SAVB The Savannah Bancorp, Inc. (MM)

The Savannah Bancorp (Nasdaq: SAVB) reported record net income of $9,040,000 in 2005 compared with net income of $5,736,000 in 2004, an increase of 58 percent. Net income per diluted share was $2.04 for 2005 and $1.36 in 2004, an increase of 50 percent. These earnings represent a return of 19.06 percent on average equity, 1.32 percent on average assets and an efficiency ratio of 51.9 percent for 2005. All per share amounts reflect the effect of a 5-for-4 stock split in the form of a 25 percent stock dividend distributed on December 20, 2004. Net income for the fourth quarter 2005 was $2,721,000, up 53 percent from $1,775,000 in the fourth quarter 2004. Net income per diluted share was 58 cents compared to 42 cents per share in 2004, an increase of 38 percent. Average outstanding diluted shares increased 484,000, or 11 percent, in the fourth quarter 2005 compared to the fourth quarter 2004. The increase is due to the August 2005 private placement offering of 397,000 shares, the exercise of stock options and increases in common stock equivalents. For the fourth quarter 2005, return on average equity was 18.75 percent, return on average assets was 1.50 percent and the efficiency ratio was 49.4 percent. Total assets increased 16 percent to $718 million at December 31, 2005, up from $617 million a year earlier. Loans, excluding $10 million in loans held for sale, totaled $614 million compared with $500 million one year earlier, an increase of 23 percent. Deposits totaled $601 million at December 31, 2005 and $506 million at December 31, 2004, an increase of 19 percent. Deposits included $95 million and $87 million of brokered deposits at December 31, 2005 and 2004, respectively. Average total assets increased 23 percent to $685 million in 2005 from $557 million in 2004. Average portfolio loans were $565 million compared with $441 million in 2004, an increase of 28 percent. Average deposits were $577 million in 2005 and $448 million in 2004, an increase of 29 percent. Earnings growth rates continued to improve relative to prior periods due primarily to excellent loan and core deposit growth, an improved net interest margin and increased operating efficiencies. Net interest income increased 36 percent due in part to the increase in short-term interest rates during 2005. The net interest margin improved to 4.25 percent from 3.86 percent. Noninterest income increased 7 percent and noninterest expenses increased 17 percent in 2005 compared to 2004. Nonperforming loans were $1,357,000, or 0.22 percent of total loans at December 31, 2005, up from $538,000, or 0.11 percent of total loans at December 31, 2004. Net loan losses for 2005 were $76,000, or 0.01 percent of average loans, compared to $128,000, or 0.03 percent in 2004. At December 31, 2005, Harbourside Mortgage, the Hilton Head, South Carolina loan production office, had total loans, excluding loans held for sale, of $99 million, up $39 million from a year earlier. Harbourside division's earnings were $466,000 in the fourth quarter of 2005 and they were $1,213,000 for 2005. This compares with fourth quarter 2004 earnings of $81,000 and earnings of $47,000 for 2004. During the fourth quarter, final regulatory approvals were received to open Harbourside Community Bank, a Federal Stock Savings bank being organized on Hilton Head Island, SC as the company's third banking subsidiary. Due to delays in completion of the main office building, opening is planned during February 2006. Operating results include approximately $128,000 of pre-opening expenses related to Harbourside. "2005 was an outstanding year for our company. Every operating unit within the company made a significant contribution to growth, income and efficiency which results in the exceptional performance that we report to our shareholders today. Congratulations and thanks to each of our dedicated team members," said CEO G. Mike Odom, Jr. and President John C. Helmken II in a statement to employees. Today, the Board of Directors approved a 3.7 percent increase in the regular quarterly cash dividend to 14 cents per share from 13.5 cents per share. The first quarter dividend is payable on February 27, 2006 to shareholders of record on February 10, 2006. The Savannah Bancorp, Inc. is a bank holding company for The Savannah Bank, N.A. and Bryan Bank & Trust (Richmond Hill, Georgia). The Company has five banking locations in Savannah and one in Richmond Hill. Additionally, the Company operates Harbourside Mortgage Company, a division of The Savannah Bank, N.A., a loan production office on Hilton Head Island, South Carolina. Harbourside Mortgage is scheduled to become Harbourside Community Bank, FSB in February 2006. The Savannah Bancorp, Inc.'s Corporate Website at www.savb.com contains comprehensive historical and current financial information on the Company. Forward-Looking Statements This press release may contain 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 regarding future expectations or events. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. 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. A printable PDF 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 the "Latest Earnings Release" selection. -0- *T The Savannah Bancorp, Inc. and Subsidiaries Fourth Quarter Financial Highlights December 31, 2005 and 2004 (thousands, except per share data) (Unaudited) Balance Sheet Data at December 31 2005 2004 % Change ----------------------------------------- --------- ------------------ Total assets $717,901 $617,341 16 Interest-earning assets 685,531 593,035 16 Loans 613,667 499,868 23 Allowance for credit losses 7,813 6,389 22 Nonperforming assets 1,357 998 36 Deposits 600,510 506,120 19 Interest-bearing liabilities 558,116 488,546 14 Shareholders' equity 58,543 40,071 46 Allowance for credit losses to total loans 1.27 % 1.28 % (0.8) Nonperforming assets to total loans and OREO 0.22 % 0.20 % 10 Loan to deposit ratio 102.19 % 98.76 % 3.5 Equity to assets 8.15 % 6.49 % 26 Tier 1 capital to risk-weighted assets 11.52 % 9.95 % 16 Total capital to risk-weighted assets 12.77 % 11.20 % 14 Outstanding shares (a) 4,591 4,112 12 Book value per share (a) $ 12.75 $ 9.74 31 Market value per share (a) $ 35.48 $ 27.05 31 Performance Data For the Year ----------------------------- Net income $ 9,040 $ 5,736 58 Return on average assets 1.32 % 1.03 % 28 Return on average equity 19.06 % 15.04 % 27 Net interest margin 4.25 % 3.86 % 10 Efficiency ratio 51.91 % 58.47 % (11) Per share data: (a) Net income - basic $ 2.09 $ 1.40 49 Net income - diluted $ 2.04 $ 1.36 50 Dividends $ 0.540 $ 0.524 3.1 Average shares: (a) Basic 4,317 4,109 5.1 Diluted 4,425 4,209 5.1 Performance Data For the Fourth Quarter --------------------------------------- Net income $ 2,721 $ 1,775 53 Return on average assets 1.50 % 1.16 % 29 Return on average equity 18.75 % 17.84 % 5.1 Net interest margin 4.48 % 4.00 % 12 Efficiency ratio 49.41 % 55.94 % (12) Per share data: (a) Net income - basic $ 0.59 $ 0.43 40 Net income - diluted $ 0.58 $ 0.42 38 Dividends $ 0.135 $ 0.132 2.3 Average shares: (a) Basic 4,591 4,112 12 Diluted 4,709 4,225 11 (a) Share and per share amounts have been restated to reflect the effect of a 5-for-4 stock split in December 2004. The Savannah Bancorp, Inc. and Subsidiaries Consolidated Balance Sheets December 31, 2005 and 2004 (thousands, except share data) December 31, 2005 2004 -------------------------------------------------- --------- -------- Assets Cash and due from banks $ 14,736 $ 11,164 Federal funds sold 11,847 12,521 Interest-bearing deposits in banks 5,885 13,211 -------------------------------------------------- --------- -------- Cash and cash equivalents 32,468 36,896 Securities available for sale, at fair value (amortized cost of $44,972 in 2005 and $41,196 in 2004) 44,438 41,505 Loans held for sale 10,473 26,471 Loans, net of allowance for credit losses of $7,813 in 2005 and $6,389 in 2004 605,854 493,479 Premises and equipment, net 5,020 4,785 Other real estate owned - 460 Bank-owned life insurance 5,551 5,349 Other assets 14,097 8,396 -------------------------------------------------- --------- -------- Total assets $717,901 $617,341 ================================================== ========= ======== Liabilities Deposits: Noninterest-bearing $ 93,082 $ 83,790 Interest-bearing demand 93,568 86,401 Savings 19,319 18,423 Money market accounts 118,413 83,443 Time deposits 276,128 234,063 -------------------------------------------------- --------- -------- Total deposits 600,510 506,120 Securities sold under repurchase agreements, federal funds purchased and other borrowings 19,902 35,069 Federal Home Loan Bank advances - long-term 20,476 20,837 Subordinated debt to nonconsolidated subsidiaries 10,310 10,310 Other liabilities 8,160 4,934 -------------------------------------------------- --------- -------- Total liabilities 659,358 577,270 -------------------------------------------------- --------- -------- Shareholders' equity Common stock, par value $1 per share: authorized 20,000,000 shares; issued 4,591,339 and 4,112,448 shares in 2005 and 2004, respectively 4,591 4,112 Preferred stock, par value $1 per share: authorized 10,000,000 shares, none issued - - Additional paid-in capital 36,257 24,232 Retained earnings 18,272 11,539 Treasury stock, 267 and 282 shares in 2005 and 2004, respectively (4) (4) Accumulated other comprehensive income (loss), net (573) 192 -------------------------------------------------- --------- -------- Total shareholders' equity 58,543 40,071 -------------------------------------------------- --------- -------- Total liabilities and shareholders' equity $717,901 $617,341 ================================================== ========= ======== The Savannah Bancorp, Inc. and Subsidiaries Consolidated Statements of Income For the Two Years and Five Quarters Ending December 31, 2005 (thousands, except per share data) ---------------------------------------------------------------------- For the Years Ended ---------------------------------------------------------------------- December 31 % 2005 2004 Chg ----------------------------------------------- -------- -------- ---- Interest and fee income Interest and fees on loans $ 38,503 $ 25,298 52 Interest on loans held for sale 1,335 1,432 (6.8) Interest on investment securities 1,671 1,675 0 Interest on deposits with banks 473 201 135 Interest on federal funds sold 376 101 272 ----------------------------------------------- -------- -------- Total interest and fee income 42,358 28,707 48 ----------------------------------------------- -------- -------- Interest expense Interest on deposits 12,373 6,462 91 Interest on other borrowings 1,297 942 38 Interest on FHLB advances 1,009 1,023 (1.4) ----------------------------------------------- -------- -------- Total interest expense 14,679 8,427 74 ----------------------------------------------- -------- -------- Net interest income 27,679 20,280 36 Provision for credit losses 1,500 1,450 3.4 ----------------------------------------------- -------- -------- Net interest income after the provision for credit losses 26,179 18,830 39 ----------------------------------------------- -------- -------- Noninterest income Service charges on deposit accounts 1,622 1,598 1.5 Mortgage related income, net 1,292 1,079 20 Trust fees 501 442 13 Gain (loss) on sale of OREO (7) 91 (108) Other operating income 979 890 10 ----------------------------------------------- -------- -------- Total noninterest income 4,387 4,100 7.0 ----------------------------------------------- -------- -------- Noninterest expense Salaries and employee benefits 9,530 8,362 14 Occupancy and equipment 2,199 1,963 12 Data processing 1,244 1,049 19 Other operating expense 3,673 2,880 28 ----------------------------------------------- -------- -------- Total noninterest expense 16,646 14,254 17 ----------------------------------------------- -------- -------- Income before income taxes 13,920 8,676 60 Income tax expense 4,880 2,940 66 ----------------------------------------------- -------- -------- Net income $ 9,040 $ 5,736 58 =============================================== ======== ======== Net income per share: Basic $ 2.09 $ 1.40 49 =============================================== ======== ======== Fully diluted $ 2.04 $ 1.36 50 =============================================== ======== ======== Basic shares 4,317 4,109 5.1 Fully diluted shares 4,425 4,209 5.1 Performance ratios Return on average equity 19.06% 15.04% 27 Return on average assets 1.32% 1.03% 28 Net interest margin 4.25% 3.86% 10 Efficiency ratio 51.9% 58.5% (11) Average equity 47,428 38,126 24 Average assets 685,163 557,474 23 Average earning assets 655,632 531,716 23 (Unaudited) ---------------------------------------------------------------------- 2005 2004 ------------------- ----------------------------------- ------ Q4-05/ Fourth Third Second First Fourth Q4-04 Quarter Quarter Quarter Quarter Quarter % Chg ------------------- -------------------------------------------------- Interest and fee income Interest and fees on loans $ 10,936 $ 10,109 $ 9,244 $ 8,214 $ 7,316 49 Interest on loans held for sale 227 304 369 435 446 (49) Interest on investment securities 445 406 415 405 398 12 Interest on deposits with banks 171 123 100 79 83 106 Interest on federal funds sold 154 108 69 45 42 267 ------------------- -------- -------- -------- -------- -------- Total interest and fee income 11,933 11,050 10,197 9,178 8,285 44 ------------------- -------- -------- -------- -------- -------- Interest expense Interest on deposits 3,616 3,329 3,010 2,418 1,961 84 Interest on other borrowings 346 319 263 369 305 13 Interest on FHLB advances 253 253 253 250 255 (0.8) ------------------- -------- -------- -------- -------- -------- Total interest expense 4,215 3,901 3,526 3,037 2,521 67 ------------------- -------- -------- -------- -------- -------- Net interest income 7,718 7,149 6,671 6,141 5,764 34 Provision for credit losses 305 375 315 505 255 20 ------------------- -------- -------- -------- -------- -------- Net interest income after the provision for credit losses 7,413 6,774 6,356 5,636 5,509 35 ------------------- -------- -------- -------- -------- -------- Noninterest income Service charges on deposit accounts 406 402 427 387 384 5.7 Mortgage related income, net 502 260 276 254 349 44 Trust fees 143 125 117 116 118 21 Gain (loss) on sale of OREO (1) 18 (24) 0 0 0 Other operating income 202 288 252 237 240 (16) ------------------- -------- -------- -------- -------- -------- Total noninterest income 1,252 1,093 1,048 994 1,091 15 ------------------- -------- -------- -------- -------- -------- Noninterest expense Salaries and employee benefits 2,474 2,422 2,291 2,343 2,262 9.4 Occupancy and equipment 556 580 551 512 584 (4.8) Data processing 328 317 298 301 257 28 Other operating expense 1,074 920 892 787 732 47 ------------------- -------- -------- -------- -------- -------- Total noninterest expense 4,432 4,239 4,032 3,943 3,835 16 ------------------- -------- -------- -------- -------- -------- Income before income taxes 4,233 3,628 3,372 2,687 2,765 53 Income tax expense 1,512 1,274 1,188 906 990 53 ------------------- -------- -------- -------- -------- -------- Net income $ 2,721 $ 2,354 $ 2,184 $ 1,781 $ 1,775 53 =================== ======== ======== ======== ======== ======== Net income per share: Basic $ .59 $ .54 $ .52 $ .43 $ .43 37 =================== ======== ======== ======== ======== ======== Fully diluted $ .58 $ .53 $ .51 $ .42 $ .42 38 =================== ======== ======== ======== ======== ======== Basic shares 4,591 4,346 4,177 4,153 4,112 12 Fully diluted shares 4,709 4,467 4,275 4,259 4,225 11 Performance ratios Return on average equity 18.75% 19.16% 20.51% 17.71% 17.84% 5.1 Return on average assets 1.50% 1.34% 1.29% 1.12% 1.16% 29 Net interest margin 4.48% 4.28% 4.16% 4.07% 4.00% 12 Efficiency ratio 49.4% 51.4% 52.2% 55.3% 55.9% (12) Average equity 57,571 48,745 42,719 40,792 39,476 46 Average assets 719,743 698,310 676,527 645,326 606,037 19 Average earning assets 687,307 668,197 648,944 617,226 578,207 19 (a) Share and per share amounts have been restated to reflect the effect of a 5-for-4 stock split in December 2004. The Savannah Bancorp, Inc. and Subsidiaries Selected Financial Condition Highlights - Five-Year Comparison (thousands, except per share data) (Unaudited) Selected Average Balances 2005 2004 2003 2002 2001 ------------------------- -------- -------- -------- -------- -------- Assets $685,163 $557,474 $443,502 $396,836 $364,077 Loans held for sale 23,033 27,209 939 - - Loans, net of unearned fees 565,131 441,421 356,006 307,285 264,684 Securities 41,300 40,703 44,015 55,692 64,299 Other interest-earning assets 26,168 22,383 21,198 13,426 17,178 Total interest-earning assets 655,632 531,716 422,158 376,403 346,161 Interest-bearing deposits 487,493 371,877 300,045 271,563 256,852 Borrowed funds 55,255 67,353 40,158 34,341 30,731 Total interest-bearing liabilities 542,748 439,230 340,203 305,904 287,583 Noninterest-bearing deposits 89,386 76,593 65,403 55,250 43,356 Total deposits 576,879 448,470 365,448 326,813 300,208 Shareholders' equity 47,428 38,126 35,740 33,398 30,532 Loan to deposit ratio - average 98% 98% 97% 94% 88% Selected Financial Data at Year-End ------------------------- Assets $717,901 $617,341 $476,865 $437,598 $376,183 Interest-earning assets 685,531 593,035 449,025 394,756 352,089 Loans held for sale 10,473 26,471 10,393 - - Loans, net of unearned fees 613,667 499,868 386,731 336,775 284,623 Deposits 600,510 506,120 389,146 363,044 309,623 Loan to deposit ratio 102% 99% 99% 93% 92% Interest-bearing liabilities 558,116 488,546 360,817 337,213 291,550 Shareholders' equity 58,543 40,071 36,771 34,756 32,071 Shareholders' equity to total assets 8.15% 6.49% 7.71% 7.94% 8.53% Dividend payout ratio 25.53% 37.69% 45.00% 44.32% 41.95% Risk-based capital ratios: Tier 1 capital to risk-based assets 11.52% 9.95% 10.60% 9.99% 10.77% Total capital to risk- based assets 12.77% 11.20% 11.85% 11.24% 12.02% Credit Quality Data ------------------------- Nonperforming assets $ 1,357 $ 998 $ 1,525 $ 2,114 $ 587 Nonperforming loans 1,357 538 598 1,997 587 Net credit losses 76 128 306 203 148 Allowance for credit losses 7,813 6,389 5,067 4,373 3,826 Nonperforming loans to loans 0.22% 0.11% 0.15% 0.59% 0.21% Nonperforming assets to loans and other real estate owned 0.22% 0.20% 0.39% 0.63% 0.21% Net credit losses to average loans 0.01% 0.03% 0.09% 0.07% 0.06% Allowance for credit losses to total loans 1.27% 1.28% 1.31% 1.30% 1.34% Per Share Data at Year-End (a) ------------------------------ Book value $ 12.75 $ 9.74 $ 8.96 $ 8.47 $ 7.86 Common stock closing price (Nasdaq) $ 35.48 $ 27.05 $ 23.20 $ 15.25 $ 14.84 Common shares outstanding (000s) 4,591 4,112 4,103 4,101 4,079 (a) Note - share and per share amounts have been restated for a 5-for-4 stock split distributed on December 20, 2004 and for a ten-percent stock dividend distributed in February 2003 and in May 2001. The Savannah Bancorp, Inc. and Subsidiaries Selected Operating Highlights - Five-Year Comparison (thousands, except per share data) (Unaudited) Summary of Operations 2005 2004 2003 2002 2001 ------------------------------ ------- ------- ------- ------- ------- Interest income - taxable equivalent $42,544 $28,947 $23,221 $23,824 $27,016 Interest expense 14,679 8,427 6,695 8,402 12,734 ------------------------------ ------- ------- ------- ------- ------- Net interest income - taxable equivalent 27,865 20,520 16,526 15,422 14,282 Taxable equivalent adjustment (186) (240) (284) (312) (312) ------------------------------ ------- ------- ------- ------- ------- Net interest income 27,679 20,280 16,242 15,110 13,970 Provision for credit losses 1,500 1,450 1,000 750 605 ------------------------------ ------- ------- ------- ------- ------- Net interest income after provision for credit losses 26,179 18,830 15,242 14,360 13,365 ------------------------------ ------- ------- ------- ------- ------- Noninterest income Service charges on deposit accounts 1,622 1,598 1,572 1,576 1,302 Mortgage related income, net 1,292 1,079 776 612 443 Trust fees 501 442 398 353 317 Other operating income 972 981 635 469 471 Gains on sale of securities - - - - 13 ------------------------------ ------- ------- ------- ------- ------- Total noninterest income 4,387 4,100 3,381 3,010 2,546 ------------------------------ ------- ------- ------- ------- ------- Noninterest expense Salaries and employee benefits 9,530 8,362 6,693 6,008 4,974 Occupancy and equipment 2,199 1,963 1,767 1,678 1,335 Data processing 1,244 1,049 908 805 985 Other operating expense 3,673 2,880 2,287 2,231 2,138 ------------------------------ ------- ------- ------- ------- ------- Total noninterest expense 16,646 14,254 11,655 10,722 9,432 ------------------------------ ------- ------- ------- ------- ------- Income before income taxes 13,920 8,676 6,968 6,648 6,479 Income tax expense 4,880 2,940 2,324 2,140 2,121 ------------------------------ ------- ------- ------- ------- ------- Net income $ 9,040 $ 5,736 $ 4,644 $ 4,508 $ 4,358 ============================== ======= ======= ======= ======= ======= Net income per share: (a) Basic $ 2.09 $ 1.40 $ 1.13 $ 1.10 $ 1.07 Diluted $ 2.04 $ 1.36 $ 1.11 $ 1.08 $ 1.05 Cash dividends paid per share $ 0.54 $ 0.52 $ 0.51 $ 0.49 $ 0.45 Average basic shares outstanding (000s) 4,317 4,109 4,103 4,100 4,068 Average diluted shares outstanding (000s) 4,425 4,209 4,181 4,160 4,140 Performance Ratios (averages) Net interest margin 4.25% 3.86% 3.91% 4.10% 4.13% Return on average assets 1.32% 1.03% 1.05% 1.14% 1.20% Return on average equity 19.06% 15.04% 12.99% 13.50% 14.27% Efficiency ratio 51.91% 58.47% 59.40% 59.17% 57.11% (a) Share and per share amounts have been restated for a 5-for-4 stock split distributed December 20, 2004 and for a ten-percent stock dividend distributed in February 2003 and in May 2001. The Savannah Bancorp, Inc. and Subsidiaries Selected Quarterly Data - 2005 and 2004 (thousands, except per share data) (Unaudited) Condensed Quarterly Income Statements The following is a summary of unaudited quarterly results for 2005 and 2004: 2005 2004 ----------------------------------------- ---------------------------- Fourth Third Second First Fourth Third Second First ----------------------------------------- ---------------------------- Net interest income $7,718 $7,149 $6,671 $6,141 $5,764 $5,281 $4,744 $4,491 Provision for credit losses 305 375 315 505 255 320 415 460 ------------- ------ ------ ------ ------- ------ ------ ------ ------ Net interest income after provision for credit losses 7,413 6,774 6,356 5,636 5,509 4,961 4,329 4,031 Noninterest income 1,252 1093 1,048 994 1,091 1,029 1,042 938 Noninterest expense 4,432 4,239 4,032 3,943 3,835 3,692 3,468 3,259 ------------- ------ ------ ------ ------- ------ ------ ------ ------ Income before income taxes 4,233 3,628 3,372 2,687 2,765 2,298 1,903 1,710 Income tax expense 1,512 1,274 1,188 906 990 754 626 570 ------------- ------ ------ ------ ------- ------ ------ ------ ------ Net income $2,721 $2,354 $2,184 $1,781 $1,775 $1,544 $1,277 $1,140 ============= ====== ====== ====== ======= ====== ====== ====== ====== Per Share:(a) Net income - basic $.593 $.542 $.523 $.429 $.432 $.375 $.311 $.278 Net income - diluted $.578 $.527 $.511 $.418 $.420 $.367 $.303 $.271 Dividends $.135 $.135 $.135 $.135 $.132 $.132 $.132 $.128 Average shares (000s) Basic 4,591 4,346 4,177 4,153 4,112 4,113 4,109 4,103 Diluted 4,709 4,467 4,275 4,259 4,225 4,204 4,214 4,203 (a) Share and per share amounts have been adjusted for a 5-for-4 stock split in December 2004. The summation of quarterly earnings per share may not agree with annual earnings per share. Quarterly Market Values of Common Shares The Company's common stock is traded on the over-the-counter market and is quoted on the Nasdaq National Market under the symbol SAVB. The quarterly high, low and closing stock trading prices for 2005 and 2004 are listed below. There were approximately 680 holders of record of Company Common Stock and, according to information available to the Company, approximately 740 additional shareholders in street name through brokerage accounts at December 31, 2005. The per share amounts have been restated to reflect the effect of a 5-for-4 stock split distributed December 20, 2004. 2005 2004 ----------------------------------------- ---------------------------- Closing Market Prices Fourth Third Second First Fourth Third Second First ----------------------------------------- ---------------------------- High $37.50 $34.54 $30.95 $28.85 $27.60 $22.60 $23.12 $23.20 Low 34.25 30.27 27.80 26.50 21.99 20.14 21.00 21.00 Close 35.48 34.50 30.95 28.85 27.05 22.16 22.60 21.78 The Savannah Bancorp, Inc. and Subsidiaries Average Balance Sheet and Rate/Volume Analysis - 2005 and 2004 Average Balance Average Rate ------------------------------------ 2005 2004 2005 2004 ------------------------------------ ($ in thousands) (%) Assets Interest-bearing deposits $ 14,747 $ 14,418 3.21 1.39 Investments - taxable 36,999 35,010 3.93 3.98 Investments - non-taxable 4,301 5,693 9.39 9.17 Federal funds sold 11,421 7,965 3.29 1.27 Loans held for sale 23,033 27,209 5.80 5.26 Loans (c) 565,131 441,421 6.81 5.73 --------- --------- Total interest-earning assets 655,632 531,716 6.49 5.44 ---------------- Non-interest earning assets 29,531 25,758 --------- --------- Total assets $685,163 $557,474 ========= ========= Liabilities and equity Deposits NOW accounts $ 89,963 $ 85,824 0.77 0.36 Savings accounts 20,020 18,828 0.93 0.50 Money market accounts 104,023 76,748 2.35 1.15 CDs, $100M or more 76,661 64,278 3.45 2.76 CDs, broker 112,347 48,798 3.24 2.83 Other time deposits 84,479 77,401 3.27 2.62 --------- --------- Total interest-bearing deposits 487,493 371,877 2.54 1.74 FHLB advances - long term 20,669 20,837 4.88 4.91 Other borrowings 24,276 39,061 2.78 1.57 Subordinated debt 10,310 7,455 6.03 4.40 --------- --------- Total interest-bearing liabilities 542,748 439,230 2.70 1.92 ---------------- Noninterest-bearing deposits 89,386 76,593 Other liabilities 5,601 3,525 Shareholders' equity 47,428 38,126 --------- --------- Liabilities and equity $685,163 $557,474 ========= ========= Interest rate spread 3.79 3.52 ================ Net interest margin 4.25 3.86 ================ Net earning assets $112,884 $ 92,486 ========= ========= Average deposits $576,879 $448,470 ========= ========= Average cost of deposits 2.14 1.44 ================ Average loan to deposit ratio 98% 98% ========= ========= Taxable-Equivalent (a) Variance Interest (b) Attributable to ------------------ --------------- Vari- 2005 2004 ance Rate Volume ---------------------------------------------------------------------- ($ in thousands) ($ in thousands) Assets Interest-bearing deposits $ 473 $ 201 $ 272 $ 263 $ 9 Investments - taxable 1,453 1,393 60 (18) 78 Investments - non-taxable 404 522 (118) 13 (131) Federal funds sold 376 101 275 159 116 Loans held for sale 1,335 1,432 (97) 147 (244) Loans (c) 38,503 25,298 13,205 4,767 8,438 -------- ------- ------- Total interest-earning assets 42,544 28,947 13,597 5,331 8,266 -------- ------- ------- ------ ------ Non-interest earning assets Total assets Liabilities and equity Deposits NOW accounts 697 306 391 352 39 Savings accounts 187 94 93 81 12 Money market accounts 2,443 879 1,564 921 643 CDs, $100M or more 2,642 1,775 867 444 423 CDs, broker 3,640 1,381 2,259 200 2,059 Other time deposits 2,764 2,027 737 503 234 -------- ------- ------- Total interest-bearing deposits 12,373 6,462 5,911 2,501 3,410 FHLB advances - long term 1,009 1,023 (14) (6) (8) Other borrowings 675 614 61 473 (412) Subordinated debt 622 328 294 122 172 -------- ------- ------- Total interest-bearing liabilities 14,679 8,427 6,252 3,090 3,162 -------- ------- ------- ------ ------ Net interest income $27,865 $20,520 $7,345 $2,241 $5,104 ======== ======= ======= ====== ====== (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 $186 in 2005 and $240 in 2004. (c) Average nonaccruing loans have been excluded from total average loans and categorized as a non interest-earning asset. The Savannah Bancorp, Inc. and Subsidiaries Average Balance Sheet and Rate/Volume Analysis - Fourth Quarter, 2005 and 2004 Average Balance Average Rate ------------------------------------ Q4 Q4 Q4 Q4 2005 2004 2005 2004 ------------------------------------ ($ in thousands) (%) Assets Interest-bearing deposits $ 17,189 $ 15,247 3.95 2.16 Investments - taxable 40,065 34,248 3.95 3.86 Investments - non-taxable 3,769 5,404 9.58 9.18 Federal funds sold 15,351 9,080 3.98 1.84 Loans held for sale 14,031 30,477 6.42 5.81 Loans (c) 596,902 483,751 7.27 6.00 --------- -------- Total interest-earning assets 687,307 578,207 6.91 5.73 ------------------ Non-interest earning assets 32,436 27,830 --------- -------- Total assets $719,743 $606,037 ========= ======== Liabilities and equity Deposits NOW accounts $ 97,353 $ 89,557 1.06 0.36 Savings accounts 19,488 19,085 1.00 0.50 Money market accounts 117,902 83,891 2.65 1.36 CDs, $100M or more 86,484 65,951 3.77 2.89 CDs, broker 99,549 76,206 3.40 2.90 Other time deposits 92,420 77,549 3.62 2.72 --------- -------- Total interest-bearing deposits 513,196 412,239 2.80 1.89 FHLB advances - long term 20,534 20,897 4.89 4.77 Other borrowings 18,025 36,492 3.68 1.92 Subordinated debt 10,310 10,310 6.89 5.08 --------- -------- Total interest-bearing liabilities 562,065 479,938 2.98 2.08 ------------------ Noninterest-bearing deposits 92,169 80,253 Other liabilities 7,938 6,370 Shareholders' equity 57,571 39,476 --------- -------- Liabilities and equity $719,743 $606,037 ========= ======== Interest rate spread 3.93 3.65 ================== Net interest margin 4.48 4.00 ================== Net earning assets $125,242 $ 98,269 ========= ======== Average deposits $605,365 $492,492 ========= ======== Average cost of deposits 2.37 1.58 ================== Average loan to deposit ratio 99% 98% ========= ======== Taxable- Equivalent (a) Variance Interest (b) Attributable to ----------------- --------------- Q4 Q4 Vari- 2005 2004 ance Rate Volume ---------------------------------------------------------------------- ($ in thousands) ($ in thousands) Assets Interest-bearing deposits $ 171 $ 83 $ 88 $ 69 $ 19 Investments - taxable 399 333 66 8 58 Investments - non-taxable 91 125 (34) 5 (39) Federal funds sold 154 42 112 47 65 Loans held for sale 227 446 (219) 47 (266) Loans (c) 10,936 7,316 3,620 1,549 2,071 ------ ------ ------ Total interest-earning assets 11,978 8,345 3,633 1,725 1,908 ------ ------ ------ ------ ------ Non-interest earning assets Total assets Liabilities and equity Deposits NOW accounts 260 81 179 158 21 Savings accounts 49 24 25 24 1 Money market accounts 788 287 501 273 228 CDs, $100M or more 822 481 341 146 195 CDs, broker 854 557 297 96 201 Other time deposits 843 531 312 176 136 ------ ------ ------ Total interest-bearing deposits 3,616 1,961 1,655 873 782 FHLB advances - long term 253 251 2 6 (4) Other borrowings 167 177 (10) 162 (172) Subordinated debt 179 132 47 47 0 ------ ------ ------ Total interest-bearing liabilities 4,215 2,521 1,694 1,088 606 ------ ------ ------ ------ ------ Net interest income $7,763 $5,824 $1,939 $ 637 $1,302 ====== ====== ====== ====== ====== (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 $45 and $60 in the fourth quarter 2005 and 2004, respectively. (c) Average nonaccruing loans have been excluded from total average loans and categorized as a non interest-earning asset. The Savannah Bancorp, Inc. and Subsidiaries Regulatory Capital Ratios The primary banking regulators of The Savannah Bancorp, Inc. and Subsidiary Banks have adopted capital requirements that specify the minimum level for which no prompt corrective action is required. In addition, the Federal Deposit Insurance Corporation (FDIC) has adopted FDIC insurance assessment rates based on certain "well-capitalized" risk-based and equity capital ratios. Failure to meet minimum capital requirements can result in the initiation of certain actions by the regulators that, if undertaken, could have a material effect on the Company's and the Subsidiary Banks' financial statements. The following tables show the capital ratios for the Company and the Subsidiary Banks at December 31, 2005 and 2004: ($ in thousands) Company Savannah Bank Bryan Bank ---------------------------------------------------------------------- 2005 2004 2005 2004 2005 2004 ----------------- -------- -------- -------- -------- -------- ------- Qualifying Capital ----------------- Tier 1 capital $69,116 $50,003 $43,047 $34,623 $13,962 $11,860 Total capital 76,617 56,226 48,656 39,302 15,798 13,389 Leverage Ratios ----------------- Tier 1 capital to average assets 9.60% 8.23% 7.93% 7.56% 8.08% 8.08% Risk-based Ratios ----------------- Tier 1 capital to risk-weighted assets 11.52% 9.95% 9.60% 9.16% 9.51% 9.70% Total capital to risk-weighted assets 12.77% 11.20% 10.85% 10.41% 10.76% 10.95% Following are the regulatory capital ratios minimum ratio and the minimum ratios to be classified as a well-capitalized holding company or bank: Well- Regulatory Capital Guidelines: Capitalized Minimum -------------------------------------------------------------- ------- Tier 1 capital to average assets 5.00% 4.00% Tier 1 capital to risk-weighted assets 6.00% 4.00% Total capital to risk-weighted assets 10.00% 8.00% The Savannah Bancorp, Inc. & Subsidiaries Loan Concentration Schedule % of % of % Dollar ($ in thousands) 12/31/05 Total 12/31/04 Total Change --------------------------- --------------- --------------- --------- Non-residential real estate Owner-occupied $ 94,622 16 $100,702 20 (6) Non owner-occupied 76,004 12 70,529 14 8 Construction 14,601 2 7,710 2 89 Commercial land and lot development 30,643 5 24,645 5 24 --------------------------- --------------- --------------- --------- Total non-residential real estate 215,870 35 203,586 41 6 --------------------------- --------------- --------------- --------- Residential real estate Owner-occupied - 1-4 family 68,971 11 50,205 10 37 Non owner-occupied - 1- 4 family 58,142 10 48,967 10 19 Construction 99,954 16 65,451 13 53 Residential lots 41,859 7 32,441 7 29 Residential land and lot development 30,730 5 11,232 2 174 Home equity lines 39,230 6 35,529 7 10 --------------------------- --------------- --------------- --------- Total residential real estate 338,886 55 243,825 49 39 --------------------------- --------------- --------------- --------- Total real estate loans 554,756 90 447,411 90 24 Commercial 45,526 8 37,049 7 23 Consumer 14,156 2 16,365 3 (13) Unearned fees, net (771) - (957) - (19) --------------------------- --------------- --------------- --------- Total loans, net of unearned fees $613,667 100 $499,868 100 23 =========================== =============== =============== ========= The Savannah Bancorp, Inc. and Subsidiaries Consolidated Statement of Shareholders' Equity For the Three Years Ended December 31, 2005 (thousands, except share data) December 31, ---------------------------------------------------------------------- 2005 2004 2003 ------------------------------------- ---------- ---------- ---------- Common shares issued Shares, beginning of period 4,112,448 3,290,223 2,991,378 Common stock issued 397,273 - - Stock split / dividend - 822,225 298,845 Exercise of options 81,618 - - ------------------------------------- ---------- ---------- ---------- Shares, end of period 4,591,339 4,112,448 3,290,223 ===================================== ========== ========== ========== Treasury shares owned Shares, beginning of period 282 8,246 8,450 Stock dividend, issuance, net (15) 36 - Exercise of options, from treasury shares in 2004 - (8,000) (204) ------------------------------------- ---------- ---------- ---------- Shares, end of period 267 282 8,246 ===================================== ========== ========== ========== Common stock Balance, beginning of period $ 4,112 $ 3,290 $ 2,991 Common stock issued 397 - - Stock split / dividend - 822 299 Exercise of options 82 - - ------------------------------------- ---------- ---------- ---------- Balance, end of period 4,591 4,112 3,290 ------------------------------------- ---------- ---------- ---------- Additional paid-in capital Balance, beginning of period 24,232 25,109 18,557 Common stock issued, net of issuance costs 11,191 - - Stock split / dividend - (822) 6,551 Exercise of options 494 (55) 1 Tax-benefit of non-qualified option exercises 340 - - ------------------------------------- ---------- ---------- ---------- Balance, end of period 36,257 24,232 25,109 ------------------------------------- ---------- ---------- ---------- Retained earnings Balance, beginning of period 11,539 7,965 12,261 Net income 9,040 5,736 4,644 Dividends paid (2,307) (2,162) (2,090) Stock dividend, less than 25% - - (6,850) ------------------------------------- ---------- ---------- ---------- Balance, end of period 18,272 11,539 7,965 ------------------------------------- ---------- ---------- ---------- Treasury stock Balance, beginning of period (4) (147) (161) Exercise of options - 143 14 ------------------------------------- ---------- ---------- ---------- Balance, end of period (4) (4) (147) ------------------------------------- ---------- ---------- ---------- Accumulated other comprehensive income (loss), net Balance, beginning of period 192 554 1,108 Change in unrealized losses on securities available for sale, net of tax (522) (362) (554) Net change in fair value of derivative instruments, net of tax (243) - - ------------------------------------- ---------- ---------- ---------- Balance, end of period (573) 192 554 ------------------------------------- ---------- ---------- ---------- Total shareholders' equity $58,543 $40,071 $36,771 ===================================== ========== ========== ========== *T