    %
 
 NCM  not considered meaningful. Six Months Ended June 30,2009
    
    
    2008
    
    

%Change(Dollars in thousands)Noninterest ExpensesSalaries and employee benefits
    
    $
    24,613
    
    
    $
    24,199
    
    
    
    1.71
    %Occupancy, furniture and equipment expense
    
    
    8,907
    
    
    
    8,180
    
    
    
    8.89Amortization of core deposit intangibles
    
    
    1,971
    
    
    
    1,792
    
    
    
    9.99FDIC assessment
    
    
    2,389
    
    
    
    224
    
    
    NCMForeclosure losses
    
    
    2,317
    
    
    
    364
    
    
    NCMProfessional fees
    
    
    1,792
    
    
    
    1,137
    
    
    
    57.61Insurance expense
    
    
    1,221
    
    
    
    1,176
    
    
    
    3.83Postage, stationery and supplies
    
    
    1,487
    
    
    
    1,530
    
    
    
    (2.81
    )Communications expense
    
    
    1,563
    
    
    
    1,405
    
    
    
    11.21Advertising expense
    
    
    1,337
    
    
    
    1,811
    
    
    
    (26.16
    )Other operating expense
    
    
    4,262
    
    
    
    3,722
    
    
    
    14.49Total
    
    $
    51,859
    
    
    $
    45,540
    
    
    
    13.88
    %
  Income tax (benefit) expense
 Provision for Loan Losses and Loan Charge-offs.
 34




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##### Table of Contents



Three Months EndedJune 30,
    
    
    June 30,
    
    
    March 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands)Allowance for loan losses at beginning of period
    
    $
    29,870
    
    
    $
    23,273
    
    
    $
    28,850
    
    
    $
    27,670Provision for loan losses
    
    
    5,982
    
    
    
    5,967
    
    
    
    3,452
    
    
    
    2,969Total charge-offs
    
    
    2,513
    
    
    
    2,481
    
    
    
    2,809
    
    
    
    1,971Total recoveries
    
    
    (165
    )
    
    
    (484
    )
    
    
    (377
    )
    
    
    (182
    )Net charge-offs
    
    
    2,348
    
    
    
    1,997
    
    
    
    2,432
    
    
    
    1,789Allowance for loan losses at end of period
    
    $
    33,504
    
    
    $
    27,243
    
    
    $
    29,870
    
    
    $
    28,850Total loans, net of unearned income
    
    $
    2,398,471
    
    
    $
    2,148,750
    
    
    $
    2,359,299
    
    
    $
    2,314,921Ratio: Allowance for loan losses to total loans, net of unearned income
    
    
    1.40
    %
    
    
    1.27
    %
    
    
    1.27
    %
    
    
    1.25
    %
 For the Six-Month Period Ended
    
    
    Year EndedJune 30,
    
    
    June 30,
    
    
    December 31,2009
    
    
    2008
    
    
    2008Allowance for loan losses at beginning of period
    
    $
    28,850
    
    
    $
    22,868
    
    
    $
    22,868Provision for loan losses
    
    
    9,434
    
    
    
    7,838
    
    
    
    13,112Total charge-offs
    
    
    5,322
    
    
    
    4,226
    
    
    
    8,444Total recoveries
    
    
    (542
    )
    
    
    (763
    )
    
    
    (1,314
    )Net charge-offs
    
    
    4,780
    
    
    
    3,463
    
    
    
    7,130Allowance for loan losses at end of period
    
    $
    35,504
    
    
    $
    27,243
    
    
    $
    28,850Total loans, net of unearned income
    
    $
    2,398,471
    
    
    $
    2,148,750
    
    
    $
    2,314,921Ratio: Allowance for loan losses to total loans, net
of unearned income
    
    
    1.40
    %
    
    
    1.27
    %
    
    
    1.25
    %
  Results of Segment Operations
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands)Alabama region
    
    $
    (2
    )
    
    $
    836
    
    
    $
    (309
    )
    
    $
    1,214Florida region
    
    
    2,592
    
    
    
    3,532
    
    
    
    4,964
    
    
    
    7,261Administrative and other
    
    
    (10,921
    )
    
    
    (3,217
    )
    
    
    (13,888
    )
    
    
    (6,366
    )Income tax (benefit) expense
    
    
    (4,569
    )
    
    
    310
    
    
    
    (4,784
    )
    
    
    572Consolidated net (loss) income
    
    $
    (3,762
    )
    
    $
    841
    
    
    $
    (4,448
    )
    
    $
    1,537
 Alabama Region.
     35




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##### Table of Contents



Florida Region.
     Fair Value Measurements
   36




---



##### Table of Contents



Financial Condition
  Short-term liquid assets
 Investment Securities
  Investment Portfolio
 Available for SaleJune 30,
    
    
    December 31,
    
    
    Percent2009
    
    
    2008
    
    
    Change(Dollars in thousands)Investment securities available for sale:U.S. agency securities
    
    $
    5,630
    
    
    $
    3,843
    
    
    
    46.5
    %Mortgage-backed securities (MBS):U.S. Agency MBS  residential
    
    
    212,481
    
    
    
    237,508
    
    
    
    (10.5
    )U.S. Agency MBS  collateralized mortgage obligation (CMO)
    
    
    12,716
    
    
    
    16,186
    
    
    
    (21.4
    )Private-label  CMO
    
    
    18,726
    
    
    
    26,430
    
    
    
    (29.1
    )Total MBS
    
    
    243,923
    
    
    
    280,124
    
    
    
    (12.9
    )State, county and municipal securities
    
    
    41,630
    
    
    
    40,622
    
    
    
    2.5Corporate obligations:Corporate debt
    
    
    3,800
    
    
    
    5,746
    
    
    
    (33.9
    )Pooled trust preferred securities
    
    
    8,653
    
    
    
    9,939
    
    
    
    (12.9
    )Single issue trust preferred securities
    
    
    6,537
    
    
    
    6,704
    
    
    
    (2.5
    )Other collateralized debt obligations
    
    
    5,128
    
    
    
    
    
    
    NATotal corporate obligations
    
    
    24,118
    
    
    
    22,389
    
    
    
    7.7Equity securities
    
    
    250
    
    
    
    164
    
    
    
    52.4Total investment securities available for sale
    
    $
    315,551
    
    
    $
    347,142
    
    
    
    (9.1
    )%
 37




---



##### Table of Contents



June 30, 2009Less Than 12 Months
    
    
    More Than 12 Months
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    Losses (1)
    
    
    Fair Value
    
    
    Losses (1)
    
    
    Fair Value
    
    
    Losses (1)(In thousands)Temporarily ImpairedMortgage-backed securities:U.S. Agency MBS  residential
    
    $
    107
    
    
    $
    
    
    
    $
    240
    
    
    $
    12
    
    
    $
    347
    
    
    $
    12Private-label  CMO
    
    
    299
    
    
    
    16
    
    
    
    16,679
    
    
    
    4,259
    
    
    
    16,978
    
    
    
    4,275Total MBS
    
    
    406
    
    
    
    16
    
    
    
    16,919
    
    
    
    4,271
    
    
    
    17,325
    
    
    
    4,287State, county and municipal securities
    
    
    10,839
    
    
    
    385
    
    
    
    12,260
    
    
    
    718
    
    
    
    23,099
    
    
    
    1,103Corporate obligations:Corporate debt
    
    
    3,800
    
    
    
    374
    
    
    
    
    
    
    
    
    
    
    
    3,800
    
    
    
    374Pooled trust preferred securities
    
    
    
    
    
    
    
    
    
    
    8,593
    
    
    
    3,943
    
    
    
    8,593
    
    
    
    3,943Single issue trust preferred securities
    
    
    
    
    
    
    
    
    
    
    3,202
    
    
    
    1,798
    
    
    
    3,202
    
    
    
    1,798Other collateralized debt obligations
    
    
    5,128
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    5,128
    
    
    
    6Total corporate obligations
    
    
    8,928
    
    
    
    380
    
    
    
    11,795
    
    
    
    5,741
    
    
    
    20,723
    
    
    
    6,121Equity securities
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    313
    
    
    
    250
    
    
    
    313Total temporarily impaired securities
    
    
    20,173
    
    
    
    781
    
    
    
    41,224
    
    
    
    11,043
    
    
    
    61,397
    
    
    
    11,824Other-than-temporarily ImpairedMortgage-backed securities:Private-label  CMO
    
    
    
    
    
    
    
    
    
    
    1,749
    
    
    
    132
    
    
    
    1,749
    
    
    
    132Corporate obligations:Pooled trust preferred securities
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    1,744
    
    
    
    60
    
    
    
    1,744Single issue trust preferred securities
    
    
    
    
    
    
    
    
    
    
    3,335
    
    
    
    1,354
    
    
    
    3,335
    
    
    
    1,354Total corporate obligations
    
    
    
    
    
    
    
    
    
    
    3,395
    
    
    
    3,098
    
    
    
    3,395
    
    
    
    3,098Total OTTI securities
    
    
    
    
    
    
    
    
    
    
    5,144
    
    
    
    3,230
    
    
    
    5,144
    
    
    
    3,230Total temporarily and other-than-temporarily impaired
    
    $
    20,173
    
    
    $
    781
    
    
    $
    46,368
    
    
    $
    14,273
    
    
    $
    66,541
    
    
    $
    15,054
 
 (1)
    
    - Unrealized losses are included in other comprehensive income (loss), net of unrealized gains and applicable income taxes. 38




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##### Table of Contents



Other-Than-Temporary
Impairment
 Accounting for Certain Investments in Debt and Equity
Securities Recognition of Interest Income and Impairment on Purchased Beneficial Interests
and Beneficial Interests that Continue to be Held by a Transfer in
Securitized Financial Assets
    39




---



##### Table of Contents



Rating
    
    
    
    

Credit Support  Coverage

    
    UnrealizedMoody/Fitch
    
    Count
    

Ratio (1)

    
    Loss(In thousands)A1/NR
    

    1
    


3.75

    
    $
    (395
    )Aaa/AAA
    

    1
    


12.72

    
    
    (17
    )Aaa/NR
    

    1
    


9.05

    
    
    (46
    )NR/AAA
    

    4
    


2.72 - 17.94

    
    
    (1,864
    )B2/NR
    
    1
    


5.03

    
    
    (375
    )Caa1/BBB (2)
    

    1
    


2.19

    
    
    (1,578
    )Ca/CCC (2)
    
    3
    


0.11 - 0.85

    
    
    (131
    )Total
    

    12
    




    
    $
    (4,406
    )
 (1)
    
    The Credit Support Coverage Ratio, which is the ratio that determines the multiple of credit support, based on assumptions for the performance of the
loans within the delinquency pipeline. The assumptions used are:
Current Collateral Support/ ((60 day delinquencies x.60) + (90
day delinquencies x.70) + (foreclosures x 1.00) + (other real estate x 1.00)) x .40 for loss severity.(2)
    
    Includes all private-label CMOs that have OTTI. See discussion
that follows.
  Life-to-DateOther-than-temporary Impairment (OTTI)Discount

    
    
    
    
    
    
    
    
    
    
    
    
    
   Actual
    
    Credit PortionMargin
    
    
    
    
    
    Cumulative
    
    Average
    
    60+ DaysSecurity
    
    Price (%)
    
    (Basis Points)
    
    Yield
    
    Default
    
    Severity
    
    Delinquent
    
    2008
    
    2009
    
    Other
    
    TotalCMO 1
    
    
    24.90
    
    
    
    1640
    
    
    
    18.00
    %
    
    
    56.40
    %
    
    
    50.00
    %
    
    
    25.90
    %
    
    $
    (599
    )
    
    $
    (1,231
    )
    
    $
    (43
    )
    
    $
    (1,873
    )CMO 2
    
    
    10.21
    
    
    
    1801
    
    
    
    19.00
    %
    
    
    57.85
    %
    
    
    50.00
    %
    
    
    31.02
    %
    
    
    (492
    )
    
    
    (1,341
    )
    
    
    (4
    )
    
    
    (1,837
    )CMO 3
    
    
    28.62
    
    
    
    1543
    
    
    
    17.00
    %
    
    
    42.74
    %
    
    
    40.00
    %
    
    
    19.17
    %
    
    
    (803
    )
    
    
    (1,473
    )
    
    
    (84
    )
    
    
    (2,360
    )$
    (1,894
    )
    
    $
    (4,045
    )
    
    $
    (131
    )
    
    $
    (6,070
    )
    40




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##### Table of Contents



YTDOther-than-temporary Impairment (OTTI)Single/
    
    Class/
    
    Amortized
    
    Fair
    
    Unrealized
    
    CreditName
    
    
    
    Pooled
    
    Tranche
    
    Cost
    
    Value
    
    Loss
    
    Portion
    
    Other
    
    TotalMM Caps Funding I Ltd
    
    
    
    Pooled
    
    B
    
    $
    2,159
    
    
    $
    1,492
    
    
    $
    (667
    )
    
    $
    
    
    
    $
    
    
    
    $
    MM Community Funding Ltd
    
    (1)
    
    Pooled
    
    B
    
    
    5,000
    
    
    
    3,854
    
    
    
    (1,146
    )
    
    
    
    
    
    
    
    
    
    
    Preferred Term Securities V
    
    (2)
    
    Pooled
    
    M
    
    
    1,378
    
    
    
    862
    
    
    
    (516
    )
    
    
    
    
    
    
    
    
    
    
    Tpref Funding III Ltd
    
    
    
    Pooled
    
    B-1
    
    
    4,000
    
    
    
    2,385
    
    
    
    (1,615
    )
    
    
    
    
    
    
    
    
    
    
    Trapeza 2007-13A LLC
    
    (3)
    
    Pooled
    
    D
    
    
    1,803
    
    
    
    60
    
    
    
    (1,743
    )
    
    
    (32
    )
    
    
    (1,744
    )
    
    
    (1,776
    )New South Capital Corp
    
    (4)
    
    Single
    
    Sole
    
    
    4,689
    
    
    
    3,335
    
    
    
    (1,354
    )
    
    
    (324
    )
    
    
    (1,354
    )
    
    
    (1,678
    )Emigrant Capital Trust
    
    (5)
    
    Single
    
    Sole
    
    
    5,000
    
    
    
    3,202
    
    
    
    (1,798
    )
    
    
    
    
    
    
    
    
    
    
    $
    24,029
    
    
    $
    15,190
    
    
    $
    (8,839
    )
    
    $
    (356
    )
    
    $
    (3,098
    )
    
    $
    (3,454
    )
 Original Collateral
    
    Performing CollateralPercent of Actual
    
    Percent of Expected
    
    (6)Lowest
    
    Performing
    
    Deferrals and
    
    Deferrals and
    
    ExcessName
    
    
    
    Rating
    
    Banks
    
    Defaults
    
    Defaults
    
    SubordinationMM Caps Funding I Ltd
    
    
    
    Ca
    
    26
    
    
    9
    %
    
    
    25
    %
    
    
    8
    %MM Community Funding Ltd
    
    (1)
    
    CCC
    
    6
    
    
    10
    %
    
    
    25
    %
    
    
    0
    %Preferred Term Securities V
    
    (2)
    
    Ba3
    
    3
    
    
    2
    %
    
    
    25
    %
    
    
    25
    %Tpref Funding III Ltd
    
    
    
    CC
    
    28
    
    
    16
    %
    
    
    20
    %
    
    
    15
    %Trapeza 2007-13A LLC
    
    (3)
    
    C
    
    48
    
    
    11
    %
    
    
    20
    %
    
    
    0
    %New South Capital Corp
    
    (4)
    
    NR
    
    NA
    
    NA
    
    NA
    
    NAEmigrant Capital Trust
    
    (5)
    
    CC
    
    NA
    
    NA
    
    NA
    
    NA
 
 (1)
    -
    Although the excess subordination for this issue is zero, this tranche does not have any
projected cash flow shortfalls.(2)
    -
    This issue is no longer a subordinate tranche. The senior tranche has been retired.(3)
    -
    Actual and projected defaults increased during the second
quarter of 2009, and this security
was considered OTTI.(4)
    -
    Management received notification in April 2009 that interest payments on this issue will be
deferred for up to 20 quarters. OTTI was recognized during the first quarter of 2009. A full
discussion is included below.(5)
    -
    There has been no notification of deferral or default on this
issue. An analysis of the
company indicates there is adequate capital and liquidity to service the debt.(6)
    -
    Excess subordination represents the additional defaults in excess of both the current and
projected defaults the issue can absorb before the security experiences any credit impairment.
Excess subordination is calculated by determining what level of defaults an issue can experience
before the security has any credit impairment and then subtracting both the current and projected
future defaults. 41




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##### Table of Contents



For the Three-
    
    
    For the Six-Months Ended
    
    
    Months EndedJune 30, 2009
    
    
    June 30, 2009Balance at beginning of period
    
    $
    324
    
    
    $
    Amounts related to credit losses for which an OTTI was not previously recognized
    
    
    32
    
    
    
    356Reductions for securities sold during the period
    
    
    
    
    
    
    Increases in credit loss for which an OTTI was previously recognized when the
investor does not intend to sell the security and it is not more likely than not
that the entity will be required to sell the security before recovery of its
amortized cost
    
    
    4,045
    
    
    
    4,045Reductions for securities where there is an intent to sale or requirement to sale
    
    
    
    
    
    
    Reductions for increases in cash flows expected to be collected
    
    
    
    
    
    
    Balance at end of period
    
    $
    4,401
    
    
    $
    4,401
   Accounting by Certain Entities
(Including Entities With Trade Receivables) That Lend to or Finance the Activities of Others.
 42




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##### Table of Contents




    
    The significance of the decline in net assets of FHLB Atlanta as compared to the
capital stock amount for FHLB Atlanta and the length of time this decline has
persisted.
    
    Commitments by FHLB Atlanta to make payments required by law or regulation and
the level of such payments in relation to the operating performance of FHLB Atlanta.
    
    The impact of legislative and regulatory changes on financial institutions and,
accordingly, on the customer base of FHLB Atlanta.
    
    The liquidity position of FHLB Atlanta.
   Loans
 Composition of Loan Portfolio, Yield Changes and Diversification.
  43




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Distribution of Loans by Category
(Dollars in thousands)
 June 30, 2009
    
    
    December 31, 2008Percent of
    
    
    
    
    
    
    Percent ofAmount
    
    
    Total
    
    
    Amount
    
    
    TotalCommercial and industrial
    
    $
    200,350
    
    
    
    8.34
    %
    
    $
    207,372
    
    
    
    8.95
    %Real estate  construction and land development (1)
    
    
    671,107
    
    
    
    27.95
    
    
    
    637,587
    
    
    
    27.52Real estate  mortgagesSingle-family
    
    
    670,833
    
    
    
    27.94
    
    
    
    655,216
    
    
    
    28.28Commercial
    
    
    720,742
    
    
    
    30.02
    
    
    
    692,147
    
    
    
    29.87Other
    
    
    76,485
    
    
    
    3.19
    
    
    
    65,744
    
    
    
    2.84Consumer
    
    
    59,923
    
    
    
    2.50
    
    
    
    57,877
    
    
    
    2.50Other
    
    
    1,464
    
    
    
    0.06
    
    
    
    972
    
    
    
    0.04Total loans
    
    
    2,400,904
    
    
    
    100.0
    %
    
    
    2,316,915
    
    
    
    100.0
    %Unearned income
    
    
    (2,433
    )
    
    
    
    
    
    
    (1,994
    )Allowance for loan losses
    
    
    (33,504
    )
    
    
    
    
    
    
    (28,850
    )Net loans
    
    $
    2,364,967
    
    
    
    
    
    
    $
    2,286,071
 
 (1)
    
    A further analysis of the components of our real estate construction and land development
loans as of June 30, 2009 and December 31, 2008 is as follows: Residential
    
    
    CommercialDevelopment
    
    
    Development
    
    
    Other
    
    
    Total(Dollars in thousands)As of June 30, 2009Alabama segment
    
    $
    180,597
    
    
    $
    85,263
    
    
    $
    14,425
    
    
    $
    280,285Florida segment
    
    
    142,309
    
    
    
    217,400
    
    
    
    11,760
    
    
    
    371,469Other
    
    
    7,855
    
    
    
    11,498
    
    
    
    
    
    
    
    19,353Total
    
    $
    330,761
    
    
    $
    314,161
    
    
    $
    26,185
    
    
    $
    671,107As of December 31, 2008Alabama segment
    
    $
    173,579
    
    
    $
    76,315
    
    
    $
    17,830
    
    
    $
    267,724Florida segment
    
    
    141,003
    
    
    
    201,688
    
    
    
    13,573
    
    
    
    356,264Other
    
    
    122
    
    
    
    13,477
    
    
    
    
    
    
    
    13,599Total
    
    $
    314,704
    
    
    $
    291,480
    
    
    $
    31,403
    
    
    $
    637,587
  June 30,
    
    December 31,
    
    Percent2009
    
    2008
    
    Change(Dollars in thousands)Total loans, net of unearned income
    
    $
    2,398,471
    
    
    $
    2,314,921
    
    
    
    3.61
    %Alabama segment
    
    
    960,477
    
    
    
    935,232
    
    
    
    2.70Florida segment
    
    
    1,119,481
    
    
    
    1,060,994
    
    
    
    5.51Other
    
    
    318,513
    
    
    
    318,695
    
    
    
    (0.06
    )
 Allowance for Loan Losses
 Overview. Accounting for Contingencies
 SFAS 5.
 44




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##### Table of Contents




    
    trends in volume;
    
    effects of changes in credit concentrations;
    
    levels of and trends in delinquencies, classified loans, and non-performing assets;
    
    levels of and trends in charge-offs and recoveries;
    
    changes in lending policies and underwriting guidelines;
    
    national and local economic trends and condition; and
    
    mergers and acquisitions.
 SFAS 114.
 Allocation of the Allowance for Loan Losses.
   Allocation of the Allowance for Loan Losses
 June 30,
    
    
    December 31,2009
    
    
    2008Percent of
    
    
    
    
    
    
    Percent ofLoans in Each
    
    
    
    
    
    
    Loans in EachCategory to
    
    
    
    
    
    
    Category toAmount
    
    
    Total Loans
    
    
    Amount
    
    
    Total Loans(Dollars in thousands)Commercial and industrial
    
    $
    1,720
    
    
    
    8.3
    %
    
    $
    2,136
    
    
    
    8.9
    %Real estate  construction and land development
    
    
    13,721
    
    
    
    27.9
    
    
    
    12,168
    
    
    
    27.5Real estate  mortgagesSingle-family
    
    
    10,174
    
    
    
    27.9
    
    
    
    7,159
    
    
    
    28.3Commercial
    
    
    5,243
    
    
    
    30.1
    
    
    
    5,155
    
    
    
    29.9Other
    
    
    678
    
    
    
    3.2
    
    
    
    532
    
    
    
    2.9Consumer
    
    
    1,968
    
    
    
    2.6
    
    
    
    1,700
    
    
    
    2.5Total
    
    $
    33,504
    
    
    
    100.0
    %
    
    $
    28,850
    
    
    
    100.0
    %
  45




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##### Table of Contents



.
   46




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##### Table of Contents



Summary of Loan Loss Experience.
 Summary of Loan Loss Experience
 Three Months
    
    
    Six monthsEnded
    
    
    Ended
    
    
    Year EndedJune 30,
    
    
    June 30,
    
    
    December 31,2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2008(Dollars in Thousands)Allowance for loan losses at beginning of period
    
    $
    29,870
    
    
    $
    23,273
    
    
    $
    28,850
    
    
    $
    22,868
    
    
    $
    22,868Charge-offs:Commercial and industrial
    
    
    141
    
    
    
    160
    
    
    
    197
    
    
    
    312
    
    
    
    504Real estate  construction and land development
    
    
    131
    
    
    
    662
    
    
    
    1,055
    
    
    
    665
    
    
    
    2,095Real estate  mortgageSingle-family
    
    
    821
    
    
    
    871
    
    
    
    1,368
    
    
    
    1,483
    
    
    
    2,460Commercial
    
    
    508
    
    
    
    49
    
    
    
    848
    
    
    
    411
    
    
    
    411Other
    
    
    7
    
    
    
    
    
    
    
    186
    
    
    
    106
    
    
    
    241Consumer
    
    
    707
    
    
    
    715
    
    
    
    1,402
    
    
    
    1,150
    
    
    
    2,490Other
    
    
    198
    
    
    
    24
    
    
    
    266
    
    
    
    99
    
    
    
    243Total charge-offs
    
    
    2,513
    
    
    
    2,481
    
    
    
    5,322
    
    
    
    4,226
    
    
    
    8,444Recoveries:Commercial and industrial
    
    
    41
    
    
    
    339
    
    
    
    108
    
    
    
    478
    
    
    
    646Real estate  construction and land development
    
    
    6
    
    
    
    31
    
    
    
    26
    
    
    
    33
    
    
    
    44Real estate  mortgageSingle-family
    
    
    21
    
    
    
    24
    
    
    
    32
    
    
    
    43
    
    
    
    89Commercial
    
    
    2
    
    
    
    9
    
    
    
    5
    
    
    
    25
    
    
    
    128Other
    
    
    19
    
    
    
    9
    
    
    
    217
    
    
    
    23
    
    
    
    71Consumer
    
    
    41
    
    
    
    39
    
    
    
    83
    
    
    
    85
    
    
    
    181Other
    
    
    35
    
    
    
    33
    
    
    
    71
    
    
    
    76
    
    
    
    155Total recoveries
    
    
    165
    
    
    
    484
    
    
    
    542
    
    
    
    763
    
    
    
    1,314Net charge-offs
    
    
    2,348
    
    
    
    1,997
    
    
    
    4,780
    
    
    
    3,463
    
    
    
    7,130Provision for loan losses
    
    
    5,982
    
    
    
    5,967
    
    
    
    9,434
    
    
    
    7,838
    
    
    
    13,112Allowance for loan losses at end of period
    
    $
    33,504
    
    
    $
    27,243
    
    
    $
    33,504
    
    
    $
    27,243
    
    
    $
    28,850Loans at end of period, net of unearned income
    
    $
    2,398,471
    
    
    $
    2,148,751
    
    
    $
    2,398,471
    
    
    $
    2,148,751
    
    
    $
    2,314,921Average loans, net of unearned income
    
    
    2,387,078
    
    
    
    2,123,039
    
    
    
    2,364,676
    
    
    
    2,077,884
    
    
    
    2,147,524Ratio of ending allowance to ending loans
    
    
    1.40
    %
    
    
    1.27
    %
    
    
    1.40
    %
    
    
    1.27
    %
    
    
    1.25
    %Ratio of net charge-offs to average loans (1)
    
    
    0.39
    
    
    
    0.38
    
    
    
    0.41
    
    
    
    0.34
    
    
    
    0.33Net charge-offs as a percentage of:Provision for loan losses
    
    
    39.26
    
    
    
    33.46
    
    
    
    50.66
    
    
    
    44.18
    
    
    
    54.38Allowance for loan losses (1)
    
    
    28.11
    
    
    
    29.39
    
    
    
    28.77
    
    
    
    25.49
    
    
    
    24.71Allowance for loan losses as a percentage of
nonperforming loans
    
    
    24.48
    
    
    
    69.33
    
    
    
    24.48
    
    
    
    69.33
    
    
    
    44.12
 
 (1)
    
    Annualized. Nonperforming Assets.
 47




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##### Table of Contents



Nonperforming Assets
 June 30,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)Nonaccrual
    
    $
    105,356
    
    
    $
    54,712Accruing loans 90 days or more delinquent
    
    
    12,373
    
    
    
    8,033Total nonperforming loans
    
    
    117,729
    
    
    
    62,745Other real estate owned assets
    
    
    35,206
    
    
    
    19,971Repossessed assets
    
    
    454
    
    
    
    332Total nonperforming assets
    
    $
    153,389
    
    
    $
    83,048Restructured and performing under restructured terms
    
    $
    19,143
    
    
    $
    2,643Nonperforming loans as a percentage of loans
    
    
    4.91
    %
    
    
    2.72
    %Nonperforming assets as a percentage of loans plus nonperforming assets
    
    
    6.30
    %
    
    
    3.56
    %Nonperforming assets as a percentage of total assets
    
    
    4.77
    %
    
    
    2.72
    %
  June 30,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)Commercial and industrial
    
    $
    1,463
    
    
    $
    166Real estate  construction and land development
    
    
    57,964
    
    
    
    20,976Real estate  mortgagesSingle-family
    
    
    37,268
    
    
    
    22,730Commercial
    
    
    16,362
    
    
    
    14,686Other
    
    
    3,386
    
    
    
    2,981Consumer
    
    
    662
    
    
    
    723Other
    
    
    624
    
    
    
    483Total nonperforming loans
    
    $
    117,729
    
    
    $
    62,745
   June 30,
    
    
    December 31,2009
    
   
    2008Acreage
    
    $
    2,154
    
    
    $
    1,222Commercial building
    

    
    3,519
    
    
    
    656Residential condominiums
    


    
    3,659
    
    
    
    1,314Residential single-family homes
    


    
    10,299
    
    
    
    9,394Residential lots
    


    
    15,089
    
    
    
    7,277Other
    


    
    486
    
    
    
    108Other real estate owned
    


    $
    35,206
    
    
    $
    19,971
 Impaired Loans.
 48




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##### Table of Contents



June 30, 2009
    
    
    December 31, 2008Outstanding
    
    
    Specific
    
    
    Outstanding
    
    
    SpecificBalance
    
    
    Allowance
    
    
    Balance
    
    
    Allowance(Dollars in thousands)Commercial and industrial
    
    $
    1,243
    
    
    $
    220
    
    
    $
    515
    
    
    $
    42Real estate  construction and land development
    
    
    52,719
    
    
    
    5,182
    
    
    
    18,155
    
    
    
    1,570Real estate  mortgagesSingle-family
    
    
    37,190
    
    
    
    4,565
    
    
    
    18,063
    
    
    
    2,251Commercial
    
    
    23,342
    
    
    
    487
    
    
    
    15,615
    
    
    
    1,173Other
    
    
    2,523
    
    
    
    134
    
    
    
    532
    
    
    
    70Total
    
    $
    117,017
    
    
    $
    10,588
    
    
    $
    52,880
    
    
    $
    5,106
 Potential Problem Loans.
 Changes in Lending Policies and Procedures, Including Underwriting Standards.
 Deposits
  49




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##### Table of Contents



June 30,
    
    
    December 31,
    
    
    Percent2009
    
    
    2008
    
    
    Change(Dollars in thousands)Noninterest-bearing demand
    
    $
    246,724
    
    
    $
    212,732
    
    
    
    15.9
    %Alabama segment
    
    
    126,110
    
    
    
    98,133
    
    
    
    28.5Florida segment
    
    
    79,792
    
    
    
    72,250
    
    
    
    10.4Other
    
    
    40,822
    
    
    
    42,349
    
    
    
    (3.6
    )Interest-bearing demand
    
    
    692,133
    
    
    
    632,430
    
    
    
    9.4Alabama segment
    
    
    353,294
    
    
    
    327,387
    
    
    
    7.9Florida segment
    
    
    212,306
    
    
    
    185,239
    
    
    
    14.6Other
    
    
    126,533
    
    
    
    119,804
    
    
    
    5.6Savings
    
    
    247,522
    
    
    
    185,522
    
    
    
    33.4Alabama segment
    
    
    132,176
    
    
    
    106,946
    
    
    
    23.6Florida segment
    
    
    113,564
    
    
    
    76,449
    
    
    
    48.5Other
    
    
    1,782
    
    
    
    2,127
    
    
    
    (16.2
    )Time deposits
    
    
    1,418,179
    
    
    
    1,312,304
    
    
    
    8.1Alabama segment
    
    
    743,245
    
    
    
    608,056
    
    
    
    22.2Florida segment
    
    
    545,370
    
    
    
    490,266
    
    
    
    11.2Other
    
    
    129,564
    
    
    
    213,982
    
    
    
    (39.5
    )Total deposits
    
    $
    2,604,558
    
    
    $
    2,342,988
    
    
    
    11.2
    %Alabama segment
    
    $
    1,354,825
    
    
    $
    1,140,522
    
    
    
    18.8
    %Florida segment
    
    $
    951,032
    
    
    $
    824,204
    
    
    
    15.4
    %Other
    
    $
    298,701
    
    
    $
    378,262
    
    
    
    (21.0
    )%
 Borrowings
  Stockholders Equity
 Overview.
 50




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##### Table of Contents



Other Comprehensive Income.
 Pre-Tax
    
    
    
    
    
    
    Net ofAmount
    
    
    Income Tax
    
    
    Income Tax(In thousands)Three months ended June 30, 2009Unrealized loss on available for sale securities
    
    $
    (4,305
    )
    
    $
    1,593
    
    
    $
    (2,712
    )Less reclassification adjustment for OTTI realized in net loss
    
    
    4,077
    
    
    
    (1,508
    )
    
    
    2,569Unrealized gain on derivatives
    
    
    354
    
    
    
    (131
    )
    
    
    223Net unrealized gain
    
    $
    126
    
    
    $
    (46
    )
    
    $
    80Six months ended June 30, 2009Unrealized loss on available for sale securities
    
    $
    (2,817
    )
    
    $
    1,042
    
    
    $
    (1,775
    )Less reclassification adjustment for OTTI realized in net loss
    
    
    4,401
    
    
    
    (1,628
    )
    
    
    2,773Unrealized gain on derivatives
    
    
    325
    
    
    
    (120
    )
    
    
    205Net unrealized gain
    
    $
    1,909
    
    
    $
    (706
    )
    
    $
    1,203
  Regulatory Capital.
 To Be WellFor Capital
    
    Capitalized UnderAdequacy
    
    Prompt CorrectiveActual
    
    Purposes
    
    ActionSuperior Bank
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of June 30, 2009Tier 1 Core Capital (to Adjusted Total Assets)
    
    $
    265,402
    
    
    
    8.36
    %
    
    $
    126,913
    
    
    
    4.00
    %
    
    $
    158,641
    
    
    
    5.00
    %Total Capital (to Risk Weighted Assets)
    
    
    298,062
    
    
    
    11.16
    
    
    
    213,603
    
    
    
    8.00
    
    
    
    267,010
    
    
    
    10.00Tier 1 Capital (to Risk Weighted Assets)
    
    
    265,402
    
    
    
    9.94
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    160,206
    
    
    
    6.00Tangible Capital (to Adjusted Total Assets)
    
    
    265,402
    
    
    
    8.36
    
    
    
    47,592
    
    
    
    1.50
    
    
    
    N/A
    
    
    
    N/A
  To Be WellFor Capital
    
    Capitalized UnderAdequacy
    
    Prompt CorrectiveActual
    
    Purposes
    
    ActionSuperior Bancorp
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of June 30, 2009Tier 1 Core Capital (to Adjusted Total Assets)
    
    $
    256,616
    
    
    
    8.09
    %
    
    $
    126,806
    
    
    
    4.00
    %
    
    $
    158,508
    
    
    
    5.00
    %Total Capital (to Risk Weighted Assets)
    
    
    289,277
    
    
    
    10.84
    
    
    
    213,431
    
    
    
    8.00
    
    
    
    266,789
    
    
    
    10.00Tier 1 Capital (to Risk Weighted Assets)
    
    
    256,616
    
    
    
    9.62
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    160,074
    
    
    
    6.00Tangible Capital (to Adjusted Total Assets)
    
    
    256,616
    
    
    
    8.09
    
    
    
    47,552
    
    
    
    1.50
    
    
    
    N/A
    
    
    
    N/A
 Liquidity
      51




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Forward-Looking Statements
      
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   52




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##### Table of Contents



June 30,
    
    December 31,12-Month Gap
    
    2009
    
    2008Interest-bearing liabilities in excess of interest-earning assets based on repricing date
    
    $
    (262,000
    )
    
    $
    (297,000
    )Cumulative 12-month Gap Ratio
    
    
    .87
    
    
    
    .86
 Increase (Decrease) in Net Interest IncomeChange (in Basis Points) in Interest
    
    June 30, 2009
    
    December 31, 2008Rates (12-Month Projection)
    
    Amount
    
    Percent
    
    Amount
    
    Percent+200 BP (1)
    
    $
    3,126
    
    
    
    3.1
    %
    
    $
    1,200
    
    
    
    1.7
    %- 200 BP (2)
    
    NCM
    
    
    NCM
        
    NCM
        
    NCM
 
 (1)
    
    Results are within our asset and liability management policy.(2)
    
    Not considered meaningful in the current rate environment  Change (in Basis Points) in
    
    
    
    
    
    ChangeInterest Rates
    
    EVE
    
    Amount
    
    Percent(Dollars in thousands)+ 200 BP
    
    $
    352,061
    
    
    $
    18,828
    
    
    
    5.7
    %+ 100 BP
    
    
    344,906
    
    
    
    11,673
    
    
    
    3.50 BP
    
    
    333,233
    
    
    
    
    
    
    
    - 100 BP
    
    
    331,167
    
    
    
    (2,066
    )
    
    
    (0.6
    )
  
 ITEM 4. CONTROLS AND PROCEDURES
       53




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  Higher FDIC deposit insurance premiums and assessments could adversely affect our financial condition.
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  54




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##### Table of Contents



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  1.
    
    The stockholders voted as follows to elect the following persons as directors, each to hold office for a one-year term:
 NAME
    
    FOR
    
    WITHHELDC. Stanley Bailey
    
    
    7,934,857
    
    
    
    281,954Roger D. Barker
    
    
    8,011,066
    
    
    
    205,744Rick D. Gardner
    
    
    7,964,291
    
    
    
    252,519Thomas E. Jernigan, Jr.
    
    
    7,946,937
    
    
    
    269,873James Mailon Kent, Jr.
    
    
    7,832,557
    
    
    
    384,253Mark A. Lee
    
    
    7,985,140
    
    
    
    231,670Peter L. Lowe
    
    
    7,895,532
    
    
    
    321,278John C. Metz
    
    
    7,984,830
    
    
    
    231,980D. Dewey Mitchell
    
    
    8,002,362
    
    
    
    214,448Robert R. Parrish, Jr.
    
    
    7,874,277
    
    
    
    342,533Charles W. Roberts, III
    
    
    7,902,195
    
    
    
    314,615C. Marvin Scott
    
    
    7,822,226
    
    
    
    394,584James C. White, Sr.
    
    
    7,991,011
    
    
    
    225,799
 2.
    
    The stockholders voted to approve an amendment to our Restated Certificate of Incorporation to increase the number of
authorized shares of our common stock to 20 million shares as follows:
 FOR
    
    AGAINST
    
    ABSTAIN
    
    BROKER NON-VOTES7,530,012
    
    645,765
    
    41,033
    
    0
 3.
    
    The stockholders voted to ratify the appointment of Grant Thornton LLP
as our registered independent public accounting firm:
 FOR
    
    AGAINST
    
    ABSTAIN
    
    BROKER NON-VOTES7,992,041
    
    74,243
    
    150,525
    
    0
 4.
    
    The stockholders voted to approve the overall compensation of our
executives named in the proxy statement for the 2009 annual meeting of
stockholders :
 FOR
    
    AGAINST
    
    ABSTAIN
    
    BROKER NON-VOTES7,560,258
    
    598,393
    
    58,159
    
    0
 
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  31.1
    
    Certification of principal executive officer pursuant to Rule 13a-14(a).31.2
    
    Certification of principal financial officer pursuant to 13a-14(a).32.1
    
    Certification of principal executive officer pursuant to 18 U.S.C. Section 1350.32.2
    
    Certification of principal financial officer pursuant to 18 U.S.C. Section 1350.
 55




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##### Table of Contents



Date: August 10, 2009
    By:
    /s/ C. Stanley BaileyC. Stanley BaileyChief Executive OfficerDate: August 10, 2009
    By:
    /s/ James A. WhiteJames A. WhiteChief Financial Officer
(Principal Financial Officer) 56