**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
        DC**
 **FORM
        10-Q**
 
 **(Mark
                  One)**R
              **QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES****EXCHANGE
                  ACT OF 1934****FOR
                  THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007****OR**£
              **TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934****FOR
                  THE TRANSITION PERIOD FROM __________****TO
                  __________**
 
 **Commission
        File number 0-25033**
 
 **Superior
        Bancorp**
 ____________________________________________
 (Exact
        Name of Registrant as Specified in its Charter)
 
 Delaware
              
              63-1201350(State
                  or Other Jurisdiction of Incorporation)
              
              (IRS
                  Employer Identification No.)
 
 17
        North 20th Street, Birmingham, Alabama 35203
 (Address
        of Principal Executive Offices)
 
 (205)
        327-1400
 (Registrant’s
        Telephone Number, Including Area Code)
 
 Indicate
        by check mark whether the registrant: (1) has filed all reports required
        to be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for
        the past 90 days.
 
 Yes R No £
 
 Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of
        the
        Exchange Act).
 
 Large
                  Accelerated Filer£
              Accelerated
                  FilerR
              Non-Accelerated
                  Filer£
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
 
 Yes £ No R
 
 Indicate
        the number of shares outstanding of each of the issuer’s classes of common
        stock, as of the latest practicable date.
 
 Class
              
              Outstanding
                  as of September 30, 2007Common
                  stock, $.001 par value
              
              40,282,981
 
 
 
 **TABLE
        OF CONTENTS**
 
 PART
                  I FINANCIAL INFORMATIONITEM
                  1. FINANCIAL STATEMENTS
              2ITEM
                  2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
                  OF OPERATIONS
              12ITEM
                  3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
                  RISK
              28ITEM
                  4. CONTROLS AND PROCEDURES
              29PART
                  II. OTHER INFORMATIONITEM
                  1. LEGAL PROCEEDINGS
              30ITEM
                  1A. RISK FACTORS
              30ITEM
                  2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
                  PROCEEDS
              30ITEM
                  3. DEFAULTS UPON SENIOR SECURITIES
              30ITEM
                  4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
              30ITEM
                  5. OTHER INFORMATION
              30ITEM
                  6. EXHIBITS
              31SIGNATURES
              32
 
 
 
 PART
        I
        FINANCIAL INFORMATION
 
 ITEM
        1.
        FINANCIAL STATEMENTS
 
 **SUPERIOR
        BANCORP AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION**
 **(Dollars
        in thousands, except per share data)**
 
 **September
                  30,**
                **2007**
              
              **December
                  31,**
                **2006****(UNAUDITED)****ASSETS**Cash
                  and due from banks
              
              $
              53,399
              
              $
              49,783Interest-bearing
                  deposits in other banks
              
              
              7,062
              
              
              10,994Federal
                  funds sold
              
              
              7,536
              
              
              25,185Investment
                  securities available for sale
              
              
              367,538
              
              
              354,716Tax
                  lien certificates
              
              
              13,935
              
              
              16,313Mortgage
                  loans held for sale
              
              
              26,942
              
              
              24,433Loans,
                  net of unearned income
              
              
              2,039,530
              
              
              1,639,528Less:
                  Allowance for loan losses
              
              
              (22,867
              )
              
              (18,892
              )Net
                  loans
              
              
              2,016,663
              
              
              1,620,636Premises
                  and equipment, net
              
              
              91,734
              
              
              94,626Accrued
                  interest receivable
              
              
              17,421
              
              
              14,387Stock
                  in FHLB
              
              
              17,870
              
              
              12,382Cash
                  surrender value of life insurance
              
              
              45,219
              
              
              40,598Goodwill
                  and other intangibles
              
              
              187,289
              
              
              129,520Other
                  assets
              
              
              50,183
              
              
              47,417Total
                  assets
              
              $
              2,902,791
              
              $
              2,440,990**LIABILITIES
                  AND STOCKHOLDERS’ EQUITY**Deposits:Noninterest-bearing
              
              $
              207,383
              
              $
              191,323Interest-bearing
              
              
              1,942,654
              
              
              1,679,518Total
                  deposits
              
              
              2,150,037
              
              
              1,870,841Advances
                  from FHLB
              
              
              287,795
              
              
              187,840Federal
                  funds purchased and security repurchase agreements
              
              
              21,990
              
              
              23,415Notes
                  payable
              
              
              8,768
              
              
              5,545Junior
                  subordinated debentures owed to unconsolidated subsidiary
                  trusts
              
              
              53,831
              
              
              44,006Capital
                  lease obligation
              
              
              3,756
              
              
              3,798Accrued
                  expenses and other liabilities
              
              
              29,279
              
              
              29,458Total
                  liabilities
              
              
              2,555,456
              
              
              2,164,903Stockholders’
                  equityCommon
                  stock, par value $.001 per share; authorized 60,000,000 shares;
                  shares
                  issued 41,491,126 and 34,732,345, respectively; outstanding 40,282,981
                  and
                  34,651,669, respectively
              
              
              41
              
              
              35Surplus
              
              
              328,365
              
              
              253,815Retained
                  earnings
              
              
              31,653
              
              
              26,491Accumulated
                  other comprehensive loss
              
              
              (968
              )
              
              (1,452
              )Treasury
                  stock, at cost
              
              
              (11,105
              )
              
              (716
              )Unearned
                  ESOP stock
              
              
              (651
              )
              
              (2,086
              )Total
                  stockholders’ equity
              
              
              347,335
              
              
              276,087Total
                  liabilities and stockholders’ equity
              
              $
              2,902,791
              
              $
              2,440,990
  See
          Notes
          to Condensed Consolidated Financial Statements.
  2
  **SUPERIOR
        BANCORP AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)**
 **(Dollars
        in thousands, except per share data)**
 
 **Three
                  Months Ended**
                **September
                  30,**
              
              **Nine
                  Months Ended**
                **September
                  30,****2007**
              
              **2006**
              
              **2007**
              
              **2006**Interest
                  incomeInterest
                  and fees on loans
              
              $
              40,486
              
              $
              23,366
              
              $
              109,783
              
              $
              62,038Interest
                  on taxable securities
              
              
              4,271
              
              
              3,248
              
              
              12,805
              
              
              8,757Interest
                  on tax-exempt securities
              
              
              276
              
              
              106
              
              
              543
              
              
              273Interest
                  on federal funds sold
              
              
              91
              
              
              142
              
              
              373
              
              
              229Interest
                  and dividends on other investments
              
              
              875
              
              
              596
              
              
              2,304
              
              
              1,418Total
                  interest income
              
              
              45,999
              
              
              27,458
              
              
              125,808
              
              
              72,715Interest
                  expenseInterest
                  on deposits
              
              
              21,410
              
              
              12,653
              
              
              57,659
              
              
              30,833Interest
                  on other borrowed funds
              
              
              3,617
              
              
              3,093
              
              
              9,636
              
              
              8,212Interest
                  on junior subordinated debentures
              
              
              1,066
              
              
              797
              
              
              3,062
              
              
              2,338Total
                  interest expense
              
              
              26,093
              
              
              16,543
              
              
              70,357
              
              
              41,383Net
                  interest income
              
              
              19,906
              
              
              10,915
              
              
              55,451
              
              
              31,332Provision
                  for loan losses
              
              
              1,179
              
              
              550
              
              
              2,884
              
              
              1,850Net
                  interest income after provision for loan losses
              
              
              18,727
              
              
              10,365
              
              
              52,567
              
              
              29,482Noninterest
                  incomeService
                  charges and fees on deposits
              
              
              2,090
              
              
              1,137
              
              
              5,774
              
              
              3,417Mortgage
                  banking income
              
              
              970
              
              
              919
              
              
              3,052
              
              
              2,158Investment
                  securities gains
              
              
              —
              
              
              —
              
              
              242
              
              
              —Change
                  in fair value of derivatives
              
              
              202
              
              
              6
              
              
              169
              
              
              43Gain
                  on cash surrender value of life insurance
              
              
              481
              
              
              443
              
              
              1,381
              
              
              1,222Other
                  income
              
              
              1,181
              
              
              315
              
              
              2,931
              
              
              1,377Total
                  noninterest income
              
              
              4,924
              
              
              2,820
              
              
              13,549
              
              
              8,217Noninterest
                  expensesSalaries
                  and employee benefits
              
              
              10,724
              
              
              6,390
              
              
              30,959
              
              
              18,064Occupancy
                  and equipment expense
              
              
              3,506
              
              
              1,806
              
              
              9,650
              
              
              5,391Amortization
                  of intangibles
              
              
              494
              
              
              104
              
              
              1,102
              
              
              233Loss
                  on extinguishment of debt
              
              
              1,469
              
              
              —
              
              
              1,469
              
              
              —Merger-related
                  costs
              
              
              103
              
              
              350
              
              
              530
              
              
              350Loss
                  on termination of ESOP
              
              
              158
              
              
              —
              
              
              158
              
              
              —Subsidiary
                  startup costs
              
              
              —
              
              
              135
              
              
              —
              
              
              135Other
                  expenses
              
              
              4,836
              
              
              3,421
              
              
              13,504
              
              
              9,566Total noninterest
                  expenses
              
              
              21,290
              
              
              12,206
              
              
              57,372
              
              
              33,739Income
                  before income taxes
              
              
              2,361
              
              
              979
              
              
              8,744
              
              
              3,960Income
                  tax expense
              
              
              911
              
              
              166
              
              
              3,027
              
              
              1,022Net
                  income
              
              $
              1,450
              
              $
              813
              
              $
              5,717
              
              $
              2,938Basic
                  net income per common share
              
              $
              0.04
              
              $
              0.04
              
              $
              0.16
              
              $
              0.14Diluted
                  net income per common share
              
              $
              0.04
              
              $
              0.04
              
              $
              0.16
              
              $
              0.14Weighted
                  average common shares outstanding
              
              
              38,773
              
              
              22,234
              
              
              35,903
              
              
              20,810Weighted
                  average common shares outstanding, assuming dilution
              
              
              39,082
              
              
              22,849
              
              
              36,369
              
              
              21,444
  See
          Notes
          to Condensed Consolidated Financial Statements.
 3
 
  **SUPERIOR
            BANCORP AND SUBSIDIARIES**
 **CONDENSED
            CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)**
 **(Dollars
            in thousands)**
 **Nine
                    Months Ended**
                  **September
                    30,****2007**
                
                **2006**Net
                    cash provided by operating activities
                
                $
                1,515
                
                $
                8,741Cash
                    flows from investing activities:Net
                    decrease in interest-bearing deposits in other banks
                
                
                3,932
                
                
                2,709Net
                    decrease (increase) in federal funds sold
                
                
                21,849
                
                
                (1,009
                )Proceeds
                    from sales of securities available for sale
                
                
                18,378
                
                
                149,730Proceeds
                    from maturities of investment securities available for
                    sale
                
                
                63,345
                
                
                10,921Purchases
                    of investment securities available for sale
                
                
                (47,772
                )
                
                (44,729
                )Net
                    increase in loans
                
                
                (146,015
                )
                
                (159,078
                )Net
                    cash received in business combinations
                
                
                1,231
                
                
                4,459Proceeds
                    from sales of premises and equipment
                
                
                5,535
                
                
                1,228Purchases
                    of premises and equipment
                
                
                (9,839
                )
                
                (8,683
                )Proceeds
                    from sale of repossessed assets
                
                
                2,492
                
                
                1,214(Increase)
                    decrease in stock in FHLB
                
                
                (3,206
                )
                
                1,594Other
                    investing activities, net
                
                
                3,833
                
                
                (6,965
                )Net
                    cash used by investing activities
                
                
                (86,237
                )
                
                (48,609
                )Cash
                    flows from financing activities:Net
                    increase in deposits
                
                
                33,872
                
                
                103,084Net
                    increase (decrease) in FHLB advances and other borrowed
                    funds
                
                
                53,642
                
                
                (66,396
                )Proceeds
                    from notes payable
                
                
                9,268
                
                
                —Principal
                    payments on notes payable
                
                
                (6,045
                )
                
                (158
                )Proceeds
                    from issuance of junior subordinated debenture
                
                
                22,680
                
                
                —Principal
                    payment of junior subordinated debenture
                
                
                (16,495
                )
                
                —Purchase
                    of treasury stock
                
                
                (9,223
                )
                
                —Proceeds
                    from sale of common stock
                
                
                639
                
                
                1,214Net
                    cash provided by financing activities
                
                
                88,338
                
                
                37,744Net
                    increase (decrease) in cash and due from banks
                
                
                3,616
                
                
                (2,124
                )Cash
                    and due from banks at beginning of period
                
                
                49,783
                
                
                35,088Cash
                    and due from banks at end of period
                
                $
                53,399
                
                $
                32,964
 See
          Notes
          to Condensed Consolidated Financial Statements.
  4
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**
 
 **Note
        1 — Basis of Presentation**
 
 The
        accompanying unaudited condensed consolidated financial statements have been
        prepared in accordance with the instructions for Form 10-Q, and, therefore,
        do
        not include all information and footnotes necessary for a fair presentation
        of
        financial position, results of operations and cash flows in conformity with
        generally accepted accounting principles. For a summary of significant
        accounting policies that have been consistently followed, see Note 1 to the
        Consolidated Financial Statements included in Superior Bancorp’s (“the
        Corporation’s”) Annual Report on Form 10-K for the year ended December 31, 2006.
        It is management’s opinion that all adjustments, consisting of only normal and
        recurring items necessary for a fair presentation, have been included in
        these
        condensed consolidated financial statements. Operating results for the three-
        and nine-month periods ended September 30, 2007, are not necessarily indicative
        of the results that may be expected for the year ending December 31,
        2007.
 
 The
        Condensed Consolidated Statement of Financial Condition at December 31, 2006,
        which has been derived from the financial statements audited by Carr, Riggs
        & Ingram, LLC, independent registered public accountants, as indicated in
        their report, dated March 16, 2007, included in the Corporation’s Annual Report
        on Form 10-K, does not include all of the information and footnotes required
        by
        generally accepted accounting principles for complete financial
        statements.
 
 **Note
        2 — Recent Accounting Pronouncements**
 
 *FASB
        Interpretation No. 48*
 
 In
        July
        2006, the Financial Accounting Standards Board (“FASB”) issued FASB
        Interpretation No. 48, *Accounting
        for*  *Uncertainty
        in Income Taxes* (“FIN
        48”). This interpretation clarifies the accounting for uncertainty in income
        taxes recognized in a company’s financial statements in accordance with
        Statement of Financial Accounting Standards (“SFAS”) No. 109, *Accounting
        for Income Taxes* .
        Specifically, the pronouncement prescribes a recognition threshold and a
        measurement attribute for the financial statement recognition and measurement
        of
        a tax position taken or expected to be taken in a tax return. The interpretation
        also provides guidance on the related derecognition, classification, interest
        and penalties, accounting for interim periods, disclosure and transition
        of
        uncertain tax positions. The interpretation was effective for fiscal years
        beginning after December 15, 2006. See Note 7 for other disclosures related
        to
        income taxes.
 
 The
        Corporation adopted FIN 48 on January 1, 2007. As a result of the adoption,
        the
        Corporation recognized a charge of approximately $554,000 to the January
        1, 2007
        retained earnings balance. As of the adoption date, the Corporation had
        unrecognized tax benefits of $459,000, all of which, if recognized, would
        affect
        the effective tax rate. Also, as of the adoption date, the Corporation had
        accrued interest expense related to the unrecognized tax benefits of
        approximately $145,000. Accrued interest related to unrecognized tax benefits
        is
        recognized in income tax expense. Penalties, if incurred, will be recognized
        in
        income tax expense as well.
 
 The
        Corporation and its subsidiaries are subject to U.S. federal income tax as
        well
        as to Alabama and Florida income taxes . The Corporation has concluded all
        U.S.
        federal income tax matters for years through 2002, including
        acquisitions.
 
 All
        state
        income tax matters have been concluded for years through 2001. The Corporation
        has received notices of proposed adjustments relating to state taxes due
        for the
        years 2002 and 2003, which include proposed adjustments relating to income
        apportionment of a subsidiary. Management anticipates that these examinations
        may be finalized in the foreseeable future. However, based on the status
        of
        these examinations, and the protocol of finalizing audits by the taxing
        authority, which could include formal legal proceedings, it is not possible
        to
        estimate the impact of any changes to the previously recorded uncertain tax
        positions. There have been no significant changes to the status of these
        examinations during the three- and nine-month periods ended September 30,
        2007.
  5
  *Statement
        of Financial Accounting Standards No. 157*
 
 In
        September 2006, the FASB issued SFAS No. 157, *Fair
        Value Measurements* (“SFAS
        157”). SFAS 157 defines fair value, establishes a framework for measuring fair
        value in generally accepted accounting principles and expands disclosures
        about
        fair value measurements. SFAS 157 is effective for financial statements issued
        for fiscal years beginning after November 15, 2007. The Corporation will
        adopt
        SFAS 157 on January 1, 2008 and is assessing the impact of the adoption of
        SFAS
        157.
 
 *Statement
        of Financial Accounting Standards No. 159*
 
 In
        February 2007, the FASB issued SFAS No. 159, *The
        Fair Value Option for Financial Assets and Financial
        Liabilities* (“SFAS
        159”). SFAS 159 would allow the Corporation to make an irrevocable election to
        measure certain financial assets and liabilities at fair value, with unrealized
        gains and losses on the elected items recognized in earnings at each reporting
        period. The fair value option may only be elected at the time of initial
        recognition of a financial asset or financial liability or upon the occurrence
        of certain specified events. The election is applied on an instrument by
        instrument basis, with a few exceptions, and is applied only to entire
        instruments and not to portions of instruments. SFAS 159 also provides expanded
        disclosure requirements regarding the effects of electing the fair value
        option
        on the financial statements. SFAS 159 is effective prospectively for fiscal
        years beginning after November 15, 2007. The Corporation is currently evaluating
        SFAS 159 and has not yet determined the financial assets and liabilities,
        if
        any, for which the fair value option would be elected or the potential impact
        on
        the Corporation’s consolidated financial statements if such election were
        made.
 
 **Note
        3 — Acquisitions**
 
 *People’s
        Acquisition*
  The
        Corporation completed the acquisition of 100% of the outstanding stock of
        People’s Community Bancshares, Inc. (“People’s”), of Sarasota, Florida on July
        27, 2007 in exchange for 6,635,125 shares of the Corporation’s common stock
        valued at approximately $73,982,000. The shares were valued by using the
        average
        of the closing prices of the Corporation’s stock for several days prior to and
        after the terms of the acquisition were agreed to and announced. The total
        purchase price, which includes certain direct acquisition costs, was
        $76,429,000. As a result of the acquisition, the Corporation now operates
        three banking locations in Sarasota and Manatee Counties in Florida.
        This area is a significant addition to the Corporation’s largest market, which
        was expanded in 2006 by the Kensington acquisition discussed below.
  The
        People’s transaction resulted in $47,502,000 of goodwill allocated to the
        Florida reporting unit and $9,810,000 of core deposit intangibles. The goodwill
        acquired is not tax-deductible. The amount allocated to the core deposit
        intangible was determined by an independent valuation and is being amortized
        over an estimated useful life of ten years based on the undiscounted cash
        flow.
  Management
        is completing its plan to consolidate People’s data processing operations and
        convert People’s accounts to the Corporation’s system. This conversion is
        expected to be completed in the first quarter of 2008. Certain costs associated
        with this conversion totaling approximately $575,000, which primarily includes
        contract cancellation costs, were estimated and accrued as of the acquisition
        date.
  6
 The
        following table summarizes the estimated fair values of the assets acquired
        and
        liabilities assumed at the date of acquisition. The Corporation has not
        finalized its valuation of certain intangible assets but plans to do so in
        the
        fourth quarter of 2007.
  **Amount****(In
                  thousands)**Cash
                  and due from banks
              
              $
              3,854Federal
                  funds sold
              
              
              4,200Investment
                  securities
              
              
              47,684Loans,
                  net
              
              
              254,047Premises
                  and equipment, net
              
              
              2,318Goodwill
              
              
              47,502Core
                  deposit intangibles
              
              
              9,810Other
                  assets
              
              
              10,805Deposits
              
              
              (245,459
              )Federal
                  funds purchased and repurchase agreements
              
              
              (6,905
              )Advances
                  from FHLB
              
              
              (37,983
              )Junior
                  subordinated debentures
              
              
              (3,962
              )Other
                  liabilities
              
              
              (9,482
              )Total
                  consideration paid for People’s
              
              $
              76,429
  *Community
        Acquisition*
 
 The
        Corporation completed the acquisition of 100% of the outstanding stock of
        Community Bancshares, Inc. (“Community”) of Blountsville, Alabama on November 7,
        2006 in exchange for 8,072,179 shares of the Corporation’s common stock valued
        at approximately $91,848,000. The shares were valued by using the average
        of the
        closing prices of the Corporation’s stock for several days prior to and after
        the terms of the acquisition were agreed to and announced. The total purchase
        price, which includes certain direct acquisition costs, totaled $97,200,000.
        As
        a result of the acquisition, the Corporation added 18 banking locations and
        15
        consumer finance company locations in Alabama.
 
 *Kensington
        Acquisition*
 
 The
        Corporation completed the acquisition of 100% of the outstanding stock of
        Kensington Bankshares, Inc. of Tampa, Florida (“Kensington”) on August 31, 2006
        in exchange for 6,226,722 shares of the Corporation’s common stock valued at
        approximately $71,200,000. The shares were valued by using the average of
        the
        closing prices of the Corporation’s stock for several days prior to and after
        the terms of the acquisition were agreed to and announced. The total purchase
        price, which includes certain direct acquisition costs, totaled $71,372,000.
        As
        a result of the acquisition, the Corporation added 12 banking locations in
        the
        Tampa Bay area of Florida. This area is the Corporation’s largest market and has
        a higher projected population growth than any of the Corporation’s other banking
        markets.
 
 *Pro
        forma Results of Operations*
 
 The
        results of operations of People’s, Community and Kensington subsequent to their
        respective acquisition dates are included in the Corporation’s consolidated
        statements of income. The following pro forma information for the nine-month
        periods ended September 30, 2007 and 2006 reflects the Corporation’s pro
        forma consolidated results of operations as if the acquisitions of People’s,
        Community and Kensington occurred at January 1 of the respective period,
        unadjusted for potential cost savings.
 
 **Nine
                  Months Ended*****(Dollars
                  in thousands, except per share data)***
              
              **September
                  30, 2007**
              
              **September
                  30, 2006**Pro
                  forma net interest income and noninterest income after provision
                  for loan
                  losses
              
              $
              72,585
              
              $
              74,806Pro
                  forma net income
              
              
              6,226
              
              
              10,537Pro
                  forma earnings per common share — basic
              
              $
              0.15
              
              $
              0.25Pro
                  forma earnings per common share — diluted
              
              
              0.15
              
              
              0.25
  7
  **Note
        4 — Segment Reporting**
 
 Beginning
        in the third quarter of 2007, the Corporation’s management made certain
        revisions to how it assesses the performance of its reportable business
        segments. The following presentation of segment data has been revised to
        reflect
        this change. The
        Corporation has two reportable segments, the Alabama Region, and the Florida
        Region. The Alabama Region consists of operations located throughout Alabama.
        The Florida Region consists of operations located primarily in the Tampa
        Bay
        area and panhandle region of Florida. The Corporation’s reportable segments are
        managed as separate business units because they are located in different
        geographic areas. Both segments derive revenues from the delivery of financial
        services. These services include commercial loans, mortgage loans, consumer
        loans, deposit accounts and other financial services. All of
        the corporate administrative costs and other banking activities have been
        removed from the Alabama Region. Administrative and other banking activities
        include the results of the Corporation’s investment portfolio, residential
        mortgage division, brokered deposits and borrowed funds positions.
 
 The
        Corporation evaluates performance and allocates resources based on profit
        or
        loss from operations. There are no material inter-segment sales or transfers.
        Net interest income is used as the basis for performance evaluation rather
        than
        its components, total interest income and total interest expense. The accounting
        policies used by each reportable segment are the same as those discussed
        in Note
        1 to the Consolidated Financial Statements included in the Corporation’s Form
        10-K for the year ended December 31, 2006. All costs, except corporate
        administration and income taxes, have been allocated to the reportable segments.
        Therefore, combined amounts agree to the consolidated totals (in
        thousands).
 
 **Alabama**
                **Region**
              
              **Florida**
                **Region**
              
              **Total
                  Alabama and**
                **Florida**
              
              **Administrative**
                **and
                  Other**
              
              **Superior
                  Bancorp**
                **Combined****Three
                  months ended September 30, 2007**Net
                  interest income
              
              $
              9,614
              
              $
              10,593
              
              $
              20,207
              
              $
              (301
              )
              $
              19,906Provision
                  for loan losses
              
              
              1,794
              
              
              837
              
              
              2,631
              
              
              (1,452
              )
              
              1,179Noninterest
                  income
              
              
              1,851
              
              
              490
              
              
              2,341
              
              
              2,583
              
              
              4,924Noninterest
                  expense
              
              
              6,116
              
              
              3,962
              
              
              10,078
              
              
              11,212
              
              
              21,290Operating
                  profit (loss)
              
              $
              3,555
              
              $
              6,284
              
              $
              9,839
              
              $
              (7,478
              )
              
              2,361Income
                  tax expense
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              911Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              1,450Total
                  assets
              
              $
              1,043,044
              
              $
              1,126,161
              
              $
              2,169,205
              
              $
              733,586
              
              $
              2,902,791**Three
                  months ended September 30, 2006**Net
                  interest income
              
              $
              6,460
              
              $
              6,239
              
              $
              12,699
              
              $
              (1,784
              )
              $
              10,915Provision
                  for loan losses
              
              
              587
              
              
              263
              
              
              850
              
              
              (300
              )
              
              550Noninterest
                  income
              
              
              1,063
              
              
              266
              
              
              1,329
              
              
              1,491
              
              
              2,820Noninterest
                  expense
              
              
              3,516
              
              
              1,836
              
              
              5,352
              
              
              6,854
              
              
              12,206Operating
                  profit (loss)
              
              $
              3,420
              
              $
              4,406
              
              $
              7,826
              
              $
              (6,847
              )
              
              979Income
                  tax expense
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              166Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              813Total
                  assets
              
              $
              553,735
              
              $
              821,111
              
              $
              1,374,846
              
              $
              461,252
              
              $
              1,836,098**Nine
                  months ended September 30, 2007**Net
                  interest income
              
              $
              28,010
              
              $
              27,145
              
              $
              55,155
              
              $
              296
              
              $
              55,451Provision
                  for loan losses
              
              
              2,832
              
              
              1,187
              
              
              4,019
              
              
              (1,135
              )
              
              2,884Noninterest
                  income
              
              
              5,262
              
              
              1,152
              
              
              6,414
              
              
              7,135
              
              
              13,549Noninterest
                  expense
              
              
              18,483
              
              
              10,060
              
              
              28,543
              
              
              28,829
              
              
              57,372Operating
                  profit (loss)
              
              $
              11,957
              
              $
              17,050
              
              $
              29,007
              
              $
              (20,263
              )
              
              8,744Income
                  tax expense
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3,027Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              5,717**Nine
                  months ended September 30, 2006**Net
                  interest income
              
              $
              18,249
              
              $
              17,728
              
              $
              35,977
              
              $
              (4,645
              )
              $
              31,332Provision
                  for loan losses
              
              
              2,168
              
              
              448
              
              
              2,616
              
              
              (766
              )
              
              1,850Noninterest
                  income
              
              
              2,995
              
              
              762
              
              
              3,757
              
              
              4,460
              
              
              8,217Noninterest
                  expense
              
              
              9,399
              
              
              4,284
              
              
              13,683
              
              
              20,056
              
              
              33,739Operating
                  profit (loss)
              
              $
              9,677
              
              $
              13,758
              
              $
              23,435
              
              $
              (19,475
              )
              
              3,960Income
                  tax expense
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,022Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              2,938
 
 8
 
 **Note
        5 — Net Income per Common Share**
 
 The
        following table shows the computation of basic and diluted net income per
        common
        share (in thousands, except per share amounts):
 
 **Three
                  Months Ended**
                **September
                  30,**
              
              **Nine
                  Months Ended**
                **September
                  30,****2007**
              
              **2006**
              
              **2007**
              
              **2006**Numerator:For
                  basic and diluted, net income
              
              $
              1,450
              
              $
              813
              
              $
              5,717
              
              $
              2,938Denominator:For
                  basic, weighted average common shares outstanding
              
              
              38,773
              
              
              22,234
              
              
              35,903
              
              
              20,810Effect
                  of dilutive stock options and restricted stock
              
              
              309
              
              
              615
              
              
              466
              
              
              634Average
                  diluted common shares outstanding
              
              
              39,082
              
              
              22,849
              
              
              36,369
              
              
              21,444Basic
                  net income per common share
              
              $
              .04
              
              $
              .04
              
              $
              .16
              
              $
              .14Diluted
                  net income per common share
              
              $
              .04
              
              $
              .04
              
              $
              .16
              
              $
              .14
 
 **Note
        6 — Comprehensive Income**
 
 Total
        comprehensive income was $3,358,000 and $6,201,000 for the three- and nine-month
        periods ended September 30, 2007, respectively, and $3,308,000 and $3,027,000
        for the three- and nine-month periods ended September 30, 2006, respectively.
        Total comprehensive income consists of net income and the unrealized gain
        or
        loss on the Corporation’s available-for-sale investment securities portfolio
        arising during the period.
 
 **Note
        7 — Income Taxes**
 
 The
        effective tax rate increased in the three- and nine- month periods ended
        September 30, 2007 primarily as a result of higher levels of pre-tax income,
        the
        recognition of a taxable gain from the exchange of certain single-premium
        life
        insurance policies and the recapture of tax credits related to the sale of
        condominium units. The difference in the effective tax rate in the nine months
        ended September 30, 2007 and 2006 and the blended federal statutory rate
        of 34%
        and state tax rates of 5% and 6% is due primarily to tax-exempt income from
        investments and insurance policies. The Corporation adopted the provisions
        of
        FIN 48 as of January 1, 2007, the effect of which is described in Note
        2.
 
 **Note
        8 — Stockholders’ Equity**
 
 *Stock
        Repurchase Plan*
 
 The
        Corporation announced in June 2007 that the Board of Directors had approved
        the
        repurchase of up to 1,000,000 shares of the Corporation’s outstanding common
        stock. During the quarter ended September 30, 2007, the Corporation purchased
        1,000,000 shares of then outstanding stock at an average price of $9.22 per
        share, which have been recorded, at cost, as treasury stock in the statement
        of
        financial condition. The shares were purchased in the open market through
        negotiated or block transactions and were not repurchased from the Corporations
        management team or other insiders.
 
 The
        Corporation announced in October 2007, that the Board of Directors approved
        the
        purchase of an additional 1,000,000 shares of its outstanding common stock
        beginning on or after November 2, 2007. The shares may be purchased in the
        open
        market through negotiated or block transactions. The Corporation does not
        intend
        to repurchase any shares from its management team or other insiders. This
        stock
        repurchase program does not obligate the Corporation to acquire any specific
        number of shares and may be suspended or discontinued at any time.
 
 *Termination
        of Superior ESOP*
 
 Effective
        August 31, 2007, the Corporation terminated the Superior Bancorp Employee
        Stock
        Ownership Plan (the “ESOP”). The ESOP was leveraged, and a promissory note
        existed between the ESOP and the Corporation that had a remaining balance
        of
        $1,165,000 at the termination date. The promissory note was satisfied by
        the
        transfer from the ESOP to the Corporation of 127,469 unallocated shares of
        Corporation common stock valued at a price of $9.14 per share, the closing
        price
        that day. The Corporation transferred these shares during the third quarter
        of
        2007 to treasury stock at current market value from the unallocated ESOP
        shares
        account. The remaining 17,178 unallocated shares were committed to be allocated
        to the participants’ accounts, and, as a result, the Corporation recognized
        additional compensation expense during the third quarter of 2007 of
        approximately $158,000.
  The
        Corporation still sponsors an additional, internally
        leveraged, ESOP as a result of its merger with Community.
  9
  *Stock
        Incentive Plan*
 
 The
        Corporation has established a stock incentive plan for directors and certain
        key
        employees that provides for the granting of restricted stock and incentive
        and
        nonqualified options to purchase up to 2,500,000 shares of the Corporation’s
        common stock. The compensation committee of the Board of Directors determines
        the terms of the restricted stock and options granted. All options granted
        have
        a maximum term of ten years from the grant date, and the option price per
        share
        of options granted cannot be less than the fair market value of the
        Corporation’s common stock on the grant date. Some of the options granted under
        the plan in the past vested over a five-year period, while others vested
        based
        on certain benchmarks relating to the trading price of the Corporation’s common
        stock, with an outside vesting date of five years from the date of grant.
        More
        recent grants have followed this benchmark-vesting formula.
 
 During
        the first quarter of 2005, the Corporation granted 1,690,937 options to the
        new
        management team. These options have exercise prices ranging from $8.17 to
        $9.63
        per share and were granted outside of the stock incentive plan as part of
        the
        inducement package for new management. These shares are included in the table
        below.
 
 The
        fair
        value of each option award is estimated on the date of grant based upon the
        Black-Scholes pricing model that uses the assumptions noted in the following
        table. The risk-free interest rate is based on the implied yield on U.S.
        Treasury zero-coupon issues with a remaining term equal to the expected term.
        Expected volatility has been estimated based on historical data. The expected
        term has been estimated based on the five-year vesting date and change of
        control provisions. The Corporation used the following weighted-average
        assumptions for the nine-month periods ended September 30, 2007 and
        2006:
 
 **2007**
              
              **2006**Risk
                  free interest rate
              
              
              4.49
              %
              
              4.54
              %Volatility
                  factor
              
              
              29.33
              %
              
              30.16
              %Weighted
                  average life of options (in years)
              
              
              5.00
              
              
              5.00Dividend
                  yield
              
              
              0.00
              %
              
              0.00
              %
 
 A
        summary
        of stock option activity as of September 30, 2007 and changes during the
        nine
        months then ended is shown below:
 
 **Number**
              
              **Weighted-**
                **Average**
                **Exercise**
                **Price**
              
              **Weighted-**
                **Average**
                **Remaining**
                **Contractual**
                **Term**
              
              **Aggregate**
                **Intrinsic
                  Value**Under
                  option, January 1, 2007
              
              
              3,042,597
              
              $
              8.07Granted
              
              
              271,596
              
              
              10.09Exercised
              
              
              (85,000
              )
              
              (6.37
              )Forfeited
              
              
              (18,500
              )
              
              (10.46
              )Under
                  option, September 30, 2007
              
              
              3,210,693
              
              $
              8.27
              
              
              6.95
              
              $
              2,903,419Exercisable
                  at end of period
              
              
              2,770,097
              
              $
              7.94
              
              
              5.66
              
              $
              2,903,419Weighted-average
                  fair value per option of options granted during the period
              
              $
              3.45
 
 The
        total
        intrinsic value of options exercised during the three- and nine-month periods
        ended September 30, 2007 was $266,000 and $287,000, respectively. The total
        intrinsic value of options exercised during the three- and nine-month periods
        ended September 30, 2006 was $26,000 and $767,000, respectively. As of September
        30, 2007, there was $1,125,000 of total unrecognized compensation expense
        related to the unvested awards. This expense will be recognized over a 25-to
        30-month period unless the shares vest earlier based on achievement of benchmark
        trading price levels. During the three- and nine-month periods ended September
        30, 2007, the Corporation recognized approximately $164,000 and $308,000,
        respectively, in compensation expense related to options granted. During
        the
        three- and nine-month periods ended September 30, 2006, the Corporation
        recognized approximately $41,000 and $88,000, respectively, in compensation
        expense related to options granted.
 
 10
  **Note
        9 - Property Classified as Held-for-Sale**
 
 During
        the second quarter of 2007, management committed to a plan to sell real estate
        that is no longer used in the Corporation’s operations. The real estate consists
        of two groups. The first group contains the former corporate headquarters
        and
        administrative office facilities of Community in Blountsville, Alabama, and
        the
        second group consists of seven condominium units located in the John Hand
        Building in downtown Birmingham, Alabama, where the Corporation’s headquarters
        and operations center are housed.
 
 Management
        committed to the sale of the Community property in Blountsville because the
        size
        and location of the facility does not meet the Corporation’s current needs or
        future expansion plans. Management expects to sell the property within the
        next
        12 months to an unrelated party. The property’s current carrying value, included
        in other assets, is $4,292,000, which approximates its market value. Management
        is in the process of obtaining a final estimate of fair value which, if
        different, will be adjusted through the final allocation of Community’s purchase
        price (See Note 3).
 
 Management
        committed to the sale of the condominium units because the rental operations
        are
        not a part of the Corporation’s long-term strategy. Management expects to sell
        the units within the next 12 months. The current carrying value of the
        condominiums, included in other assets, is $1,992,000, which is lower than
        the
        current market price.
 
 Both
        groups of assets are included as part of the administrative reporting unit.
 
 **Note
        10- Junior Subordinated Debentures Owed to Unconsolidated Subsidiary
        Trusts**
 
 On
        July
        19, 2007, the Corporation issued approximately $22,000,000 in aggregate
        principal amount of Trust Preferred Securities and a like amount of related
        subordinated debentures through the Corporation’s wholly-owned, unconsolidated
        subsidiary trust, Superior Capital Trust I. The Trust Preferred Securities
        and
        subordinated debentures bear interest at a floating rate of three-month LIBOR
        plus 1.33% that is payable quarterly. The Trust Preferred Securities, which
        may
        be redeemed on or after September 15, 2012, will mature on September 15,
        2037.
 
 On
        July
        25, 2007, the Corporation completed its redemption of approximately $16,000,000
        in aggregate outstanding principal amount of Trust Preferred Securities and
        related six-month LIBOR plus 3.75% junior subordinated debentures due July
        25,
        2031, both of which were issued by the Corporation’s wholly-owned,
        unconsolidated subsidiary trust, TBC Capital Statutory Trust III. The
        Corporation called the securities for redemption effective July 25, 2007
        at a
        redemption price equal to 106.15% of par. The Corporation incurred a loss
        of
        approximately $1,469,000 ($925,000, net of tax, or $.02 per share), during
        the
        third quarter of 2007 relating to the redemption of the outstanding Trust
        Preferred Securities.
 
 The
        remaining proceeds from the issuance of the new trust preferred securities
        were
        used in the stock repurchase program and for other corporate
        purposes.
 
 **Note
        11- Sale-Leaseback Transactions**
 
 On
        July
        24, 2007, the Corporation’s banking subsidiary sold a branch office building in
        Huntsville, Alabama to a limited liability company, of which one of the
        Corporation’s directors is a member, for $3,000,000. The limited liability
        company then leased the building back to the banking subsidiary. The initial
        term of the lease is 14 years and may be renewed, at the banking subsidiary’s
        option, for three additional terms of five years each. The amount of the
        monthly
        lease payments to be made by Superior Bank is $19,500 for the first year
        of the
        lease and increases annually until it reaches $26,881 per month in year 14.
        Annual rent escalations associated with this lease are being accounted for
        on a
        straight-line basis over 14 years. Rent for the renewal terms is to be
        determined based on appraisals of the property. No gain or loss was recognized
        on this transaction, which was entered into in the ordinary course of business
        and is being accounted for as an operating lease.
 
 On
        September 7, 2007, the Corporation’s banking subsidiary sold an additional
        branch office building in Huntsville, Alabama to an unrelated party for
        $2,445,000. The purchaser then leased the building back to the banking
        subsidiary. The initial term of the lease is 15 years and may be renewed,
        at the
        banking subsidiary’s option, for three additional terms of five years each. The
        amount of the monthly lease payments to be made by the banking subsidiary
        is
        $11,225 for the initial term. Rent for the renewal terms is to be determined
        based on future appraisals of the property. No gain or loss was recognized
        on
        this transaction, which was entered into in the ordinary course of business
        and
        is being accounted for as an operating lease.
 
 11
 
 **ITEM
        2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS**  **OF
        OPERATIONS**
 
 **Basis
        of Presentation**
 
 The
        following is a discussion and analysis of our September 30, 2007 condensed
        consolidated financial condition and results of operations for the three-
        and
        nine-month periods ended September 30, 2007 and 2006. All significant
        intercompany accounts and transactions have been eliminated. Our accounting
        and
        reporting policies conform to generally accepted accounting
        principles.
 
 This
        information should be read in conjunction with our unaudited condensed
        consolidated financial statements and related notes appearing elsewhere in
        this
        report and the audited consolidated financial statements and related notes
        and
“Management’s Discussion and Analysis of Financial Condition and Results of
        Operations” appearing in our Annual Report on Form 10-K for the year ended
        December 31, 2006.
 
 **Recent
        Developments**
 
 On
        July
        27, 2007, we announced we had completed our merger with People’s Community
        Bancshares, Inc. (“People’s”). People’s was the holding company for People’s
        Community Bank of the West Coast, a Florida state bank with three branches
        in
        Sarasota and Manatee Counties in Florida. People’s had total assets of
        approximately $321 million, total loans of approximately $259 million and
        total
        deposits of approximately $245 million. Under the terms of the merger agreement,
        we issued 2.9036 shares for each share of People’s stock, or approximately 6.6
        million shares of our common stock. (See Note 3 to the Condensed Consolidated
        Financial Statements.)
 
 **Overview**
 
 Our
        principal subsidiary is Superior Bank, a federal savings bank headquartered
        in
        Birmingham, Alabama, which operates 66 banking offices from Huntsville, Alabama
        to Venice, Florida and 20 consumer finance company offices in Alabama. Our
        Florida franchise currently has 26 branches. Superior Bank continues its
        de novo
        branch strategy with eight of 20 planned new branches already opened in key
        Alabama and Florida markets contributing approximately $102 million of core
        deposits as of September 30, 2007. For the nine months ended September 30,
        2007,
        non interest expense associated with the new branches was $2.0 million, or
        approximately a 2% premium on deposits. Nine new branches are scheduled to
        open
        during the fourth quarter of 2007 and three branches in early 2008 in Alabama
        and Florida. Superior Bank will invest approximately $25 to $30 million toward
        its de novo expansion program.
 
 Our
        total
        assets were $2.903 billion at September 30, 2007, an increase of $462 million,
        or 18.9%, from $2.441 billion as of December 31, 2006. Our total loans, net
        of
        unearned income, were $2.039 billion at September 30, 2007, an increase of
        $400
        million, or 24.4%, from $1.639 billion as of December 31, 2006. Our total
        deposits were $2.150 billion at September 30, 2007, an increase of $279 million,
        or 14.9%, from $1.871 billion as of December 31, 2006. Our total stockholders’
equity was $347 million at September 30, 2007, an increase of $71 million,
        or
        25.8%, from $276 million as of December 31, 2006. Our acquisition of People’s
        contributed significantly to this growth. As of September 30, 2007, the
        locations added by the People’s acquisition had total assets of $364 million,
        total loans of $247 million and total deposits of $241 million.
 
 The
        primary source of our revenue is net interest income, which is the difference
        between income earned on interest-earning assets, such as loans and investments,
        and interest paid on interest-bearing liabilities, such as deposits and
        borrowings. Our results of operations are also affected by the provision
        for
        loan losses and other noninterest expenses such as salaries and benefits,
        occupancy expenses and provision for income taxes. The effects of these
        noninterest expenses are partially offset by noninterest sources of revenue
        such
        as service charges and fees on deposit accounts and mortgage banking income.
        Our
        volume of business is influenced by competition in our markets and overall
        economic conditions, including such factors as market interest rates, business
        spending and consumer confidence.
  12
  **Results
        of Operations**
 
 Net
        income increased $637,000, or 78.4%, to $1.45 million for the three months
        ended
        September 30, 2007 (third quarter of 2007), from $813,000 for the three months
        ended September 30, 2006 (third quarter of 2006). Net income increased $2.78
        million, or 94.6%, to $5.72 million for the nine months ended September 30,
        2007, from $2.94 million for the nine months ended September 30, 2006. The
        following table presents key earnings data for the periods
        indicated:
 
 **Three
                  Months**
                **Ended
                  September 30,**
              
              **Nine
                  Months**
                **Ended
                  September 30,****2007**
              
              **2006**
              
              **2007**
              
              **2006**(Dollars
                  in thousands, except per share data)*Superior
                  Bancorp and Subsidiaries*Net
                  income
              
              $
              1,450
              
              $
              813
              
              $
              5,717
              
              $
              2,938Net
                  income per common share (diluted)
              
              
              0.04
              
              
              0.04
              
              
              0.16
              
              
              0.14Net
                  interest margin
              
              
              3.38
              %
              
              2.94
              %
              
              3.43
              %
              
              3.10
              %Net
                  interest spread
              
              
              3.03
              
              
              2.71
              
              
              3.10
              
              
              2.88Return
                  on average assets
              
              
              0.21
              
              
              0.20
              
              
              0.30
              
              
              0.26Return
                  on average tangible assets
              
              
              0.22
              
              
              0.20
              
              
              0.32
              
              
              0.26Return
                  on average stockholders’ equity
              
              
              1.75
              
              
              2.46
              
              
              2.60
              
              
              3.44Return
                  on average tangible equity
              
              
              3.61
              
              
              3.77
              
              
              5.00
              
              
              3.87Book
                  value per share
              
              $
              8.63
              
              $
              6.84
              
              $
              8.63
              
              $
              6.84Tangible
                  book value per share
              
              
              3.98
              
              
              4.56
              
              
              3.98
              
              
              4.56*Banking
                  Subsidiary, Superior Bank*Net
                  income
              
              $
              3,700
              
              $
              1,514
              
              $
              10,144
              
              $
              5,272Return
                  on average assets
              
              
              0.54
              %
              
              0.36
              %
              
              0.54
              %
              
              0.48
              %Return
                  on average tangible assets
              
              
              0.58
              
              
              0.37
              
              
              0.57
              
              
              0.47Return
                  on average stockholders’ equity
              
              
              4.01
              
              
              4.60
              
              
              4.14
              
              
              6.19Return
                  on average tangible equity
              
              
              7.37
              
              
              6.95
              
              
              7.29
              
              
              6.94
 
 The
        increase in our net income during the third quarter and first nine months
        of
        2007 compared to the third quarter and first nine months of 2006 is primarily
        the result of an increase in net interest income and noninterest income offset
        by an increase in noninterest expenses. The increase in each of these components
        is primarily attributable to our de novo branch strategy and our acquisitions
        of
        People’s in the third quarter of 2007, and Kensington and Community in the third
        and fourth quarters, respectively, of 2006.
 
 *Net
        Interest Income.* Net
        interest income is the difference between the income earned on interest-earning
        assets and interest paid on interest-bearing liabilities used to support
        such
        assets. The following table summarizes the changes in the components of net
        interest income for the periods indicated:
  **Increase
                      (Decrease) in****Third
                      Quarter 2007 vs 2006**
                  
                  **First
                      Nine Months of 2007 vs 2006****Average**
                  
                  **Income/**
                  
                  **Yield/**
                  
                  **Average**
                  
                  **Income/**
                  
                  **Yield/****Balance**
                  
                  **Expense**
                  
                  **Rate**
                  
                  **Balance**
                  
                  **Expense**
                  
                  **Rate****(Dollars
                      in thousands)****ASSETS**Interest-earning
                      assets:Loans,
                      net of unearned income
                  
                  $
                  786,304
                  
                  $
                  17,120
                  
                  
                  0.25
                  %
                  $
                  701,371
                  
                  $
                  47,745
                  
                  
                  0.53
                  %Investment
                      securitiesTaxable
                  
                  
                  67,475
                  
                  
                  1,023
                  
                  
                  0.22
                  
                  
                  88,422
                  
                  
                  4,048
                  
                  
                  0.57Tax-exempt
                  
                  
                  16,038
                  
                  
                  257
                  
                  
                  0.22
                  
                  
                  8,232
                  
                  
                  408
                  
                  
                  0.37Total
                      investment securities
                  
                  
                  83,513
                  
                  
                  1,280
                  
                  
                  0.26
                  
                  
                  96,654
                  
                  
                  4,456
                  
                  
                  0.57Federal
                      funds sold
                  
                  
                  (3,720
                  )
                  
                  (51
                  )
                  
                  (0.07
                  )
                  
                  3,259
                  
                  
                  146
                  
                  
                  0.28Other
                      investments
                  
                  
                  7,948
                  
                  
                  279
                  
                  
                  1.33
                  
                  
                  13,407
                  
                  
                  886
                  
                  
                  (2.18
                  )Total
                      interest -earning assets
                  
                  $
                  874,045
                  
                  
                  18,628
                  
                  
                  0.40
                  
                  $
                  814,691
                  
                  
                  53,233
                  
                  
                  0.58
  13
 **Increase
                        (Decrease) in****Third
                        Quarter 2007 vs 2006**
                    
                    **First
                        Nine Months of 2007 vs 2006****Average**
                    
                    **Income/**
                    
                    **Yield/**
                    
                    **Average**
                    
                    **Income/**
                    
                    **Yield/****Balance**
                    
                    **Expense**
                    
                    **Rate**
                    
                    **Balance**
                    
                    **Expense**
                    
                    **Rate****(Dollars
                        in thousands)**Interest-bearing
                        liabilities:Demand
                        deposits
                    
                    $
                    243,337
                    
                    
                    2,170
                    
                    
                    0.20
                    
                    $
                    214,378
                    
                    
                    7,165
                    
                    
                    0.49Savings
                        deposits
                    
                    
                    32,324
                    
                    
                    232
                    
                    
                    1.34
                    
                    
                    26,367
                    
                    
                    453
                    
                    
                    1.10Time
                        deposits
                    
                    
                    441,580
                    
                    
                    6,355
                    
                    
                    0.37
                    
                    
                    450,008
                    
                    
                    19,208
                    
                    
                    0.50Other
                        borrowings
                    
                    
                    38,360
                    
                    
                    524
                    
                    
                    0.03
                    
                    
                    24,708
                    
                    
                    1,424
                    
                    
                    0.27Subordinated
                        debentures
                    
                    
                    20,556
                    
                    
                    269
                    
                    
                    (1.84
                    )
                    
                    14,831
                    
                    
                    724
                    
                    
                    (1.03
                    )Total
                        interest-bearing liabilities
                    
                    $
                    776,157
                    
                    
                    9,550
                    
                    
                    0.08
                    
                    $
                    730,292
                    
                    
                    28,974
                    
                    
                    0.36Net
                        interest income/net interest spread
                    
                    
                    
                    
                    
                    9,078
                    
                    
                    0.32
                    %
                    
                    
                    
                    
                    24,259
                    
                    
                    0.22
                    %Net
                        yield on earning assets
                    
                    
                    
                    
                    
                    
                    
                    
                    0.44
                    %
                    
                    
                    
                    
                    
                    
                    
                    0.33
                    %Taxable
                        equivalent adjustment:Investment
                        securities
                    
                    
                    
                    
                    
                    87
                    
                    
                    
                    
                    
                    
                    
                    
                    139Net
                        interest income
                    
                    
                    
                    
                    $
                    8,991
                    
                    
                    
                    
                    
                    
                    
                    $
                    24,120
 
 The
        following table depicts, on a taxable equivalent basis for the periods
        indicated, certain information related to our average balance sheet and our
        average yields on assets and average costs of liabilities. Average yields
        are
        calculated by dividing income or expense by the average balance of the
        corresponding assets or liabilities. Average balances have been calculated
        on a
        daily basis.
 
 **Three
                  Months Ended September 30,****2007**
              
              **2006****Average**
                **Balance**
              
              **Income/**
                **Expense**
              
              **Yield/**
                **Rate**
              
              **Average**
                **Balance**
              
              **Income/**
                **Expense**
              
              **Yield/**
                **Rate****(Dollars
                  in thousands)****ASSETS**Interest-earning
                  assets:Loans,
                  net of unearned income (1)
              
              $
              1,944,252
              
              $
              40,486
              
              
              8.26
              %
              $
              1,157,948
              
              $
              23,366
              
              
              8.01
              %Investment
                  securitiesTaxable
              
              
              326,585
              
              
              4,271
              
              
              5.19
              
              
              259,110
              
              
              3,248
              
              
              4.97Tax-exempt
                  (2)
              
              
              26,638
              
              
              418
              
              
              6.23
              
              
              10,600
              
              
              161
              
              
              6.01Total
                  investment securities
              
              
              353,223
              
              
              4,689
              
              
              5.27
              
              
              269,710
              
              
              3,409
              
              
              5.01Federal
                  funds sold
              
              
              6,792
              
              
              91
              
              
              5.29
              
              
              10,512
              
              
              142
              
              
              5.36Other
                  investments
              
              
              47,936
              
              
              875
              
              
              7.24
              
              
              39,988
              
              
              596
              
              
              5.91Total
                  interest-earning assets
              
              
              2,352,203
              
              
              46,141
              
              
              7.78
              
              
              1,478,158
              
              
              27,513
              
              
              7.38Noninterest-earning
                  assets:Cash
                  and due from banks
              
              
              44,921
              
              
              
              
              
              
              
              
              32,340Premises
                  and equipment
              
              
              91,727
              
              
              
              
              
              
              
              
              62,702Accrued
                  interest and other assets
              
              
              272,138
              
              
              
              
              
              
              
              
              93,061Allowance
                  for loan losses
              
              
              (21,813
              )
              
              
              
              
              
              
              
              (12,832
              )Total
                  assets
              
              $
              2,739,176
              
              
              
              
              
              
              
              $
              1,653,429
  14
  **Three
                  Months Ended September 30,****2007**
              
              **2006****Average**
                **Balance**
              
              **Income/**
                **Expense**
              
              **Yield/**
                **Rate**
              
              **Average**
                **Balance**
              
              **Income/**
                **Expense**
              
              **Yield/**
                **Rate****(Dollars
                  in thousands)****LIABILITIES
                  AND STOCKHOLDERS’ EQUITY**Interest-bearing
                  liabilities:Demand
                  deposits
              
              $
              599,656
              
              $
              5,801
              
              
              3.84
              %
              $
              356,319
              
              $
              3,631
              
              
              4.04
              %Savings
                  deposits
              
              
              54,812
              
              
              265
              
              
              1.92
              
              
              22,488
              
              
              33
              
              
              0.58Time
                  deposits
              
              
              1,200,005
              
              
              15,344
              
              
              5.07
              
              
              758,425
              
              
              8,989
              
              
              4.70Other
                  borrowings
              
              
              273,579
              
              
              3,617
              
              
              5.25
              
              
              235,218
              
              
              3,093
              
              
              5.22Subordinated
                  debentures
              
              
              52,515
              
              
              1,066
              
              
              8.05
              
              
              31,959
              
              
              797
              
              
              9.89Total
                  interest-bearing liabilities
              
              
              2,180,567
              
              
              26,093
              
              
              4.75
              
              
              1,404,409
              
              
              16,543
              
              
              4.67Noninterest-bearing
                  liabilities:Demand
                  deposits
              
              
              197,977
              
              
              
              
              
              
              
              
              100,872Accrued
                  interest and other liabilities
              
              
              32,723
              
              
              
              
              
              
              
              
              16,984Stockholders’
                  equity
              
              
              327,909
              
              
              
              
              
              
              
              
              131,163Total
                  liabilities and stockholders’ equity
              
              $
              2,739,176
              
              
              
              
              
              
              
              $
              1,653,428Net
                  interest income/net interest spread
              
              
              
              
              
              20,048
              
              
              3.03
              %
              
              
              
              
              10,970
              
              
              2.71
              %Net
                  yield on earning assets
              
              
              
              
              
              
              
              
              3.38
              %
              
              
              
              
              
              
              
              2.94
              %Taxable
                  equivalent adjustment:Investment
                  securities (2)
              
              
              
              
              
              142
              
              
              
              
              
              
              
              
              55Net
                  interest income
              
              
              
              
              $
              19,906
              
              
              
              
              
              
              
              $
              10,915
 ____________
 (1)
              Nonaccrual
                  loans are included in loans, net of unearned income. No adjustment
                  has
                  been made for these loans in the calculation of
                  yields.
 
 (2)
              Interest
                  income and yields are presented on a fully taxable equivalent basis
                  using
                  a tax rate of 34%.
 
 The
        following table sets forth, on a taxable equivalent basis, the effect that
        the
        varying levels of interest-earning assets and interest-bearing liabilities
        and
        the applicable rates have had on changes in net interest income for the
        three-month periods ended September 30, 2007 and 2006.
  **Three
                    Months Ended September 30,**
                  **2007
                    vs. 2006****(1)****Increase**
                
                **Changes
                    Due To****(Decrease)**
                
                **Rate**
                
                **Volume****(Dollars
                    in thousands)**Increase
                    (decrease) in:Income
                    from interest-earning assets:Interest
                    and fees on loans
                
                $
                17,120
                
                $
                753
                
                $
                16,367Interest
                    on securities:Taxable
                
                
                1,023
                
                
                149
                
                
                874Tax-exempt
                
                
                257
                
                
                4
                
                
                253Interest
                    on federal funds
                
                
                (51
                )
                
                (1
                )
                
                (50
                )Interest
                    on other investments
                
                
                279
                
                
                148
                
                
                131Total
                    interest income
                
                
                18,628
                
                
                1,053
                
                
                17,575Expense
                    from interest-bearing liabilities:Interest
                    on demand deposits
                
                
                2,170
                
                
                (188
                )
                
                2,358Interest
                    on savings deposits
                
                
                232
                
                
                143
                
                
                89Interest
                    on time deposits
                
                
                6,355
                
                
                757
                
                
                5,598Interest
                    on other borrowings
                
                
                524
                
                
                18
                
                
                506Interest
                    on subordinated debentures
                
                
                269
                
                
                (169
                )
                
                438Total
                    interest expense
                
                
                9,550
                
                
                561
                
                
                8,989Net
                    interest income
                
                $
                9,078
                
                $
                492
                
                $
                8,586
 ____________
 (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.
  15
  The
        following table depicts, on a taxable equivalent basis for the periods
        indicated, certain information related to our average balance sheet and our
        average yields on assets and average costs of liabilities. Average yields
        are
        calculated by dividing income or expense by the average balance of the
        corresponding assets or liabilities. Average balances have been calculated
        on a
        daily basis.
 
 **Nine
                  Months Ended September 30,****2007**
              
              **2006****Average**
                **Balance**
              
              **Income/**
                **Expense**
              
              **Yield/**
                **Rate**
              
              **Average**
                **Balance**
              
              **Income/**
                **Expense**
              
              **Yield/**
                **Rate****(Dollars
                  in thousands)****ASSETS**Interest-earning
                  assets:Loans,
                  net of unearned income (1)
              
              $
              1,769,343
              
              $
              109,783
              
              
              8.30
              %
              $
              1,067,972
              
              $
              62,038
              
              
              7.77
              %Investment
                  securitiesTaxable
              
              
              327,981
              
              
              12,805
              
              
              5.22
              
              
              239,560
              
              
              8,757
              
              
              4.89Tax-exempt
                  (2)
              
              
              17,698
              
              
              822
              
              
              6.21
              
              
              9,466
              
              
              414
              
              
              5.84Total
                  investment securities
              
              
              345,679
              
              
              13,627
              
              
              5.27
              
              
              249,026
              
              
              9,171
              
              
              4.92Federal
                  funds sold
              
              
              9,135
              
              
              373
              
              
              5.47
              
              
              5,876
              
              
              228
              
              
              5.19Other
                  investments
              
              
              47,214
              
              
              2,305
              
              
              6.53
              
              
              33,805
              
              
              1,418
              
              
              5.61Total
                  interest-earning assets
              
              
              2,171,371
              
              
              126,088
              
              
              7.76
              
              
              1,356,679
              
              
              72,855
              
              
              7.18Noninterest-earning
                  assets:Cash
                  and due from banks
              
              
              43,965
              
              
              
              
              
              
              
              
              24,927Premises
                  and equipment
              
              
              93,975
              
              
              
              
              
              
              
              
              58,823Accrued
                  interest and other assets
              
              
              242,629
              
              
              
              
              
              
              
              
              84,416Allowance
                  for loan losses
              
              
              (19,871
              )
              
              
              
              
              
              
              
              (12,394
              )Total
                  assets
              
              $
              2,532,069
              
              
              
              
              
              
              
              $
              1,512,451**LIABILITIES
                  AND STOCKHOLDERS’ EQUITY**Interest-bearing
                  liabilities:Demand
                  deposits
              
              $
              545,465
              
              $
              15,134
              
              
              3.71
              %
              $
              331,086
              
              $
              7,969
              
              
              3.22
              %Savings
                  deposits
              
              
              47,519
              
              
              504
              
              
              1.42
              
              
              21,152
              
              
              51
              
              
              0.32Time
                  deposits
              
              
              1,135,872
              
              
              42,021
              
              
              4.95
              
              
              685,864
              
              
              22,813
              
              
              4.45Other
                  borrowings
              
              
              242,243
              
              
              9,636
              
              
              5.32
              
              
              217,535
              
              
              8,212
              
              
              5.05Subordinated
                  debentures
              
              
              46,790
              
              
              3,062
              
              
              8.75
              
              
              31,959
              
              
              2,338
              
              
              9.78Total
                  interest-bearing liabilities
              
              
              2,017,889
              
              
              70,357
              
              
              4.66
              
              
              1,287,596
              
              
              41,383
              
              
              4.30Noninterest-bearing
                  liabilities:Demand
                  deposits
              
              
              185,704
              
              
              
              
              
              
              
              
              95,376Accrued
                  interest and other liabilities
              
              
              33,946
              
              
              
              
              
              
              
              
              15,386Stockholders’
                  equity
              
              
              294,530
              
              
              
              
              
              
              
              
              114,093Total
                  liabilities and stockholders’ equity
              
              $
              2,532,069
              
              
              
              
              
              
              
              $
              1,512,451Net
                  interest income/net interest spread
              
              
              
              
              
              55,731
              
              
              3.10
              %
              
              
              
              
              31,472
              
              
              2.88
              %Net
                  yield on earning assets
              
              
              
              
              
              
              
              
              3.43
              %
              
              
              
              
              
              
              
              3.10
              %Taxable
                  equivalent adjustment:Investment
                  securities (2)
              
              
              
              
              
              280
              
              
              
              
              
              
              
              
              140Net
                  interest income
              
              
              
              
              $
              55,451
              
              
              
              
              
              
              
              $
              31,332
 ____________
 (1)
              Nonaccrual
                  loans are included in loans, net of unearned income. No adjustment
                  has
                  been made for these loans in the calculation of
                  yields.
 
 (2)
              Interest
                  income and yields are presented on a fully taxable equivalent basis
                  using
                  a tax rate of 34%.
  16
  The
        following table sets forth, on a taxable equivalent basis, the effect which
        the
        varying levels of interest-earning assets and interest-bearing liabilities
        and
        the applicable rates have had on changes in net interest income for the
        nine-month periods ended September 30, 2007 and 2006.
 
 **Nine
                  Months Ended September 30,**
                **2007
                  vs. 2006****(1)****Increase**
              
              **Changes
                  Due To****(Decrease)**
              
              **Rate**
              
              **Volume****(Dollars
                  in thousands)**Increase
                  (decrease) in:Income
                  from interest-earning assets:Interest
                  and fees on loans
              
              $
              47,745
              
              $
              4,492
              
              $
              43,253Interest
                  on securities:Taxable
              
              
              4,048
              
              
              626
              
              
              3,422Tax-exempt
              
              
              408
              
              
              28
              
              
              380Interest
                  on federal funds
              
              
              146
              
              
              13
              
              
              133Interest
                  on other investments
              
              
              886
              
              
              259
              
              
              627Total
                  interest income
              
              
              53,233
              
              
              5,418
              
              
              47,815Expense
                  from interest-bearing liabilities:Interest
                  on demand deposits
              
              
              7,165
              
              
              1,364
              
              
              5,801Interest
                  on savings deposits
              
              
              453
              
              
              332
              
              
              121Interest
                  on time deposits
              
              
              19,208
              
              
              2,808
              
              
              16,400Interest
                  on other borrowings
              
              
              1,424
              
              
              456
              
              
              968Interest
                  on subordinated debentures
              
              
              724
              
              
              (267
              )
              
              991Total
                  interest expense
              
              
              28,974
              
              
              4,693
              
              
              24,281Net
                  interest income
              
              $
              24,259
              
              $
              725
              
              $
              23,534
 ____________
 
 (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.
 
 *Noninterest
        income* .
        Noninterest income increased $2.1 million and $5.3 million, or 74.6% and
        64.9%,
        to $4.9 million and $13.5 million for the third quarter and first nine months
        of
        2007, respectively, from $2.8 million and $8.2 million for the third quarter
        and
        first nine months of 2006, respectively. The components of noninterest income
        for the third quarter and first nine months of 2007 and 2006 consisted of
        the
        following:
 
 **Three
                  Months Ended September 30,****2007**
              
              **2006**
              
              **%
                  Change****(Dollars
                  in thousands)**Service
                  charges and fees on deposits
              
              $
              2,090
              
              $
              1,137
              
              
              83.82
              %Mortgage
                  banking income
              
              
              970
              
              
              919
              
              
              5.55Change
                  in fair value of derivatives
              
              
              202
              
              
              6
              
              
              3,266.67Increase
                  in cash surrender value of life insurance
              
              
              481
              
              
              443
              
              
              8.58Other
                  noninterest income
              
              
              1,181
              
              
              315
              
              
              274.92Total
              
              $
              4,924
              
              $
              2,820
              
              
              74.61
              %
 
 **Nine
                  Months Ended September 30,****2007**
              
              **2006**
              
              **%
                  Change****(Dollars
                  in thousands)**Service
                  charges and fees on deposits
              
              $
              5,774
              
              $
              3,417
              
              
              68.98
              %Mortgage
                  banking income
              
              
              3,052
              
              
              2,158
              
              
              41.43Investment
                  securities gains
              
              
              242
              
              
              —
              
              
              100.00Change
                  in fair value of derivatives
              
              
              169
              
              
              43
              
              
              293.02Increase
                  in cash surrender value of life insurance
              
              
              1,381
              
              
              1,222
              
              
              13.01Other
                  noninterest income
              
              
              2,931
              
              
              1,377
              
              
              112.85Total
              
              $
              13,549
              
              $
              8,217
              
              
              64.89
              %
 
 The
        increases in service charges on deposits and fees are primarily attributable
        to
        an increased customer base resulting from our acquisitions. The increase
        in
        mortgage banking income is the result of an increase in the volume of
        originations. The increase in other noninterest income is primarily due to
        increases in credit life insurance commissions, brokerage commissions and
        ATM
        network fees. Our credit life insurance commissions have increased due to
        the
        acquisition of a consumer finance company subsidiary as part of the Community
        purchase. The increase in brokerage commissions is the result of increased
        volume in our investment subsidiary, and the increase in ATM network fees
        is the
        result of increased volume related to new customers and additional ATM
        locations, acquired through acquisitions or new branch locations.
  17
  *Noninterest
        expenses* .
        Noninterest expenses increased $9 million, or 74.42%, to $21.3 million for
        the
        third quarter of 2007 from $12.2 million for the third quarter of 2006. This
        increase is primarily due to our acquisitions, extinguishment of debt and
        the
        opening of new branch locations. Selected key ratios, as shown below, remained
        level between the periods with the efficiency ratio showing some improvement.
        Continued branch expansion is expected to put pressure on these ratios. However,
        increases in the volume of net interest income and noninterest income are
        expected to begin offsetting these costs. Noninterest expenses included the
        following for the third quarters of 2007 and 2006:
 
 **Three
                  Months Ended September 30,****2007**
              
              **2006**
              
              **%
                  Change**(Dollars
                  in thousands)**Noninterest
                  Expenses**Salaries
                  and employee benefits
              
              $
              10,724
              
              $
              6,390
              
              
              70.30
              %Occupancy
                  and equipment expense
              
              
              3,506
              
              
              1,806
              
              
              94.13Amortization
                  of intangibles
              
              
              494
              
              
              104
              
              
              375.00Loss
                  on extinguishment of debt
              
              
              1,469
              
              
              —
              
              
              —Merger-related
                  costs
              
              
              103
              
              
              350
              
              
              (70.57
              )Loss
                  on termination of ESOP
              
              
              158
              
              
              —
              
              
              —Subsidiary
                  startup costs
              
              
              —
              
              
              135
              
              
              (100.00
              )Professional
                  fees
              
              
              529
              
              
              604
              
              
              (12.42
              )Insurance
                  expense
              
              
              646
              
              
              451
              
              
              43.24Postage,
                  stationery and supplies
              
              
              508
              
              
              273
              
              
              86.08Communications
                  expense
              
              
              489
              
              
              214
              
              
              128.50Advertising
                  expense
              
              
              536
              
              
              366
              
              
              46.45Other
                  operating expense
              
              
              2,128
              
              
              1,513
              
              
              40.65Total
              
              $
              21,290
              
              $
              12,206
              
              
              74.42
              %**Selected
                  Key Ratios**Noninterest
                  income to average assets (1)
              
              
              0.67
              %
              
              0.67
              %Noninterest
                  expense to average assets (2)
              
              
              2.76
              
              
              2.70Efficiency
                  ratio (2)
              
              
              77.13
              
              
              81.49
 ____________
 (1)
              Noninterest income has been adjusted
                for the
                change in fair value of derivatives and security gains
                (losses). (2)
              Noninterest
                  expense has been adjusted for amortization of intangibles, extinguishment
                  of debt, merger-related costs, termination of ESOP and other losses
                  on the
                  sale of assets.
 
 Noninterest
        expenses increased $23.6 million, or 70.1%, to $57.4 million for the first
        nine
        months of 2007 from $33.7 million for the first nine months of 2006. This
        increase is primarily due to our acquisitions and the opening of new branch
        locations. Selected key ratios, as shown below, improved from the first nine
        months of 2006 to the first nine months of 2007. Continued branch expansion
        is
        expected to put pressure on these ratios. However, increases in the volume
        of
        net interest income and noninterest income are expected to begin offsetting
        these costs. Noninterest expenses included the following for the first nine
        months of 2007 and 2006:
 
 **Nine
                  Months Ended September 30,****2007**
              
              **2006**
              
              **%
                  Change**(Dollars
                  in thousands)**Noninterest
                  Expenses**Salaries
                  and employee benefits
              
              $
              30,959
              
              $
              18,064
              
              
              71.39
              %Occupancy
                  and equipment expense
              
              
              9,650
              
              
              5,391
              
              
              79.00Amortization
                  of intangibles
              
              
              1,102
              
              
              233
              
              
              372.96Loss
                  on extinguishment of debt
              
              
              1,469
              
              
              —
              
              
              —Merger-related
                  costs
              
              
              530
              
              
              350
              
              
              51.43Loss
                  on termination of ESOP
              
              
              158
              
              
              —
              
              
              —Subsidiary
                  startup costs
              
              
              —
              
              
              135
              
              
              (100.00
              )Professional
                  fees
              
              
              1,549
              
              
              1,860
              
              
              (16.72
              )Insurance
                  expense
              
              
              1,551
              
              
              1,311
              
              
              18.31Postage,
                  stationery and supplies
              
              
              1,682
              
              
              812
              
              
              107.14Communications
                  expense
              
              
              1,469
              
              
              587
              
              
              150.26Advertising
                  expense
              
              
              1,760
              
              
              920
              
              
              91.30Other
                  operating expense
              
              
              5,493
              
              
              4,076
              
              
              34.76Total
              
              $
              57,372
              
              $
              33,739
              
              
              70.05
              %**Selected
                  Key Ratios**Noninterest
                  income to average assets (1)
              
              
              0.69
              %
              
              0.71
              %Noninterest
                  expense to average assets (2)
              
              
              2.85
              
              
              2.88Efficiency
                  ratio (2)
              
              
              78.88
              
              
              82.52
 ____________
 (1)
              Noninterest income has been adjusted
                for the
                change in fair value of derivatives and security gains
                (losses). (2)
              Noninterest
                  expense has been adjusted for amortization of intangibles, extinguishment
                  of debt, merger-related costs, termination of ESOP and other losses
                  on the
                  sale of assets.
  18
  *Income
        tax expense* .
        We
        recognized income tax expense of $911,000 and $3.0 million for the third
        quarter
        of 2007 and first nine months of 2007, respectively, compared to $166,000
        and
        $1.0 million for the third quarter of 2006 and first nine months of 2006,
        respectively. Our effective tax rate increased in 2007 compared to 2006 due
        to
        higher levels of income, recognition of taxable gains on the exchange of
        bank-owned life insurance and the recapture of tax credits related to the
        sale
        of condominium units. The difference in the effective tax rates in the first
        nine months of 2007 and 2006 and the blended federal statutory rate of 34%
        and
        state tax rates between 5% and 6%, is primarily due to certain tax-exempt
        income
        from investments and insurance policies. We adopted the provisions of FIN
        48 as
        of January 1, 2007, the effect of which is described in Note 2 to the Condensed
        Consolidated Financial Statements.
 
 *Provision
        for Loan Losses* .
        The
        provision for loan losses represents the amount determined by management
        to be
        necessary to maintain the allowance for loan losses at a level capable of
        absorbing inherent losses in the loan portfolio. Management reviews the adequacy
        of the allowance for loan losses on a quarterly basis. The allowance for
        loan
        loss calculation is segregated into various segments that include classified
        loans, loans with specific allocations and pass rated loans. A pass rated
        loan
        is generally characterized by a very low to average risk of default and in
        which
        management perceives there is a minimal risk of loss. Loans are rated using
        an
        eight-point scale, with loan officers having the primary responsibility for
        assigning risk ratings and for the timely reporting of changes in the risk
        ratings. These processes, and the assigned risk ratings, are subject to review
        by our internal loan review function and chief credit officer. Impaired loans
        are reviewed specifically and separately under Statement of Financial Accounting
        Standards (“SFAS”) No. 114 to determine the appropriate reserve allocation.
        Management compares the investment in an impaired loan with the present value
        of
        expected future cash flows discounted at the loan’s effective interest rate, the
        loan’s observable market price, or the fair value of the collateral, if the loan
        is collateral-dependent, to determine the specific reserve allowance. To
        evaluate the overall adequacy of the allowance to absorb losses inherent
        in our
        loan portfolio, management considers historical loss experience based on
        volume
        and types of loans, trends in classifications, volume and trends in
        delinquencies and non-accruals, economic conditions and other pertinent
        information. Based on future evaluations, additional provisions for loan
        losses
        may be necessary to maintain the allowance for loan losses at an appropriate
        level. See “Financial Condition — Allowance for Loan Losses” for additional
        discussion.
 
 The
        provision for loan losses was $1.2 million for the third quarter of 2007,
        an
        increase of $629,000, or 114.4%, from $550,000 in the third quarter of 2006.
        The
        provision for loan losses was $2.9 million for the first nine months of 2007,
        an
        increase of $1.0 million, or 55.9%, from $1.9 million in the first nine months
        of 2006. During the third quarter and first nine months of 2007, we had net
        charged-off loans totaling $1.2 million and $2.6 million, respectively, compared
        to net charged-off loans of $654,000 and $1.6 million in the third quarter
        and
        first nine months of 2006, respectively. The annualized ratio of net charged-off
        loans to average loans was 0.24% and 0.20% for the three- and nine-month
        periods
        ended September 30, 2007, compared to the .23% and 0.21% for the three- and
        nine-month periods ended September 30, 2006, and .20% for the year ended
        December 31, 2006, respectively. The allowance for loan losses totaled $22.9
        million, or 1.12% of loans, net of unearned income, at September 30, 2007,
        compared to $18.9 million, or 1.15% of loans, net of unearned income, at
        December 31, 2006. See “Financial Condition — Allowance for Loan Losses” for
        additional discussion.
 
 **Financial
        Condition**
 
 Total
        assets were $2.902 billion at September 30, 2007, an increase of $461 million,
        or 18.9%, from $2.441 billion as of December 31, 2006. Average total assets
        for
        the first nine months of 2007 were $2.532 billion, which was supported by
        average total liabilities of $2.237 billion and average total stockholders’
equity of $295 million.
 
 *People’s
        Acquisition.* We
        completed the acquisition of 100% of the outstanding stock of People’s on July
        27, 2007 in exchange for 6,635,125 shares of our common stock valued at
        approximately $74 million (see Note 3 to Condensed Consolidated Financial
        Statements). The shares were valued by using the average of the closing prices
        of our stock for several days prior to and after the terms of the acquisition
        were agreed to and announced. The total purchase price, which includes certain
        direct acquisition costs, was $76 million. As a result of the acquisition
        we now
        operate three banking locations in Sarasota and Manatee Counties of
        Florida. This area is a significant addition to our largest market, which
        we
        expanded in 2006 with the Kensington acquisition.
  The
        People’s transaction resulted in $47 million of goodwill allocated to the
        Florida reporting unit and $10 million of core deposit intangibles. The goodwill
        acquired is not tax-deductible. The amount allocated to the core deposit
        intangible was determined by an independent valuation and is being amortized
        over an estimated useful life of ten years based on the undiscounted cash
        flow.
  19
 
 Management
        is completing its plan to consolidate People’s data processing operations and
        convert People’s accounts to our system. This conversion is expected to be
        completed in the first quarter of 2008. Certain costs associated with this
        conversion, totaling approximately $575,000, were estimated and accrued as
        of
        the acquisition date and consist primarily of contract cancellation costs.
  *Short-term
        liquid assets* .
        Short-term liquid assets (cash and due from banks, interest-bearing deposits
        in
        other banks and federal funds sold) decreased $18.0 million, or 20.9%, to
        $68.0
        million at September 30, 2007 from $86.0 million at December 31, 2006. At
        September 30, 2007, short-term liquid assets comprised 2.3% of total assets,
        compared to 3.5% at December 31, 2006. We continually monitor our liquidity
        position and will increase or decrease our short-term liquid assets as we
        deem
        necessary.
 
 *Investment
        Securities* .
        Total
        investment securities increased $12.8 million, or 3.6%, to $367.5 million
        at
        September 30, 2007, from $354.7 million at December 31, 2006. The acquisition
        of
        People’s added approximately $47.0 million in investment securities during the
        third quarter of 2007. Excluding the People’s acquisition, investment securities
        declined approximately $34.0 million from December 31, 2006 primarily as
        a
        result of maturities, calls and principal pay-downs which have been used
        primarily to fund loan growth. Average investment securities totaled $345.7
        million for the first nine months of 2007 compared to $249.0 million for
        the
        first nine months of 2006. Investment securities were 14.8% of interest-earning
        assets at September 30, 2007, compared to 17.0% at December 31, 2006. The
        investment portfolio produced an average tax-equivalent yield of 5.27% for
        the
        first nine months of 2007, compared to 4.92% for the first nine months of
        2006.
  The
        following table presents the carrying value of the securities we held at
        the
        dates indicated.
  **Investment
        Portfolio**
 **Available
                  for Sale****September
                  30,**
                **2007**
              
              **December
                  31,**
                **2006**
              
              **Percent**
                **Change****(Dollars
                  in thousands)**U.S.
                  Treasury and agencies
              
              $
              103,581
              
              $
              111,852
              
              
              (7.40
              )%State
                  and political subdivisions
              
              
              32,757
              
              
              12,942
              
              
              153.10Mortgage-backed
                  securities
              
              
              196,931
              
              
              184,453
              
              
              6.76Corporate
                  debt and other securities
              
              
              34,269
              
              
              45,469
              
              
              (24.63
              )Total
                  investment securities
              
              $
              367,538
              
              $
              354,716
              
              
              3.61
              %
 
 *Loans* .
        Loans,
        net of unearned income, totaled $2.039 billion at September 30, 2007, an
        increase of 24.4%, or $399 million, from $1.640 billion at December 31, 2006.
        Mortgage loans held for sale totaled $26.9 million at September 30, 2007,
        an
        increase of $2.5 million from $24.4 million at December 31, 2006. Average
        loans,
        including mortgage loans held for sale, totaled $1.769 billion for the first
        nine months of 2007 compared to $1.067 billion for the first nine months
        of
        2006. Loans, net of unearned income, were 82.2% of interest-earning assets
        at
        September 30, 2007, compared to 78.7% at December 31, 2006. The loan portfolio
        produced an average yield of 8.30% for the first nine months of 2007, compared
        to 7.77% for the first nine months of 2006.
  20
  The
        People’s acquisition contributed approximately $258 million in loans at the
        acquisition date and had outstanding balances of $247 million as of September
        30, 2007.
 
 The
        following table details the distribution of the loan portfolio by category
        as of
        September 30, 2007 and December 31, 2006:
  DISTRIBUTION
        OF LOANS BY CATEGORY
 (Dollars
        in thousands)
 
 **September
                  30, 2007**
              
              **December
                  31, 2006****Amount**
              
              **Percent
                  of**
                **Total**
              
              **Amount**
              
              **Percent
                  of**
                **Total**Commercial
                  and industrial
              
              $
              175,784
              
              
              8.61
              %
              $
              172,872
              
              
              10.53
              %Real
                  estate — construction and land development
              
              
              673,829
              
              
              33.02
              
              
              547,772
              
              
              33.37Real
                  estate — mortgageSingle-family
              
              
              533,531
              
              
              26.14
              
              
              456,341
              
              
              27.80Commercial
              
              
              562,791
              
              
              27.58
              
              
              362,542
              
              
              22.09Other
              
              
              40,960
              
              
              2.01
              
              
              46,895
              
              
              2.86Consumer
              
              
              52,553
              
              
              2.58
              
              
              54,462
              
              
              3.32Other
              
              
              1,353
              
              
              .06
              
              
              438
              
              
              .03Total
                  loans
              
              
              2,040,801
              
              
              100.0
              %
              
              1,641,322
              
              
              100.0
              %Unearned
                  income
              
              
              (1,271
              )
              
              
              
              
              (1,794
              )Allowance
                  for loan losses
              
              
              (22,867
              )
              
              
              
              
              (18,892
              )Net
                  loans
              
              $
              2,016,663
              
              
              
              
              $
              1,620,636
 
 
 The
        following table shows the amount of total loans, net of unearned income,
        by
        segment and the percent change for the dates indicated:
 
 **September
                  30,**
                **2007**
              
              **December
                  31,**
                **2006**
              
              **Percent**
                **Change****(Dollars
                  in thousands)**Total
                  loans, net of unearned income
              
              $
              2,039,530
              
              $
              1,639,580
              
              
              24.40
              %Alabama
                  segment
              
              
              929,476
              
              
              872,870
              
              
              6.49Florida
                  segment
              
              
              934,524
              
              
              625,633
              
              
              49.37Other
              
              
              175,530
              
              
              141,025
              
              
              24.47
  *Property
        and Equipment.* Property
        and equipment totaled $91.7 million at September 30, 2007, a decrease of
        3.1%,
        or $2.9 million, from $94.6 million at December 31, 2006. This decrease is
        primarily due to a reclassification of certain properties to the held-for-sale
        category and the sale and lease-back of two branch facilities (See Notes
        9 and
        11 to the Condensed Consolidated Financial Statements). The People’s acquisition
        added approximately $2.3 million in property and equipment. We also announced
        on
        July 25, 2007 that our banking subsidiary will be expanding into Citrus and
        Marion Counties with four new offices in the Tampa Bay area. The four new
        offices will be in Homosassa, Inverness, Dunnellon and Beverly Hills. These
        existing facilities were purchased in October, 2007 from a large regional
        bank
        for approximately $4.5 million, and are expected to open and begin serving
        customers in the fourth quarter of 2007.
 
 *Deposits* .
        Noninterest-bearing deposits totaled $207.3 million at September 30, 2007,
        an
        increase of 8.4%, or $16.0 million, from $191.3 million at December 31, 2006.
        Noninterest-bearing deposits were 9.6% of total deposits at September 30,
        2007
        compared to 10.2% at December 31, 2006.
 
 Interest-bearing
        deposits totaled $1.943 billion at September 30, 2007, an increase of 15.7%,
        or
        $263 million, from $1.680 billion at December 31, 2006. Interest-bearing
        deposits averaged $1.728 billion for the first nine months of 2007 compared
        to
        $1.038 billion for the first nine months of 2006. The average rate paid on
        all
        interest-bearing deposits during the first nine months of 2007 was 4.66%,
        compared to 3.97% for the first nine months of 2006.
  21
  The
        People’s acquisition contributed approximately $245 million in deposits at the
        acquisition date. As of September 30, 2007 People’s deposits totaled
        approximately $241 million, of which $33 million were noninterest-bearing
        and
        $208 million were interest-bearing.
 
 The
        following table sets forth the composition of our total deposit accounts
        at the
        dates indicated.
 
 **September
                  30,**
                **2007**
              
              **December
                  31,**
                **2006**
              
              **Percent**
                **Change****(Dollars
                  in thousands)**Noninterest-bearing
                  demand
              
              $
              207,383
              
              $
              191,323
              
              
              8.39
              %Alabama
                  segment
              
              
              124,232
              
              
              130,129
              
              
              (4.53
              )Florida
                  segment
              
              
              73,784
              
              
              49,742
              
              
              48.33Other
              
              
              9,367
              
              
              11,452
              
              
              (18.21
              )Interest-bearing
                  demand
              
              
              631,260
              
              
              552,887
              
              
              14.18Alabama
                  segment
              
              
              252,068
              
              
              220,514
              
              
              14.31Florida
                  segment
              
              
              231,172
              
              
              115,528
              
              
              100.10Other
              
              
              148,020
              
              
              216,845
              
              
              (31.74
              )Savings
              
              
              58,966
              
              
              42,717
              
              
              38.04Alabama
                  segment
              
              
              32,354
              
              
              28,161
              
              
              14.89Florida
                  segment
              
              
              26,065
              
              
              14,323
              
              
              81.98Other
              
              
              547
              
              
              233
              
              
              134.76Time
                  deposits
              
              
              1,252,428
              
              
              1,083,914
              
              
              15.27Alabama
                  segment
              
              
              659,964
              
              
              592,900
              
              
              16.37Florida
                  segment
              
              
              443,694
              
              
              341,161
              
              
              30.05Other
              
              
              148,770
              
              
              149,853
              
              
              (0.72
              )Total
                  deposits
              
              $
              2,150,037
              
              $
              1,870,841
              
              
              14.92
              %Alabama
                  segment
              
              $
              1,068,618
              
              $
              971,704
              
              
              9.97
              %Florida
                  segment
              
              $
              774,715
              
              $
              520,754
              
              
              48.77
              %Other
              
              $
              306,704
              
              $
              378,383
              
              
              (18.94
              )%
 
 *Borrowings* .
        Advances from the Federal Home Loan Bank (“FHLB”) totaled $288 million at
        September 30, 2007, an increase of 53.25%, or $100 million, from $188 million
        at
        December 31, 2006. The People’s acquisition contributed approximately $42
        million in FHLB advances. Borrowings from the FHLB were used primarily to
        fund
        growth in the loan portfolio and have a weighted average interest rate of
        approximately 5.21% at September 30, 2007. The advances are secured by FHLB
        stock, agency securities and a blanket lien on certain residential real estate
        loans and commercial loans.
 
 *Junior
        Subordinated Debentures Owed to Unconsolidated Subsidiary Trusts.* On
        July
        19, 2007, we issued approximately $22 million in aggregate principal amount
        of
        Trust Preferred Securities and a like amount of related subordinated debentures
        through our wholly-owned, unconsolidated subsidiary trust, Superior Capital
        Trust I. On
        July
        25, 2007, we completed our redemption of approximately $16 million in aggregate
        outstanding principal amount of Trust Preferred Securities and related six-month
        LIBOR plus 3.75% junior subordinated debentures due July 25, 2031, both of
        which
        were issued by our wholly-owned, unconsolidated subsidiary trust, TBC Capital
        Statutory Trust III. (See Note 10 to the Condensed Consolidated Financial
        Statements).
 
 *Allowance
        for Loan Losses* .
        We
        maintain an allowance for loan losses within a range we believe is adequate
        to
        absorb estimated losses inherent in the loan portfolio. We prepare a quarterly
        analysis to assess the risk in the loan portfolio and to determine the adequacy
        of the allowance for loan losses. Generally, we estimate the allowance using
        specific reserves for impaired loans, and other factors, such as historical
        loss
        experience based on volume and types of loans, trends in classifications,
        volume
        and trends in delinquencies and non-accruals, national and local economic
        trends
        and conditions and other pertinent information. The level of allowance for
        loan
        losses to net loans will vary depending on the quarterly analysis.
 
 We
        manage
        and control risk in the loan portfolio through adherence to credit standards
        established by the Board of Directors and implemented by senior management.
        These standards are set forth in a formal loan policy which establishes loan
        underwriting and approval procedures, sets limits on credit concentration
        and
        enforces regulatory requirements.
  22
  Loan
        portfolio concentration risk is reduced through concentration limits for
        borrowers, varying collateral types and geographic diversification.
        Concentration risk is measured and reported to senior management and the
        board
        of directors on a regular basis.
 
 The
        allowance for loan loss calculation is segregated into various segments that
        include classified loans, loans with specific allocations and pass rated
        loans.
        A pass rated loan is generally characterized by a very low to average risk
        of
        default and in which management perceives there is a minimal risk of loss.
        Loans
        are rated using an eight-point scale, with the loan officer having the primary
        responsibility for assigning risk ratings and for the timely reporting of
        changes in the risk ratings. These processes, and the assigned risk ratings,
        are
        subject to review by our internal loan review function and senior management.
        Based on the assigned risk ratings, the criticized and classified loans in
        the
        portfolio are segregated according to the following regulatory classifications:
        Special Mention, Substandard, Doubtful or Loss.
 
 Pursuant
        to SFAS No. 114, impaired loans are specifically reviewed loans for which
        it is
        probable that we will be unable to collect all amounts due according to the
        terms of the loan agreement. Impairment is measured by comparing the recorded
        investment in the loan with the present value of expected future cash flows
        discounted at the loan’s effective interest rate, at the loan’s observable
        market price or the fair value of the collateral if the loan is collateral
        dependent. A valuation allowance is provided to the extent that the measure
        of
        the impaired loans is less than the recorded investment. A loan is not
        considered impaired during a period of delay in payment if we continue to
        expect
        that all amounts due will ultimately be collected according to the terms
        of the
        loan agreement. Larger groups of homogenous loans such as consumer installment
        and residential real estate mortgage loans are collectively evaluated for
        impairment.
 
 Reserve
        percentages assigned to homogeneous loans are based on historical charge-off
        experience adjusted for current trends in the portfolio and other risk
        factors.
 
 As
        stated
        above, risk ratings are subject to independent review by internal loan review,
        which also performs ongoing, independent review of the risk management process.
        The risk management process includes underwriting, documentation and collateral
        control. Loan review is centralized and independent of the lending function.
        The
        loan review results are reported to senior management and the Audit Committee
        of
        the Board of Directors . We have a centralized loan administration department
        to
        serve our entire bank. This department provides standardized oversight for
        compliance with loan approval authorities and bank lending policies and
        procedures, as well as centralized supervision, monitoring and
        accessibility.
  23
  The
        following table summarizes certain information with respect to our allowance
        for
        loan losses and the composition of charge-offs and recoveries for the periods
        indicated.
 
 **SUMMARY
        OF LOAN LOSS EXPERIENCE**
 
 **Three
                  Months**
                **Ended**
                **September
                  30,**
              
              **Nine
                  Months**
                **Ended**
                **September
                  30,**
              
              **Year
                  Ended**
                **December
                  31,****2007**
              
              **2006**
              
              **2007**
              
              **2006**
              
              **2006**(Dollars
                  in Thousands)Allowance
                  for loan losses at beginning of period
              
              $
              19,147
              
              $
              12,311
              
              $
              18,892
              
              $
              12,011
              
              $
              12,011Allowance
                  of acquired bank
              
              
              3,717
              
              
              1,016
              
              
              3,717
              
              
              1,016
              
              
              6,697Charge-offs:Commercial
                  and industrial
              
              
              247
              
              
              456
              
              
              684
              
              
              1,071
              
              
              1,450Real
                  estate — construction and land development
              
              
              120
              
              
              -
              
              
              121
              
              
              44
              
              
              378Real
                  estate — mortgageSingle-family
              
              
              350
              
              
              87
              
              
              799
              
              
              537
              
              
              625Commercial
              
              
              570
              
              
              226
              
              
              589
              
              
              321
              
              
              416Other
              
              
              -
              
              
              4
              
              
              206
              
              
              15
              
              
              15Consumer
              
              
              472
              
              
              141
              
              
              1,409
              
              
              545
              
              
              860Other
              
              
              -
              
              
              -
              
              
              -
              
              
              2
              
              
              2Total
                  charge-offs
              
              
              1,759
              
              
              914
              
              
              3,808
              
              
              2,535
              
              
              3,746Recoveries:Commercial
                  and industrial
              
              
              78
              
              
              104
              
              
              334
              
              
              322
              
              
              465Real
                  estate — construction and land development
              
              
              275
              
              
              2
              
              
              283
              
              
              123
              
              
              126Real
                  estate — mortgageSingle-family
              
              
              87
              
              
              27
              
              
              144
              
              
              83
              
              
              102Commercial
              
              
              3
              
              
              21
              
              
              23
              
              
              75
              
              
              363Other
              
              
              10
              
              
              17
              
              
              68
              
              
              63
              
              
              73Consumer
              
              
              106
              
              
              89
              
              
              304
              
              
              215
              
              
              301Other
              
              
              24
              
              
              —
              
              
              26
              
              
              —
              
              
              —Total
                  recoveries
              
              
              583
              
              
              260
              
              
              1,182
              
              
              881
              
              
              1,430Net
                  charge-offs
              
              
              1,176
              
              
              654
              
              
              2,626
              
              
              1,654
              
              
              2,316Provision
                  for loan losses
              
              
              1,179
              
              
              550
              
              
              2,884
              
              
              1,850
              
              
              2,500Allowance
                  for loan losses at end of period
              
              $
              22,867
              
              $
              13,223
              
              $
              22,867
              
              $
              13,223
              
              $
              18,892Loans
                  at end of period, net of unearned income
              
              $
              2,039,530
              
              $
              1,257,640
              
              $
              2,039,530
              
              $
              1,257,640
              
              $
              1,639,528Average
                  loans, net of unearned income
              
              
              1,921,404
              
              
              1,157,948
              
              
              1,745,261
              
              
              1,067,972
              
              
              1,176,844Ratio
                  of ending allowance to ending loans
              
              
              1.12
              %
              
              1.05
              %
              
              1.12
              %
              
              1.05
              %
              
              1.15
              %Ratio
                  of net charge-offs to average
                loans
                  (1)
              
              
              0.24
              %
              
              0.23
              %
              
              0.20
              %
              
              0.21
              %
              
              0.20
              %Net
                  charge-offs as a percentage of:Provision
                  for loan losses
              
              
              99.83
              %
              
              118.91
              %
              
              91.09
              %
              
              89.41
              %
              
              92.64
              %Allowance
                  for loan losses (1)
              
              
              20.42
              %
              
              19.62
              %
              
              15.36
              %
              
              16.72
              %
              
              12.26
              %Allowance
                  for loan losses as a percentage of nonperforming loans
              
              
              97.35
              %
              
              307.15
              %
              
              97.35
              %
              
              307.15
              %
              
              219.88
              %
 ____________
 (1)
              Annualized.
 
 Compared
        to the third quarter of 2006, we have realized some weakness in overall asset
        quality. Nonperforming assets (“NPAs”) as a percentage of total loans plus
        nonperforming assets increased to 1.24% as of September 30, 2007, compared
        to
        0.63% as of December 31, 2006. We believe this decline in asset quality is
        attributable primarily to current market and economic conditions. The overall
        increase in NPAs can be primarily attributed to the bank acquisition consummated
        in the third quarter, credits located in northwest Florida adversely affected
        by
        the real estate slowdown in that region and the inconsistent payment performance
        of a multifamily project located in the Atlanta, Georgia metropolitan area.
        Management is actively monitoring these credits and does not currently expect
        any significant losses. We believe that the current allowance for loan losses
        is
        sufficient for the increase in NPAs and the corresponding decline in coverage
        ratios, as compared to the prior periods, as these changes are related to
        loans
        on which we currently believe we will incur no loss.
  24
  The
        provision for loan losses was $2.9 million for the first nine months of 2007,
        an
        increase of $1.0 million, or 55.9%, from $1.9 million in the first nine months
        of 2006. We had net charged-off loans totaling $1.2 million and $2.6 million
        during the third quarter and first nine months of 2007, respectively, compared
        to net charged-off loans totaling $654,000 and $1.7 million in the third
        quarter
        and first nine months of 2006, respectively. The annualized ratio of net
        charged-off loans to average loans was 0.24% and 0.20% for the three- and
        nine-month periods ended September 30, 2007, respectively, compared to .23%
        and
        0.21% for the three- and nine-month periods ended September 30, 2006,
        respectively, and 0.20% for the year ended December 31, 2006. The total required
        allowance for loan losses as a percentage of total loans decreased from 1.15%
        at
        December 31, 2006 to 1.12% at September 30, 2007.
 
 *Nonperforming
        Assets* .
        Nonperforming assets increased $14.8 million, to $25.2 million as of September
        30, 2007 from $10.4 million at December 31, 2006. The following table represents
        our nonperforming assets for the dates indicated:
  **September
                  30,**
                **2007**
              
              **December
                  31,**
                **2006****(Dollars
                  in thousands)**Nonaccrual
              
              $
              17,066
              
              $
              7,773Accruing
                  loans 90 days or more delinquent
              
              
              5,923
              
              
              514Restructured
              
              
              499
              
              
              305Total
                  nonperforming loans
              
              
              23,488
              
              
              8,592Other
                  real estate owned assets and repossessed assets
              
              
              1,737
              
              
              1,821Total
                  nonperforming assets
              
              $
              25,225
              
              $
              10,413Nonperforming
                  loans as a percentage of loans
              
              
              1.15%
              
              
              0.52%Nonperforming
                  assets as a percentage of loans plus nonperforming assets
              
              
              1.24%
              
              
              0.63%Nonperforming
                  assets as a percentage of total assets
              
              
              0.87%
              
              
              0.43%
  The
        following is a summary of nonperforming loans by category for the dates
        shown:
 
 **September
                  30,**
                **2007**
              
              **December
                  31,**
                **2006****(Dollars
                  in thousands)**Commercial
                  and industrial
              
              $
              1,162
              
              $
              704Real
                  estate — construction and land development
              
              
              6,242
              
              
              2,067Real
                  estate — mortgagesSingle-family
              
              
              7,320
              
              
              2,805Commercial
              
              
              3,062
              
              
              1,765Other
              
              
              5,024
              
              
              688Consumer
              
              
              678
              
              
              559Other
              
              
              —
              
              
              4Total
                  nonperforming loans
              
              $
              23,488
              
              $
              8,592
 
 A
        delinquent loan is placed on nonaccrual status when it becomes 90 days or
        more
        past due and management believes, after considering economic and business
        conditions and collection efforts, that the borrower’s financial condition is
        such that the collection of interest is doubtful. When a loan is placed on
        nonaccrual status, all interest, that has been accrued on the loan during
        the
        current period but remains unpaid, is reversed and deducted from earnings
        as a
        reduction of reported interest income; any prior period accrued and unpaid
        interest is reversed and charged against the allowance for loan losses. No
        additional interest income is accrued on the loan balance until the collection
        of both principal and interest becomes reasonably certain. When a problem
        loan
        is finally resolved, there may ultimately be an actual write-down, charge-off
        or
        recovery of previous charged-off amounts of the principal balance to the
        allowance for loan losses, which may affect earnings.
 
 *Past
        Due Loans.* Loans
        past due 30 to 89 days for the subsidiary bank increased to 1.58% for September
        30, 2007, compared to 0.85% at December 31, 2006. Consolidated loans past
        due 30
        to 89 days, including the finance company subsidiaries, increased to 1.61%
        for
        September 30, 2007 compared to 0.90% at December 31, 2006. The majority of
        our
        subsidiary bank’s past due loans consisted of approximately $24.9 million, or
        79% of total past due loans, within the commercial real estate and real estate
        construction loan categories. Within these two categories, $16.5 million,
        or
        52%, of the total past due loans, are attributed to four large relationships,
        three of which are located in the Florida region and one of which is located
        in
        Georgia. The Florida region has been most affected by the recent slowdown
        in the
        real estate market. We are actively working with each of these borrowers
        to
        restore the credits to a consistent performance level while minimizing our
        loss
        exposure. In spite of the increased levels of delinquency within our portfolio,
        as well as the overall challenges faced by the banking industry, the level
        of
        associated credit losses has remained within our expectations, and we
        do not currently expect any significant losses.
  25
  *Impaired
        Loans* .
        At
        September 30, 2007, the recorded investment in impaired loans under SFAS
        114
        totaled $16.2 million, with approximately $1.2 million in allowance for loan
        losses specifically allocated to impaired loans. This represents a increase
        of
        $9.3 million from $6.9 million at December 31, 2006. The following is a summary
        of impaired loans and the specifically allocated allowance for loan losses
        by
        category as of September 30, 2007:
 
 **Outstanding**
                **Balance**
              
              **Specific**
                **Allowance****(Dollars
                  in thousands)**Commercial
                  and industrial
              
              $
              1,175
              
              $
              93Real
                  estate — construction and land development
              
              
              3,336
              
              
              464Real
                  estate — mortgagesCommercial
              
              
              7,954
              
              
              4951-4
                  family
              
              
              2,936
              
              
              12Other
              
              
              801
              
              
              94Total
              
              $
              16,202
              
              $
              1,158
 
 *Potential
        Problem Loans* .
        In
        addition to nonperforming loans, management has identified $15.0 to $20.0
        million in potential problem loans as of September 30, 2007, compared to
        $5.2
        million as of December 31, 2006. Potential problem loans are loans where
        known
        information about possible credit problems of the borrowers causes management
        to
        have doubts as to the ability of such borrowers to comply with the present
        repayment terms and may result in recognition of such loans as nonperforming.
        Borrowers are experiencing cash-flow shortages due to the slowdown in real
        estate activity predominately along the northwest and central Florida regions.
        We are working closely with those borrowers and will continue to
        monitor their respective cash flow positions.
 
 *Stockholders’
        Equity*
 
 *Stock
        Repurchase Plan.* We
        announced in June 2007 that our Board of Directors had approved the repurchase
        of up to 1,000,000 shares of our outstanding common stock. During the quarter
        ended September 30, 2007, we purchased 1,000,000 shares of stock at an average
        price of $9.22 per share, including commissions, which we recorded as treasury
        stock in the statement of financial condition at cost. The shares were purchased
        in the open market through negotiated or block transactions and were not
        repurchased from our management team or other insiders.
 
 In
        October 2007 our Board of Directors approved our second stock repurchase
        program. Beginning on or after November 2, 2007, we may purchase up to 1,000,000
        shares of our outstanding common stock. The shares may be purchased in the
        open
        market through negotiated or block transactions. We do not intend to repurchase
        any shares from our management team or other insiders. This stock repurchase
        program does not obligate us to acquire any specific number of shares and
        may be
        suspended or discontinued at any time.
 
 *Termination
        of Superior ESOP.* Effective
        August 31, 2007, we terminated the Superior Bancorp Employee Stock Ownership
        Plan (the “ESOP”). The ESOP was leveraged and a promissory note was outstanding
        between the ESOP and us with a remaining balance of $1.2 million at the
        termination date. The promissory note was satisfied by the transfer from
        the
        ESOP to us of 127,469 unallocated shares of our common stock valued at a
        price
        of $9.14 per share, the closing price on that date. We transferred these
        shares
        to treasury stock at the current market value from the unallocated ESOP shares
        account. The remaining 17,178 of unallocated shares were committed to be
        allocated to the participants’ accounts, and as a result, we recognized
        additional compensation expense during the third quarter of 2007 of
        approximately $158,000.
  26
  *Regulatory
        Capital.* The
        table
        below represents our and our federal thrift subsidiary’s regulatory and minimum
        regulatory capital requirements at September 30, 2007 (dollars in
        thousands):
 
 **Actual**
              
              **For
                  Capital**
                **Adequacy**
                **Purposes**
              
              **To
                  Be Well**
                **Capitalized
                  Under**
                **Prompt
                  Corrective**
                **Action****Amount**
              
              **Ratio**
              
              **Amount**
              
              **Ratio**
              
              **Amount**
              
              **Ratio****As
                  of September 30, 2007**Tier
                  1 Core Capital (to Adjusted Total Assets)Corporation
              
              $
              209,877
              
              
              7.73
              %
              $
              108,573
              
              
              4.00
              %
              $
              135,716
              
              
              5.00
              %Superior
                  Bank
              
              
              203,231
              
              
              7.55
              
              
              107,625
              
              
              4.00
              
              
              134,531
              
              
              5.00Total
                  Capital (to Risk Weighted Assets)Corporation
              
              
              231,455
              
              
              10.56
              
              
              175,285
              
              
              8.00
              
              
              219,106
              
              
              10.00
              %Superior
                  Bank
              
              
              224,810
              
              
              10.37
              
              
              173,377
              
              
              8.00
              
              
              216,721
              
              
              10.00Tier
                  1 Capital (to Risk Weighted Assets)Corporation
              
              
              209,877
              
              
              9.58
              
              
              N/A
              
              
              N/A
              
              
              131,464
              
              
              6.00
              %Superior
                  Bank
              
              
              203,231
              
              
              9.38
              
              
              N/A
              
              
              N/A
              
              
              130,033
              
              
              6.00Tangible
                  Capital (to Adjusted Total Assets)Superior
                  Bank
              
              
              203,231
              
              
              7.55
              
              
              40,359
              
              
              1.50
              
              
              N/A
              
              
              N/A
 
 **Liquidity**
  Our
        principal sources of funds are deposits, principal and interest payments
        on
        loans, federal funds sold and maturities and sales of investment securities.
        In
        addition to these sources of liquidity, we have access to purchased funds
        from
        several regional financial institutions, brokered deposits, and may borrow
        from
        the FHLB under a blanket floating lien on certain commercial loans and
        residential real estate loans. Also, we have established repurchase agreements
        with a large financial institution. While scheduled loan repayments and maturing
        investments are relatively predictable, interest rates, general economic
        conditions and competition influence deposit flows and early loan payments.
        Management places constant emphasis on the maintenance of adequate liquidity
        to
        meet conditions that might reasonably be expected to occur. Management believes
        it has established sufficient sources of funds to meet its anticipated liquidity
        needs.
 As
          shown
          in the Condensed Consolidated Statement of Cash Flows, operating activities
          provided $1.5 million in funds in the first nine months of 2007, primarily
          due
          to net income of $5.7 million plus $3.4 million in depreciation and $2.9
          million
          in provision for loan losses, which were offset by an increase in mortgage
          loans
          held for sale of $2.5 million and decreases in accrued interest payable
          of $2.0
          million and other liabilities of $6.0 million which primarily resulted
          from the payment of interest and merger related costs. This compares to net
          funds provided of $8.7 million in the first nine months of 2006, primarily
          due
          to net income of $2.9 million plus depreciation expense and provision for
          loan
          losses of $2.3 million and $1.9 million, respectively. Additional cash
          flows
          from operations included a net decrease in mortgage loans held for sale
          and
          other assets offset by increases in accrued expenses and deferred
          taxes.
 
 Investing
          activities were a net use of funds in the first nine months of 2007, primarily
          due to an increase in loans offset by investment security sales and maturities.
          Investing activities were a net use of funds in the first nine months of
          2006
          primarily due to an increase in loans and investments offset by the sale
          of a
          majority of the securities obtained in the Kensington merger in an effort
          to
          de-leverage our balance sheet.
 
 Financing
          activities provided funds in the first nine months of 2007, primarily as
          a
          result of an increase in deposits and advances from the FHLB to finance
          our loan
          growth. Financing activities provided funds in the first nine months of
          2006, as
          we increased our levels of brokered certificates of deposit to finance
          our loan
          growth.


**Forward-Looking
        Statements**
 
 The
        Private Securities Litigation Reform Act of 1995 provides a safe harbor for
        forward-looking statements made by us or on our behalf. Some of the disclosures
        in this Quarterly Report on Form 10-Q, including any statements preceded
        by,
        followed by, or which include, the words “may,” “could,” “should,” “will,”
“would,” “hope,” “might,” “believe,” “expect,” “anticipate,” “estimate,”
“intend,” “plan,” “assume” or similar expressions constitute forward-looking
        statements.
 
 These
        forward-looking statements, implicitly and explicitly, include the assumptions
        underlying the statements and other information with respect to our beliefs,
        plans, objectives, goals, expectations, anticipations, estimates, intentions,
        financial condition, results of operations, future performance and business,
        including our expectations and estimates with respect to our revenues, expenses,
        earnings, return on equity, return on assets, efficiency ratio, asset quality,
        the adequacy of our allowance for loan losses and other financial data and
        capital and performance ratios.
  27
  Although
        we believe that the expectations reflected in our forward-looking statements
        are
        reasonable, these statements involve risks and uncertainties which are subject
        to change based on various important factors (some of which are beyond our
        control). The following factors, among others, could cause our financial
        performance to differ materially from our goals, plans, objectives, intentions,
        expectations and other forward-looking statements: (1) the strength of the
        United States economy in general and the strength of the regional and local
        economies in which we conduct operations; (2) the effects of, and changes
        in,
        trade, monetary and fiscal policies and laws, including interest rate policies
        of the Board of Governors of the Federal Reserve System; (3) inflation, interest
        rate, market and monetary fluctuations; (4) our ability to successfully
        integrate the assets, liabilities, customers, systems and management we acquire
        or merge into our operations; (5) our timely development of new products
        and
        services in a changing environment, including the features, pricing and quality
        compared to the products and services of our competitors; (6) the willingness
        of
        users to substitute competitors’ products and services for our products and
        services; (7) the impact of changes in financial services policies, laws
        and
        regulations, including laws, regulations and policies concerning taxes, banking,
        securities and insurance, and the application thereof by regulatory bodies;
        (8)
        our ability to resolve any legal proceeding on acceptable terms and its effect
        on our financial condition or results of operations; (9) technological changes;
        (10) changes in consumer spending and savings habits; (11) regulatory, legal
        or
        judicial proceedings, and (12) the effect of natural disasters, such as
        hurricanes, in our geographic markets. If
        one or
        more of the factors affecting our forward-looking statements proves incorrect,
        then our actual results, performance or achievements could differ materially
        from those expressed in, or implied by, forward-looking statements contained
        in
        this report. Therefore, we caution you not to place undue reliance on our
        forward-looking information and statements.
 
 We
        do not
        intend to update our forward-looking statements, whether written or oral,
        to
        reflect changes. All forward-looking statements attributable to us are expressly
        qualified by these cautionary statements.
 
 **ITEM
        3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
        RISK**
 
 The
        information set forth under the caption “Item 7. Management’s Discussion and
        Analysis of Financial Condition and Results of Operations-Market Risk-Interest
        Rate Sensitivity” included in our Annual Report on Form 10-K for the year ended
        December 31, 2006, is hereby incorporated herein by reference.
 
 We
        measure our interest rate risk by analyzing the correlation of interest-bearing
        assets to interest-bearing liabilities (“gap analysis”), net interest income
        simulation, and economic value of equity (“EVE”) modeling. There have been no
        significant changes in our quantitative or qualitative disclosures about
        market
        risk as of September 30, 2007 from those presented in our annual report on
        Form
        10-K for the year ended December 31, 2006. The following is a comparison
        of
        these measurements as of September 30, 2007 to December 31, 2006 (dollars
        in
        thousands):
  **September
                    30,****2007**
                
                **December
                    31,****2006****12-Month
                    Gap**Interest-bearing
                    liabilities in excess of interest-earning assets
                
                
                
                
                $
                (478,000
                )
                $
                (206,000
                )Cumulative
                    12-month Gap Ratio
                
                
                
                
                
                .76
                
                
                .87**Increase
                    (Decrease) in Net Interest Income****September
                    30, 2007**
                
                
                **December
                    31, 2006****Change
                    (in Basis Points) in Interest Rates (12-Month
                    Projection)**
                
                
                **Amount**
                
                
                **Percent**
                
                
                **Amount**
                
                
                **Percent**+200
                    BP (1)
                
                $
                4,800
                
                
                6.0%
                
                $
                5,100
                
                
                7.0%-
                    200 BP (1)
                
                
                (6,900
                )
                
                (8.6)
                
                
                (6,200
                )
                
                (8.6)
 (1)
          -
          Results are within our asset and liability management policy.
 Our
        cumulative 12-month gap ratio decreased 11 basis points primarily as a the
        result of an increase in our non-maturity interest-bearing deposits and
        certificates of deposit with maturities of less than one year.
 
 Our
        net
        interest income simulation model assumes an instantaneous and parallel increase
        or decrease in interest rates of 200 basis points.
 
 EVE
        is a
        concept related to our longer-term interest rate risk. EVE is defined as
        the net
        present value of the balance sheet’s cash flows or the residual value of future
        cash flows. While EVE does not represent actual market liquidation or
        replacement value, it is a useful tool for estimating our balance sheet earnings
        capacity. The greater the EVE, the greater our earnings capacity. Our EVE
        model
        assumes an instantaneous and parallel increase or decrease of 200 basis points.
        The EVE produced by these scenarios is within our asset and liability management
        policy. The following table sets forth our EVE as of September 31, 2007 and
        December 31, 2006:
  28
  **December
                  31, 2006**
              
              
              
              **Change****Change
                  (in Basis Points) in Interest Rates**
              
              **EVE**
              
              **Amount**
              
              **Percent****(Dollars
                  in thousands)**+
                  200 BP
              
              $
              404,377
              
              $
              14,626
              
              
              3.8
              %0
                  BP
              
              
              389,751
              
              
              —
              
              
              —-
                  200 BP
              
              
              355,976
              
              
              (33,775
              )
              
              (8.7
              )
 
 **September
                  31, 2007**
              
              
              
              **Change****Change
                  (in Basis Points) in Interest Rates**
              
              **EVE**
              
              **Amount**
              
              **Percent****(Dollars
                  in thousands)**+
                  200 BP
              
              $
              476,643
              
              $
              14,189
              
              
              3.1
              %0
                  BP
              
              
              462,454
              
              
              —
              
              
              —-
                  200 BP
              
              
              427,255
              
              
              (35,199
              )
              
              (7.6
              )
 
 Both
        the
        net interest income and EVE simulations include balances, asset prepayment
        speeds, and interest rate relationships among balances that management believes
        to be reasonable for the various interest rate environments. Differences
        in
        actual occurrences from these assumptions, as well as non-parallel changes
        in
        the yield curve, may change our market risk exposure.
  **ITEM
        4. CONTROLS AND PROCEDURES**
 
 CEO
        AND
        CFO CERTIFICATION
 
 Appearing
        as exhibits to this report are Certifications of our Chief Executive Officer
        (“CEO”) and our Chief Financial Officer (“CFO”). The Certifications are required
        to be made by Rule 13a-14 under the Securities Exchange Act of 1934, as amended.
        This Item contains the information about the evaluation that is referred
        to in
        the Certifications, and the information set forth below in this Item 4 should be
        read in conjunction with the Certifications for a more complete understanding
        of
        the Certifications.
 
 EVALUATION
        OF DISCLOSURE CONTROLS AND PROCEDURES
 
 We
        maintain disclosure controls and procedures that are designed to ensure that
        information required to be disclosed in our Exchange Act reports is recorded,
        processed, summarized and reported within the time periods specified in the
        SEC’s rules and forms, and that such information is accumulated and communicated
        to our management, including our CEO and CFO, as appropriate, to allow timely
        decisions regarding required disclosure. In designing and evaluating the
        disclosure controls and procedures, management recognized that any controls
        and
        procedures, no matter how well designed and operated, can provide only
        reasonable assurance of achieving the desired control objectives.
 
 We
        conducted an evaluation (the “Evaluation”) of the effectiveness of the design
        and operation of our disclosure controls and procedures under the supervision
        and with the participation of our management, including our CEO and CFO,
        as of
        September 30, 2007. Based upon the Evaluation, our CEO and CFO have concluded
        that, as of September 30, 2007, our disclosure controls and procedures are
        effective to ensure that material information relating to Superior Bancorp
        and
        its subsidiaries is made known to management, including the CEO and CFO,
        particularly during the period when our periodic reports are being
        prepared.
 
 There
        have not been any changes in our internal control over financial reporting
        (as
        defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934,
        as
        amended) during the fiscal quarter to which this report relates that have
        materially affected, or are reasonably likely to materially affect, our internal
        control over financial reporting.
  29
  **PART
        II. OTHER INFORMATION**
 
 **ITEM
        1. LEGAL PROCEEDINGS**
 
 While
        we
        are a party to various legal proceedings arising in the ordinary course of
        business, we believe that there are no proceedings threatened or pending
        against
        us at this time that will individually, or in the aggregate, materially
        adversely affect our business, financial condition or results of operations.
        We
        believe that we have strong claims and defenses in each lawsuit in which
        we are
        involved. While we believe that we will prevail in each lawsuit, there can
        be no
        assurance that the outcome of the pending, or any future, litigation, either
        individually or in the aggregate, will not have a material adverse effect
        on our
        financial condition or our results of operations.
 
 **ITEM
        1A. RISK FACTORS**
 
 Our
        business is influenced by many factors that are difficult to predict, involve
        uncertainties that may materially affect actual results and are often beyond
        our
        control. We have identified a number of these risk factors in our Annual
        Report
        on Form 10-K for the year ended December 31, 2006, which should be taken
        into
        consideration when reviewing the information contained in this report. There
        have been no material changes with regard to the risk factors previously
        disclosed in our most recent Form 10-K. For other factors that may cause
        actual
        results to differ materially from those indicated in any forward-looking
        statement or projection contained in this report, see “Forward-Looking
        Statements” under Part I, Item 2 above.
 
 **ITEM
        2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
        PROCEEDS**
 
 There
        were no unregistered sales of equity securities by Superior Bancorp during
        the
        third quarter of 2007.
 
 We
        repurchased 1,000,000 shares of our issued and outstanding common stock during
        the third quarter of 2007 pursuant to a program announced in June 2007.
 
 Issuer
        Purchases of Equity Securities
 
 Period
              Total
                  Number of
                Shares
                  Purchased
              Average
                  Price
                Paid
                  Per Share
              Total
                  Number of
                Shares
                  Purchased
                as
                  Part of Publicly
                Announced
                  Plans
                or
                  Programs
              Maximum
                  Number
                of
                  Shares That
                May
                  Yet be
                Purchased
                  Under
                the
                  Plans
                or
                  ProgramsAugust
                  2007
              1,000,000
              $9.22
              1,000,000
              -0-
  On
        October 29, 2007 we announced that, beginning on or after November 2, 2007,
        we
        may purchase up to 1,000,000 additional shares of our outstanding common
        stock.
        The shares may be purchased in the open market through negotiated or block
        transactions. We do not intend to repurchase any shares from our management
        team
        or other insiders. This stock repurchase program does not obligate us to
        acquire
        any specific number of shares and may be suspended or discontinued at any
        time.
  **ITEM
        3. DEFAULTS UPON SENIOR SECURITIES**
 
 None.
 
 **ITEM
        4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 
 None.
 
 **ITEM
        5. OTHER INFORMATION**
 
 None.
  30
  **ITEM
        6. EXHIBITS**
 
 (a)  Exhibit:
 
 4.01
              Declaration
                  of Trust, dated July 10, 2007 by and between Superior Bancorp
                  (“Depositor”), Wilmington Trust Company (“the Trustee”), and Mark
                  Tarnakow, William H. Caughran and Rick D. Gardner (each an
                  “Administrator”)4.02
              Indenture,
                  dated July 19, 2007, between Superior Bancorp, as issuer, and Wilmington
                  Trust Company, as trustee, relating to Floating Rate Junior Subordinated
                  Deferrable Interest Debentures, due 20374.03
              Guarantee
                  Agreement, by and between Superior Bancorp and Wilmington Trust
                  Company,
                  dated July 19, 20074.04
              Superior
                  Bancorp, 22,000 Capital Securities, Floating Rate Capital Securities
                  Placement Agreement, dated July 18, 200731.01
              Certification
                  of principal executive officer pursuant to Rule
                  13a-14(a).31.02
              Certification
                  of principal financial officer pursuant to 13a-14(a).32.01
              Certification
                  of principal executive officer pursuant to 18 U.S.C. Section
                  1350.32.02
              Certification
                  of principal financial officer pursuant to 18 U.S.C. Section
                  1350.
  31
  SIGNATURES
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the registrant
        has
        duly caused this report to be signed on its behalf by the undersigned thereunto
        duly authorized.
 
 SUPERIOR
                  BANCORP
                (Registrant)Date:
                November 9, 2007
              By:
              /s/ C.
                Stanley BaileyC.
                Stanley BaileyChief
                  Executive Officer Date:
                November 9, 2007
              By:
              /s/ Mark
                TarnakowMark
                TarnakowChief
                  Financial Officer
                (Principal
                  Financial Officer)
 
 
 32