Superior Bancorp Reports Results For 2009

BIRMINGHAM, Ala., Feb. 9 /PRNewswire-FirstCall/ --  

2009 HIGHLIGHTS:

• Deposits grew approximately 13.4%, to $2.7 billion.
• Loans increased 6.8% during 2009, to $2.5 billion.
• Net interest income increased 11.1%, to $92.6 million.
• Capital Optimization Plan initiated:
  • Shareholders approved an increase in authorized shares to 200 million as part of our program to build our equity base.
  • Exchanged TARP Preferred Stock into Trust Preferred debt -- resulted in a $23 million enhancement of tangible common equity.
  • Agreed to exchange privately held Trust Preferred debt into common equity.
• Net loss of $20 million for the year 2009, versus a $163 million loss in 2008 (2008 loss included $160 million goodwill impairment charge)
• Well-capitalized, with Total Risk Based Capital of 10.69%.

Superior Bancorp (Nasdaq: SUPR) today reported its fourth quarter and full year 2009 results.  A summary of the results is provided below and in the attached financial data:

    
    
                                                         As of and for the 
                                                          Quarters Ended
                                                    --------------------------
                                                    December 31, September 30,
    (Dollars in thousands, except per share data)        2009          2009
    ---------------------------------------------        ----          ----
    
    Total assets                                       $3,221,869 $3,226,570
    Total loans, net of unearned income                 2,472,697  2,434,534
    Total deposits                                      2,656,573  2,619,961
    Stockholders' equity                                  191,704    244,730
    Net interest income                                    24,605     23,913
    Net (loss) income                                     (11,500)       880
    Net income (loss) available to common stockholders(1)  10,881       (287)
    Net income (loss) per common share(1)                    0.94      (0.03)
    Total branches                                             73         72
    
    (1) Includes a $23.1 million gain on exchange of TARP Preferred Stock
        into Trust Preferred debt
    

2009 Performance

"2009 proved to be as challenging as anticipated, given the economic conditions faced by our country, our markets and our bank," said Stan Bailey, Chairman & CEO.  "We focused our efforts on two primary objectives: assuring our customers that we were still 'doing business' with regards to making loans, accepting deposits and fulfilling their banking needs, and managing the current credit cycle at the least cost to our shareholders."  During 2009, Superior experienced over 15% core deposit growth while also generating almost 7% loan growth; non-interest bearing deposits grew over 21%.  These factors combined with a stable interest rate environment resulted in a 3.28% margin in 2009 versus 3.27% in 2008.  Core noninterest income grew 16% primarily from strong deposit transaction account growth and a 78% growth in mortgage origination revenue.  Core expenses remained under control with only a 4% increase over 2008, with salary expense remaining essentially flat.  The 12% improvement in core operating performance was more than offset by credit-related costs (i.e. provisions for loan loans, OREO expense, collection costs, etc.), totaling $36.7 million versus $14.0 million in 2008, and by the increase in the allowance for loan losses by approximately $13 million, to $41.9 million.  The net loss for 2009 was $19.9 million compared to a loss of $163.2 million in 2008.  The 2008 loss included, however, a goodwill impairment charge of $160.3 million.

Expansion of Mortgage Activities

During the last quarter, we took advantage of a unique opportunity in the local market by bringing on board 60 originators and associated staff from an existing Alabama bank which had been taken into FDIC receivership and sold to another financial institution.  We believe this "no-cost" acquisition 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 through the expansion of our mortgage operation.  Initially, we expect the new staff to approximately double our origination capability in Alabama, as well as significantly improve the efficiency of the secondary placement of our existing originations.  Longer term, we expect this to raise our origination capability to a higher level in support of our Florida branches.  As noted below, these additions did result in increases in operating expenses in the fourth quarter, but we expect this expansion to be solidly profitable on an incremental basis starting in 2010.

Comparison of Fourth Quarter 2009 with Third Quarter 2009

Net interest income increased from $23.9 million to $24.6 million.  The margin rose from 3.36%, to 3.42% with both being constrained by the effects of loans being placed on non-accruing status, approximating 0.10% and 0.12% in the third and fourth quarters of 2009, respectively.  The increase in net interest income resulted from margin improvement, as earning assets were flat.  Loan yields were also flat, but funding costs continued to decline, falling 19 basis points from the third quarter.

Nonetheless, Superior incurred a loss of $11.5 million (before the gain on the Preferred Stock for Trust Preferred debt exchange) for the fourth quarter.  This had been expected, given current economic conditions. Our situation is common in the banking industry today.   Despite the increase in interest income and relatively encouraging progress on the fee income front, the quarter's progress was negatively impacted by increases in the provision for loan losses in light of the current economy.   Our loan loss provisions are well above those in previous quarters, with a provision of $13.9 million in the fourth quarter, compared to $5.2 million in the third quarter.  A portion of this provision related to charged-off loans in the fourth quarter, but a majority was used to increase our allowance for loan losses based on management's ongoing assessment of the loss potential of certain areas of risk.  Second, our losses and expenses on other real estate owned, or "OREO", were $4.5 million during the fourth quarter, which was a significant increase from the $1.3 million recorded in the third quarter, reflecting several recent dispositions of foreclosed properties.

The fourth quarter's results were also affected by increases in operating expenses including a one-time increase in FDIC expense of approximately $1.5 million associated with the prepayment of three years of premiums, a charge associated with an other-than-temporary impairment ("OTTI") of investment securities of $600,000 (bringing total OTTI recognized in 2009 to $15.7 million), increased expenses of approximately $550,000 associated with our new mortgage activity previously discussed, and one-time costs of approximately $420,000 associated with recent closures of six branches.

Credit Quality

Loans 30-89 days past due (DPD) and still accruing were 1.84% of total loans at quarter end compared to 1.64% on September 30, 2009.  Non-performing loans, including loans 90 DPD and still accruing, increased slightly to $159.6 million, or 6.5 %, of total loans in the quarter, compared to 6.3% of total loans at September 30, 2009.  Of the non-performing loans, 30% are in Alabama, 64% in Florida and 6% elsewhere.  Our OREO portfolio of $42 million consists of 62% in Alabama, 36% in Florida, and 2% elsewhere.  Net charge-offs for the quarter were $6.4 million, or an annualized rate of 1.03% of total loans. The provision for loan losses for the quarter was $13.9 million compared to a provision of $5.2 million in the third quarter.  The allowance for loan losses stands at $41.9 million, 1.69% of loans, up from $34.3 million at the end of the third quarter.

Balance Sheet, Capital and Liquidity

Loan demand in the fourth quarter was relatively flat, with total loans increasing 1.6% from September 30, 2009 to December 31, 2009.  We expect this slowed rate of loan growth to continue into 2010 due to the current condition of the economy.  Deposits were up 1.4% for the quarter, and 13.4% for the year, as we continue to experience the benefits of our de novo branching program and our focus on relationship banking.  Deposits at our 23 de novo branches reached $432 million at year-end, and more than any other single factor were the cause of the continued increase in our liquidity.

Liquidity at Superior Bank continued to build.  A year ago, borrowings were approximately 13.5% of borrowings plus deposits, and during this quarter, the ratio fell to less than 8.9%.  Reliance on brokered deposits, including brokered certificates of deposit and CDARS, which had been slightly in excess of 10% last year and at September 30, 2009, fell to approximately 9% at December 31, 2009.  

Superior Bank continues to be "well-capitalized", with a total risk based capital ratio standing at 10.69% for the quarter.  We continue to focus on maintaining our capital ratios at appropriately high levels given current economic conditions.