##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  TO
 Commission File number 0-25033
 Superior Bancorp
 (Exact Name of Registrant as Specified in its Charter)
 Delaware
    
    63-1201350(State or Other Jurisdiction of Incorporation)
    
    (IRS Employer Identification No.)
 17 North 20th Street, Birmingham, Alabama 35203
 (Registrants Telephone Number, Including Area Code)
  þ o
  Large accelerated filer o

   

   Accelerated filer
þ


   Non-accelerated filer
o
(Do not check if a smaller reporting company)


  Smaller reporting company
o
  o þ
  Class
    
    Outstanding as of September 30, 2008Common stock, $.001 par value
    
    10,064,941




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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
    
    
    17ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    
    
    41ITEM 4. CONTROLS AND PROCEDURES
    
    
    42PART II. OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    42ITEM 1A. RISK FACTORS
    
    
    42ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    42ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    43ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    43ITEM 5. OTHER INFORMATION
    
    
    43ITEM 6. EXHIBITS
    
    
    43SIGNATURES
    
    
    44EX-10.1EX-10.2EX-10.3EX-10.4EX-10.5EX-10.6EX-10.7EX-10.8EX-10.9EX-31.1EX-31.2EX-32.1EX-32.2
  1




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##### Table of Contents



SUPERIOR BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
 September 30,
    
    
    December 31,2008
    
    
    2007(UNAUDITED)ASSETSCash and due from banks
    
    $
    88,035
    
    
    $
    52,983Interest-bearing deposits in other banks
    
    
    6,564
    
    
    
    6,916Federal funds sold
    
    
    3,038
    
    
    
    3,452Investment securities available for sale
    
    
    334,502
    
    
    
    361,171Tax lien certificates
    
    
    18,877
    
    
    
    15,615Mortgage loans held for sale
    
    
    15,292
    
    
    
    33,408Loans, net of unearned income
    
    
    2,219,041
    
    
    
    2,017,011Less: Allowance for loan losses
    
    
    (27,670
    )
    
    
    (22,868
    )Net loans
    
    
    2,191,371
    
    
    
    1,994,143Premises and equipment, net
    
    
    104,003
    
    
    
    104,799Accrued interest receivable
    
    
    15,188
    
    
    
    16,512Stock in FHLB
    
    
    24,965
    
    
    
    14,945Cash surrender value of life insurance
    
    
    47,789
    
    
    
    45,277Goodwill and other intangibles
    
    
    184,442
    
    
    
    187,520Other assets
    
    
    69,611
    
    
    
    48,684TOTAL ASSETS
    
    $
    3,103,677
    
    
    $
    2,885,425LIABILITIES AND STOCKHOLDERS EQUITYDeposits:Noninterest-bearing
    
    $
    220,553
    
    
    $
    207,602Interest-bearing
    
    
    2,004,976
    
    
    
    1,993,009TOTAL DEPOSITS
    
    
    2,225,529
    
    
    
    2,200,611Advances from FHLB
    
    
    440,327
    
    
    
    222,828Federal funds purchased and security repurchase agreements
    
    
    5,989
    
    
    
    17,075Note payable
    
    
    10,000
    
    
    
    9,500Subordinated debentures
    
    
    60,940
    
    
    
    53,744Accrued expenses and other liabilities
    
    
    19,019
    
    
    
    31,625TOTAL LIABILITIES
    
    
    2,761,804
    
    
    
    2,535,383STOCKHOLDERS EQUITYCommon stock, par value $.001 per share; authorized 15,000,000
shares; shares issued 10,391,748 and 10,380,658, respectively;
outstanding 10,064,941 and 10,027,079, respectively
    
    
    10
    
    
    
    10Surplus
    
    
    331,860
    
    
    
    329,232Retained earnings
    
    
    28,586
    
    
    
    33,557Accumulated other comprehensive (loss) income
    
    
    (6,441
    )
    
    
    174Treasury
stock, at cost  321,485 and 347,536 shares, respectively
    
    
    (11,370
    )
    
    
    (12,309
    )Unearned ESOP stock
    
    
    (487
    )
    
    
    (622
    )Unearned restricted stock
    
    
    (285
    )
    
    
    TOTAL STOCKHOLDERS EQUITY
    
    
    341,873
    
    
    
    350,042TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    3,103,677
    
    
    $
    2,885,425
  2




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##### Table of Contents



SUPERIOR BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in thousands, except per share data)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007INTEREST INCOMEInterest and fees on loans
    
    $
    36,664
    
    
    $
    40,486
    
    
    $
    110,717
    
    
    $
    109,783Interest on taxable securities
    
    
    4,106
    
    
    
    4,271
    
    
    
    12,302
    
    
    
    12,805Interest on tax-exempt securities
    
    
    430
    
    
    
    276
    
    
    
    1,291
    
    
    
    543Interest on federal funds sold
    
    
    17
    
    
    
    91
    
    
    
    114
    
    
    
    373Interest and dividends on other investments
    
    
    663
    
    
    
    875
    
    
    
    2,039
    
    
    
    2,304Total interest income
    
    
    41,880
    
    
    
    45,999
    
    
    
    126,463
    
    
    
    125,808INTEREST EXPENSEInterest on deposits
    
    
    16,010
    
    
    
    21,410
    
    
    
    52,972
    
    
    
    57,659Interest on other borrowed funds
    
    
    3,290
    
    
    
    3,617
    
    
    
    9,098
    
    
    
    9,636Interest on subordinated debentures
    
    
    954
    
    
    
    1,066
    
    
    
    2,887
    
    
    
    3,062Total interest expense
    
    
    20,254
    
    
    
    26,093
    
    
    
    64,957
    
    
    
    70,357NET INTEREST INCOME
    
    
    21,626
    
    
    
    19,906
    
    
    
    61,506
    
    
    
    55,451Provision for loan losses
    
    
    2,305
    
    
    
    1,179
    
    
    
    10,143
    
    
    
    2,884NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
    
    
    19,321
    
    
    
    18,727
    
    
    
    51,363
    
    
    
    52,567NONINTEREST INCOMEService charges and fees on deposits
    
    
    2,425
    
    
    
    2,090
    
    
    
    6,721
    
    
    
    5,774Mortgage banking income
    
    
    820
    
    
    
    970
    
    
    
    3,117
    
    
    
    3,052Investment securities (loss) gain
    
    
    (8,541
    )
    
    
    
    
    
    
    (7,072
    )
    
    
    242Change in fair value of derivatives
    
    
    141
    
    
    
    202
    
    
    
    773
    
    
    
    169Increase in cash surrender value of life insurance
    
    
    583
    
    
    
    481
    
    
    
    1,689
    
    
    
    1,381Gain on extinguishment of liabilities
    
    
    
    
    
    
    
    
    
    
    2,918
    
    
    
    Other income
    
    
    1,359
    
    
    
    1,181
    
    
    
    4,247
    
    
    
    2,931TOTAL NONINTEREST INCOME
    
    
    (3,213
    )
    
    
    4,924
    
    
    
    12,393
    
    
    
    13,549NONINTEREST EXPENSESSalaries and employee benefits
    
    
    12,379
    
    
    
    10,724
    
    
    
    36,577
    
    
    
    30,959Occupancy, furniture and equipment expense
    
    
    4,434
    
    
    
    3,506
    
    
    
    12,614
    
    
    
    9,650Amortization of core deposit intangibles
    
    
    896
    
    
    
    494
    
    
    
    2,688
    
    
    
    1,102Loss on extinguishment of debt
    
    
    
    
    
    
    1,469
    
    
    
    
    
    
    
    1,469Merger-related costs
    
    
    
    
    
    
    103
    
    
    
    118
    
    
    
    530Loss on termination of ESOP
    
    
    
    
    
    
    158
    
    
    
    
    
    
    
    158Other expenses
    
    
    6,199
    
    
    
    4,836
    
    
    
    17,449
    
    
    
    13,504TOTAL NONINTEREST EXPENSES
    
    
    23,908
    
    
    
    21,290
    
    
    
    69,446
    
    
    
    57,372(Loss) income before income taxes
    
    
    (7,800
    )
    
    
    2,361
    
    
    
    (5,690
    )
    
    
    8,744INCOME TAX (BENEFIT) EXPENSE
    
    
    (1,292
    )
    
    
    911
    
    
    
    (719
    )
    
    
    3,027NET (LOSS) INCOME
    
    $
    (6,508
    )
    
    $
    1,450
    
    
    $
    (4,971
    )
    
    $
    5,717BASIC NET (LOSS) INCOME PER COMMON SHARE
    
    $
    (0.65
    )
    
    $
    0.15
    
    
    $
    (0.50
    )
    
    $
    0.64DILUTED NET (LOSS) INCOME PER COMMON SHARE
    
    $
    (0.65
    )
    
    $
    0.15
    
    
    $
    (0.50
    )
    
    $
    0.63Weighted average common shares outstanding
    
    
    10,023
    
    
    
    9,693
    
    
    
    10,017
    
    
    
    8,975Weighted average common shares outstanding, assuming dilution
    
    
    10,023
    
    
    
    9,770
    
    
    
    10,017
    
    
    
    9,092
  3




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SUPERIOR BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
(Dollars in thousands)
 Nine Months EndedSeptember 30,2008
    
    
    2007NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    $
    28,439
    
    
    $
    1,515CASH FLOWS FROM INVESTING ACTIVITIES:Net decrease in interest-bearing deposits in other banks
    
    
    352
    
    
    
    3,932Net decrease in federal funds sold
    
    
    414
    
    
    
    21,849Proceeds from sales of securities available for sale
    
    
    37,633
    
    
    
    18,378Proceeds from maturities of investment securities available for sale
    
    
    100,906
    
    
    
    63,345Purchases of investment securities available for sale
    
    
    (129,229
    )
    
    
    (47,772
    )Purchase (redemption) of tax lien certificates
    
    
    (3,262
    )
    
    
    2,378Net increase in loans
    
    
    (233,613
    )
    
    
    (146,015
    )Net cash received in business combinations
    
    
    
    
    
    
    1,231Purchases of premises and equipment
    
    
    (10,193
    )
    
    
    (9,839
    )Proceeds from sale of premises and equipment
    
    
    7,637
    
    
    
    5,535Proceeds from sale of repossessed assets
    
    
    5,522
    
    
    
    2,492Increase in stock in FHLB
    
    
    (10,020
    )
    
    
    (3,206
    )Other investing activities, net
    
    
    (1,090
    )
    
    
    1,455Net cash used by investing activities
    
    
    (234,943
    )
    
    
    (86,237
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net increase in deposits
    
    
    24,760
    
    
    
    33,872Net increase in FHLB advances and other borrowed funds
    
    
    206,296
    
    
    
    53,642Payments made on notes payable
    
    
    (9,500
    )
    
    
    (6,045
    )Proceeds from notes payable
    
    
    10,000
    
    
    
    9,268Proceeds from issuance of subordinated debenture
    
    
    10,000
    
    
    
    22,680Principal payment of subordinated debenture
    
    
    
    
    
    
    (16,495
    )Purchase of treasury stock
    
    
    
    
    
    
    (9,223
    )Proceeds from sale of common stock
    
    
    
    
    
    
    639Net cash provided by financing activities
    
    
    241,556
    
    
    
    88,338Net increase in cash and due from banks
    
    
    35,052
    
    
    
    3,616CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD
    
    
    52,983
    
    
    
    49,783CASH AND DUE FROM BANKS AT END OF PERIOD
    
    $
    88,035
    
    
    $
    53,399
  4




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Note 1  Basis of Presentation
   Restatement to Reflect 1-for-4 Reverse Stock Split
  Note 2  Recent Accounting Pronouncements
 Statement of Financial Accounting Standards No. 157
 Fair
Value Measurements
 Statement of Financial Accounting Standards No. 159
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Statement of Financial Accounting Standards No. 141(R)
 Business Combinations  a replacement of FASB
No. 141 Business Combinations
 5




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Note 2  Recent Accounting Pronouncements  (Continued)
 Accounting for Costs Associated with Exit or
Disposal Activities Accounting for Contingencies
 Staff Accounting Bulletin No. 109
 Written Loan Commitments Recorded at Fair Value Through Earnings Application of Accounting Principles to Loan Commitments
 Statement of Financial Accounting Standards No. 161
 Disclosures About Derivative Instruments and Hedging
Activities, an Amendment of FASB Statement No. 133 Accounting for Derivative Instruments and Hedging Activities
 Note 3  Acquisitions
   6




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##### Table of Contents



Note 3  Acquisitions  (Continued)
 Pro forma Results of Operations
  Nine MonthsEnded(Dollars in thousands, except per share data)
    
    September 30, 2007Pro forma net interest income and noninterest income
    
    $
    72,585Pro forma net income
    
    
    6,226Pro forma earnings per common share  basic
    
    $
    0.60Pro forma earnings per common share  diluted
    
    
    0.60
 Note 4  Investment Securities
  Available for SaleSeptember 30,
    
    
    December 31,
    
    
    Percent2008
    
    
    2007
    
    
    Change(Dollars in thousands)U.S. agencies
    
    $
    6,743
    
    
    $
    94,215
    
    
    
    (92.84
    )%State and political subdivisions
    
    
    39,301
    
    
    
    40,587
    
    
    
    (3.17
    )Mortgage-backed securities (MBS)
    
    
    262,438
    
    
    
    191,378
    
    
    
    37.13Corporate debt and other securities
    
    
    26,020
    
    
    
    34,991
    
    
    
    (25.64
    )Total investment securities
    
    $
    334,502
    
    
    $
    361,171
    
    
    
    (7.38
    )%
 Net Unrealized Gain (Loss)September 30,
    
    
    December 31,
    
    
    Dollar2008
    
    
    2007
    
    
    Change Pre-tax(Dollars in thousands)U.S. agencies
    
    $
    111
    
    
    $
    1,011
    
    
    $
    (900
    )State and political subdivisions
    
    
    (2,097
    )
    
    
    (173
    )
    
    
    (1,924
    )Mortgage-backed securities (MBS)
    
    
    (4,302
    )
    
    
    194
    
    
    
    (4,496
    )Corporate debt and other securities
    
    
    (5,003
    )
    
    
    (1,892
    )
    
    
    (3,111
    )Net unrealized loss
    
    $
    (11,291
    )
    
    $
    (860
    )
    
    $
    (10,431
    )
   7




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Note 4  Investment Securities  Continued
 Amortized
    
    
    
    
    
    
    Unrealized Gain(Dollars in thousands)
    
    Cost
    
    
    Fair Value
    
    
    (Loss)September 30, 2008U.S. agency and agency MBS  AAA rated
    
    $
    244,144
    
    
    $
    244,004
    
    
    $
    (140
    )Municipal securities
    
    
    41,398
    
    
    
    39,301
    
    
    
    (2,097
    )Non-agency MBS  AAA rated
    
    
    27,574
    
    
    
    23,521
    
    
    
    (4,053
    )Non-agency MBS  A and B2 rated
    
    
    1,656
    
    
    
    1,656
    
    
    
    Bank and pooled trust preferred securities
    
    
    24,399
    
    
    
    19,650
    
    
    
    (4,749
    )Corporate securities
    
    
    6,059
    
    
    
    5,807
    
    
    
    (252
    )Fannie Mae and Freddie Mac preferred stock
    
    
    563
    
    
    
    563
    
    
    
    Total
    
    $
    345,793
    
    
    $
    334,502
    
    
    $
    (11,291
    )
       8




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##### Table of Contents



Note 4  Investment Securities  Continued
  Note 5  Segment Reporting
   Total
    
    
    
    
    
    
    SuperiorAlabama
    
    
    Florida
    
    
    Alabama and
    
    
    Administrative
    
    
    BancorpRegion
    
    
    Region
    
    
    Florida
    
    
    and Other
    
    
    CombinedThree months ended September
30, 2008Net interest income
    
    $
    8,726
    
    
    $
    9,687
    
    
    $
    18,413
    
    
    $
    3,213
    
    
    $
    21,626Provision for loan losses
    
    
    1,175
    
    
    
    1,145
    
    
    
    2,320
    
    
    
    (15
    )
    
    
    2,305Noninterest income
    
    
    1,984
    
    
    
    465
    
    
    
    2,449
    
    
    
    (5,662
    )
    
    
    (3,213
    )Noninterest expense
    
    
    7,834
    
    
    
    5,238
    
    
    
    13,072
    
    
    
    10,836
    
    
    
    23,908Operating profit (loss)
    
    $
    1,701
    
    
    $
    3,769
    
    
    $
    5,470
    
    
    $
    (13,270
    )
    
    
    (7,800
    )Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,292
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (6,508
    )Total assets
    
    $
    1,085,022
    
    
    $
    1,168,301
    
    
    $
    2,253,323
    
    
    $
    850,354
    
    
    $
    3,103,677Three months ended September
30, 2007Net 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
    
    $
    1,026,579
    
    
    $
    1,126,161
    
    
    $
    2,152,740
    
    
    $
    750,051
    
    
    $
    2,902,791
 9




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##### Table of Contents



Note 5  Segment Reporting  (Continued)
 Total
    
    
    
    
    
    
    SuperiorAlabama
    
    
    Florida
    
    
    Alabama and
    
    
    Administrative
    
    
    BancorpRegion
    
    
    Region
    
    
    Florida
    
    
    and Other
    
    
    CombinedNine Months ended September
30, 2008Net interest income
    
    $
    24,353
    
    
    $
    28,415
    
    
    $
    52,768
    
    
    $
    8,738
    
    
    $
    61,506Provision for loan losses
    
    
    2,977
    
    
    
    2,663
    
    
    
    5,640
    
    
    
    4,503
    
    
    
    10,143Noninterest income
    
    
    5,587
    
    
    
    1,405
    
    
    
    6,992
    
    
    
    5,401
    
    
    
    12,393Noninterest expense
    
    
    22,928
    
    
    
    16,129
    
    
    
    39,057
    
    
    
    30,389
    
    
    
    69,446Operating profit (loss)
    
    $
    4,035
    
    
    $
    11,028
    
    
    $
    15,063
    
    
    $
    (20,753
    )
    
    
    (5,690
    )Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (719
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (4,971
    )Nine Months ended September
30, 2007Net 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
 Note 6 Net (Loss) Income per Common Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Numerator:For basic and diluted, net (loss) income
    
    $
    (6,508
    )
    
    $
    1,450
    
    
    $
    (4,971
    )
    
    $
    5,717Denominator:For basic, weighted average common shares outstanding
    
    
    10,023
    
    
    
    9,693
    
    
    
    10,017
    
    
    
    8,975Effect of dilutive stock options and restricted stock
    
    
    
    
    
    
    77
    
    
    
    
    
    
    
    117Average diluted common shares outstanding
    
    
    10,023
    
    
    
    9,770
    
    
    
    10,017
    
    
    
    9,092Basic net (loss) income per common share
    
    $
    (.65
    )
    
    $
    .15
    
    
    $
    (.50
    )
    
    $
    .64Diluted net (loss) income per common share
    
    $
    (.65
    )
    
    $
    .15
    
    
    $
    (.50
    )
    
    $
    .63
  Note 7  Comprehensive (Loss) Income
  10




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##### Table of Contents



Note 8  Income Taxes
   FASB Interpretation No. 48
 Accounting for Uncertainty in Income
Taxes Accounting for Income Taxes
    Note 9  Stockholders Equity
 1-for-4 Reverse Stock Split
 .
 11




---



##### Table of Contents



Note 9
 Stockholders Equity  (Continued)
 Issuance of Subordinated Debt and Related Warrant
   Stock Incentive Plan
    12




---



##### Table of Contents



Note 9
 Stockholders Equity  (Continued)
  2008
    
    2007Risk free interest rate
    
    
    3.62
    %
    
    
    4.49
    %Volatility factor
    
    
    34.77
    %
    
    
    29.11
    %Weighted average life of options (in years)
    
    
    5.00
    
    
    
    5.00Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
  Weighted-Weighted-
    
    
    AverageAverage
    
    
    RemainingExercise
    
    
    Contractual
    
    
    AggregateNumber
    
    
    Price
    
    
    Term
    
    
    Intrinsic ValueUnder option, January 1, 2008
    
    
    802,048
    
    
    $
    32.28Granted
    
    
    84,875
    
    
    
    10.88Forfeited
    
    
    (15,375
    )
    
    
    32.52Under option, September 30, 2008
    
    
    871,548
    
    
    $
    30.93
    
    
    
    6.34
    
    
    $
    Exercisable at end of period
    
    
    678,528
    
    
    $
    31.78
    
    
    
    4.34
    
    
    $
    Weighted-average fair value per
option of options granted
during the period
    
    $
    3.94
   Note 10  Fair Value Measurements
  13




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##### Table of Contents



Note 10  Fair Value Measurements  (Continued)
     Assets and Liabilities Recorded at Fair Value on a Recurring Basis
  Quoted Prices in
    
    
    
    
    
    
    SignificantFair Value at
    
    
    Active Markets for
    
    
    Significant Other
    
    
    UnobservableSeptember 30,
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    Inputs2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Available for sale securities
    
    $
    334,502
    
    
    $
    563
    
    
    $
    312,420
    
    
    $
    21,519Derivative assets
    
    
    199
    
    
    
    
    
    
    
    199
    
    
    
    Total recurring basis measured assets
    
    $
    334,701
    
    
    $
    563
    
    
    $
    312,619
    
    
    $
    21,519Derivative liabilities
    
    $
    139
    
    
    $
    
    
    
    $
    139
    
    
    $
    Total recurring basis measured
liabilities
    
    $
    139
    
    
    $
    
    
    
    $
    139
    
    
    $
    
 Valuation Techniques  Recurring Basis
 Securities Available for Sale
 14




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##### Table of Contents



Note 10  Fair Value Measurements  (Continued)
 Derivative financial instruments
 Changes in Level 3 fair value measurements
  Level 3 assets measured at fair value on a recurring basis
 Available for(in thousands)
    
    Sale SecuritiesBalance at January 1, 2008 (date of adoption)
    
    $
    Transfer into Level 3 during third quarter 2008
    
    
    25,956Total net losses for the year-to-date included
in other comprehensive loss
    
    
    (4,437
    )Balance at September 30, 2008
    
    $
    21,519Net realized losses included in net loss for the
year-to-date relating to Level 3 assets held at
September 30, 2008
    
    $
    
 Assets Recorded at Fair Value on a Nonrecurring Basis
  Quoted PricesinFair Value
    
    
    Active Markets for
    
    
    Significant Other
    
    
    Significantat
    
    
    Identical
    
    
    Observable
    
    
    UnobservableSeptember 30,
    
    
    Assets
    
    
    Inputs
    
    
    Inputs2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Mortgage loans held for sale
    
    $
    15,292
    
    
    $
    
    
    
    $
    15,292
    
    
    $
    Impaired loans, net of specific allowance
    
    
    43,071
    
    
    
    
    
    
    
    
    
    
    
    43,071Total nonrecurring basis measured assets
    
    $
    58,363
    
    
    $
    
    
    
    $
    15,292
    
    
    $
    43,071
 Valuation Techniques  Nonrecurring Basis
 Mortgage Loans Held for Sale.
 Impaired Loans.
 15




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##### Table of Contents





Note 10  Fair Value Measurements  (Continued)  Note 11  Gain on Extinguishment of Liabilities
  16




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Basis of Presentation
   Recent Developments
   Overview
     17




---



##### Table of Contents



Fair Value Measurements
  18




---



##### Table of Contents



Assets and Liabilities Recorded at Fair Value on a Recurring Basis
  Quoted Prices in
    
    
    
    
    
    
    SignificantFair Value at
    
    
    Active Markets for
    
    
    Significant Other
    
    
    UnobservableSeptember 30,
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    Inputs2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Available for sale securities
    
    $
    334,502
    
    
    $
    563
    
    
    $
    312,420
    
    
    $
    21,519Derivative assets
    
    
    199
    
    
    
    
    
    
    
    199
    
    
    
    Total recurring basis measured assets
    
    $
    334,701
    
    
    $
    563
    
    
    $
    312,619
    
    
    $
    21,519Derivative liabilities
    
    $
    139
    
    
    $
    
    
    
    $
    139
    
    
    $
    Total recurring basis measured
liabilities
    
    $
    139
    
    
    $
    
    
    
    $
    139
    
    
    $
    
 Securities Available for Sale
 Derivative financial instruments
 19




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##### Table of Contents



Changes in Level 3 fair value measurements
  Level 3 assets measured at fair value on a recurring basis
 Available for(in thousands)
    
    Sale SecuritiesBalance at January 1, 2008 (date of adoption)
    
    $
    Transfer into Level 3 during third quarter 2008
    
    
    25,956Total net losses for the year-to-date included
in other comprehensive loss
    
    
    (4,437
    )Balance at September 30, 2008
    
    $
    21,519Net realized losses included in net loss for the
year-to-date relating to level 3 assets held at
September 30, 2008
    
    $
    
 Assets Recorded at Fair Value on a Nonrecurring Basis
  QuotedAssets
    
    
    Prices inMeasured at
    
    
    Active Markets for
    
    
    Significant Other
    
    
    SignificantFair Value at
    
    
    Identical
    
    
    Observable
    
    
    UnobservableSeptember 30,
    
    
    Assets
    
    
    Inputs
    
    
    Inputs2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Mortgage loans held for sale
    
    $
    15,292
    
    
    $
    
    
    
    $
    15,292
    
    
    $
    Impaired loans, net of specific allowance
    
    
    43,071
    
    
    
    
    
    
    
    
    
    
    
    43,071Total nonrecurring basis measured assets
    
    $
    58,363
    
    
    $
    
    
    
    $
    15,292
    
    
    $
    43,071
 Valuation Techniques  Nonrecurring Basis
 Mortgage Loans Held for Sale.
 Impaired Loans.
 20




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##### Table of Contents



Results of Operations
  Three Months
    
    Nine MonthsEnded September 30,
    
    Ended September 30,2008
    
    2007
    
    2008
    
    2007(Dollars in thousands, except per share data)Net (loss) income
    
    $
    (6,508
    )
    
    $
    1,450
    
    
    $
    (4,971
    )
    
    $
    5,717Net (loss) income per common share (diluted)
    
    
    (0.65
    )
    
    
    0.15
    
    
    
    (0.50
    )
    
    
    0.63Net interest margin
    
    
    3.33
    %
    
    
    3.38
    %
    
    
    3.26
    %
    
    
    3.43
    %Net interest spread
    
    
    3.16
    %
    
    
    3.03
    %
    
    
    3.03
    %
    
    
    3.10
    %Return on average assets
    
    
    (0.85
    )%
    
    
    0.21
    %
    
    
    (0.22
    )%
    
    
    0.30
    %Return on average tangible assets
    
    
    (0.90
    )%
    
    
    0.22
    %
    
    
    (0.24
    )%
    
    
    0.32
    %Return on average stockholders equity
    
    
    (7.44
    )%
    
    
    1.75
    %
    
    
    (1.90
    )%
    
    
    2.60
    %Return on average tangible equity
    
    
    (15.88
    )%
    
    
    3.58
    %
    
    
    (4.04
    )%
    
    
    5.00
    %Book value per share
    
    $
    33.97
    
    
    $
    34.49
    
    
    $
    33.97
    
    
    $
    34.49Tangible book value per share
    
    
    15.64
    
    
    
    15.89
    
    
    
    15.64
    
    
    
    15.89
  Net Interest Income.
 Increase (Decrease) inThird Quarter 2008 vs 2007
    
    
    First Nine Months of 2008 vs 2007Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in thousands)ASSETSInterest-earning assets:Loans, net of unearned income
    
    $
    257,467
    
    
    $
    (3,822
    )
    
    
    (1.64
    )%
    
    $
    372,911
    
    
    $
    934
    
    
    
    (1.40
    )%Investment securitiesTaxable
    
    
    (17,384
    )
    
    
    (165
    )
    
    
    0.09
    
    
    
    (18,043
    )
    
    
    (503
    )
    
    
    0.08Tax-exempt
    
    
    13,944
    
    
    
    233
    
    
    
    0.15
    
    
    
    22,915
    
    
    
    1,134
    
    
    
    0.22Total investment securities
    
    
    (3,440
    )
    
    
    68
    
    
    
    0.14
    
    
    
    4,872
    
    
    
    631
    
    
    
    0.16Federal funds sold
    
    
    (3,784
    )
    
    
    (74
    )
    
    
    (3.04
    )
    
    
    (3,836
    )
    
    
    (259
    )
    
    
    (2.60
    )Other investments
    
    
    7,681
    
    
    
    (212
    )
    
    
    (2.50
    )
    
    
    3,241
    
    
    
    (266
    )
    
    
    (1.13
    )Total interest-earning assets
    
    $
    257,924
    
    
    
    (4,040
    )
    
    
    (1.36
    )
    
    $
    377,161
    
    
    
    1,040
    
    
    
    (1.10
    )Interest-bearing liabilities:Demand deposits
    
    $
    11,764
    
    
    
    (2,511
    )
    
    
    (1.70
    )
    
    $
    104,617
    
    
    
    (2.988
    )
    
    
    (1.21
    )Savings deposits
    
    
    106,968
    
    
    
    735
    
    
    
    0.54
    
    
    
    54,703
    
    
    
    1,114
    
    
    
    0.69Time deposits
    
    
    45,941
    
    
    
    (3,624
    )
    
    
    (1.33
    )
    
    
    106,818
    
    
    
    (2,813
    )
    
    
    (0.74
    )Other borrowings
    
    
    122,916
    
    
    
    (327
    )
    
    
    (1.95
    )
    
    
    100,088
    
    
    
    (538
    )
    
    
    (1.77
    )Subordinated debentures
    
    
    2,145
    
    
    
    (112
    )
    
    
    (1.11
    )
    
    
    7,206
    
    
    
    (175
    )
    
    
    (1.61
    )Total interest-bearing liabilities
    
    $
    289,735
    
    
    
    (5,839
    )
    
    
    (1.49
    )
    
    $
    373,432
    
    
    
    (5,400
    )
    
    
    (1.03
    )Net interest income/net interest spread
    
    
    
    
    
    
    1,799
    
    
    
    0.13
    %
    
    
    
    
    
    
    6,440
    
    
    
    (0.07
    )%Net yield on earning assets
    
    
    
    
    
    
    
    
    
    
    (0.05
    )%
    
    
    
    
    
    
    
    
    
    
    (0.17
    )%Taxable equivalent adjustment:Investment securities
    
    
    
    
    
    
    79
    
    
    
    
    
    
    
    
    
    
    
    385Net interest income
    
    
    
    
    
    $
    1,720
    
    
    
    
    
    
    
    
    
    
    $
    6,055
 21




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##### Table of Contents



Three Months Ended September 30,2008
    
    

    2007Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in thousands)ASSETSInterest-earning assets:Loans, net of unearned income (1)
    
    $
    2,201,719
    
    
    $
    36,664
    
    
    
    6.62
    %
    
    $
    1,944,252
    
    
    $
    40,486
    
    
    
    8.26
    %Investment securitiesTaxable
    
    
    309,201
    
    
    
    4,106
    
    
    
    5.28
    
    
    
    326,585
    
    
    
    4,271
    
    
    
    5.19Tax-exempt (2)
    
    
    40,582
    
    
    
    651
    
    
    
    6.38
    
    
    
    26,638
    
    
    
    418
    
    
    
    6.23Total investment securities
    
    
    349,783
    
    
    
    4,757
    
    
    
    5.41
    
    
    
    353,223
    
    
    
    4,689
    
    
    
    5.27Federal funds sold
    
    
    3,008
    
    
    
    17
    
    
    
    2.25
    
    
    
    6,792
    
    
    
    91
    
    
    
    5.29Other investments
    
    
    55,617
    
    
    
    663
    
    
    
    4.74
    
    
    
    47,936
    
    
    
    875
    
    
    
    7.24Total interest-earning assets
    
    
    2,610,127
    
    
    
    42,101
    
    
    
    6.42
    
    
    
    2,352,203
    
    
    
    46,141
    
    
    
    7.78Noninterest-earning assets:Cash and due from banks
    
    
    64,435
    
    
    
    
    
    
    
    
    
    
    
    44,921Premises and equipment
    
    
    104,032
    
    
    
    
    
    
    
    
    
    
    
    91,727Accrued interest and other assets
    
    
    301,776
    
    
    
    
    
    
    
    
    
    
    
    272,138Allowance for loan losses
    
    
    (27,302
    )
    
    
    
    
    
    
    
    
    
    
    (21,813
    )Total assets
    
    $
    3,053,068
    
    
    
    
    
    
    
    
    
    
    $
    2,739,176LIABILITIES AND STOCKHOLDERS EQUITYInterest-bearing liabilities:Demand deposits
    
    $
    611,420
    
    
    $
    3,290
    
    
    
    2.14
    %
    
    $
    599,656
    
    
    $
    5,801
    
    
    
    3.84
    %Savings deposits
    
    
    161,780
    
    
    
    1,000
    
    
    
    2.46
    
    
    
    54,812
    
    
    
    265
    
    
    
    1.92Time deposits
    
    
    1,245,947
    
    
    
    11,720
    
    
    
    3.74
    
    
    
    1,200,005
    
    
    
    15,344
    
    
    
    5.07Other borrowings
    
    
    396,495
    
    
    
    3,290
    
    
    
    3.30
    
    
    
    273,579
    
    
    
    3,617
    
    
    
    5.25Subordinated debentures
    
    
    54,660
    
    
    
    954
    
    
    
    6.94
    
    
    
    52,515
    
    
    
    1,066
    
    
    
    8.05Total interest-bearing liabilities
    
    
    2,470,302
    
    
    
    20,254
    
    
    
    3.26
    
    
    
    2,180,567
    
    
    
    26,093
    
    
    
    4.75Noninterest-bearing liabilities:Demand deposits
    
    
    218,861
    
    
    
    
    
    
    
    
    
    
    
    197,977Accrued interest and other liabilities
    
    
    15,945
    
    
    
    
    
    
    
    
    
    
    
    32,723Stockholders equity
    
    
    347,960
    
    
    
    
    
    
    
    
    
    
    
    327,909Total liabilities and
stockholders equity
    
    $
    3,053,068
    
    
    
    
    
    
    
    
    
    
    $
    2,739,176Net interest income/net interest spread
    
    
    
    
    
    
    21,847
    
    
    
    3.16
    %
    
    
    
    
    
    
    20,048
    
    
    
    3.03
    %Net yield on earning assets
    
    
    
    
    
    
    
    
    
    
    3.33
    %
    
    
    
    
    
    
    
    
    
    
    3.38
    %Taxable equivalent adjustment:Investment securities (2)
    
    
    
    
    
    
    221
    
    
    
    
    
    
    
    
    
    
    
    142Net interest income
    
    
    
    
    
    $
    21,626
    
    
    
    
    
    
    
    
    
    
    $
    19,906
 
 (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%. 22




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##### Table of Contents



Three Months Ended September 30,2008 vs. 2007 (1)Increase
    
    
    Changes Due To(Decrease)
    
    
    Rate
    
    
    Volume(Dollars in thousands)Increase (decrease) in:Income from interest-earning assets:Interest and fees on loans
    
    $
    (3,822
    )
    
    $
    (8,724
    )
    
    $
    4,902Interest on securities:Taxable
    
    
    (165
    )
    
    
    71
    
    
    
    (236
    )Tax-exempt
    
    
    233
    
    
    
    10
    
    
    
    223Interest on federal funds
    
    
    (74
    )
    
    
    (38
    )
    
    
    (36
    )Interest on other investments
    
    
    (212
    )
    
    
    (336
    )
    
    
    124Total interest income
    
    
    (4,040
    )
    
    
    (9,017
    )
    
    
    4,977Expense from interest-bearing liabilities:Interest on demand deposits
    
    
    (2,511
    )
    
    
    (2,623
    )
    
    
    112Interest on savings deposits
    
    
    735
    
    
    
    93
    
    
    
    642Interest on time deposits
    
    
    (3,624
    )
    
    
    (4,187
    )
    
    
    563Interest on other borrowings
    
    
    (327
    )
    
    
    (1,620
    )
    
    
    1,293Interest on subordinated debentures
    
    
    (112
    )
    
    
    (154
    )
    
    
    42Total interest expense
    
    
    (5,839
    )
    
    
    (8,491
    )
    
    
    2,652Net interest income
    
    $
    1,799
    
    
    $
    (526
    )
    
    $
    2,325
 
 (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. 23




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##### Table of Contents



Nine Months Ended September 30,2008
    
    
    2007Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in thousands)ASSETSInterest-earning assets:Loans, net of unearned income (1)
    
    $
    2,142,254
    
    
    $
    110,717
    
    
    
    6.90
    %
    
    $
    1,769,343
    
    
    $
    109,783
    
    
    
    8.30
    %Investment securities:Taxable
    
    
    309,938
    
    
    
    12,302
    
    
    
    5.30
    
    
    
    327,981
    
    
    
    12,805
    
    
    
    5.22Tax-exempt (2)
    
    
    40,613
    
    
    
    1,956
    
    
    
    6.43
    
    
    
    17,698
    
    
    
    823
    
    
    
    6.21Total investment securities
    
    
    350,551
    
    
    
    14,258
    
    
    
    5.43
    
    
    
    345,679
    
    
    
    13,628
    
    
    
    5.27Federal funds sold
    
    
    5,300
    
    
    
    114
    
    
    
    2.87
    
    
    
    9,135
    
    
    
    373
    
    
    
    5.47Other investments
    
    
    50,428
    
    
    
    2,039
    
    
    
    5.40
    
    
    
    47,214
    
    
    
    2,304
    
    
    
    6.53Total interest-earning assets
    
    
    2,548,533
    
    
    
    127,128
    
    
    
    6.66
    
    
    
    2,171,371
    
    
    
    126,088
    
    
    
    7.76Noninterest-earning assets:Cash and due from banks
    
    
    60,953
    
    
    
    
    
    
    
    
    
    
    
    43,965Premises and equipment
    
    
    103,370
    
    
    
    
    
    
    
    
    
    
    
    93,975Accrued interest and other assets
    
    
    292,824
    
    
    
    
    
    
    
    
    
    
    
    242,629Allowance for loan losses
    
    
    (24,749
    )
    
    
    
    
    
    
    
    
    
    
    (19,871
    )Total assets
    
    $
    2,980,931
    
    
    
    
    
    
    
    
    
    
    $
    2,532,069LIABILITIES AND STOCKHOLDERS EQUITYInterest-bearing liabilities:Demand deposits
    
    $
    650,082
    
    
    $
    12,146
    
    
    
    2.50
    %
    
    $
    545,465
    
    
    $
    15,134
    
    
    
    3.71
    %Savings deposits
    
    
    102,222
    
    
    
    1,618
    
    
    
    2.11
    
    
    
    47,519
    
    
    
    504
    
    
    
    1.42Time deposits
    
    
    1,242,690
    
    
    
    39,208
    
    
    
    4.21
    
    
    
    1,135,872
    
    
    
    42,021
    
    
    
    4.95Other borrowings
    
    
    342,331
    
    
    
    9,098
    
    
    
    3.55
    
    
    
    242,243
    
    
    
    9,636
    
    
    
    5.32Subordinated debentures
    
    
    53,996
    
    
    
    2,887
    
    
    
    7.14
    
    
    
    46,790
    
    
    
    3,062
    
    
    
    8.75Total interest-bearing liabilities
    
    
    2,391,321
    
    
    
    64,957
    
    
    
    3.63
    
    
    
    2,017,889
    
    
    
    70,357
    
    
    
    4.66Noninterest-bearing liabilities:Demand deposits
    
    
    218,419
    
    
    
    
    
    
    
    
    
    
    
    185,704Accrued interest and other liabilities
    
    
    20,845
    
    
    
    
    
    
    
    
    
    
    
    33,946Stockholders equity
    
    
    350,346
    
    
    
    
    
    
    
    
    
    
    
    294,530Total liabilities and
stockholders equity
    
    $
    2,980,931
    
    
    
    
    
    
    
    
    
    
    $
    2,532,069Net interest income/net interest spread
    
    
    
    
    
    
    62,171
    
    
    
    3.03
    %
    
    
    
    
    
    
    55,731
    
    
    
    3.10
    %Net yield on earning assets
    
    
    
    
    
    
    
    
    
    
    3.26
    %
    
    
    
    
    
    
    
    
    
    
    3.43
    %Taxable equivalent adjustment:Investment securities (2)
    
    
    
    
    
    
    665
    
    
    
    
    
    
    
    
    
    
    
    280Net interest income
    
    
    
    
    
    $
    61,506
    
    
    
    
    
    
    
    
    
    
    $
    55,451
 
 (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%. 24




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##### Table of Contents



Nine Months Ended September 30,2008 vs. 2007 (1)Increase
    
    
    Changes Due To(Decrease)
    
    
    Rate
    
    
    Volume(Dollars in thousands)Increase (decrease) in:Income from interest-earning assets:Interest and fees on loans
    
    $
    934
    
    
    $
    (20,243
    )
    
    $
    21,177Interest on securities:Taxable
    
    
    (503
    )
    
    
    199
    
    
    
    (702
    )Tax-exempt
    
    
    1,134
    
    
    
    30
    
    
    
    1,104Interest on federal funds
    
    
    (259
    )
    
    
    (138
    )
    
    
    (121
    )Interest on other investments
    
    
    (266
    )
    
    
    (417
    )
    
    
    151Total interest income
    
    
    1,040
    
    
    
    (20,569
    )
    
    
    21,609Expense from interest-bearing liabilities:Interest on demand deposits
    
    
    (2,988
    )
    
    
    (5,551
    )
    
    
    2,563Interest on savings deposits
    
    
    1,114
    
    
    
    331
    
    
    
    783Interest on time deposits
    
    
    (2,813
    )
    
    
    (6,601
    )
    
    
    3,788Interest on other borrowings
    
    
    (538
    )
    
    
    (3,806
    )
    
    
    3,268Interest on subordinated debentures
    
    
    (175
    )
    
    
    (611
    )
    
    
    436Total interest expense
    
    
    5,400
    
    
    
    (16,238
    )
    
    
    10,838Net interest income
    
    $
    6,440
    
    
    $
    (4,331
    )
    
    $
    10,771
 
 (1)
    
    The change in interest due to both rate and volume has been allocated to rate and
volumes changes in proportion to the relationship of the absolute dollar amounts of changes in each. 25




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##### Table of Contents



Noninterest income
 Three Months Ended September 30,2008
    
    
    2007
    
    
    % Change(Dollars in thousands)Service charges and fees on deposits
    
    $
    2,425
    
    
    $
    2,090
    
    
    
    16.0
    %Mortgage banking income
    
    
    820
    
    
    
    970
    
    
    
    (15.5
    )Investment securities loss
    
    
    (8,541
    )
    
    
    
    
    
    
    Change in fair value of derivatives
    
    
    141
    
    
    
    202
    
    
    
    (30.2
    )Increase in cash surrender value of life insurance
    
    
    583
    
    
    
    481
    
    
    
    21.2Other noninterest income
    
    
    1,359
    
    
    
    1,181
    
    
    
    15.1Total
    
    $
    (3,213
    )
    
    $
    4,924
    
    
    
    (165.3
    )%
 Nine Months Ended September 30,2008
    
    
    2007
    
    
    % Change(Dollars in thousands)Service charges and fees on deposits
    
    $
    6,721
    
    
    $
    5,774
    
    
    
    16.4
    %Mortgage banking income
    
    
    3,117
    
    
    
    3,052
    
    
    
    2.1Investment securities (loss) gain
    
    
    (7,072
    )
    
    
    242
    
    
    
    Change in fair value of derivatives
    
    
    773
    
    
    
    169
    
    
    
    357.4Increase in cash surrender value of life insurance
    
    
    1,689
    
    
    
    1,381
    
    
    
    22.3Gain on extinguishment of liabilities
    
    
    2,918
    
    
    
    
    
    
    
    Other noninterest income
    
    
    4,247
    
    
    
    2,931
    
    
    
    44.9Total
    
    $
    12,393
    
    
    $
    13,549
    
    
    
    (8.5
    )%
  26




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##### Table of Contents



Noninterest expenses
 Three Months Ended September 30,2008
    
    
    2007
    
    
    % Change(Dollars in thousands)Noninterest ExpensesSalaries and employee benefits
    
    $
    12,379
    
    
    $
    10,724
    
    
    
    15.4
    %Occupancy, furniture and equipment expense
    
    
    4,434
    
    
    
    3,506
    
    
    
    26.5Amortization of core deposit intangibles
    
    
    896
    
    
    
    494
    
    
    
    81.4Loss on extinguishment of debt
    
    
    
    
    
    
    1,469
    
    
    
    (100.0
    )Merger-related costs
    
    
    
    
    
    
    103
    
    
    
    (100.0
    )Loss on termination of ESOP
    
    
    
    
    
    
    158
    
    
    
    (100.0
    )Professional fees
    
    
    756
    
    
    
    529
    
    
    
    42.8Insurance expense
    
    
    1,038
    
    
    
    646
    
    
    
    60.7Postage, stationery and supplies
    
    
    447
    
    
    
    508
    
    
    
    (12.0
    )Communications expense
    
    
    604
    
    
    
    489
    
    
    
    23.5Advertising expense
    
    
    843
    
    
    
    536
    
    
    
    57.2Other operating expense
    
    
    2,511
    
    
    
    2,128
    
    
    
    18.0Total
    
    $
    23,908
    
    
    $
    21,290
    
    
    
    12.3
    %Selected Key RatiosNoninterest expense to average assets (1)
    
    
    2.98
    %
    
    
    2.76
    %Efficiency ratio (1)
    
    
    84.66
    
    
    
    77.77
 27




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##### Table of Contents



Nine Months Ended September 30,2008
    
    
    2007
    
    
    % Change(Dollars in thousands)Noninterest ExpensesSalaries and employee benefits
    
    $
    36,577
    
    
    $
    30,959
    
    
    
    18.2
    %Occupancy, furniture and equipment expense
    
    
    12,614
    
    
    
    9,650
    
    
    
    30.7Amortization of core deposit intangibles
    
    
    2,688
    
    
    
    1,102
    
    
    
    143.9Loss on extinguishment of debt
    
    
    
    
    
    
    1,469
    
    
    
    (100.0
    )Merger-related costs
    
    
    118
    
    
    
    530
    
    
    
    (77.7
    )Loss on extinguishment of debt
    
    
    
    
    
    
    158
    
    
    
    (100.0
    )Professional fees
    
    
    1,893
    
    
    
    1,549
    
    
    
    22.2Insurance expense
    
    
    2,438
    
    
    
    1,551
    
    
    
    57.2Postage, stationery and supplies
    
    
    1,555
    
    
    
    1,682
    
    
    
    (7.6
    )Communications expense
    
    
    1,654
    
    
    
    1,469
    
    
    
    12.6Advertising expense
    
    
    2,311
    
    
    
    1,760
    
    
    
    31.3Other operating expense
    
    
    7,598
    
    
    
    5,493
    
    
    
    38.3Total
    
    $
    69,446
    
    
    $
    57,372
    
    
    
    21.1
    %Selected Key RatiosNoninterest expense to average assets (1)
    
    
    2.97
    %
    
    
    2.85
    %Efficiency ratio (1)
    
    
    85.09
    
    
    
    78.65
 
 (1)
    
    In calculating the selected key ratios, noninterest expense has been adjusted for
amortization of intangibles, merger-related costs and other losses on the sale of assets. Income
tax (benefit) expense
 28




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##### Table of Contents



Provision for Loan Losses
  Financial Condition
  Short-term liquid assets
 Investment Securities
 29




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##### Table of Contents



Investment Portfolio
 Available for SaleSeptember 30,
    
    
    December 31,
    
    
    Percent2008
    
    
    2007
    
    
    Change(Dollars in thousands)U.S. agencies
    
    $
    6,743
    
    
    $
    94,215
    
    
    
    (92.8
    )%State and political subdivisions
    
    
    39,301
    
    
    
    40,587
    
    
    
    (3.2
    )Mortgage-backed securities (MBS)
    
    
    262,438
    
    
    
    191,378
    
    
    
    37.3Corporate
debt and other securities
    
    
    26,020
    
    
    
    34,991
    
    
    
    (25.6
    )Total investment securities
    
    $
    334,502
    
    
    $
    361,171
    
    
    
    (7.4
    )%
 Net Unrealized Gain (Loss)September 30,
    
    
    December 31,
    
    
    Dollar2008
    
    
    2007
    
    
    Change Pre-tax(Dollars in thousands)U.S. agencies
    
    $
    111
    
    
    $
    1,011
    
    
    $
    (900
    )State and political subdivisions
    
    
    (2,097
    )
    
    
    (173
    )
    
    
    (1,924
    )Mortgage-backed securities (MBS)
    
    
    (4,302
    )
    
    
    194
    
    
    
    (4,496
    )Corporate
debt and other securities
    
    
    (5,003
    )
    
    
    (1,892
    )
    
    
    (3,111
    )Net unrealized loss
    
    $
    (11,291
    )
    
    $
    (860
    )
    
    $
    (10,431
    )
   Amortized
    
    
    
    
    
    
    Unrealized Gain(Dollars in thousands)
    
    Cost
    
    
    Fair Value
    
    
    (Loss)September 30, 2008U.S. agency and agency MBS  AAA rated
    
    $
    244,144
    
    
    $
    244,004
    
    
    $
    (140
    )Municipal securities
    
    
    41,398
    
    
    
    39,301
    
    
    
    (2,097
    )Non-agency MBS  AAA rated
    
    
    27,574
    
    
    
    23,521
    
    
    
    (4,053
    )Non-agency MBS  A and B2 rated
    
    
    1,656
    
    
    
    1,656
    
    
    
    Bank and pooled trust preferred securities
    
    
    24,399
    
    
    
    19,650
    
    
    
    (4,749
    )Corporate securities
    
    
    6,059
    
    
    
    5,807
    
    
    
    (252
    )Fannie Mae and Freddie Mac preferred stock
    
    
    563
    
    
    
    563
    
    
    
    Total
    
    $
    345,793
    
    
    $
    334,502
    
    
    $
    (11,291
    )
   30




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##### Table of Contents



Loans
 31




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##### Table of Contents



DISTRIBUTION OF LOANS BY CATEGORY
(Dollars in thousands)
 September 30, 2008
    
    
    December 31, 2007Percent of
    
    
    
    
    
    
    Percent ofAmount
    
    
    Total
    
    
    Amount
    
    
    TotalCommercial and industrial
    
    $
    213,887
    
    
    
    9.6
    %
    
    $
    183,013
    
    
    
    9.1
    %Real estate  construction and land
development (1)
    
    
    610,364
    
    
    
    27.5
    
    
    
    665,303
    
    
    
    33.0Real estate  mortgageSingle-family
    
    
    639,405
    
    
    
    28.8
    
    
    
    540,277
    
    
    
    26.8Commercial
    
    
    639,991
    
    
    
    28.8
    
    
    
    533,611
    
    
    
    26.4Other
    
    
    63,447
    
    
    
    2.9
    
    
    
    41,535
    
    
    
    2.1Consumer
    
    
    52,820
    
    
    
    2.3
    
    
    
    53,570
    
    
    
    2.5Other
    
    
    1,280
    
    
    
    .1
    
    
    
    1,235
    
    
    
    .1Total loans
    
    
    2,221,194
    
    
    
    100.0
    %
    
    
    2,018,544
    
    
    
    100.0
    %Unearned income
    
    
    (2,153
    )
    
    
    
    
    
    
    (1,533
    )Allowance for loan losses
    
    
    (27,670
    )
    
    
    
    
    
    
    (22,868
    )Net loans
    
    $
    2,191,371
    
    
    
    
    
    
    $
    1,994,143
 
 (1)
    
    A further analysis of the components of our real estate construction and land development
loans as of September 30, 2008 and December 31, 2007 is as follows: Residential
    
    
    CommercialDevelopment
    
    
    Development
    
    
    Other
    
    
    Total(Dollars in thousands)As of September 30, 2008Alabama segment
    
    $
    157,610
    
    
    $
    69,071
    
    
    $
    17,128
    
    
    $
    243,809Florida segment
    
    
    152,021
    
    
    
    178,442
    
    
    
    14,955
    
    
    
    345,418Other
    
    
    7,838
    
    
    
    13,299
    
    
    
    
    
    
    
    21,137Total
    
    $
    317,469
    
    
    $
    260,812
    
    
    $
    32,083
    
    
    $
    610,364As of December 31, 2007Alabama segment
    
    $
    192,133
    
    
    $
    60,407
    
    
    $
    16,003
    
    
    $
    268,543Florida segment
    
    
    195,460
    
    
    
    162,286
    
    
    
    18,564
    
    
    
    376,310Other
    
    
    7,929
    
    
    
    12,521
    
    
    
    
    
    
    
    20,450Total
    
    $
    395,522
    
    
    $
    235,214
    
    
    $
    34,567
    
    
    $
    665,303
  September 30,
    
    December 31,
    
    Percent2008
    
    2007
    
    Change(Dollars in thousands)Total loans, net of unearned income
    
    $
    2,219,041
    
    
    $
    2,017,011
    
    
    
    10.0
    %Alabama segment
    
    
    939,407
    
    
    
    888,007
    
    
    
    5.8Florida segment
    
    
    1,024,086
    
    
    
    932,478
    
    
    
    9.8Other (2)
    
    
    255,548
    
    
    
    196,526
    
    
    
    30.0
 
 (2)
    
    Increase is due to the purchase of a pool of residential mortgage loans with a balance of
approximately $52 million during the second quarter of 2008. 32




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##### Table of Contents



Premises & Equipment.
 Deposits
   September 30,
    
    
    December 31,
    
    
    Percent2008
    
    
    2007
    
    
    Change(Dollars in thousands)Noninterest-bearing demand
    
    $
    220,553
    
    
    $
    207,602
    
    
    
    6.2
    %Alabama segment
    
    
    128,589
    
    
    
    128,009
    
    
    
    0.5Florida segment
    
    
    82,721
    
    
    
    73,061
    
    
    
    13.2Other
    
    
    9,243
    
    
    
    6,532
    
    
    
    41.5Interest-bearing demand
    
    
    583,734
    
    
    
    657,809
    
    
    
    (11.3
    )Alabama segment
    
    
    275,759
    
    
    
    295,794
    
    
    
    (6.8
    )Florida segment
    
    
    184,495
    
    
    
    253,017
    
    
    
    (27.1
    )Other
    
    
    123,480
    
    
    
    108,998
    
    
    
    13.2Savings (1)
    
    
    174,987
    
    
    
    59,507
    
    
    
    194.1Alabama segment
    
    
    99,120
    
    
    
    33,919
    
    
    
    192.2Florida segment
    
    
    74,865
    
    
    
    25,056
    
    
    
    198.8Other
    
    
    1,002
    
    
    
    532
    
    
    
    88.4Time deposits
    
    
    1,246,255
    
    
    
    1,275,693
    
    
    
    (2.3
    )Alabama segment
    
    
    595,104
    
    
    
    694,380
    
    
    
    (14.3
    )Florida segment
    
    
    470,428
    
    
    
    462,071
    
    
    
    1.8Other
    
    
    180,723
    
    
    
    119,242
    
    
    
    51.6Total deposits
    
    $
    2,225,529
    
    
    $
    2,200,611
    
    
    
    1.1
    %Alabama segment
    
    $
    1,098,572
    
    
    $
    1,152,102
    
    
    
    (4.7
    )%Florida segment
    
    $
    812,509
    
    
    $
    813,205
    
    
    
    (0.1
    )%Other
    
    $
    314,448
    
    
    $
    235,304
    
    
    
    33.6
    %
 
 (1)
    
    Increase resulted from the introduction of a new savings deposit product carrying a yield of
3.25%. Borrowings
   33




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Accrued Expenses and Other Liabilities
 34




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##### Table of Contents



Allowance for Loan Losses
       35




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##### Table of Contents



SUMMARY OF LOAN LOSS EXPERIENCE
 Three Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Year EndedSeptember 30,
    
    
    September 30,
    
    
    December 31,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2007(Dollars in Thousands)Allowance for loan losses at
beginning of period
    
    $
    27,243
    
    
    $
    19,147
    
    
    $
    22,868
    
    
    $
    18,892
    
    
    $
    18,892Allowance of acquired bank
    
    
    
    
    
    
    3.717
    
    
    
    
    
    
    
    3,717
    
    
    
    3,717Charge-offs:Commercial and industrial
    
    
    88
    
    
    
    247
    
    
    
    400
    
    
    
    684
    
    
    
    1,162Real estate  construction and
land development
    
    
    877
    
    
    
    120
    
    
    
    1,542
    
    
    
    121
    
    
    
    301Real estate  mortgageSingle-family
    
    
    606
    
    
    
    350
    
    
    
    2,089
    
    
    
    799
    
    
    
    1,149Commercial
    
    
    
    
    
    
    570
    
    
    
    411
    
    
    
    589
    
    
    
    724Other
    
    
    3
    
    
    
    
    
    
    
    109
    
    
    
    206
    
    
    
    206Consumer
    
    
    627
    
    
    
    472
    
    
    
    1,777
    
    
    
    1,409
    
    
    
    2,117Other
    
    
    46
    
    
    
    
    
    
    
    145
    
    
    
    
    
    
    
    63Total charge-offs
    
    
    2,247
    
    
    
    1,759
    
    
    
    6,473
    
    
    
    3,808
    
    
    
    5,722Recoveries:Commercial and industrial
    
    
    117
    
    
    
    78
    
    
    
    595
    
    
    
    334
    
    
    
    398Real estate  construction and
land development
    
    
    8
    
    
    
    275
    
    
    
    41
    
    
    
    283
    
    
    
    286Real estate  mortgageSingle-family
    
    
    33
    
    
    
    87
    
    
    
    76
    
    
    
    144
    
    
    
    174Commercial
    
    
    99
    
    
    
    3
    
    
    
    124
    
    
    
    23
    
    
    
    70Other
    
    
    16
    
    
    
    10
    
    
    
    39
    
    
    
    68
    
    
    
    82Consumer
    
    
    62
    
    
    
    106
    
    
    
    147
    
    
    
    304
    
    
    
    382Other
    
    
    34
    
    
    
    24
    
    
    
    110
    
    
    
    26
    
    
    
    48Total recoveries
    
    
    369
    
    
    
    583
    
    
    
    1,132
    
    
    
    1,182
    
    
    
    1,440Net charge-offs
    
    
    1,878
    
    
    
    1,176
    
    
    
    5,341
    
    
    
    2,626
    
    
    
    4,282Provision for loan losses
    
    
    2,305
    
    
    
    1,179
    
    
    
    10,143
    
    
    
    2,884
    
    
    
    4,541Allowance for loan losses at end
of period
    
    $
    27,670
    
    
    $
    22,867
    
    
    $
    27,670
    
    
    $
    22,867
    
    
    $
    22,868Loans at end of period, net of
unearned income
    
    $
    2,219,041
    
    
    $
    2,039,530
    
    
    $
    2,219,041
    
    
    $
    2,039,530
    
    
    $
    2,017,011Average loans, net of unearned
income
    
    
    2,181,873
    
    
    
    1,921,404
    
    
    
    2,112,800
    
    
    
    1,745,261
    
    
    
    1,814,032Ratio of ending allowance to
ending loans
    
    
    1.25
    %
    
    
    1.12
    %
    
    
    1.25
    %
    
    
    1.12
    %
    
    
    1.13
    %Ratio of net charge-offs to
average loans (1)
    
    
    0.34
    
    
    
    0.24
    
    
    
    0.34
    
    
    
    0.20
    
    
    
    0.24Net charge-offs as a percentage of:Provision for loan losses
    
    
    81.48
    
    
    
    99.83
    
    
    
    52.66
    
    
    
    91.09
    
    
    
    94.30Allowance for loan losses (1)
    
    
    27.00
    
    
    
    20.42
    
    
    
    25.78
    
    
    
    15.36
    
    
    
    18.72Allowance for loan losses as a
percentage of nonperforming loans
    
    
    44.96
    
    
    
    97.35
    
    
    
    44.96
    
    
    
    97.35
    
    
    
    90.31
 
 (1)
    
    Annualized. 36




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##### Table of Contents



Nonperforming Assets
 September 30,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands)Nonaccrual
    
    $
    51,451
    
    
    $
    22,533Accruing loans 90 days or more delinquent
    
    
    8,268
    
    
    
    2,117Restructured
    
    
    1,818
    
    
    
    671Total nonperforming loans
    
    
    61,537
    
    
    
    25,321Other real estate owned and repossessed assets
    
    
    24,787
    
    
    
    4,415Total nonperforming assets
    
    $
    86,324
    
    
    $
    29,736Nonperforming loans as a percentage of loans
    
    
    2.77
    %
    
    
    1.26
    %Nonperforming assets as a percentage of loans plus nonperforming assets
    
    
    3.85
    %
    
    
    1.47
    %Nonperforming assets as a percentage of total assets
    
    
    2.78
    %
    
    
    1.03
    %
  September 30,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands)Commercial and industrial
    
    $
    231
    
    
    $
    1,058Real estate  construction and land development
    
    
    27,648
    
    
    
    10,569Real estate  mortgagesSingle-family
    
    
    17,704
    
    
    
    8,069Commercial
    
    
    13,849
    
    
    
    4,045Other
    
    
    1,243
    
    
    
    805Consumer
    
    
    862
    
    
    
    775Total nonperforming loans
    
    $
    61,537
    
    
    $
    25,321
 37




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##### Table of Contents



September 30,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands)Land
    
    $
    13,780
    
    
    $
    1,100Single-family residential properties
    
    
    10,114
    
    
    
    2,874Construction
    
    
    632
    
    
    
    153Other repossessed assets
    
    
    261
    
    
    
    288Other real estate owned and repossessed assets
    
    $
    24,787
    
    
    $
    4,415
  Past Due Loans.
 Impaired Loans
 Outstanding
    
    
    SpecificBalance
    
    
    Allowance(Dollars in thousands)Commercial and industrial
    
    $
    350
    
    
    $
    2Real estate  construction and land development
    
    
    23,567
    
    
    
    1,912Real estate  mortgagesCommercial
    
    
    11,559
    
    
    
    5401-4 family
    
    
    10,275
    
    
    
    1,269Other
    
    
    1,192
    
    
    
    149Total
    
    $
    46,943
    
    
    $
    3,872
 Potential Problem Loans
 38




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##### Table of Contents



Stockholders Equity
 Subordinated Debentures and Warrants.
 Stock Incentive Plan .
 Regulatory Capital.
 To Be WellFor Capital
    
    Capitalized UnderAdequacy
    
    Prompt CorrectiveActual
    
    Purposes
    
    ActionAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of September 30, 2008Tier 1 Core Capital (to
Adjusted Total Assets)
    
    $
    209,351
    
    
    
    7.20
    %
    
    $
    116,332
    
    
    
    4.00
    %
    
    $
    145,414
    
    
    
    5.00
    %Total Capital (to Risk
Weighted Assets)
    
    
    243,142
    
    
    
    10.10
    
    
    
    192,566
    
    
    
    8.00
    
    
    
    240,708
    
    
    
    10.00Tier 1 Capital (to Risk
Weighted Assets)
    
    
    209,351
    
    
    
    8.70
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    144,425
    
    
    
    6.00Tangible Capital (to
Adjusted Total Assets)
    
    
    209,351
    
    
    
    7.20
    
    
    
    43,624
    
    
    
    1.50
    
    
    
    N/A
    
    
    
    N/A
 Liquidity
    39




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##### Table of Contents



Forward-Looking Statements
      40




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   September 30,
    
    December 31,12-Month Gap
    
    2008
    
    2007Interest-bearing liabilities in excess of interest-earning assets
    
    $
    (384,000
    )
    
    $
    (455,000
    )Cumulative 12-month Gap Ratio
    
    
    .81
    
    
    
    .77
 Increase (Decrease) in Net Interest IncomeSeptember 30, 2008
    
    December 31, 2007Change (in Basis Points) in Interest Rates (12-Month Projection)
    
    Amount
    
    Percent
    
    Amount
    
    Percent+200 BP (1)
    
    $
    3,072
    
    
    
    3.8
    %
    
    $
    2,700
    
    
    
    3.5
    %- 200 BP (1)
    
    
    (887
    )
    
    
    (1.1
    )
    
    
    (7,100
    )
    
    
    (9.1
    )
 
 (1)
    
    Results are within our asset and liability management policy.  September 30, 2008
    
    
    
    
    
    ChangeChange (in Basis Points) in Interest Rates
    
    EVE
    
    Amount
    
    Percent(Dollars in thousands)+ 200 BP
    
    $
    523,994
    
    
    $
    15,129
    
    
    
    3.0
    %0 BP
    
    
    508,865
    
    
    
    
    
    
    
    - 200 BP
    
    
    474,398
    
    
    
    (34,467
    )
    
    
    (6.8
    )
 December 31, 2007Change (in Basis Points) in Interest Rates+ 200 BP
    
    $
    470,866
    
    
    $
    19,274
    
    
    
    4.4
    %0 BP
    
    
    451,142
    
    
    
    
    
    
    
    - 200 BP
    
    
    407,146
    
    
    
    (43,996
    )
    
    
    (9.8
    )
   41




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
       
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  42




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##### Table of Contents



ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  10.1
    
    Loan Agreement, dated as of September 4, 2008, between Superior Bancorp and Colonial Bank10.2
    
    Revolving Credit Note, dated September 4, 2008, between Superior Bancorp and Colonial Bank10.3
    
    Stock Pledge Agreement, dated as of September 4, 2008, given by Superior Bancorp10.4
    
    Agreement to Purchase Subordinated Notes, dated as of
September 17, 2008, by and among Superior Bank, Superior Bancorp and Durden Enterprises, LLC10.5
    
    Letter to Durden Enterprises, LLC, dated as of September 17, 200810.6
    
    9.5% Subordinated Note Due September 15, 2018 given by Superior Bank10.7
    
    Warrant to Purchase Common Stock of Superior Bancorp dated as of September 17, 2008.10.8
    
    Agreement, dated as of September 8, 2008, between Superior Bancorp and James A. White10.9
    
    Change in Control Agreement, dated as of September 8, 2008, by and among Superior Bancorp,
Superior Bank and James A. White31.1
    
    Certification of principal executive officer pursuant to Rule 13a-14(a).31.2
    
    Certification of principal financial officer pursuant to 13a-14(a).32.1
    
    Certification of principal executive officer pursuant to 18 U.S.C. Section 1350.32.2
    
    Certification of principal financial officer pursuant to 18 U.S.C. Section 1350.
 43




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##### Table of Contents



SUPERIOR BANCORP
(Registrant)Date: November 7, 2008
    By:
    /s/ C. Stanley BaileyC. Stanley BaileyChief Executive OfficerDate: November 7, 2008
    By:
    /s/ James C. GossettJames C. GossettChief Accounting Officer

(Principal Accounting Officer) 44