##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  TO
 Commission File number 0-25033
 Superior Bancorp
 (Exact Name of Registrant as Specified in its Charter)
 Delaware
    
    63-1201350(State or Other Jurisdiction of Incorporation)
    
    (IRS Employer Identification No.)
  
   
   þ o
  o þ o
  o þ
  Class
    
    Outstanding as of June 30, 2006Common stock, $.001 par value
    
    20,171,497




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##### 



TABLE OF CONTENTS
 PART I FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTS
    
    
    2ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    15ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    
    
    31ITEM 4. CONTROLS AND PROCEDURES
    
    
    31PART II. OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    32ITEM 1A. RISK FACTORS
    
    
    32ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    32ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    32ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    32ITEM 5. OTHER INFORMATION
    
    
    33ITEM 6. EXHIBITS
    
    
    33SIGNATURES
    
    
    34EX-31.01 SECTION 302 CERTIFICATION OF THE CEOEX-31.02 SECTION 302 CERTIFICATION OF THE CFOEX-32.01 SECTION 906 CERTIFICATION OF THE CEOEX-32.02 SECTION 906 CERTIFICATION OF THE CFO




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SUPERIOR BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
 June 30,
    
    
    December 31,2006
    
    
    2005(UNAUDITED)ASSETSCash and due from banks
    
    $
    22,712
    
    
    $
    35,088Interest-bearing deposits in other banks
    
    
    5,191
    
    
    
    9,772Federal funds sold
    
    
    9,055
    
    
    
    Investment securities available for sale
    
    
    233,554
    
    
    
    242,306Tax lien certificates
    
    
    6,054
    
    
    
    289Mortgage loans held for sale
    
    
    23,142
    
    
    
    21,355Loans, net of unearned income
    
    
    1,080,713
    
    
    
    963,253Less: Allowance for loan losses
    
    
    (12,311
    )
    
    
    (12,011
    )Net loans
    
    
    1,068,402
    
    
    
    951,242Premises and equipment, net
    
    
    59,452
    
    
    
    56,017Accrued interest receivable
    
    
    7,593
    
    
    
    7,081Stock in FHLB
    
    
    11,847
    
    
    
    10,966Cash surrender value of life insurance
    
    
    39,841
    
    
    
    39,169Goodwill and other intangibles
    
    
    11,998
    
    
    
    12,090Other assets
    
    
    32,386
    
    
    
    30,094TOTAL ASSETS
    
    $
    1,531,227
    
    
    $
    1,415,469LIABILITIES
AND STOCKHOLDERS EQUITYDeposits:Noninterest-bearing
    
    $
    103,696
    
    
    $
    92,342Interest-bearing
    
    
    1,036,569
    
    
    
    951,354TOTAL DEPOSITS
    
    
    1,140,265
    
    
    
    1,043,696Advances from FHLB
    
    
    201,090
    
    
    
    181,090Federal funds borrowed and security repurchase agreements
    
    
    30,975
    
    
    
    33,406Notes payable
    
    
    3,650
    
    
    
    3,755Junior subordinated debentures owed to unconsolidated subsidiary trusts
    
    
    31,959
    
    
    
    31,959Accrued expenses and other liabilities
    
    
    17,358
    
    
    
    16,498TOTAL LIABILITIES
    
    
    1,425,297
    
    
    
    1,310,404STOCKHOLDERS EQUITYCommon stock, par value $.001 per share; authorized 50,000,000 shares;
shares issued 20,357,446 and 20,221,456, respectively; outstanding
20,171,497 and 19,980,261, respectively
    
    
    20
    
    
    
    20Surplus
    
    
    88,986
    
    
    
    87,979Retained earnings
    
    
    23,618
    
    
    
    21,494Accumulated other comprehensive loss
    
    
    (4,949
    )
    
    
    (2,544
    )Treasury stock, at cost
    
    
    (310
    )
    
    
    (341
    )Unearned ESOP stock
    
    
    (1,435
    )
    
    
    (1,543
    )TOTAL STOCKHOLDERS EQUITY
    
    
    105,930
    
    
    
    105,065TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    1,531,227
    
    
    $
    1,415,469
  2




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SUPERIOR BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(Dollars in thousands, except per share data)INTEREST INCOMEInterest and fees on loans
    
    $
    20,254
    
    
    $
    15,590
    
    
    $
    38,672
    
    
    $
    30,468Interest on taxable securities
    
    
    2,749
    
    
    
    2,945
    
    
    
    5,510
    
    
    
    5,870Interest on tax exempt securities
    
    
    90
    
    
    
    59
    
    
    
    167
    
    
    
    117Interest on federal funds sold
    
    
    51
    
    
    
    109
    
    
    
    86
    
    
    
    191Interest and dividends on other investments
    
    
    464
    
    
    
    254
    
    
    
    822
    
    
    
    497Total interest income
    
    
    23,608
    
    
    
    18,957
    
    
    
    45,257
    
    
    
    37,143INTEREST EXPENSEInterest on deposits
    
    
    9,767
    
    
    
    6,528
    
    
    
    18,180
    
    
    
    12,565Interest on other borrowed funds
    
    
    2,648
    
    
    
    1,881
    
    
    
    5,120
    
    
    
    3,738Interest on subordinated debentures
    
    
    780
    
    
    
    699
    
    
    
    1,541
    
    
    
    1,384Total interest expense
    
    
    13,195
    
    
    
    9,108
    
    
    
    24,841
    
    
    
    17,687NET INTEREST INCOME
    
    
    10,413
    
    
    
    9,849
    
    
    
    20,416
    
    
    
    19,456Provision for loan losses
    
    
    700
    
    
    
    1,500
    
    
    
    1,300
    
    
    
    2,250NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
    
    
    9,713
    
    
    
    8,349
    
    
    
    19,116
    
    
    
    17,206NONINTEREST INCOMEService charges and fees on deposits
    
    
    1,129
    
    
    
    1,166
    
    
    
    2,160
    
    
    
    2,278Mortgage banking income
    
    
    708
    
    
    
    762
    
    
    
    1,238
    
    
    
    1,208Investment securities losses
    
    
    
    
    
    
    (68
    )
    
    
    
    
    
    
    (977
    )Change in fair value of derivatives
    
    
    (33
    )
    
    
    933
    
    
    
    37
    
    
    
    703Increase in cash surrender value of life insurance
    
    
    359
    
    
    
    391
    
    
    
    780
    
    
    
    742Insurance proceeds
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    5,000Other income
    
    
    664
    
    
    
    510
    
    
    
    1,114
    
    
    
    987TOTAL NONINTEREST INCOME
    
    
    2,827
    
    
    
    8,694
    
    
    
    5,329
    
    
    
    9,941NONINTEREST EXPENSESSalaries and employee benefits
    
    
    5,803
    
    
    
    5,927
    
    
    
    11,671
    
    
    
    11,329Occupancy, furniture and equipment expense
    
    
    1,739
    
    
    
    2,059
    
    
    
    3,586
    
    
    
    4,040Management separation costs
    
    
    
    
    
    
    2,961
    
    
    
    
    
    
    
    15,338Other operating expenses
    
    
    3,118
    
    
    
    4,536
    
    
    
    6,208
    
    
    
    8,098TOTAL NONINTEREST EXPENSES
    
    
    10,660
    
    
    
    15,483
    
    
    
    21,465
    
    
    
    38,805Income (loss) before income taxes
    
    
    1,880
    
    
    
    1,560
    
    
    
    2,980
    
    
    
    (11,658
    )INCOME TAX EXPENSE (BENEFIT)
    
    
    606
    
    
    
    412
    
    
    
    856
    
    
    
    (4,645
    )NET INCOME (LOSS)
    
    
    1,274
    
    
    
    1,148
    
    
    
    2,124
    
    
    
    (7,013
    )PREFERRED STOCK DIVIDENDS
    
    
    
    
    
    
    305
    
    
    
    
    
    
    
    305EFFECT OF EARLY CONVERSION OF PREFFERED STOCK
    
    
    
    
    
    
    2,006
    
    
    
    
    
    
    
    2,006NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS
    
    $
    1,274
    
    
    $
    (1,163
    )
    
    $
    2,124
    
    
    $
    (9,324
    )BASIC NET INCOME (LOSS) PER COMMON SHARE
    
    $
    0.06
    
    
    $
    (0.06
    )
    
    $
    0.11
    
    
    $
    (0.50
    )DILUTED NET INCOME (LOSS) PER COMMON SHARE
    
    $
    0.06
    
    
    $
    (0.06
    )
    
    $
    0.10
    
    
    $
    (0.50
    )Weighted average common shares outstanding
    
    
    20,129
    
    
    
    18,726
    
    
    
    20,073
    
    
    
    18,562Weighted average common shares outstanding, assuming
dilution
    
    
    20,757
    
    
    
    18,726
    
    
    
    20,716
    
    
    
    18,562
  3




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SUPERIOR BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
(Dollars in thousands)
 Six Months EndedJune 30,2006
    
    
    2005NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
    
    $
    549
    
    
    $
    (20,929
    )CASH FLOWS FROM INVESTING ACTIVITIES:Net decrease in interest-bearing deposits in other banks
    
    
    4,581
    
    
    
    6,642Net (increase) decrease in federal funds sold
    
    
    (9,055
    )
    
    
    3,405Proceeds from sales of securities available for sale
    
    
    
    
    
    
    57,150Proceeds from maturities of investment securities available for sale
    
    
    7,412
    
    
    
    20,105Purchases of investment securities available for sale
    
    
    (2,887
    )
    
    
    (53,609
    )Purchases of tax lien certificates
    
    
    (5,765
    )
    
    
    Net (increase) decrease in loans
    
    
    (118,460
    )
    
    
    28,985Proceeds from sales of premises and equipment
    
    
    1,104
    
    
    
    3,055Purchases of premises and equipment
    
    
    (6,049
    )
    
    
    (511
    )Proceeds from sale of repossessed assets
    
    
    1,070
    
    
    
    2,618Increase in other investments
    
    
    (874
    )
    
    
    (34
    )Net cash (used) provided by investing activities
    
    
    (128,923
    )
    
    
    67,806CASH FLOWS FROM FINANCING ACTIVITIES:Net increase (decrease) in deposit accounts
    
    
    97,593
    
    
    
    (26,711
    )Net increase (decrease) in FHLB advances and other borrowed funds
    
    
    17,569
    
    
    
    (21,299
    )Payments made on notes payable
    
    
    (105
    )
    
    
    (105
    )Proceeds from sale of common stock
    
    
    941
    
    
    
    7,705Cash dividends paid
    
    
    
    
    
    
    (305
    )Net cash provided (used) by financing activities
    
    
    115,998
    
    
    
    (40,715
    )Net (decrease) increase in cash and due from banks
    
    
    (12,376
    )
    
    
    6,162Cash and due from banks at beginning of period
    
    
    35,088
    
    
    
    23,489CASH AND DUE FROM BANKS AT END OF PERIOD
    
    $
    22,712
    
    
    $
    29,651
  4




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NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Note 1
 Basis of Presentation
   Accounting for Derivative Instruments and Hedging Activities
 Note 2
 Recent Accounting Pronouncements
 Statement
of Financial Accounting Standards No. 155
 Accounting for Certain Hybrid Financial Instruments Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities  a replacement of
FASB Statement No. 125,
 5




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Statement
of Financial Accounting Standards No. 156
 Accounting for Servicing of Financial Assets
 FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes
 Accounting for Uncertainty in Income
Taxes Accounting for Income Taxes
 Note 3
 Recent Developments
   Note 4
 Asset Sales
  Note 5
 Segment Reporting
  6




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Alabama
    
    FloridaRegion
    
    Region
    
    CombinedThree months ended June 30, 2006Net interest income
    
    $
    6,536
    
    
    $
    3,877
    
    
    $
    10,413Provision for loan losses
    
    
    243
    
    
    
    457
    
    
    
    700Noninterest income
    
    
    2,579
    
    
    
    248
    
    
    
    2,827Noninterest expense (1)
    
    
    9,585
    
    
    
    1,075
    
    
    
    10,660Income
tax (benefit) expense
    
    
    (222
    )
    
    
    828
    
    
    
    606Net (loss) income
    
    
    (491
    )
    
    
    1,765
    
    
    
    1,274Total assets
    
    
    1,214,545
    
    
    
    316,682
    
    
    
    1,531,227Three months ended June 30, 2005Net interest income
    
    $
    6,757
    
    
    $
    3,092
    
    
    $
    9,849Provision for loan losses
    
    
    1,379
    
    
    
    121
    
    
    
    1,500Noninterest
income (3)
    
    
    8,365
    
    
    
    329
    
    
    
    8,694Noninterest expense (1) (2)
    
    
    14,456
    
    
    
    1,027
    
    
    
    15,483Income
tax (benefit) expense
    
    
    (206
    )
    
    
    618
    
    
    
    412Net (loss) income
    
    
    (507
    )
    
    
    1,655
    
    
    
    1,148Total assets
    
    
    1,108,062
    
    
    
    275,205
    
    
    
    1,383,267Six months ended June 30, 2006Net interest income
    
    $
    12,895
    
    
    $
    7,521
    
    
    $
    20,416Provision for loan losses
    
    
    1,032
    
    
    
    268
    
    
    
    1,300Noninterest income
    
    
    4,835
    
    
    
    494
    
    
    
    5,329Noninterest expense (1)
    
    
    19,298
    
    
    
    2,167
    
    
    
    21,465Income
tax (benefit) expense
    
    
    (928
    )
    
    
    1,784
    
    
    
    856Net (loss) income
    
    
    (1,672
    )
    
    
    3,796
    
    
    
    2,124Six months ended June 30, 2005Net interest income
    
    $
    13,535
    
    
    $
    5,921
    
    
    $
    19,456Provision for loan losses
    
    
    2,112
    
    
    
    138
    
    
    
    2,250Noninterest income (3)
    
    
    9,288
    
    
    
    653
    
    
    
    9,941Noninterest expense (1) (2)
    
    
    36,630
    
    
    
    2,175
    
    
    
    38,805Income
tax (benefit) expense
    
    
    (5,845
    )
    
    
    1,200
    
    
    
    (4,645
    )Net (loss) income
    
    
    (10,074
    )
    
    
    3,061
    
    
    
    (7,013
    )
 
 (1)
    
    Noninterest expense for the Alabama region includes all expenses for the holding company,
which have not been prorated to the Florida region.(2)
    
    See Notes 4 and 12 concerning the amount of gain on the sale
of assets and management separation costs.(3)
    
    Noninterest income for the periods ended June 30, 2005
includes $5.0 million in insurance proceeds. 7




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Note 6
 Net Income (Loss) per Common Share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Numerator:Net income (loss)
    
    $
    1,274
    
    
    $
    1,148
    
    
    $
    2,124
    
    
    $
    (7,013
    )Less preferred dividends
    
    
    
    
    
    
    305
    
    
    
    
    
    
    
    305Less effect of preferred stock conversion
    
    
    
    
    
    
    2,006
    
    
    
    
    
    
    
    2,006For basic and diluted, net income (loss)
    
    $
    1,274
    
    
    $
    (1,163
    )
    
    $
    2,124
    
    
    $
    (9,324
    )Denominator:For basic, weighted average common shares outstanding
    
    
    20,129
    
    
    
    18,726
    
    
    
    20,073
    
    
    
    18,562Effect of dilutive stock options and restricted stock
    
    
    628
    
    
    
    
    
    
    
    643
    
    
    
    Average diluted common shares outstanding
    
    
    20,757
    
    
    
    18,726
    
    
    
    20,716
    
    
    
    18,562Basic net income (loss) per common share
    
    $
    .06
    
    
    $
    (.06
    )
    
    $
    .11
    
    
    $
    (.50
    )Diluted net income (loss) per common share
    
    $
    .06
    
    
    $
    (.06
    )
    
    $
    .10
    
    
    $
    (.50
    )
   Note 7
 Comprehensive (Loss) Income
  Note 8
 Income Taxes
   8




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Note 9
 Junior Subordinated Debentures
    June 30,
    
    
    December 31,2006
    
    
    2005(In thousands)10.6% junior subordinated debentures owed to TBC Capital Statutory
Trust II due September 7, 2030
    
    $
    15,464
    
    
    $
    15,4646-month LIBOR plus 3.75% junior subordinated debentures owed to TBC Capital
Statutory Trust III July 25, 2031
    
    
    16,495
    
    
    
    16,495Total junior subordinated debentures owed to unconsolidated subsidiary trusts
    
    $
    31,959
    
    
    $
    31,959
   9




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Note
10  Stockholders Equity
     June 30, 2006Allocated shares
    
    
    82,028Estimated shares committed to be released
    
    
    13,350Unreleased shares
    
    
    178,022Total ESOP shares
    
    
    273,400Fair value of unreleased shares
    
    $
    3,007,400
 Share-Based Payment Accounting for Stock-Based Compensation , Accounting for Stock Issued to Employees
 10




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Risk-free interest rate
    
    
    4.92
    %Volatility factor
    
    
    .47
    %Weighted average life of options (in years)
    
    
    7.00Dividend yield
    
    
    0.00
    %
  Weighted-Weighted-
    
    
    AverageAverage
    
    
    RemainingExercise
    
    
    Contractual
    
    
    AggregateNumber
    
    
    Price
    
    
    Term
    
    
    Intrinsic ValueUnder option, beginning of period
    
    
    3,031,946
    
    
    $
    7.81Granted
    
    
    33,500
    
    
    
    11.34Exercised
    
    
    (140,818
    )
    
    
    6.35Forfeited
    
    
    (15,031
    )
    
    
    7.25Under option, end of period
    
    
    2,909,597
    
    
    $
    7.93
    
    
    
    7.77
    
    
    $
    8,973,207Exercisable at end of period
    
    
    2,881,097
    
    
    $
    7.89
    
    
    
    7.75
    
    
    $
    8,973,207Weighted-average fair value per
option of options granted during the
period
    
    $
    6.29
  11




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For the Three Months
    
    For the Six MonthsEnded
    
    EndedJune 30, 2005
    

June 30, 2005Net income (loss):As reported
    
    $
    1,148
    
    
    $
    (7,013
    )Pro forma
    
    
    (407
    )
    
    
    (10,729
    )Loss per common share:As reported
    
    $
    (.06
    )
    
    $
    (.50
    )Pro forma
    
    
    (.15
    )
    
    
    (.70
    )Diluted loss per common share:As reported
    
    $
    (.06
    )
    
    $
    (.50
    )Pro forma
    
    
    (.15
    )
    
    
    (.69
    )
  Risk-free interest rate
    
    
    4.34
    %Volatility factor
    
    
    .41
    %Weighted average life of options
    
    
    7.0Dividend yield
    
    
    0.00
    %
 Note
11  Derivative Instruments and Hedging Activities
    12




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Note
12  Management Separation Costs
      13




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Note
13  Tax Lien Certificates
  14




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ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
          15




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16




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17




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Average Balances Income, Expense and Rates
 Three Months Ended June 30,2006
    
    
    2005Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in thousands)ASSETSInterest-earning assets:Loans, net of unearned income(1)
    
    $
    1,047,829
    
    
    $
    20,254
    
    
    
    7.75
    %
    
    $
    945,407
    
    
    $
    15,590
    
    
    
    6.61
    %Investment securitiesTaxable
    
    
    238,826
    
    
    
    2,749
    
    
    
    4.62
    
    
    
    251,876
    
    
    
    2,945
    
    
    
    4.69Tax-exempt (2)
    
    
    9,322
    
    
    
    136
    
    
    
    5.87
    
    
    
    6,616
    
    
    
    89
    
    
    
    5.40Total investment securities
    
    
    248,148
    
    
    
    2,885
    
    
    
    4.66
    
    
    
    258,492
    
    
    
    3,034
    
    
    
    4.71Federal funds sold
    
    
    4,028
    
    
    
    51
    
    
    
    5.08
    
    
    
    15,851
    
    
    
    109
    
    
    
    2.76Other investments
    
    
    19,208
    
    
    
    464
    
    
    
    9.69
    
    
    
    21,571
    
    
    
    254
    
    
    
    4.72Total interest-earning assets
    
    
    1,319,213
    
    
    
    23,654
    
    
    
    7.19
    
    
    
    1,241,321
    
    
    
    18,987
    
    
    
    6.14Noninterest-earning assets:Cash and due from banks
    
    
    25,828
    
    
    
    
    
    
    
    
    
    
    
    29,032Premises and equipment
    
    
    57,465
    
    
    
    
    
    
    
    
    
    
    
    57,211Accrued interest and other assets
    
    
    78,501
    
    
    
    
    
    
    
    
    
    
    
    87,290Allowance for loan losses
    
    
    (12,232
    )
    
    
    
    
    
    
    
    
    
    
    (12,783
    )Total assets
    
    $
    1,468,775
    
    
    
    
    
    
    
    
    
    
    $
    1,402,071LIABILITIES
AND STOCKHOLDERS EQUITYInterest-bearing liabilities:Demand deposits
    
    $
    308,459
    
    
    $
    2,188
    
    
    
    2.85
    
    
    $
    335,803
    
    
    $
    1,645
    
    
    
    1.96Savings deposits
    
    
    19,882
    
    
    
    10
    
    
    
    0.20
    
    
    
    27,078
    
    
    
    10
    
    
    
    0.15Time deposits
    
    
    682,352
    
    
    
    7,569
    
    
    
    4.45
    
    
    
    605,584
    
    
    
    4,873
    
    
    
    3.23Other borrowings
    
    
    212,278
    
    
    
    2,648
    
    
    
    5.00
    
    
    
    190,113
    
    
    
    1,881
    
    
    
    3.97Subordinated debentures
    
    
    31,959
    
    
    
    780
    
    
    
    9.79
    
    
    
    31,959
    
    
    
    699
    
    
    
    8.77Total interest-bearing liabilities
    
    
    1,254,930
    
    
    
    13,195
    
    
    
    4.22
    
    
    
    1,190,537
    
    
    
    9,108
    
    
    
    3.07Noninterest-bearing liabilities:Demand deposits
    
    
    93,705
    
    
    
    
    
    
    
    
    
    
    
    92,120Accrued interest and other liabilities
    
    
    14,663
    
    
    
    
    
    
    
    
    
    
    
    18,356Stockholders equity
    
    
    105,477
    
    
    
    
    
    
    
    
    
    
    
    101,058Total liabilities and
stockholders equity
    
    $
    1,468,775
    
    
    
    
    
    
    
    
    
    
    $
    1,402,071Net interest income/net interest spread
    
    
    
    
    
    
    10,459
    
    
    
    2.97
    %
    
    
    
    
    
    
    9,879
    
    
    
    3.07
    %Net yield on earning assets
    
    
    
    
    
    
    
    
    
    
    3.18
    %
    
    
    
    
    
    
    
    
    
    
    3.19
    %Taxable equivalent adjustment:Investment securities(2)
    
    
    
    
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    30Net interest income
    
    
    
    
    
    $
    10,413
    
    
    
    
    
    
    
    
    
    
    $
    9,849
 
 (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 percent. 18




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##### Table of Contents



Three Months Ended June 30, (1)2006 vs. 2005Increase
    
    
    Changes Due To(Decrease)
    
    
    Rate
    
    
    Volume(Dollars in thousands)Increase (decrease) in:Income from interest-earning assets:Interest and fees on loans
    
    $
    4,664
    
    
    $
    2,865
    
    
    $
    1,799Interest on securities:Taxable
    
    
    (196
    )
    
    
    (44
    )
    
    
    (152
    )Tax-exempt
    
    
    47
    
    
    
    8
    
    
    
    39Interest on federal funds
    
    
    (58
    )
    
    
    55
    
    
    
    (113
    )Interest on other investments
    
    
    210
    
    
    
    241
    
    
    
    (31
    )Total interest income
    
    
    4,667
    
    
    
    3,125
    
    
    
    1,542Expense from interest-bearing liabilities:Interest on demand deposits
    
    
    543
    
    
    
    687
    
    
    
    (144
    )Interest on savings deposits
    
    
    
    
    
    
    3
    
    
    
    (3
    )Interest on time deposits
    
    
    2,696
    
    
    
    2,019
    
    
    
    678Interest on other borrowings
    
    
    767
    
    
    
    529
    
    
    
    238Interest on subordinated debentures
    
    
    81
    
    
    
    81
    
    
    
    Total interest expense
    
    
    4,087
    
    
    
    3,319
    
    
    
    769Net interest income
    
    $
    580
    
    
    $
    (194
    )
    
    $
    773
 
 (1)
    
    The change in interest due to both rate and volume has been allocated to volume and
rate changes in proportion to the relationship of the absolute dollar amounts of the
changes in each. 19




---



##### Table of Contents



Average Balances Income, Expense and Rates
 Six Months Ended June 30,2006
    
    
    2005Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in thousands)ASSETSInterest-earning assets:Loans, net of unearned income(1)
    
    $
    1,022,238
    
    
    $
    38,672
    
    
    
    7.63
    %
    
    $
    949,626
    
    
    $
    30,468
    
    
    
    6.47
    %Investment securitiesTaxable
    
    
    241,353
    
    
    
    5,509
    
    
    
    4.60
    
    
    
    264,178
    
    
    
    5,870
    
    
    
    4.48Tax-exempt (2)
    
    
    8,889
    
    
    
    253
    
    
    
    5.74
    
    
    
    6,624
    
    
    
    177
    
    
    
    5.39Total investment securities
    
    
    250,242
    
    
    
    5,762
    
    
    
    4.64
    
    
    
    270,802
    
    
    
    6,047
    
    
    
    4.50Federal funds sold
    
    
    3,520
    
    
    
    86
    
    
    
    4.93
    
    
    
    14,726
    
    
    
    191
    
    
    
    2.62Other investments
    
    
    18,932
    
    
    
    822
    
    
    
    8.76
    
    
    
    23,962
    
    
    
    497
    
    
    
    4.18Total interest-earning assets
    
    
    1,294,932
    
    
    
    45,342
    
    
    
    7.06
    
    
    
    1,259,116
    
    
    
    37,203
    
    
    
    5.96Noninterest-earning assets:Cash and due from banks
    
    
    27,241
    
    
    
    
    
    
    
    
    
    
    
    30,748Premises and equipment
    
    
    56,850
    
    
    
    
    
    
    
    
    
    
    
    58,076Accrued interest and other assets
    
    
    77,683
    
    
    
    
    
    
    
    
    
    
    
    83,525Allowance for loan losses
    
    
    (12,169
    )
    
    
    
    
    
    
    
    
    
    
    (12,792
    )Total assets
    
    $
    1,444,537
    
    
    
    
    
    
    
    
    
    
    $
    1,418,673LIABILITIES
AND STOCKHOLDERS EQUITYInterest-bearing liabilities:Demand deposits
    
    $
    318,406
    
    
    $
    4,338
    
    
    
    2.75
    
    
    $
    319,371
    
    
    $
    2,755
    
    
    
    1.74Savings deposits
    
    
    20,474
    
    
    
    18
    
    
    
    0.18
    
    
    
    27,643
    
    
    
    21
    
    
    
    0.15Time deposits
    
    
    648,984
    
    
    
    13,824
    
    
    
    4.30
    
    
    
    631,728
    
    
    
    9,789
    
    
    
    3.12Other borrowings
    
    
    212,137
    
    
    
    5,119
    
    
    
    4.87
    
    
    
    196,323
    
    
    
    3,738
    
    
    
    3.84Subordinated debentures
    
    
    31,959
    
    
    
    1,541
    
    
    
    9.72
    
    
    
    31,959
    
    
    
    1,384
    
    
    
    8.73Total interest-bearing liabilities
    
    
    1,231,960
    
    
    
    24,840
    
    
    
    4.07
    
    
    
    1,207,024
    
    
    
    17,687
    
    
    
    2.95Noninterest-bearing liabilities:Demand deposits
    
    
    92,583
    
    
    
    
    
    
    
    
    
    
    
    93,792Accrued interest and other liabilities
    
    
    14,576
    
    
    
    
    
    
    
    
    
    
    
    16,870Stockholders equity
    
    
    105,418
    
    
    
    
    
    
    
    
    
    
    
    100,987Total liabilities and
stockholders equity
    
    $
    1,444,537
    
    
    
    
    
    
    
    
    
    
    $
    1,418,673Net interest income/net interest spread
    
    
    
    
    
    
    20,502
    
    
    
    2.99
    %
    
    
    
    
    
    
    19,516
    
    
    
    3.01
    %Net yield on earning assets
    
    
    
    
    
    
    
    
    
    
    3.19
    %
    
    
    
    
    
    
    
    
    
    
    3.13
    %Taxable equivalent adjustment:Investment securities(2)
    
    
    
    
    
    
    86
    
    
    
    
    
    
    
    
    
    
    
    60Net interest income
    
    
    
    
    
    $
    20,416
    
    
    
    
    
    
    
    
    
    
    $
    19,456
 
 (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 percent. 20




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##### Table of Contents



Six Months Ended June 30, (1)2006 vs. 2005Increase
    
    
    Changes Due To(Decrease)
    
    
    Rate
    
    
    Volume(Dollars in thousands)Increase (decrease) in:Income from interest-earning assets:Interest and fees on loans
    
    $
    8,204
    
    
    $
    5,751
    
    
    $
    2,453Interest on securities:Taxable
    
    
    (361
    )
    
    
    155
    
    
    
    (516
    )Tax-exempt
    
    
    76
    
    
    
    11
    
    
    
    65Interest on federal funds
    
    
    (105
    )
    
    
    100
    
    
    
    (205
    )Interest on other investments
    
    
    325
    
    
    
    448
    
    
    
    (123
    )Total interest income
    
    
    8,139
    
    
    
    6,465
    
    
    
    1,674Expense from interest-bearing liabilities:Interest on demand deposits
    
    
    1,583
    
    
    
    1,591
    
    
    
    (8
    )Interest on savings deposits
    
    
    (3
    )
    
    
    3
    
    
    
    (6
    )Interest on time deposits
    
    
    4,035
    
    
    
    3,763
    
    
    
    272Interest on other borrowings
    
    
    1,381
    
    
    
    1,062
    
    
    
    319Interest on subordinated debentures
    
    
    157
    
    
    
    157
    
    
    
    Total interest expense
    
    
    7,153
    
    
    
    6,576
    
    
    
    577Net interest income
    
    $
    986
    
    
    $
    (111
    )
    
    $
    1,097
 
 (1)
    
    The change in interest due to both rate and volume has been allocated to volume and rate
changes in proportion to the relationship of the absolute dollar amounts of the changes in
each. Noninterest income
  Noninterest expenses
 21




---



##### Table of Contents



Income tax expense
  Provision for Loan Losses
 22




---



##### Table of Contents



Short-term liquid assets
 Investment
Securities
 Tax lien certificates.
 Loans
 23




---



##### Table of Contents



June 30, 2006
    
    
    December 31, 2005Percent of
    
    
    
    
    
    
    Percent ofAmount
    
    
    Total
    
    
    Amount
    
    
    TotalCommercial and industrial
    
    $
    135,395
    
    
    
    12.5
    %
    
    $
    135,454
    
    
    
    14.0
    %Real estate  construction and land development
    
    
    410,058
    
    
    
    37.9
    
    
    
    326,418
    
    
    
    33.8Real estate  mortgageSingle-family
    
    
    279,410
    
    
    
    25.8
    
    
    
    243,183
    
    
    
    25.2Commercial
    
    
    207,665
    
    
    
    19.2
    
    
    
    210,611
    
    
    
    21.8Other
    
    
    28,722
    
    
    
    2.6
    
    
    
    27,503
    
    
    
    2.9Consumer
    
    
    20,431
    
    
    
    1.9
    
    
    
    21,122
    
    
    
    2.2Other
    
    
    641
    
    
    
    .1
    
    
    
    498
    
    
    
    .1Total loans
    
    
    1,082,322
    
    
    
    100.0
    %
    
    
    964,789
    
    
    
    100.0
    %Unearned income
    
    
    (1,609
    )
    
    
    
    
    
    
    (1,536
    )Allowance for loan losses
    
    
    (12,311
    )
    
    
    
    
    
    
    (12,011
    )Net loans
    
    $
    1,068,402
    
    
    
    
    
    
    $
    951,242
 Premises and Equipment, net.
 Deposits
  Borrowings
 Junior Subordinated Debentures
 24




---



##### Table of Contents



June 30, 2006
    
    
    December 31, 2005(In thousands)10.6% junior subordinated
debentures owed to TBC Capital
Statutory Trust II due September
7, 2030
    
    $
    15,464
    
    
    $
    15,4646-month LIBOR plus 3.75% junior
subordinated debentures owed to
TBC Capital Statutory Trust III
due July 25, 2031
    
    
    16,495
    
    
    
    16,495Total junior subordinated
debentures owed to
unconsolidated subsidiary trusts
    
    $
    31,959
    
    
    $
    31,959
   Derivatives.
     25




---



##### Table of Contents



Allowance for Loan Losses
       26




---



##### Table of Contents



SUMMARY OF LOAN LOSS EXPERIENCE
 Three-Month
    

    
    Six-MonthPeriod Ended
    
    
    Period Ended
    
    
    Year EndedJune 30,
    
    
    June 30,
    
    
    December 31,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2005(Dollars in thousands)Allowance for loan losses at beginning
of period
    
    $
    11,999
    
    
    $
    12,957
    
    
    $
    12,011
    
    
    $
    12,543
    
    
    $
    12,543Charge-offs:Commercial and industrial
    
    
    334
    
    
    
    1,120
    
    
    
    615
    
    
    
    1,161
    
    
    
    2,097Real estate  construction and land
development
    
    
    1
    
    
    
    73
    
    
    
    44
    
    
    
    74
    
    
    
    358Real estate  mortgageSingle-family
    
    
    175
    
    
    
    412
    
    
    
    450
    
    
    
    499
    
    
    
    795Commercial
    
    
    81
    
    
    
    785
    
    
    
    95
    
    
    
    995
    
    
    
    1,432Other
    
    
    
    
    
    
    20
    
    
    
    11
    
    
    
    20
    
    
    
    85Consumer
    
    
    184
    
    
    
    255
    
    
    
    404
    
    
    
    380
    
    
    
    630Other
    
    
    2
    
    
    
    163
    
    
    
    2
    
    
    
    254
    
    
    
    345Total charge-offs
    
    
    777
    
    
    
    2,828
    
    
    
    1,621
    
    
    
    3,383
    
    
    
    5,742Recoveries:Commercial and industrial
    
    
    137
    
    
    
    128
    
    
    
    218
    
    
    
    210
    
    
    
    413Real estate  construction and land
development
    
    
    120
    
    
    
    15
    
    
    
    121
    
    
    
    25
    
    
    
    37Real estate  mortgageSingle-family
    
    
    24
    
    
    
    253
    
    
    
    56
    
    
    
    282
    
    
    
    335Commercial
    
    
    30
    
    
    
    123
    
    
    
    54
    
    
    
    124
    
    
    
    526Other
    
    
    14
    
    
    
    63
    
    
    
    46
    
    
    
    73
    
    
    
    118Consumer
    
    
    64
    
    
    
    49
    
    
    
    126
    
    
    
    97
    
    
    
    280Other
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    42
    
    
    
    1Total recoveries
    
    
    389
    
    
    
    634
    
    
    
    621
    
    
    
    853
    
    
    
    1,710Net charge-offs
    
    
    388
    
    
    
    2,194
    
    
    
    1,000
    
    
    
    2,530
    
    
    
    4,032Provision for loan losses
    
    
    700
    
    
    
    1,500
    
    
    
    1,300
    
    
    
    2,250
    
    
    
    3,500Allowance for loan losses at end of period
    
    $
    12,311
    
    
    $
    12,263
    
    
    $
    12,311
    
    
    $
    12,263
    
    
    $
    12,011Loans at end of period, net of unearned
income
    
    $
    1,080,713
    
    
    $
    903,456
    
    
    $
    1,080,713
    
    
    $
    903,456
    
    
    $
    963,253Average loans, net of unearned income
    
    
    1,047,829
    
    
    
    945,407
    
    
    
    1,022,238
    
    
    
    949,626
    
    
    
    947,212Ratio of ending allowance to ending loans
    
    
    1.14
    %
    
    
    1.36
    %
    
    
    1.14
    %
    
    
    1.36
    %
    
    
    1.25
    %Ratio of net charge-offs to average loans (1)
    
    
    0.15
    %
    
    
    0.93
    %
    
    
    0.20
    %
    
    
    0.54
    %
    
    
    0.43
    %Net charge-offs as a percentage of:Provision for loan losses
    
    
    55.43
    %
    
    
    146.27
    %
    
    
    76.92
    %
    
    
    112.44
    %
    
    
    115.20
    %Allowance for loan losses (1)
    
    
    12.64
    %
    
    
    71.76
    %
    
    
    16.38
    %
    
    
    41.60
    %
    
    
    33.57
    %Allowance for loan losses as a percentage of
nonperforming loans
    
    
    258.09
    %
    
    
    195.08
    %
    
    
    258.09
    %
    
    
    195.08
    %
    
    
    252.76
    %
 
 (1)
    
    Annualized.  27




---



##### Table of Contents



Nonperforming
Assets
 NONPERFORMING ASSETS
 June 30,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Nonaccrual
    
    $
    4,567
    
    
    $
    4,550Accruing loans 90 days or more delinquent
    
    
    
    
    
    
    49Restructured
    
    
    203
    
    
    
    153Total nonperforming loans
    
    
    4,770
    
    
    
    4,752Other real estate owned
    
    
    866
    
    
    
    1,842Total nonperforming assets
    
    $
    5,636
    
    
    $
    6,594Nonperforming loans as a percentage of loans
    
    
    0.44
    %
    
    
    0.49
    %Nonperforming
assets as a percentage of loans plus nonperforming assets
    
    
    0.52
    %
    
    
    0.68
    %Nonperforming
assets as a  percentage of total assets
    
    
    0.37
    %
    
    
    0.47
    %
   June 30,
    
    
    December 31,2006
    
    
    2005(Dollars in thousands)Commercial and industrial
    
    $
    1,950
    
    
    $
    1,797Real estate  construction and land development
    
    
    429
    
    
    
    469Real estate  mortgagesSingle-family
    
    
    1,737
    
    
    
    1,639Commercial
    
    
    618
    
    
    
    675Other
    
    
    
    
    
    
    11Consumer
    
    
    36
    
    
    
    161Total nonperforming loans
    
    $
    4,770
    
    
    $
    4,752
  
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##### Table of Contents



Impaired Loans
 Outstanding
    
    
    SpecificBalance
    
    
    Allowance(Dollars in thousands)Commercial and industrial
    
    $
    1,804
    
    
    $
    776Real estate  construction and land development
    
    
    482
    
    
    
    137Real estate  mortgagesCommercial
    
    
    1,130
    
    
    
    392Other
    
    
    
    
    
    
    Total
    
    $
    3,416
    
    
    $
    1,305
 Potential Problem Loans
 Stockholders Equity
 Regulatory Capital.
 To Be WellFor Capital
    
    Capitalized UnderAdequacy
    
    Prompt CorrectiveActual
    
    Purposes
    
    ActionAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of June 30, 2006Tier 1 Core Capital (to
Adjusted Total Assets)Corporation
    
    $
    120,615
    
    
    
    7.96
    %
    
    $
    60,596
    
    
    
    4.00
    %
    
    $
    75,746
    
    
    
    5.00
    %Superior Bank
    
    
    115,464
    
    
    
    7.68
    
    
    
    60,142
    
    
    
    4.00
    
    
    
    75,177
    
    
    
    5.00Total Capital (to Risk
Weighted Assets)Corporation
    
    
    131,934
    
    
    
    10.46
    
    
    
    100,896
    
    
    
    8.00
    
    
    
    126,120
    
    
    
    10.00Superior Bank
    
    
    126,783
    
    
    
    10.14
    
    
    
    99,987
    
    
    
    8.00
    
    
    
    124,984
    
    
    
    10.00Tier 1 Capital (to Risk
Weighted Assets)Corporation
    
    
    120,615
    
    
    
    9.56
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    75,672
    
    
    
    6.00Superior Bank
    
    
    115,464
    
    
    
    9.24
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    74,991
    
    
    
    6.00Tangible Capital (to
Adjusted Total Assets)Corporation
    
    
    120,615
    
    
    
    7.96
    
    
    
    22,724
    
    
    
    1.50
    
    
    
    N/A
    
    
    
    N/ASuperior Bank
    
    
    115,464
    
    
    
    7.68
    
    
    
    22,553
    
    
    
    1.50
    
    
    
    N/A
    
    
    
    N/A
 29




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##### Table of Contents



30




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
   
 ITEM 4. CONTROLS AND PROCEDURES
        31




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##### Table of Contents



PART
II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS.
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  1.
    
    The stockholders voted as follows to elect the following persons as directors, each to
hold office for a one-year term:
 NAME
    
    FOR
    
    WITHHELDC. Stanley Bailey
    
    16,253,917
    
    70,305Roger Barker
    
    16,169,476
    
    154,746K. Earl Durden
    
    15,870,824
    
    453,398Rick D. Gardner
    
    16,254,117
    
    70,105Thomas E. Jernigan, Jr.
    
    16,146,126
    
    178,096James Mailon Kent, Jr.
    
    16,130,906
    
    193,316James M. Link
    
    15,744,115
    
    580,107Barry Morton
    
    16,269,582
    
    54,640Robert R. Parrish, Jr.
    
    16,008,382
    
    315,840C. Marvin Scott
    
    16,253,917
    
    70,305Michael E. Stephens
    
    15,963,010
    
    361,212James A. Taylor
    
    15,304,751
    
    1,019,471James C. White, Sr.
    
    15,995,794
    
    328,428
 32




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##### Table of Contents



2.
    
    The stockholders voted to approve an amendment to our Restated Certificate of
Incorporation to change our corporate name to Superior Bancorp, as follows:
 FOR
    
    AGAINST
    
    ABSTAIN16,232,189
    
    87,834
    
    4,199
 3.
    
    The stockholders voted to approve an amendment to our Restated Certificate of
Incorporation to increase the number of authorized shares of our common stock to 50
million, as follows:
 FOR
    
    AGAINST
    
    ABSTAIN15,930,905
    
    332,721
    
    60,595
 4.
    
    The stockholders voted to approve our Non-Employee Director Stock Plan, as
follows:
 FOR
    
    AGAINST
    
    ABSTAIN11,519,568
    
    209,110
    
    277,465
 5.
    
    The stockholders voted to ratify the appointment of Carr, Riggs & Ingram, LLC
as our independent registered public accounting firm to conduct our audit for the 2006
fiscal year, as follows:
 FOR
    
    AGAINST
    
    ABSTAIN16,274,266
    
    48,107
    
    1,849
 
 ITEM
5. OTHER INFORMATION.
  
 ITEM
6. EXHIBITS.
  31.01
    
    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.
 33




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##### Table of Contents



SUPERIOR BANCORP
(Registrant)Date: August 9, 2006
    By:
    /s/ C. Stanley BaileyC. Stanley BaileyChief Executive OfficerDate: August 9, 2006
    By:
    /s/ James C. GossettJames C. GossettChief Accounting Officer
(Principal Financial and Accounting Officer) 34