Savannah Bancorp Reports Fourth Quarter and Annual Results

SAVANNAH, Ga., Feb. 1, 2012 (GLOBE NEWSWIRE) -- The Savannah Bancorp, Inc. (Nasdaq:SAVB) (the "Company") reported a net loss for the fourth quarter 2011 of $2,034,000 compared to a net loss of $1,876,000 for the fourth quarter 2010. Net loss per diluted share was 28 cents in the fourth quarter 2011 compared to a net loss per diluted share of 26 cents in 2010. The net loss for 2011 was $2,172,000 compared to a net loss of $3,989,000 in 2010. Net loss per diluted share was 30 cents in 2011 compared to a net loss per diluted share of 60 cents in 2010. The decline in the net loss for 2011 was primarily due to an increase in the net interest margin and a decrease in the Company's provision for loan losses. Pretax earnings before the provision for loan losses and gain/loss on sale of securities and foreclosed assets increased $2,119,000, or 13 percent, to $17,884,000 in 2011 compared to $15,765,000 in 2010. Core earnings in the fourth quarter of 2011 declined slightly to $4,320,000 compared to $4,448,000 in the fourth quarter of 2010. Other growth and performance ratios are included in the attached financial highlights.

Total assets decreased 7.9 percent to $985 million at December 31, 2011, down approximately $82 million from $1.07 billion a year earlier. Loans totaled $760 million compared to $827 million one year earlier, a decrease of approximately $67 million or 8.1 percent. Deposits totaled $847 and $924 million at December 31, 2011 and 2010, respectively, a decrease of 8.3 percent. On June 25, 2010, The Savannah Bank, N.A. ("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. 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 $84.1 million at December 31, 2011 compared to $85.8 million at December 31, 2010. The Company's total capital to risk-weighted assets ratio was 12.63 percent at December 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, "In reviewing 2011, there are several notable positives. Our net interest margin increased from 3.43 percent in 2010 to 3.88 percent in 2011, resulting in a 6.0 percent increase in our net interest income year over year. Most of the improvement in our margin is a result of our lower cost of deposits. This is our highest net interest margin since 2007. We reduced salaries and benefits $666,000 and information technology expense $393,000 saving us more than $1 million annually. All of this, and more, contributed to our 62 percent efficiency ratio in 2011, an improvement over 66 percent in 2010 but well short of our goal of less than 60 percent. There is more work to do."

The Company's allowance for loan losses was $21,917,000, or 2.89 percent of total loans at December 31, 2011 compared to $20,350,000 or 2.46 percent of total loans a year earlier. Nonperforming assets were $55,213,000 or 5.60 percent of total assets at December 31, 2011 compared to $49,099,000 or 4.60 percent at December 31, 2010. Other real estate owned ("OREO") increased $7,133,000, or 54 percent, to $20,332,000 in 2011. For 2011, net charge-offs were $18,468,000 compared to net charge-offs of $18,348,000 for 2010. The provision for loan losses for 2011 was $20,035,000 compared to $21,020,000 for 2010. Fourth quarter 2011 net charge offs and provision for loan losses were $7,447,000 and $6,510,000, respectively compared to net charge offs and provision for loan losses of $5,894,000 and $6,725,000, respectively, for the fourth quarter of 2010.  Both the net charge-offs and the provision for loan losses have remained elevated in 2011. 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, "We anticipated a reduction in charge-offs in 2011 compared to 2010 but several year-end appraisals resulted in significant impairments and resulted in this year's charge-offs again surpassing $18 million.  We will continue to aggressively review and address our loan and OREO portfolios.

Our disappointing fourth quarter and annual loss, led by the previously mentioned charge-offs, highlight the negatives of this quarter and year.  Loan balances were down $45 million on average in 2011, which is not surprising given the elevated level of charge-offs, normal repayments, weakened loan demand and increased underwriting standards.  Despite the lower loan balances, we increased our allowance for loan losses by 7.7 percent, to 2.89 percent of loans at year end.  As we work problem assets into and through our Special Assets Division, our relationship managers will be able to return their focus to business development and an intensified calling effort that includes senior management and is directed by me.  There continues to be tremendous opportunity to gain market share in our trade areas."

Net interest income increased $2,008,000, or 6.0 percent, in 2011 versus 2010. The net interest margin increased to 3.88 percent in 2011 as compared to 3.43 percent in 2010. The Company saw increases in its net interest income and net interest margin due primarily to a lower cost on interest-bearing deposits in 2011 compared to 2010 partially offset by less interest income on loans. The cost of interest-bearing deposits decreased to 1.03 percent for the year ended December 31, 2011 compared to 1.48 percent for the same period in 2010.  Average loans declined approximately $45 million for the year ended December 31, 2011 compared to the same period in 2010. The decrease in average loans was due to normal pay downs, significant charge-offs, and weakened demand for new loans.

Net interest income decreased $151,000, or 1.7 percent during the fourth quarter of 2011 versus the same period in 2010. The net interest margin increased to 3.88 percent in the fourth quarter of 2011 as compared to 3.57 percent in the same period in 2010. While the net interest margin increased, net interest income decreased in the fourth quarter of 2011 compared to the same period in 2010 due to the lower level of interest-earning assets. Average loans declined approximately $50 million for the fourth quarter of 2011 compared to the same period in 2010. This decline was also due to normal pay downs, significant charge-offs, and weakened demand for new loans.

On a linked quarter basis, the net interest margin decreased 13 basis points compared to the third quarter of 2011. The Company held, on average, $34 million more in lower-yielding interest-bearing deposits during the fourth quarter of 2011 compared to the third quarter.

Noninterest income decreased $665,000, or 9.1 percent, in 2011 versus 2010. This decrease was primarily related to a decline in service charges on deposit accounts of $330,000, or 18 percent, and other operating income of $319,000, or 17 percent, in 2011 compared to 2010. The decrease in service charges was primarily due to recent regulatory guidance related to overdraft charges. The decline 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 2010. Noninterest income decreased $270,000, or 15 percent, in the fourth quarter of 2011 compared to the same period in 2010 primarily due to a $66,000 decline in service charges on deposit accounts and a decline in other operating income. In the fourth quarter of 2010, the Company recorded a $254,000 gain in other operating income related to the sale of its 50 percent interest in a parking lot.

Noninterest expense decreased $724,000, or 2.7 percent, to $26,253,000 during 2011 as compared to 2010. Salaries and employee benefits decreased $667,000, or 5.6 percent, information technology declined $393,000, or 19 percent, and FDIC deposit insurance declined $385,000, or 23 percent. The decrease in salaries and employee benefits was due to the Company averaging fewer employees during 2011 when compared to 2010. The Company renegotiated and renewed its contract with its core processor which contributed to the decline in the information technology expense. The decrease in the FDIC deposit insurance premiums was due to changes to the FDIC assessment process which became effective in the second quarter of 2011. These decreases were partially offset by an increase in loss on sale of foreclosed assets of $207,000, or 8.4 percent, and an increase in other operating expense of $722,000, or 16 percent. The increase in other operating expense was mainly due to a $684,000 increase in loan collection costs and OREO expenses in 2011. The Company had significantly more activity in OREO in 2011. Noninterest expense declined $88,000, or 1.3 percent, during the fourth quarter of 2011 compared to the same period in 2010. Salaries and employee benefits decreased $263,000, or 9.0 percent, occupancy and equipment declined $147,000, or 14 percent, and FDIC deposit insurance declined $286,000, or 64 percent. These decreases were offset by an increase in loss on sale of foreclosed assets of $187,000, or 33 percent, and an increase in other operating expense of $471,000, or 40 percent. The increase in other operating expense was due to a $425,000 increase in loan collection costs and OREO expenses during the fourth quarter of 2011 compared to the same period in 2010.

The Savannah Bancorp, Inc., a bank holding company for The Savannah Bank, N.A., 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 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.

A printable format of this entire Annual 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."