updated 10/29/2010 2:45:43 PM ET 2010-10-29T18:45:43

SAVANNAH, Ga., Oct. 29, 2010 (GLOBE NEWSWIRE) -- The Savannah Bancorp, Inc. (Nasdaq:SAVB) reported a net loss for the third quarter 2010 of $1,563,000 compared to net income $346,000 in the third quarter of 2009. Net loss per diluted share was 22 cents in the third quarter of 2010 compared to net income per diluted share of 6 cents in 2009. The quarter over quarter decline in earnings results primarily from a higher provision for loan losses and higher loss on sale of foreclosed assets. Pretax earnings before the provision for loan losses and gain/loss on sale of securities and foreclosed assets were $3,321,000 in the third quarter 2010 compared to $3,607,000 in 2009. Other growth and performance ratios are included in the attached financial highlights.

Total assets increased 5.3 percent to $1.10 billion at September 30, 2010, up $55 million from $1.04 billion a year earlier. Loans totaled $833 million compared to $867 million one year earlier, a decrease of 3.9 percent. Deposits totaled $947 million and $881 million at September 30, 2010 and 2009, respectively, an increase of 7.4 percent. Shareholders' equity was $88.7 million at September 30, 2010 compared to $79.0 million at September 30, 2009. The Company's total capital to risk-weighted assets ratio was 12.96 percent at September 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, "In the third quarter, we spent a significant amount of time integrating our FDIC-assisted acquisition of First National Bank, Savannah and continuing to work through our Company's problem assets. While we continue to be affected by declining real estate values and appraisals, we will maintain our discipline of reappraising properties, both collateral and foreclosed assets, and adjusting the values as appropriate. Unfortunately, these actions have the short term impact of reducing earnings and creating losses.  Even so, we will proactively re-value these assets so that we recognize the inherent risk in our portfolio."

The allowance for loan losses was $19,519,000, or 2.34 percent of total loans at September 30, 2010 compared to $16,880,000 or 1.95 percent of total loans a year earlier. Nonperforming assets were $50,780,000 or 4.63 percent of total assets at September 30, 2010 compared to $36,253,000 or 3.48 percent at September 30, 2009. Third quarter net charge-offs were $4,486,000 compared to net charge-offs of $2,277,000 for the same period in 2009. The provision for loan losses for the third quarter of 2010 was $5,230,000 compared to $3,560,000 for the third 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.

Helmken continued, "The continued high level of provisioning is required as we address asset quality deterioration connected with the real estate and housing downturn.  The increased real estate activity that we saw in the second quarter, including our sales of foreclosed assets, failed to continue into the third quarter. The stabilization that we expected did not materialize and, until we see stabilization in this market, charge offs and problem assets will be higher than both historical and desired levels. Fortunately, our pre-tax, pre-provision core earnings continue to be very strong thus allowing us to continue our push to move the foreclosed assets that have been marked."

Net interest income decreased $211,000, or 2.6 percent, in the third quarter 2010 versus the third quarter 2009. Third quarter net interest margin decreased to 3.02 percent in 2010 as compared to 3.47 percent in 2009, primarily due to a higher level of interest-bearing deposits and investment securities. The Company received $174 million in cash when it acquired the deposits and certain assets of First National Bank, Savannah ("First National") in an FDIC-assisted transaction in June, 2010.  This excess liquidity decreased the net interest margin approximately 33 basis points in the third quarter 2010. The net interest margin decreased 52 basis points on a linked quarter basis from the 3.54 percent margin for the second quarter 2010. During the third quarter 2010, the Company used its excess liquidity to reduce total deposits $139 million, primarily brokered and higher priced time deposits. The Company continues to aggressively manage the pricing on deposits and the use of wholesale funds to mitigate the amount of margin compression.

Helmken noted, "Over the last 90 days, we have been able to put some of the funds acquired through the First National transaction to work. While loan demand remains weak in our markets, we are still seeing opportunities to take relationships from our competitors.  That being said, we are not going to stretch our underwriting in order to make loans and we are not going to extend maturities unreasonably on securities in order to pick up yield in our investment portfolio."

Noninterest income decreased $689,000, or 31 percent, in the third quarter of 2010 versus the same period in 2009 due to $187,000 lower gain on hedges, and a $622,000 lower gain on the sale of securities, partially offset by $57,000, or 10 percent, higher trust and asset management fees and $41,000, or 46 percent, higher mortgage related income.

Noninterest expense increased $834,000, or 13 percent, to $7,310,000 in the third quarter 2010 compared to the same period in 2009. Loss on sale of foreclosed assets increased $826,000 to $1,046,000 and included a $447,000 loss on a single property consisting of finished commercial lots. In addition, third quarter 2010 noninterest expense included approximately $353,000 of expenses related to the purchase of First National.

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 twelve 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 September 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 $84.2 million, or 7.70 percent of total assets at September 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 third 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 $24 in the first nine months 2010 and 2009, respectively.

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

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