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, 2007

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                      TO                     

Superior Bancorp

Delaware		63-1201350
(State or Other Jurisdiction of Incorporation)		(IRS Employer Identification No.)

17 North 20th Street, Birmingham, Alabama 35203
(Address of Principal Executive Offices)

(205) 327-1400

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 
12b-2 of the Exchange Act).

Large Accelerated Filer o       Accelerated Filer þ      Non-Accelerated Filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o     No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding as of March 31, 2007
Common stock, $.001 par value		34,658,368

 

 

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS			2
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK			20
ITEM 4. CONTROLS AND PROCEDURES			21
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS			21
ITEM 1A. RISK FACTORS			21
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			22
ITEM 3. DEFAULTS UPON SENIOR SECURITIES			22
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			22
ITEM 5. OTHER INFORMATION			22
ITEM 6. EXHIBITS			22
SIGNATURES			23
EX-10.1 LOAN AGREEMENT, DATED JANUARY 26, 2007, BETWEEN SUPERIOR BANCORP AND U.S. BANK NATIONAL ASSOCIATION
EX-10.2 STOCK PLEDGE AGREEMENT, DATED JANUARY 26, 2007, GIVEN BY SUPERIOR BANCORP IN FAVOR OF U.S. BANK NATIONAL ASSOCIATION
EX-31.01 SECTION 302 CERTIFICATION OF THE CEO
EX-31.02 SECTION 302 CERTIFICATION OF THE CFO
EX-32.01 SECTION 906 CERTIFICATION OF THE CEO
EX-32.02 SECTION 906 CERTIFICATION OF THE CFO

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SUPERIOR BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)

		March 31,				December 31,
		2007				2006
		(UNAUDITED)
ASSETS
Cash and due from banks		$	47,339			$	49,783
Interest-bearing deposits in other banks			12,447				10,994
Federal funds sold			14,889				25,185
Investment securities available for sale			342,837				354,716
Tax lien certificates			12,188				16,313
Mortgage loans held for sale			28,059				24,433
Loans, net of unearned income			1,675,317				1,639,528
Less: Allowance for loan losses			(18,977	)			(18,892	)
Net loans			1,656,340				1,620,636
Premises and equipment, net			95,689				94,626
Accrued interest receivable			13,440				14,387
Stock in FHLB			13,383				12,382
Cash surrender value of life insurance			40,895				40,598
Goodwill and other intangibles			128,743				129,520
Other assets			45,561				47,417
TOTAL ASSETS		$	2,451,810			$	2,440,990
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing		$	189,729			$	191,323
Interest-bearing			1,670,964				1,679,518
TOTAL DEPOSITS			1,860,693				1,870,841
Advances from FHLB			200,840				187,840
Security repurchase agreements			23,022				23,415
Notes payable			5,993				5,545
Junior subordinated debentures owed to unconsolidated subsidiary trusts			43,859				44,006
Capital lease obligation			3,785				3,798
Accrued expenses and other liabilities			35,087				29,458
TOTAL LIABILITIES			2,173,279				2,164,903
STOCKHOLDERS’ EQUITY
Common stock, par value $.001 per share; authorized 50,000,000 shares; shares issued 34,739,044 and 34,732,345, respectively; outstanding 34,658,368 and 34,651,669, respectively			35				35
Surplus			253,994				253,815
Retained earnings			28,234				26,491
Accumulated other comprehensive loss			(1,024	)			(1,452	)
Treasury stock, at cost			(716	)			(716	)
Unearned ESOP stock			(1,992	)			(2,086	)
TOTAL STOCKHOLDERS’ EQUITY			278,531				276,087
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	2,451,810			$	2,440,990

See Notes to Condensed Consolidated Financial Statements.

SUPERIOR BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

		THREE MONTHS ENDED
		MARCH 31,
		2007				2006
INTEREST INCOME
Interest and fees on loans		$	34,312			$	18,418
Interest on taxable securities			4,439				2,760
Interest on tax-exempt securities			129				78
Interest on federal funds sold			127				35
Interest and dividends on other investments			737				358
Total interest income			39,744				21,649
INTEREST EXPENSE
Interest on deposits			17,468				8,413
Interest on other borrowed funds			3,249				2,471
Interest on subordinated debentures			993				761
Total interest expense			21,710				11,645
NET INTEREST INCOME			18,034				10,004
Provision for loan losses			705				600
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES			17,329				9,404
NONINTEREST INCOME
Service charges and fees on deposits			1,786				1,031
Mortgage banking income			950				531
Investment securities gains			243				—
Change in fair value of derivatives			(152	)			70
Increase in cash surrender value of life insurance			448				420
Other income			811				450
TOTAL NONINTEREST INCOME			4,086				2,502
NONINTEREST EXPENSES
Salaries and employee benefits			10,098				5,869
Occupancy, furniture and equipment expense			3,127				1,847
Amortization of intangibles			304				72
Merger-related costs			319				—
Other operating expenses			4,178				3,018
TOTAL NONINTEREST EXPENSES			18,026				10,806
Income before income taxes			3,389				1,100
INCOME TAX EXPENSE			1,091				250
NET INCOME		$	2,298			$	850
BASIC NET INCOME PER COMMON SHARE		$	0.07			$	0.04
DILUTED NET INCOME PER COMMON SHARE		$	0.07			$	0.04
Weighted average common shares outstanding			34,438				20,015
Weighted average common shares outstanding, assuming dilution			35,038				20,673

See Notes to Condensed Consolidated Financial Statements.

SUPERIOR BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
(Dollars in thousands)

		THREE MONTHS ENDED
		March 31,
		2007				2006
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES		$	(3,142	)		$	6,043
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in interest-bearing deposits in other banks			(1,453	)			1,104
Net decrease (increase) in federal funds sold			10,296				(4,905	)
Proceeds from sales of securities available for sale			2,400				—
Proceeds from maturities of investment securities available for sale			16,253				3,193
Purchases of investment securities available for sale			(6,326	)			(877	)
Redemptions of tax lien certificates			4,125				—
Net increase in loans			(24,840	)			(26,323	)
Purchases of premises and equipment			(2,099	)			(1,145	)
Proceeds from sale of repossessed assets			750				—
Increase in stock in FHLB			(1,001	)			—
Other investing activities, net			(230	)			(192	)
Net cash used by investing activities			(2,125	)			(29,145	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposit accounts			(10,232	)			34,157
Net increase (decrease) in FHLB advances and other borrowed funds			12,607				(17,400	)
Proceeds from note payable			5,250				—
Payments made on notes payable			(4,802	)			(52	)
Proceeds from sale of common stock			—				721
Net cash provided by financing activities			2,823				17,426
Net decrease in cash and due from banks			(2,444	)			(5,676	)
Cash and due from banks at beginning of period			49,783				35,088
CASH AND DUE FROM BANKS AT END OF PERIOD		$	47,339			$	29,412

See Notes to Condensed Consolidated Financial Statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 — Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q, and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. For a summary of significant accounting policies that have been consistently followed, see Note 1 to the Consolidated Financial Statements included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2006. It is management’s opinion that all adjustments, consisting of only normal and recurring items necessary for a fair presentation, have been included. Operating results for the three-month period ended March 31, 2007, are not necessarily indicative of the results that may be expected for the year ending December 31, 2007.

The condensed statement of financial condition at December 31, 2006, which has been derived from the financial statements audited by Carr, Riggs & Ingram, LLC, independent public accountants, as indicated in their report, dated March 16, 2007, included in the Corporation’s Annual Report on Form 10-K, does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

Note 2 — Recent Accounting Pronouncements

FASB Interpretation No. 48

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). This interpretation clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. Specifically, the pronouncement prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on the related derecognition, classification, interest and penalties, accounting for interim periods, disclosure and transition of uncertain tax positions. The interpretation was effective for fiscal years beginning after December 15, 2006. See Note 7 for other disclosures related to income taxes.

The Corporation adopted FIN 48 on January 1, 2007. As a result, the Corporation recognized a charge of approximately $554,000 to its January 1, 2007 retained earnings balance. As of the adoption date, the Corporation had unrecognized tax benefits of $459,000 all of which, if recognized, would affect the effective tax rate. Also, as of the adoption date, we had accrued interest expense related to the unrecognized tax benefits of approximately $145,000. Accrued interest related to unrecognized tax benefits is recognized in income tax expense. Penalties, if incurred, will be recognized in income tax expense as well.

The Corporation and its subsidiaries are subject to U.S. federal income tax as well as to Alabama and Florida income tax. The Corporation has concluded all U.S. federal income tax matters for years through 2002, including acquisitions.

All state income tax matters have been concluded for years through 2001. The Corporation has received notices of proposed adjustments relating to state taxes due for the years 2002 and 2003, which include proposed adjustments relating to income apportionment of a subsidiary. Management anticipates that these examinations may be finalized in the foreseeable future. However, based on the status of these examinations, and the protocol of finalizing audits by the taxing authority, which could include formal legal proceedings, it is not possible to estimate the impact of any changes to the previously recorded uncertain tax positions. There have been no significant changes to the status of these examinations during the quarter ended March 31, 2007.

Statement of Financial Accounting Standards No. 157

In September 2006, the FASB issued SFAS 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years

beginning after November 15, 2007. The Corporation will adopt SFAS 157 on January 1, 2008 and is assessing the impact of the adoption of this statement.

Statement of Financial Accounting Standards No. 159

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). SFAS 159 would allow the Corporation an irrevocable election to measure certain related financial assets and liabilities at fair value, with unrealized gains and losses on the elected items recognized in earnings at each reporting period. The fair value option may only be elected at the time of initial recognition of a financial asset or financial liability or upon the occurrence of certain specified events. The election is applied on an instrument by instrument basis, with a few exceptions, and is applied only to entire instruments and not to portions of instruments. SFAS 159 also provides expanded disclosure requirements regarding the effects of electing the fair value option on the financial statements. SFAS 159 is effective prospectively for fiscal years beginning after November 15, 2007. The Corporation is currently evaluating this statement and has not yet determined the financial assets and liabilities, if any, for which the fair value option would be elected or the potential impact on the consolidated financial statements, if such election were made.

Note 3 — Acquisitions

The Corporation completed the acquisition of 100% of the outstanding stock of Kensington Bankshares, Inc. of Tampa, Florida (“Kensington”) on August 31, 2006 in exchange for 6,226,722 shares of the Corporation’s common stock valued at approximately $71,200,000. The shares were valued by using the average of the closing prices of the Corporation’s stock for several days prior to and after the terms of the acquisition were agreed to and announced. The total purchase price, which includes certain direct acquisition costs, totaled $71,372,000. As a result of the acquisition, the Corporation now operates the 12 banking locations formerly operated by Kensington in the Tampa Bay area of Florida. This area is the Corporation’s largest market and has a higher projected population growth than any of its other banking markets.

The Corporation completed the acquisition of 100% of the outstanding stock of Community Bancshares, Inc. (“Community”) of Blountsville, Alabama on November 7, 2006 in exchange for 8,072,179 shares of the Corporation’s common stock valued at approximately $91,848,000. The shares were valued by using the average of the closing prices of the Corporation’s stock for several days prior to and after the terms of the acquisition were agreed to and announced. The total purchase price, which includes certain direct acquisition costs, totaled $97,200,000. As a result of the acquisition, the Corporation added 18 banking locations and 15 consumer finance company locations in the State of Alabama.

Pro Forma Results of Operations

The results of operations of Kensington and Community subsequent to the acquisition date are included in the Corporation’s consolidated statements of operations. The following pro forma information for the period ended March 31, 2006 reflects the Corporation’s estimated consolidated results of operations as if the acquisitions of Kensington and Community had occurred at January 1, 2006, unadjusted for potential cost savings.

(Dollars in thousands, except per share data)		2006
Net interest income and noninterest income after provision for loan losses		$	21,141
Net income			2,329
Earnings per common share — basic		$	0.07
Earnings per common share — diluted		$	0.07

Pending Acquisitions

On January 18, 2007, the Corporation announced that it had signed a definitive agreement to merge with People’s Community Bancshares, Inc. (“People’s”). People’s is the holding company for People’s Community Bank of the West Coast, a Florida state bank with three branches in Sarasota and Manatee Counties in Florida. Under the terms of the merger agreement, the Corporation will issue 2.9036 shares of common stock for each share of People’s stock, or approximately 6,650,000 shares. The merger is currently expected to occur in the third quarter of 2007. Completion of the merger is subject to approval by the stockholders of People’s, to the receipt of required regulatory approvals, and to the satisfaction of usual and customary closing conditions.

Note 4 — Segment Reporting

The Corporation has two reportable segments, the Alabama Region and the Florida Region. The Alabama Region consists of operations located throughout the state of Alabama. The Florida Region consists of operations located in the panhandle and Tampa Bay regions of Florida. The Corporation’s reportable segments are managed as separate business units because they are located in different geographic areas. Both segments derive revenues from the delivery of financial services. These services include commercial loans, mortgage loans, consumer loans, deposit accounts and other financial services.

The Corporation evaluates performance and allocates resources based on profit or loss from operations. There are no material inter-segment sales or transfers. Net interest revenue is used as the basis for performance evaluation rather than its components, total interest revenue and total interest expense. The accounting policies used by each reportable segment are the same as those discussed in Note 1 to the Consolidated Financial Statements included in the Corporation’s Form 10-K for the year ended December 31, 2006. All costs have been allocated to the reportable segments. Therefore, combined amounts agree to the consolidated totals (in thousands).

		Alabama				Florida
		Region				Region				Combined
Three months ended March 31, 2007
Net interest income		$	13,385			$	4,649			$	18,034
Provision for loan losses			641				64				705
Noninterest income			3,774				312				4,086
Noninterest expense (1)			15,049				2,977				18,026
Income tax expense			477				614				1,091
Net income			348				1,950				2,298
Total assets			1,926,823				524,987				2,451,810
Three months ended March 31, 2006
Net interest income		$	6,360			$	3,644			$	10,004
Provision for loan losses			789				(189	)			600
Noninterest income			2,256				246				2,502
Noninterest expense (1)			9,714				1,092				10,806
Income tax (benefit) expense			(706	)			956				250
Net (loss) income			(1,181	)			2,031				850
Total assets			1,129,776				302,191				1,431,967

Note 5 — Net Income per Common Share

The following table sets forth the computation of basic and diluted net income per common share (in thousands, except per share amounts):

		Three Months Ended
		March 31,
		2007				2006
Numerator:
For basic and diluted, net income		$	2,298			$	850
Denominator:
For basic, weighted average common shares outstanding			34,438				20,015
Effect of dilutive stock options and restricted stock			600				658
Average diluted common shares outstanding			35,038				20,673
Basic net income per common share		$	.07			$	.04
Diluted net income per common share		$	.07			$	.04

Note 6 — Comprehensive Income (Loss)

Total comprehensive income (loss) was $2,726,000 for the three-month period ended March 31, 2007 and $(111,000) for the three-month period ended March 31, 2006. Total comprehensive income (loss) consists of net income  and the unrealized gain or loss on the Corporation’s available-for-sale investment securities portfolio arising during the period.

Note 7 — Income Taxes

The difference between the effective tax rate and the federal statutory rate in 2007 and 2006 is primarily due to certain tax-exempt income. See Note 2 regarding the adoption of FIN 48.

Note 8 — Stockholders’ Equity

The Corporation has established a stock incentive plan for directors and certain key employees that provides for the granting of restricted stock and incentive and nonqualified options to purchase up to 2,500,000 shares of the Corporation’s common stock. The compensation committee of the Board of Directors determines the terms of the restricted stock and options granted. All options granted have a maximum term of ten years from the grant date, and the option price per share of options granted cannot be less than the fair market value of the Corporation’s common stock on the grant date. Some of the options granted under the plan in the past vested over a five-year period, while others vested based on certain benchmarks relating to the trading price of the Corporation’s common stock, with an outside vesting date of five years from the date of grant. More recent grants have followed this benchmark-vesting formula.

The fair value of each option award is estimated on the date of grant based upon the Black-Scholes pricing model that uses the assumptions noted in the following table. The risk-free interest rate is based on the implied yield on U. S. Treasury zero-coupon issues with a remaining term equal to the expected term. Expected volatility has been estimated based on historical data. The expected term has been estimated based on the five-year vesting date and change of control provisions. The Corporation used the following weighted-average assumptions for the three-month period ended March 31, 2007:

Risk-free interest rate			4.47	%
Volatility factor			29.34	%
Expected term (in years)			5.00
Dividend yield			0.00	%

A summary of stock option activity as of March 31, 2007 and changes during the three-month period then ended is set forth below:

										Weighted-
						Weighted-				Average
						Average				Remaining
						Exercise				Contractual				Aggregate
		Number				Price				Term				Intrinsic Value
Under option, beginning of period			3,042,597			$	8.07
Granted			21,096				11.22
Under option, end of period			3,063,693			$	8.09				7.16			$	8,276,398
Exercisable at end of period			2,861,097			$	7.90				6.55			$	8,324,363
Weighted-average fair value per option of options granted during the period		$	3.83

The total intrinsic value of options exercised during the three-month period ended March 31, 2007 and 2006 was $-0- and $617,000, respectively. As of March 31, 2007, there was $519,000 of total unrecognized compensation expense related to the unvested awards. This expense will be recognized over an eighteen- to twenty- month period unless the shares vest earlier based on achievement of benchmark trading price levels. During the three-month periods ended March 31, 2007 and 2006, the Corporation recognized approximately $83,000 and $38,000, respectively, in compensation expense related to options granted.

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

Basis of Presentation

The following is a discussion and analysis of our March 31, 2007 consolidated financial condition and results of operations for the three-month period ended March 31, 2007 and 2006. All significant intercompany accounts and transactions have been eliminated. Our accounting and reporting policies conform to generally accepted accounting principles.

This information should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this report and the audited consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing in our Annual Report on Form 10-K for the year ended December 31, 2006.

Recent Developments

On January 18, 2007, we announced that we had signed a definitive agreement to merge with People’s Community Bancshares, Inc. (“People’s”). People’s is the holding company for People’s Community Bank of the West Coast, a Florida state bank with three branches in Sarasota and Manatee Counties in Florida. Under the terms of the merger agreement, the Corporation will issue 2.9036 shares of the Corporation’s common stock for each share of People’s stock, or approximately 6.7 million shares. The merger is currently expected to occur in the third quarter of 2007. Completion of the merger is subject to approval by the stockholders of People’s, to the receipt of required regulatory approvals, and to the satisfaction of usual and customary closing conditions.

Overview

Our principal subsidiary is Superior Bank, a federal savings bank headquartered in Birmingham, Alabama, which operates 60 banking offices in Alabama and Florida and 19 consumer finance company offices in Alabama.

Our total assets were $2.452 billion at March 31, 2007, an increase of $11 million, or 0.44%, from $2.441 billion as of December 31, 2006. Our total loans, net of unearned income, were $1.675 billion at March 31, 2007, an increase of $36 million, or 2.18%, from $1.639 billion as of December 31, 2006. Our total deposits were $1.861 billion at March 31, 2007, a decrease of $10 million, or .54%, from $1.871 billion as of December 31, 2006. Our total stockholders’ equity was $279 million at March 31, 2007, an increase of $3 million, or .89%, from $276 million as of December 31, 2006.

The primary source of our revenue is net interest income, which is the difference between income earned on interest-earning assets, such as loans and investments, and interest paid on interest-bearing liabilities, such as deposits and borrowings. Our results of operations are also affected by the provision for loan losses and other noninterest expenses such as salaries and benefits, occupancy expenses and provision for income taxes. The effects of these noninterest expenses are partially offset by noninterest sources of revenue such as service charges and fees on deposit accounts and mortgage banking income. Our volume of business is influenced by competition in our markets and overall economic conditions, including such factors as market interest rates, business spending and consumer confidence.

Results of Operations

Net income was $2.298 million for the three-month period ended March 31, 2007 (first quarter of 2007), compared to $850,000 for the three-month period ended March 31, 2006 (first quarter of 2006). Net income per common share was $.07 and $.04, respectively, for the first quarters of 2007 and 2006 based on weighted average common shares outstanding for the respective periods. Return on average assets (“ROA”), on an annualized basis, was .38% for the first quarter of 2007, compared to .24 % for the first quarter of 2006. Return on average stockholders’ equity (“ROE”), on an annualized basis, was 3.37 % for the first quarter of 2007, compared to 3.27% for the first quarter of 2006. Book value per share at March 31, 2007 was $8.04, compared to $7.97 at December 31, 2006. Tangible book value per share at March 31, 2007 was $4.32, compared to $4.23 at December 31, 2006.

For our banking subsidiary, Superior Bank, its ROA was .56% for the first quarter of 2007, compared to .47% for the first quarter of 2006, and its ROE was 4.34% for the first quarter of 2007, compared to 5.22% for the first quarter of 2006. Superior Bank’s return on tangible equity was 7.47% for the first quarter of 2007, compared to 5.77% for the first quarter of 2006.

The increase in our net income for the first quarter of 2007 compared to the first quarter of 2006 is primarily the result of an increase in net interest income and noninterest income offset by an increase in noninterest expenses. The increase in each of these components is primarily attributable to our acquisitions of Kensington and Community, which closed in the third and fourth quarters of 2006.

Net interest income is the difference between the income earned on interest-earning assets and interest paid on interest-bearing liabilities used to support such assets. Net interest income increased $8.0 million, or 80.3%, to $18.0 million for the first quarter of 2007 compared to $10.0 million for the first quarter of 2006. Net interest income increased due to an $18.1 million increase in total interest income offset by a $10.1 million increase in total interest expense. The increase in total interest income is primarily due to an 85-basis point increase in the average interest rate on loans and a $671 million and $115 million increases in the average volumes of loans and investment securities, respectively. Increases in volumes are primarily related to the Kensington and Community acquisitions.

The increase in total interest expense is attributable to a 65-basis point increase in the average interest rate paid on interest-bearing liabilities and a $722 million increase in the volume of average interest-bearing liabilities. The average rate paid on interest-bearing liabilities was 4.56% for the first quarter of 2007, compared to 3.91% for the first quarter of 2006. Our net interest spread and net interest margin were 3.21% and 3.53%, respectively, for the first quarter of 2007, compared to 3.01% and 3.21% for the first quarter of 2006.

Average interest-earning assets for the first quarter of 2007 increased $807 million, or 63.5%, to $2.077 billion from $1.270 billion in the first quarter of 2006. Average interest-bearing liabilities increased by $722 million, or 59.7%, to $1.931 billion for the first quarter of 2007 from $1.209 billion for the first quarter of 2006. The ratio of average interest-earning assets to average interest-bearing liabilities was 107.6% and 105.1% for the first quarters of 2007 and 2006, respectively. Average interest-bearing assets produced a taxable equivalent yield of 7.77% for the first quarter of 2007, compared to 6.92% for the first quarter of 2006.

Average Balances, Income, Expense and Rates. The following table depicts, on a taxable equivalent basis for the periods indicated, certain information related to our average balance sheet and our average yields on assets and average costs of liabilities. Average yields are calculated by dividing income or expense by the average balance of the corresponding assets or liabilities. Average balances have been calculated on a daily basis.

		Three Months Ended March 31,
		2007												2006
		Average				Income/				Yield/				Average				Income/				Yield/
		Balance				Expense				Rate				Balance				Expense				Rate
		(Dollars in thousands)
ASSETS
Interest-earning assets:
Loans, net of unearned income (1)		$	1,668,124			$	34,312				8.34	%		$	996,773			$	18,418				7.49	%
Investment securities
Taxable			354,388				4,439				5.08				243,907				2,760				4.59
Tax-exempt (2)			12,716				195				6.19				8,452				118				5.67
Total investment securities			367,104				4,634				5.12				252,359				2,878				4.63
Federal funds sold			8,888				127				5.79				3,005				35				4.72
Other investments			33,293				737				8.99				18,309				358				7.93
Total interest-earning assets			2,077,409				39,810				7.77				1,270,446				21,689				6.92
Noninterest-earning assets:
Cash and due from banks			41,919												28,607
Premises and equipment			95,022												56,229
Accrued interest and other assets			226,966												76,835
Allowance for loan losses			(18,898	)											(12,105	)
Total assets		$	2,422,418											$	1,420,012

		Three Months Ended March 31,
		2007												2006
		Average				Income/				Yield/				Average				Income/				Yield/
		Balance				Expense				Rate				Balance				Expense				Rate
		(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Interest-bearing liabilities:
Demand deposits		$	513,074			$	4,502				3.56	%		$	328,886			$	2,150				2.65	%
Savings deposits			43,410				105				0.98				21,068				8				0.15
Time deposits			1.089,686				12,861				4.79				615,253				6,255				4.12
Other borrowings			241,316				3,249				5.46				211,993				2,471				4.73
Subordinated debentures			43,918				993				9.17				31,959				761				9.66
Total interest — bearing liabilities			1,931,404				21,710				4.56				1,209,159				11,645				3.91
Noninterest-bearing liabilities:
Demand deposits			182,453												91,027
Accrued interest and other liabilities			31,837												14,466
Stockholders’ equity			276,725												105,359
Total liabilities and stockholders’ equity		$	2,422,419											$	1,420,011
Net interest income/net interest spread							18,100				3.21	%							10,044				3.01	%
Net yield on earning assets											3.53	%											3.21	%
Taxable equivalent adjustment:
Investment securities (2)							66												40
Net interest income						$	18,034											$	10,004

The following table sets forth, on a taxable equivalent basis, the effect which the varying levels of interest-earning assets and interest-bearing liabilities and the applicable rates have had on changes in net interest income for the three months ended March 31, 2007 and 2006.

		Three Months Ended March 31, (1)
		2007 vs. 2006
		Increase				Changes Due To
		(Decrease)				Rate				Volume
		(Dollars in thousands)
Increase (decrease) in:
Income from interest-earning assets:
Interest and fees on loans		$	15,894			$	2,292			$	13,602
Interest on securities:
Taxable			1,679				320				1,359
Tax-exempt			76				12				64
Interest on federal funds			92				10				82
Interest on other investments			380				53				327
Total interest income			18,121				2,687				15,434
Expense from interest-bearing liabilities:
Interest on demand deposits			2,352				894				1,458
Interest on savings deposits			97				81				16
Interest on time deposits			6,606				1,151				5,455
Interest on other borrowings			778				410				368
Interest on subordinated debentures			232				(40	)			272
Total interest expense			10,065				2,496				7,569
Net interest income on a taxable equivalent basis		$	8,056			$	191			$	7,865

Noninterest income. Noninterest income increased $1.6 million, or 63.3%, to $4.1 million for the first quarter of 2007 from $2.5 million for the first quarter of 2006. Noninterest income for the three-month periods ended March 31, 2007 and 2006 consisted of the following:

		Three-Month Period Ended March 31,
		2007				2006				% Change
Service charges and fees on deposits		$	1,786			$	1,031				73.2	%
Mortgage banking income			950				531				78.9
Investment securities gains			243				—				—
Change in fair value of derivatives			(152	)			70				(317.1	)
Increase in cash surrender value of life insurance			448				420				6.7
Other income			811				450				80.2
Total noninterest income		$	4,086			$	2,502				63.3	%

Service charges and fees on deposits increased primarily due to the Kensington and Community acquisitions. Mortgage banking income increased due to higher production levels.

Noninterest expenses. Noninterest expenses increased $7.2 million, or 66.8%, to $18.0 million for the first quarter of 2007 from $10.8 million for the first quarter of 2006. This increase is primarily due to increased salaries and benefits and occupancy and equipment expenses due to the acquisitions of Kensington and Community. Salaries and benefits increased $4.2 million, or 72.0% to $10.1 million for the first quarter of 2007 from $5.9 million for the first quarter of 2006. Occupancy, furniture and equipment expenses increased $1.3 million, or 69.3% to $3.1 million for the first quarter of 2007 from $1.8 million for the first quarter of 2006.

Income tax expense. We recognized income tax expense of $1.1 million for the first quarter of 2007, compared to a $250,000 for the first quarter of 2006. The difference in the effective tax rate and the federal statutory rate of 34% for the first quarters of 2007 and 2006 is due primarily to certain tax-exempt income from investments and insurance policies. We adopted the provisions of FIN 48 as of January 1, 2007, the effect of which is included in Note 2 to the Condensed Consolidated Financial Statements.

Provision for Loan Losses. The provision for loan losses represents the amount determined by management to be necessary to maintain the allowance for loan losses at a level capable of absorbing inherent losses in the loan portfolio. Management reviews the adequacy of the allowance for loan losses on a quarterly basis. The allowance for loan loss calculation is segregated into various segments that include classified loans, loans with specific allocations and pass rated loans. A pass rated loan is generally characterized by a very low to average risk of default and in which management perceives there is a minimal risk of loss. Loans are rated using an eight-point scale, with loan officers having the primary responsibility for assigning risk ratings and for the timely reporting of changes in the risk ratings. These processes, and the assigned risk ratings, are subject to review by our internal loan review function and chief credit officer. Based on the assigned risk ratings, the criticized and classified loans in the portfolio are segregated into the following regulatory classifications: Special Mention, Substandard, Doubtful or Loss. Generally, regulatory reserve percentages are applied to these categories to estimate the amount of loan loss allowance, adjusted for previously mentioned risk factors. Impaired loans are reviewed specifically and separately under Statement of Financial Accounting Standards (“SFAS”) No. 114 to determine the appropriate reserve allocation. Management compares the investment in an impaired loan with the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral, if the loan is collateral-dependent, to determine the specific reserve allowance. Reserve percentages assigned to non- rated loans are based on historical charge-off experience adjusted for other risk factors. To evaluate the overall adequacy of the allowance to absorb losses inherent in our loan portfolio, management considers historical loss experience based on volume and types of loans, trends in classifications, volume and trends in delinquencies and non-accruals, economic conditions and other pertinent information. Based on future evaluations, additional provisions for loan losses may be necessary to maintain the allowance for loan losses at an appropriate level. See “Financial Condition — Allowance for Loan Losses” for additional discussion.

The provision for loan losses was $705,000 for the first quarter of 2007, an increase of $105,000, or 17.5%, from $600,000 in the first quarter of 2006. This increase is primarily related to loan growth. During the first quarter of 2007, we had net charged-off loans totaling $620,000, compared to net charged-off loans of $612,000 in the first quarter of 2006. The annualized ratio of net charged-off loans to average loans was .15% for the first quarter of 2007 compared to .25% for the first quarter of 2006 and .20% for the year ended December 31, 2006. The allowance for loan losses totaled $19.0 million, or 1.13% of loans, net of unearned income, at March 31, 2007, compared to $18.9 million, or 1.15% of loans, net of unearned income, at December 31, 2006. See “Financial Condition — Allowance for Loan Losses” for additional discussion.

Financial Condition

Total assets were $2.452 billion at March 31, 2007, an increase of $11 million, or .44%, from $2.441 billion as of December 31, 2006. Average total assets for the first quarter of 2007 were $2.422 billion, which was supported by average total liabilities of $2.146 billion and average total stockholders’ equity of $276 million.

Short-term liquid assets. Short-term liquid assets (cash and due from banks, interest-bearing deposits in other banks and federal funds sold) decreased $11.3 million, or 13.1%, to $74.7 million at March 31, 2007 from $86.0 million at December 31, 2006. At March 31, 2007, short-term liquid assets were 3.0% of total assets, compared to 3.5% at December 31, 2006. We continually monitor our liquidity position and will increase or decrease our short-term liquid assets as we deem necessary.

Investment Securities. Total investment securities decreased $11.9 million, or 3.3%, to $342.8 million at March 31, 2007, from $354.7 million at December 31, 2006. Average investment securities totaled $367.1 million for the first quarter of 2007 compared to $252.4 million for the first quarter of 2006. Investment securities, were 16.3% of interest-earning assets at March 31, 2007, compared to 17.0% at December 31, 2006. The investment portfolio produced an average taxable-equivalent yield of 5.12% for the first quarter of 2007, compared to 4.63% for the first quarter of 2006.

The following table sets forth the carrying value of the securities we held at the dates indicated.

Investment Portfolio

		Available for Sale
		March 31,				December 31,				Percent
		2007				2006				Change
						(Dollars in thousands)
U.S. agencies		$	104,566			$	111,852				(6.51	)%
State and political subdivisions			13,344				12,942				3.10
Mortgage-backed securities			181,720				184,453				(1.48	)
Corporate debt and other securities			43,207				45,469				(4.97	)
Total investment securities		$	342,837			$	354,716				(3.34	)%

Loans. Loans, net of unearned income, totaled $1.675 billion at March 31, 2007, an increase of 2.2%, or $35 million, from $1.640 billion at December 31, 2006. Mortgage loans held for sale totaled $28.1 million at March 31, 2007, an increase of $3.7 million from $24.4 million at December 31, 2006. Average loans, including mortgage loans held for sale, totaled $1.668 billion for the first quarter of 2007 compared to $997 million for the first quarter of 2006. Loans, net of unearned income, were 79.8% of interest-earning assets at March 31, 2007, compared to 78.7% at December 31, 2006. The loan portfolio produced an average yield of 8.34% for the first quarter of 2007, compared to 7.49% for the first quarter of 2006.

The following table details the distribution of the loan portfolio by category as of March 31, 2007 and December 31, 2006:

Distribution of Loans by Category
(Dollars in thousands)

		March 31, 2007								December 31, 2006
						Percent of								Percent of
		Amount				Total				Amount				Total
Commercial and industrial		$	155,854				9.30	%		$	172,872				10.53	%
Real estate — construction and land development			580,047				34.60				547,772				33.37
Real estate — mortgage
Single-family			470,697				28.07				456,341				27.80
Commercial			372,474				22.20				362,542				22.09
Other			44,781				2.67				46,895				2.86
Consumer			51,558				3.08				54,462				3.32
Other			1,180				.08				438				.03
Total loans			1,676,591				100.0	%			1,641,322				100.0	%
Unearned income			(1,274	)							(1,794	)
Allowance for loan losses			(18,977	)							(18,892	)
Net loans		$	1,656,340							$	1,620,636

Deposits. Noninterest-bearing deposits totaled $189.7 million at March 31, 2007, a decrease of .8%, or $1.6 million, from $191.3 million at December 31, 2006. Noninterest-bearing deposits were 10.2% of total deposits at March 31, 2007 and December 31, 2006. Of total noninterest-bearing deposits, $144.6 million, or 76.2%, were in the Alabama branches, while $45.1 million, or 23.8%, were in the Florida branches.

Interest-bearing deposits totaled $1.671 billion at March 31, 2007, a decrease of 0.5%, or $9 million, from $1.680 billion at December 31, 2006. Interest-bearing deposits averaged $1.646 billion for the first quarter of 2007 compared to $965 million for the quarter of 2006. The average rate paid on all interest-bearing deposits during the first quarter of 2007 was 4.29%, compared to 3.52% for the first quarter of 2006. Of total interest-bearing deposits, $1.200 billion, or 71.8%, were in the Alabama branches, while $471 million, or 28.2%, were in the Florida branches.

The following table sets forth the composition of our total deposit accounts at the dates indicated.

Total Deposits

		March 31,				December 31,				Percent
		2007				2006				Change
		(Dollars in thousands)
Noninterest-bearing demand		$	189,729			$	191,323				(0.83	)%
Interest-bearing demand			512,327				552,887				(7.33	)
Savings			43,651				42,717				2.18
Time deposits			1,114,986				1,083,914				2.86
Total deposits		$	1,860,693			$	1,870,841				(0.54	)%

Borrowings. Advances from the Federal Home Loan Bank (“FHLB”) totaled $200.8 million at March 31, 2007 and $187.8 million at December 31, 2006. Borrowings from the FHLB were used primarily to fund growth in the loan portfolio and have a weighted average interest rate of approximately 5.31% at March 31, 2007. The advances are secured by FHLB stock, agency securities and a blanket lien on certain residential real estate loans and commercial loans.

Allowance for Loan Losses. We maintain an allowance for loan losses within a range we believe is adequate to absorb estimated losses inherent in the loan portfolio. We prepare a quarterly analysis to assess the risk in the loan portfolio and to determine the adequacy of the allowance for loan losses. Generally, we estimate the allowance using specific reserves for impaired loans, and other factors, such as historical loss experience based on volume and types of loans, trends in classifications, volume and trends in delinquencies and non-accruals, economic conditions and other pertinent information. The level of allowance for loan losses to net loans will vary depending on the quarterly analysis.

We manage and control risk in the loan portfolio through adherence to credit standards established by the board of directors and implemented by senior management. These standards are set forth in a formal loan policy, which establishes loan underwriting and approval procedures, sets limits on credit concentration and enforces regulatory requirements.

Loan portfolio concentration risk is reduced through concentration limits for borrowers, collateral types and geographic diversification. Concentration risk is measured and reported to senior management and the board of directors on a regular basis.

The allowance for loan loss calculation is segregated into various segments that include classified loans, loans with specific allocations and pass rated loans. A pass rated loan is generally characterized by a very low to average risk of default and in which management perceives there is a minimal risk of loss. Loans are rated using an eight-point scale, with the loan officer having the primary responsibility for assigning risk ratings and for the timely reporting of changes in the risk ratings. These processes, and the assigned risk ratings, are subject to review by our internal loan review function and senior management. Based on the assigned risk ratings, the criticized and classified loans in the portfolio are segregated into the following regulatory classifications: Special Mention, Substandard, Doubtful or Loss. Generally, regulatory reserve percentages (5%, Special Mention; 15%, Substandard; 50%, Doubtful; 100%, Loss) are applied to these categories to estimate the amount of loan loss allowance required, adjusted for previously mentioned risk factors.

Pursuant to SFAS No. 114, impaired loans are specifically reviewed loans for which it is probable that we will be unable to collect all amounts due according to the terms of the loan agreement. Impairment is measured by comparing the recorded investment in the loan with the present value of expected future cash flows discounted at the loan’s effective interest rate, at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. A valuation allowance is provided to the extent that the measure of the impaired loans is less than the recorded investment. A loan is not considered impaired during a period of delay in payment if we continue to expect that all amounts due will ultimately be collected. Larger groups of homogenous loans such as consumer installment and residential real estate mortgage loans are collectively evaluated for impairment.

Reserve percentages assigned to pass rated homogeneous loans are based on historical charge-off experience adjusted for current trends in the portfolio and other risk factors.

As stated above, risk ratings are subject to independent review by internal loan review, which also performs ongoing, independent review of the risk management process. The risk management process includes underwriting, documentation and collateral control. Loan review is centralized and independent of the lending function. The loan review results are reported to the Audit Committee of the board of directors and senior management. We have a centralized loan administration services department to serve our entire bank. This department provides standardized oversight for compliance with loan approval authorities and bank lending policies and procedures, as well as centralized supervision, monitoring and accessibility.

The following table summarizes certain information with respect to our allowance for loan losses and the composition of charge-offs and recoveries for the periods indicated.

SUMMARY OF LOAN LOSS EXPERIENCE

		Three-Month
		Period Ended								Year Ended
		March 31,								December 31,
		2007				2006				2006
		(Dollars in Thousands)
Allowance for loan losses at beginning of period		$	18,892			$	12,011			$	12,011
Allowance of acquired banks			—				—				6,697
Charge-offs:
Commercial and industrial			110				281				1,450
Real estate — construction and land development			—				43				378
Real estate — mortgage
Single-family			260				275				625
Commercial			14				14				416
Other			202				11				15
Consumer			400				220				860
Other			—				—				2
Total charge-offs			986				844				3,746
Recoveries:
Commercial and industrial			170				81				465
Real estate — construction and land development			7				1				126
Real estate — mortgage
Single-family			27				32				102
Commercial			18				24				363
Other			47				32				73
Consumer			97				62				301
Total recoveries			366				232				1,430
Net charge-offs			620				612				2,316
Provision for loan losses			705				600				2,500
Allowance for loan losses at end of period		$	18,977			$	11,999			$	18,892
Loans at end of period, net of unearned income		$	1,675,317			$	989,576			$	1,639,528
Average loans, net of unearned income			1,668,124				996,773				1,176,844
Ratio of ending allowance to ending loans			1.13	%			1.21	%			1.15	%
Ratio of net charge-offs to average loans (1)			0.15	%			0.25	%			0.20	%
Net charge-offs as a percentage of:
Provision for loan losses			87.94	%			102.00	%			92.64	%
Allowance for loan losses (1)			13.25	%			20.69	%			12.26	%
Allowance for loan losses as a percentage of nonperforming loans			221.18	%			290.60	%			219.88	%

Over the past 18 months, we have realized significant improvements in overall asset quality. Nonperforming assets (NPA’s) as a percentage of total loans plus NPA’s has remained stable at .61% as of March 31, 2007, compared to .63% as of December 31, 2006 and 0.56% as of March 31, 2006. Net charge-offs to average loans improved to an annualized ratio of .15% for the first quarter of 2007, from .20% for the year ended December 31, 2006. With improvements in overall asset quality and recovery efforts, the provision for loan losses has remained relatively

level. The provision for loan losses for the first quarter of 2007 increased 17.5%, or $105,000, from the provision for first quarter of 2006. This increase is primarily due to loan growth. The total required allowance for loan losses as a percentage of total loans decreased from 1.15% at December 31, 2006 to 1.13% at March 31, 2007.

Nonperforming Assets. NPA’s decreased $252,000, to $10.2 million as of March 31, 2007 from $10.4 million at December 31, 2006. As a percentage of net loans plus NPA’s, NPA’s decreased from 0.63% at December 31, 2006 to 0.61% at March 31, 2007. The following table represents our nonperforming assets for the dates indicated:

NONPERFORMING ASSETS

		March 31,				December 31,
		2007				2006
		(Dollars in thousands)
Nonaccrual		$	7,645			$	7,773
Accruing loans 90 days or more delinquent			432				514
Restructured			503				305
Total nonperforming loans			8,580				8,592
Other real estate owned and repossessed assets			1,581				1,821
Total nonperforming assets		$	10,161			$	10,413
Nonperforming loans as a percentage of loans			0.51	%			0.52	%
Nonperforming assets as a percentage of loans plus nonperforming assets			0.61	%			0.63	%
Nonperforming assets as a percentage of total assets			0.41	%			0.43	%

Loans past due 30 days or more, net of non-accruals, remained low at .82% for March 31, 2007, compared to 1.15% at December 31, 2006.

The following is a summary of nonperforming loans by category for the dates shown:

		March 31,				December 31,
		2007				2006
		(Dollars in thousands)
Commercial and industrial		$	1,077			$	704
Real estate — construction and land development			2,008				2,067
Real estate — mortgages
Single-family			2,436				2,805
Commercial			2,007				1,765
Other			477				688
Consumer			575				559
Other			—				4
Total nonperforming loans		$	8,580			$	8,592

A delinquent loan is placed on nonaccrual status when it becomes 90 days or more past due and management believes, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that the collection of interest is doubtful. When a loan is placed on nonaccrual status, all interest which has been accrued on the loan during the current period but remains unpaid is reversed and deducted from earnings as a reduction of reported interest income; any prior period accrued but unpaid interest is reversed and charged against the allowance for loan losses. No additional interest income is accrued on the loan balance until the collection of both principal and interest becomes reasonably certain. When a problem loan is finally resolved, there may ultimately be an actual write-down or charge-off of the principal balance of the loan to the allowance for loan losses, which may necessitate additional charges to earnings.

Impaired Loans. At March 31, 2007, the recorded investment in impaired loans under SFAS 114 totaled $5.8 million, with approximately $1.3 million in allowance for loan losses specifically allocated to impaired loans. This represents a decrease of $1.1 million from $6.9 million at December 31, 2006. The following is a summary of impaired loans and the specifically allocated allowance for loan losses by category as of March 31, 2007:

		Outstanding				Specific
		Balance				Allowance
		(Dollars in thousands)
Commercial and industrial		$	966			$	451
Real estate — construction and land development			2,055				313
Real estate — mortgages
Commercial			2,262				414
Other			551				145
Total		$	5,834			$	1,323

Potential Problem Loans. In addition to nonperforming loans, management has identified $4.7 million in potential problem loans as of March 31, 2007, compared to $5.2 million as of December 31, 2006. Potential problem loans are loans where known information about possible credit problems of the borrowers causes management to have doubts as to the ability of such borrowers to comply with the present repayment terms and may result in disclosure of such loans as nonperforming. The balance primarily consists of one relationship totaling $2.0 million in which the borrowers were experiencing cash-flow shortages; however, we believe the overall liquidity of the guarantors provides adequate strength to support the credit in the short term. We are working closely with the borrowers and will continue to monitor the borrowers’ cash-flow position.

Regulatory Capital. The table below represents our and our federal thrift subsidiary’s regulatory and minimum regulatory capital requirements at March 31, 2007 (dollars in thousands):

																		To Be Well
										For Capital								Capitalized Under
										Adequacy								Prompt Corrective
		Actual								Purposes								Action
		Amount				Ratio				Amount				Ratio				Amount				Ratio
As of March 31, 2007
Tier 1 Core Capital (to Adjusted Total Assets)
Corporation		$	175,718				7.61	%		$	92,322				4.00	%		$	115,403				5.00	%
Superior Bank			180,493				7.86				91,882				4.00				114,852				5.00
Total Capital (to Risk Weighted Assets)
Corporation			194,196				10.58				146,740				8.00				183,425				10.00	%
Superior Bank			198,921				10.91				145,859				8.00				182,324				10.00
Tier 1 Capital (to Risk Weighted Assets)
Corporation			175,718				9.58				N/A				N/A			$	110,055				6.00	%
Superior Bank			180,493				9.90				N/A				N/A				109,394				6.00
Tangible Capital (to Adjusted Total Assets)
Superior Bank			180,493				7.86				34,456				1.50				N/A				N/A

Liquidity

Our principal sources of funds are deposits, principal and interest payments on loans, federal funds sold and maturities and sales of investment securities. In addition to these sources of liquidity, we have access to purchased funds from several regional financial institutions and brokered deposits, and may borrow from the FHLB under a blanket floating lien on certain commercial loans and residential real estate loans. Also, we have established certain repurchase agreements with a large financial institution. While scheduled loan repayments and maturing investments are relatively predictable, interest rates, general economic conditions and competition primarily influence deposit flows and early loan payments. Management places constant emphasis on the maintenance of adequate liquidity to meet conditions that might reasonably be expected to occur. Management believes it has established sufficient sources of funds to meet its anticipated liquidity needs.

As shown in the Condensed Consolidated Statement of Cash Flows, operating activities used $3.1 million in funds in the first quarter of 2007, primarily due to an increase in mortgage loans held for sale and a decrease in accrued expenses and other operating liabilities. This compares to net funds provided of $6.0 million in the first quarter of 2006, primarily due to a decrease in mortgage loans held for sale of $3.6 million and net income, depreciation, and provision for loan losses of $850,000, $769,000, and $600,000, respectively.

Investing activities were a net user of funds in the first quarter of 2007, primarily due to an increase in loans offset by investment security maturities. Investing activities were a net user of funds in the first quarter of 2006 due to an increase in loans.

Financing activities were a net provider of funds in the first quarter of 2007, primarily as a result of an increase in FHLB advances offset by a decrease in deposits. Financing activities were a net provider of funds in the first quarter of 2006, as we increased our levels of brokered certificates of deposit while decreasing repurchase agreements and other borrowings.

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf. Some of the disclosures in this Quarterly Report on Form 10-Q, including any statements preceded by, followed by or which include the words “may,” “could,” “should,” “will,” “would,” “hope,” “might,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “assume” or similar expressions constitute forward-looking statements.

These forward-looking statements, implicitly and explicitly, include the assumptions underlying the statements and other information with respect to our beliefs, plans, objectives, goals, expectations, anticipations, estimates, intentions, financial condition, results of operations, future performance and business, including our expectations and estimates with respect to our revenues, expenses, earnings, return on equity, return on assets, efficiency ratio, asset quality, the adequacy of our allowance for loan losses and other financial data and capital and performance ratios.

Although we believe that the expectations reflected in our forward-looking statements are reasonable, these statements involve risks and uncertainties which are subject to change based on various important factors (some of which are beyond our control). The following factors, among others, could cause our financial performance to differ materially from our goals, plans, objectives, intentions, expectations and other forward-looking statements: (1) the strength of the United States economy in general and the strength of the regional and local economies in which we conduct operations; (2) the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; (3) inflation, interest rate, market and monetary fluctuations; (4) our ability to successfully integrate the assets, liabilities, customers, systems and management we acquire or merge into our operations; (5) our timely development of new products and services in a changing environment, including the features, pricing and quality compared to the products and services of our competitors; (6) the willingness of users to substitute competitors’ products and services for our products and services; (7) the impact of changes in financial services policies, laws and regulations, including laws, regulations and policies concerning taxes, banking, securities and insurance, and the application thereof by regulatory bodies; (8) our ability to resolve any legal proceeding on acceptable terms and its effect on our financial condition or results of operations; (9) technological changes; (10) changes in consumer spending and savings habits; (11) regulatory, legal or judicial proceedings, and (12) the effect of natural disasters, such as hurricanes, in our geographic markets.

If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this report. Therefore, we caution you not to place undue reliance on our forward-looking information and statements.

We do not intend to update our forward-looking information and statements, whether written or oral, to reflect changes. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

There have been no material changes in our quantitative or qualitative disclosures about market risk as of March 31, 2007 from those presented in our annual report on Form 10-K for the year ended December 31, 2006.

The information set forth under the caption “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Market Risk-Interest Rate Sensitivity” included in our Annual Report on Form 10-K for the year ended December 31, 2006, is hereby incorporated herein by reference.

ITEM 4. CONTROLS AND PROCEDURES

CEO AND CFO CERTIFICATION

Appearing as exhibits to this report are Certifications of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”). The Certifications are required to be made by Rule 13a - 14 of the Securities Exchange Act of 1934, as amended. This Item contains the information about the evaluation that is referred to in the Certifications, and the information set forth below in this Item 4 should be read in conjunction with the Certifications for a more complete understanding of the Certifications.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

We conducted an evaluation (the “Evaluation”) of the effectiveness of the design and operation of our disclosure controls and procedures under the supervision and with the participation of our management, including our CEO and CFO, as of March 31, 2007. Based upon the Evaluation, our CEO and CFO have concluded that, as of March 31, 2007, our disclosure controls and procedures are effective to ensure that material information relating to Superior Bancorp and its subsidiaries is made known to management, including the CEO and CFO, particularly during the period when our periodic reports are being prepared.

There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

While we are a party to various legal proceedings arising in the ordinary course of business, we believe that there are no proceedings threatened or pending against us at this time that will individually, or in the aggregate, materially adversely affect our business, financial condition or results of operations. We believe that we have strong claims and defenses in each lawsuit in which we are involved. While we believe that we will prevail in each lawsuit, there can be no assurance that the outcome of the pending, or any future, litigation, either individually or in the aggregate, will not have a material adverse effect on our financial condition or our results of operations.

ITEM 1A. RISK FACTORS

Our business is influenced by many factors that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond our control. We have identified a number of these risk factors in our Annual Report on Form 10-K for the year ended December 31, 2006, which should be taken into consideration when reviewing the information contained in this report. There have been no material changes with regard to the risk factors previously disclosed in our most recent Form 10-K. For other factors that may cause actual results to differ materially from those indicated in any forward-looking statement or projection contained in this report, see “Forward-Looking Statements” under Part I, Item 2 above.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(a) Exhibit:

10.1		Loan Agreement, dated January 26, 2007, between Superior Bancorp and U.S. Bank National Association.
10.2		Stock Pledge Agreement, dated January 26, 2007, given by Superior Bancorp in favor of U.S. Bank National Association.
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.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.