##### 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 MARCH 31, 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
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ
  Class
    

    Outstanding as of March 31, 2008Common stock, $.001 par value
    

    10,052,808




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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
    
    
    13ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    
    
    29ITEM 4. CONTROLS AND PROCEDURES
    
    
    30PART II. OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    31ITEM 1A. RISK FACTORS
    
    
    31ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    31ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    31ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    31ITEM 5. OTHER INFORMATION
    
    
    31ITEM 6. EXHIBITS
    
    
    31SIGNATURES
    
    
    32EX-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)
 March 31,
    
    
    December 31,2008
    
    
    2007(UNAUDITED)ASSETSCash and due from banks
    
    $
    67,057
    
    
    $
    52,983Interest-bearing deposits in other banks
    
    
    5,515
    
    
    
    6,916Federal funds sold
    
    
    10,647
    
    
    
    3,452Investment securities available for sale
    
    
    367,975
    
    
    
    361,171Tax lien certificates
    
    
    12,085
    
    
    
    15,615Mortgage loans held for sale
    
    
    41,789
    
    
    
    33,408Loans, net of unearned income
    
    
    2,066,192
    
    
    
    2,017,011Less: Allowance for loan losses
    
    
    (23,273
    )
    
    
    (22,868
    )Net loans
    
    
    2,042,919
    
    
    
    1,994,143Premises and equipment, net
    
    
    104,687
    
    
    
    104,799Accrued interest receivable
    
    
    15,566
    
    
    
    16,512Stock in FHLB
    
    
    19,227
    
    
    
    14,945Cash surrender value of life insurance
    
    
    45,731
    
    
    
    45,277Goodwill and other intangibles
    
    
    186,519
    
    
    
    187,520Other assets
    
    
    44,182
    
    
    
    48,684TOTAL ASSETS
    
    $
    2,963,899
    
    
    $
    2,885,425LIABILITIES AND STOCKHOLDERS EQUITYDeposits:Noninterest-bearing
    
    $
    226,256
    
    
    $
    207,602Interest-bearing
    
    
    1,939,628
    
    
    
    1,993,009TOTAL DEPOSITS
    
    
    2,165,884
    
    
    
    2,200,611Advances from FHLB
    
    
    312,832
    
    
    
    222,828Federal funds purchased and security repurchase agreements
    
    
    6,619
    
    
    
    17,075Notes payable
    
    
    9,500
    
    
    
    9,500Junior subordinated debentures owed to unconsolidated subsidiary trusts
    
    
    53,658
    
    
    
    53,744Accrued expenses and other liabilities
    
    
    63,571
    
    
    
    31,625TOTAL LIABILITIES
    
    
    2,612,064
    
    
    
    2,535,383STOCKHOLDERS EQUITYCommon stock, par value $.001 per share; authorized 15,000,000
shares; shares issued 10,373,556 and 10,380,658, respectively;
outstanding 10,052,808 and 10,027,079, respectively
    
    
    11
    
    
    
    10Surplus
    
    
    329,008
    
    
    
    329,232Retained earnings
    
    
    34,252
    
    
    
    33,557Accumulated other comprehensive income
    
    
    966
    
    
    
    174Treasury stock, at cost - 320,749 and 347,536 shares respectively
    
    
    (11,364
    )
    
    
    (12,309
    )Unearned ESOP stock
    
    
    (582
    )
    
    
    (622
    )Unearned restricted stock
    
    
    (456
    )
    
    
    TOTAL STOCKHOLDERS EQUITY
    
    
    351,835
    
    
    
    350,042TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    2,963,899
    
    
    $
    2,885,425
  2




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SUPERIOR BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except per share data)
 Three Months EndedMarch 31,2008
    
    
    2007INTEREST INCOMEInterest and fees on loans
    
    $
    37,346
    
    
    $
    34,312Interest on taxable securities
    
    
    4,052
    
    
    
    4,439Interest on tax-exempt securities
    
    
    430
    
    
    
    129Interest on federal funds sold
    
    
    80
    
    
    
    127Interest and dividends on other investments
    
    
    644
    
    
    
    737Total interest income
    
    
    42,552
    
    
    
    39,744INTEREST EXPENSEInterest on deposits
    
    
    20,253
    
    
    
    17,468Interest on other borrowed funds
    
    
    2,792
    
    
    
    3,249Interest on junior subordinated debentures
    
    
    1,015
    
    
    
    993Total interest expense
    
    
    24,060
    
    
    
    21,710NET INTEREST INCOME
    
    
    18,492
    
    
    
    18,034Provision for loan losses
    
    
    1,872
    
    
    
    705NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
    
    
    16,620
    
    
    
    17,329NONINTEREST INCOMEService charges and fees on deposits
    
    
    2,103
    
    
    
    1,786Mortgage banking income
    
    
    1,266
    
    
    
    950Investment securities gains
    
    
    402
    
    
    
    243Change in fair value of derivatives
    
    
    1,050
    
    
    
    (152
    )Increase in cash surrender value of life insurance
    
    
    552
    
    
    
    448Other income
    
    
    1,228
    
    
    
    811TOTAL NONINTEREST INCOME
    
    
    6,601
    
    
    
    4,086NONINTEREST EXPENSESSalaries and employee benefits
    
    
    12,141
    
    
    
    10,098Occupancy, furniture and equipment expense
    
    
    4,060
    
    
    
    3,127Amortization of core deposit intangibles
    
    
    896
    
    
    
    304Merger-related costs
    
    
    108
    
    
    
    319Other expenses
    
    
    5,059
    
    
    
    4,178TOTAL NONINTEREST EXPENSES
    
    
    22,264
    
    
    
    18,026Income before income taxes
    
    
    957
    
    
    
    3,389INCOME TAX EXPENSE
    
    
    262
    
    
    
    1,091NET INCOME
    
    $
    695
    
    
    $
    2,298BASIC NET INCOME PER COMMON SHARE
    
    $
    0.07
    
    
    $
    0.27DILUTED NET INCOME PER COMMON SHARE
    
    $
    0.07
    
    
    $
    0.26Weighted average common shares outstanding
    
    
    10,011
    
    
    
    8,610Weighted average common shares outstanding, assuming dilution
    
    
    10,045
    
    
    
    8,760
  3




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SUPERIOR BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
(Dollars in thousands)
 Three Months EndedMarch 31,2008
    
    
    2007NET CASH USED BY OPERATING ACTIVITIES
    
    $
    (5,316
    )
    
    $
    (3,142
    )CASH FLOWS FROM INVESTING ACTIVITIES:Net decrease (increase) in interest-bearing deposits in other banks
    
    
    1,401
    
    
    
    (1,453
    )Net (increase) decrease in federal funds sold
    
    
    (7,195
    )
    
    
    10,296Proceeds from sales of securities available for sale
    
    
    17,368
    
    
    
    2,400Proceeds from maturities of investment securities available for sale
    
    
    71,607
    
    
    
    16,253Purchases of investment securities available for sale
    
    
    (54,930
    )
    
    
    (6,326
    )Redemption of tax lien certificates
    
    
    3,530
    
    
    
    4,125Net increase in loans
    
    
    (55,890
    )
    
    
    (24,840
    )Purchases of premises and equipment
    
    
    (4,245
    )
    
    
    (2,099
    )Proceeds from sale of premises and equipment
    
    
    4,249
    
    
    
    Proceeds from sale of repossessed assets
    
    
    2,898
    
    
    
    750Increase in stock in FHLB
    
    
    (4,281
    )
    
    
    (1,001
    )Other investing activities, net
    
    
    
    
    
    
    (230
    )Net cash used by investing activities
    
    
    (25,488
    )
    
    
    (2,125
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net decrease in deposits
    
    
    (34,641
    )
    
    
    (10,232
    )Net increase in FHLB advances and other borrowed funds
    
    
    79,519
    
    
    
    12,607Payments made on notes payable
    
    
    
    
    
    
    (4,802
    )Proceeds from notes payable
    
    
    
    
    
    
    5,250Net cash provided by financing activities
    
    
    44,878
    
    
    
    2,823Net
increase (decrease) in cash and due from banks
    
    
    14,074
    
    
    
    (2,444
    )CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD
    
    
    52,983
    
    
    
    49,783CASH AND DUE FROM BANKS AT END OF PERIOD
    
    $
    67,057
    
    
    $
    47,339
  4




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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Note 1  Basis of Presentation
 10-Q,
  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)
 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
   Pro forma Results of Operations
  6




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Note 3
 Acquisitions  (Continued)
  Three MonthsEnded(Dollars in thousands, except per share data)
    
    March 31, 2007Pro forma net interest income and noninterest income
    
    $
    25,488Pro forma net income
    
    
    3,233Pro forma earnings per common share  basic
    
    $
    0.31Pro forma earnings per common share  diluted
    
    
    0.31
 Note 4  Segment Reporting
   Total
    
    
    
    
    
    
    SuperiorAlabama
    
    
    Florida
    
    
    Alabama and
    
    
    Administrative
    
    
    BancorpRegion
    
    
    Region
    
    
    Florida
    
    
    and Other
    
    
    CombinedThree months ended March 31, 2008Net interest income
    
    $
    6,998
    
    
    $
    9,621
    
    
    $
    16,619
    
    
    $
    1,873
    
    
    $
    18,492Provision for loan losses
    
    
    855
    
    
    
    858
    
    
    
    1,713
    
    
    
    159
    
    
    
    1,872Noninterest income
    
    
    1,862
    
    
    
    450
    
    
    
    2,312
    
    
    
    4,289
    
    
    
    6,601Noninterest expense
    
    
    7,626
    
    
    
    5,486
    
    
    
    13,112
    
    
    
    9,152
    
    
    
    22,264Operating profit (loss)
    
    $
    379
    
    
    $
    3,727
    
    
    $
    4,106
    
    
    $
    (3,149
    )
    
    
    957Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    262Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    695Total assets
    
    $
    993,808
    
    
    $
    1,155,201
    
    
    $
    2,149,009
    
    
    $
    814,890
    
    
    $
    2,963,899Three months ended March 31, 2007Net interest income
    
    $
    9,424
    
    
    $
    8,531
    
    
    $
    17,955
    
    
    $
    79
    
    
    $
    18,034Provision for loan losses
    
    
    603
    
    
    
    94
    
    
    
    697
    
    
    
    8
    
    
    
    705Noninterest income
    
    
    1,737
    
    
    
    312
    
    
    
    2,049
    
    
    
    2,037
    
    
    
    4,086Noninterest expense
    
    
    6,079
    
    
    
    3,080
    
    
    
    9,159
    
    
    
    8,867
    
    
    
    18,026Operating profit (loss)
    
    $
    4,479
    
    
    $
    5,669
    
    
    $
    10,148
    
    
    $
    (6,759
    )
    
    
    3,389Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,091Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,298Total assets
    
    $
    977,573
    
    
    $
    707,488
    
    
    $
    1,685,061
    
    
    $
    765,873
    
    
    $
    2,450,934
 7




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Note 5  Net Income per Common Share
  Three Months EndedMarch 31,2008
    
    
    2007Numerator:For basic and diluted, net income
    
    $
    695
    
    
    $
    2,298Denominator:For basic, weighted average common shares outstanding
    
    
    10,011
    
    
    
    8,610Effect of dilutive stock options and restricted stock
    
    
    34
    
    
    
    150Average diluted common shares outstanding
    
    
    10,045
    
    
    
    8,760Basic net income per common share
    
    $
    .07
    
    
    $
    .27Diluted net income per common share
    
    $
    .07
    
    
    $
    .26
 Note 6  Comprehensive Income
  Note 7  Income Taxes
  FASB Interpretation No. 48
 Accounting for Uncertainty in Income Taxes Accounting for Income Taxes
    8




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Note 8  Stockholders Equity
 1-for-4 Reverse Stock Split
 .
 Stock Incentive Plan
     2008
    
    2007Risk free interest rate
    
    
    4.50
    %
    
    
    4.47
    %Volatility factor
    
    
    29.11
    %
    
    
    29.34
    %Weighted average life of options (in years)
    
    
    5.00
    
    
    
    5.00Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
 9




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Note 8
 Stockholders Equity  (Continued)
  Weighted-Weighted-
    
    
    AverageAverage
    
    
    RemainingExercise
    
    
    Contractual
    
    
    AggregateNumber
    
    
    Price
    
    
    Term
    
    
    Intrinsic ValueUnder option, January 1, 2008
    
    
    802,048
    
    
    $
    32.28Granted
    
    
    2,875
    
    
    
    18.56Under option, March 31, 2008
    
    
    804,293
    
    
    $
    33.03
    
    
    
    6.46
    
    
    $
    Exercisable at end of period
    
    
    694,649
    
    
    $
    31.76
    
    
    
    5.21
    
    
    $
    Weighted-average fair value
per option of options
granted during the period
    
    $
    6.35
   Note 9  Fair Value Measurements
    10




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Note 9  Fair Value Measurements  (Continued)
 
 Assets Recorded at Fair Value on a Recurring Basis
  AssetsMeasured at
    
    Quoted Prices in
    
    
    
    
    
    SignificantFair Value at
    
    Active Markets for
    
    Significant Other
    
    UnobservableMarch 31,
    
    Identical Assets
    
    Observable Inputs
    
    Inputs2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Available for sale securities
    
    $
    367,975

    
    $
    

    
    $
    367,975

    
    $
    Derivative financial instruments, net
    
    
    666

    
    
    

    
    
    666

    
    
    Total recurring basis measured assets
    
    $
    368,641

    
    $

    

    $
368,641


    
    $

 Valuation Techniques  Recurring Basis
 Securities Available for Sale
 Derivative financial instruments
 11




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Note 9  Fair Value Measurements  (Continued)
 Assets Recorded at Fair Value on a Nonrecurring Basis
  Assets
    
    Quoted PricesMeasured at
    
    inFair Value
    
    Active Markets for
    
    Significant Other
    
    Significantat
    
    Identical
    
    Observable
    
    UnobservableMarch 31,
    
    Assets
    
    Inputs
    
    Inputs2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Mortgage loans held for sale
    
    $
    41,789

    
    $
    

    
    $
    41,789

    
    $
    Impaired loans, net of specific allowance
    
    
    26,946

    
    
    

    
    
    

    
    
    26,946Total nonrecurring basis measured
assets
    
    $
    68,735

    
    $
    

    
    $
    41,789

    
    $
    26,946
 Valuation Techniques  Nonrecurring Basis
 Mortgage Loans Held for Sale.
 Impaired Loans.
 12




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Basis of Presentation
   Recent Developments
  Overview
      13




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Fair Value Measurements
    14




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Assets Recorded at Fair Value on a Recurring Basis
  AssetsMeasured at
    
    Quoted Prices in
    
    
    
    
    
    SignificantFair Value at
    
    Active Markets for
    
    Significant Other
    
    UnobservableMarch 31,
    
    Identical Assets
    
    Observable Inputs
    
    Inputs2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Available for sale securities
    
    $
    367,975

    
    $
    
    

    $
    367,975
    

    $
    Derivative financial instruments, net

    
    666


    
    


    
    666


    
    Total recurring basis measured assets
    
    $
    368,641

    
    $
    

    
    $
    368,641

    
    $
    
 Valuation Techniques  Recurring Basis
 Securities Available for Sale
 Derivative financial instruments
 Assets Recorded at Fair Value on a Nonrecurring Basis
  QuotedAssets
    
    Prices inMeasured at
    
    Active Markets for
    
    Significant Other
    
    SignificantFair Value at
    
    Identical
    
    Observable
    
    UnobservableMarch 31,
    
    Assets
    
    Inputs
    
    Inputs2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Mortgage loans held for sale
    
    $
    41,789

    
    $
    

    
    $
    41,789
    

    $
    Impaired loans
    
    
    26,946
    

    
    
    
    
    
    
    
    26,946Total nonrecurring basis measured assets
    
    $
    68,735

    
    $
    

    
    $
    41,789

    
    $
    26,946
 Valuation Techniques  Nonrecurring Basis
 Mortgage Loans Held for Sale.
 15




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Impaired Loans.
 16




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Results of Operations
  Three MonthsEnded March 31,2008
    
    2007(Dollars in thousands, except per share data)Superior Bancorp and SubsidiariesNet income
    
    $
    695
    
    
    $
    2,298Net income per common share (diluted)
    
    
    0.07
    
    
    
    0.26Net interest margin
    
    
    3.04
    %
    
    
    3.53
    %Net interest spread
    
    
    2.76
    
    
    
    3.22Return on average assets
    
    
    0.10
    
    
    
    0.38Return on average tangible assets
    
    
    0.10
    
    
    
    0.41Return on average stockholders equity
    
    
    0.80
    
    
    
    3.37Return on average tangible equity
    
    
    1.70
    
    
    
    6.33Book value per share
    
    $
    35.14
    
    
    $
    32.14Tangible book value per share
    
    
    16.51
    
    
    
    17.29Banking Subsidiary, Superior BankNet income
    
    $
    1,677
    
    
    $
    3,283Return on average assets
    
    
    0.23
    %
    
    
    0.56
    %Return on average stockholders equity
    
    
    1.71
    
    
    
    4.34Return on tangible equity
    
    
    3.24
    
    
    
    7.48
  Net Interest Income.
 Increase (Decrease) inFirst Quarter 2008 vs 2007Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate(Dollars in Thousands)ASSETSInterest-earning assets:Loans, net of unearned income
    
    $
    402,918
    
    
    $
    3,034
    
    
    
    (1.09
    )%Investment securitiesTaxable
    
    
    (32,878
    )
    
    
    (387
    )
    
    
    0.02Tax-exempt
    
    
    27,256
    
    
    
    457
    
    
    
    0.35Total investment securities
    
    
    (5,622
    )
    
    
    70
    
    
    
    0.12Federal funds sold
    
    
    653
    
    
    
    (47
    )
    
    
    (2.40
    )Other investments
    
    
    (2,419
    )
    
    
    (93
    )
    
    
    (0.54
    )Total interest -earning assets
    
    $
    395,530
    
    
    
    2,964
    
    
    
    (0.81
    )
 17




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##### Table of Contents



Increase (Decrease) inFirst Quarter 2008 vs 2007Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate(Dollars in Thousands)Interest-bearing liabilities:Demand deposits
    
    $
    159,977
    
    
    
    574
    
    
    
    (0.52
    )Savings deposits
    
    
    13,983
    
    
    
    128
    
    
    
    0.65Time deposits
    
    
    159,754
    
    
    
    2,083
    
    
    
    0.02Other borrowings
    
    
    26,664
    
    
    
    (457
    )
    
    
    (1.27
    )Subordinated debentures
    
    
    9,771
    
    
    
    22
    
    
    
    (1.57
    )Total interest-bearing liabilities
    
    $
    370,149
    
    
    
    2,350
    
    
    
    (0.35
    )Net interest income/net interest spread
    
    
    
    
    
    
    614
    
    
    
    (0.46
    )%Net yield on earning assets
    
    
    
    
    
    
    
    
    
    
    (0.49
    )%Taxable equivalent adjustment:Investment securities
    
    
    
    
    
    
    156Net interest income
    
    
    
    
    
    $
    458
  Three Months Ended March 31,2008
    
    
    2007Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in thousands)ASSETSInterest-earning assets:Loans, net of unearned income (1)
    
    $
    2,070,312
    
    
    $
    37,346
    
    
    
    7.26
    %
    
    $
    1,667,394
    
    
    $
    34,312
    
    
    
    8.35
    %Investment securitiesTaxable
    
    
    307,195
    
    
    
    4,052
    
    
    
    5.31
    
    
    
    340,073
    
    
    
    4,439
    
    
    
    5.29Tax-exempt (2)
    
    
    39,972
    
    
    
    652
    
    
    
    6.56
    
    
    
    12,716
    
    
    
    195
    
    
    
    6.21Total investment securities
    
    
    347,167
    
    
    
    4,704
    
    
    
    5.45
    
    
    
    352,789
    
    
    
    4,634
    
    
    
    5.33Federal funds sold
    
    
    9,541
    
    
    
    80
    
    
    
    3.37
    
    
    
    8,888
    
    
    
    127
    
    
    
    5.77Other investments
    
    
    45,669
    
    
    
    644
    
    
    
    5.67
    
    
    
    48,088
    
    
    
    737
    
    
    
    6.21Total interest-earning assets
    
    
    2,472,689
    
    
    
    42,774
    
    
    
    6.96
    
    
    
    2,077,159
    
    
    
    39,810
    
    
    
    7.77Noninterest-earning assets:Cash and due from banks
    
    
    56,657
    
    
    
    
    
    
    
    
    
    
    
    43,319Premises and equipment
    
    
    103,624
    
    
    
    
    
    
    
    
    
    
    
    95,137Accrued interest and other assets
    
    
    287,435
    
    
    
    
    
    
    
    
    
    
    
    226,006Allowance for loan losses
    
    
    (22,814
    )
    
    
    
    
    
    
    
    
    
    
    (18,900
    )Total assets
    
    $
    2,897,591
    
    
    
    
    
    
    
    
    
    
    $
    2,422,721
 18




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##### Table of Contents



Three Months Ended March 31,2008
    
    
    2007Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in thousands)LIABILITIES AND STOCKHOLDERS EQUITYInterest-bearing liabilities:Demand deposits
    
    $
    676,148
    
    
    $
    5,076
    
    
    
    3.02
    %
    
    $
    516,171
    
    
    $
    4,502
    
    
    
    3.54
    %Savings deposits
    
    
    57,393
    
    
    
    233
    
    
    
    1.63
    
    
    
    43,410
    
    
    
    105
    
    
    
    0.98Time deposits
    
    
    1,249,440
    
    
    
    14,944
    
    
    
    4.81
    
    
    
    1,089,686
    
    
    
    12,861
    
    
    
    4.79Other borrowings
    
    
    267,866
    
    
    
    2,792
    
    
    
    4.20
    
    
    
    241,202
    
    
    
    3,249
    
    
    
    5.46Subordinated debentures
    
    
    53,707
    
    
    
    1,015
    
    
    
    7.60
    
    
    
    43,936
    
    
    
    993
    
    
    
    9.17Total interest-bearing liabilities
    
    
    2,304,554
    
    
    
    24,060
    
    
    
    4.20
    
    
    
    1,934,405
    
    
    
    21,710
    
    
    
    4.55Noninterest-bearing liabilities:Demand deposits
    
    
    216,745
    
    
    
    
    
    
    
    
    
    
    
    179,567Accrued interest and other liabilities
    
    
    24,942
    
    
    
    
    
    
    
    
    
    
    
    32,330Stockholders equity
    
    
    351,350
    
    
    
    
    
    
    
    
    
    
    
    276,419Total liabilities and
stockholders equity
    
    $
    2,897,591
    
    
    
    
    
    
    
    
    
    
    $
    2,422,721Net interest income/net interest spread
    
    
    
    
    
    
    18,714
    
    
    
    2.76
    %
    
    
    
    
    
    
    18,100
    
    
    
    3.22
    %Net yield on earning assets
    
    
    
    
    
    
    
    
    
    
    3.04
    %
    
    
    
    
    
    
    
    
    
    
    3.53
    %Taxable equivalent adjustment:Investment securities (2)
    
    
    
    
    
    
    222
    
    
    
    
    
    
    
    
    
    
    
    66Net interest income
    
    
    
    
    
    $
    18,492
    
    
    
    
    
    
    
    
    
    
    $
    18,034
 
 (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%.  Three Months Ended March 31,2008 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
    
    $
    3,034
    
    
    $
    (4,820
    )
    
    $
    7,854Interest on securities:Taxable
    
    
    (387
    )
    
    
    18
    
    
    
    (405
    )Tax-exempt
    
    
    457
    
    
    
    11
    
    
    
    446Interest on federal funds
    
    
    (47
    )
    
    
    (56
    )
    
    
    9Interest on other investments
    
    
    (93
    )
    
    
    (59
    )
    
    
    (34
    )Total interest income
    
    
    2,964
    
    
    
    (4,906
    )
    
    
    7,870Expense from interest-bearing liabilities:Interest on demand deposits
    
    
    574
    
    
    
    (723
    )
    
    
    1,297Interest on savings deposits
    
    
    128
    
    
    
    86
    
    
    
    42Interest on time deposits
    
    
    2,083
    
    
    
    58
    
    
    
    2,025Interest on other borrowings
    
    
    (457
    )
    
    
    (802
    )
    
    
    345Interest on subordinated debentures
    
    
    22
    
    
    
    (185
    )
    
    
    207Total interest expense
    
    
    2,350
    
    
    
    (1,566
    )
    
    
    3,916Net interest income
    
    $
    614
    
    
    $
    (3,340
    )
    
    $
    3,954
 
 (1)
    
    The change in interest due to both rate and volume has been allocated to rate and
volume changes in proportion to the relationship of the absolute dollar amounts of the
changes in each. Noninterest income
 19




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##### Table of Contents



Three Months Ended March 31,2008
    
    
    2007
    
    
    % Change(Dollars in thousands)Service charges and fees on deposits
    
    $
    2,103
    
    
    $
    1,786
    
    
    
    17.75
    %Mortgage banking income
    
    
    1,266
    
    
    
    950
    
    
    
    33.26Investment securities gains
    
    
    402
    
    
    
    243
    
    
    
    65.43Change in fair value of derivatives
    
    
    1,050
    
    
    
    (152
    )
    
    
    790.79Increase in cash surrender value of life insurance
    
    
    552
    
    
    
    448
    
    
    
    23.21Other noninterest income
    
    
    1,228
    
    
    
    811
    
    
    
    51.42Total
    
    $
    6,601
    
    
    $
    4,086
    
    
    
    61.55
    %
  Noninterest expenses
 Three Months Ended March 31,2008
    
    
    2007
    
    
    % Change(Dollars in thousands)Noninterest ExpensesSalaries and employee benefits
    
    $
    12,141
    
    
    $
    10,098
    
    
    
    20.23
    %Occupancy, furniture and equipment expense
    
    
    4,060
    
    
    
    3,127
    
    
    
    29.84Amortization of core deposit intangibles
    
    
    896
    
    
    
    304
    
    
    
    194.74Merger-related costs
    
    
    108
    
    
    
    319
    
    
    
    (66.14
    )Professional fees
    
    
    436
    
    
    
    461
    
    
    
    (5.39
    )Insurance expense
    
    
    640
    
    
    
    364
    
    
    
    75.91Postage, stationery and supplies
    
    
    602
    
    
    
    626
    
    
    
    (3.94
    )Communications expense
    
    
    494
    
    
    
    520
    
    
    
    (4.92
    )Advertising expense
    
    
    590
    
    
    
    655
    
    
    
    (10.02
    )Other operating expense
    
    
    2,297
    
    
    
    1,551
    
    
    
    48.06Total
    
    $
    22,264
    
    
    $
    18,026
    
    
    
    23.51
    %Selected Key RatiosNoninterest expense to average assets (1)
    
    
    2.95
    %
    
    
    2.91
    %Efficiency ratio (1)
    
    
    88.92
    
    
    
    78.79
 
 (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 expense
 Provision for Loan Losses
 20




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##### Table of Contents



Financial Condition
  Short-term liquid assets
 Investment Securities
  Investment Portfolio
 Available for SaleMarch 31,
    
    
    December 31,
    
    
    Percent2008
    
    
    2007
    
    
    Change(Dollars in thousands)U.S. agencies
    
    $
    34,338
    
    
    $
    94,215
    
    
    
    (63.55
    )%State and political subdivisions
    
    
    40,897
    
    
    
    40,587
    
    
    
    0.76Mortgage-backed securities
    
    
    254,705
    
    
    
    191,378
    
    
    
    33.09Corporate debt & other securities
    
    
    38,035
    
    
    
    34,991
    
    
    
    8.71Total investment securities
    
    $
    367,975
    
    
    $
    361,171
    
    
    
    1.88
    %
 Loans
 21




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##### Table of Contents



DISTRIBUTION OF LOANS BY CATEGORY
(Dollars in thousands)
 March 31, 2008
    
    
    December 31, 2007Percent of
    
    
    
    
    
    
    Percent ofAmount
    
    
    Total
    
    
    Amount
    
    
    TotalCommercial and industrial
    
    $
    197,721
    
    
    
    9.56
    %
    
    $
    183,013
    
    
    
    9.07
    %Real estate  construction and land development (1)
    
    
    688,926
    
    
    
    33.32
    
    
    
    665,303
    
    
    
    32.96Real estate  mortgageSingle-family
    
    
    534,893
    
    
    
    25.87
    
    
    
    540,277
    
    
    
    26.77Commercial
    
    
    549,683
    
    
    
    26.59
    
    
    
    533,611
    
    
    
    26.44Other
    
    
    43,296
    
    
    
    2.09
    
    
    
    41,535
    
    
    
    2.06Consumer
    
    
    51,244
    
    
    
    2.48
    
    
    
    53,377
    
    
    
    2.64Other
    
    
    1,857
    
    
    
    .09
    
    
    
    1,235
    
    
    
    .06Total loans
    
    
    2,067,620
    
    
    
    100.0
    %
    
    
    2,018,351
    
    
    
    100.0
    %Unearned income
    
    
    (1,428
    )
    
    
    
    
    
    
    (1,340
    )Allowance for loan losses
    
    
    (23,273
    )
    
    
    
    
    
    
    (22,868
    )Net loans
    
    $
    2,042,919
    
    
    
    
    
    
    $
    1,994,143
 
 (1)
    
    A further analysis of the components of our real estate construction and land development
loans as of March 31, 2008 and December 31, 2007 is as follows: Residential
    
    CommercialDevelopment
    
    Development
    
    Other
    
    Total(Dollars in thousands)As of March 31, 2008Alabama segment
    
    $
    187,253
    
    
    $
    70,053
    
    
    $
    17,850
    
    
    $
    275,156Florida segment
    
    
    182,972
    
    
    
    184,378
    
    
    
    25,127
    
    
    
    392,477Other
    
    
    8,101
    
    
    
    13,109
    
    
    
    83
    
    
    
    21,293Total
    
    $
    378,326
    
    
    $
    267,540
    
    
    $
    43,060
    
    
    $
    688,926As 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
  March 31,
    
    
    December 31,
    
    
    Percent2008
    
    
    2007
    
    
    Change(Dollars in thousands)Total loans, net of unearned income
    
    $
    2,066,192
    
    
    $
    2,017,011
    
    
    
    2.44
    %Alabama segment
    
    
    871,558
    
    
    
    908,292
    
    
    
    (4.04
    )Florida segment
    
    
    962,290
    
    
    
    932,478
    
    
    
    3.20Other
    
    
    232,344
    
    
    
    176,241
    
    
    
    31.83
 Deposits
  22




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##### Table of Contents



March 31,
    
    
    December 31,
    
    
    Percent2008
    
    
    2007
    
    
    Change(Dollars in thousands)Noninterest-bearing demand
    
    $
    226,256
    
    
    $
    207,602
    
    
    
    8.99
    %Alabama segment
    
    
    128,828
    
    
    
    128,009
    
    
    
    0.64Florida segment
    
    
    86,696
    
    
    
    73,061
    
    
    
    18.66Other
    
    
    10,732
    
    
    
    6,532
    
    
    
    64.27Interest-bearing demand
    
    
    684,276
    
    
    
    657,809
    
    
    
    4.02Alabama segment
    
    
    301,797
    
    
    
    295,794
    
    
    
    2.03Florida segment
    
    
    261,346
    
    
    
    253,017
    
    
    
    3.29Other
    
    
    121,133
    
    
    
    108,998
    
    
    
    11.13Savings
    
    
    58,772
    
    
    
    59,507
    
    
    
    (1.24
    )Alabama segment
    
    
    38,844
    
    
    
    33,919
    
    
    
    14.52Florida segment
    
    
    19,231
    
    
    
    25,056
    
    
    
    (23.25
    )Other
    
    
    697
    
    
    
    532
    
    
    
    31.02Time deposits
    
    
    1,196,580
    
    
    
    1,275,693
    
    
    
    (6.20
    )Alabama segment
    
    
    659,852
    
    
    
    694,380
    
    
    
    (4.97
    )Florida segment
    
    
    488,080
    
    
    
    462,071
    
    
    
    5.63Other
    
    
    48,648
    
    
    
    119,242
    
    
    
    (59.20
    )Total deposits
    
    $
    2,165,884
    
    
    $
    2,200,611
    
    
    
    (1.58
    )%Alabama segment
    
    $
    1,129,321
    
    
    $
    1,152,102
    
    
    
    (1.98
    )%Florida segment
    
    $
    855,353
    
    
    $
    813,205
    
    
    
    5.18
    %Other
    
    $
    181,210
    
    
    $
    235,304
    
    
    
    (22.99
    )%
 Borrowings
 Accrued Expenses and Other Liabilities
 Allowance for Loan Losses
   23




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##### Table of Contents



24




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##### Table of Contents



SUMMARY OF LOAN LOSS EXPERIENCE
 Three MonthsEnded
    
    
    Year EndedMarch 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2007(Dollars in Thousands)Allowance for loan losses at beginning of period
    
    $
    22,868
    
    
    $
    18,892
    
    
    $
    18,892Allowance of acquired bank
    
    
    
    
    
    
    
    
    
    
    3,717Charge-offs:Commercial and industrial
    
    
    152
    
    
    
    110
    
    
    
    1,162Real estate  construction and land development
    
    
    3
    
    
    
    
    
    
    
    301Real estate  mortgageSingle-family
    
    
    612
    
    
    
    260
    
    
    
    1,149Commercial
    
    
    362
    
    
    
    14
    
    
    
    724Other
    
    
    106
    
    
    
    202
    
    
    
    206Consumer
    
    
    435
    
    
    
    400
    
    
    
    2,117Other
    
    
    75
    
    
    
    
    
    
    
    63Total charge-offs
    
    
    1,745
    
    
    
    986
    
    
    
    5,722Recoveries:Commercial and industrial
    
    
    138
    
    
    
    170
    
    
    
    398Real estate  construction and land development
    
    
    2
    
    
    
    7
    
    
    
    286Real estate  mortgageSingle-family
    
    
    19
    
    
    
    27
    
    
    
    174Commercial
    
    
    16
    
    
    
    18
    
    
    
    70Other
    
    
    14
    
    
    
    47
    
    
    
    82Consumer
    
    
    46
    
    
    
    97
    
    
    
    382Other
    
    
    43
    
    
    
    
    
    
    
    48Total recoveries
    
    
    278
    
    
    
    366
    
    
    
    1,440Net charge-offs
    
    
    1,467
    
    
    
    620
    
    
    
    4,282Provision for loan losses
    
    
    1,872
    
    
    
    705
    
    
    
    4,541Allowance for loan losses at end of period
    
    $
    23,273
    
    
    $
    18,977
    
    
    $
    22,868Loans at end of period, net of unearned income
    
    $
    2,066,192
    
    
    $
    1,675,317
    
    
    $
    2,017,011Average loans, net of unearned income
    
    
    2,032,730
    
    
    
    1,668,124
    
    
    
    1,814,032Ratio of ending allowance to ending loans
    
    
    1.13
    %
    
    
    1.13
    %
    
    
    1.13
    %Ratio of net charge-offs to average loans (1)
    
    
    0.29
    
    
    
    0.15
    
    
    
    0.24Net charge-offs as a percentage of:Provision for loan losses
    
    
    78.37
    
    
    
    87.94
    
    
    
    94.30Allowance for loan losses (1)
    
    
    25.28
    
    
    
    13.25
    
    
    
    18.72Allowance for loan losses as a percentage of
nonperforming loans
    
    
    75.42
    
    
    
    221.18
    
    
    
    90.31
 
 (1)
    
    Annualized.    25




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##### Table of Contents



Nonperforming Assets
 March 31,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands)Nonaccrual
    
    $
    30,543
    
    
    $
    22,533Accruing loans 90 days or more delinquent
    
    
    251
    
    
    
    2,117Restructured
    
    
    65
    
    
    
    671Total nonperforming loans
    
    
    30,859
    
    
    
    25,321Other real estate owned assets and repossessed assets
    
    
    6,748
    
    
    
    4,415Total nonperforming assets
    
    $
    37,607
    
    
    $
    29,736Nonperforming loans as a percentage of loans
    
    
    1.49
    %
    
    
    1.26
    %Nonperforming assets as a percentage of loans plus nonperforming assets
    
    
    1.81
    %
    
    
    1.47
    %Nonperforming assets as a percentage of total assets
    
    
    1.27
    %
    
    
    1.03
    %
  March 31,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands)Commercial and industrial
    
    $
    499
    
    
    $
    1,058Real estate  construction and land development
    
    
    13,898
    
    
    
    10,569Real estate  mortgagesSingle-family
    
    
    9,966
    
    
    
    8,069Commercial
    
    
    4,555
    
    
    
    4,045Other
    
    
    1,208
    
    
    
    805Consumer
    
    
    733
    
    
    
    775Total nonperforming loans
    
    $
    30,859
    
    
    $
    25,321
  Past Due Loans.
 26




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Impaired Loans
 Outstanding
    
    
    SpecificBalance
    
    
    Allowance(Dollars in thousands)Commercial and industrial
    
    $
    703
    
    
    $
    30Real estate  construction and land development
    
    
    15,269
    
    
    
    990Real estate  mortgagesCommercial
    
    
    5,610
    
    
    
    4541-4 family
    
    
    6,431
    
    
    
    37Other
    
    
    543
    
    
    
    99Total
    
    $
    28,556
    
    
    $
    1,610
 Potential Problem Loans
 Stock Incentive Plan .
 Regulatory Capital.
 To Be WellFor Capital
    
    Capitalized UnderAdequacy
    
    Prompt CorrectiveActual
    
    Purposes
    
    ActionAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of March 31, 2008Tier 1 Core Capital
(to Adjusted Total
Assets)
    
    $
    212,104
    
    
    
    7.69
    %
    
    $
    110,265
    
    
    
    4.00
    %
    
    $
    137,831
    
    
    
    5.00
    %Total Capital (to
Risk Weighted
Assets)
    
    
    234,038
    
    
    
    10.43
    
    
    
    179,495
    
    
    
    8.00
    
    
    
    224,369
    
    
    
    10.00Tier 1 Capital (to
Risk Weighted
Assets)
    
    
    212,104
    
    
    
    9.45
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    134,621
    
    
    
    6.00Tangible Capital
(to Adjusted Total
Assets)
    
    
    212,104
    
    
    
    7.69
    
    
    
    41,349
    
    
    
    1.50
    
    
    
    N/A
    
    
    
    N/A
 Liquidity
  27




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Forward-Looking Statements
      28




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   March 31,
    
    December 31,12-Month Gap
    
    2008
    
    2007Interest-bearing liabilities in excess of interest-earning
assets
    
    $
    (393,000
    )
    
    $
    (455,000
    )Cumulative 12-month Gap Ratio
    
    
    .80
    
    
    
    .77
 Increase (Decrease) in Net Interest IncomeMarch 31, 2008
    
    December 31, 2007Change (in Basis Points) in Interest Rates (12-Month Projection)
    
    Amount
    
    Percent
    
    Amount
    
    Percent+200 BP (1)
    
    $
    3,200
    
    
    
    4.2
    %
    
    $
    2,700
    
    
    
    3.5
    %- 200 BP (1)
    
    
    (7,000
    )
    
    
    (9.0
    )
    
    
    (7,100
    )
    
    
    (9.1
    )
 
 (1)
    
    Results are within our asset and liability management policy.   March
31, 2008
    
    
    
    
    
    ChangeChange (in Basis Points) in Interest Rates
    
    EVE
    
    Amount
    
    Percent(Dollars in thousands)+ 200 BP
    
    $
    478,874
    
    
    $
    26,877
    
    
    
    5.9
    %0 BP
    
    
    451,997
    
    
    
    
    
    
    
    - 200 BP
    
    
    402,669
    
    
    
    (49,328
    )
    
    
    (10.9
    )
 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
    )
  29




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ITEM 4. CONTROLS AND PROCEDURES
       30




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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
  
 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.
 31




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##### Table of Contents



SUPERIOR BANCORP
(Registrant)Date: May 9, 2008
    By:
    /s/ C. Stanley BaileyC. Stanley BaileyChief Executive OfficerDate: May 9, 2008
    By:
    /s/ Mark TarnakowMark TarnakowChief Financial Officer

(Principal Financial Officer) 32