Savannah Bancorp Reports Second Quarter Results

SAVANNAH, Ga., July 28, 2011 (GLOBE NEWSWIRE) -- The Savannah Bancorp, Inc. SAVB reported a net loss for the second quarter 2011 of $1,492,000 compared to a net loss of $62,000 for the second quarter 2010. Net loss per diluted share was 21 cents in the second quarter of 2011 compared to a net loss per diluted share of 1 cent in 2010. The quarter over quarter decrease in earnings resulted primarily from an increase in the provision for loan losses and losses on the sale and write-down of foreclosed assets. These losses were partially offset by higher net interest income. Pretax earnings before the provision for loan losses and gain/loss on sale of securities and foreclosed assets increased $858,000 or 23 percent to $4,511,000 in the second quarter 2011 compared to the second quarter 2010. The Company's largest subsidiary, The Savannah Bank, N.A., continued to be profitable in the second quarter. Other growth and performance ratios are included in the attached financial highlights.

Total assets decreased 19 percent to $1.00 billion at June 30, 2011, down $233 million from $1.23 billion a year earlier. Loans totaled $808 million compared to $849 million one year earlier, a decrease of $41 million or 4.9 percent. Deposits totaled $857 million and $1.07 billion at June 30, 2011 and 2010, respectively, a decrease of 20 percent. On June 25, 2010, The Savannah Bank, N.A. entered into an agreement with the FDIC to purchase approximately $201 million in deposits and certain other liabilities and assets of First National Bank, Savannah ("First National"). Since this transaction, the Company has allowed much of its brokered and higher priced time deposits to run-off in order to reduce this excess liquidity and improve its net interest margin. Shareholders' equity was $85.1 million at June 30, 2011 compared to $89.6 million at June 30, 2010. The Company's total capital to risk-weighted assets ratio was 12.37 percent at June 30, 2011, which exceeds the 10 percent required by the regulatory agencies to maintain well-capitalized status.

John C. Helmken II, President and CEO, said, "As noted above, our pre-tax, pre-provision income increased 23 percent over second quarter 2010. Our net interest income for the quarter increased to over $9 million which was 9.2 percent higher than the same quarter of last year. Our quarterly net interest margin increased to 3.91 percent in 2011 from 3.54 percent last year. The net interest margin also increased 18 basis points from the first quarter of this year. We remain confident in our direction and strategy.

"The strong core and fundamental operating results of this quarter were overshadowed by the continued slide in area real estate values that required us to impair and reserve against real estate loans, a significant portion of which continue to perform as agreed. Our discipline of revaluing collateral and other real estate owned, with the Bryan Bank cycle being concluded in the second quarter, drove the quarterly loss."

The allowance for loan losses was $23,523,000, or 2.91 percent of total loans at June 30, 2011 compared to $18,775,000 or 2.21 percent of total loans a year earlier. Nonperforming assets were $51,435,000 or 5.13 percent of total assets at June 30, 2011 compared to $48,978,000 or 3.97 percent at June 30, 2010. Second quarter net charge-offs were $5,140,000 compared to net charge-offs of $4,581,000 for the same period in 2010. The provision for loan losses for the second quarter of 2011 was $6,300,000 compared to $3,745,000 for the second quarter of 2010. The higher provision for loan losses was primarily due to real estate related charge-offs and continued weakness in the Company's local real estate markets.

Helmken continued, "We continue to work at controlling and maximizing the variables that we can.  Our margin and net interest income have increased each of the last three quarters. Compared to the second quarter of 2010, salaries and benefits are down 6.8 percent and information technology expense is down 20 percent. As we said last quarter and prior to that, with strong capital levels and core earnings, we will aggressively address any asset quality issues. Our allowance for loan losses is now $23.5 million, or almost three percent of loan balances."

Net interest income increased $759,000, or 9.2 percent, in the second quarter 2011 versus the second quarter 2010. Second quarter net interest margin increased to 3.91 percent in 2011 as compared to 3.54 percent in the second quarter of 2010. The increase was primarily due to a lower cost on interest-bearing deposits partially offset by a decrease in the yield on interest-earning assets. The cost of interest-bearing deposits decreased to 1.06 percent in the second quarter 2011 from 1.54 percent for the same period in 2010, primarily due to the repricing of time deposits. The yield on earning assets decreased from 5.07 percent for the second quarter of 2010 to 4.97 percent for the second quarter of 2011 which was primarily a result of the Company holding, on average, $31.8 million more in lower yielding interest-bearing deposits and investments during the second quarter of 2011 than the same period in 2010. The Company received $190 million in cash when it acquired the deposits and certain assets of First National in June, 2010 and much of this liquidity was invested in interest-bearing deposits and investments. On a linked quarter basis, the net interest margin increased 18 basis points compared to the first quarter of 2011. The Company on average held $23.5 million less in lower-yielding interest-bearing deposits and investments during the second quarter of 2011 compared to the first quarter of 2011. The Company continues to aggressively manage the pricing on deposits and the use of wholesale funds to mitigate the amount of margin compression.

Noninterest income decreased $19,000, or 1.1 percent, in the second quarter of 2011 versus the same period in 2010. Service charges on deposit accounts declined $112,000 in 2011 primarily due to recent regulatory guidance related to NSF/overdraft charges. This decline was partially offset by a $96,000 increase in the gain on sale of securities during the second quarter of 2011 compared to the same period in 2010.

Noninterest expense increased $570,000, or 8.7 percent, to $7,109,000 in the second quarter 2011 compared to the same period in 2010. The increase in noninterest expense was mainly attributable to a $784,000 or 237 percent increase in loss on sale and write-down of foreclosed assets. Salaries and employee benefits decreased $207,000 or 6.8 percent in the second quarter 2011. In addition information technology expense declined $103,000 or 20 percent and FDIC deposit insurance premiums were down $74,000 or 18 percent. The Company renegotiated and renewed its contract with its core processor resulting in the decline in its information technology expense. The decrease in the FDIC insurance premiums was due to changes to the FDIC assessment process which became effective in the second quarter of 2011.

The Savannah Bancorp, Inc. ("SAVB" or "Company"), a bank holding company for The Savannah Bank, N.A., Bryan Bank & Trust (Richmond Hill, Georgia), and Minis & Co., Inc., is headquartered in Savannah, Georgia and began operations in 1990. SAVB has eleven branches in Coastal Georgia and South Carolina. Its primary businesses include loan, deposit, trust, asset management, and mortgage origination services provided to local customers.

Forward-Looking Statements

This press release contains statements that constitute "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 as amended by the Private Securities Litigation Reform Act of 1995.  These forward-looking statements include, among others, statements identified by words or phrases such as "potential," "opportunity," "believe," "expect," "anticipate," "current," "intention," "estimate," "assume," "outlook," "continue," "seek," "plans," "achieve," and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "may" or similar expressions.  These statements are based on the current beliefs and expectations of our management and are subject to significant risks and uncertainties.  There can be no assurance that these transactions will occur or that the expected benefits associated therewith will be achieved.  A number of important factors could cause actual results to differ materially from those contemplated by our forward-looking statements in this press release.  Many of these factors are beyond our ability to control or predict.  These factors include, but are not limited to, those found in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.  We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations.  We do not assume any obligation to update any forward-looking statements as a result of new information, future developments or otherwise.

Capital Resources

The banking regulatory agencies have adopted capital requirements that specify the minimum level for which no prompt corrective action is required. In addition, the FDIC assesses FDIC insurance premiums based on certain "well-capitalized" risk-based and equity capital ratios. As of June 30, 2011, the Company and the Subsidiary Banks exceeded the minimum requirements necessary to be classified as "well-capitalized."  Bryan has agreed with its primary regulator to maintain a Tier 1 Leverage Ratio of not less than 8.00 percent.

Total tangible equity capital for the Company was $81.5 million, or 8.13 percent of total assets at June 30, 2011. The table below includes the regulatory capital ratios for the Company and each Subsidiary Bank along with the minimum capital ratio and the ratio required to maintain a well-capitalized regulatory status.

Tier 1 and total capital at the Company level includes $10 million of subordinated debt issued to the Company's nonconsolidated subsidiaries. Total capital also includes the allowance for loan losses up to 1.25 percent of risk-weighted assets.