SUPR Superior Bancorp (MM)

BIRMINGHAM, Ala., May 6 /PRNewswire-FirstCall/ --

HIGHLIGHTS:

• Deposits grew approximately 3.6% in the first quarter, to a new high of $2.75 billion.
• Loans were relatively unchanged from the previous quarter-end, at $2.51 billion.
• Capital Optimization Plan implementation continues.
• Net loss of $5.7 million for the quarter, an improvement from the loss of $11.5 million in the fourth quarter of 2009.
• Bank remains "well-capitalized."  

Superior Bancorp (Nasdaq: SUPR) today reported its first quarter 2010 results.  A summary of the results is provided below and in the attached financial data:

Comments on our First Quarter's Performance

Stan Bailey, Chairman & CEO, stated, "Superior's first quarter results reflect the challenges facing our industry in the Southeast as we continue to deal with the 'Great Recession' and its direct impact on our credit costs, which totaled over $11.7 million in the first quarter.  Our top priorities in 2010 are capital optimization, credit quality improvement and a return to profitability.  Based on work completed in the first quarter, we know the right amount of capital, the cost of improving the balance sheet and their respective impacts on the profitable performance of the company going forward.  With this knowledge, we believe the successful execution of these priorities during 2010 will significantly diminish the pressure our shareholder value has experienced over the past several years."

Comparison of First Quarter of 2010 with Fourth Quarter of 2009

Net interest income declined from $24.6 million to $23.5 million, but this decline is largely the result of the conversion of $69 million of our outstanding Preferred Stock to Trust Preferred securities that took place late in the fourth quarter of 2009 (which resulted in dividends on preferred stock now being reported as interest expense).  Our net interest margin declined from 3.42% to 3.19%.  In addition to the effect of the preferred stock conversion, several other factors contributed to this decline, including maintaining significantly higher levels of short-term investments for liquidity purposes (which have inherently lower yields), the negative impact of loans being placed on non-accrual, and lower levels of non-interest bearing funds.  Deposit funding costs continued to decline, following the favorable trend demonstrated throughout the past several quarters. The dividend payments on preferred stock, which are now recorded as interest expense on trust preferred securities, reduced the net interest margin by approximately 0.22% on a taxable-equivalent basis. The effect on net interest margin of loans being placed on non-accrual status approximated 0.05% in the first quarter of 2010.  The total impact of non-accruals, including foregone interest, was approximately 0.39%.  We estimate that the cost of excess liquidity maintained in the first quarter was approximately 0.10%.

Non-interest income was $6.2 million for the quarter, essentially unchanged from the previous quarter, after adjusting both quarters to eliminate investment securities losses and derivatives transactions.  Mortgage banking income in the first quarter did increase significantly, to $2.0 million, as the result of an expansion of our mortgage operations, which is discussed later in this release.  This increase offsets a decline in service charge revenue.  

Non-interest expense declined $3.2 million from the fourth quarter of 2009 to $29.8 million.  After eliminating credit costs for other real estate owned from both quarters, and a one-time increase in FDIC assessment costs in the fourth quarter of 2009, the expense levels for the two quarters were essentially flat.  We are pleased that we were able to achieve this, because the first quarter of 2010 includes the higher personnel expenses associated with the expansion of our mortgage operation, which was offset by expense reductions elsewhere.  We anticipate that the expanded mortgage operation should be solidly in the black in our second quarter.

Capital Optimization Plan  

In late 2009, our shareholders approved an increase in authorized shares to 200 million, a preparatory step in our program to build our equity base.  In December of 2009, we retired the entire outstanding $69 million principal amount of TARP Preferred Stock in exchange for a like amount of newly issued Trust Preferred securities, which resulted in a $23 million accounting gain, resulting in an increase to tangible common equity.  

Also during the first quarter, we agreed to exchange $7.5 million of privately held Trust Preferred securities into common equity.  The first portion ($3.5 million) of the exchange occurred in late April, 2010.  The remainder will convert later this year.

Expanded Mortgage Operations

At the end of last year, we announced that we had brought on board 60 mortgage originators and associated staff who came to us from an Alabama bank that had been taken into FDIC receivership.  This "no-cost" expansion of our mortgage operation affords us a tremendous opportunity in both Alabama and Florida -- not only to increase shareholder value but also to help people achieve their dream of home ownership. This move has approximately doubled our origination capability in Alabama, as well as significantly improved the efficiency of the secondary placement of our existing originations.  During the first quarter, we have begun to extend this capability by adding to our Florida mortgage origination team, which will be managed through this centralized activity.  Our expectations for this new venture are high, and we are optimistic that its payoff in terms of enhanced customer service and significantly increased contribution to our bottom line will prove that the expenses associated with the expansion are well-justified.

Credit Quality

Loans 30-89 days past due (DPD) and still accruing were 1.88% of total loans at quarter end compared to 1.84% at December 31, 2009.  Non-performing loans, including loans 90 DPD and still accruing, increased slightly to $178.0 million, or 7.1 %, of total loans in the quarter, compared to 6.5% of total loans at December 31, 2009.  Of the non-performing loans, 27% are in Alabama, 67% in Florida and 6% elsewhere.  Of our $46.7 million OREO portfolio,  44% is in Alabama, 55% is in Florida, and 1% is elsewhere.  Net charge-offs for the quarter were $7.8 million, or an annualized rate of 1.27% of total loans. The provision for loan losses for the quarter was $9.1 million compared to a provision of $13.9 million in the fourth quarter of 2009.  The allowance for loan losses stands at $43.2 million, 1.72% of loans, up from $41.9 million at the end of the fourth quarter of 2009.

Balance Sheet

Loan demand in the first quarter was relatively flat, with total loans increasing slightly by 1.3% from December 31, 2009 to March 31, 2010.  We expect this slowed rate of loan growth to continue throughout 2010, due to the current condition of the economy.  We are very pleased with the continued growth in our deposit base, with deposits up 3.6% for the quarter, as we continue to experience the benefits of our de novo branching program and our focus on relationship banking.  Deposits at our 22 de novo branches reached $480 million at quarter-end. This expansion, initiated in 2006 and which continued into 2010 with the opening of our 22nd new branch, is the single largest contributing factor in the increase in liquidity in our bank, and in our demonstrated transformation of Superior from a transaction-based bank into a relationship-based bank.

Liquidity and Capital

Liquidity at Superior Bank remained excellent.  Federal Home Loan Bank borrowings were approximately 8.0% of deposits.  Brokered deposits, excluding CDARS, totaled approximately 6.6% of deposits.  Including CDARS, brokered deposits totaled less than 9% of deposits.  

Although Superior Bank remains "well-capitalized" under regulatory guidelines, its capital ratios slipped during the quarter, with the total risk-based capital ratio standing at 10.11% at March 31, 2010.  We are responding to the decline in the capital ratio by instituting several initiatives we will implement during the second quarter including a repositioning of our securities portfolio, the program to raise bank-level debt capital noted above, and other measures that we expect to enable us to increase this ratio during the second quarter, while allowing us to continue servicing our customers' credit needs.  

About Superior Bancorp

Superior Bancorp is a $3.3 billion thrift holding company headquartered in Birmingham, and the second largest bank holding company headquartered in Alabama. The principal subsidiary of Superior Bancorp is Superior Bank, a southeastern community bank that currently has 73 branches, with 45 locations throughout the state of Alabama and 28 locations in Florida.  Superior Bank also operates 24 consumer finance offices in North Alabama as 1st Community Credit and Superior Financial Services.

This press release contains financial information determined by methods other than in accordance with U.S. generally accepted accounting principles ("GAAP"). Superior's management uses these "non-GAAP" measures in its analysis of Superior's performance. Non-GAAP measures typically adjust GAAP performance measures to exclude the effects of significant gains, losses or expenses that are unusual in nature and not expected to recur. Since these items and their impact on Superior's performance are difficult to predict, management believes presentations of financial measures excluding the impact of these items provide useful supplemental information that is important for a proper understanding of the operating results of Superior's core business. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that are presented by other companies.

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). Such forward looking statements should, therefore, be considered in light of various important factors set forth from time to time in our reports and registration statements filed with the SEC. 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) increases in FDIC deposit insurance premiums and assessments; (4) inflation, interest rate, market and monetary fluctuations; (5) our ability to successfully integrate the assets, liabilities, customers, systems and management we acquire or merge into our operations; (6) 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; (7) the willingness of users to substitute competitors' products and services for our products and services; (8) changes in loan underwriting, credit review or loss reserve policies associated with economic conditions, examination conclusions, or regulatory developments; (9) 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; (10) our focus on lending to small to mid-size community-based businesses, which may increase our credit risk; (11) our ability to resolve any legal proceeding on acceptable terms and its effect on our financial condition or results of operations; (12) technological changes; (13) changes in consumer spending and savings habits; (14) the effect of natural or environmental disasters, such as, among other,  hurricanes and oil spills in our geographic markets; (15) regulatory, legal or judicial proceedings; (16) the continuing instability in the domestic and international capital markets; (17) the effects of new and proposed laws relating to financial institutions and credit transactions;  (18) the effects of policy initiatives that have been and may continue to be  introduced by the Presidential administration or Congress and related regulatory actions; and (19) our success in any new capital financing activities we may undertake.  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 annual 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 change. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

Superior Bancorp disclaims any intent or obligation to update forward-looking statements.

More information on Superior Bancorp and its subsidiaries may be obtained over the Internet, http://www.superiorbank.com, or by calling 1-877-326-BANK (2265).

SOURCE Superior Bancorp