##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED June 30, 2010
 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
  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 o
    Non-accelerated filer o
    Smaller reporting company þ(Do not check if a smaller reporting company)
  o þ
  Class
    
    Outstanding as of August 13, 2010Common stock, $.001 par value
    
    12,560,457




---



##### 



TABLE OF CONTENTS
 PagePART I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    3Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    32Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    65Item 4.
    
    Controls and Procedures
    
    
    66PART II
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    67Item 1A.
    
    Risk Factors
    
    
    67Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    75Item 3.
    
    Defaults Upon Senior Securities
    
    
    76Item 5.
    
    Other Information
    
    
    76Item 6.
    
    Exhibits
    
    
    76SIGNATURES
    
    
    
    
    77EX-3EX-31.1EX-31.2EX-32.1EX-32.2
  2




---



##### Table of Contents



SUPERIOR BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)

(Dollars in thousands, except per share data)
 June 30,
    
    
    December 31,2010
    
    
    2009ASSETSCash and due from banks
    
    $
    54,648
    
    
    $
    74,020Interest-bearing deposits in other banks
    
    
    245,182
    
    
    
    23,714Federal funds sold
    
    
    1,328
    
    
    
    2,036Total cash and cash equivalents
    
    
    301,158
    
    
    
    99,770Investment securities available-for-sale
    
    
    269,943
    
    
    
    286,310Tax lien certificates
    
    
    18,820
    
    
    
    19,292Mortgage loans held-for-sale
    
    
    54,823
    
    
    
    71,879Loans, net of unearned income
    
    
    2,482,560
    
    
    
    2,472,697Allowance for loan losses
    
    
    (79,425
    )
    
    
    (41,884
    )Net loans
    
    
    2,403,135
    
    
    
    2,430,813Premises and equipment, net
    
    
    102,765
    
    
    
    104,022Accrued interest receivable
    
    
    15,168
    
    
    
    15,581Stock in FHLB
    
    
    18,212
    
    
    
    18,212Cash surrender value of life insurance
    
    
    50,792
    
    
    
    50,142Core deposit and other intangible assets
    
    
    14,746
    
    
    
    16,694Other real estate
    
    
    45,184
    
    
    
    41,618Other assets
    
    
    63,589
    
    
    
    67,536Total assets
    
    $
    3,358,335
    
    
    $
    3,221,869LIABILITIES AND STOCKHOLDERS EQUITYDeposits:Noninterest-bearing
    
    $
    275,712
    
    
    $
    257,744Interest-bearing
    
    
    2,562,809
    
    
    
    2,398,829Total deposits
    
    
    2,838,521
    
    
    
    2,656,573Advances from FHLB
    
    
    216,324
    
    
    
    218,322Security repurchase agreements
    
    
    762
    
    
    
    841Notes payable
    
    
    45,150
    
    
    
    45,917Subordinated debentures, net
    
    
    81,196
    
    
    
    84,170Accrued expenses and other liabilities
    
    
    27,068
    
    
    
    24,342Total liabilities
    
    
    3,209,021
    
    
    
    3,030,165Commitments and contingenciesStockholders equity:Preferred stock, par value $.001 per share; shares authorized 5,000,000:Series B, cumulative convertible preferred stock, 111 and -0- shares
issued and outstanding as of June 30, 2010 and December 31, 2009,
respectively
    
    
    
    
    
    
    Series C, cumulative convertible preferred stock, 3 and -0- shares
issued and outstanding as of June 30, 2010 and December 31, 2009,
respectively
    
    
    
    
    
    
    Common stock, par value $.001 per share; shares authorized 200,000,000;
shares issued 12,560,457 and 11,673,837, respectively; outstanding
12,560,457 and 11,667,794, respectively
    
    
    13
    
    
    
    12Surplus   preferred
    
    
    10,888
    
    
    
     warrants
    
    
    9,827
    
    
    
    8,646 common
    
    
    325,159
    
    
    
    322,043Accumulated deficit
    
    
    (191,250
    )
    
    
    (130,889
    )Accumulated other comprehensive loss
    
    
    (5,136
    )
    
    
    (7,825
    )Unearned ESOP stock
    
    
    (174
    )
    
    
    (263
    )Unearned restricted stock
    
    
    (13
    )
    
    
    (20
    )Total stockholders equity
    
    
    149,314
    
    
    
    191,704Total liabilities and stockholders equity
    
    $
    3,358,335
    
    
    $
    3,221,869
  3




---



##### Table of Contents



SUPERIOR BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
(UNAUDITED)
(Dollars in thousands, except per share data)
 For the
    
    
    For theThree Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Interest income:Interest and fees on loans
    
    $
    36,212
    
    
    $
    35,959
    
    
    $
    72,554
    
    
    $
    70,911Interest on taxable securities
    
    
    2,625
    
    
    
    3,778
    
    
    
    5,536
    
    
    
    7,787Interest on tax-exempt securities
    
    
    314
    
    
    
    434
    
    
    
    626
    
    
    
    863Interest on federal funds sold
    
    
    2
    
    
    
    2
    
    
    
    3
    
    
    
    7Interest and dividends on other investments
    
    
    393
    
    
    
    456
    
    
    
    765
    
    
    
    818Total interest income
    
    
    39,546
    
    
    
    40,629
    
    
    
    79,484
    
    
    
    80,386Interest expense:Interest on deposits
    
    
    11,452
    
    
    
    14,109
    
    
    
    22,977
    
    
    
    29,002Interest on other borrowed funds
    
    
    2,542
    
    
    
    2,597
    
    
    
    5,064
    
    
    
    4,938Interest on subordinated debentures
    
    
    2,399
    
    
    
    1,206
    
    
    
    4,785
    
    
    
    2,400Total interest expense
    
    
    16,393
    
    
    
    17,912
    
    
    
    32,826
    
    
    
    36,340Net interest income
    
    
    23,153
    
    
    
    22,717
    
    
    
    46,658
    
    
    
    44,046Provision for loan losses
    
    
    50,363
    
    
    
    5,982
    
    
    
    59,490
    
    
    
    9,434Net interest (loss) income after provision for loan losses
    
    
    (27,210
    )
    
    
    16,735
    
    
    
    (12,832
    )
    
    
    34,612Noninterest income:Service charges and fees on deposits
    
    
    2,335
    
    
    
    2,524
    
    
    
    4,551
    
    
    
    4,911Mortgage banking income
    
    
    2,667
    
    
    
    2,271
    
    
    
    4,677
    
    
    
    3,961Investment securities gains (losses)Gain on sale of securities
    
    
    1,858
    
    
    
    
    
    
    
    1,858
    
    
    
    Total other-than-temporary impairment losses (OTTI)
    
    
    (683
    )
    
    
    (6,685
    )
    
    
    (883
    )
    
    
    (17,189
    )Portion of OTTI recognized in other comprehensive
loss
    
    
    181
    
    
    
    904
    
    
    
    183
    
    
    
    5,563Investment securities gains (losses)
    
    
    1,356
    
    
    
    (5,781
    )
    
    
    1,158
    
    
    
    (11,626
    )Change in fair value of derivatives
    
    
    (239
    )
    
    
    (67
    )
    
    
    (29
    )
    
    
    (266
    )Increase in cash surrender value of life insurance
    
    
    558
    
    
    
    540
    
    
    
    1,126
    
    
    
    1,055Gain on exchange of subordinated debt for common stock
    
    
    507
    
    
    
    
    
    
    
    507
    
    
    
    Other income
    
    
    1,344
    
    
    
    1,340
    
    
    
    2,750
    
    
    
    2,557Total noninterest income
    
    
    8,528
    
    
    
    827
    
    
    
    14,740
    
    
    
    592Noninterest expenses:Salaries and employee benefits
    
    
    13,840
    
    
    
    12,304
    
    
    
    28,040
    
    
    
    24,613Occupancy, furniture and equipment
    
    
    4,850
    
    
    
    4,503
    
    
    
    9,613
    
    
    
    8,919Amortization of core deposit intangibles
    
    
    869
    
    
    
    985
    
    
    
    1,739
    
    
    
    1,971FDIC assessments
    
    
    1,853
    
    
    
    1,932
    
    
    
    3,233
    
    
    
    2,389Foreclosure losses
    
    
    3,358
    
    
    
    1,748
    
    
    
    5,935
    
    
    
    2,317Other expenses
    
    
    6,763
    
    
    
    6,323
    
    
    
    12,782
    
    
    
    11,650Total noninterest expenses
    
    
    31,533
    
    
    
    27,795
    
    
    
    61,342
    
    
    
    51,859Loss before income taxes
    
    
    (50,215
    )
    
    
    (10,233
    )
    
    
    (59,434
    )
    
    
    (16,655
    )Income tax expense (benefit)
    
    
    3,507
    
    
    
    (4,539
    )
    
    
    28
    
    
    
    (7,387
    )Net loss
    
    
    (53,722
    )
    
    
    (5,694
    )
    
    
    (59,462
    )
    
    
    (9,268
    )Preferred stock dividends and amortization
    
    
    (899
    )
    
    
    (1,167
    )
    
    
    (899
    )
    
    
    (2,310
    )Net loss applicable to common stockholders
    
    $
    (54,621
    )
    
    $
    (6,861
    )
    
    $
    (60,361
    )
    
    $
    (11,578
    )Weighted average common shares outstanding
    
    
    12,305
    
    
    
    10,071
    
    
    
    11,977
    
    
    
    10,062Weighted average common shares outstanding, assuming dilution
    
    
    12,305
    
    
    
    10,071
    
    
    
    11,977
    
    
    
    10,062Basic net loss per common share
    
    $
    (4.44
    )
    
    $
    (0.68
    )
    
    $
    (5.04
    )
    
    $
    (1.15
    )Diluted net loss per common share
    
    $
    (4.44
    )
    
    $
    (0.68
    )
    
    $
    (5.04
    )
    
    $
    (1.15
    )
  4




---



##### Table of Contents



SUPERIOR BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY (UNAUDITED)
(Dollars in thousands)
 AccumulatedOther
    
    
    Unearned
    
    
    Unearned
    
    
    TotalPreferred
    
    
    Common
    
    
    Surplus
    
    
    Accumulated
    
    
    Comprehensive
    
    
    ESOP
    
    
    Restricted
    
    
    StockholdersStock
    
    
    Stock
    
    
    Preferred
    
    
    Warrants
    
    
    Common
    
    
    Deficit
    
    
    (Loss) Gain
    
    
    Stock
    
    
    Stock
    
    
    EquityBalance at December 31, 2009
    
    $
    
    
    
    $
    12
    
    
    $
    
    
    
    $
    8,646
    
    
    $
    322,043
    
    
    $
    (130,889
    )
    
    $
    (7,825
    )
    
    $
    (263
    )
    
    $
    (20
    )
    
    $
    191,704Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59,462
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59,462
    )Other
comprehensive gain, net of tax expense of $1.6 million unrealized gain on
securities available for sale, arising during the period, net of reclassification
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,780
    
    
    
    
    
    
    
    
    
    
    
    2,780Change in accumulated loss on cash flow hedging instrument, net of tax benefit of $56
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (91
    )
    
    
    
    
    
    
    
    
    
    
    (91
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (56,773
    )Cumulative preferred stock dividend, net of amortization
    
    
    
    
    
    
    
    
    
    
    718
    
    
    
    
    
    
    
    
    
    
    
    (899
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (181
    )Exchange of trust preferred debt for
849,156 shares of common stock
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    2,883
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,884Compensation expense related to stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    162
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    162Issuance of 111 shares Series B preferred stock and 792,859 warrants
    
    
    
    
    
    
    
    
    
    
    9,887
    
    
    
    1,164
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,051Issuance of 3 shares Series C preferred stock and 21,429 warrants
    
    
    
    
    
    
    
    
    
    
    283
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300Amortization of unearned restricted
stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    7Issuance of 43,507 shares related to
board compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    155
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    155Release of 1,969 shares by ESOP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (84
    )
    
    
    
    
    
    
    
    
    
    
    89
    
    
    
    
    
    
    
    5Balance at June 30, 2010
    
    $
    
    
    
    $
    13
    
    
    $
    10,888
    
    
    $
    9,827
    
    
    $
    325,159
    
    
    $
    (191,250
    )
    
    $
    (5,136
    )
    
    $
    (174
    )
    
    $
    (13
    )
    
    $
    149,314
  5




---



##### Table of Contents



SUPERIOR BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW 
(UNAUDITED)
(Dollars in thousands)
 Six Months EndedJune 30,2010
    
    
    2009Net cash provided by (used in) operating activities
    
    $
    30,260
    
    
    $
    (71,019
    )Investing activitiesProceeds from sales of investment securities available-for-sale
    
    
    89,130
    
    
    
    Proceeds from maturities of investment securities available-for-sale
    
    
    49,458
    
    
    
    40,602Purchase of investment securities available-for-sale
    
    
    (117,055
    )
    
    
    (11,683
    )Net increase in loans
    
    
    (52,856
    )
    
    
    (110,932
    )Redemptions of tax lien certificates
    
    
    9,171
    
    
    
    18,582Purchase of tax lien certificates
    
    
    (8,699
    )
    
    
    (20,329
    )Purchase of premises and equipment
    
    
    (2,313
    )
    
    
    (5,295
    )Proceeds from sale of premises and equipment
    
    
    
    
    
    
    338Proceeds from sale of foreclosed assets
    
    
    13,962
    
    
    
    5,673Decrease in stock of FHLB
    
    
    
    
    
    
    3,198Net cash used in investing activities
    
    
    (19,202
    )
    
    
    (79,846
    )Financing activitiesNet increase in deposits
    
    
    181,873
    
    
    
    261,784Decrease in FHLB advances
    
    
    (1,998
    )
    
    
    (134,493
    )Proceeds from note payable
    
    
    
    
    
    
    38,575Principal payment on note payable
    
    
    (1,000
    )
    
    
    Net decrease in other borrowed funds
    
    
    (138
    )
    
    
    Proceeds from exchange of subordinated debt for common stock
    
    
    193
    
    
    
    Proceeds from issuance of preferred stock
    
    
    11,400
    
    
    
    Cash dividends paid
    
    
    
    
    
    
    (1,534
    )Net cash provided by financing activities
    
    
    190,330
    
    
    
    164,332Net increase in cash and cash equivalents
    
    
    201,388
    
    
    
    13,467Cash and cash equivalents at beginning of period
    
    
    99,770
    
    
    
    89,448Cash and cash equivalents at end of period
    
    $
    301,158
    
    
    $
    102,915
  6




---



##### Table of Contents



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Note 1  Basis of Presentation
   Reclassifications
  Note 2  Recent Accounting Pronouncements
 Accounting Standards
Codification (ASC) 860 Accounting for Transfers of Financial Assets (Topic 860)
 Accounting Standards Update (ASU) No.
2009-16  Transfers and Servicing  Accounting for Transfers of Financial Assets (ASU 2009 -16) Accounting for Transfers of Financial Assets
 ASU No. 2009-17  Consolidation  Improvements to Financial Reporting
by Enterprises Involved with Variable Interest Entities (ASU 2009-17)
 , ASU No. 2010-06  Fair Value Measurements and Disclosures  Improving
Disclosures about Fair Value Measurements (ASU
2010-06) Fair Value Measurements and Disclosures
 7




---



##### Table of Contents



, ASU No. 2010-20  Receivables (Topic 310)  Disclosures about the Credit
Quality of Financing Receivables and the Allowance for Credit Losses
(ASU 2010-20)
 Note 3  Investment Securities
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value(Dollars in thousands)Investment securities available-for-saleU.S. Agency securities
    
    $
    18,277
    
    
    $
    342
    
    
    $
    
    
    
    $
    18,619Mortgage-backed securities (MBS):U.S. Agency pass-through
    
    
    109,180
    
    
    
    3,249
    
    
    
    7
    
    
    
    112,422U.S. Agency collateralized mortgage obligation (CMO)
    
    
    82,941
    
    
    
    1,513
    
    
    
    
    
    
    
    84,454Private-label CMO
    
    
    17,076
    
    
    
    296
    
    
    
    2,716
    
    
    
    14,656Total MBS
    
    
    209,197
    
    
    
    5,058
    
    
    
    2,723
    
    
    
    211,532State, county and municipal securities
    
    
    30,493
    
    
    
    430
    
    
    
    262
    
    
    
    30,661Corporate obligations:Corporate debt
    
    
    4,101
    
    
    
    
    
    
    
    101
    
    
    
    4,000Pooled trust preferred securities
    
    
    8,288
    
    
    
    
    
    
    
    5,025
    
    
    
    3,263Single issue trust preferred securities
    
    
    5,000
    
    
    
    
    
    
    
    3,245
    
    
    
    1,755Total corporate obligations
    
    
    17,389
    
    
    
    
    
    
    
    8,371
    
    
    
    9,018Equity securities
    
    
    113
    
    
    
    
    
    
    
    
    
    
    
    113Total investment securities available-for-sale
    
    $
    275,469
    
    
    $
    5,830
    
    
    $
    11,356
    
    
    $
    269,943
   Securities Available-for-SaleAmortized
    
    
    EstimatedCost
    
    
    Fair Value(Dollars in thousands)Due in one year or less
    
    $
    285
    
    
    $
    287Due after one year through five years
    
    
    6,970
    
    
    
    6,909Due after five years through ten years
    
    
    23,130
    
    
    
    23,562Due after ten years
    
    
    35,887
    
    
    
    27,652Mortgage-backed securities
    
    
    209,197
    
    
    
    211,533$
    275,469
    
    
    $
    269,943
  8




---



##### Table of Contents



Less than 12 Months
    
    More than 12 Months
    
    TotalFair
    
    Unrealized
    
    Fair
    
    Unrealized
    
    Fair
    
    UnrealizedValue
    
    Losses (1)
    
    Value
    
    Losses (1)
    
    Value
    
    Losses (1)(Dollars in thousands)Temporarily ImpairedMortgage-backed securities:U.S. Agency pass-through
    
    $
    23
    
    
    $
    
    
    
    $
    240
    
    
    $
    7
    
    
    $
    263
    
    
    $
    7Private-label CMO
    
    
    
    
    
    
    
    
    
    
    6,338
    
    
    
    1,096
    
    
    
    6,338
    
    
    
    1,096Total MBS
    
    
    23
    
    
    
    
    
    
    
    6,578
    
    
    
    1,103
    
    
    
    6,601
    
    
    
    1,103State, county and municipal securities
    
    
    5,585
    
    
    
    116
    
    
    
    1,602
    
    
    
    146
    
    
    
    7,187
    
    
    
    262Corporate obligations:Corporate debt
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    
    101
    
    
    
    4,000
    
    
    
    101Single issue trust preferred securities
    
    
    
    
    
    
    
    
    
    
    1,755
    
    
    
    3,245
    
    
    
    1,755
    
    
    
    3,245Total corporate obligations
    
    
    
    
    
    
    
    
    
    
    5,755
    
    
    
    3,346
    
    
    
    5,755
    
    
    
    3,346Total temporarily impaired securities
    
    
    5,608
    
    
    
    116
    
    
    
    13,935
    
    
    
    4,595
    
    
    
    19,543
    
    
    
    4,711Other-than-temporarily ImpairedMortgage-backed securities:Private-label CMO
    
    
    
    
    
    
    
    
    
    
    3,021
    
    
    
    1,620
    
    
    
    3,021
    
    
    
    1,620Corporate obligations:Pooled trust preferred securities
    
    
    
    
    
    
    
    
    
    
    3,263
    
    
    
    5,025
    
    
    
    3,263
    
    
    
    5,025Total OTTI securities
    
    
    
    
    
    
    
    
    
    
    6,284
    
    
    
    6,645
    
    
    
    6,284
    
    
    
    6,645Total temporarily and other-than-temporarily impaired
    
    $
    5,608
    
    
    $
    116
    
    
    $
    20,219
    
    
    $
    11,240
    
    
    $
    25,827
    
    
    $
    11,356\
 
 (1)
    
    Unrealized losses are included in other comprehensive loss, net of unrealized gains and
applicable income taxes. 9




---



##### Table of Contents



Less than
    
    Greater Than12 Months
    
    12 Months
    
    TotalTemporarily ImpairedMortgage-backed securities:U.S. Agency pass-through
    
    
    1
    
    
    
    1
    
    
    
    2Private-label CMO
    
    
    
    
    
    
    5
    
    
    
    5Total MBS
    
    
    1
    
    
    
    6
    
    
    
    7State, county and municipal securities
    
    
    15
    
    
    
    6
    
    
    
    21Corporate obligations:Corporate debt
    
    
    
    
    
    
    3
    
    
    
    3Single issue trust preferred securities
    
    
    
    
    
    
    1
    
    
    
    1Total corporate obligations
    
    
    
    
    
    
    4
    
    
    
    4Total temporarily impaired securities
    
    
    16
    
    
    
    16
    
    
    
    32Other-than-temporarily ImpairedMortgage-backed securities:Private-label CMO
    
    
    
    
    
    
    1
    
    
    
    1Corporate obligations:Pooled trust preferred securities
    
    
    
    
    
    
    4
    
    
    
    4Total OTTI securities
    
    
    
    
    
    
    5
    
    
    
    5Total temporarily and other-than-temporarily impaired
    
    
    16
    
    
    
    21
    
    
    
    37
 10




---



##### Table of Contents



Other-Than-Temporary Impairment (OTTI)
      11




---



##### Table of Contents



Mortgage-backed securities
  Credit Support
    
    
    NetRating
    
    
    
    
    
    Coverage
    
    
    UnrealizedMoody/Fitch
    
    Count
    
    
    Ratios (1)
    
    
    (Loss) GainA1/NR
    
    
    1
    
    
    
    3.06
    
    
    $
    (152
    )Aaa/NR
    
    
    1
    
    
    
    4.25
    
    
    
    NR/AAA
    
    
    1
    
    
    
    3.05
    
    
    
    110NR/AA
    
    
    1
    
    
    
    3.12
    
    
    
    (240
    )B2/AA
    
    
    1
    
    
    
    N/A
    
    
    
    (548
    )B2/NR
    
    
    1
    
    
    
    4.02
    
    
    
    (92
    )NR/BBB
    
    
    1
    
    
    
    2.39
    
    
    
    (64
    )Caa2/CCC (2)
    
    
    1
    
    
    
    0.91
    
    
    
    (1,620
    )NR/C (2)
    
    
    2
    
    
    
    0.00-0.30
    
    
    
    186Total
    
    
    10
    
    
    
    
    
    
    $
    (2,420
    )
 
 (1)
    
    The Credit Support Coverage Ratio is the ratio that determines the multiple of credit
support, and it is 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
below).  Discount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Year-to-DateMargin
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Actual
    
    
    OTTIPrice
    
    
    Basis
    
    
    
    
    
    
    Cumulative
    
    
    Average
    
    
    60+ Days
    
    
    CreditSecurity
    
    (%)
    
    
    Points
    
    
    Yield
    
    
    Default
    
    
    Security
    
    
    Delinquent
    
    
    Portion
    
    
    Other
    
    
    TotalCMO 1
    
    
    19.13
    
    
    
    1684
    
    
    
    18%
    
    
    
    51.87%
    
    
    
    50%
    
    
    
    7.52%
    
    
    $
    
    
    
    $
    
    
    
    $
    CMO 2
    
    
    19.27
    
    
    
    1586
    
    
    
    17%
    
    
    
    48.73%
    
    
    
    45%
    
    
    
    27.89%
    
    
    
    
    
    
    
    
    
    
    
    CMO 4
    
    
    60.41
    
    
    
    1472
    
    
    
    17%
    
    
    
    29.03%
    
    
    
    45%
    
    
    
    16.48%
    
    
    
    (21
    )
    
    
    (2
    )
    
    
    (23
    )$
    (21
    )
    
    $
    (2
    )
    
    $
    (23
    )
   12




---



##### Table of Contents



State, county and municipal securities
   Trust preferred securities
  
    
    Detailed credit and structural evaluation for each piece of collateral in the CDO;
    
    Collateral performance projections for each piece of collateral in the CDO (default,
recovery and prepayment/amortization probabilities);
    
    Terms of the CDO structure, as laid out in the indenture;
    
    The cash flow waterfall (for both interest and principal);
    
    Overcollateralization and interest coverage tests;
    
    Events of default/liquidation;
    
    Mandatory auction call;
    
    Optional redemption;
    
    Hedge agreements; and
    
    Discounted cash flow modeling.
    13




---



##### Table of Contents



Year-to-DateOther-than-temporary-impairmentSingle/
    
    
    Class/
    
    
    Amortized
    
    
    Fair
    
    
    Unrealized
    
    
    CreditName
    
    Pooled
    
    
    Tranche
    
    
    Cost
    
    
    Value
    
    
    Loss
    
    
    Portion
    
    
    Other
    
    
    TotalMM Caps Funding I Ltd
    
    Pooled
    
    MEZ
    
    $
    2,083
    
    
    $
    984
    
    
    $
    (1,099
    )
    
    $
    
    
    
    $
    
    
    
    $
    MM Community Funding Ltd
    
    Pooled
    
    
    B
    
    
    
    2,026
    
    
    
    720
    
    
    
    (1,306
    )
    
    
    (20
    )
    
    
    (117
    )
    
    
    (137
    )Preferred Term Securities V
    
    Pooled
    
    MEZ
    
    
    1,189
    
    
    
    434
    
    
    
    (755
    )
    
    
    (24
    )
    
    
    
    
    
    
    (24
    )Tpref Funding III Ltd
    
    Pooled
    
    
    B-2
    
    
    
    2,990
    
    
    
    1,125
    
    
    
    (1,865
    )
    
    
    (32
    )
    
    
    (64
    )
    
    
    (96
    )Emigrant Capital Trust (1)
    
    Single
    
    Sole
    
    
    5,000
    
    
    
    1,755
    
    
    
    (3,245
    )
    
    
    
    
    
    
    
    
    
    
    $
    13,288
    
    
    $
    5,018
    
    
    $
    (8,270
    )
    
    $
    (76
    )
    
    $
    (181
    )
    
    $
    (257
    )
 Original Collateral -
    
    Performing Collateral -Percent of Actual
    
    Percent of ExpectedLowest
    
    Performing
    
    Deferrals and
    
    Deferrals and
    
    ExcessName
    
    Rating
    
    Banks
    
    Defaults
    
    Defaults
    
    Subordination (2)MM Caps Funding I Ltd
    
    Ca
    
    
    21
    
    
    
    21
    %
    
    
    19
    %
    
    
    0
    %MM Community Funding Ltd
    
    Ca
    
    
    8
    
    
    
    21
    %
    
    
    43
    %
    
    
    0
    %Preferred Term Securities V
    
    Ba3
    
    
    2
    
    
    
    4
    %
    
    
    26
    %
    
    
    0
    %Tpref Funding III Ltd
    
    Ca
    
    
    22
    
    
    
    28
    %
    
    
    25
    %
    
    
    0
    %Emigrant Capital Trust (1)
    
    NR
    
    NA
    
    NA
    
    NA
    
    NA
 Fair Value
    
    Discount Margin
    
    YieldName
    
    (Price to Par)
    
    (Basis Points)
    
    (Basis Points)MM Caps Funding I Ltd
    
    $
    44.85
    
    
    Swap + 1700
    
    9.48% FixedMM Community Funding Ltd
    
    
    14.40
    
    
    LIBOR + 1500
    
    LIBOR + 310Preferred Term Securities V
    
    
    31.52
    
    
    LIBOR + 1400
    
    LIBOR + 210Tpref Funding III Ltd
    
    
    28.14
    
    
    LIBOR + 1200
    
    LIBOR + 190Emigrant Capital Trust (1)
    
    
    35.10
    
    
    LIBOR + 1312
    
    LIBOR + 200
 
 (1)
    
    There has been no notification of deferral or default on this issue. An analysis of the
company, including discussion with its management, indicates there is adequate capital and
liquidity to service the debt. The discount margin of 1312 basis points was derived from
implied credit spreads from certain publicly traded trust preferred securities within the
issuers peer group.(2)
    
    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.    14




---



##### Table of Contents



For the Three
    
    
    For the SixMonths Ended
    
    
    Months EndedJune 30, 2010
    
    
    June 30, 2010(Dollars in thousands)Balance at beginning of period
    
    $
    8,886
    
    
    $
    8,869Amounts related to credit losses for which an OTTI was not previously recognized
    
    
    450
    
    
    
    604Increases 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
    
    
    51
    
    
    
    97Reductions for securities where there is an intent to sell or requirement to sell
    
    
    
    
    
    
    (154
    )Reductions for increases in cash flows expected to be collected
    
    
    (13
    )
    
    
    (42
    )Balance at end of period
    
    $
    9,374
    
    
    $
    9,374
  Stock in the Federal Home Loan Bank of Atlanta (FHLB Atlanta)
   
    
    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; and
    
    the liquidity position of FHLB Atlanta.
  15




---



##### Table of Contents



Note 4
 Allowance For Loan Losses
   For The Three Months Ended

For The Six Months EndedJune 30,

June 30,

June 30,

June 30,2010

2009

2010

2009(Dollars in thousands)Beginning allowance for loan losses

$
43,190


$
29,870


$
41,884


$
28,850Provision for loan losses


50,363



5,982



59,490



9,434Total charge-offs


14,633



2,513



22,720



5,322Total recoveries


(505
)


(165
)


(771
)


(542
)Net charge-offs


14,128



2,348



21,949



4,780Ending allowance for loan losses

$
79,425


$
33,504


$
79,425


$
33,504Total loans, net of unearned income

$
2,482,560


$
2,398,471Allowance for loan losses to total loans, net of unearned income


3.20
%


1.40
%








Note 5  Notes Payable




Note payable
to bank, borrowed under $7.0 million line of credit, due
September 3, 2010; interest is based on Wall Street prime plus 1.25 but not less than 4.5%,
secured by 100% of the outstanding Superior Bank stock
    
    $
    6,000Senior 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
    
    
    (850
    )Total notes payable
    
    $
    45,150






Note 6  Derivative Financial Instruments






Interest Rate Swaps






16



---



##### Table of Contents



Fair Value Hedges
  Cash Flow Hedges
  Interest Rate Lock Commitments
  Forward Sales Commitments
  Forward Purchase Commitments
  Assets and Liabilities Recorded at
Fair Value on a Recurring Basis
 17




---



##### Table of Contents



June 30, 2010
    
    December 31, 2009Estimated
    
    
    
    
    
    EstimatedNotional
    
    Fair
    
    Notional
    
    FairAmount
    
    Value
    
    Amount
    
    Value(Dollars in thousands)Interest rate derivatives designated as hedges of fair value:Interest rate swap on brokered certificates of deposit
    
    $
    2,777
    
    
    $
    325
    
    
    $
    2,777
    
    
    $
    228Interest rate derivatives designated as hedges of cash flows:Interest rate swaps on subordinated debenture
    
    
    18,500
    
    
    
    (900
    )
    
    
    22,000
    
    
    
    (766
    )Non-hedging derivatives:Brokered certificates of deposit interest rate swap
    
    
    723
    
    
    
    85
    
    
    
    723
    
    
    
    59Mortgage loan held for sale interest rate lock commitment
    
    
    50,194
    
    
    
    630
    
    
    
    41,038
    
    
    
    (370
    )Mortgage loan forward sales commitments
    
    
    72,329
    
    
    
    (1,261
    )
    
    
    
    
    
    
    Mortgage loan forward purchase commitments
    
    
    39,306
    
    
    
    209
    
    
    
    
    
    
    
    Commercial
loan interest rate swap with loan customer
    
    
    3,716
    
    
    
    388
    
    
    
    3,766
    
    
    
    323Commercial
loan interest rate swap with financial institution
    
    
    3,716
    
    
    
    (388
    )
    
    
    3,766
    
    
    
    (323
    )
  Weighted-AverageInterest
    
    InterestRate
    
    RatePaid
    
    ReceivedInterest rate swaps:Fair value hedge on brokered certificates of deposit interest rate swap
    
    
    0.46
    %
    
    
    4.70
    %Cash flow hedge interest rate swaps on subordinated debentures
    
    
    4.42
    
    
    
    1.87Non-hedging interest rate swap on commercial loan
    
    
    6.73
    
    
    
    6.73
 Gains, Losses and Derivative Cash Flows
  18




---



##### Table of Contents



For the
    
    For theThree Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2010
    
    2009
    
    2010
    
    2009(Dollars in thousands)Interest rate swap on brokered certificates of deposit:Amount of gain included in interest expense on deposits
    
    $
    29
    
    
    $
    26
    
    
    $
    59
    
    
    $
    49Amount of gain (loss) included in other noninterest income
    
    
    
    
    
    
    (51
    )
    
    
    1
    
    
    
    (481
    )
  For the
    
    For theThree Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2010
    
    2009
    
    2010
    
    2009(Dollars in thousands)Interest rate swap on subordinated debenture:Net loss included in interest expense on subordinated debt
    
    $
    (159
    )
    
    $
    (104
    )
    
    $
    (315
    )
    
    $
    (159
    )Amount of (loss) gain recognized in other comprehensive income
    
    
    (92
    )
    
    
    223
    
    
    
    (191
    )
    
    
    205
    For the
    
    For theThree Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2010
    
    2009
    
    2010
    
    2009(Dollars in thousands)Non-hedging derivatives:Brokered certificates of deposit interest rate swap
    
    $
    25
    
    
    $
    (27
    )
    
    $
    41
    
    
    $
    (72
    )Mortgage loan held for sale interest rate lock commitment
    
    
    807
    
    
    
    12
    
    
    
    1,000
    
    
    
    288Mortgage loan forward sales commitments
    
    
    (1,261
    )
    
    
    
    
    
    
    (1,261
    )
    
    
    Mortgage loan forward purchase commitments
    
    
    209
    
    
    
    
    
    
    
    209
    
    
    
    
 19




---



##### Table of Contents



Counterparty Credit Risk
   20




---



##### Table of Contents



Note 7  Segment Reporting
   Total
    
    
    
    
    
    
    SuperiorAlabama
    
    
    Florida
    
    
    Alabama and
    
    
    Administrative
    
    
    BancorpRegion
    
    
    Region
    
    
    Florida
    
    
    and Other
    
    
    Combined(Dollars in thousands)Three Months Ended June 30, 2010Net interest income
    
    $
    9,942
    
    
    $
    10,943
    
    
    $
    20,885
    
    
    $
    2,268
    
    
    $
    23,153Provision
for loan losses(1)
    
    
    1,889
    
    
    
    11,751
    
    
    
    13,640
    
    
    
    36,723
    
    
    
    50,363Noninterest income
    
    
    2,009
    
    
    
    438
    
    
    
    2,447
    
    
    
    6,081
    
    
    
    8,528Noninterest expense
    
    
    9,578
    
    
    
    6,450
    
    
    
    16,028
    
    
    
    15,505
    
    
    
    31,533Operating profit (loss)
    
    $
    484
    
    
    $
    (6,820
    )
    
    $
    (6,336
    )
    
    $
    (43,879
    )
    
    
    (50,215
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,507Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (53,722
    )Total assets
    
    $
    1,057,887
    
    
    $
    1,267,926
    
    
    $
    2,325,813
    
    
    $
    1,032,522
    
    
    $
    3,358,335Three Months Ended June 30, 2009Net interest income
    
    $
    8,931
    
    
    $
    9,396
    
    
    $
    18,327
    
    
    $
    4,390
    
    
    $
    22,717Provision for loan losses(1)
    
    
    1,424
    
    
    
    1,486
    
    
    
    2,910
    
    
    
    3,072
    
    
    
    5,982Noninterest income
    
    
    2,206
    
    
    
    514
    
    
    
    2,720
    
    
    
    (1,893
    )
    
    
    827Noninterest expense
    
    
    9,113
    
    
    
    5,832
    
    
    
    14,945
    
    
    
    12,850
    
    
    
    27,795Operating profit (loss)
    
    $
    600
    
    
    $
    2,592
    
    
    $
    3,192
    
    
    $
    (13,425
    )
    
    $
    (10,233
    )Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,539
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (5,694
    )Total assets
    
    $
    1,073,850
    
    
    $
    1,171,252
    
    
    $
    2,245,102
    
    
    $
    964,319
    
    
    $
    3,209,421Six Months Ended June 30, 2010Net interest income
    
    $
    20,090
    
    
    $
    21,670
    
    
    $
    41,760
    
    
    $
    4,898
    
    
    $
    46,658Provision for loan losses(1)
    
    
    2,862
    
    
    
    18,969
    
    
    
    21,831
    
    
    
    37,659
    
    
    
    59,490Noninterest income
    
    
    3,972
    
    
    
    890
    
    
    
    4,862
    
    
    
    9,878
    
    
    
    14,740Noninterest expense
    
    
    18,318
    
    
    
    13,406
    
    
    
    31,724
    
    
    
    29,618
    
    
    
    61,342Operating profit (loss)
    
    $
    2,882
    
    
    $
    (9,815
    )
    
    $
    (6,933
    )
    
    $
    (52,501
    )
    
    $
    (59,434
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (59,462
    )Six Months Ended June 30, 2009Net interest income
    
    $
    16,991
    
    
    $
    18,467
    
    
    $
    35,458
    
    
    $
    8,588
    
    
    $
    44,046Provision for loan losses(1)
    
    
    3,036
    
    
    
    2,964
    
    
    
    6,000
    
    
    
    3,434
    
    
    
    9,434Noninterest income
    
    
    4,277
    
    
    
    1,029
    
    
    
    5,306
    
    
    
    (4,714
    )
    
    
    592Noninterest expense
    
    
    17,425
    
    
    
    11,568
    
    
    
    28,993
    
    
    
    22,866
    
    
    
    51,859Operating profit (loss)
    
    $
    807
    
    
    $
    4,964
    
    
    $
    5,771
    
    
    $
    (22,426
    )
    
    $
    (16,655
    )Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,387
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (9,268
    )
 (1)
    
    Provision for loan losses for Alabama and Florida segments
primarily represents charge-offs during the periods presented. Any provision in
excess of charge-offs initially flows though Administrative and Other. 21




---



##### Table of Contents



Note 8 Net Loss per Common Share
  For the
    
    
    For theThree Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator:Net loss
    
    $
    (53,722
    )
    
    $
    (5,694
    )
    
    $
    (59,462
    )
    
    $
    (9,268
    )Less preferred stock dividends and amortization
    
    
    (899
    )
    
    
    (1,167
    )
    
    
    (899
    )
    
    
    (2,310
    )For basic and diluted, net loss applicable to common
stockholders
    
    $
    (54,621
    )
    
    $
    (6,861
    )
    
    $
    (60,361
    )
    
    $
    (11,578
    )Denominator:For basic, weighted average common shares outstanding
    
    
    12,305
    
    
    
    10,071
    
    
    
    11,977
    
    
    
    10,062Effect of dilutive stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average common shares outstanding, assuming dilution
    
    
    12,305
    
    
    
    10,071
    
    
    
    11,977
    
    
    
    10,062Basic net loss per common share
    
    $
    (4.44
    )
    
    $
    (0.68
    )
    
    $
    (5.04
    )
    
    $
    (1.15
    )Diluted net loss per common share
    
    $
    (4.44
    )
    
    $
    (0.68
    )
    
    $
    (5.04
    )
    
    $
    (1.15
    )
   22




---



##### Table of Contents



Note 9  Comprehensive Loss
  Pre-Tax
    
    
    Income Tax
    
    
    Net ofAmount
    
    
    Expense
    
    
    Income Tax(Dollars in thousands)Three Months Ended June 30, 2010Unrealized gain on available-for-sale securities
    
    $
    4,031
    
    
    $
    (1,491
    )
    
    $
    2,540Reclassification adjustment for gains realized in net loss
    
    
    (1,356
    )
    
    
    502
    
    
    
    (854
    )Unrealized gain on derivatives
    
    
    24
    
    
    
    (9
    )
    
    
    15Reclassification adjustment for gains realized in net loss
    
    
    (13
    )
    
    
    5
    
    
    
    (8
    )Net unrealized gain
    
    $
    2,686
    
    
    $
    (993
    )
    
    $
    1,693Three Months Ended June 30, 2009Unrealized loss on available-for-sale securities
    
    $
    (3,660
    )
    
    $
    1,354
    
    
    $
    (2,306
    )Reclassification adjustment for losses realized in net loss
    
    
    5,781
    
    
    
    (2,139
    )
    
    
    3,642Unrealized gain on derivatives
    
    
    354
    
    
    
    (131
    )
    
    
    223Net unrealized gain
    
    $
    2,475
    
    
    $
    (916
    )
    
    $
    1,559Six Months Ended June 30, 2010Unrealized gain on available-for-sale securities
    
    $
    5,571
    
    
    $
    (2,061
    )
    
    $
    3,510Reclassification adjustment for gains realized in net loss
    
    
    (1,158
    )
    
    
    428
    
    
    
    (730
    )Unrealized loss on derivatives
    
    
    (134
    )
    
    
    51
    
    
    
    (83
    )Reclassification adjustment for gains realized in net loss
    
    
    (13
    )
    
    
    5
    
    
    
    (8
    )Net unrealized gain
    
    $
    4,266
    
    
    $
    (1,577
    )
    
    $
    2,689Six Months Ended June 30, 2009Unrealized loss on available-for-sale securities
    
    $
    (12,054
    )
    
    $
    4,459
    
    
    $
    (7,595
    )Reclassification adjustment for losses realized in net loss
    
    
    11,626
    
    
    
    (4,302
    )
    
    
    7,324Unrealized gain on derivatives
    
    
    325
    
    
    
    (120
    )
    
    
    205Net unrealized loss
    
    $
    (103
    )
    
    $
    37
    
    
    $
    (66
    )
 Note 10  Income Taxes
    23




---



##### Table of Contents



Note 11  Stock Incentive Plan
    2010
    
    2009Risk-free interest rate
    
    
    2.57
    %
    
    
    3.59
    %Volatility factor
    
    
    55.79
    
    
    
    35.59Expected term (in years)
    
    
    5.00
    
    
    
    5.00Dividend yield
    
    
    0.00
    
    
    
    0.00
 24




---



##### Table of Contents



Weighted-Weighted-
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicFor the Six Months Ended June 30, 2010
    
    Number
    
    
    Price
    
    
    Term
    
    
    ValueUnder option, beginning of period
    
    
    925,647
    
    
    $
    26.85Granted
    
    
    5,000
    
    
    
    3.44Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (25,119
    )
    
    
    14.62Under option, end of period
    
    
    905,528
    
    
    $
    27.06
    
    
    
    5.21
    
    
    $
    Exercisable at end of period
    
    
    613,028
    
    
    $
    31.91
    
    
    
    2.63
    
    
    $
    Weighted-average fair value per
option of options granted during the
period
    
    $
    3.44
  Note 12  Fair Value Measurements
  25




---



##### Table of Contents



Assets and Liabilities Recorded at Fair Value on a Recurring Basis
  Quoted Prices in
    
    
    
    
    
    SignificantActive Markets for
    
    Significant Other
    
    UnobservableCarrying
    
    Identical Assets
    
    Observable Inputs
    
    InputsValue
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)(Dollars in thousands)June 30, 2010Investment securities available-for-saleU.S. Agency securities
    
    $
    18,619
    
    
    $
    
    
    
    $
    18,619
    
    
    $
    Mortgage-backed securities:U.S. Agency MBS pass-through
    
    
    112,422
    
    
    
    
    
    
    
    112,422
    
    
    
    U.S. Agency CMO
    
    
    84,454
    
    
    
    
    
    
    
    84,454
    
    
    
    Private-label CMO
    
    
    14,656
    
    
    
    
    
    
    
    8,052
    
    
    
    6,604Total MBS
    
    
    211,532
    
    
    
    
    
    
    
    204,928
    
    
    
    6,604State, county and municipal securities
    
    
    30,661
    
    
    
    
    
    
    
    29,061
    
    
    
    1,600Corporate obligations:Corporate debt
    
    
    4,000
    
    
    
    
    
    
    
    4,000
    
    
    
    Pooled trust preferred securities
    
    
    3,263
    
    
    
    
    
    
    
    
    
    
    
    3,263Single issue trust preferred securities
    
    
    1,755
    
    
    
    
    
    
    
    
    
    
    
    1,755Total corporate obligations
    
    
    9,018
    
    
    
    
    
    
    
    4,000
    
    
    
    5,018Equity securities
    
    
    113
    
    
    
    113
    
    
    
    
    
    
    
    Total investment securities
available-for-sale
    
    
    269,943
    
    
    
    113
    
    
    
    256,608
    
    
    
    13,222Derivative assets
    
    
    1,637
    
    
    
    
    
    
    
    1,637
    
    
    
    Total recurring basis measured assets
    
    $
    271,580
    
    
    $
    113
    
    
    $
    258,245
    
    
    $
    13,222Derivative liabilities
    
    $
    2,549
    
    
    $
    
    
    
    $
    2,549
    
    
    $
    Total recurring basis measured liabilities
    
    $
    2,549
    
    
    $
    
    
    
    $
    2,549
    
    
    $
    
 26




---



##### Table of Contents



Quoted Prices in
    
    
    
    
    
    SignificantActive Markets for
    
    Significant Other
    
    UnobservableCarrying
    
    Identical Assets
    
    Observable Inputs
    
    InputsValue
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)(Dollars in thousands)December 31, 2009Investment securities available-for-saleU.S. Agency securities
    
    $
    53,681
    
    
    $
    
    
    
    $
    53,681
    
    
    $
    Mortgage-backed securities:U.S. Agency pass-through
    
    
    163,724
    
    
    
    
    
    
    
    163,724
    
    
    
    U.S. Agency CMO
    
    
    12,759
    
    
    
    
    
    
    
    12,759
    
    
    
    Private-label CMO
    
    
    16,191
    
    
    
    
    
    
    
    8,771
    
    
    
    7,420Total MBS
    
    
    192,674
    
    
    
    
    
    
    
    185,254
    
    
    
    7,420State, county and municipal securities
    
    
    31,462
    
    
    
    
    
    
    
    29,733
    
    
    
    1,729Corporate obligations:Corporate debt
    
    
    4,000
    
    
    
    
    
    
    
    4,000
    
    
    
    Pooled trust preferred securities
    
    
    3,203
    
    
    
    
    
    
    
    
    
    
    
    3,203Single issue trust preferred securities
    
    
    977
    
    
    
    
    
    
    
    
    
    
    
    977Total corporate obligations
    
    
    8,180
    
    
    
    
    
    
    
    4,000
    
    
    
    4,180Equity securities
    
    
    313
    
    
    
    313
    
    
    
    
    
    
    
    Total investment securities
available-for-sale
    
    
    286,310
    
    
    
    313
    
    
    
    272,668
    
    
    
    13,329Derivative assets
    
    
    610
    
    
    
    
    
    
    
    610
    
    
    
    Total recurring basis measured assets
    
    $
    286,920
    
    
    $
    313
    
    
    $
    273,278
    
    
    $
    13,329Derivative liabilities
    
    $
    1,459
    
    
    $
    
    
    
    $
    1,459
    
    
    $
    Total recurring basis measured liabilities
    
    $
    1,459
    
    
    $
    
    
    
    $
    1,459
    
    
    $
    
 Valuation Techniques  Recurring Basis
 Securities Available-for-Sale
 Trust Preferred Securities Mortgage-backed
Securities
 27




---



##### 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-Sale SecuritiesJune 30,2010
    
    
    2009(Dollars in thousands)Balance at January 1
    
    $
    13,329
    
    
    $
    18,497Transfer into level 3 category during the year
    
    
    
    
    
    
    6,181Total gains (losses) (realized and unrealized)Included in earnings  investment security loss
    
    
    (97
    )
    
    
    (11,626
    )Included in other comprehensive loss
    
    
    929
    
    
    
    (3,038
    )Other changes due to principal payments
    
    
    (939
    )
    
    
    (309
    )Balance at June 30
    
    $
    13,222
    
    
    $
    9,705Total 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
    
    $
    (97
    )
    
    $
    (11,626
    )
 28




---



##### Table of Contents



Assets Recorded at Fair Value on a Nonrecurring Basis
  Quoted PricesinActive Marketsfor
    
    Significant Other
    
    SignificantIdentical
    
    Observable
    
    UnobservableCarrying
    
    Assets
    
    Inputs
    
    InputsValue
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)(Dollars in thousands)June 30, 2010Mortgage loans held-for-sale
    
    $
    54,823
    
    
    $
    
    
    
    $
    54,823
    
    
    $
    Impaired loans, net of specific allowance
    
    
    204,957
    
    
    
    
    
    
    
    
    
    
    
    204,957Other foreclosed real estate
    
    
    45,184
    
    
    
    
    
    
    
    
    
    
    
    45,184Other real estate held-for-sale
    
    
    3,342
    
    
    
    
    
    
    
    
    
    
    
    3,342Total nonrecurring basis measured assets
    
    $
    308,306
    
    
    $
    
    
    
    $
    54,823
    
    
    $
    253,483December 31, 2009Mortgage loans held-for-sale
    
    $
    71,879
    
    
    $
    
    
    
    $
    71,879
    
    
    $
    Impaired loans, net of specific allowance
    
    
    155,545
    
    
    
    
    
    
    
    
    
    
    
    155,545Other foreclosed real estate
    
    
    41,618
    
    
    
    
    
    
    
    
    
    
    
    41,618Other real estate held-for-sale
    
    
    3,349
    
    
    
    
    
    
    
    
    
    
    
    3,349Total nonrecurring basis measured assets
    
    $
    272,391
    
    
    $
    
    
    
    $
    71,879
    
    
    $
    200,512
 Valuation Techniques  Nonrecurring Basis
 Mortgage Loans Held- for- Sale
  Impaired Loans
  29




---



##### Table of Contents



Other Foreclosed Real Estate
  Other Real Estate Held-for-Sale
   Tax Lien Certificates
  Net Loans
  Deposits
  Advances from FHLB Atlanta
  Federal Funds Borrowed and Security Repurchase Agreements
  Notes Payable
  30




---



##### Table of Contents



Subordinated debentures
  Limitations
   June 30, 2010
    
    December 31, 2009Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    Value(Dollars in thousands)Financial assets:Cash and due from banks
    
    $
    54,648
    
    
    $
    54,648
    
    
    $
    74,020
    
    
    $
    74,020Interest-bearing deposits in other banks
    
    
    245,182
    
    
    
    245,182
    
    
    
    23,714
    
    
    
    23,714Federal funds sold
    
    
    1,328
    
    
    
    1,328
    
    
    
    2,036
    
    
    
    2,036Securities available for sale
    
    
    269,943
    
    
    
    269,943
    
    
    
    286,310
    
    
    
    286,310Tax lien certificates
    
    
    18,820
    
    
    
    18,820
    
    
    
    19,292
    
    
    
    19,292Mortgage loans held for sale
    
    
    54,823
    
    
    
    54,823
    
    
    
    71,879
    
    
    
    71,879Net loans
    
    
    2,403,135
    
    
    
    2,418,129
    
    
    
    2,430,813
    
    
    
    2,440,026Stock in FHLB
    
    
    18,212
    
    
    
    18,212
    
    
    
    18,212
    
    
    
    18,212Accrued interest receivable
    
    
    50,792
    
    
    
    50,792
    
    
    
    50,142
    
    
    
    50,142Derivative assets
    
    
    1,637
    
    
    
    1,637
    
    
    
    610
    
    
    
    610Financial liabilities:Deposits
    
    
    2,838,521
    
    
    
    2,856,411
    
    
    
    2,656,573
    
    
    
    2,671,504Advances from FHLB
    
    
    216,324
    
    
    
    233,574
    
    
    
    218,322
    
    
    
    233,028Security repurchase agreements
    
    
    762
    
    
    
    762
    
    
    
    841
    
    
    
    841Note payable
    
    
    45,150
    
    
    
    46,765
    
    
    
    45,917
    
    
    
    45,917Subordinated debentures
    
    
    81,196
    
    
    
    58,956
    
    
    
    84,170
    
    
    
    51,609Derivative liabilities
    
    
    2,549
    
    
    
    2,549
    
    
    
    1,459
    
    
    
    1,459
 Note 13  Stockholders Equity
   31




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Basis of Presentation
   32




---



##### Table of Contents



Overview
 st
         33




---



##### Table of Contents



Liquidity and Capital
   Recent Accounting Pronouncements
  34




---



##### Table of Contents



Results of Operations
    For the
    
    For theThree Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2010
    
    2009
    
    2010
    
    2009(Dollars in thousands, except per share data)Net loss
    
    $
    (53,722
    )
    
    $
    (5,694
    )
    
    $
    (59,462
    )
    
    $
    (9,268
    )Net loss applicable to common shareholders
    
    
    (54,621
    )
    
    
    (6,861
    )
    
    
    (60,361
    )
    
    
    (11,578
    )Net loss per common share (diluted)
    
    
    (4.44
    )
    
    
    (0.68
    )
    
    
    (5.04
    )
    
    
    (1.15
    )Net interest margin
    
    
    3.02
    %
    
    
    3.22
    %
    
    
    3.10
    %
    
    
    3.17
    %Net interest spread
    
    
    2.89
    
    
    
    3.04
    
    
    
    2.97
    
    
    
    2.97Return on average assets
    
    
    (6.42
    )
    
    
    (0.72
    )
    
    
    (3.62
    )
    
    
    (0.60
    )Return on average stockholders equity
    
    
    (113.06
    )
    
    
    (9.28
    )
    
    
    (62.73
    )
    
    
    (7.51
    )Common book value per share
    
    $
    10.24
    
    
    $
    16.66
    
    
    $
    10.24
    
    
    $
    16.66
 35




---



##### Table of Contents



Three Months Ended June 30,2010
    
    
    2009Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in thousands)ASSETSInterest-earning assets:Loans, net of unearned income (1)
    
    $
    2,565,992
    
    
    $
    36,212
    
    
    
    5.66
    %
    
    $
    2,459,020
    
    
    $
    35,959
    
    
    
    5.87
    %Investment securitiesTaxable
    
    
    258,851
    
    
    
    2,625
    
    
    
    4.07
    
    
    
    280,655
    
    
    
    3,778
    
    
    
    5.40Tax-exempt (2)
    
    
    29,781
    
    
    
    476
    
    
    
    6.41
    
    
    
    41,510
    
    
    
    658
    
    
    
    6.36Total investment securities
    
    
    288,632
    
    
    
    3,101
    
    
    
    4.31
    
    
    
    322,165
    
    
    
    4,436
    
    
    
    5.52Federal funds sold
    
    
    2,690
    
    
    
    2
    
    
    
    0.30
    
    
    
    3,498
    
    
    
    2
    
    
    
    0.23Other investments
    
    
    181,794
    
    
    
    393
    
    
    
    0.87
    
    
    
    71,650
    
    
    
    456
    
    
    
    2.55Total interest-earning assets
    
    
    3,039,108
    
    
    
    39,708
    
    
    
    5.24
    
    
    
    2,856,333
    
    
    
    40,853
    
    
    
    5.74Noninterest-earning assets:Cash and due from banks
    
    
    69,357
    
    
    
    
    
    
    
    
    
    
    
    81,951Premises and equipment
    
    
    102,204
    
    
    
    
    
    
    
    
    
    
    
    105,519Accrued interest and other assets
    
    
    187,145
    
    
    
    
    
    
    
    
    
    
    
    160,060Allowance for loan losses
    
    
    (43,709
    )
    
    
    
    
    
    
    
    
    
    
    (29,889
    )Total assets
    
    $
    3,354,105
    
    
    
    
    
    
    
    
    
    
    $
    3,173,974LIABILITIES AND STOCKHOLDERS EQUITYInterest-bearing liabilities:Demand deposits
    
    $
    657,265
    
    
    $
    2,060
    
    
    
    1.26
    %
    
    $
    672,869
    
    
    $
    2,172
    
    
    
    1.29
    %Savings deposits
    
    
    344,485
    
    
    
    1,117
    
    
    
    1.30
    
    
    
    235,946
    
    
    
    904
    
    
    
    1.54Time deposits
    
    
    1,520,740
    
    
    
    8,275
    
    
    
    2.18
    
    
    
    1,402,255
    
    
    
    11,033
    
    
    
    3.16Other borrowings
    
    
    267,839
    
    
    
    2,542
    
    
    
    3.81
    
    
    
    292,474
    
    
    
    2,597
    
    
    
    3.56Subordinated debentures (2)
    
    
    84,487
    
    
    
    2,843
    
    
    
    13.50
    
    
    
    60,795
    
    
    
    1,206
    
    
    
    7.96Total interest-bearing liabilities
    
    
    2,874,816
    
    
    
    16,837
    
    
    
    2.35
    
    
    
    2,664,339
    
    
    
    17,912
    
    
    
    2.70Noninterest-bearing liabilities:Demand deposits
    
    
    269,095
    
    
    
    
    
    
    
    
    
    
    
    245,819Accrued interest and other liabilities
    
    
    19,600
    
    
    
    
    
    
    
    
    
    
    
    17,663Total liabilities
    
    
    3,163,511
    
    
    
    
    
    
    
    
    
    
    
    2,927,821Stockholders equity
    
    
    190,594
    
    
    
    
    
    
    
    
    
    
    
    246,153Total liabilities and stockholders equity
    
    $
    3,354,105
    
    
    
    
    
    
    
    
    
    
    $
    3,173,974Net interest income/net interest spread
    
    
    
    
    
    
    22,871
    
    
    
    2.89
    %
    
    
    
    
    
    
    22,941
    
    
    
    3.04
    %Net yield on earning assets
    
    
    
    
    
    
    
    
    
    
    3.02
    %
    
    
    
    
    
    
    
    
    
    
    3.22
    %Taxable equivalent adjustment (2):Investment securities
    
    
    
    
    
    
    (162
    )
    
    
    
    
    
    
    
    
    
    
    (224
    )Interest expense on subordinated debentures
    
    
    
    
    
    
    444
    
    
    
    
    
    
    
    
    
    
    
    Net interest income
    
    
    
    
    
    $
    23,153
    
    
    
    
    
    
    
    
    
    
    $
    22,717
 36




---



##### Table of Contents



Six Months Ended June 30,2010
    
    
    2009Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in thousands)ASSETSInterest-earning assets:Loans, net of unearned income (1)
    
    $
    2,552,351
    
    
    $
    72,554
    
    
    
    5.73
    %
    
    $
    2,425,767
    
    
    $
    70,911
    
    
    
    5.89
    %Investment securitiesTaxable
    
    
    256,332
    
    
    
    5,536
    
    
    
    4.36
    
    
    
    291,255
    
    
    
    7,787
    
    
    
    5.39Tax-exempt (2)
    
    
    30,023
    
    
    
    948
    
    
    
    6.37
    
    
    
    40,898
    
    
    
    1,307
    
    
    
    6.44Total investment securities
    
    
    286,355
    
    
    
    6,484
    
    
    
    4.57
    
    
    
    332,153
    
    
    
    9,094
    
    
    
    5.52Federal funds sold
    
    
    2,452
    
    
    
    3
    
    
    
    0.25
    
    
    
    5,359
    
    
    
    7
    
    
    
    0.26Other investments
    
    
    155,115
    
    
    
    765
    
    
    
    0.99
    
    
    
    64,739
    
    
    
    818
    
    
    
    2.55Total interest-earning assets
    
    
    2,996,273
    
    
    
    79,806
    
    
    
    5.37
    
    
    
    2,828,018
    
    
    
    80,830
    
    
    
    5.76Noninterest-earning assets:Cash and due from banks
    
    
    71,594
    
    
    
    
    
    
    
    
    
    
    
    76,104Premises and equipment
    
    
    102,555
    
    
    
    
    
    
    
    
    
    
    
    105,300Accrued interest and other assets
    
    
    185,932
    
    
    
    
    
    
    
    
    
    
    
    156,807Allowance for loan losses
    
    
    (42,764
    )
    
    
    
    
    
    
    
    
    
    
    (29,508
    )Total assets
    
    $
    3,313,590
    
    
    
    
    
    
    
    
    
    
    $
    3,136,721LIABILITIES AND STOCKHOLDERS EQUITYInterest-bearing liabilities:Demand deposits
    
    $
    661,245
    
    
    $
    4,114
    
    
    
    1.25
    %
    
    $
    657,286
    
    
    $
    4,366
    
    
    
    1.34
    %Savings deposits
    
    
    321,148
    
    
    
    2,090
    
    
    
    1.31
    
    
    
    217,655
    
    
    
    1,825
    
    
    
    1.69Time deposits
    
    
    1,501,486
    
    
    
    16,773
    
    
    
    2.25
    
    
    
    1,380,972
    
    
    
    22,811
    
    
    
    3.33Other borrowings
    
    
    268,403
    
    
    
    5,064
    
    
    
    3.80
    
    
    
    312,812
    
    
    
    4,938
    
    
    
    3.18Subordinated
debentures (2)
    
    
    84,372
    
    
    
    5,674
    
    
    
    13.56
    
    
    
    60,823
    
    
    
    2,400
    
    
    
    7.96Total interest-bearing liabilities
    
    $
    2,836,654
    
    
    
    33,715
    
    
    
    2.40
    
    
    $
    2,629,548
    
    
    
    36,340
    
    
    
    2.79Noninterest-bearing liabilities:Demand deposits
    
    
    265,636
    
    
    
    
    
    
    
    
    
    
    
    238,722Accrued interest and other liabilities
    
    
    20,158
    
    
    
    
    
    
    
    
    
    
    
    19,594Total liabilities
    
    
    3,122,448
    
    
    
    
    
    
    
    
    
    
    
    2,887,864Stockholders equity
    
    
    191,142
    
    
    
    
    
    
    
    
    
    
    
    248,857Total liabilities and stockholders equity
    
    $
    3,313,590
    
    
    
    
    
    
    
    
    
    
    $
    3,136,721Net interest income/net interest spread
    
    
    
    
    
    
    46,091
    
    
    
    2.97
    %
    
    
    
    
    
    
    44,490
    
    
    
    2.97
    %Net yield on earning assets
    
    
    
    
    
    
    
    
    
    
    3.10
    %
    
    
    
    
    
    
    
    
    
    
    3.17
    %Taxable equivalent adjustment: (2)Investment securities
    
    
    
    
    
    
    (322
    )
    
    
    
    
    
    
    
    
    
    
    (444
    )Interest expense on subordinated debentures
    
    
    
    
    
    
    889
    
    
    
    
    
    
    
    
    
    
    
    Net interest income
    
    
    
    
    
    $
    46,658
    
    
    
    
    
    
    
    
    
    
    $
    44,046
 
 (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/expense and yields are presented on a fully taxable equivalent basis using a
tax rate of 34%. 37




---



##### Table of Contents



Increase (Decrease) inThree Months Ended June 30,
    
    
    Six Months Ended June 30,2010 vs. 2009
    
    
    2010 vs. 2009Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in thousands)ASSETSInterest-earning assets:Loans, net of unearned income
    
    $
    106,972
    
    
    $
    253
    
    
    
    (0.21
    )%
    
    $
    126,584
    
    
    $
    1,643
    
    
    
    (0.16
    )%Investment securitiesTaxable
    
    
    (21,804
    )
    
    
    (1,153
    )
    
    
    (1.33
    )
    
    
    (34,923
    )
    
    
    (2,251
    )
    
    
    (1.03
    )Tax-exempt
    
    
    (11,729
    )
    
    
    (182
    )
    
    
    0.05
    
    
    
    (10,875
    )
    
    
    (359
    )
    
    
    (0.07
    )Total investment securities
    
    
    (33,533
    )
    
    
    (1,335
    )
    
    
    (1.21
    )
    
    
    (45,798
    )
    
    
    (2,610
    )
    
    
    (0.95
    )Federal funds sold
    
    
    (808
    )
    
    
    
    
    
    
    0.07
    
    
    
    (2,907
    )
    
    
    (4
    )
    
    
    (0.01
    )Other investments
    
    
    110,144
    
    
    
    (63
    )
    
    
    (1.68
    )
    
    
    90,376
    
    
    
    (53
    )
    
    
    (1.56
    )Total interest-earning assets
    
    $
    182,775
    
    
    
    (1,145
    )
    
    
    (0.50
    )
    
    $
    168,255
    
    
    
    (1,024
    )
    
    
    (0.39
    )Interest-bearing liabilities:Demand deposits
    
    $
    (15,604
    )
    
    $
    (112
    )
    
    
    (0.03
    )%
    
    $
    3,959
    
    
    $
    (252
    )
    
    
    (0.09
    )%Savings deposits
    
    
    108,539
    
    
    
    213
    
    
    
    (0.24
    )
    
    
    103,493
    
    
    
    265
    
    
    
    (0.38
    )Time deposits
    
    
    118,485
    
    
    
    (2,758
    )
    
    
    (0.98
    )
    
    
    120,514
    
    
    
    (6,038
    )
    
    
    (1.08
    )Other borrowings
    
    
    (24,635
    )
    
    
    (55
    )
    
    
    0.25
    
    
    
    (44,409
    )
    
    
    126
    
    
    
    0.62Subordinated debentures
    
    
    23,692
    
    
    
    1,637
    
    
    
    5.54
    
    
    
    23,549
    
    
    
    3,274
    
    
    
    5.60Total interest-bearing liabilities
    
    $
    210,477
    
    
    
    (1,075
    )
    
    
    (0.35
    )
    
    $
    207,106
    
    
    
    (2,625
    )
    
    
    (0.39
    )Net interest income/net interest spread
    
    
    
    
    
    
    (70
    )
    
    
    (0.15
    )%
    
    
    
    
    
    
    1,601
    
    
    
    
    %Net yield on earning assets
    
    
    
    
    
    
    
    
    
    
    (0.20
    )%
    
    
    
    
    
    
    
    
    
    
    (0.07
    )%Taxable equivalent adjustment:Investment securities
    
    
    
    
    
    
    62
    
    
    
    
    
    
    
    
    
    
    
    122Interest expense on subordinated
debentures
    
    
    
    
    
    
    444
    
    
    
    
    
    
    
    
    
    
    
    889Net interest income
    
    
    
    
    
    $
    436
    
    
    
    
    
    
    
    
    
    
    $
    2,612
 38




---



##### Table of Contents



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010 vs. 2009 (1)
    
    
    2010 vs. 2009 (1)Increase
    
    
    Changes Due To
    
    
    Increase
    
    
    Changes Due To(Decrease)
    
    
    Rate
    
    
    Volume
    
    
    (Decrease)
    
    
    Rate
    
    
    Volume(Dollars in thousands)
    
    
    (Dollars in thousands)Increase (decrease) in:Income from interest-earning
assets:Interest and fees on loans
    
    $
    253
    
    
    $
    (1,299
    )
    
    $
    1,552
    
    
    $
    1,643
    
    
    $
    (1,969
    )
    
    $
    3,612Interest on securities:Taxable
    
    
    (1,153
    )
    
    
    (877
    )
    
    
    (276
    )
    
    
    (2,251
    )
    
    
    (1,383
    )
    
    
    (868
    )Tax-exempt
    
    
    (182
    )
    
    
    5
    
    
    
    (187
    )
    
    
    (359
    )
    
    
    (14
    )
    
    
    (345
    )Interest on federal funds
    
    
    
    
    
    
    1
    
    
    
    (1
    )
    
    
    (4
    )
    
    
    
    
    
    
    (4
    )Interest on other investments
    
    
    (63
    )
    
    
    (439
    )
    
    
    376
    
    
    
    (53
    )
    
    
    (713
    )
    
    
    660Total interest income
    
    
    (1,145
    )
    
    
    (2,609
    )
    
    
    1,464
    
    
    
    (1,024
    )
    
    
    (4,079
    )
    
    
    3,055Expense from interest-bearing
liabilities:Interest on demand deposits
    
    
    (112
    )
    
    
    (56
    )
    
    
    (56
    )
    
    
    (252
    )
    
    
    (280
    )
    
    
    28Interest on savings deposits
    
    
    213
    
    
    
    (157
    )
    
    
    370
    
    
    
    265
    
    
    
    (472
    )
    
    
    737Interest on time deposits
    
    
    (2,758
    )
    
    
    (3,635
    )
    
    
    877
    
    
    
    (6,038
    )
    
    
    (7,894
    )
    
    
    1,856Interest on other borrowings
    
    
    (55
    )
    
    
    174
    
    
    
    (229
    )
    
    
    126
    
    
    
    883
    
    
    
    (757
    )Interest on subordinated
debentures
    
    
    1,637
    
    
    
    1,049
    
    
    
    588
    
    
    
    3,274
    
    
    
    2,112
    
    
    
    1,162Total interest expense
    
    
    (1,075
    )
    
    
    (2,625
    )
    
    
    1,550
    
    
    
    (2,625
    )
    
    
    (5,651
    )
    
    
    3,026Net interest income
    
    $
    (70
    )
    
    $
    16
    
    
    $
    (86
    )
    
    $
    1,601
    
    
    $
    1,572
    
    
    $
    29
 
 (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. 39




---



##### Table of Contents



Noninterest income
  Three Months Ended June 30,2010
    
    
    2009
    
    
    % Change(Dollars in thousands)Service charges and fees on deposits
    
    $
    2,335
    
    
    $
    2,524
    
    
    
    (7.49
    )%Mortgage banking income
    
    
    2,667
    
    
    
    2,271
    
    
    
    17.44Investment securities gains (losses)
    
    
    1,356
    
    
    
    (5,781
    )
    
    
    NCMChange in fair value of derivatives
    
    
    (239
    )
    
    
    (67
    )
    
    
    NCMIncrease in cash surrender value of life insurance
    
    
    558
    
    
    
    540
    
    
    
    3.33Gain on exchange of subordinated debt for common stock
    
    
    507
    
    
    
    
    
    
    
    NCMOther noninterest income
    
    
    1,344
    
    
    
    1,340
    
    
    
    0.30Total
    
    $
    8,528
    
    
    $
    827
    
    
    
    NCM
    %
 Six Months Ended June 30,2010
    
    
    2009
    
    
    % Change(Dollars in thousands)Service charges and fees on deposits
    
    $
    4,551
    
    
    $
    4,911
    
    
    
    (7.33
    )%Mortgage banking income
    
    
    4,677
    
    
    
    3,961
    
    
    
    18.08Investment securities gains (losses)
    
    
    1,158
    
    
    
    (11,626
    )
    
    
    NCMChange in fair value of derivatives
    
    
    (29
    )
    
    
    (266
    )
    
    
    NCMIncrease in cash surrender value of life insurance
    
    
    1,126
    
    
    
    1,055
    
    
    
    6.73Gain on exchange of subordinated debt for common stock
    
    
    507
    
    
    
    
    
    
    
    NCMOther noninterest income
    
    
    2,750
    
    
    
    2,557
    
    
    
    7.55Total
    
    $
    14,740
    
    
    $
    592
    
    
    
    NCM
    %
 
 NCM  not considered meaningful. 40




---



##### Table of Contents



Noninterest expenses
  Three Months Ended June 30,%2010
    
    
    2009
    
    
    Change(Dollars in thousands)Noninterest ExpensesSalaries and employee benefits
    
    $
    13,840
    
    
    $
    12,304
    
    
    
    12.48
    %Occupancy, furniture and equipment expense
    
    
    4,850
    
    
    
    4,503
    
    
    
    7.71Amortization of core deposit intangibles
    
    
    869
    
    
    
    985
    
    
    
    (11.78
    )FDIC assessments
    
    
    1,853
    
    
    
    1,932
    
    
    
    (4.09
    )Foreclosure losses
    
    
    3,358
    
    
    
    1,748
    
    
    
    92.11Professional fees
    
    
    1,438
    
    
    
    1,027
    
    
    
    40.02Insurance expense
    
    
    789
    
    
    
    612
    
    
    
    28.92Postage, stationery and supplies
    
    
    743
    
    
    
    760
    
    
    
    (2.24
    )Communications expense
    
    
    780
    
    
    
    760
    
    
    
    2.63Advertising expense
    
    
    625
    
    
    
    787
    
    
    
    (20.58
    )Other operating expense
    
    
    2,388
    
    
    
    2,377
    
    
    
    0.46Total
    
    $
    31,533
    
    
    $
    27,795
    
    
    
    13.45
    %
 Six Months Ended June 30,%2010
    
    
    2009
    
    
    Change(Dollars in thousands)Noninterest ExpensesSalaries and employee benefits
    
    $
    28,040
    
    
    $
    24,613
    
    
    
    13.92
    %Occupancy, furniture and equipment expense
    
    
    9,613
    
    
    
    8,919
    
    
    
    7.78Amortization of core deposit intangibles
    
    
    1,739
    
    
    
    1,971
    
    
    
    (11.77
    )FDIC assessment
    
    
    3,233
    
    
    
    2,389
    
    
    
    35.33Foreclosure losses
    
    
    5,935
    
    
    
    2,317
    
    
    
    156.15Professional fees
    
    
    2,818
    
    
    
    1,792
    
    
    
    57.25Insurance expense
    
    
    1,527
    
    
    
    1,221
    
    
    
    25.06Postage, stationery and supplies
    
    
    1,464
    
    
    
    1,487
    
    
    
    (1.55
    )Communications expense
    
    
    1,435
    
    
    
    1,563
    
    
    
    (8.19
    )Advertising expense
    
    
    1,296
    
    
    
    1,337
    
    
    
    (3.07
    )Other operating expense
    
    
    4,242
    
    
    
    4,250
    
    
    
    (0.19
    )Total
    
    $
    61,342
    
    
    $
    51,859
    
    
    
    18.29
    %
 41




---



##### Table of Contents



Income tax
     Provision for Loan Losses and Loan Charge-offs
  42




---



##### Table of Contents



For The Three Months EndedJune 30,
    
    
    March 31,
    
    
    June 30,
    
    
    December 31,2010
    
    
    2010
    
    
    2009
    
    
    2009(Dollars in thousands)Beginning allowance for loan losses
    
    $
    43,190
    
    
    $
    41,884
    
    
    $
    29,870
    
    
    $
    34,336Provision for loan losses
    
    
    50,363
    
    
    
    9,127
    
    
    
    5,982
    
    
    
    13,947Total charge-offs
    
    
    14,633
    
    
    
    8,087
    
    
    
    2,513
    
    
    
    6,793Total recoveries
    
    
    (505
    )
    
    
    (266
    )
    
    
    (165
    )
    
    
    (394
    )Net charge-offs
    
    
    14,128
    
    
    
    7,821
    
    
    
    2,348
    
    
    
    6,399Ending allowance for loan losses
    
    $
    79,425
    
    
    $
    43,190
    
    
    $
    33,504
    
    
    $
    41,884Total loans, net of unearned income
    
    $
    2,482,560
    
    
    $
    2,505,465
    
    
    $
    2,398,471
    
    
    $
    2,472,697Allowance for loan losses to total
loans, net of unearned income
    
    
    3.20
    %
    
    
    1.72
    %
    
    
    1.40
    %
    
    
    1.69
    %
 For The Six Months Ended
    
    
    Year EndedJune 30,
    
    
    June 30,
    
    
    December 31,2010
    
    
    2009
    
    
    2009(Dollars in thousands)Beginning allowance for loan losses
    
    $
    41,884
    
    
    $
    28,850
    
    
    $
    28,850Provision for loan losses
    
    
    59,490
    
    
    
    9,434
    
    
    
    28,550Total charge-offs
    
    
    22,720
    
    
    
    5,322
    
    
    
    16,661Total recoveries
    
    
    (771
    )
    
    
    (542
    )
    
    
    (1,145
    )Net charge-offs
    
    
    21,949
    
    
    
    4,780
    
    
    
    15,516Ending allowance for loan losses
    
    $
    79,425
    
    
    $
    33,504
    
    
    $
    41,884
  Results of Segment Operations
  For the
    
    
    For theThree Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Dollars in thousands)Alabama region
    
    $
    484
    
    
    $
    600
    
    
    $
    2,882
    
    
    $
    807Florida region
    
    
    (6,820
    )
    
    
    2,592
    
    
    
    (9,815
    )
    
    
    4,964Administrative and other
    
    
    (43,879
    )
    
    
    (13,425
    )
    
    
    (52,501
    )
    
    
    (22,426
    )Income tax expense (benefit)
    
    
    3,507
    
    
    
    (4,539
    )
    
    
    28
    
    
    
    (7,387
    )Consolidated net loss
    
    $
    (53,722
    )
    
    $
    (5,694
    )
    
    $
    (59,462
    )
    
    $
    (9,268
    )
 43




---



##### Table of Contents



Alabama Region
      Florida Region
      44




---



##### Table of Contents



Fair Value Measurements
    Financial Condition
  Short-term liquid assets
  45




---



##### Table of Contents



Investment Securities
   Investment Portfolio
  Available-for-SaleJune 30,
    
    
    December 31,
    
    
    Percent2010
    
    
    2009
    
    
    Change(Dollars in thousands)Investment securities available-for-sale:U.S. agency securities
    
    $
    18,619
    
    
    $
    53,681
    
    
    
    (65.3
    )%Mortgage-backed securities:U.S. Agency pass-through
    
    
    112,422
    
    
    
    163,724
    
    
    
    (31.3
    )U.S. Agency collateralized mortgage obligation (CMO)
    
    
    84,454
    
    
    
    12,759
    
    
    NCMPrivate-label CMO
    
    
    14,656
    
    
    
    16,191
    
    
    
    (9.5
    )Total MBS
    
    
    211,532
    
    
    
    192,674
    
    
    
    9.8State, county and municipal securities
    
    
    30,661
    
    
    
    31,462
    
    
    
    (2.5
    )Corporate obligations:Corporate debt
    
    
    4,000
    
    
    
    4,000
    
    
    
    Pooled trust preferred securities
    
    
    3,263
    
    
    
    3,203
    
    
    
    1.9Single issue trust preferred securities
    
    
    1,755
    
    
    
    977
    
    
    
    79.6Total corporate obligations
    
    
    9,018
    
    
    
    8,180
    
    
    
    10.2Equity securities
    
    
    113
    
    
    
    313
    
    
    
    (63.9
    )Total investment securities available-for-sale
    
    $
    269,943
    
    
    $
    286,310
    
    
    
    (5.7
    )%
 46




---



##### Table of Contents



Less than 12 Months
    
    More than 12 Months
    
    TotalFair
    
    Unrealized
    
    Fair
    
    Unrealized
    
    Fair
    
    UnrealizedValue
    
    Losses (1)
    
    Value
    
    Losses (1)
    
    Value
    
    Losses (1)(Dollars in thousands)Temporarily ImpairedMortgage-backed securities:U.S. Agency pass-through
    
    $
    23
    
    
    $
    
    
    
    $
    240
    
    
    $
    7
    
    
    $
    263
    
    
    $
    7Private-label CMO
    
    
    
    
    
    
    
    
    
    
    6,338
    
    
    
    1,096
    
    
    
    6,338
    
    
    
    1,096Total MBS
    
    
    23
    
    
    
    
    
    
    
    6,578
    
    
    
    1,103
    
    
    
    6,601
    
    
    
    1,103State, county and municipal securities
    
    
    5,585
    
    
    
    116
    
    
    
    1,602
    
    
    
    146
    
    
    
    7,187
    
    
    
    262Corporate obligations:Corporate debt
    
    
    
    
    
    
    
    
    
    
    4,000
    
    
    
    101
    
    
    
    4,000
    
    
    
    101Single issue trust preferred securities
    
    
    
    
    
    
    
    
    
    
    1,755
    
    
    
    3,245
    
    
    
    1,755
    
    
    
    3,245Total corporate obligations
    
    
    
    
    
    
    
    
    
    
    5,755
    
    
    
    3,346
    
    
    
    5,755
    
    
    
    3,346Total temporarily impaired securities
    
    
    5,608
    
    
    
    116
    
    
    
    13,935
    
    
    
    4,595
    
    
    
    19,543
    
    
    
    4,711Other-than-temporarily ImpairedMortgage-backed securities:Private-label CMO
    
    
    
    
    
    
    
    
    
    
    3,021
    
    
    
    1,620
    
    
    
    3,021
    
    
    
    1,620Corporate obligations:Pooled trust preferred securities
    
    
    
    
    
    
    
    
    
    
    3,263
    
    
    
    5,025
    
    
    
    3,263
    
    
    
    5,025Total OTTI securities
    
    
    
    
    
    
    
    
    
    
    6,284
    
    
    
    6,645
    
    
    
    6,284
    
    
    
    6,645Total temporarily and
other-than-temporarily impaired
    
    $
    5,608
    
    
    $
    116
    
    
    $
    20,219
    
    
    $
    11,240
    
    
    $
    25,827
    
    
    $
    11,356
 
 (1)
    
    Unrealized losses are included in other comprehensive income (loss), net of unrealized gains
and applicable income taxes. Other-Than-Temporary-Impairment
     47




---



##### Table of Contents



Mortgage-backed securities
  Credit Support
    
    
    NetRating
    
    
    
    
    
    Coverage
    
    
    UnrealizedMoody/Fitch
    
    Count
    
    
    Ratios (1)
    
    
    (Loss) GainA1/NR
    
    
    1
    
    
    
    3.06
    
    
    $
    (152
    )Aaa/NR
    
    
    1
    
    
    
    4.25
    
    
    
    NR/AAA
    
    
    1
    
    
    
    3.05
    
    
    
    110NR/AA
    
    
    1
    
    
    
    3.12
    
    
    
    (240
    )B2/AA
    
    
    1
    
    
    
    N/A
    
    
    
    (548
    )B2/NR
    
    
    1
    
    
    
    4.02
    
    
    
    (92
    )NR/BBB
    
    
    1
    
    
    
    2.39
    
    
    
    (64
    )Caa2/CCC (2)
    
    
    1
    
    
    
    0.91
    
    
    
    (1,620
    )NR/C (2)
    
    
    2
    
    
    
    0.00-0.30
    
    
    
    186Total
    
    
    10
    
    
    
    
    
    
    $
    (2,420
    )
 
 (1)
    
    The Credit Support Coverage Ratio 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.  Discount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Year-to-DateMargin
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Actual
    
    
    OTTIPrice
    
    
    Basis
    
    
    
    
    
    
    Cumulative
    
    
    Average
    
    
    60+ Days
    
    
    CreditSecurity
    
    (%)
    
    
    Points
    
    
    Yield
    
    
    Default
    
    
    Security
    
    
    Delinquent
    
    
    Portion
    
    
    Other
    
    
    TotalCMO 1
    
    
    19.13
    
    
    
    1684
    
    
    
    18%
    
    
    
    51.87%
    
    
    
    50%
    
    
    
    7.52%
    
    
    $
    
    
    
    $
    
    
    
    $
    CMO 2
    
    
    19.27
    
    
    
    1586
    
    
    
    17%
    
    
    
    48.73%
    
    
    
    45%
    
    
    
    27.89%
    
    
    
    
    
    
    
    
    
    
    
    CMO 4
    
    
    60.41
    
    
    
    1472
    
    
    
    17%
    
    
    
    29.03%
    
    
    
    45%
    
    
    
    16.48%
    
    
    
    (21
    )
    
    
    (2
    )
    
    
    (23
    )$
    (21
    )
    
    $
    (2
    )
    
    $
    (23
    )
 48




---



##### Table of Contents



State, county and municipal securities
   Trust preferred securities
  
    
    Detailed credit and structural evaluation for each piece of collateral in the CDO;
 
    
    Collateral performance projections for each piece of collateral in the CDO (default,
recovery and prepayment/amortization probabilities);
 
    
    Terms of the CDO structure, as laid out in the indenture;
 
    
    The cash flow waterfall (for both interest and principal);
 
    
    Overcollateralization and interest coverage tests;
 
    
    Events of default/liquidation;
 
    
    Mandatory auction call;
 
    
    Optional redemption;
 
    
    Hedge agreements; and
 
    
    Discounted cash flow modeling.
    49




---



##### Table of Contents



Year-to-DateOther-than-temporary-impairmentSingle/
    
    Class/
    
    Amortized
    
    
    Fair
    
    
    Unrealized
    
    
    CreditName
    
    Pooled
    
    Tranche
    
    Cost
    
    
    Value
    
    
    Loss
    
    
    Portion
    
    
    Other
    
    
    TotalMM Caps Funding I Ltd
    
    Pooled
    
    MEZ
    
    $
    2,083
    
    
    $
    984
    
    
    $
    (1,099
    )
    
    $
    
    
    
    $
    
    
    
    $
    MM Community Funding Ltd
    
    Pooled
    
    B
    
    
    2,026
    
    
    
    720
    
    
    
    (1,306
    )
    
    
    (20
    )
    
    
    (117
    )
    
    
    (137
    )Preferred Term Securities V
    
    Pooled
    
    MEZ
    
    
    1,189
    
    
    
    434
    
    
    
    (755
    )
    
    
    (24
    )
    
    
    
    
    
    
    (24
    )Tpref Funding III Ltd
    
    Pooled
    
    B-2
    
    
    2,990
    
    
    
    1,125
    
    
    
    (1,865
    )
    
    
    (32
    )
    
    
    (64
    )
    
    
    (96
    )Emigrant Capital Trust (1)
    
    Single
    
    Sole
    
    
    5,000
    
    
    
    1,755
    
    
    
    (3,245
    )
    
    
    
    
    
    
    
    
    
    
    $
    13,288
    
    
    $
    5,018
    
    
    $
    (8,270
    )
    
    $
    (76
    )
    
    $
    (181
    )
    
    $
    (257
    )
 Original Collateral -
    
    Performing Collateral -Percent of Actual
    
    Percent of ExpectedLowest
    
    Performing
    
    Deferrals and
    
    Deferrals and
    
    ExcessName
    
    Rating
    
    Banks
    
    Defaults
    
    Defaults
    
    Subordination (2)MM Caps Funding I Ltd
    
    Ca
    
    21
    
    
    21
    %
    
    
    19
    %
    
    
    0
    %MM Community Funding Ltd
    
    Ca
    
    8
    
    
    21
    %
    
    
    43
    %
    
    
    0
    %Preferred Term Securities V
    
    Ba3
    
    2
    
    
    4
    %
    
    
    26
    %
    
    
    0
    %Tpref Funding III Ltd
    
    Ca
    
    22
    
    
    28
    %
    
    
    25
    %
    
    
    0
    %Emigrant Capital Trust (1)
    
    NR
    
    NA
    
    NA
    
    NA
    
    NA
 Fair Value
    
    Discount Margin
    
    YieldName
    
    (Price to Par)
    
    (Basis Points)
    
    (Basis Points)MM Caps Funding I Ltd
    
    $
    44.85
    
    
    Swap + 1700
    
    9.48% FixedMM Community Funding Ltd
    
    
    14.40
    
    
    LIBOR + 1500
    
    LIBOR + 310Preferred Term Securities V
    
    
    31.52
    
    
    LIBOR + 1400
    
    LIBOR + 210Tpref Funding III Ltd
    
    
    28.14
    
    
    LIBOR + 1200
    
    LIBOR + 190Emigrant Capital Trust (1)
    
    
    35.10
    
    
    LIBOR + 1312
    
    LIBOR + 200
 
 (1)
    
    There has been no notification of deferral or default on this issue. An analysis of the
company, including discussion with its management, indicates there is adequate capital and
liquidity to service the debt. The discount margin of 1312 basis points was derived from
implied credit spreads from certain publicly traded trust preferred securities within the
issuers peer group. 50




---



##### Table of Contents



(2)
    
    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.     For the Three
    
    
    For the SixMonths Ended
    
    
    Months EndedJune 30, 2010
    
    
    June 30, 2010(Dollars in thousands)Balance at beginning of period
    
    $
    8,886
    
    
    $
    8,869Amounts related to credit losses for which an OTTI was not previously recognized
    
    
    450
    
    
    
    604Increases 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
    
    
    51
    
    
    
    97Reductions for securities where there is an intent to sell or requirement to sell
    
    
    
    
    
    
    (154
    )Reductions for increases in cash flows expected to be collected
    
    
    (13
    )
    
    
    (42
    )Balance at end of period
    
    $
    9,374
    
    
    $
    9,374
  Stock in the Federal Home Loan Bank of Atlanta (FHLB Atlanta)
   
    
    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;
 51




---



##### Table of Contents




    
    the impact of legislative and regulatory changes on financial institutions and,
accordingly, on the customer base of FHLB Atlanta; and
 
    
    the liquidity position of FHLB Atlanta.
  Loans
 Composition of Loan Portfolio, Yield Changes and Diversification
   Distribution of Loans by Category
 June 30, 2010
    
    
    December 31, 2009Percent of
    
    
    
    
    
    
    Percent ofAmount
    
    
    Total
    
    
    Amount
    
    
    Total(Dollars in thousands)Commercial and industrial
    
    $
    186,954
    
    
    
    7.52
    %
    
    $
    213,329
    
    
    
    8.62
    %Real estate  construction and land development
    
    
    680,364
    
    
    
    27.37
    
    
    
    680,445
    
    
    
    27.48Real estate  mortgagesSingle-family
    
    
    701,220
    
    
    
    28.21
    
    
    
    691,364
    
    
    
    27.93Commercial
    
    
    829,081
    
    
    
    33.35
    
    
    
    801,813
    
    
    
    32.39Other
    
    
    31,201
    
    
    
    1.26
    
    
    
    28,885
    
    
    
    1.17Consumer
    
    
    56,139
    
    
    
    2.26
    
    
    
    58,785
    
    
    
    2.37Other
    
    
    844
    
    
    
    0.03
    
    
    
    969
    
    
    
    0.04Total loans
    
    
    2,485,803
    
    
    
    100.00
    %
    
    
    2,475,590
    
    
    
    100.00
    %Unearned income
    
    
    (3,243
    )
    
    
    
    
    
    
    (2,893
    )Allowance for loan losses
    
    
    (79,425
    )
    
    
    
    
    
    
    (41,884
    )Net loans
    
    $
    2,403,135
    
    
    
    
    
    
    $
    2,430,813
 52




---



##### Table of Contents



June 30,
    
    December 31,
    
    Percent2010
    
    2009
    
    Change(Dollars in thousands)Total loans, net of unearned income
    
    $
    2,482,560
    
    
    $
    2,472,697
    
    
    
    0.4
    %Alabama segment
    
    
    991,418
    
    
    
    996,545
    
    
    
    (0.5
    )Florida segment
    
    
    1,219,000
    
    
    
    1,213,202
    
    
    
    0.5Other
    
    
    272,142
    
    
    
    262,950
    
    
    
    3.5
  Residential
    
    
    CommercialDevelopment
    
    
    Development
    
    
    Total(Dollars in thousands)Real estate  construction and land developmentAs of June 30, 2010Alabama segment
    
    $
    158,204
    
    
    $
    87,429
    
    
    $
    245,633Florida segment
    
    
    121,115
    
    
    
    281,317
    
    
    
    402,432Other
    
    
    9,532
    
    
    
    22,767
    
    
    
    32,299Total
    
    $
    288,851
    
    
    $
    391,513
    
    
    $
    680,364As of December 31, 2009Alabama segment
    
    $
    163,978
    
    
    $
    102,339
    
    
    $
    266,317Florida segment
    
    
    129,590
    
    
    
    265,767
    
    
    
    395,357Other
    
    
    7,856
    
    
    
    10,915
    
    
    
    18,771Total
    
    $
    301,424
    
    
    $
    379,021
    
    
    $
    680,445
 Single-family
    
    
    Commercial(Dollars in thousands)Real estate  mortgagesAs of June 30, 2010Alabama segment
    
    $
    419,831
    
    
    $
    314,347Florida segment
    
    
    226,759
    
    
    
    470,047Other
    
    
    54,630
    
    
    
    44,687Total
    
    $
    701,220
    
    
    $
    829,081As of December 31, 2009Alabama segment
    
    $
    461,365
    
    
    $
    296,520Florida segment
    
    
    189,245
    
    
    
    475,218Other
    
    
    40,754
    
    
    
    30,075Total
    
    $
    691,364
    
    
    $
    801,813
 Allowance for Loan Losses
 Overview
  53




---



##### Table of Contents



ASC 450-20
  
    
    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.
 ASC 310-35
 Impaired Loans
 54




---



##### Table of Contents



Summary of Loan Loss Experience
 Three Months Ended
    
    
    Six Months Ended
    
    
    Year EndedJune 30,
    
    
    June 30,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2009(Dollars in thousands)Allowance for loan losses at beginning of period
    
    $
    43,190
    
    
    $
    29,870
    
    
    $
    41,884
    
    
    $
    28,850
    
    
    $
    28,850Charge-offs:Commercial and industrial
    
    
    2,880
    
    
    
    141
    
    
    
    2,935
    
    
    
    197
    
    
    
    1,390Real estate  construction and land development
    
    
    7,503
    
    
    
    131
    
    
    
    13,095
    
    
    
    1,055
    
    
    
    4,870Real estate  mortgageSingle-family
    
    
    2,751
    
    
    
    821
    
    
    
    3,803
    
    
    
    1,368
    
    
    
    5,372Commercial
    
    
    712
    
    
    
    508
    
    
    
    1,254
    
    
    
    848
    
    
    
    1,094Other
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    186
    
    
    
    210Consumer
    
    
    736
    
    
    
    707
    
    
    
    1,440
    
    
    
    1,402
    
    
    
    3,346Other
    
    
    51
    
    
    
    198
    
    
    
    193
    
    
    
    266
    
    
    
    379Total charge-offs
    
    
    14,633
    
    
    
    2,513
    
    
    
    22,720
    
    
    
    5,322
    
    
    
    16,661Recoveries:Commercial and industrial
    
    
    27
    
    
    
    41
    
    
    
    59
    
    
    
    108
    
    
    
    161Real estate  construction and land development
    
    
    4
    
    
    
    6
    
    
    
    20
    
    
    
    26
    
    
    
    68Real estate  mortgageSingle-family
    
    
    36
    
    
    
    21
    
    
    
    91
    
    
    
    32
    
    
    
    71Commercial
    
    
    311
    
    
    
    2
    
    
    
    335
    
    
    
    5
    
    
    
    277Other
    
    
    14
    
    
    
    19
    
    
    
    61
    
    
    
    217
    
    
    
    251Consumer
    
    
    64
    
    
    
    41
    
    
    
    134
    
    
    
    83
    
    
    
    186Other
    
    
    49
    
    
    
    35
    
    
    
    71
    
    
    
    71
    
    
    
    131Total recoveries
    
    
    505
    
    
    
    165
    
    
    
    771
    
    
    
    542
    
    
    
    1,145Net charge-offs
    
    
    14,128
    
    
    
    2,348
    
    
    
    21,949
    
    
    
    4,780
    
    
    
    15,516Provision for loan losses
    
    
    50,363
    
    
    
    5,982
    
    
    
    59,490
    
    
    
    9,434
    
    
    
    28,550Allowance for loan losses at end of period
    
    $
    79,425
    
    
    $
    33,504
    
    
    $
    79,425
    
    
    $
    33,504
    
    
    $
    41,884Loans at end of period, net of unearned income
    
    $
    2,482,560
    
    
    $
    2,398,471
    
    
    $
    2,482,560
    
    
    $
    2,398,471
    
    
    $
    2,472,697Average loans, net of unearned income
    
    
    2,512,856
    
    
    
    2,387,078
    
    
    
    2,502,589
    
    
    
    2,364,676
    
    
    
    2,401,805Ratio of ending allowance to ending loans
    
    
    3.20
    %
    
    
    1.40
    %
    
    
    3.20
    %
    
    
    1.40
    %
    
    
    1.69
    %Ratio of net charge-offs to average loans (1)
    
    
    2.26
    
    
    
    0.39
    
    
    
    1.77
    
    
    
    0.41
    
    
    
    0.65Net charge-offs as a percentage of:Provision for loan losses
    
    
    28.05
    
    
    
    39.26
    
    
    
    36.90
    
    
    
    50.66
    
    
    
    54.35Allowance for loan losses (1)
    
    
    71.34
    
    
    
    28.11
    
    
    
    55.73
    
    
    
    28.77
    
    
    
    37.04Allowance for loan losses as a percentage of
nonperforming loans
    
    
    34.32
    
    
    
    28.46
    
    
    
    34.32
    
    
    
    28.46
    
    
    
    26.25
 
 (1)
    
    Annualized. 55




---



##### Table of Contents



Three Months Ended June 30, 2010 compared to Three Months Ended March 31, 2010
   Six Months Ended June 30, 2010 compared to the Six Months Ended June 30, 2009
   Allocation of the Allowance for Loan Losses
    56




---



##### Table of Contents



Allocation of the Allowance for Loan Losses
 June 30, 2010
    
    
    December 31, 2009Percent
    
    
    
    
    
    
    Percentof Loans
    
    
    
    
    
    
    of Loansin Each
    
    
    
    
    
    
    in EachCategory
    
    
    
    
    
    
    Categoryto Total
    
    
    
    
    
    
    to TotalAmount
    
    
    Loans
    
    
    Amount
    
    
    Loans(Dollars in thousands)Commercial and industrial
    
    $
    5,975
    
    
    
    7.5
    %
    
    $
    2,356
    
    
    
    8.6
    %Real estate  construction and land development
    
    
    43,392
    
    
    
    27.4
    
    
    
    17,971
    
    
    
    27.5Real estate  mortgagesSingle-family
    
    
    16,860
    
    
    
    28.2
    
    
    
    12,342
    
    
    
    27.9Commercial
    
    
    11,142
    
    
    
    33.3
    
    
    
    7,019
    
    
    
    32.4Other
    
    
    209
    
    
    
    1.3
    
    
    
    371
    
    
    
    1.2Consumer
    
    
    1,847
    
    
    
    2.3
    
    
    
    1,825
    
    
    
    2.4Total
    
    $
    79,425
    
    
    
    100.0
    %
    
    $
    41,884
    
    
    
    100.0
    %
     57




---



##### Table of Contents



Nonperforming Assets
  June 30,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)Nonaccrual
    
    $
    215,891
    
    
    $
    155,631Accruing loans 90 days or more delinquent
    
    
    15,547
    
    
    
    3,920Total nonperforming loans
    
    
    231,438
    
    
    
    159,551Other real estate owned assets
    
    
    45,184
    
    
    
    41,618Repossessed assets
    
    
    322
    
    
    
    380Total nonperforming assets
    
    $
    276,944
    
    
    $
    201,549Restructured and performing under restructured
terms, net of specific allowance
    
    $
    147,588
    
    
    $
    110,777Nonperforming loans as a percentage of loans
    
    
    9.32
    %
    
    
    6.45
    %Nonperforming assets as a percentage of loans plus
nonperforming assets
    
    
    10.95
    %
    
    
    8.01
    %Nonperforming assets as a percentage of total assets
    
    
    8.25
    %
    
    
    6.26
    %
 58




---



##### Table of Contents



June 30,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)Commercial and industrial
    
    $
    3,030
    
    
    $
    1,797Real estate  construction and land developmentResidential
    
    
    81,464
    
    
    
    23,818Commercial
    
    
    52,385
    
    
    
    49,240Real estate  mortgagesSingle-family
    
    
    54,007
    
    
    
    52,323Commercial
    
    
    39,091
    
    
    
    30,343Other
    
    
    336
    
    
    
    436Consumer
    
    
    834
    
    
    
    734Other
    
    
    291
    
    
    
    860Total nonperforming loans
    
    $
    231,438
    
    
    $
    159,551
  .
  June 30,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)Acreage
    
    $
    4,844
    
    
    $
    2,251Commercial buildings
    
    
    6,177
    
    
    
    5,226Residential condominiums
    
    
    1,952
    
    
    
    2,730Residential single-family homes
    
    
    16,753
    
    
    
    15,696Residential lots
    
    
    12,022
    
    
    
    14,613Other
    
    
    3,436
    
    
    
    1,102Other real estate owned
    
    $
    45,184
    
    
    $
    41,618
 59




---



##### Table of Contents



Impaired Loans
   June 30, 2010
    
    
    December 31, 2009Oustanding
    
    
    Specific
    
    
    Oustanding
    
    
    SpecificBalance
    
    
    Allowance
    
    
    Balance
    
    
    Allowance(Dollars in thousands)Commercial and industrial
    
    $
    3,443
    
    
    $
    1,825
    
    
    $
    3,032
    
    
    $
    1,053Real estate  construction and land developmentResidential
    
    
    114,141
    
    
    
    18,155
    
    
    
    31,912
    
    
    
    3,044Commercial
    
    
    80,335
    
    
    
    10,409
    
    
    
    82,356
    
    
    
    3,675Real estate  mortgagesSingle-family
    
    
    67,492
    
    
    
    8,839
    
    
    
    53,229
    
    
    
    5,005Commercial
    
    
    132,211
    
    
    
    7,824
    
    
    
    109,222
    
    
    
    1,686Other
    
    
    2,123
    
    
    
    147
    
    
    
    500
    
    
    
    62Consumer
    
    
    
    
    
    
    
    
    
    
    97
    
    
    
    2Total
    
    $
    399,745
    
    
    $
    47,199
    
    
    $
    280,348
    
    
    $
    14,527
    60




---



##### Table of Contents



RestructuredPerforming
    
    
    Not-Performingin accordance
    
    
    in accordancewith restructured terms
    
    
    with restructured termsOustanding
    
    
    Specific
    
    
    Oustanding
    
    
    SpecificBalance
    
    
    Allowance
    
    
    Balance
    
    
    Allowance(Dollars in thousands)Alabama:Commercial and industrial
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Real estate  construction and land development
    
    
    4,155
    
    
    
    274
    
    
    
    
    
    
    
    Real estate  mortgagesSingle-family
    
    
    11,435
    
    
    
    441
    
    
    
    2,210
    
    
    
    622Commercial
    
    
    22,846
    
    
    
    382
    
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    38,436
    
    
    $
    1,097
    
    
    $
    2,210
    
    
    $
    622FloridaCommercial and industrial
    
    $
    909
    
    
    $
    857
    
    
    $
    304
    
    
    $
    7Real estate  construction and land development
    
    
    37,895
    
    
    
    734
    
    
    
    1,291
    
    
    
    8Real estate  mortgagesSingle-family
    
    
    9,691
    
    
    
    800
    
    
    
    4,581
    
    
    
    1,065Commercial
    
    
    69,653
    
    
    
    5,508
    
    
    
    3,310
    
    
    
    Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    118,148
    
    
    $
    7,899
    
    
    $
    9,486
    
    
    $
    1,080TotalCommercial and industrial
    
    $
    909
    
    
    $
    857
    
    
    $
    304
    
    
    $
    7Real estate  construction and land development
    
    
    42,050
    
    
    
    1,008
    
    
    
    1,291
    
    
    
    8Real estate  mortgagesSingle-family
    
    
    21,126
    
    
    
    1,241
    
    
    
    6,791
    
    
    
    1,687Commercial
    
    
    92,499
    
    
    
    5,890
    
    
    
    3,310
    
    
    
    Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    156,584
    
    
    $
    8,996
    
    
    $
    11,696
    
    
    $
    1,702
 Potential Problem Loans
  61




---



##### Table of Contents



Deposits
     June 30,
    
    
    December 31,
    
    
    Percent2010
    
    
    2009
    
    
    Change(Dollars in thousands)Noninterest-bearing demand
    
    $
    275,712
    
    
    $
    257,744
    
    
    
    7.0
    %Alabama segment
    
    
    146,612
    
    
    
    137,160
    
    
    
    6.9Florida segment
    
    
    123,377
    
    
    
    103,621
    
    
    
    19.1Other
    
    
    5,723
    
    
    
    16,963
    
    
    
    (66.3
    )Interest-bearing demand
    
    
    650,402
    
    
    
    690,677
    
    
    
    (5.8
    )Alabama segment
    
    
    393,635
    
    
    
    385,246
    
    
    
    2.2Florida segment
    
    
    246,222
    
    
    
    233,740
    
    
    
    5.3Other
    
    
    10,545
    
    
    
    71,691
    
    
    
    (85.3
    )Savings
    
    
    365,249
    
    
    
    284,430
    
    
    
    28.4Alabama segment
    
    
    181,469
    
    
    
    151,263
    
    
    
    20.0Florida segment
    
    
    181,618
    
    
    
    131,185
    
    
    
    38.4Other
    
    
    2,162
    
    
    
    1,982
    
    
    
    9.1Time deposits
    
    
    1,547,158
    
    
    
    1,423,722
    
    
    
    8.7Alabama segment
    
    
    725,442
    
    
    
    663,510
    
    
    
    9.3Florida segment
    
    
    625,914
    
    
    
    555,262
    
    
    
    12.7Other
    
    
    195,802
    
    
    
    204,950
    
    
    
    (4.5
    )Total deposits
    
    $
    2,838,521
    
    
    $
    2,656,573
    
    
    
    6.8
    %Alabama segment
    
    $
    1,447,158
    
    
    $
    1,337,179
    
    
    
    8.2
    %Florida segment
    
    $
    1,177,131
    
    
    $
    1,023,808
    
    
    
    15.0
    %Other
    
    $
    214,232
    
    
    $
    295,586
    
    
    
    (27.5
    )%
 Borrowings
   62




---



##### Table of Contents



Stockholders Equity
 Overview
  Stockholders Equity
 Other Comprehensive Income
  Pre-Tax
    
    
    Income Tax
    
    
    Net ofAmount
    
    
    Expense
    
    
    Income Tax(Dollars in thousands)Three Months Ended June 30, 2010Unrealized gain on available-for-sale securities
    
    $
    4,031
    
    
    $
    (1,491
    )
    
    $
    2,540Reclassification adjustment for gains realized in net loss
    
    
    (1,356
    )
    
    
    502
    
    
    
    (854
    )Unrealized gain on derivatives
    
    
    24
    
    
    
    (9
    )
    
    
    15Reclassification adjustment for gains realized in net loss
    
    
    (13
    )
    
    
    5
    
    
    
    (8
    )Net unrealized gain
    
    $
    2,686
    
    
    $
    (993
    )
    
    $
    1,693Three Months Ended June 30, 2009Unrealized loss on available-for-sale securities
    
    $
    (3,660
    )
    
    $
    1,354
    
    
    $
    (2,306
    )Reclassification adjustment for losses realized in net loss
    
    
    5,781
    
    
    
    (2,139
    )
    
    
    3,642Unrealized gain on derivatives
    
    
    354
    
    
    
    (131
    )
    
    
    223Net unrealized gain
    
    $
    2,475
    
    
    $
    (916
    )
    
    $
    1,559Six Months Ended June 30, 2010Unrealized gain on available-for-sale securities
    
    $
    5,571
    
    
    $
    (2,061
    )
    
    $
    3,510Reclassification adjustment for gains realized in net loss
    
    
    (1,158
    )
    
    
    428
    
    
    
    (730
    )Unrealized loss on derivatives
    
    
    (134
    )
    
    
    51
    
    
    
    (83
    )Reclassification adjustment for gains realized in net loss
    
    
    (13
    )
    
    
    5
    
    
    
    (8
    )Net unrealized gain
    
    $
    4,266
    
    
    $
    (1,577
    )
    
    $
    2,689Six Months Ended June 30, 2009Unrealized loss on available-for-sale securities
    
    $
    (12,054
    )
    
    $
    4,459
    
    
    $
    (7,595
    )Reclassification adjustment for losses realized in net loss
    
    
    11,626
    
    
    
    (4,302
    )
    
    
    7,324Unrealized gain on derivatives
    
    
    325
    
    
    
    (120
    )
    
    
    205Net unrealized loss
    
    $
    (103
    )
    
    $
    37
    
    
    $
    (66
    )
  63




---



##### Table of Contents



Regulatory Capital
  To Be WellFor
    
    Capitalized UnderCapital Adequacy
    
    Prompt CorrectiveActual
    
    Purposes
    
    ActionAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in thousands)Superior BankJune 30, 2010Tier 1 Core Capital (to Adjusted Total Assets)
    
    $
    187,183
    
    
    
    5.64
    %
    
    $
    132,727
    
    
    
    4.00
    %
    
    $
    165,909
    
    
    
    5.00
    %Total Capital (to Risk Weighted Assets)
    
    
    229,408
    
    
    
    8.85
    
    
    
    207,397
    
    
    
    8.00
    
    
    
    259,247
    
    
    
    10.00Tier 1 Capital (to Risk Weighted Assets)
    
    
    187,183
    
    
    
    7.22
    
    
    NA
    
    
    NA
    
    
    
    155,548
    
    
    
    6.00Tangible Capital (to Adjusted Total Assets)
    
    
    187,183
    
    
    
    5.64
    
    
    
    49,773
    
    
    
    1.50
    
    
    NA
    
    
    NA
 Liquidity
      Forward-Looking Statements
   64




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   Interest Rate Sensitivity
  Sensitivity Measurement
   65




---



##### Table of Contents



Interest Rate Exposures
  Change (in Basis Points)
    
    Increase in Net Interest Incomein Interest Rates
    
    June 30, 2010
    
    December 31, 2009(12-Month Projection)
    
    Amount
    
    Percent
    
    Amount
    
    Percent(Dollars in thousands)+ 200 BP (1)
    
    $
    2,973
    
    
    
    3.1
    %
    
    $
    2,200
    
    
    
    2.3
    %- 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.  ChangeChange (in Basis Points) in Interest Rates
    
    EVE
    
    Amount
    
    Percent(Dollars in thousands)+ 200 BP
    
    $
    295,608
    
    
    $
    33,125
    
    
    
    12.6
    %+ 100 BP
    
    
    282,172
    
    
    
    19,686
    
    
    
    7.50 BP
    
    
    262,479
    
    
    
    
    
    
    
    - 100 BP
    
    
    256,080
    
    
    
    (6,404
    )
    
    
    (2.4
    )
  
 ITEM 4. CONTROLS AND PROCEDURES
 CEO and CFO Certification
  Evaluation of Disclosure Controls and Procedures
   66




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
 Risks Relating To Our Business
 The current economic environment poses significant challenges for us and our industry and could
adversely affect our financial condition and results of operations.
 
    
    Economic conditions that negatively affect housing prices and the job
market have caused, and may continue to cause, the credit quality of
our loan portfolios to deteriorate, and that deterioration in credit
quality has had, and could continue to have, a negative effect on our
business.
    
    Market developments may affect consumer confidence levels and may
cause adverse changes in payment patterns, causing increases in
delinquencies and default rates on loans and other credit facilities.
    
    Market conditions can change rapidly in the current
economic environment, and, if they do, the processes we
use to estimate our allowance for loan losses and reserves
may no longer be reliable.
    
    The value of our securities portfolio may decline.
    
    Our industry faces increased regulation, and compliance
with such regulatory changes has increased our costs and
the complexity of our compliance processes and may
continue to do so.
    
    Natural and environmental disasters, such as hurricanes or
oil spills, have adversely affected and may continue to
adversely affect the local economies in which we operate,
with the potential for further deterioration in credit
quality in those markets as well as a general reduction in
business activity.
 67




---



##### Table of Contents



Our allowance for loan losses may not be adequate to cover actual losses.
 
    
    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 conditions; and
    
    mergers and acquisitions.
  Further deterioration of local economic conditions where we operate could have a continuing
negative effect on us.
 
    
    loan delinquencies may increase;
    
    problem assets and foreclosures may increase;
    
    demand for our products and services may decline; and
    
    collateral for loans we make, especially loans secured by real estate,
may decline in value, in turn reducing a customers borrowing power,
and reducing the value of assets and collateral associated with our
loans.
 Liquidity needs could adversely affect our results of operations and financial condition.
 68




---



##### Table of Contents



Changes in monetary policy and interest rates could adversely affect our profitability.
   Non-performing assets take significant time to resolve and adversely affect our results of
operations and financial condition.
 The failures of other financial institutions could adversely affect us.
 An interruption or breach in security with respect to our information systems, as well as
information systems of our outsourced service providers, could have a material adverse effect on
us.
 69




---



##### Table of Contents



We incurred a net loss in our last fiscal year and for the first six months of the current fiscal
year and losses may continue in the future.
 A significant portion of our loan portfolio is secured by real estate, and events that negatively
affect the real estate market could hurt our business.
 An increase in loan prepayments may adversely affect our profitability.
 Events in our geographic markets could adversely affect us.
   We face substantial competition.
 We are subject to extensive regulation.
 70




---



##### Table of Contents



Recently enacted financial reform legislation will, among other things, tighten capital standards,
create a new Consumer Financial Protection Bureau and result in new regulations that are expected
to increase our costs of operations.
       71




---



##### Table of Contents



We may require additional capital to fund our growth plans and to meet regulatory requirements.
 We are dependent upon the services of our management team.
 Additional regulatory requirements especially those imposed under ARRA, EESA or other legislation
intended to strengthen the U.S. financial system, could adversely affect us.
 The imposition of certain restrictions on our executive compensation as a result of our decision to
participate in the CPP may have material adverse effects on our business and results of
operations.
 Higher FDIC deposit insurance premiums and assessments could adversely affect our financial
condition.
 72




---



##### Table of Contents



Changes in accounting policies and practices, as may be adopted by regulatory agencies, the
Financial Accounting Standards Board, or other authoritative bodies, could materially affect our
reported financial condition and results of operations.
 The accuracy of our financial statements and related disclosures could be affected because we are
exposed to conditions or assumptions different from the judgments, assumptions or estimates used in
our critical accounting policies.
 Future losses could result in the recording of a valuation allowance against our deferred tax
assets (DTA) and impair our ability to recover our deferred tax assets.
 Issuances or sales of common stock or other equity securities could result in an ownership change
as defined for U.S. federal income tax purposes. If an ownership change were to occur, our
ability to fully utilize a significant portion of our U.S. federal and state tax net operating
losses and certain built-in losses that have not been recognized for tax purposes could be impaired
as a result of the operation of Section 382 of the Internal Revenue Code.
  73




---



##### Table of Contents



Our financial condition and outlook may be adversely affected by damage to our reputation.
 We will realize additional future losses if the proceeds we receive upon liquidation of assets are
less than the carrying value of such assets.
 If we defer payments of interest on our outstanding junior subordinated debentures or if certain
defaults relating to those debentures occur, we will be prohibited from declaring or paying
dividends or distributions on, and from making liquidation payments with respect to, our preferred
and common stock.
   Risks Related To an Investment in Our Common Stock
 Our stock price may be volatile due to limited trading volume and general market conditions.
  74




---



##### Table of Contents



Our common stock is equity and is subordinate to our existing and future indebtedness and preferred
stock.
 Our ability to pay dividends and to repurchase shares of common stock is limited.
   The exercise of our warrants would dilute existing stockholders ownership interest.
 We may issue additional shares of common stock or equity derivative securities that will dilute the
percentage ownership interest of existing stockholders and may dilute the book value per share of
our common stock
 
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  75




---



##### Table of Contents



ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  3
    
    Certificate of Designation of Preferences and Rights of Series C Cumulative Convertible Preferred Stock31.1
    
    Certification of principal executive officer pursuant to Rule 13a-14(a).31.2
    
    Certification of principal financial officer pursuant to Rule 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.
 76




---



##### Table of Contents



SIGNATURES
  Date: August 16, 2010
    By:
    /s/ C. Stanley BaileyC. Stanley BaileyChief Executive OfficerDate: August 16, 2010
    By:
    /s/ James A. WhiteJames A. WhiteChief Financial Officer
(Principal Financial Officer) 77