Savannah Bancorp Reports First Quarter Results

SAVANNAH, Ga., April 24, 2012 (GLOBE NEWSWIRE) -- The Savannah Bancorp, Inc. SAVB (the "Company") reported a net loss for the first quarter 2012 of $1,031,000 compared to net income of $126,000 for the first quarter 2011. Net loss per diluted share was 14 cents in the first quarter 2012 compared to net income per diluted share of 2 cents in 2011. The quarter over quarter decrease in earnings resulted primarily from an increase in loss on sales of foreclosed assets and in the provision for loans losses. Pretax earnings before the provision for loan losses and gain/loss on sale of securities and foreclosed assets decreased $167,000, or 3.8 percent, to $4,204,000 in the first quarter of 2012 compared to $4,371,000 in the first quarter of 2011. Other growth and performance ratios are included in the attached financial highlights.

Total assets decreased 6.5 percent to $972 million at March 31, 2012, down approximately $67 million from $1.04 billion a year earlier. Loans totaled $744 million compared to $819 million one year earlier, a decrease of approximately $75 million or 9.2 percent. Deposits totaled $834 million and $898 million at March 31, 2012 and 2011, respectively, a decrease of 7.2 percent. Shareholders' equity was $83.3 million at March 31, 2012 compared to $85.9 million at March 31, 2011. The Company's total capital to risk-weighted assets ratio was 12.69 percent at March 31, 2012, which exceeds the 10 percent required by the regulatory agencies to maintain well-capitalized status.

John C. Helmken II, President and CEO, said, "We continue to focus on our net interest margin with the result being another increase this quarter to 3.92 percent. This margin has helped reduce the impact of lower loan balances due to pay downs, charge-offs and continued weak loan demand. While many borrowers are seeing improved operating results, most are still reluctant to pull the trigger on any growth or expansion plans. Most, but not all, of our new relationship activity is coming from our competitors. We continue to solicit business and believe our efforts will pay off over time."

The Company's allowance for loan losses was $22,396,000, or 3.01 percent of total loans at March 31, 2012 compared to $22,363,000 or 2.73 percent of total loans a year earlier. Nonperforming assets were $50,207,000 or 5.17 percent of total assets at March 31, 2012 compared to $48,752,000 or 4.69 percent at March 31, 2011. Other real estate owned ("OREO") increased $3,575,000, or 26 percent, to $17,589,000 in 2012 due to an increase in foreclosures on real property as a result of borrower defaults. For the first quarter of 2012, net charge-offs were $4,261,000 compared to net charge-offs of $2,347,000 for the first quarter of 2011. The provision for loan losses for the first quarter of 2012 was $4,740,000 compared to $4,360,000 for the same period in 2011. Both the net charge-offs and the provision for loan losses have remained elevated in 2012. The Company continues to see weakness in its local real estate markets with downward pressure on real estate values, and this weakness has led to a continued high level of real estate related charge-offs and provisions for loan losses.

Helmken continued, "Our team continues to do a good job of containing expenses. During the first quarter, we experienced a large loss on an OREO property, but otherwise expenses remained flat. In 2011, we saw a reduction in operating expenses other than those associated with collection efforts and we expect to continue to press on controlling expenses during the balance of 2012.

"We continue to deal with primarily one issue – asset quality. The past due trends for the first quarter, coupled with the decline in nonperforming assets, are encouraging. However, the continued decline in values on loan collateral and OREO is significantly impacting our profitability. With collection costs averaging more than $100,000 per month and significant provisioning and charge-offs during the first quarter, management and the Board of Directors are evaluating all alternatives to reduce nonperforming and classified assets of which a bulk asset sale is a consideration."

Net interest income decreased $274,000, or 3.1 percent, in the first quarter of 2012 versus the first quarter of 2011. The net interest margin increased to 3.92 percent in the first quarter of 2012 as compared to 3.73 percent in the same period in 2011. While the net interest margin increased, net interest income decreased quarter over quarter due primarily to the lower level of interest-earning assets. The net interest margin increased mainly due to a decline in the cost of interest-bearing deposits partially offset by a decline in the yield on earning assets. The cost of interest-bearing deposits decreased to 0.83 percent for the first quarter of 2012 compared to 1.18 percent for the same period in 2011 primarily due to the repricing of time deposits and money market accounts in the current low interest rate environment. The yield on earning assets declined from 4.89 percent in the first quarter of 2011 to 4.77 percent in the first quarter of 2012 due to the Company holding, on average, $38 million more in lower yielding interest-bearing deposits and $71 million less in higher yielding accruing loans. The decline in average accruing loans was due to normal pay downs, charge-offs and weakened demand for new loans. On a linked quarter basis, the net interest margin increased 4 basis points compared to the fourth quarter of 2011.

Noninterest income decreased $107,000, or 6.6 percent, in 2012 versus 2011. This decrease was primarily related to a decline in gain on sale of securities of $218,000 in the first quarter of 2012 compared to the same period in 2011. This decline was somewhat offset by an increase in other operating income of $89,000 or 25 percent. The decline in gain on sale of securities was due to the fact that the Company did not sell any investment securities in the first quarter of 2012. The increase in other operating income during the first quarter of 2012 compared to the same period in 2011 was due primarily to an increase of $34,000 in rent income from OREO and $34,000 in income from fees related to ATMs and debit cards.

Noninterest expense increased $1.1 million, or 18 percent, to $7,189,000 during the first quarter of 2012 as compared to the same period in 2011. This increase was due to a $1.1 million, or 460 percent, increase in loss on sale of foreclosed assets in the first quarter of 2012. A write-down on one OREO property accounted for approximately $564,000 of the 2012 loss. In addition, the Company had increased activity related to foreclosed properties and continued declines in real estate values.

The Savannah Bancorp, Inc., a bank holding company for The Savannah Bank, N.A. ("Savannah"), Bryan Bank & Trust (Richmond Hill, Georgia) ("Bryan"), and Minis & Co., Inc., is headquartered in Savannah, Georgia and began operations in 1990. The Company 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 federal securities laws.  All statements other than statements of historical fact are forward-looking statements. 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 of the future or otherwise regarding the outlook for the Company's future business and financial performance and/or the performance of the banking industry and economy in general. These forward-looking statements include, among others, our assessment of local real estate markets and the decline in values on loan collateral and OREO; expectations regarding loan demand, new business and relationships; expectations on our ability to contain operating expenses in 2012; our evaluation of alternatives to reduce nonperforming and classified assets; and the assumptions underlying our expectations. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties which may cause the actual results, performance or achievements of the Company to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. Actual results may differ materially from those contemplated by such forward-looking statements.

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 results 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 under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2011, 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 and speak only as of the date that they are made. We do not assume any obligation to update any forward-looking statements as a result of new information, future developments or otherwise, except as required by law.

A printable format of this entire Earnings Release may be obtained from the Corporate Website at www.savb.com under the "SEC Filings and More" link and then "Latest Earnings Release".

Capital Resources

The banking regulators have adopted capital requirements that specify the minimum capital level for which no prompt corrective action is required. In addition, the FDIC has adopted FDIC insurance assessment rates based on certain "well-capitalized" risk-based and equity capital ratios. As of March 31, 2012, the Company and the Subsidiary Banks exceeded the minimum statutory requirements necessary to be classified as "well-capitalized."  Savannah has agreed with its primary regulator to maintain a Tier 1 Leverage Ratio of not less than 8.00 percent and a Total Risk-based Capital Ratio of not less than 12.00 percent and is currently in conformity with the agreement.

Bryan entered into a Consent Order ("Order") with its regulators, which requires the bank to maintain a Tier 1 Leverage Ratio of 8.00 percent and Total Risk-based Capital Ratio of 10.00 percent.  Entry into the Order automatically changes Bryan's capital status to "adequately capitalized" for regulatory purposes.  As of March 31, 2012, Bryan had a Tier 1 Leverage Ratio of 7.57 percent and a Total Risk-based Capital Ratio of 11.60 percent and is evaluating strategic alternatives to conform to the minimum capital ratios required by the Order.

Total tangible equity capital for the Company was $79.8 million, or 8.21 percent of total assets at March 31, 2012. The table below shows the regulatory capital amounts and ratios for the Company and Subsidiary Banks, 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.