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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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.

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

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

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INDEX

ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES

FORWARD-LOOKING INFORMATION

Statements contained in this Quarterly Report on Form 10-Q that are not historical facts are forward-looking statements.  In addition, Alabama National BanCorporation (“Alabama National”), through its senior management, from time to time makes forward-looking public statements concerning its expected future operations and performance and other developments.  Such forward-looking statements are necessarily estimates reflecting Alabama National’s best judgment based upon current information and involve a number of risks and uncertainties, and various factors could cause results to differ materially from those contemplated by such forward-looking statements.  Such factors could include those identified from time to time in Alabama National’s Securities and Exchange Commission filings and other public announcements, including the factors described in Alabama National’s Annual Report on Form 10-K for the year ended December 31, 2002.  With respect to the adequacy of the allowance for loan and lease losses for Alabama National, these factors include the rate of growth in the economy, especially in the Southeast, the relative strength and weakness in the consumer and commercial credit sectors and in the real estate markets and the performance of the stock and bond markets.  The forward-looking statements contained in this Quarterly Report speak only as of the date of this report, and Alabama National undertakes no obligation to revise these statements following the date of this Quarterly Report on Form 10-Q.

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Part I - Financial Information

Item 1 - Financial Statements (Unaudited)
Alabama National BanCorporation and Subsidiaries
Consolidated Statements of Condition
(In thousands, except share amounts)

See accompanying notes to unaudited consolidated financial statements

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Alabama National BanCorporation and Subsidiaries
Consolidated Statements of Income (Unaudited)
(In thousands, except per share data)

See accompanying notes to unaudited consolidated financial statements

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Alabama National BanCorporation and Subsidiaries
Consolidated Statements of Income (Unaudited) (Continued)
(In thousands, except per share data)

See accompanying notes to unaudited consolidated financial statements

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Alabama National BanCorporation and Subsidiaries
Consolidated Statements of Comprehensive Income (Unaudited)
(In thousands)

See accompanying notes to unaudited consolidated financial statements

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Alabama National BanCorporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows (Unaudited)
(In thousands)

See accompanying notes to unaudited consolidated financial statements

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ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003

NOTE A - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included.  Operating results for the three months ended March 31, 2003 are subject to year-end audit and are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2003.  These interim financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in Alabama National’s Form 10-K for the year ended December 31, 2002.

NOTE B - COMMITMENTS AND CONTINGENCIES

Alabama National’s subsidiary banks make loan commitments and incur contingent liabilities in the normal course of business, which are not reflected in the consolidated statements of condition.  As of March 31, 2003, the total unfunded commitments which are not reflected in the consolidated statements of condition totaled $557.1 million. A majority of these commitments will expire in less than one year.

Alabama National, in the normal course of business, is subject to various pending and threatened litigation.  Although it is not possible to determine with certainty Alabama National’s potential exposure from pending and threatened litigation, based on current knowledge and advice of legal counsel, management does not anticipate that the ultimate liability, if any, resulting from such litigation will have a material adverse effect on Alabama National’s financial condition or results of operations.

NOTE C - RECENTLY ISSUED PRONOUNCEMENTS

Acquisitions of Certain Financial Institutions

On October 1, 2002, the FASB issued SFAS No. 147, Acquisitions of Certain Financial Institutions.  SFAS No. 147 addresses the treatment of goodwill related to branch acquisitions.  SFAS No. 147 requires that goodwill meeting certain criteria be accounted for under SFAS No. 142.  The initial adoption of this standard did not have an impact on the financial condition or results of operations of Alabama National.

Accounting for Asset Retirement Obligations

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations.  SFAS No. 143 applies to legal obligations associated with the retirement of tangible long-lived assets.  SFAS No. 143 is effective for financial statements issued for fiscal years beginning after June 15, 2002.  Alabama National adopted SFAS No. 143 on January 1, 2003. The initial adoption of this standard did not have an impact on the financial condition or results of operations of Alabama National.  Management does not believe the provisions of this standard will have a material impact on future operations of Alabama National.

Rescission and Amendment of Certain FASB Statements

On April 30, 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment to FASB Statement No. 13, and Technical Corrections.  SFAS No. 145 relates to the recording of gains and losses from the extinguishment of debt to be classified as operating income, as opposed to previous requirements which reflected such gains and losses as extraordinary items.  SFAS No. 145 is effective for fiscal years beginning on or after May 15, 2002.  Alabama National adopted SFAS No. 145 on January 1, 2003.  The initial adoption of this standard did not have an impact on the financial condition or results of operations of Alabama National. Management does not believe the provisions of this standard will have a material impact on future operations of Alabama National.

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Accounting for Costs Associated with Exit or Disposal Activities

On July 31, 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities.   SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred.  The provisions of SFAS No. 146 are effective after December 31, 2002.  Alabama National adopted SFAS No. 146 on January 1, 2003. The initial adoption of this standard did not have an impact on the financial condition or results of operations of Alabama National.  Management does not believe the provisions of this standard will have a material impact on future operations of Alabama National.

Accounting for Stock-Based Compensation – Transition and Disclosure

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, which amends SFAS No. 123, Accounting for Stock-Based Compensation.  SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation.  In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require more prominent and more frequent disclosures in financial statements about the effects of stock-based compensation. Alabama National had previously adopted all provisions of SFAS No. 123.  Accordingly, the initial adoption of SFAS No. 148 did not have an impact on the financial condition or results of operations of Alabama National.  Management of Alabama National does not believe the provisions of this standard will have a material impact on future operations of Alabama National.

Guarantor’s Accounting and Disclosure Requirements

In November  2002, the FASB issued FASB Interpretation No. 45 (FIN 45), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Guarantees of Indebtedness of Others, an Interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34.  FIN 45 clarifies the requirements of SFAS No. 5, Accounting for Contingencies, relating to the guarantor’s accounting for, and disclosure of, the issuance of certain types of guarantees.  The disclosure provisions of the Interpretation are effective for financial statements that end after December 31, 2002.  However, the provisions for initial recognition and measurement are effective on a prospective basis for guarantees that are issued or modified after December 31, 2002, irrespective of a guarantor’s year end.  See Note 11 to Alabama National’s consolidated financial statements appearing in Alabama National’s Annual Report on Form 10-K for the year ended December 31, 2002, titled Commitments and Contingencies, for additional discussion of the Company’s financial guarantees. The initial adoption of this standard did not have an impact on the financial condition or results of operations of Alabama National.  Management does not believe the provisions of this standard will have a material impact on future operations of Alabama National.

In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities.  FIN 46 states that if a business enterprise has a controlling financial interest in a variable interest entity, the assets, liabilities and results of the activities of the variable interest entity should be included in the consolidated financial statements of the business enterprise.  This Interpretation explains how to identify variable interest entities and how an enterprise assesses its interests in a variable interest entity to decide whether to consolidate that entity.  FIN 46 also requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved.  Variable interest entities that effectively disperse risks will not be consolidated unless a single party holds an interest or combination of interests that effectively recombines risks that were previously dispersed.  This Interpretation applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date.  It applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003.  This interpretation does not apply to securitization structures that are qualified special purpose entities (QSPE) as defined within SFAS No. 140. Alabama National has investments in entities in the form of limited partnerships that operate qualified multi-family affordable housing projects and generate tax credits.  Alabama National’s interest in these partnerships was $2.4 million at March 31, 2003.  The assets and liabilities of these partnerships consist of primarily apartment complexes and related mortgages.  Alabama National accounts for the investments under the equity method, and therefore the carrying value approximates its underlying equity in the net assets of these partnerships.  As of March 31, 2003, Alabama National’s maximum potential exposure to loss with

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respect to these partnerships is limited to Alabama National’s recorded investment of $2.4 million.  While Alabama National has not yet completed its assessment of these investments, it may be required to consolidate a portion of these investments effective July 1, 2003.

Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities

In April 2003, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 149, “Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities,” having a required effective date for contracts entered into after June 30, 2003.  The changes in this Statement improve financial reporting by requiring that contracts with comparable characteristics be accounted for similarly. In particular, this Statement (1) clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative discussed in paragraph 6(b) of Statement 133, (2) clarifies when a derivative contains a financing component, (3) amends the definition of an underlying to conform it to language used in FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” and (4) amends certain other existing pronouncements. Those changes will result in more consistent reporting of contracts as either derivatives or hybrid instruments.  Management has determined that the adoption of this standard will not have a material impact on the financial condition or results of operations of Alabama National.

NOTE D - EARNINGS PER SHARE

The following table reflects the reconciliation of the numerator and denominator of the basic earnings per share computation to the diluted earnings per share computation for the quarters ended March 31, 2003 and 2002.

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NOTE E – SEGMENT REPORTING

Alabama National’s reportable segments represent the distinct major product lines it offers and are viewed separately for strategic planning purposes by management.  The following table is a reconciliation of the reportable segment revenues, expenses and profit to Alabama National’s consolidated totals (in thousands).

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Corporate overhead is comprised of compensation and benefits for certain members of management, merger related costs, interest expense on parent company debt, amortization of intangibles and other expenses.

At March 31, 2003, the carrying value of goodwill totaled $15.9 million.  The amount attributable to the Retail and Commercial Banking segment and Insurance Division is $13.2 million and $2.7 million, respectively.

NOTE F – MERGERS AND ACQUISITIONS

On January 28, 2003, Alabama National signed a definitive agreement providing for the acquisition of Millennium Bank in Gainesville, Florida. Upon completion of the acquisition, Millennium Bank will become a wholly owned subsidiary of Alabama National and will continue to operate under its existing name, management, and board of directors.  Millennium shareholders will receive approximately $1,120,000 in cash and 520,000 of Alabama National common shares and share equivalents, subject to certain adjustment.  As of March 31, 2003, Millennium Bank has assets of $106.4 million, and had net income of $244,000 for the three months ended March 31, 2003.

On April 30^, 2003, the shareholders of Millennium Bank approved the proposed acquisition.  The acquisition is subject to regulatory approval and certain other conditions.  Alabama National expects the acquisition to close in June 2003.

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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 the consolidated financial condition of Alabama National and results of operations as of the dates and for the periods indicated.  All significant intercompany accounts and transactions have been eliminated.  The accounting and reporting policies of Alabama National conform with generally accepted accounting principles and with general financial services industry practices.

This information should be read in conjunction with Alabama National’s unaudited consolidated financial statements and related notes appearing elsewhere in this report and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing in Alabama National’s Annual Report on Form 10-K for the year ended December 31, 2002.

Critical Accounting Policies and Estimates

Alabama National’s accounting policies are critical to understanding the results of operations and financial position as reported in the consolidated financial statements.  Significant accounting policies utilized by Alabama National are discussed in detail in the notes to the consolidated financial statements and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing in Alabama National’s Annual Report on Form 10-K for the year ended December 31, 2002.

Performance Overview

Alabama National’s net income for the three month period ended March 31, 2003 (the “2003 three months”) was $9.5 million compared to $8.6 million for the three months ended March 31, 2002 (the “2002 three months”).  Net income per diluted common share for the 2003 three months and the 2002 three months was $0.75 and $0.68, respectively. 

The annualized return on average assets for Alabama National was 1.16% and 1.21% for the 2003 three months and the 2002 three months, respectively.  The annualized return on average stockholders’ equity decreased slightly for the 2003 three months to 16.21%, as compared to 16.35% for the 2002 three months.  Book value per share at March 31, 2003 was $19.44, an increase of $0.49 from year-end 2002.  Tangible book value per share at March 31, 2003 was $17.79, an increase of $0.51 from year-end 2002.  Alabama National paid cash dividends of $0.285 per share on common shares during the 2003 three months, compared to $0.25 per share paid on common shares during the 2002 three months.

Net Income

Contributing to the increase in net income during the 2003 three months is the increased revenue from the noninterest income business lines.  Noninterest income in the 2003 three months totaled $18.7 million, compared to $13.2 million during the 2002 three months, an increase of $5.5 million, or 41.7%.  The increased noninterest income was offset by an increase in noninterest expense of $5.0 million to $31.5 million for the 2003 three months, compared with $26.5 million for the 2002 three months, an increase of 19.0%. The increase in net income is also attributable to an increase in net interest income of $910,000 during the 2003 three months compared to the 2002 three months. This increase was offset by an increase in income tax expense of $654,000 during the 2003 three months as compared to the 2002 three months.

Average earning assets for the 2003 three months increased by approximately $413.6 million as compared to the 2002 three months, as average interest-bearing liabilities increased $380.4 million. The average taxable equivalent rate earned on assets was 5.72% for the 2003 three months compared to 6.76% for the 2002 three months.  The average rate paid on interest-bearing liabilities was 2.24% for the 2003 three months compared to 2.93% for the 2002 three months.  The net interest margin for the 2003 three months was 3.70%, compared to 4.14% for the 2002 three months and 3.85% for 2002 fourth quarter.  The net interest margin for 2003 three months was negatively impacted by the Federal Reserve’s 50 basis point reduction during the fourth quarter of 2002 and by the accelerated repayment on securities owned by Alabama National.  As the securities being repaid were at higher interest rates than the rates earned on Federal funds sold and new securities purchased, the net interest margin declined. Management anticipates the net interest margin to stabilize somewhat near current levels, absent any additional rate reductions by the Federal Reserve or significant changes in the general interest rate environment.

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The following table depicts, on a taxable equivalent basis for the 2003 and 2002 three months, certain information related to Alabama National’s average balance sheet and its average yields on assets and average costs of liabilities.  Such yields or costs are derived by dividing income or expense by the average daily balance of the associated assets or liabilities.

AVERAGE BALANCES, INCOME AND EXPENSES AND RATES
(Amounts in thousands, except yields and rates)