Savannah Bancorp Reports Third Quarter Earnings of $1,228,000

SAVANNAH, Ga., Oct. 18, 2011 (GLOBE NEWSWIRE) -- The Savannah Bancorp, Inc. (Nasdaq:SAVB) ("SAVB" or the "Company") reported a net profit for the third quarter 2011 of $1,228,000 compared to a net loss of $1,563,000 for the third quarter 2010. Third quarter net income per diluted share was 17 cents in 2011 compared to a net loss per diluted share of 22 cents in 2010. The quarter over quarter increase in earnings resulted primarily from an increase in net interest income and a decrease in the Company's provision for loan losses and losses on the sale and write-down of foreclosed assets. Pretax earnings before the provision for loan losses and gain/loss on sale of securities and foreclosed assets increased $1,361,000, or 41 percent, to $4,682,000 in the third quarter 2011 compared to the third quarter 2010. Both of the Company's bank subsidiaries, Bryan Bank & Trust ("Bryan") and The Savannah Bank, N.A. ("Savannah"), were profitable in the third quarter, as was its registered investment advisory firm, Minis & Co., Inc. Net loss for the first nine months of 2011 was $138,000 compared to a net loss of $2,113,000 for the same period in 2010. Other growth and performance ratios are included in the attached financial highlights.

Total assets decreased 10 percent to $989 million at September 30, 2011, down approximately $107 million from $1.10 billion a year earlier. Loans totaled $789 million compared to $833 million one year earlier, a decrease of approximately $44 million or 5.3 percent. Deposits totaled $846 and $947 million at September 30, 2011 and 2010, respectively, a decrease of 11 percent. On June 25, 2010, Savannah 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 $86.3 million at September 30, 2011 compared to $88.7 million at September 30, 2010. The Company's total capital to risk-weighted assets ratio was 12.62 percent at September 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, our pre-tax, pre-provision income increased 41 percent over third quarter 2010. We are pleased to report our quarterly profit of $1.2 million, our first quarterly profit over $1 million since the third quarter 2008. The hard work of our dedicated staff is finally passing through to earnings. Our quarterly net interest margin climbed above four percent for the first time since the third quarter 2007. The net interest margin increased 28 basis points from the first quarter of this year."

The Company's allowance for loan losses was $22,854,000, or 2.90 percent of total loans at September 30, 2011 compared to $19,519,000 or 2.34 percent of total loans a year earlier. Nonperforming assets were $59,675,000 or 6.04 percent of total assets at September 30, 2011 compared to $50,780,000 or 4.63 percent at September 30, 2010. Other real estate owned increased $7,396,000 in the third quarter 2011 compared to the same period one year earlier. Third quarter net charge-offs were $3,534,000 in 2011 compared to net charge-offs of $4,486,000 for the same period in 2010. The provision for loan losses for the third quarter of 2011 was $2,865,000 compared to $5,230,000 for the third quarter of 2010. The lower provision for loan losses and net charge-offs during the third quarter of 2011 compared to the same period in 2010 was primarily due to lower real estate related charge-offs. While the local real estate market has not fully stabilized at this point, the Company has experienced lower valuation allowances related to updated appraisals on real estate in 2011 compared to 2010.

Helmken continued, "While we are disappointed in the increase in nonperforming assets, we continue to work at controlling and maximizing the variables that we can. Our net interest margin has increased in each of the last four quarters. With a third quarter efficiency ratio of 59 percent, our team is exemplifying the goal of 'doing more with less.' With strong capital levels and core earnings, we plan to continue to aggressively address asset quality issues. Of particular note, trust and asset management fees continue to run well above last year's numbers."

Net interest income increased $985,000, or 12 percent, in the third quarter 2011 versus the third quarter 2010. Third quarter net interest margin increased to 4.01 percent in 2011 as compared to 3.02 percent in the third quarter of 2010. The increase was due to both a lower cost on interest-bearing deposits and an increase in the yield on interest-earning assets. In addition, the Company had a significantly lower amount of interest-earning cash during the third quarter 2011. The cost of interest-bearing deposits decreased to 0.99 percent in the third quarter 2011 from 1.46 percent for the same period in 2010, primarily due to the re-pricing of time deposits and money market accounts. The yield on earning assets increased from 4.46 percent in the third quarter of 2010 to 5.01 percent for the third quarter of 2011, which was primarily a result of the Company holding, on average, $125 million less in lower yielding interest-bearing deposits, fed funds sold and investment securities during the third 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 10 basis points compared to the second quarter of 2011. The Company held, on average, $20 million less in lower-yielding interest-bearing deposits, fed funds sold and investment securities during the third quarter of 2011 compared to the second 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 increased $279,000, or 18 percent, in the third quarter of 2011 versus the same period in 2010. This increase was primarily related to a $326,000 increase in gains on sale of securities during the third quarter of 2011 compared to the same period in 2010. This increase was partially offset by a $67,000 decrease in service charges on deposit accounts during 2011 compared to 2010, primarily due to recent regulatory guidance related to overdraft charges. 

Noninterest expense decreased $892,000, or 12 percent, to $6,418,000 in the third quarter 2011 compared to the same period in 2010. The decrease in noninterest expense was mainly attributable to a $469,000, or 45 percent, decrease in loss on sale and write-down of foreclosed assets. Salaries and employee benefits decreased $62,000 or 2.1 percent in the third quarter 2011. In addition, information technology expense declined $147,000 or 26 percent and FDIC deposit insurance premiums were down $117,000 or 26 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., 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 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, 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, except as required by law.

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 September 30, 2011, the Company and the Subsidiary Banks exceeded the minimum statutory requirements necessary to be classified as "well-capitalized."  Notwithstanding the foregoing, Bryan has agreed with its primary regulator to maintain a Tier 1 Leverage Ratio of not less than 8.00 percent. The Company is evaluating its options for Bryan to conform to this stipulation.  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.

Total tangible equity capital for the Company was $82.7 million, or 8.36 percent of total assets at September 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.