updated 4/19/2011 3:46:22 PM ET 2011-04-19T19:46:22

SAVANNAH, Ga., April 19, 2011 (GLOBE NEWSWIRE) -- The Savannah Bancorp, Inc. (Nasdaq:SAVB) reported net income for the first quarter 2011 of $126,000 compared to a net loss of $488,000 for the first quarter 2010. Net income per diluted share was 2 cents in the first quarter of 2011 compared to net loss per diluted share of 8 cents in 2010. The quarter over quarter increase in earnings resulted primarily from an increase in net interest income and a decrease in the provision for loan losses. Pretax earnings before the provision for loan losses and gain/loss on sale of securities and foreclosed assets were $4,371,000 in the first quarter 2011 compared to $4,343,000 in 2010. Other growth and performance ratios are included in the attached financial highlights.

Total assets decreased 0.8 percent to $1.04 billion at March 31, 2011, down $8 million from $1.05 billion a year earlier. Loans totaled $819 million compared to $869 million one year earlier, a decrease of 5.7 percent. Deposits totaled $898 million and $902 million at March 31, 2011 and 2010, respectively, a decrease of 0.4 percent. Shareholders' equity was $85.9 million at March 31, 2011 compared to $77.9 million at March 31, 2010. The Company's total capital to risk-weighted assets ratio was 12.56 percent at March 31, 2011, which exceeds the 10 percent required by the regulatory agencies to maintain well-capitalized status.

John C. Helmken II, President and CEO, said, "Our bankers continue to exhibit the pricing discipline that is always very important, even more so in today's environment with so many unprecedented challenges. Our first quarter net interest margin was 3.73 percent, a 9 basis point increase over last year and up 16 basis points over year end. We continue to do an excellent job of controlling and maximizing the variables that we can. In addition, our noninterest expense was down 4.9 percent versus the first quarter of 2010. We continue to play offense but identifying solid, credit worthy borrowers at an acceptable margin is a challenge. We are soliciting relationships from our competitors but have seen defensive loan pricing creep back into the market."

The allowance for loan losses was $22,363,000, or 2.73 percent of total loans at March 31, 2011 compared to $19,611,000 or 2.26 percent of total loans a year earlier. Nonperforming assets were $48,752,000 or 4.69 percent of total assets at March 31, 2011 compared to $44,099,000 or 4.21 percent at March 31, 2010. First quarter net charge-offs were $2,347,000 compared to net charge-offs of $3,387,000 for the same period in 2010. The provision for loan losses for the first quarter of 2011 was $4,360,000 compared to $5,320,000 for the first quarter of 2010. The lower provision for loan losses was primarily due to the $49 million smaller loan portfolio, lower net charge-offs and stabilizing credit quality trends.

Helmken added, "We continue to build our allowance for loan losses, which exceeds $22 million and is now 2.73 percent of loans. We believe that our reserve methodology is sound and that we must continue elevated provision levels until real estate values and sales activity have improved. We are encouraged by what we are seeing in that regard but are not yet comfortable with allowing the provision to return to more historical levels."

Helmken continued, "Our pre-tax, pre-provision core earnings continue to be very strong and we remain confident in our strategic and operational direction.  With strong capital levels and core earnings, we will aggressively address any asset quality issues."

Net interest income increased $415,000, or 4.9 percent, in the first quarter 2011 versus the first quarter 2010. First quarter net interest margin increased to 3.73 percent in 2011 as compared to 3.64 percent in 2010, primarily due to a lower cost on interest-bearing deposits. This was partially offset by a decrease in the yield on interest-earning assets. The cost of interest-bearing deposits decreased from 1.66 percent for the first three months of 2010 to 1.18 percent for the same period in 2011, primarily due to the repricing of time deposits in the current low interest rate environment. The yield on earning assets decreased from 5.27 percent for the first three months of 2010 to 4.89 percent for the first three months of 2011 which was primarily a result of the Company holding, on average, $77.5 million more in lower yielding interest-bearing deposits and investments during the first quarter of 2011 than the same period in 2010. The Company received $174 million in cash when it acquired the deposits and certain assets of First National Bank, Savannah in an FDIC-assisted transaction in June, 2010 and much of this liquidity was invested in interest-bearing deposits and investments. 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 the net interest margin. The Company on average held $25.7 million less in interest-bearing deposits and investments during the first quarter of 2011 compared to the fourth quarter of 2010 and the yield on earning assets increased from 4.83 percent in the fourth quarter of 2010 to 4.89 percent during 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 $655,000, or 29 percent, in the first quarter of 2011 versus the same period in 2010 due to a $249,000 lower gain on the sale of securities, a $85,000 decline in service charges on deposits and a $275,000 decrease in other operating income. The decrease in other operating income was due to the Company recording a $308,000 gain on a bank-owned life insurance policy payout in which the Company was the beneficiary during the first quarter of 2010.

Noninterest expense decreased $314,000, or 4.9 percent, to $6,113,000 in the first quarter 2011 compared to the same period in 2010. Information technology expense declined $93,000, or 19 percent, and losses from write-downs and sales of foreclosed assets decreased $295,000, or 56 percent. This was partially offset by $92,000, or 24 percent, higher FDIC deposit insurance premiums. The Company renegotiated and renewed its contract with its core processor resulting in the decline in its information technology expense. The increase in the FDIC premiums was due in part to scheduled rate increases effective after the first quarter of 2010. The recent changes to the FDIC assessment process are not effective until the second quarter 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.

The Savannah Bancorp, Inc. and Subsidiaries
First Quarter Financial Highlights
 March 31, 2011 and 2010
($ in thousands, except share data)
(Unaudited)
       
      %
Balance Sheet Data at March 31 2011 2010 Change
Total assets $1,038,571 $1,046,645 (0.8)
Interest-earning assets 948,375 928,915 2.1
Loans 819,152 868,516 (5.7)
Other real estate owned 14,014 7,374 90
Deposits 898,171 901,792 (0.4)
Interest-bearing liabilities 855,885 870,238 (1.6)
Shareholders' equity 85,870 77,905 10
Loan to deposit ratio 91.20% 96.31% (5.3)
Equity to assets 8.27% 7.44% 11
Tier 1 capital to risk-weighted assets 11.29% 10.45% 8.0
Total capital to risk-weighted assets 12.56% 11.71% 7.3
Outstanding shares 7,199 5,938 21
Book value per share $11.93 $13.12 (9.1)
Tangible book value per share $11.41 $12.71 (10)
Market value per share $7.35 $10.61 (31)
       
Loan Quality Data      
Nonaccruing loans $33,921 $35,579 (4.7)
Loans past due 90 days – accruing 817 1,146 (29)
Net charge-offs 2,347 3,387 (31)
Allowance for loan losses 22,363 19,611 14
Allowance for loan losses to total loans 2.73% 2.26% 21
Nonperforming assets to total assets 4.69% 4.21% 11
       
Performance Data for the First Quarter      
Net income (loss) $126  $ (488) 126
Return on average assets 0.05% (0.19)% 126
Return on average equity 0.59% (2.50)% 124
Net interest margin 3.73% 3.64% 2.5
Efficiency ratio 58.39% 60.01% (2.7)
Per share data:      
Net income (loss) – basic $0.02  $ (0.08) 125
Net income (loss) – diluted $0.02  $ (0.08) 125
Dividends $0.00 $0.02 NM
Average shares (000s):      
Basic 7,199 5,936 21
Diluted 7,199 5,936 21
 
The Savannah Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets
($ in thousands, except share data)
(Unaudited)
     
  March 31,
  2011 2010
Assets    
Cash and due from banks $14,074 $45,685
Federal funds sold 155 9,205
Interest-bearing deposits in banks 41,679 5,259
Cash and cash equivalents 55,908 60,149
Securities available for sale, at fair value (amortized cost of $121,310 and $81,514) 122,323 82,128
Loans, net of allowance for loan losses of $22,363 and $19,611 796,789 848,905
Premises and equipment, net 14,830 15,494
Other real estate owned 14,014 7,374
Bank-owned life insurance 6,358 6,155
Goodwill and other intangible assets, net 3,730 2,462
Other assets 24,619 23,978
Total assets $1,038,571 $1,046,645
     
Liabilities    
Deposits:    
Noninterest-bearing $92,972 $94,836
Interest-bearing demand 141,255 120,643
Savings 20,963 18,266
Money market 279,865 259,893
Time deposits 363,116 408,154
Total deposits 898,171 901,792
Short-term borrowings 14,583 17,854
Other borrowings 10,136 15,456
FHLB advances 15,657 19,662
Subordinated debt 10,310 10,310
Other liabilities 3,844 3,666
Total liabilities 952,701 968,740
Shareholders' equity    
Preferred stock, par value $1 per share: shares authorized 10,000,000, none issued -- --
Common stock, par value $1 per share: shares authorized 20,000,000, issued 7,201,346 and 5,938,189 7,201 5,938
Additional paid-in capital 48,641 38,644
Retained earnings 29,401 32,776
Treasury stock, at cost, 2,210 and 500 shares (1) (1)
Accumulated other comprehensive income, net 628 548
Total shareholders' equity 85,870 77,905
Total liabilities and shareholders' equity $1,038,571 $1,046,645
 
The Savannah Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income
for the Three Months and Five Quarters Ending March 31, 2011
($ in thousands, except per share data)
                   
  (Unaudited)
  For the Three Months Ended 2011 2010 Q1-11/Q1-10
  March 31, % First Fourth Third Second First %
  2011 2010 Chg Quarter Quarter Quarter Quarter Quarter  Chg
Interest and dividend income                  
Loans, including fees $10,697 $11,618 (7.9) $10,697 $10,985 $11,100 $11,298 $11,618 (7.9)
Investment securities 875 561 56 875 950 698 552 561 56
Deposits with banks 32 8 300 32 37 80 24 8 300
Federal funds sold 1 6 (83) 1 -- 9 3 6 (83)
Total interest and dividend income 11,605 12,193 (4.8) 11,605 11,972 11,887 11,877 12,193 (4.8)
Interest expense                  
Deposits 2,383 3,275 (27) 2,383 2,731 3,336 3,118 3,275 (27)
Borrowings & sub debt 289 393 (26) 289 330 358 392 393 (26)
FHLB advances 89 96 (7.3) 89 78 164 91 96 (7.3)
Total interest expense 2,761 3,764 (27) 2,761 3,139 3,858 3,601 3,764 (27)
Net interest income 8,844 8,429 4.9 8,844 8,833 8,029 8,276 8,429 4.9 
Provision for loan losses 4,360 5,320 (18) 4,360 6,725 5,230 3,745 5,320 (18)
Net interest income after the provision for loan losses 4,484 3,109 44 4,484 2,108 2,799 4,531 3,109 44
Noninterest income                  
Trust and asset management fees 662 633 4.6 662 651 637 678 633 4.6
Service charges on deposits 370 455 (19) 370 435 438 460 455 (19)
Mortgage related income, net 14 89 (84) 14 76 130 103 89 (84)
Gain (loss) on sale of securities 218 467 (53) 218 18 (18) 141 467 (53)
Gain (loss) on hedges -- -- -- -- 16 (3) (11) -- --
Other operating income 361 636 (43) 361 571 354 355 636 (43)
 Total noninterest income 1,625 2,280 (29) 1,625 1,767 1,538 1,726 2,280 (29)
Noninterest expense                  
Salaries and employee benefits 2,906 3,040 (4.4) 2,906 2,907 2,948 3,053 3,040 (4.4)
Occupancy and equipment 883 893 (1.1) 883 1,041 1,102 909 893 (1.1)
FDIC deposit insurance 480 388 24 480 448 442 410 388 24
Information technology 402 495 (19) 402 512 575 519 495 (19)
Loss on sale of foreclosed assets 233 528 (56) 233 567 1,046 331 528 (56)
Other operating expense 1,209 1,083 12 1,209 1,226 1,197 1,317 1,083 12
 Total noninterest expense 6,113 6,427 (4.9) 6,113 6,701 7,310 6,539 6,427 (4.9)
Income (loss) before income taxes (4) (1,038) NM (4) (2,826) (2,973) (282) (1,038) NM
Income tax expense (benefit) (130) (550) (76) (130) (950) (1,410) (220) (550) (76)
Net income (loss)  $ 126  $ (488) 126 $126  $ (1,876)  $ (1,563)  $ (62)  $ (488) 126
Net income (loss) per share:                  
Basic  $ 0.02  $ (0.08) 125 $0.02  $ (0.26)  $ (0.22)  $ (0.01)  $ (0.08) 125
Diluted  $ 0.02  $ (0.08) 125 $0.02  $ (0.26)  $ (0.22)  $ (0.01)  $ (0.08) 125
Average basic shares (000s) 7,199 5,938 21 7,199 7,200 7,200 6,146 5,938 21
Average diluted shares (000s) 7,199 5,938 21 7,199 7,200 7,200 6,146 5,938 21
Performance Ratios                  
Return on average equity 0.59% (2.50)% 124 0.59% (8.43)% (6.91)% (0.31)% (2.50)% 124
Return on average assets 0.05% (0.19)% 126 0.05% (0.69)% (0.54)% (0.02)% (0.19)% 126
Net interest margin 3.73% 3.64% 2.5 3.73% 3.57% 3.02% 3.54% 3.64% 2.5
Efficiency ratio 58.39% 60.01% (2.7) 58.39% 63.22% 76.41% 65.38% 60.01% (2.7)
Average equity 86,723 79,016 9.8 86,723 88,250 89,737 80,110 79,016 9.8
Average assets 1,054,263 1,032,454 2.1 1,054,263 1,086,365 1,158,455 1,038,176 1,032,454 2.1
Average interest-earning assets 962,328 938,805 2.5 962,328 983,548 1,057,565 939,361 938,805 2.5

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 March 31, 2011, 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 $82.1 million, or 7.90 percent of total assets at March 31, 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.

          Well-
($ in thousands) Company Savannah Bryan Minimum Capitalized
           
Qualifying Capital          
Tier 1 capital $87,812 $64,463 $21,489 -- --
Total capital 97,687 71,675 23,977 -- --
           
Leverage Ratios          
Tier 1 capital to average assets 8.39% 8.30% 8.34% 4.00% 5.00%
           
Risk-based Ratios          
Tier 1 capital to risk-weighted assets 11.29% 11.32% 11.00% 4.00% 6.00%
Total capital to risk-weighted assets 12.56% 12.59% 12.28% 8.00% 10.00%

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.

The Savannah Bancorp, Inc. and Subsidiaries
Allowance for Loan Losses and Nonperforming Assets
(Unaudited)
           
  2011 2010
  First Fourth Third Second First
($ in thousands) Quarter Quarter Quarter Quarter Quarter
           
Allowance for loan losses          
Balance at beginning of period $20,350 $19,519 $18,775 $19,611 $17,678
Provision for loan losses 4,360 6,725 5,230 3,745 5,320
Net charge-offs (2,347) (5,894) (4,486) (4,581) (3,387)
Balance at end of period $22,363 $20,350 $19,519 $18,775 $19,611
           
As a % of loans 2.73% 2.46% 2.34% 2.21% 2.26%
As a % of nonperforming loans 64.38% 56.69% 47.56% 45.59% 53.40%
As a % of nonperforming assets 45.87% 41.45% 38.44% 38.33% 44.47%
           
Net charge-offs as a % of average loans (a) 1.21% 2.26% 2.03% 2.26% 1.63%
           
Risk element assets          
Nonaccruing loans $33,921 $32,836 $40,837 $39,001 $35,579
Loans past due 90 days – accruing 817 3,064 204 2,184 1,146
Total nonperforming loans 34,738 35,900 41,041 41,185 36,725
Other real estate owned 14,014 13,199 9,739 7,793 7,374
Total nonperforming assets $48,752 $49,099 $50,780 $48,978 $44,099
           
Loans past due 30-89 days $9,175 $11,164 $10,757 $10,259 $13,740
           
Nonperforming loans as a % of loans 4.24% 4.34% 4.93% 4.85% 4.23%
Nonperforming assets as a % of loans and other real estate owned 5.85% 5.85% 6.03% 5.72% 5.03%
Nonperforming assets as a % of assets 4.69% 4.60% 4.63% 3.97% 4.21%
           
(a) Annualized          
The Savannah Bancorp, Inc. and Subsidiaries
Loan Concentration Schedule 
March 31, 2011 and December 31, 2010
           
($ in thousands)

2011
% of

Total


2010
% of

Total
% Change

($) 
Non-residential real estate          
Owner-occupied $126,066 15 $122,753 15 2.7
Non owner-occupied 188,527 23 191,255 23 (1.4)
Construction 2,763 1 3,157 -- (12)
Commercial land and lot development 40,593 5 39,882 5 1.8
Total non-residential real estate 357,949 44 357,047 43 0.3
Residential real estate          
Owner-occupied – 1-4 family 82,471 10 81,293 10 1.4
Non owner-occupied – 1-4 family 158,355 19 160,426 19 (1.3)
Construction 15,296 2 13,502 2 13
Residential land and lot development 64,655 8 68,681 8 (5.9)
Home equity lines 53,162 6 55,917 7 (4.9)
Total residential real estate 373,939 45 379,819 46 (1.5)
Total real estate loans 731,888 89 736,866 89 (0.7)
Commercial 73,616 9 74,889 9 (1.7)
Consumer 13,878 2 15,026 2 (7.6)
Unearned fees, net (230) -- (219) -- 5.0
Total loans, net of unearned fees $819,152 100 $826,562 100 (0.9)
 
The Savannah Bancorp, Inc. and Subsidiaries 
Average Balance Sheet and Rate/Volume Analysis – First Quarter, 2011 and 2010
                   
          Taxable-Equivalent   (a) Variance
Average Balance Average Rate   Interest (b)   Attributable to
QTD QTD QTD QTD   QTD QTD Vari-    
3/31/2011 3/31/2010 3/31/2011 3/31/2010   3/31/2011 3/31/2010 ance Rate Volume
($ in thousands) (%)   ($ in thousands)   ($ in thousands)
        Assets          
$41,604 $4,689 0.31 0.69 Interest-bearing deposits $32 $8 $24  $ (4) $28
125,509 77,664 2.60 2.57 Investments - taxable 806 492 314 6 308
6,896 7,831 4.35 3.99 Investments - non-taxable 74 77 (3) 7 (10)
698 6,990 0.58 0.35 Federal funds sold 1 6 (5) 4 (9)
787,621 841,631 5.51 5.60 Loans (c) 10,700 11,618 (918) (187) (731)
962,328 938,805 4.89 5.27 Total interest-earning assets 11,613 12,201 (588) (880) 292
91,935 93,649     Noninterest-earning assets          
$1,054,263 $1,032,454     Total assets          
                   
        Liabilities and equity          
        Deposits          
$139,312 $122,818 0.33 0.39 NOW accounts 113 119 (6) (18) 12
20,347 17,465 0.20 0.46 Savings accounts 10 20 (10) (11) 1
235,307 172,815 1.27 1.59 Money market accounts 736 679 57 (136) 193
42,113 67,637 0.55 0.94 Money market accounts - institutional 57 156 (99) (65) (34)
178,257 161,824 1.71 2.69 CDs, $100M or more 751 1,075 (324) (391) 67
49,532 106,262 0.86 1.10 CDs, broker 105 287 (182) (63) (119)
155,824 149,821 1.59 2.54 Other time deposits 611 939 (328) (351) 23
820,692 798,642 1.18 1.66 Total interest-bearing deposits 2,383 3,275 (892) (945) 53
25,408 35,244 3.43 3.10 Short-term/other borrowings 215 331 (116) 35 (151)
15,702 23,685 2.30 2.20 FHLB advances 89 85 4 4 --
10,310 10,310 2.91 2.87 Subordinated debt 74 73 1 1 -- 
872,112 867,881 1.28 1.76 Total interest-bearing liabilities 2,761 3,764 (1,003) (1,027) 24
91,674 79,323     Noninterest-bearing deposits          
3,754 6,234     Other liabilities          
86,723 79,016     Shareholders' equity          
$1,054,263 $1,032,454     Liabilities and equity          
    3.61 3.51 Interest rate spread          
    3.73 3.64 Net interest margin          
        Net interest income $8,852 $8,437 $415 $147 $268
$90,216 $70,924     Net earning assets          
$912,366 $877,965     Average deposits          
    1.06 1.51 Average cost of deposits          
86% 96%     Average loan to deposit ratio          
                   
(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 first quarter 2011 and 2010, respectively.
(c) Average nonaccruing loans have been excluded from total average loans and categorized in noninterest-earning assets.
CONTACT:  John C. Helmken II, President and CEO
          912-629-6486
          Michael W. Harden, Jr., Chief Financial Officer
          912-629-6496

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