Savannah Bancorp Reports Second Quarter Loss of $62,000

SAVANNAH, Ga., July 22, 2010 (GLOBE NEWSWIRE) -- The Savannah Bancorp, Inc. (Nasdaq:SAVB) reported a net loss for the second quarter 2010 of $62,000 compared to net income of $106,000 in the second quarter 2009. Net loss per diluted share was 1 cent in the second quarter of 2010 compared to net income per diluted share of 2 cents in 2009. The quarter over quarter decline in earnings results primarily from a higher provision for loan losses. Pretax earnings before the provision for loan losses and gain/loss on sale of securities and foreclosed assets were $3,653,000 in the second quarter 2010 compared to $3,946,000 in 2009.  Other growth and performance ratios are included in the attached financial highlights.

On June 25, 2010, The Savannah Bank, N.A. ("Savannah"), the Company's largest subsidiary bank, entered into an agreement with the FDIC to purchase substantially all deposits and certain liabilities and assets of First National Bank, Savannah ("First National"). Savannah acquired approximately $42 million in assets and assumed $216 million in liabilities, including $201 million in customer deposits. The assets primarily include cash and due from accounts and investment securities. Savannah acquired the local, non-brokered deposits of approximately $105 million at a premium of 0.11 percent.  In connection with closing, Savannah received a cash payment from the FDIC totaling $174 million, based on the differential between liabilities assumed and assets acquired, taking into account the deposit premium.

Total assets increased 21 percent to $1.23 billion at June 30, 2010, up $210 million from $1.02 billion a year earlier. Loans totaled $849 million compared to $862 million one year earlier, a decrease of 1.6 percent. Deposits totaled $1.07 billion and $847 million at June 30, 2010 and 2009, respectively, an increase of 26 percent. Deposits include $195 million in deposits from the acquisition of First National. Shareholders' equity was $89.6 million at June 30, 2010 compared to $79.0 million at June 30, 2009. Shareholder's equity includes $11.2 million in net proceeds from the issuance of common stock in the second quarter 2010. The Company's total capital to risk-weighted assets ratio was 13.38 percent at June 30, 2010, which exceeds the 10 percent required by the regulatory agencies to maintain well-capitalized status.

John C. Helmken II, President and CEO, said, "Though we did report a small loss this quarter, we should not lose sight of the Company's significant second quarter events:  a successful capital raise, the acquisition of a bank through an FDIC-assisted transaction, a key executive hire and continued progress in our loan portfolio.  In addition, our net interest margin remained above 3.50 percent for a second consecutive quarter and our deposit mix continues to improve.  We enter the second half of the year well positioned for growth."

Helmken continued, "With the addition of Mike Viers to lead our Commercial Banking Group in Savannah, we expect to see growth on each side of the balance sheet.  Regardless of economic conditions, there is tremendous opportunity in our existing markets and we remain focused on soliciting core relationships for our Company.  We have the best team in the market to make that happen."

The allowance for loan losses was $18,775,000, or 2.21 percent of loans at June 30, 2010 compared to $15,597,000 or 1.81 percent of total loans a year earlier. Nonperforming assets were $48,978,000 or 3.97 percent of total assets at June 30, 2010 compared to $33,745,000 or 3.31 percent at June 30, 2009. Second quarter net charge-offs were $4,581,000 compared to net charge-offs of $2,937,000 for the same period in 2009. The provision for loan losses for the second quarter of 2010 was $3,745,000 compared to $3,225,000 for the second quarter of 2009. 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.

Net interest income was up $192,000, or 2.4 percent, in the second quarter 2010 versus the second quarter 2009. Second quarter net interest margin increased to 3.54 percent in 2010 as compared to 3.52 percent in 2009, primarily due to significantly lower deposit rates partially offset by higher levels of noninterest-earning assets.  The net interest margin decreased 10 basis points on a linked quarter basis from the 3.64 percent margin for the first quarter 2010.

Noninterest income decreased $180,000, or 9.4 percent, in the second quarter of 2010 versus the same period in 2009 due to lower mortgage related income, $256,000 lower gain on hedges, and a lower gain on the sale of securities, partially offset by $107,000, or 19 percent, higher trust and asset management fees.

Noninterest expense decreased $200,000 to $6,539,000 in the second quarter 2010 compared to the same period in 2009. Second quarter 2010 noninterest expense included $405,000, or 50 percent, of lower FDIC insurance premiums and $554,000, or 63 percent, lower loss on sale of foreclosed assets. The second quarter 2009 included the special assessment from the FDIC which accounts for most of the net decline in FDIC insurance premiums. Occupancy and equipment expense was $457,000 higher, or 101 percent, and other operating expense was $179,000 higher, or 16 percent. In the second quarter 2009, the Company purchased its previously leased Hilton Head Island branch from an outside party and reversed approximately $527,000 in accrued rent expense that was recorded in occupancy and equipment expense.

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 fourteen 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, 2010, the Company and the Subsidiary Banks exceeded the minimum requirements necessary to be classified as "well-capitalized."

Total tangible equity capital for the Company was $87.1 million, or 7.05 percent of total assets at June 30, 2010. 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.  

(a) This table shows the changes in interest income and interest expense for the comparative periods based on either changes in average volume or changes in average rates for interest-earning assets and interest-bearing liabilities. Changes which are not solely due to rate changes or solely due to volume changes are attributed to volume. 

(b) The taxable equivalent adjustment results from tax exempt income less non-deductible TEFRA interest expense and was $8 in the second quarter 2010 and 2009, respectively.

(c) Average nonaccruing loans have been excluded from total average loans and categorized in noninterest-earning assets. 

(a) This table shows the changes in interest income and interest expense for the comparative periods based on either changes in average volume or changes in average rates for interest-earning assets and interest-bearing liabilities. Changes which are not solely due to rate changes or solely due to volume changes are attributed to volume. 

(b) The taxable equivalent adjustment results from tax exempt income less non-deductible TEFRA interest expense and was $16 in the first six months 2010 and 2009, respectively.

(c) Average nonaccruing loans have been excluded from total average loans and categorized in noninterest-earning assets.