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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-18560
THE SAVANNAH BANCORP, INC.
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(Exact name of registrant as specified in its charter)
Georgia 58-1861820
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
25 Bull Street, Savannah, GA 31401
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(Address of principal executive offices) (Zip Code)
912-651-8200
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _ Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of June 30,
2000.
2,703,768 shares of Common Stock, $1.00 par value per share
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<PAGE>
THE SAVANNAH BANCORP, INC. AND SUBSIDIARIES
FORM 10-Q INDEX
JUNE 30, 2000
Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Review Report of Independent Certified Public Accountants 2
Consolidated Balance Sheets - June 30, 2000 and 1999
and December 31, 1999 3
Consolidated Statements of Income for the Second Quarter and
for the Six Months Ended June 30, 2000 and 1999 4
Consolidated Statements of Changes in Shareholders' Equity
for the Six months Ended June 30, 2000 and 1999 5
Consolidated Statements of Cash Flows
for the Six months Ended June 30, 2000 and 1999 6
Condensed Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
EXHIBITS
Financial Data Schedules Exhibit 27
1
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Audit Committee of the
Board of Directors of
The Savannah Bancorp, Inc.
We have reviewed the accompanying condensed consolidated financial statements of
The Savannah Bancorp, Inc. and subsidiaries as of June 30, 2000, and for the
six-month period then ended. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
/s/ BDO Seidman, LLP
Atlanta, Georgia
August 2, 2000
2
<PAGE>
THE SAVANNAH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share data)
JUNE 30, December 31, June 30,
2000 1999 1999
ASSETS (Unaudited) (Unaudited)
----------- ----------- -----------
Cash and due from banks $ 11,395 $ 13,004 $ 11,395
Interest-bearing deposits 209 314 -
Federal funds sold 3,090 2,892 11,157
Securities available for sale,
at fair value (amortized cost of
$59,675 on 6/30/00, $59,845 on
12/31/99 and $58,512 on 6/30/99) 57,868 58,163 57,827
Loans 236,066 205,914 190,271
Less allowance for loan losses (3,059) (2,794) (2,520)
----------- ----------- -----------
Net loans 233,007 203,120 187,751
Premises and equipment, net 4,673 4,678 4,885
Other real estate owned - 45 -
Other assets 4,254 3,882 3,365
----------- ----------- -----------
TOTAL ASSETS $ 314,496 $ 286,098 $ 276,380
=========== =========== ===========
LIABILITIES
Deposits:
Non interest-bearing demand $ 39,761 $ 40,150 $ 37,858
Interest-bearing demand 47,695 40,186 55,936
Savings 12,007 12,213 12,513
Money market accounts 33,334 40,346 32,154
Time, $100,000 and over 48,582 38,889 36,526
Other time deposits 72,226 62,478 61,178
----------- ----------- -----------
Total deposits 253,605 234,262 236,165
Federal Home Loan Bank Advances 20,146 18,248 3,350
Securities sold under repurchase agreements 7,444 5,562 9,846
Federal funds purchased 5,282 905 756
Other liabilities 1,876 1,890 1,496
----------- ----------- ----------
TOTAL LIABILITIES 288,353 260,867 251,613
----------- ----------- ----------
SHAREHOLDERS' EQUITY
Common stock, par value $1 per share:
authorized 20,000,000 shares; issued
2,719,614 shares 2,720 2,720 2,720
Preferred stock, par value $1 per share:
authorized 10,000,000 shares, none issued - - -
Capital surplus 12,838 13,038 13,076
Retained earnings 12,006 10,727 9,500
Treasury stock, 15,846 shares at 6/30/00,
10,675 shares at 12/31/99, and 9,800
shares at 6/30/99 (301) (210) (107)
Accumulated other comprehensive (loss) gain (1,120) (1,044) (422)
----------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY 26,143 25,231 24,767
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 314,496 $ 286,098 $ 276,380
=========== =========== ===========
See the condensed notes to the consolidated financial statements.
3
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THE SAVANNAH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(thousands, except per share data)
FOR THE QUARTER FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------- -----------------
2000 1999 2000 1999
------- ------- ------- -------
Interest income $ 6,259 $ 5,032 $12,063 $ 9,896
Interest expense 2,834 2,086 5,390 4,201
------- ------- ------- -------
NET INTEREST INCOME 3,425 2,946 6,673 5,695
Provision for loan losses 225 120 375 225
------- ------- ------- -------
Net interest income after
provision for loan losses 3,200 2,826 6,298 5,470
------- ------- ------- -------
OTHER INCOME
Trust fees 101 52 166 84
Service charges on deposit accounts 315 227 605 458
Mortgage origination fees 133 177 219 371
Other income 126 101 230 196
------- ------- ------- -------
Total other operating income 675 557 1,220 1,109
Gains on sales of assets 0 8 0 13
------- ------- ------- -------
Total other income 675 565 1,220 1,122
------- ------- ------- -------
OTHER EXPENSE
Salaries and employee benefits 1,272 1,155 2,530 2,294
Occupancy expense 168 165 333 320
Equipment expense 145 142 299 278
Other operating expenses 729 649 1,402 1,245
------- ------- ------- -------
Total other expense 2,314 2,111 4,564 4,137
------- ------- ------- -------
Income before provision for
income taxes 1,561 1,280 2,954 2,455
Provision for income taxes 505 415 943 799
------- ------- ------- -------
NET INCOME $ 1,056 $ 865 $ 2,011 $ 1,656
======= ======= ======= =======
NET INCOME PER SHARE:
BASIC $ 0.39 $ 0.32 $ 0.74 $ 0.61
======= ======= ======= =======
DILUTED $ 0.38 $ 0.31 $ 0.73 $ 0.60
======= ======= ======= =======
See the condensed notes to the consolidated financial statements.
4
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<TABLE>
THE SAVANNAH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
Accumulated
Other
Common Stock Capital Retained Treasury Comprehensive
($ in thousands, except share data) Shares Amount Surplus Earnings Stock Income Total
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 2,719,614 $2,720 $13,076 $ 8,438 ($275) $516 $24,475
Comprehensive income:
Net income 1,656 1,656
Change in unrealized losses on
securities available for sale,
net of tax (938) (938)
-------
Total comprehensive income 718
Cash dividends - $.22 per share (594) (594)
Exercise of options 168 168
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Balance, June 30, 1999 2,719,614 $2,720 $13,076 $ 9,500 ($107) ($422) $24,767
===========================================================================
Balance, December 31, 1999 2,719,614 $2,720 $13,038 $10,727 ($210) ($1,044) $25,231
Comprehensive income:
Net income 2,011 2,011
Change in unrealized losses on
securities available for sale,
net of tax (76) (76)
-------
Total comprehensive income 1,935
Cash dividends - $.27 per share (732) (732)
Exercise of options (200) 298 98
Purchase of treasury stock (389) (389)
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Balance, June 30, 2000 2,719,614 $2,720 $12,838 $12,006 ($301) ($1,120) $26,143
===========================================================================
See the condensed notes to the consolidated financial statements.
</TABLE>
5
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THE SAVANNAH BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) FOR THE
FOR THE SIX MONTHS YEAR ENDED
($ in thousands) ENDED JUNE 30, DECEMBER 31,
----------------- ------------
OPERATING ACTIVITIES 2000 1999 1999
------- ------- ------------
Net income $ 2,011 $ 1,656 $ 3,533
Adjustments to reconcile net income to
cash provided by operating activities:
Provision for loan losses 375 225 545
Depreciation of premises and equipment 257 277 584
Gains on sale or calls of investment
securities - (13) (13)
Amortization of investment securities
discount-net 21 59 91
Increase in other assets (315) (120) (245)
Increase (decrease) in other liabilities 21 (253) 81
------- ------- ------------
Net cash provided by operating activities 2,370 1,831 4,576
------- ------- ------------
INVESTING ACTIVITIES
Purchases of investment securities (2,510) (10,350) (15,834)
Proceeds from sales or calls of investment - 2,377 1,008
Proceeds from maturities of investment
securities 2,661 11,279 16,765
Net increase in loans made to customers (30,262) (19,441) (35,130)
Capital expenditures (252) (335) (435)
------- ------- ------------
Net cash used in investing activities (30,363) (16,470) (33,626)
------- ------- ------------
FINANCING ACTIVITIES
Net (decrease) increase in demand,
savings and money market accounts (98) 8,545 2,978
Net increase (decrease) in certificates
of deposit 19,441 (4,751) (1,088)
Net increase in securities sold
under agreements to repurchase 1,882 7,172 2,888
Net increase (decrease) in FHLB advances 1,898 (1,100) 13,798
Net increase in federal funds purchased 4,377 218 368
Purchase of treasury stock (389) - (207)
Dividend payments (732) (594) (1,244)
Exercise of options 98 168 234
------- ------- ------------
Net cash provided by financing activities 26,477 9,658 17,727
------- ------- ------------
(DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (1,516) (4,981) (11,323)
Cash and cash equivalents at beginning
of period 16,210 27,533 27,533
------- ------- ------------
Cash and cash equivalents at end of period $14,694 $22,552 $ 16,210
======= ======= ============
See the condensed notes to the consolidated financial statements.
6
<PAGE>
THE SAVANNAH BANCORP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six-month period ended June 30, 2000, are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000. For further information, refer to the consolidated financial
statements and footnotes thereto, included in the Company's annual report on
Form 10-K for the year ended December 31, 1999.
NOTE 2 - SHARES USED IN COMPUTING NET INCOME PER SHARE
Net income per diluted share is computed using the weighted-average number of
common and dilutive common equivalent shares outstanding during the periods. The
diluted weighted-average shares outstanding are calculated as follow:
Second Quarter First Six Months
(thousands) 2000 1999 2000 1999
----- ----- ----- -----
Basic shares outstanding 2,706 2,706 2,708 2,698
Common stock equivalents 42 70 43 76
----- ----- ----- -----
Diluted shares outstanding 2,748 2,776 2,751 2,774
===== ===== ===== =====
The Company had no amortization of merger related intangible assets and
therefore no separate earnings per share, excluding the amortization of
intangibles has been presented.
NOTE 3 - FORWARD LOOKING STATEMENTS
The Savannah Bancorp, Inc. (the Company) may from time to time make written or
oral "forward-looking statements," including statements contained in the
Company's filings with the Securities and Exchange Commission (including this
quarterly report on Form 10-Q and, in its reports to shareholders and in other
communications by the Company, which are made in good faith by the Company
pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995.
These forward-looking statements involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations, estimates and
intentions, that are subject to change based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's financial performance to differ materially from the
plans, objectives, expectations, estimates and
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NOTE 3 - FORWARD LOOKING STATEMENTS (CONTINUED)
intentions expressed in such forward-looking statements: the strength of the
United States economy in general and the strength of the local economies in
which the Company conducts operations; the effects of, and changes in, trade,
monetary and fiscal policies and laws, including interest rate policies of the
Board of Governors of the Federal Reserve System; inflation, interest rate,
market and monetary fluctuations; the timely development of and acceptance of
new products and services of the Company and the perceived overall value of
these products and services by customers, including the features, pricing and
quality compared to competitors' products and services; the willingness of
customers to substitute competitors' products and services for the Company's
products and services; the success of the Company in gaining regulatory approval
of its products and services, when required; the impact of changes in financial
services' laws and regulations (including laws concerning taxes, banking,
securities and insurance); technological changes; acquisitions; changes in
consumer spending and saving habits; and the success of the Company at managing
the risks involved in the foregoing.
The Company cautions that the foregoing list of important factors is not
exclusive. The Company does not undertake to update any forward-looking
statement, whether written or oral, that may be made from time to time by or on
behalf of the Company.
8
<PAGE>
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For a comprehensive presentation of The Savannah Bancorp, Inc.'s financial
condition at June 30, 2000 and December 31, 1999 and results of operations for
the quarters ended June 30, 2000 and 1999, the following analysis should be
reviewed along with other information including the Company's December 31, 1999
Annual Report on Form 10-K.
THE SAVANNAH BANCORP, INC. AND SUBSIDIARIES
SECOND QUARTER FINANCIAL HIGHLIGHTS
JUNE 30, 2000 AND 1999
(Unaudited)
Percent
BALANCE SHEET DATA Increase
AT JUNE 30 2000 1999 (Decrease)
----------------------------------------------------------------------------
( thousands, except per share data)
Total assets $ 314,496 $ 276,380 14
Interest-earning assets 298,643 259,807 15
Loans 236,066 190,271 24
Allowance for loan losses 3,059 2,520 21
Nonperforming assets 437 207 111
Deposits 253,605 236,165 7
Interest-bearing liabilities 246,716 212,259 16
Shareholders' equity 26,143 24,767 6
Allowance for possible
loan losses to total loans 1.30% 1.32% (2)
Loan to deposit ratio 93.08% 80.57% 16
Equity to assets 8.31% 8.96% (7)
Tier 1 capital to risk-
weighted assets 11.50% 12.44% (10)
Book value per share $ 9.67 $ 9.14 6
Outstanding shares 2,704 2,710 0
KEY PERFORMANCE DATA
RESULTS OF OPERATIONS
FOR THE SECOND QUARTER
NET INCOME $1,056 $ 865 22
Return on average assets 1.39 % 1.29 % 8
Return on average equity 16.43 % 13.97 % 18
Net interest margin 4.83 % 4.75 % 2
Efficiency ratio ** 56.44 % 60.26 % (6)
NET INCOME PER SHARE:
Basic $ 0.39 $ 0.32 22
Diluted $ 0.38 $ 0.31 23
AVERAGE SHARES:
Basic 2,706 2,706 0
Diluted 2,748 2,776 (1)
9
<PAGE>
THE SAVANNAH BANCORP, INC. AND SUBSIDIARIES
SECOND QUARTER FINANCIAL HIGHLIGHTS - CONTINUED
JUNE 30, 2000 AND 1999
(Unaudited)
Percent
KEY PERFORMANCE DATA Increase
FOR THE FIRST SIX MONTHS 2000 1999 (Decrease)
-----------------------------------------------------------------------------
( thousands, except per share data)
NET INCOME $2,011 $ 1,656 21
Return on average assets 1.35 % 1.26 % 7
Return on average equity 15.69 % 13.52 % 16
Net interest margin 4.81 % 4.60 % 5
Efficiency ratio ** 57.82 % 60.80 % (5)
NET INCOME PER SHARE:
Basic $ .74 $ 0.61 21
Diluted $ .73 $ 0.60 22
AVERAGE SHARES:
Basic 2,708 2,698 0
Diluted 2,751 2,774 (1)
** - Efficiency ratio = other expense / (net interest income + other income
10
<PAGE>
LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT
The objectives of funds management include maintaining adequate liquidity and
reasonable harmony between the repricing of sources and uses of funds for
interest sensitive assets and liabilities. The goal of liquidity management is
to ensure the availability of adequate funds to meet the loan demand and the
deposit withdrawal needs of customers. This is achieved through maintaining a
combination of sufficient liquid assets, core deposit growth and unused capacity
to purchase funds in the money markets.
During the second quarter 2000, loans increased $15.4 million to $236.1 million,
while deposits increased $9.9 million to $253.6 million. The loan to deposit
ratio increased from 87.90% at December 31, 1999 to 93.08% at June 30, 2000.
Loan growth continues to be fueled by an excellent local economy. Developing
strategies to grow local deposits through marketing plans, incentives and higher
rates is a high management priority for the current year. Such strategies have
included advertising higher rate time deposits in the local media and
subscribing to an Internet bulletin board service designed to connect
subscribing time deposit issuers and investors across the nation. We have also
identified sources to acquire brokered deposits and to sell participations in
certain loans as a part of our contingency plan for liquidity needs.
Both subsidiary banks have a Blanket Floating Lien Agreement with the Federal
Home Loan Bank of Atlanta ("FHLB"). Under these agreements, the banks have
credit lines up to 75 percent of the book value of their 1-4 family first
mortgage loans, or approximately $25.2 million as of June 30, 2000. In addition,
the banks had approximately $23.8 million par value of investment securities
pledged as collateral at the FHLB. In aggregate, the Company had secured
borrowing capacity of approximately $47.8 million of which $20.1 million was
advanced at June 30, 2000. These credit arrangements serve as a core funding
source as well as liquidity backup for the banks. The Savannah Bank, N.A. and
Bryan Bank & Trust have credit lines approved by the FHLB of 20 percent and 16
percent of assets, respectively, subject to the FHLB collateral requirements.
The subsidiary banks also have $20 million of temporary federal funds borrowing
lines available from correspondent banks.
A continuing objective of asset liability management is to maintain a high level
of variable rate assets, including variable rate loans and shorter-maturity
investments, to balance increases in interest rate sensitive liabilities.
Interest sensitivity management and its effects on the net interest margin
require analyses and actions that take into consideration volumes repriced and
the timing and magnitude of their change.
The Company's liability-sensitive cash flow maturity and repricing gap at June
30, 2000, was $5.6 million within one year, or 1.9 percent of total
interest-earning assets. Fixed rate earning assets with maturities over five
years totaled 18.2 million, or 6.1 percent of total interest-earning assets. See
Table 1 for cash flow maturity and repricing gap. The maturity and repricing gap
between one and five years will adjust significantly each year through normal
loan and deposit activity. Based on the presently expected principal cash flows
and interest rates and the policies and procedures in place to monitor interest
11
<PAGE>
rate risk, management believes interest rate risk is being adequately managed
within reasonable earnings fluctuation tolerances.
The short-term liability-sensitivity position of the Company indicates that net
interest income over a one-year period will be impacted negatively when the
prime rate and deposit rates rise. Soon after the rate increases cease, net
interest income will be impacted negatively due to the continued time deposit
repricing at higher rates. The opposite is true in the event of falling rates.
The gap position after one year is of less concern because management has time
to respond to changing financial conditions with actions that reduce the impact
of the longer-term gap positions. However, fixed rate assets with maturities
over five years may include significant rate risk in the event of significant
market rate increases where the subsidiary banks have no opportunity to reprice
the earning assets.
The Company is a party to financial instruments with off-balance sheet risks in
the normal course of business to meet the financing needs of its customers. At
June 30, 2000, the Company had unfunded commitments to extend credit of $47.5
million and outstanding stand-by letters of credit of $2.4 million. Since many
of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
Company uses the same credit policies in establishing commitments and issuing
letters of credit as it does for on-balance sheet instruments. Management does
not anticipate that funding obligations arising from these financial instruments
will adversely impact its ability to fund future loan growth or deposit
withdrawals.
FINANCIAL CONDITION AND CAPITAL RESOURCES
The financial condition of the Company can be assessed by examining the changes
and relationships in the sources and uses of funds as shown in the consolidated
statements of cash flows. At June 30, 2000, the investment in bank premises and
equipment totaled $4.7 million, or approximately 18 percent of equity capital.
All investment securities are classified as available for sale. Net unrealized
losses on available for sale securities increased since June 1999 due to the
rise in market interest rates. These amounts are included in shareholders'
equity in other accumulated comprehensive income.
The Company announced a stock repurchase program on October 19, 1999 for up to
50,000 shares of common stock. Through June 30, 2000, 30,800 shares had been
repurchased at an average price of $19.32 per share. Repurchased shares will be
held in the Company's treasury and will be available for resale and for general
corporate purposes.
The Company's lending and investment policies continue to emphasize high quality
growth. Management is not aware of any known trends, events or uncertainties
12
<PAGE>
that will have or that are reasonably likely to have a material effect on the
liquidity, capital resources or operations of the Company.
The Office of the Comptroller of the Currency (OCC) has adopted capital
requirements that specify the minimum level for which no prompt corrective
action is required. In addition, the FDIC adopted FDIC insurance assessment
rates based on certain "well-capitalized" risk-based and equity capital ratios.
As of June 30, 2000, the Company and the subsidiary banks exceed the minimum
requirements necessary to be classified as "well-capitalized."
Total equity capital for the Company is $26.1 million, or 8.3% of total assets
at June 30, 2000. Tier 1 Capital is 11.50% of Risk-Weighted Assets at the same
date. The strong capital and earnings ratios allow the banks to continue their
aggressive growth objectives without having to raise additional capital.
RESULTS OF OPERATIONS
SECOND QUARTER 2000 COMPARED WITH SECOND QUARTER 1999
Net income for the second quarter 2000 was $1,056,000, up 22 percent from
$865,000 in the second quarter 1999. This represented annualized returns of
16.43 percent on average equity and 1.39 percent on average assets for the
second quarter, 2000. Diluted earnings per share were $0.38 in the second
quarter, 2000 compared to $0.31 for the same period in 1999, an increase of 23
percent.
Net interest income was $3,425,000 as compared to $2,946,000 in 1999, an
increase of $479,000, or 16 percent. Average loans were $226.7 million, or 24
percent, higher in the second quarter 2000 as compared to the second quarter
1999. The prime rate increased 50 basis points to 9.50 percent during the second
quarter 2000. The prime rate was 7.75 percent in the second quarter 1999. Time
deposit market rates increased between 125 and 175 basis points in the second
quarter 2000 as compared to the same period in 1999. The net yield on interest
earning assets increased to 4.83 percent in 2000 from 4.75 percent in 1999 as a
result of improved loan ratios and higher rates.
The provision for loan losses was $225,000 in 2000 compared to $120,000 in 1999.
Net loan charge-offs totaled $90,000 for the second quarter 2000 and $29,000 in
1999. There was $437,000 in non-performing assets at June 30, 1999 and $207,000
at June 30, 1999. The allowance for possible loan losses was 1.30 percent of
loans at June 30, 2000 and 1.32 percent at June 30, 1999.
Other income was $675,000 in 2000 compared to $565,000 in 1999. Other income
included mortgage origination fees of $133,000 and $177,000 in 2000 and 1999,
respectively. Higher loan rates caused decreases in mortgage origination volumes
and fees throughout the industry. Fee on trust services increased to $101,000 in
2000 from $52,000 in 1999.
Other expenses were $2,314,000 in 2000 compared to $2,111,000 in 1999, an
increase of $203,000, or 10 percent. Personnel expense increased $117,000, or 10
percent in 2000.
13
<PAGE>
The provision for income taxes was $505,000 in 2000 and $415,000 in 1999. The
effective federal and state tax rates were 32.4 percent in 2000 and 1999,
respectively. The Company has never recorded a valuation allowance against
deferred tax assets. All deferred tax assets are considered to be realizable due
to expected future taxable income.
FIRST SIX MONTHS 2000 COMPARED WITH FIRST SIX MONTH 1999
Net income for the first six months 2000 was $2,011,000, up 21 percent from
$1,656,000 in the first six months 1999. This represented annualized returns of
15.69 percent on average equity and 1.35 percent on average assets for the first
six months 2000. Diluted earnings per share were $0.73 in the first six months,
2000 compared to $0.60 for the same period in 1999, an increase of 22 percent.
Net interest income was $6,673,000 as compared to $5,695,000 in 1999, an
increase of $978,000, or 17 percent. Average loans were $219.7 million, or 24
percent, higher in the first six months 2000 as compared to the first six months
1999. The prime rate increased 100 basis points to 9.50 percent during the first
six months 2000. The prime rate was 7.75 percent in the first six months 1999.
Time deposit market rates increased between 100 and 175 basis points in the
first six months 2000 as compared to the same period in 1999. The net yield on
interest earning assets increased to 4.81 percent in 2000 from 4.60 percent in
1999 as a result of and higher rates.
The provision for loan losses was $375,000 in 2000 compared to $225,000 in 1999.
Net loan charge-offs totaled $110,000 for the first six months 2000 and $28,000
in 1999. The higher provision is due to the increased loans and net charge-offs.
Other income was $1,220,000 in 2000 compared to $1,122,000 in 1999 and increase
of 9 percent. Other income included mortgage origination fees of $219,000 and
$371,000 in 2000 and 1999, respectively. Higher loan rates caused decreases in
mortgage origination volumes and fees throughout the industry. Fee on trust
services increased to $166,000 in 2000 from $84,000 in 1999.
Other expenses were $4,564,000 in 2000 compared to $4,137,000 in 1999, an
increase of $427,000, or 10 percent. Personnel expense increased $236,000, or 10
percent in 2000.
The provision for income taxes was $943,000 in 2000 and $799,000 in 1999. The
effective federal and state tax rates were 31.9 percent and 32.5 percent in 2000
and 1999, respectively.
14
<PAGE>
TABLE 1 - LONG-TERM MATURITY GAP AND REPRICING DATA
The following is the Company's long-term maturity and repricing data for the
Company as of June 30, 2000.
<TABLE>
($ in 000's) One Two Three Four Five
INTEREST-BEARING ASSETS Year Years Years Years Years Beyond Total
----------------------- ----------- ----------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment securities 3,012 4,327 14,273 14,253 11,914 11,897 59,676
6.15% 6.67% 6.23% 6.12% 6.12% 6.16% 6.20%
Interest-bearing deposits 209 - - - - - 209
6.45% - - - - - 6.45%
Federal funds sold 3,090 - - - - - 3,090
6.45% - - - - - 6.45%
Loans - fixed rates 63,545 27,498 28,980 13,442 6,630 6,387 146,482
Loans - variable rates 51,785 11,028 9,167 4,684 4,338 8,184 89,186
10.13% 10.37% 10.07% 9.75% 9.92% 10.36% 10.15%
----------- ----------- ----------- ----------- ----------- ---------- -----------
Total earning assets 121,641 42,853 52,420 32,379 22,882 26,468 298,643
9.33% 8.94% 8.42% 7.46% 7.60% 8.03% 8.67%
INTEREST BEARING DEPOSITS:
NOW and savings 5,970 5,970 5,970 5,970 5,970 29,852 59,702
2.23% 2.23% 2.23% 2.23% 2.23% 2.23% 2.23%
Money market accts 3,354 3,355 3,355 3,355 3,355 16,560 33,334
4.28% 4.28% 4.28% 4.28% 4.28% 4.34% 4.31%
Time, $100 and over 37,355 5,061 4,138 516 1,512 - 48,582
5.99% 6.57% 6.82% 6.64% 7.02% - 6.16%
Other Time 51,659 10,149 7,737 1,520 1,161 - 72,226
5.69% 6.33% 6.52% 6.11% 6.27% - 5.89%
----------- ---------- ---------- ---------- ---------- ---------- -----------
Total interest bearing
Deposits 98,338 24,535 21,200 11,361 11,998 46,412 213,844
5.55% 5.10% 5.02% 3.56% 3.80% 2.98% 4.68%
Funds Purchased 12,726 - - - - - 12,726
6.00% - - - - - 6.00%
Federal Home Loan Bank Advances 16,207 209 213 217 1,221 2,079 20,146
6.79% 6.00% 6.00% 6.00% 6.00% 6.00% 6.63%
----------- ---------- ---------- ---------- ---------- ---------- ----------
Total interest bearing liabilities 127,271 24,744 21,413 11,578 13,219 48,491 246,716
5.75% 5.11% 5.03% 3.60% 4.00% 3.11% 4.91%
GAP-EXCESS ASSETS (5,630) 18,109 31,007 20,801 9,663 (22,023) 51,927
----------- ---------- ----------- ----------- ----------- ---------- -----------
GAP-CUMULATIVE-6/30/00 (5,630) 12,479 43,486 64,287 73,950 51,927 51,927
----------- ---------- ----------- ----------- ----------- ---------- -----------
</TABLE>
(a)- estimated cash flow runoff of 10 percent per year has been assumed.
The Company's cash flow gap is $(5,630) within one year, or 1.9 percent of total
interest-earning assets. Fixed rate earning assets with maturities over five
years total $18,284 or 6.1 percent of total interest-earning assets. The cash
flow gaps between one and five years will adjust significantly each year through
normal loan and deposit activity. Based on the principal cash flows and interest
rates presented above, and the policies and procedures in place to monitor
interest rate risk, management believes interest rate risk is being adequately
managed within reasonable earnings fluctuation tolerances of 5 percent of the
net interest income.
15
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal proceedings. None
Item 2. Changes in securities. None
Item 3. Defaults upon senior securities. None
Item 4. Submission of matters to a vote of security holders. None
Item 5. Other information. None
Item 6. Exhibits or reports on Form 8-K.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Savannah Bancorp, Inc.
-------------------------------
(Registrant)
Date 8/2/00 /s/ Archie H. Davis
-------- ------------------------
Archie H. Davis - President & CEO
Date 8/2/00 /s/ Robert B. Briscoe
-------- -------------------------
Robert B. Briscoe
Chief Financial Officer
(Principal Accounting Officer)
17
