.
Filed Pursuant to
Rule 424(b)(5)
Registration
No. 333-163210
Prospectus
supplement
(To
Prospectus dated December 2, 2009)
|
1,098,398
Shares
THE SAVANNAH BANCORP, IN
C
.
|
COMMON
STOCK
We are
offering 1,098,398 shares of our common stock, par value $1.00
per share, to be sold in this offering. We will receive all of the net proceeds
from the sale of our common stock. Our common stock is listed on The Nasdaq
Global Market under the symbol “SAVB.” On June 9, 2010, the last sale price of
our common stock reported on The Nasdaq Global Market was $9.73 per
share.
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Per Share
|
|
Total
|
Public
Offering Price
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$9.50
|
|
$10,434,781
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Underwriting
Discounts and Commissions (1)
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$0.475
|
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$ 434,913
|
Proceeds
(before expenses) (1)
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$9.025
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$
9,999,868
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|
(1)
The
underwriting discount is $0.475 per share, except with respect
to the sale of 228,490 shares to be sold to certain of our
shareholders for which the underwriting discount is $0.095 per
share.
|
We have granted the
underwriter an option to purchase up to an additional 164,759 shares of our
common stock at the public offering price, less underwriting discounts and
commissions, to cover over-allotments, if any, within 30 days of the date of
this prospectus supplement.
Investing in our common stock
involves risks. See “Risk Factors” beginning on page S-15
of this prospectus supplement
to read about some of the factors that you should consider before buying shares
of our common stock.
The
shares of common stock are not savings accounts, deposits or other obligations
of any of our bank or non-bank subsidiaries and are not insured by the Federal
Deposit Insurance Corporation, the Deposit Insurance Fund or any other
governmental agency.
None
of the Securities and Exchange Commission, any state securities commission or
any other agency has approved or disapproved of these securities or determined
that this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
The
underwriter expects to deliver the shares of common stock to purchasers on or
about June 15, 2010, subject to customary closing conditions.
The date
of this prospectus supplement is June 9, 2010
●
Savannah Bancorp Branches
TABLE
OF CONTENTS
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Prospectus
Supplement
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Page
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Important
Information About This Prospectus Supplement
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S-1
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Available
Information
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S-2
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Incorporation
of Certain Information by Reference
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S-3
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Special
Note on Forward-Looking Statements and Risk Factors
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S-4
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Summary
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S-7
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Risk
Factors
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S-15
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Use
of Proceeds
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S-31
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Dividend
Policy
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S-32
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Price
Range of Common Stock
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S-33
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Description
of Capital Stock
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S-33
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Capitalization
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S-34
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Underwriting
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S-35
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Legal
Opinions
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S-39
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Experts
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S-39
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PROSPECTUS
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Important
Information About This Prospectus
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1
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Available
Information
|
1
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Incorporation
of Certain Information by Reference
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2
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Special
Note on Forward-Looking Statements and Risk Factors
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2
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Company
Summary
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4
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Description
of Securities We May Offer
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4
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Description
of Debt Securities
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5
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Description
of Common Stock
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21
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Description
of Preferred Stock
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22
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Description
of Warrants
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22
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Description
of Rights
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23
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Legal
Ownership and Book-Entry Issuance
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23
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Ratio
of Earnings to Fixed Charges
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24
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Use
of Proceeds
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24
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Plan
of Distribution
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24
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Validity
of the Securities
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26
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Experts
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26
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IMPORTANT
INFORMATION ABOUT THIS PROSPECTUS SUPPLEMENT
This
document consists of two parts. The first part is the prospectus supplement,
which describes the specific terms of this offering. The second part is the
prospectus, which describes more general information, some of which may not
apply to this offering. Before investing in our common stock, you should
carefully read both this prospectus supplement and the accompanying prospectus
in their entirety, together with additional information described below under
the heading “Available Information.”
Unless
otherwise mentioned or unless the context requires otherwise, the terms
“we,” “our,” “ours” and “us” refer to The Savannah Bancorp, Inc. and our
consolidated subsidiaries, except that in the discussion of the common stock and
related matters, these terms refer solely to The Savannah Bancorp, Inc. and not
to any of its subsidiaries. All references to the “Banks” refer to The Savannah
Bank N.A. and the Bryan Bank & Trust, the sole banking subsidiaries of The
Savannah Bancorp, Inc.
Generally, when we refer to this
“prospectus supplement,” we are referring both to the prospectus supplement and
the accompanying prospectus, as well as the documents incorporated by reference
herein and therein unless the context suggests otherwise.
If the information set forth in this
prospectus supplement differs in any way from the information set forth in the
accompanying prospectus, you should rely on the information set forth in this
prospectus supplement.
You
should rely only on the information contained in or incorporated by reference
into this prospectus supplement and the accompanying prospectus. This prospectus
supplement may be used only for the purpose for which it has been prepared. No
one is authorized to give information other than that contained in this
prospectus supplement and the accompanying prospectus and in the documents
incorporated by reference herein and therein, and which are made available to
the public. We have not, and the underwriter has not, authorized any other
person to provide you with different information. If anyone provides you with
different or inconsistent information, you should not rely on it.
We
are not, and the underwriter is not, making an offer to sell our common stock in
any jurisdiction where the offer or sale is not permitted. You should not assume
that the information appearing in this prospectus supplement or any document
incorporated by reference herein or in the accompanying prospectus is accurate
as of any date other than the date of the applicable document. Our business,
financial condition, results of operations and prospects may have changed since
that date. Neither this prospectus supplement nor the accompanying prospectus
constitutes an offer, or an invitation on our behalf or on behalf of the
underwriter, to subscribe for and purchase any of the securities and may not be
used for or in connection with an offer or solicitation by anyone, in any
jurisdiction in which such an offer or solicitation is not authorized or to any
person to whom it is unlawful to make such an offer or
solicitation.
We are
required to file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission (the “SEC”). You
may read and copy any documents filed by us at the SEC’s public reference room
at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. Our filings
with the SEC are also available to the public through the SEC’s Internet site at
http://www.sec.gov and through The NASDAQ Global Market, One Liberty Plaza, 165
Broadway, New York, NY 10006, on which our common stock is listed.
We have
filed a registration statement on Form S-3 with the SEC (No. 333-163210)
relating to the common stock offered by this prospectus supplement and
accompanying prospectus. This prospectus supplement and the accompanying
prospectus are a part of the registration statement and do not contain all the
information in the registration statement. The registration statement may
contain additional information that may be important to you.
Whenever
a reference is made in this prospectus supplement, the accompanying prospectus,
any free writing prospectus concerning the provisions of any contract or
document, the reference is only a summary and you should refer to the exhibits
that are a part of the registration statement for a copy of the contract or
other document. You may review a copy of the registration statement at the SEC’s
public reference room in Washington, D.C., as well as through the SEC’s Internet
site.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The SEC’s
rules allow us to incorporate by reference information into this prospectus
supplement. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. Any information
referred to in this way is considered an important part of this prospectus
supplement, and such information is considered part of this prospectus
supplement from the date we file that document. Any reports filed by us with the
SEC after the date of this prospectus supplement will automatically update and,
where applicable, supersede any information contained in this prospectus
supplement or incorporated by reference in this prospectus
supplement.
We
incorporate by reference into this prospectus supplement the following documents
or information filed with the SEC (other than, in each case, documents or
information deemed to have been furnished and not filed in accordance with SEC
rules):
·
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our
Annual Report on Form 10-K for the fiscal year ended December 31,
2009;
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·
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our
definitive proxy statement in connection with our 2010 annual meeting of
shareholders;
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·
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our
Quarterly Report on Form 10-Q for the quarter ended March 31,
2010;
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·
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our
Current Reports on Form 8-K, filed on April 23, 2010 and June 7,
2010;
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·
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the
description of our common stock contained in our Registration Statement on
Form S-1 dated February 8, 1990 (including any amendment to that form that
we may have filed in the past, or may file in the future, for the purpose
of updating the description of our common stock);
and
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·
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all
documents filed by us under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, on or after the date of this
prospectus supplement and before the termination of this offering (except
for information furnished to the SEC that is not deemed to be “filed” for
purposes of the Exchange Act).
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We will
provide without charge to each person, including any beneficial owner, to whom
this prospectus supplement is delivered, upon his or her written or oral
request, a copy of any or all of the information that has been incorporated by
reference into this prospectus supplement, excluding exhibits to those
documents, unless they are specifically incorporated by reference into those
documents. These documents are available on our website at http://www.savb.com.
Information on our website is not incorporated into this prospectus supplement
by reference and is not a part hereof. You can also request those
documents from our Corporate Secretary at the following address:
25 Bull
Street
Savannah,
Georgia 31401
(912)
629-6500
Except
as expressly provided above, no other information, including information on our
website, is incorporated by reference into this prospectus
supplement.
SPECIAL NOTE ON
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
Certain
of the statements in this prospectus supplement and the accompanying supplement
and the other documents incorporated by reference in this prospectus supplement,
particularly those anticipating future performance, business prospects, growth
and operating strategies, proposed acquisitions, and similar matters, and those
that include the words “believes,” “anticipates,” “forecast,” “estimates” or
similar expressions constitute “forward-looking statements” within the meaning
of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. For those
statements, The Savannah Bancorp, Inc. claims the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. There can be no assurance that the forward-looking
statements will be accurate because they are based on many assumptions, which
involve risks and uncertainties.
In
addition to other factors discussed in the “Risk Factors” section of this
prospectus supplement, factors that could cause future results to differ
materially from those expressed in the Company’s forward-looking statements
include, but are not limited to:
·
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the
effects of the current economic crisis and general business conditions,
including, without limitation, the continuing dramatic deterioration in
the real estate and financial markets in the U.S. and in the market areas
we serve, as well as the subprime, mortgage, credit and liquidity markets,
as well as the Federal Reserve’s actions with respect to interest
rates;
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·
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the
effects of and changes in trade, monetary and fiscal policies, as well as
legislative and regulatory changes, including changes in banking,
securities and tax laws and regulations, as well as changes affecting
financial institutions’ ability to lend and otherwise do business with
consumers;
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·
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the
impact of changes in financial services’ laws and regulations (including
laws concerning taxes, banking, securities and
insurance);
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·
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regulatory
or judicial actions or proceedings;
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·
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increases
in regulatory capital requirements for banking organizations generally,
which may adversely affect the Company’s ability to expand its business or
could cause it to shrink its
business;
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·
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the
risks of changes in interest rates and the yield curve on the levels,
composition and costs of deposits, loan demand, and the values of loan
collateral, securities, and interest rate sensitive assets and
liabilities;
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·
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our
ability to manage disruptions in the credit and lending markets, including
the impact on our business and on the businesses of our customers as well
as other financial institutions with which we have commercial
relationships;
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·
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risks
related to loans secured by real estate, including further adverse
developments in the real estate markets that would decrease the value and
marketability of collateral;
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·
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the
inability of the Company to raise additional capital or to pursue other
strategic initiatives;
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·
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adverse
conditions in the stock market and other capital markets and the impact of
those conditions on our capital markets and capital management activities,
including our investment and wealth management advisory
businesses;
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·
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changes
in the cost and availability of funding due to changes in the deposit
market and credit market, or the way in which the Company is perceived in
such markets;
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·
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the
effects of natural disasters, including hurricanes, or acts of war or
terrorism that directly affect the financial health of our
customers;
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·
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changes
in United States foreign or military
policy;
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·
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the
failure to attract or retain key
personnel;
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·
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the
failure to capitalize on growth opportunities and to realize cost savings
in connection with business
acquisitions;
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·
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the
timely development of competitive new products and services by the Company
and the acceptance of those products and services by new and existing
customers;
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·
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the
willingness of customers to accept third-party products marketed by
us;
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·
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the
willingness of customers to substitute competitors’ products and services
for the Company’s products and services and vice
versa;
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·
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technological
changes affecting the nature or delivery of financial products or services
and the cost of providing them;
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·
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changes
in consumer spending and saving
habits;
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·
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the
effect of corporate restructuring, acquisitions or dispositions, including
the actual restructuring and other related charges and the failure to
achieve the expected gains, revenue growth or expense savings from such
corporate restructuring, acquisitions or
dispositions;
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·
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the
growth and profitability of our noninterest or fee income being less than
expected;
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·
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the
impact of changes in accounting policies by the SEC or the Financial
Accounting Standards Board;
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·
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the
limited trading activity of our common
stock;
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·
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the
effects of our lack of a diversified loan portfolio, including the risks
of geographic concentrations;
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·
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adverse
changes in the financial performance and/or condition of our borrowers,
which could impact the repayment of those borrowers’ outstanding
loans;
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·
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the
success of the Company at managing the risks involved in the foregoing;
and
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·
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other
risks identified in the Company’s SEC reports and public
announcements.
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You are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the dates on which they were made. Our past results
do not necessarily indicate our future results.
We do not
have any intention and undertake no obligation to update forward-looking
statements to reflect new information, future events or risks or the eventual
outcome of the facts underlying the forward-looking statements. New
information, future events or risks may cause the forward-looking events we
discuss in this prospectus not to occur or to occur in a manner different from
what we expect.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
SUMMARY
This
summary highlights selected information contained elsewhere or
incorporated by reference in this prospectus supplement and may not
contain all the information that you need to consider in making your
investment decision. You should carefully read this entire
prospectus supplement and the accompanying prospectus, as well as the
information to which we refer you and the information incorporated by
reference herein, before deciding whether to invest in the common
stock. You should pay special attention to the “Risk Factors”
section of this prospectus supplement to determine whether an investment
in the common stock is appropriate for you.
The
Savannah Bancorp, Inc.
The
Savannah Bancorp, Inc. (the “Company”) is a Georgia corporation registered
under the Bank Holding Company Act of 1956, as amended (the “BHCA”). The
Company’s banking subsidiaries are The Savannah Bank (“Savannah”), a
national banking association, which commenced operations in 1990, and
Bryan Bank & Trust, a Georgia state chartered bank (“Bryan,” and
collectively with Savannah, the “Banks”), which became a wholly-owned
subsidiary of the Company in 1998. We engage in community
banking and serve the coastal Georgia and South Carolina market
areas. Our primary service areas in Georgia include the city of
Savannah and surrounding Chatham County, the city of Richmond Hill and
surrounding Bryan County, as well as locations in South Carolina,
including Hilton Head Island, Bluffton and southern Beaufort
County. Our secondary service areas include Effingham, Glynn
and Liberty Counties, Georgia and Jasper County, South
Carolina. As of March 31, 2010, we reported, on a consolidated
basis, total assets of $1.05 billion, total loans of $869 million, total
deposits of $902 million and shareholders’ equity of $78
million.
We
provide community banking services to commercial, small business and
retail customers. We offer a full range of short-term and
medium-term commercial, real estate, residential mortgage and personal
loans. Our principal sources of funds for loans are deposits
and, to a lesser extent, borrowings. We offer a broad range of deposit
products, including checking (NOW), savings and money market accounts and
certificates of deposit. Savannah’s trust department offers a
full array of trust services, including investment management, personal
trusts, custodial accounts, estate administration and retirement plan
asset management. In addition, through our subsidiary, Minis
& Co., Inc. (“Minis”), we offer a full range of investment management
services. We acquired Minis on August 31, 2007. On
September 30, 2008, we formed SAVB Holdings, LLC (“SAVB Holdings”), to
hold previously identified problem loans (including performing and
nonperforming loans) and foreclosed real estate.
Our
common stock is traded on The Nasdaq Global Market under the ticker symbol
“SAVB.”
Market
Areas
Our primary markets are in
coastal Georgia and South Carolina, including Savannah and Richmond Hill,
Georgia, Hilton Head Island and Bluffton, South Carolina and the
surrounding areas. As of March 31, 2010, the Banks had $821
million in total deposits, which includes $168 million in brokered
deposits, in the Savannah Metropolitan Statistical Area (“MSA”) in
Georgia, which includes the city of Richmond Hill, as well as Bryan,
Chatham and Effingham counties, and $81 million in total deposits in
Jasper and Beaufort counties in South Carolina, which includes Hilton Head
Island and Bluffton. By total deposits, we have the third
largest market share in the Savannah MSA, trailing Wells Fargo Bank, N.A.
and SunTrust Banks, Inc., as of June 30, 2009.
As of March 31, 2010, the
unemployment rate totaled 8.8% in the Savannah MSA (not seasonally
adjusted), 8.8% in Beaufort County and 9.7% in Jasper County, which were
all at or below the national
|
unemployment
rate of 9.7% as of March 31, 2010 and 9.9% as of April 30, 2010 and state
unemployment rates as of March 31, 2010 of 10.6% and 12.2% in Georgia and
South Carolina, respectively. The Savannah MSA had an estimated
population of 343,092 in 2009, representing a growth rate of 17.0% since
2000, which is significantly higher than the national population growth
rate of 9.1% in the same period. Major economic drivers and
employers for the Savannah MSA include Gulfstream Aerospace Corporation,
the Georgia Ports Authority, Ft. Stewart/Hunter Army Airfield, Memorial
Health University Medical Center and other health care providers, and a
variety of commercial and non-profit enterprises. The Savannah
MSA economy has witnessed economic improvement in 2010. The
Georgia Ports Authority reported 25.6% container growth in April 2010,
compared to April 2009, and recorded five consecutive months of
double-digit growth through its ports in April. Gulfstream
Aerospace Corporation recently reported a 15% increase in revenues in the
first quarter of 2010 over the last quarter of 2009, as well as an
improvement in aircraft orders in the first quarter of
2010. Property values in the Savannah MSA have not declined as
dramatically as other areas in Georgia, particularly
Atlanta. According to Fiserv and Moody’s Economy.com, home
prices in the Savannah MSA peaked in the second quarter of 2008 and have
declined approximately 6.2% through 2009, compared to a decline in home
prices of 18.3% in the Atlanta-Sandy Springs-Marietta MSA from the peak in
the first quarter of 2007 through 2009.
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The
population in the Hilton Head-Beaufort Micropolitan Statistical Area,
which includes Beaufort and Jasper counties, increased 26.0% between 2000
and 2009, from approximately 141,619 to 178,436. Hilton Head
Island’s and Bluffton’s economies are largely driven by real estate and
tourism. The region is also host to three military
installations, Parris Island Recruit Depot, the Marine Corps Air
Station—Beaufort and the Beaufort Naval Hospital.
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Competitive
Strengths
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Our
target customers are individuals and small to medium-sized businesses,
including wholesale, retail and professional service businesses in the
community. We also target individuals who meet certain net
worth and income requirements as potential customers for private banking
services. Our strategy is to use our competitive strengths to
provide superior service through our employees, who are
relationship-oriented and committed to the economic development of
Savannah and the surrounding area.
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·
History in the Savannah
Market.
We are the largest and oldest community bank
headquartered in the Savannah market, having served the community for
twenty years. We believe that our tenure and commitment to the
local community differentiates us from other community banks, as well as
larger regional and national competitors.
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|
·
Local and Personalized
Customer Service
. We believe that we have a competitive advantage
over larger national and regional financial institutions by providing
superior customer service with experienced, knowledgeable management,
localized decision-making capabilities and prompt credit
decisions. Our business plan relies principally upon local
advertising and promotional activities and upon personal contacts by our
directors and officers to attract business and to acquaint potential
customers with our personalized services. We plan to continue to
emphasize the advantages of dealing with an independent, locally-owned,
relationship-oriented bank to meet the particular needs of individuals,
professionals and small to medium-size businesses in the
community. We believe that we present an attractive alternative
for customers who prefer localized and personalized customer service and
that this business philosophy enables us to build long-term relationships
with desirable customers, which enhances the quality and stability of our
funding and lending
operations.
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·
Experienced Management
Team
. We believe that our executive officers’ banking
experience and local market knowledge are valuable assets, which will
enable management to continue to successfully guide the Company. Our
executive management team of John C. Helmken II, Michael W. Harden, Jr.,
Holden T. Hayes, E. James Burnsed, Jerry O’Dell Keith and R. Stephen
Stramm, collectively have over 168 years of banking experience, primarily
in the coastal Georgia region. In addition, six of our fifteen
directors have served as members of our board of directors since the
Company commenced operations in 1989. Four of our directors
have served as members of our board of directors for over twelve
years. In addition, we have strong inside ownership, with
approximately 19% of our shares of common stock beneficially owned by the
Company’s directors and executive officers as of February 28,
2010. We believe such ownership aligns management’s interests
with the interests of our public shareholders.
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|
·
Strong Credit
Culture.
We emphasize a disciplined credit culture based
on intimate customer and market knowledge, strict centralized underwriting
standards supported by detailed financial analysis, and a multi-tiered
approval process involving our senior management team. The
results of our focus on credit quality are evidenced by a ratio of
nonperforming assets to total assets of 4.21% at March 31, 2010
and 4.04% at December 31, 2009 (compared to median ratios of 5.45%
and 4.95% for the same time periods, respectively, for all Georgia
commercial banks) and a net charge-offs to average total loans ratio
of 1.63% annualized for the three months ended March 31, 2010
and 0.98% for the year ended December 31, 2009 (compared to median
ratios of 0.63% and 2.17% for the same time periods, respectively, for all
Georgia commercial banks). Further, our ratio of allowance for
loan losses to nonperforming loans was 53.40% at March 31, 2010
and 51.77% at December 31, 2009 (compared to median ratios of 26.53%
and 28.60% for the same time periods, respectively, for all Georgia
commercial banks). Although the challenging operating
environment resulted in increased charge-offs and nonperforming assets for
the three months ended March 31, 2010, management believes these metrics
are manageable and compare favorably to our Georgia
peers.
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|
Growth
Strategy
|
|
We
intend to leverage our competitive strengths to grow our business, expand
our customer base and improve our
profitability. The key elements of our strategy are
to:
|
|
·
Grow Organically in a More
Rational Competitive Environment
. We believe we can
continue to increase our customer base and significantly expand our total
loans and deposits within our existing markets without materially adding
to our existing branch network. Some of our competitors have
been weakened by the current economic crisis, which may create
opportunities for us to gain new core customer
relationships. As of March 31, 2010, the aggregate amount of
our noninterest-bearing, savings, money market and NOW accounts, other
than brokered money market accounts, was $426 million, or 47% of our total
deposits, and our non-brokered time deposits were $308 million, or 34% of
our total deposits.
Growing the
Company internally is consistent with our business strategy, but without
the integration costs associated with an acquisition.
|
|
·
Grow Through Acquisitions in
or Adjacent to our Existing Footprint
. Acquisitions have
historically been an important source of our growth. Since our formation,
we have completed the formation of Savannah in 1990, the merger with Bryan
in 1998, the formation of Harbourside Community Bank in 2006 (subsequently
merged into Savannah in September 2009) and the acquisition of Minis in
2007. Based on our management’s depth of experience and our
strong customer relationships, we believe we are well-positioned to expand
our operations
|
S -
9
organically
and through strategic cost-effective branch or bank acquisitions in or
adjacent to our existing market area, including possible acquisitions of
failed financial institutions in FDIC-assisted transactions. We believe
our staff, our branch network and operational capabilities provide us the
infrastructure to support a larger asset and customer
base.
|
|
We
believe that carefully priced, negotiated whole bank and/or branch
acquisitions could increase our earnings and shareholder value, as well as
expand our footprint across coastal Georgia and South
Carolina. In addition, we believe there are numerous banks
within or adjacent to our current market areas and in other parts of the
southeastern U.S. that exhibit increasing levels of nonperforming assets
and declining levels of capital and liquidity. In failed bank situations,
the FDIC seeks bids from other financial institutions to acquire all or a
part of the failed bank. We believe that our operating history, capital
position and management favorably position us to potentially bid for
failed banks in or adjacent to our existing footprint through the FDIC’s
process. Often, acquirers in these FDIC-assisted transactions enter into
loss sharing agreements with the FDIC which enables them to inherit a core
customer base and performing loans, while working out the nonperforming
assets with reduced risk. In addition, the purchase of a failed bank may
result in a gain and corresponding increase to equity for acquirers if the
failed bank’s assets are purchased at a net discount. We believe that
purchases of one or more failed institutions from the FDIC could increase
our earnings with less credit risk than a traditional bank
acquisition.
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|
We are
committed, however, to conservative and prudent growth to ensure we
maintain strong capital ratios and operating
results. Consequently, we will pursue acquisition opportunities
only if we believe that such opportunities represent an efficient use of
our capital under the circumstances. We believe that the net
proceeds raised in this offering will assist us in implementing our growth
strategies by providing the capital necessary to support future asset
growth, both organically and through strategic acquisitions in our
existing market area and elsewhere.
|
|
·
Expand our Wealth Management
Service
. Originally founded in 1932, Minis is a
registered investment advisory firm based in Savannah,
Georgia. Minis provides fee-only investment services to
individuals, families, employee benefit plans, non-profit organizations
and other entities. As of March 31, 2010, Minis had over $425 million in
assets under management. In addition, Savannah has operated a
trust department for over ten years. We plan to continue to
promote our investment management services to high net-worth individuals
in our market area.
|
|
Corporate
Information
|
|
The
Company’s headquarters and Savannah’s main office are located on Johnson
Square in the primary financial district in downtown Savannah, at 25 Bull
Street, Savannah, Georgia 31401. Bryan’s main office is located in the
primary commercial area of the city of Richmond Hill. Our
telephone number is (912) 629-6486. We maintain a website at
www.savb.com
. Information
presented on or accessed through our website is not incorporated into, or
made a part of, this prospectus
supplement.
|
THE OFFERING
|
|
Common
stock offered
|
1,098,398 shares (or 1,263,157
shares of common stock if the underwriter exercises its over-allotment
option in full).
|
Common
stock to be outstanding after this offering
|
7,036,087 shares
of common stock (7,200,846 shares of common stock if the
underwriter exercises its over-allotment option in full), in each case
based on 500 shares of common stock held as treasury
shares.
|
Use
of Proceeds
|
We
estimate that the net proceeds to us from this offering will be
approximately $9,784,868 (or $11,271,818 if the underwriter
exercises its over-allotment option in full), after deducting underwriting
discounts and commissions and estimated expenses.
We
intend to use the net proceeds from this offering for working capital and
general corporate purposes, including to fund an earn-out payment to Minis
of up to $1.8 million, to support organic growth and potential future
acquisitions of branches or whole banks in or adjacent to our existing
footprint, which may include the possible acquisition of failed
institutions in FDIC-assisted transactions and to provide additional
capital to the Banks. See “Use of Proceeds.”
|
Risk
Factors
|
We
estimate that the net proceeds to us from this offering will be
approximately $9,784,868 (or $11,271,818 if the underwriter
exercises its over-allotment option in full), after deducting underwriting
discounts and commissions and estimated expenses.
We
intend to use the net proceeds from this offering for working capital and
general corporate purposes, including to fund an earn-out payment to Minis
of up to $1.8 million, to support organic growth and potential future
acquisitions of branches or whole banks in or adjacent to our existing
footprint, which may include the possible acquisition of failed
institutions in FDIC-assisted transactions and to provide additional
capital to the Banks. See “Use of Proceeds.”
|
Na
Nasdaq Global Market
symbol
|
SAVB
|
SUMMARY
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
Our
summary consolidated financial data presented below as of and for the
years ended December 31, 2009, 2008, 2007, 2006 and 2005 are derived from
our audited consolidated financial statements. The summary
consolidated financial data presented below as of and for the periods
ended March 31, 2010 and 2009 are derived from our unaudited consolidated
financial statements and consists of all adjustments (consisting of only
normal recurring adjustments) necessary for a fair presentation
thereof. Interim results are not indicative of year end
results. The following summary consolidated financial data
should be read in conjunction with our consolidated financial statements
and related notes and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” included in our Annual Report on Form
10-K for the year ended December 31, 2009, our Quarterly Report on Form
10-Q for the quarter ended March 31, 2010 filed with the SEC and the other
information included or incorporated by reference in this prospectus
supplement. Certain amounts have been reclassified to conform
to the current year
presentation.
|
|
As
of and for the Three Months Ended March 31,
|
|
As
of and for the Years Ended December 31,
|
($
in thousands, except share data)
|
2010
|
2009
|
|
2009
|
2008
|
2007
|
2006
|
2005
|
Selected Average Balances
|
|
|
|
|
|
|
|
|
Assets
|
$1,032,454
|
$1,003,068
|
|
$1,018,470
|
$960,260
|
$869,026
|
$769,917
|
$685,163
|
Total
interest-earning assets
|
938,805
|
925,531
|
|
935,617
|
898,295
|
830,900
|
734,470
|
655,632
|
Loans
held for sale
|
-
|
-
|
|
-
|
765
|
1,299
|
7,842
|
23,033
|
Loans,
net of unearned fees
|
841,631
|
839,791
|
|
841,033
|
821,673
|
754,490
|
658,750
|
565,131
|
Securities
|
85,495
|
78,321
|
|
81,282
|
62,019
|
58,910
|
50,600
|
41,300
|
Other
interest-earning assets
|
11,679
|
7,419
|
|
13,302
|
13,838
|
16,201
|
17,278
|
26,168
|
Interest-bearing
deposits
|
798,642
|
751,612
|
|
777,763
|
701,045
|
628,310
|
542,375
|
487,493
|
Borrowed
funds
|
69,239
|
82,989
|
|
71,967
|
88,553
|
70,939
|
62,255
|
55,255
|
Total
interest-bearing liabilities
|
867,881
|
834,601
|
|
849,730
|
789,598
|
699,249
|
604,630
|
542,748
|
Noninterest-bearing
deposits
|
79,323
|
81,126
|
|
82,406
|
83,678
|
91,367
|
96,113
|
89,386
|
Total
deposits
|
877,965
|
832,738
|
|
860,169
|
784,723
|
719,677
|
638,488
|
576,879
|
Shareholders'
equity
|
79,016
|
80,873
|
|
79,804
|
78,998
|
71,516
|
61,766
|
47,428
|
Loan
to deposit ratio – average
|
96%
|
101%
|
|
98%
|
105%
|
105%
|
103%
|
98%
|
|
|
|
|
|
|
|
|
|
Selected Financial Data
|
|
|
|
|
|
|
|
|
Assets
|
$1,046,645
|
$999,900
|
|
$1,050,508
|
$1,007,284
|
$932,459
|
$843,514
|
$717,901
|
Interest-earning
assets
|
928,915
|
920,205
|
|
959,219
|
931,448
|
878,992
|
803,927
|
685,531
|
Loans
held for sale
|
-
|
-
|
|
-
|
291
|
180
|
914
|
10,473
|
Loans,
net of unearned fees
|
868,516
|
864,926
|
|
883,886
|
864,974
|
808,651
|
720,918
|
613,667
|
Deposits
|
901,792
|
842,519
|
|
884,569
|
832,015
|
764,218
|
706,824
|
600,510
|
Interest-bearing
liabilities
|
870,238
|
830,087
|
|
883,527
|
837,558
|
759,597
|
669,974
|
558,116
|
Shareholders'
equity
|
77,905
|
79,644
|
|
79,026
|
80,932
|
76,272
|
66,574
|
58,543
|
Loan
to deposit ratio
|
96%
|
103%
|
|
100%
|
104%
|
106%
|
102%
|
102%
|
Yield
on earning assets
|
5.27
|
5.51
|
|
5.41
|
6.30
|
7.63
|
7.54
|
6.49
|
Cost
of funds
|
1.51
|
2.18
|
|
1.91
|
2.78
|
3.67
|
3.03
|
2.14
|
Leverage
ratio
|
8.22
|
8.88
|
|
8.25
|
8.63
|
8.93
|
9.57
|
9.60
|
Shareholders'
equity to total assets
|
7.44
|
7.97
|
|
7.52
|
8.03
|
8.18
|
7.89
|
8.15
|
Dividend
payout ratio
|
NM
|
NM
|
|
118
|
49
|
37
|
26
|
26
|
Risk-based
capital ratios:
|
|
|
|
|
|
|
|
|
Tier
1 capital to risk-weighted assets
|
10.45
|
10.26
|
|
10.30
|
10.28
|
10.49
|
11.09
|
11.52
|
Total
capital to risk-weighted assets
|
11.71
|
11.52
|
|
11.56
|
11.54
|
11.74
|
12.34
|
12.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Quality Data
|
|
|
|
|
|
|
|
|
Nonperforming
loans
|
36,725
|
24,195
|
|
34,115
|
27,603
|
17,424
|
2,231
|
1,357
|
Nonaccruing
loans
|
35,579
|
23,927
|
|
32,545
|
26,277
|
14,663
|
825
|
1,313
|
Loans
past due 90 days – accruing
|
1,146
|
268
|
|
1,570
|
1,326
|
2,761
|
1,406
|
44
|
Net
charge-offs
|
3,387
|
1,711
|
|
8,687
|
5,564
|
765
|
444
|
76
|
Allowance
for loan losses
|
19,611
|
15,309
|
|
17,678
|
13,300
|
12,864
|
8,954
|
7,813
|
Allowance
for loan losses to total loans
|
2.26%
|
1.77%
|
|
2.00%
|
1.54%
|
1.59%
|
1.24%
|
1.27%
|
Nonperforming
loans to loans
|
4.23
|
2.80
|
|
3.86
|
3.19
|
2.15
|
0.31
|
0.22
|
Nonperforming
assets to assets
|
4.21
|
3.35
|
|
4.04
|
3.54
|
2.09
|
0.33
|
0.19
|
|
|
|
|
|
|
|
|
|
Per Share Data at Year
End
(a)
|
|
|
|
|
|
|
|
|
Book
value
|
$13.12
|
$13.42
|
|
$13.32
|
$13.64
|
$12.88
|
$11.52
|
$10.20
|
Tangible
book value
|
12.71
|
12.98
|
|
12.90
|
13.19
|
12.40
|
11.52
|
10.20
|
Common
stock closing price (NASDAQ)
|
10.61
|
7.01
|
|
8.00
|
8.85
|
17.14
|
27.25
|
28.38
|
Common
shares outstanding (000s)
|
5,938
|
5,934
|
|
5,932
|
5,934
|
5,924
|
5,781
|
5,739
|
(a)
Share and per share amounts have been restated to reflect the effect of a
5-for-4 stock split in December 2006.
|
|
NM
= Not Meaningful
|
|
|
As
of and for the Three Months Ended March 31,
|
|
As
of and for the Years Ended December 31,
|
($ in thousands, except share
data)
|
2010
|
2009
|
|
2009
|
2008
|
2007
|
2006
|
2005
|
Summary
of operations
|
|
|
|
|
|
|
|
|
Interest
income
|
$12,193
|
$12,566
|
|
$50,563
|
$56,682
|
$63,258
|
$55,189
|
$42,358
|
Interest
expense
|
3,764
|
4,900
|
|
18,258
|
24,439
|
30,282
|
22,737
|
14,679
|
Net
interest income
|
8,429
|
7,666
|
|
32,337
|
32,275
|
33,132
|
32,610
|
27,865
|
Provision
for loan losses
|
5,320
|
3,720
|
|
13,065
|
6,000
|
4,675
|
1,585
|
1,500
|
Net
interest income after
|
3,109
|
3,946
|
|
19,240
|
26,243
|
28,301
|
30,867
|
26,179
|
provision
for loan losses
|
|
Noninterest
income
|
|
|
|
|
|
|
|
|
Trust
and asset management fees
|
633
|
587
|
|
2,351
|
2,832
|
1,513
|
658
|
501
|
Service
charges on deposits accounts
|
455
|
467
|
|
1,809
|
1,881
|
1,383
|
1,526
|
1,622
|
Mortgage
related income, net
|
89
|
92
|
|
432
|
295
|
615
|
886
|
1,292
|
Other
operating income
|
636
|
283
|
|
1,238
|
1,216
|
1,242
|
1,233
|
979
|
Gain
on hedges
|
-
|
396
|
|
873
|
1,288
|
-
|
-
|
-
|
Gain
on sale of securities
|
467
|
184
|
|
2,119
|
163
|
-
|
-
|
-
|
Total
noninterest income
|
2,280
|
2,009
|
|
8,822
|
7,675
|
4,753
|
4,303
|
4,394
|
Noninterest
expense
|
|
|
|
|
|
|
|
|
Salaries
and employee benefits
|
3,040
|
3,351
|
|
12,146
|
13,584
|
11,846
|
10,852
|
9,530
|
Occupancy
and equipment
|
893
|
1,008
|
|
3,716
|
3,884
|
3,294
|
2,920
|
2,199
|
FDIC
deposit insurance
|
388
|
299
|
|
1,886
|
653
|
251
|
78
|
72
|
Information
technology
|
495
|
438
|
|
1,810
|
1,633
|
1,616
|
1,525
|
1,244
|
Amortization
of client list
|
36
|
36
|
|
144
|
144
|
48
|
-
|
-
|
Loss
on sale and write-downs of
|
|
|
|
|
|
|
|
|
foreclosed
assets
|
528
|
164
|
|
2,566
|
228
|
44
|
-
|
7
|
Other
operating expense
|
1,047
|
1,179
|
|
4,710
|
4,616
|
4,084
|
4,578
|
3,601
|
Total
noninterest expense
|
6,427
|
6,475
|
|
26,978
|
24,742
|
21,183
|
19,953
|
16,653
|
S -
13
Income
[loss] before income taxes
|
[1,038]
|
[520]
|
|
1,084
|
9,176
|
11,871
|
15,217
|
13,920
|
Income
tax expense [benefit]
|
[550]
|
[235]
|
|
155
|
3,170
|
4,235
|
5,215
|
4,880
|
Net income
[loss]
|
($488)
|
($285)
|
|
$929
|
$6,006
|
$7,636
|
$10,002
|
$9,040
|
Net income [loss] per
share:
(a)
|
|
|
|
|
|
|
|
|
Basic
|
($0.08)
|
($0.05)
|
|
$0.16
|
$1.01
|
$1.31
|
$1.73
|
$1.68
|
Diluted
|
(0.08)
|
(0.05)
|
|
0.16
|
1.01
|
1.29
|
1.70
|
1.63
|
Cash
dividends paid per share
|
0.02
|
0.125
|
|
0.19
|
0.50
|
0.48
|
0.45
|
0.43
|
Average
basic shares outstanding (000s)
|
5,936
|
5,933
|
|
5,933
|
5,930
|
5,850
|
5,765
|
5,396
|
Average
diluted shares outstanding (000s)
|
5,936
|
5,933
|
|
5,936
|
5,947
|
5,922
|
5,876
|
5,531
|
|
|
|
|
|
|
|
|
|
Performance
ratios (averages)
|
|
|
|
|
|
|
|
|
Net
interest margin
|
3.64%
|
3.36%
|
|
3.46%
|
3.58%
|
3.99%
|
4.44%
|
4.25%
|
Return
on average assets
|
[0.19]
|
[0.12]
|
|
0.09
|
0.63
|
0.88
|
1.30
|
1.32
|
Return
on average equity
|
[2.50]
|
[1.43]
|
|
1.16
|
7.60
|
10.68
|
16.19
|
19.06
|
Efficiency
ratio
|
60.01
|
66.93
|
|
65.60
|
61.98
|
56.15
|
54.29
|
51.92
|
|
|
|
|
|
|
|
|
|
(a)
Share and per share amounts have been restated to reflect the effect of a
5-for-4 stock split in December 2006.
|
|
RISK
FACTORS
Our
business, financial condition and results of operations are subject to various
risks, including those discussed below, which may affect the value of our
securities. The risks discussed in this prospectus supplement and incorporated
herein by reference are those that we believe are the most
significant risks, although additional risks not presently known to us or that
we currently deem less significant may also adversely affect our business,
financial condition, results of operations, cash flows and/or future prospects,
perhaps materially. Before making a decision to invest in our common stock, you
should carefully consider the risks and uncertainties described below and the
risks incorporated by reference in this prospectus supplement, together with all
of the other information included or incorporated by reference in this
prospectus supplement, as well as the financial statements and the notes to
those financial statements.
Credit
Risk
Our
business has been adversely affected by unfavorable market conditions in the
local economies in which we operate.
Our
success significantly depends upon the growth in population, income levels,
deposits and real estate development in our primary markets in coastal Georgia
and South Carolina. If these communities do not grow or if prevailing
economic conditions locally or nationally are unfavorable, our business may be
adversely impacted. The events in the national economy have filtered
down to the Company’s local markets. We are less able than larger
institutions to spread the risks of unfavorable local economic conditions across
a large number of diversified economies. Moreover, we cannot give any
assurance that we will benefit from any market growth or favorable economic
conditions in our primary market areas.
Any
adverse market or economic conditions in coastal Georgia and South Carolina may
disproportionately increase the risk that our borrowers will be unable to make
their loan payments. In addition, the market value of the real estate
securing loans could be adversely affected by unfavorable changes in market and
economic conditions. The Bluffton/Hilton Head Island (“Bluffton/HHI”)
market experienced a pronounced slowdown beginning in 2007 which seriously and
adversely affected our residential real estate loans that were originated in
that market. The Company has also experienced a slowdown in its other
real estate markets. As of December 31, 2009, approximately 88% of
our loans held for investment were secured by real estate. Of the
commercial real estate loans in our portfolio, approximately 39% represent
properties owned and occupied by businesses to which we have extended
loans. The current sustained period of increased payment
delinquencies, foreclosures and losses caused by adverse market and economic
conditions in coastal Georgia and South Carolina has adversely affected the
value of our assets, our revenues, results of operations and overall financial
condition and is likely to continue to at least in the short term.
Our
business is concentrated in Chatham and Bryan County, Georgia and southern
Beaufort County, South Carolina, which have been negatively impacted by current
economic conditions and may be susceptible to natural disasters, which could
adversely affect our operations and financial condition.
Currently,
our lending and other business is concentrated in Chatham and Bryan Counties in
Georgia and southern Beaufort County in South Carolina. The current
downturn in market conditions in these respective areas has adversely affected
the performance of our loans and the results of our operations and financial
condition. In particular, Hilton Head Island in southern Beaufort
County is a vacation and resort area with high concentrations of second home and
investment properties. Further changes in interest rates, local or
general economic conditions, real estate values or the income tax
S-15
deductibility
of mortgage interest would subject our markets to greater volatility which would
further adversely impact our performance. Additionally, our market
area is susceptible to the risk of hurricane disasters and many areas are
located in flood zones, which could adversely affect our operations and our
financial condition.
If
our allowance for loan losses is not sufficient to cover actual charge-offs, our
earnings could decrease.
Our loan
customers may not repay their loans according to the terms of these loans and
the collateral securing the payment of these loans may be insufficient to assure
repayment. We may continue to experience significant charge-offs
which could have a material adverse effect on our operating
results. Our management makes various assumptions and judgments about
the collectability of our loans, including the creditworthiness of our borrowers
and the value of the real estate and other assets serving as collateral for the
repayment of our loans. We maintain an allowance for loan losses in
an attempt to cover any charge-offs which may occur. In determining
the size of the allowance, we rely on an analysis of our loan portfolio based on
historical loss experience, volume and types of loans, trends in classification,
volume and trends in delinquencies and nonaccruals, national and local economic
conditions and other pertinent information. As noted above, the
Bluffton/HHI market experienced a significant slowdown beginning in 2007 which
necessitated additional provisions for loan losses. Our Georgia
markets are experiencing a slowdown as well.
If our
assumptions are wrong, our current allowance may not be sufficient to cover
future charge-offs, and adjustments may be necessary to allow for different
economic conditions or adverse developments in our loan
portfolio. Material additional provisions to our allowance would
materially decrease our net income and adversely affect our “well-capitalized”
status.
In
addition, federal and state regulators periodically review our allowance for
loan losses and may require us to increase our provision for loan losses or
recognize further loan charge-offs, based on judgments different than those of
our management. Any increase in our allowance for loan losses or loan
charge-offs as required by these regulatory agencies could have a negative
effect on our operating results and “well-capitalized” status.
Turmoil
in the real estate markets and the tightening of credit have adversely affected
the financial services industry and may continue to adversely affect our
business, financial condition and results of operations.
Turmoil
in the housing and real estate markets, including falling real estate prices,
increasing foreclosures, and rising unemployment, have negatively affected the
credit performance of loans secured by real estate and resulted in significant
write-downs of asset values by banks and other financial institutions. Over the
last few years, these write-downs caused many banks and financial institutions
to seek additional capital, to reduce or eliminate dividends, to merge with
other financial institutions and, in some cases, to fail. As a result, many
lenders and institutional investors reduced or ceased providing credit to
borrowers, including other financial institutions, which, in turn, led to the
global credit crisis.
This
market turmoil and credit crisis have resulted in an increased level of
commercial and consumer delinquencies, lack of consumer confidence, increased
market volatility and widespread reduction of business activity generally. As
previously noted, our market areas have been adversely impacted by the economic
crisis. The degree and timing of economic recovery (or further
recovery) remain uncertain. The resulting economic pressure on consumers and
businesses and lack of confidence in the financial markets have adversely
affected our business, financial condition and results of operations and may
continue to result in credit losses and write-downs in the future.
S-16
Market
Risk
Changes
in interest rates could negatively impact our financial condition and results of
operations.
Our
earnings are significantly dependent on our net interest income. We
expect to realize income primarily from the difference between interest earned
on loans and investments and the interest paid on deposits and
borrowings. We expect that we will periodically experience “gaps” in
the interest rate sensitivities of our assets and liabilities, meaning that
either our interest-bearing liabilities will be more sensitive to changes in
market interest rates than our interest-earning assets, or vice
versa. In either event, if market interest rates should move contrary
to our position, this “gap” would work against us, and our earnings may be
negatively affected.
For
example, in the event of a decrease in interest rates, our net interest income
will be negatively affected because our interest-bearing assets currently
reprice faster than our interest-bearing liabilities. Although our
asset-liability management strategy is designed to control our risk from changes
in market interest rates, we may not be able to prevent changes in interest
rates from having a material adverse effect on our results of operations and
financial condition. A significant portion of our variable rate loans
have interest rate floors such that the loans will not reprice immediately when
interest rates begin to rise.
Changes
in the level of interest rates also may negatively affect our ability to
originate loans, the value of our assets and our ability to realize gains from
the sale of our assets, all of which ultimately affect our
earnings.
A decline
in the market value of our assets may limit our ability to borrow additional
funds or result in our lenders requiring additional collateral from us under our
loan agreements. As a result, we could be required to sell some of
our loans and investments under adverse market conditions, upon terms that are
less favorable to us, in order to maintain our liquidity. If those
sales are made at prices lower than the amortized costs of the investments, we
will incur losses. While rising interest rates are favorable to us,
declining rates, like those experienced during 2007 and 2008, generally have a
negative impact on earnings. There can be no assurance or guarantee
that declining rates will not continue to negatively impact earnings or that we
will be able to take measures to hedge, on favorable terms or at all, against
unfavorable events, which could adversely affect our results of operations and
financial condition.
Monetary
policies may adversely affect our business and earnings.
Our
results of operations are affected by the policies of monetary authorities,
particularly the Federal Reserve. Changes in interest rates can
affect the number of loans we originate, as well as the value of our loans and
other interest-bearing assets and liabilities and the ability to realize gains
on the sale of those assets and liabilities. Prevailing interest
rates also affect the extent to which borrowers prepay loans owned by
us. When interest rates decrease, borrowers are more likely to prepay
their loans, and vice versa. We may be required to invest funds
generated by prepayments at less favorable interest rates. Increases
in interest rates could hurt the ability of borrowers who have loans with
floating interest rates to meet their increased payment
obligations. If those borrowers were not able to make their payments,
then we could suffer losses, and our level of nonperforming assets could
increase.
The
loss of significant revenues in Minis could result in lower operating earnings
as well as significant non-cash charges to earnings related to the impairment of
goodwill and accelerated amortization of the client list intangible
asset.
Asset
management fee revenues are directly impacted by the total investments under
management. The assets under management are impacted by stock values,
bond values, interest rates and the gain or loss of accounts due primarily to
investment performance. Minis’ selling shareholders have significant
earn-out incentives to maintain and increase revenues through June
2010. However, events and decisions beyond their control can
negatively impact assets under management and the related revenues from such
assets.
As
prescribed by Accounting Standards Codification (“ASC”) Topic 350,
“Intangibles — Goodwill and Other,” we undertake an annual review of the
goodwill asset balance reflected in our financial statements. We conduct an
annual review for impairment or at any time an event occurs or circumstances
change that may trigger a decline in the value of the reporting
unit. Goodwill was evaluated for impairment as of August 31, 2009 and
based on that evaluation it was determined that there was no
impairment. As of March 31, 2010, we had $2.5 million in
goodwill related to Minis. Future goodwill impairment tests may
result in future non-cash charges, which could adversely affect our earnings for
any such future period.
Liquidity
Risk
Our
use of brokered deposits, uninsured local deposits and other borrowings may
impair our liquidity and constitute an unstable and/or higher cost funding
source.
We use
wholesale, institutional and brokered deposits, uninsured local deposits and
other borrowings, including repurchase agreements, federal funds purchased, the
Federal Reserve Board (“FRB”) discount window borrowings and Federal Home Loan
Bank (“FHLB”) borrowings, to fund a portion of our
operations. Federal law requires a bank to be well-capitalized if it
accepts new brokered deposits. Thus, the Company and the Banks must
maintain a “well-capitalized” status to meet our funding
plans. Failure to maintain “well-capitalized” status would limit our
access to wholesale and brokered deposits and federal funds purchased (but not
necessarily repurchase agreements or FHLB or FRB borrowings), which could impair
our liquidity. We will be considered “well-capitalized” if we (i)
have a total risk-based capital ratio of 10.0 percent or greater; (ii) have a
Tier 1 risk-based capital ratio of 6.0 percent or greater; (iii) have a leverage
ratio of 5.0 percent or greater; and (iv) are not subject to any written
agreement, order, capital directive, or prompt corrective action directive
issued by the FDIC to meet and maintain a specific capital level for any capital
measure.
Depositors
that invest in brokered deposits are generally interest rate sensitive and well
informed about alternative markets and investments. Consequently,
funding with brokered deposits may not provide the same stability to our deposit
base as traditional local retail deposit relationships. Our liquidity
may be negatively affected if brokered deposit supply declines due to a loss of
investor confidence or a flight to higher quality investments such as U.S.
Treasury securities. In addition, brokered deposits historically have
a higher rate of interest than core local deposits.
Deposit
balances in excess of the FDIC’s $250,000 insurance limit (through December 31,
2013) per depositor are uninsured deposits. Customers with uninsured
deposits are more sensitive to financial or reputation risk than insured
depositors. Consequently, uninsured deposits do not provide the same
stability to our deposit base as insured deposits. Our liquidity may
be negatively affected by a decline in uninsured deposits due to a loss of
investor confidence and a flight to insured deposits at other financial
institutions.
S-18
The Banks
participate in the FDIC’s voluntary Transaction Account Guarantee Program (the
“TAGP”). Under the TAGP the FDIC will provide full FDIC deposit
insurance coverage for non-interest bearing transaction deposit accounts, NOW
accounts paying less than 50 basis points per annum, and Interest on Lawyers
Trust Accounts (“IOLTA”) held at participating FDIC insured
institutions. The FDIC has extended the TAGP until December 31,
2010, from its current expiration date of June 30, 2010. In
connection with its extension of the TAGP, the FDIC lowered the ceiling on
covered IOLTA and NOW accounts to 25 basis points from 50 basis points. In
conjunction with the increased deposit insurance coverage, insurance assessments
also increased. The Banks will opt out of this program at June 30,
2010.
Diminished access to alternative
sources of liquidity could adversely affect our net income, net interest margin
and our overall liquidity.
We
currently have and historically have had access to a number of alternative
sources of liquidity, but given the recent and dramatic downturn in the credit
and liquidity markets, there is no assurance that we will be able to continue to
obtain such liquidity on terms that are favorable to us, or at all. For example,
the cost of out-of-market deposits could exceed the cost of deposits of similar
maturity in our local market area, making them unattractive sources of funding;
financial institutions may be unwilling to extend credit to banks because of
concerns about the banking industry and the economy generally; and, given recent
downturns in the economy, there may not be a viable market for raising equity
capital. Sources of funding available to us, and upon which we rely
as regular components of our liquidity and funding management strategy, include
borrowings from the FHLB and the Federal Reserve Bank of Atlanta, internet
certificates of deposit and brokered deposits. If our access to these
sources of liquidity is diminished, or only available on unfavorable terms, then
our income, net interest margin and our overall liquidity likely would be
adversely affected.
Changes in the cost and availability
of funding due to changes in the deposit market and credit market, or the way in
which we are perceived in such markets, may adversely affect financial
results.
In
general, the amount, type and cost of our funding, including from other
financial institutions, the capital markets and deposits, directly impacts our
costs in operating our business and growing our assets and therefore, can
positively or negatively affect our financial results. A number of factors could
make funding more difficult, more expensive or unavailable on any terms,
including, but not limited to, financial results and losses, changes within our
organization, specific events that adversely impact our reputation, disruptions
in the capital markets, specific events that adversely impact the financial
services industry, counterparty availability, changes affecting our assets, the
corporate and regulatory structure, interest rate fluctuations, general economic
conditions and the legal, regulatory, accounting and tax environments governing
our funding transactions. Also, we compete for funding with other banks and
similar companies, many of which are substantially larger, and have more capital
and other resources than we do. In addition, as some of these competitors
consolidate with other financial institutions, these advantages may increase.
Competition from these institutions may increase the cost of
funds.
A
promissory note contains financial covenants and a guarantee of the
Company.
The
Company has a related party promissory note (“Note”) in the amount of $15.5
million as of March 31, 2010. The Note is secured by the
unconditional guarantee of the Company and SAVB Holdings’ blanket assignment or
pledge of all of its assets and the proceeds thereof to the Note’s
holder. The Note contains the following financial covenants: (i)
during the term of the Note, the dividends paid out by the Company, on a
quarterly basis, shall not exceed 50 percent of the Company’s
S-19
after tax
net income for the preceding quarter; (ii) Savannah and Bryan shall each
maintain a “well-capitalized” status as determined by the Office of the
Comptroller of the Currency (the “OCC”) and the Georgia Department of Banking
and Finance (the “GDBF”), respectively; (iii) on the last day of each calendar
quarter during the term of the Note, SAVB Holdings shall maintain a
loan-to-value ratio of at least 1.00:1.00; and (iv) on the last day of each
calendar quarter during the term of the Note, the amount of nonperforming assets
of the Company shall not exceed 4.75 percent of the total assets of the
Company. The Company’s non-compliance with any of the aforementioned
covenants would result in an increase in the interest rate payable pursuant to
the Note by 50 basis points in the event of noncompliance with the covenant
described in (iv) above and by 200 basis points in the event of noncompliance
with the covenants described in (i), (ii) or (iii) above. At March 31,
2010, the Company met all covenants contained in the Note.
Operational
Risk
Future
departures of our key personnel may impair our operations.
We are,
and for the foreseeable future will be, dependent on the services of John C.
Helmken II, President and Chief Executive Officer of the Company and Chief
Executive Officer of Savannah; E. James Burnsed, Chief Executive Officer of
Bryan; R. Stephen Stramm, Executive Vice President – Lending of the Company and
of Savannah; Michael W. Harden, Jr., Chief Financial Officer of the Company and
Savannah; Jerry O’Dell Keith, a Vice President of the Company and President of
Bryan, and Holden T. Hayes, President of Savannah. Should the
services of any of Messrs. Helmken, Burnsed, Stramm, Harden, Keith or Hayes
become unavailable, there can be no assurance that a suitable successor could be
found who will be willing to be employed upon terms and conditions acceptable to
us. A failure to replace any of these individuals promptly, should
his services become unavailable, could have a material adverse effect on our
results of operations and financial performance. These risks are
heightened by the fact that none of these officers have entered into employment
agreements with the Company or Banks.
Our
continued pace of growth may require us to raise additional capital in the
future, but that capital may not be available when it is needed.
We are
required by federal and state regulatory authorities to maintain adequate levels
of capital to support our operations. We believe that our current
capital resources are sufficient in the short term. We do, however,
continue to evaluate the need to raise additional capital to support growth and
a possible further deterioration of current economic conditions.
Our
ability to raise additional capital, if needed, will depend on conditions in the
capital markets at that time, which are outside our control, and on our
financial performance. Accordingly, we cannot give any assurances of
our ability to raise additional capital on terms acceptable to us, or at
all. If we cannot raise additional capital when needed, our overall
financial condition could be materially impaired.
Our
industry operates in a highly regulated environment. New laws or
regulations or changes in existing laws or regulations affecting the banking
industry could have a material adverse effect on our results of
operations.
The
Company and the Banks are subject to extensive government regulation and
supervision under various state and federal laws, rules and regulations,
primarily the rules and regulations of the OCC, FDIC, GDBF, SEC and the
FRB. These laws and regulations are designed primarily to protect
depositors, borrowers, and the deposit insurance funds of the
FDIC. These regulators maintain significant authority to impose
requirements on our overall operations, such as limiting certain activities
or
S-20
mandating
the increase of capital levels. The financial services industry also
is subject to frequent legislative and regulatory changes and proposed changes,
the effects of which cannot be predicted.
In
February 2009, the FDIC adopted a long-term deposit insurance fund (“DIF”)
restoration plan as well as an additional emergency assessment for
2009. The restoration plan increases base assessment rates for banks
in all risk categories with the goal of raising the DIF reserve
ratio. Banks in the best risk category paid initial base rates
ranging from 12 to 16 basis points of assessable deposits beginning
April 1, 2009. Additionally, the FDIC adopted a final rule
imposing a special emergency assessment on all financial institutions of 5 basis
points of total assets minus Tier 1 capital as of June 30,
2009. Our special emergency assessment totaled $425,000 and was
collected on September 30, 2009. The FDIC is also permitted to
impose an emergency special assessment after June 30, 2009 of up to 10
basis points if necessary to maintain public confidence in federal deposit
insurance. The FDIC has not to date imposed such an
assessment. The increase in assessments by the FDIC could have a
material adverse effect on our earnings. On November 12, 2009,
the FDIC imposed a requirement on all financial institutions to prepay three
years of FDIC insurance premiums. On December 30, 2009, we
prepaid $5.1 million of FDIC insurance premiums for the next three
years.
We
are subject to regulation, examination and scrutiny by a number of regulatory
authorities, and, depending upon the findings and determinations of our
regulatory authorities, we may be required to make adjustments to our business,
operations or financial position, and could become subject to formal or informal
regulatory orders.
Our
parent bank holding company, each of its subsidiary banks, and each of their
affiliated entities, are subject to examination by federal and state banking
regulators. Federal and state regulators have the ability to impose substantial
sanctions, restrictions and requirements on us and our banking subsidiaries and
their affiliates if they determine, upon conclusion of their examination or
otherwise, violations of laws with which we or our subsidiaries must comply, or
weaknesses or failures with respect to general standards of safety and
soundness, including, for example, in respect of any financial
concerns that the regulators may identify and desire for us to address. Such
enforcement may be formal or informal and can include directors’ resolutions,
memoranda of understanding, cease and desist orders, civil money penalties and
termination of deposit insurance and bank closures. Enforcement actions may be
taken regardless of the capital levels of the institutions, and regardless of
prior examination findings. In particular, institutions that are not
sufficiently capitalized in accordance with regulatory standards may also face
capital directives or prompt corrective actions. Enforcement actions may require
certain corrective steps (including staff additions or changes), impose limits
on activities (such as lending, deposit taking, acquisitions or branching),
prescribe lending parameters (such as loan types, volumes and terms) and require
additional capital to be raised, any of which could adversely affect our
financial condition and results of operations. The imposition of regulatory
sanctions, including monetary penalties, may have a material impact on our
financial condition and results of operations, and damage to our reputation, and
loss of our financial services holding company status. In addition, compliance
with any such action could distract management’s attention from our operations,
cause us to incur significant expenses, restrict us from engaging in potentially
profitable activities, and limit our ability to raise
capital.
We
face substantial competition in our industry sector from banking and financial
institutions that have larger and greater financial and marketing capabilities,
which may hinder our ability to compete successfully.
The
banking and financial services industry is highly competitive. This
competitiveness may negatively impact our ability to retain qualified management
and loan officers, raise sufficient deposits at an acceptable price, and attract
customers. The increasingly competitive environment is a result of
changes in regulation, changes in technology and product delivery systems, and
the accelerating pace of consolidation among financial providers.
S-21
We
compete with many different banking and financial institutions, including banks
and savings and loan associations, credit unions, brokerage and investment
banking firms, and mortgage companies
and
brokers. These entities may be branches or subsidiaries of much
larger organizations affiliated with statewide, regional or national banking
companies and, as a result, may have greater resources and lower costs of
funds. These entities may also be start-up
organizations. Any of these entities may attempt to duplicate our
business plan and strategy. There can be no assurance that we will be
able to compete effectively in the future.
Failure
to implement our business strategies may adversely affect our financial
performance.
Our
management has developed a business plan that details the strategies we intend
to implement in our efforts to continue profitable operations. If we
cannot implement our business strategies, we may be hampered in our ability to
develop business and serve our customers, which could, in turn, have an adverse
effect on our financial performance. Even if our business strategies
are successfully implemented, they may not have the favorable impact on
operations that we anticipate.
An
extended disruption of vital infrastructure could negatively impact our
business, results of operations, and financial condition.
Our
operations depend upon, among other things, our infrastructure, including
equipment and facilities. Extended disruption of vital infrastructure
by fire, power loss, natural disaster, telecommunications failure, computer
hacking or viruses, terrorist activity or the domestic and foreign response to
such activity, or other events outside of our control could have a material
adverse impact on the financial services industry as a whole and on our
business, results of operations, cash flows, and financial condition in
particular. Our disaster recovery and business resumption contingency
plans may not work as intended or may not prevent significant interruptions of
our operations.
Changes in accounting policies and
practices, as may be adopted by the regulatory agencies, the Financial
Accounting Standards Board, or other authoritative bodies, could materially
impact our financial statements.
Our
accounting policies and methods are fundamental to how we record and report our
financial condition and results of operations. From time to time, the regulatory
agencies, the Financial Accounting Standards Board, and other authoritative
bodies change the financial accounting and reporting standards that govern the
preparation of our financial statements. These changes can be hard to predict
and can materially impact how we record and report our financial condition and
results of operations.
Non-compliance
with the Patriot Act, Bank Secrecy Act, or other laws and regulations could
result in fines or sanctions.
The
Patriot and Bank Secrecy Acts require financial institutions to develop programs
to prevent financial institutions from being used for money laundering and
terrorist activities. If such activities are detected, financial
institutions are obligated to file suspicious activity reports with the FinCEN
of the U.S. Department of Treasury (the “Treasury”). These rules
require financial institutions to establish procedures for identifying and
verifying the identity of customers seeking to open new financial accounts.
Failure to comply with these regulations could result in fines or
sanctions. We have developed policies and procedures designed to
assist in compliance with these laws and regulations.
S-22
The
FRB may require the Company to commit capital resources to support the
Banks.
The FRB,
which examines the Company and our non-bank subsidiaries, has a policy stating
that a bank holding company is expected to act as a source of financial and
managerial strength to a subsidiary bank and to commit resources to support such
subsidiary bank. Under the source of strength doctrine, the
FRB may
require a bank holding company to make capital injections into a troubled
subsidiary bank, and may charge the bank holding company with engaging in unsafe
and unsound practices for failure to commit resources to such a subsidiary bank.
Capital injections may be required at times when the holding company may not
have the resources to provide it, and, therefore, may be required to borrow the
funds. Loans from a holding company to its subsidiary banks are
subordinate in right of payment to deposits and to certain other indebtedness of
such subsidiary bank.
In the
event of a bank holding company’s bankruptcy, the bankruptcy trustee will assume
any commitment by the holding company to a federal bank regulatory agency to
maintain the capital of a subsidiary bank. Moreover, the bankruptcy
law provides that claims based on any such commitment will be entitled to a
priority of payment over the claims of the institution’s general unsecured
creditors, including the holders of its note obligations. Thus, any
borrowing that must be done by the holding company in order to make the required
capital injection becomes more difficult and expensive and may adversely impact
the holding company’s results of operations and cash flows.
The
failure of other financial institutions, both nationally and in our market area,
could adversely affect us.
Our
ability to engage in routine transactions, including, for example, funding
transactions, could be adversely affected by the actions and potential failures
of other financial institutions nationally and in our market
area. From January 2009 until March 2010, 32 of the 181 banks closed
nationally, or approximately 18%, have occurred in the State of Georgia.
Financial institutions are interrelated as a result of trading, clearing,
counterparty and other relationships. We have exposure to many
different industries and counterparties, and we routinely execute transactions
with a variety of counterparties in the financial services
industry. As a result, defaults by, or even rumors or concerns about,
one or more financial institutions with which we do business, or the financial
services industry generally, have led to market-wide liquidity problems in the
past and could do so in the future and could lead to losses or defaults by us or
by other institutions. Many of these transactions expose us to credit
risk in the event of default of our counterparty or client. In
addition, our credit risk may be exacerbated when the collateral we hold cannot
be sold at prices that are sufficient for us to recover the full amount of our
exposure. Any such losses could materially and adversely affect our
financial condition and results of operations.
As a financial services company,
adverse changes in general business or economic conditions could have a material
adverse effect on our financial condition and results of
operations.
Sustained
weakness in business and economic conditions generally or specifically in the
principal markets in which we do business could have one or more of the
following adverse impacts on our business:
·
|
a
decrease in the demand for loans and other products and services offered
by us;
|
·
|
a
decrease in the fair value of nonperforming assets or other assets secured
by consumer or commercial real
estate;
|
·
|
an
increase or decrease in the usage of unfunded
commitments; or
|
·
|
an
increase in the number of clients and counterparties who become
delinquent, file for protection under bankruptcy laws or default on their
loans or other obligations to us.
|
S-23
Any such
increase in the number of delinquencies, bankruptcies or defaults could result
in a higher level of nonperforming assets, net charge-offs, provision for loan
losses, and valuation adjustments on loans.
The
impact of emergency measures designed to stabilize the U.S. banking system is
unknown.
Since
mid-2008, a host of legislation and regulatory actions have been implemented in
response to the financial crisis and the recession. Some of the programs are
beginning to expire and the impact of the wind-down of these programs on the
financial sector, including our counterparties, and on the economic recovery is
unknown.
·
|
The
Troubled Asset Relief Program (“TARP”), established pursuant to the
Emergency Economic Stabilization Act (the “EESA”) legislation, is
scheduled to expire on October 3, 2010. TARP includes the Capital
Purchase Program, pursuant to which the Treasury is authorized to purchase
senior preferred stock and warrants to purchase common stock of
participating financial institutions. Also under TARP, the Treasury has
the authority to, among other things, purchase up to $700 billion of
mortgages, mortgage-backed securities and certain other financial
instruments, from financial institutions for the purpose of stabilizing
and providing liquidity to the U.S. financial markets. Recent
indications from the Treasury are that TARP funds may be used to stimulate
small business lending and to support mortgage loan modification
efforts.
|
·
|
The
Treasury guarantee on money market mutual funds established on
September 19, 2008 expired on September 18, 2009 and the
Treasury did not extend the
program.
|
·
|
On
September 9, 2009, the FDIC issued a notice of proposed rulemaking
requesting comments on whether a temporary emergency facility should be
left in place following the expiration on October 31, 2009 of the
Temporary Liquidity Guaranty program, which guarantees certain senior
unsecured debt of banks and certain holding companies. The Transaction
Account Guarantee portion of the Temporary Liquidity Guarantee Program,
which guarantees noninterest bearing bank transaction accounts on an
unlimited basis, expires on December 31,
2010.
|
·
|
Since
2008, the Federal Reserve has purchased several trillion dollars of
mortgage-related assets in order to support the mortgage lending industry
during the financial crisis. The Federal Reserve is beginning to reduce
its balance sheet as the financial crisis appears to abate, with the
result that the supply of mortgage related assets on the market may
increase substantially.
|
·
|
As
part of its response to the financial crisis, the Federal Reserve has
maintained interest rates at historically low levels. The chairman of the
Federal Reserve has indicated that rates will remain low at least for
several months in 2010, but an increase in rates could occur in the coming
year.
|
In
addition, a stall in the economic recovery could materially and adversely affect
our business, financial condition, results of operations, access to credit or
the trading price of our common stock.
S-24
The
small to medium-sized businesses we lend to may have fewer resources to weather
a downturn in the economy, which may impair a borrower’s ability to repay a loan
to us that could materially harm our operating results.
We make loans
to professional firms and privately owned businesses that are considered to be
small to medium-sized businesses. Small to medium-sized businesses frequently
have smaller market shares than their competition, may be more vulnerable to
economic downturns, often need substantial additional capital to expand or
compete and may experience substantial volatility in operating results, any
of which may impair a borrower’s ability to repay a loan. In addition,
the success of a small and medium-sized business often depends on the management
talents and efforts of one or two persons or a small group of persons, and the
death, disability or resignation of one or more of these persons could have a
material adverse impact on the business and its ability to repay our loan. A
continued economic downturn and other events that negatively impact our target
markets could cause us to incur substantial loan losses that could materially
harm our operating results.
Future
legislation could impact our business, financial condition and results of
operations.
Congress
is considering additional proposals to substantially change the financial
institution regulatory system and to expand or contract the powers of banking
institutions and bank holding companies. Such legislation may significantly
change existing banking statutes and regulations, as well as our current
operating environment. If enacted, such legislation could increase or decrease
the cost of doing business, impose new operational requirements, increase our
consumer compliance obligations, limit or expand our permissible activities, or
affect the competitive balance among banks, savings associations, credit unions,
and other financial institutions. We cannot predict whether new legislation will
be enacted and, if enacted, the effect that it, or any regulations, would have
on our business, financial condition, or results of operations.
The
short- and long-term impact of a likely new capital framework is
uncertain.
For U.S.
banking institutions with assets of less than $250 billion and foreign exposures
of less than $10 billion, including the Company and the Banks, a proposal is
currently pending that would apply the “standardized approach” of the new
risk-based capital standards developed by the Basel Committee on Banking
Supervision (“Basel II”) to such banks. As a result of the recent deterioration
in the global credit markets and increases in credit, liquidity, interest rate,
and other risks, the U.S. banking regulators have discussed possible increases
in capital requirements, separate from the standardized approach of Basel II.
Furthermore, in September 2009, the Treasury issued principles for international
regulatory reform, which included recommendations for higher capital standards
for all banking organizations to be implemented as part of a broader
reconsideration of international risk-based capital standards developed by Basel
II. Any new capital framework is likely to affect the cost and availability of
different types of credit. U.S. banking organizations are likely to be required
to hold higher levels of capital and could incur increased compliance costs. It
is unclear at this time if similar increases in capital standards will be
incorporated into a revised Basel II proposal that would be adopted by
international financial institution. Any of these developments, including
increased capital requirements, could have a material negative effect on our
business, results of operations and financial condition.
New
rules that take effect in July 2010 may limit our ability to charge overdraft
fees and may reduce our noninterest income.
New rules
regarding overdraft charges for every day debit card and ATM transactions will
take effect on July 1, 2010. These rules will do away with the automatic
overdraft protection arrangements now in common use and will require us to
notify and obtain the consent of customers before enrolling them in an overdraft
protection plan. The new rules may limit the Banks’ ability to charge fees for
the payment of overdrafts for every day debit and ATM card transactions and may
reduce our noninterest income.
Common
Stock Marketability Risk
Our
authorized preferred stock exposes holders of our common stock to certain
risks.
Our
Articles of Incorporation authorize the issuance of up to 10,000,000 shares of
preferred stock, par value $1.00 per share. The authorized but
unissued preferred stock constitutes what is commonly referred to as “blank
check” preferred stock. This type of preferred stock may be issued by
us, at the direction of our Board, from time to time on any number of occasions,
without shareholder approval, as one or more separate series of shares comprised
of any number of the authorized but unissued shares of preferred stock,
designated by resolution of the Board stating (i) the dividend rate or the
amount of dividends to be paid thereon, whether dividends shall be cumulative
and, if so, from which date(s), the payment date(s) for dividends, and the
participating or other special rights, if any, with respect to dividends; (ii)
the voting powers, full or limited, if any, of shares of such series; (iii)
whether the shares of such series shall be redeemable and, if so, the price(s)
at which, and the terms and conditions on which, such shares may be redeemed;
(iv) the amount(s) payable upon the shares of such series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the Company;
(v) whether the shares of such series shall be entitled to the benefit of a
sinking or retirement fund to be applied to the purchase or redemption of such
shares, and if so entitled, the amount of such fund and the manner of its
application, including the price or prices at which such shares may be redeemed
or purchased through the application of such funds; (vi) whether the shares of
such series shall be convertible into, or exchangeable for, shares of any other
class or classes of stock of the Company, and, if so, the conversion price(s),
or the rate(s) of exchange, and the adjustments thereof, if any, at which such
conversion or exchange may be made, and any other terms and conditions of such
conversion and exchange; (vii) the price or other consideration for which the
shares of such series shall be issued; (viii) whether the shares of such series
which are redeemed or converted shall have the status of authorized but unissued
shares of serial preferred stock and whether such shares may be reissued as
shares of the same or any other series of serial preferred stock; and (ix)
whether the shares of such series shall be entitled to other rights, preferences
and privileges. Such preferred stock may provide our Board the
ability to hinder or discourage any attempt to gain control of us by a merger,
tender offer at a control premium price, proxy contest or
otherwise. Consequently, the preferred stock could entrench our
management. The market price of our common stock could be depressed
to some extent by the existence of the preferred stock. Moreover, any
preferred stock that is issued will rank ahead of our common stock, in terms of
dividends, priority and liquidation preferences and may have greater voting
rights than our Company’s common stock. No shares of preferred stock
have been issued as of December 31, 2009.
Our
directors and executive officers own a significant portion of our common
stock.
As of
February 28, 2010, our directors and executive officers, collectively,
beneficially owned approximately 19% of our outstanding common
stock. As a result of their ownership, the directors and executive
officers, as a group, have the ability to significantly influence the outcome of
all matters submitted to our shareholders for approval, including the election
of directors and the approval of mergers and other significant corporate
transactions, even if their interests conflict with those of other shareholders,
which could adversely affect the market price of our common stock.
The
OCC, FDIC, GDBF or other entities may impose dividend payment and other
restrictions on the Banks which would impact our ability to pay dividends to
shareholders.
The OCC,
FDIC and the GDBF are the primary regulatory agencies that examine the
Banks. Under certain circumstances, including any determination that
the activities of a bank or their subsidiaries constitute unsafe and unsound
banking practices, the regulators have the authority by statute to restrict the
Banks’ ability to transfer assets, make shareholder distributions, and redeem
preferred
S-26
securities
or pay dividends to the parent company. In addition, as noted
previously, one of our loan agreements contains a covenant that restricts
quarterly dividends to 50 percent of quarterly net income.
Certain
provisions in our Articles of Incorporation and Bylaws may deter potential
acquirers and may depress our stock price.
Our
Articles of Incorporation and Bylaws divide our Board into three classes, as
nearly equal as possible, with staggered three-year terms. Business
combinations, such as sales or mergers involving us, require the approval of a
majority of shareholders as well as the recommendation for such business
combination by at least two-thirds of the continuing directors, or in the
alternative, unanimously recommended by the continuing directors, provided that
the continuing directors constitute at least three members of the Board at the
time of such approval. Shareholders may remove directors with or
without cause upon the affirmative vote of the holders of at least 75% of the
outstanding voting shares of the Company and the affirmative vote of the holders
of at least 75% of the outstanding voting shares of the Company other than those
of which an interested shareholder is the beneficial owner. These
provisions could make it more difficult for a third party to acquire control of
the Company. In addition, the above provisions may be altered only
pursuant to specified shareholder action. With several specific
exceptions, our Articles of Incorporation and Bylaws are silent with respect to
the amendment of our Articles of Incorporation, and thus, the Georgia Business
Corporations Code (“GBCC”) dictates the requirements for making such an
amendment. The GBCC generally provides that, other than in the case
of certain routine amendments (such as changing the corporate name) and other
amendments which the GBCC specifically allows without shareholder action, the
corporation’s board of directors must recommend any amendment of the Articles of
Incorporation to the shareholders (unless the board elects to make no such
recommendation because of a conflict of interest or other special circumstances
and the board communicates the reasons for its election to the shareholders) and
the affirmative vote of a majority of the votes entitled to be cast on the
amendment by each voting group entitled to vote on the amendment (unless the
GBCC, the articles of incorporation, or the board of directors require a greater
percentage of votes) is required to amend our Articles of
Incorporation.
Our
Articles of Incorporation provide that the provisions regarding the approval
required for certain business combinations may only be changed by the
affirmative vote of at least 75% of the outstanding voting shares of the Company
and the affirmative vote of the holders of at least 75% of the outstanding
shares of the Company other than those of which an interested shareholder is the
beneficial owner.
Our
Articles of Incorporation also provide that the provisions regarding the
applicability of Article 11, Parts 2 and 3 of the GBCC (regarding mergers and
share exchanges) to the Company may only be repealed by both the affirmative
vote of at least two-thirds of the continuing directors and a majority of the
votes entitled to be cast by voting shares of the Company, in addition to any
other vote required by our Articles of Incorporation.
Our
Bylaws generally provide that the Bylaws may be altered or amended by our
shareholders at any annual meeting or special meeting of the shareholders or by
our Board at any regular or special meeting of the Company’s Board.
The
existence of the above provisions could result in our being less attractive to a
potential acquirer, or result in our shareholders receiving less for their
shares of common voting stock than otherwise might be available if there were a
takeover attempt.
S-27
We
have certain obligations and the general ability to issue additional shares of
our common stock in the future, and such future issuances may depress the price
of our common stock.
We have
various obligations to issue additional shares of common stock in the
future. Options permit the holders to purchase shares of our common
stock at specified prices. These purchase prices may be less than the
then current market price of our common stock. Any shares of our
common stock issued pursuant to these options would dilute the percentage
ownership of existing shareholders. The terms on which we could
obtain additional capital during the life of these options may be adversely
affected because of such potential dilution. Finally, we may issue
additional shares in the future. There are no preemptive rights in
connection with our common stock. Thus, the percentage ownership of
existing shareholders may be diluted if we issue additional shares in the
future. For issuances of shares and grants of options, our Board will
determine the timing and size of the issuances and grants and the consideration
or services required thereof. Our Board intends to use its reasonable
business judgment to fulfill its fiduciary obligations to our then existing
shareholders in connection with any such issuance or
grant. Nonetheless, future issuances of additional shares could cause
immediate and substantial dilution to the net tangible book value of shares of
our common stock issued and outstanding immediately before such
transaction. Any future decrease in the net tangible book value of
such issued and outstanding shares could materially and adversely affect the
market value of the shares.
Sales
of large quantities of our common stock could reduce the market price of our
common stock.
Any sales
of large quantities of shares of our common stock, or the perception that any
such sales are likely to occur, could reduce the market price of our common
stock. In 2005, we issued 397,273 restricted shares to investors in a
private placement of our shares which were registered with the SEC on October
21, 2005. The holders of those shares are able to offer to sell those
shares from time to time at the current market price or at negotiated
prices. In 2007, we issued 71,000 shares related to the acquisition
of Minis. If holders sell large quantities of shares of our common
stock, the market price of our common stock may decrease and the public market
for our common stock may otherwise be adversely affected because of the
additional shares available in the market.
Our
common stock has experienced limited trading.
Our
common stock is quoted and traded on The NASDAQ Global Market in the United
States under the symbol “SAVB”. The trading volume in our common
stock has been relatively low when compared with larger companies quoted on The
NASDAQ Global Market or listed on the other stock exchanges. We
cannot say with any certainty that a more active and liquid trading market for
our common stock will develop. Because of this, it may be more
difficult for you to sell a substantial number of shares for the same price at
which you could sell a smaller number of shares.
We cannot
predict the effect, if any, that future sales of our common stock in the market,
or the availability of shares of common stock for sale in the market, will have
on the market price of our common stock. We, therefore, can give no
assurance that sales of substantial amounts of our common stock in the market,
or the potential for large amounts of sales in the market, would not cause the
market price of our common stock to decline or impair our future ability to
raise capital through sales of our common stock.
As of
April 30, 2010, there were 5,937,689 shares of common stock
outstanding. The price of our common stock will be determined in the
marketplace and may be influenced by many factors, including the
following:
·
|
The
depth and liquidity of the markets for our common stock;
|
S-28
·
|
Investor
perception of us and the industry in which we
participate;
|
·
|
General
economic and market conditions;
|
·
|
Responses
to quarter-to-quarter variations in operating
results;
|
·
|
Earnings
relative to securities analysts’
estimates;
|
·
|
Changes
in financial estimates by securities
analysts;
|
·
|
Conditions,
trends or announcements in the banking
industry;
|
·
|
Announcements
of significant acquisitions, strategic alliances, joint ventures or
capital commitments by us or our
competitors;
|
·
|
Additions
or departures of key personnel;
|
·
|
Accounting
pronouncements or changes in accounting rules that affect our financial
statements; and
|
·
|
Other
factors and events beyond our
control.
|
The
market price of our common stock could experience significant fluctuations
unrelated to our operating performance. As a result, an investor (due
to personal circumstances) may be required to sell their shares of our common
stock at a time when our stock price is depressed due to random fluctuations,
possibly based on factors beyond our control.
Our stock price has been and may
continue to be volatile and the value of your investment may
decline.
The
trading price of our common stock has been and may continue to be highly
volatile and subject to wide fluctuations in price. The stock market in general,
and the market for commercial banks and other financial services companies in
particular, has experienced significant price and volume fluctuations that
sometimes have been unrelated or disproportionate to the operating performance
of those companies. These broad market and industry factors may seriously harm
the market price of our common stock, regardless of our operating performance.
Furthermore, the value of your investment may decline, and you may be unable to
sell your shares of our common stock at or above the offering
price.
A holder
with as little as a 5% interest in the Company could, under certain
circumstances, be subject to certain restrictions, including regulation as a
“bank holding company.”
Any
entity (including a group of investors acting in concert) owning 25% or
more of our outstanding common stock, or 5% or more if such holder otherwise
exercises a “controlling influence” over us, may be subject to regulation as a
“bank holding company” in accordance with the Bank Holding Company Act of 1956,
as amended, or the BHCA. In addition, (1) any bank holding company or
foreign bank with a U.S. presence may be required to obtain the approval of the
FRB under the BHCA to acquire or retain 5% or more of our outstanding common
stock and (2) any person other than a bank holding company may be required
to obtain regulatory approval under the Change in Bank Control Act of 1978, as
amended, to acquire or retain 10% or more of our outstanding common stock.
Becoming a bank
S-29
holding
company imposes certain statutory and regulatory restrictions and burdens, and
might require the holder to divest all or a portion of the holder’s investment
in our common stock
.
In
addition, because a bank holding company is required to provide managerial and
financial strength for its bank subsidiary, such a holder may be required to
divest investments that may be deemed incompatible with bank holding company
status, such as a material investment in a company engaged in
activities unrelated to banking. Further, subject to an FDIC policy
statement published in August 2009 (and clarified in January and April 2010),
under certain circumstances, holders of 5% or more of our securities could be
subject to certain restrictions, such as an inability to sell or trade their
securities for a period of three years, among others, in order for us to
participate in an FDIC-assisted transaction of a failed bank. An entity
(or group of investors) that owns or controls 10% or more of our common
securities but less than 25% and that seeks to avoid designation as a bank
holding company will be required to enter into passivity commitments with
the FRB that prevent the entity from exercising control. The FRB also may
require passivity commitments from an entity that owns or controls 5% or more of
any class of our voting securities.
We may invest or spend the proceeds
in this offering in ways with which you may not agree and in ways that may not
earn a profit, including contributing capital to the
Banks.
We intend
to use the net proceeds from this offering for working capital and general
corporate purposes, including to fund an earn-out payment to Minis of up to $1.8
million, to support organic growth and potential future acquisitions of branches
or whole banks in or adjacent to our existing footprint, which may include the
possible acquisition of failed institutions in FDIC-assisted transactions and to
provide additional capital to the Banks. We will retain broad
discretion over the use of the proceeds from this offering and may use them for
purposes other than those contemplated at the time of this offering. You may not
agree with the ways we decide to use these proceeds, and our use of the proceeds
may not yield any profits. Furthermore, it is the longstanding policy of the
Federal Reserve Board, that a bank holding company is expected to act as a
source of financial strength for its subsidiary banks and to commit resources to
support these banks. As a result of this policy, we may be required to commit
resources, including proceeds from this offering, to our subsidiary banks in
circumstances where we might not otherwise choose to do so and that may not
yield any profits.
USE
OF PROCEEDS
We
estimate that the net proceeds of this offering will be approximately $9,784,868
million (or $11,271,818 million if the underwriter exercises its
over-allotment option in full), based on the public offering price of
$9.50 per share, after deducting underwriting commissions and
expenses.
We intend
to use the net proceeds from this offering for working capital and general
corporate purposes, including to fund an earn-out payment to Minis of up to $1.8
million, to support organic growth and potential future acquisitions of branches
or whole banks in or adjacent to our existing footprint, which may include the
possible acquisition of failed institutions in FDIC-assisted transactions and to
provide additional capital to the Banks. At the present time, we do
not have any plans, arrangements or understandings relating to any material
acquisitions.
We have
not specifically allocated the amount of net proceeds that will be used for
these purposes. We are conducting this offering at this time because we believe
that it will allow us to better execute our growth strategy.
The
precise amounts and timing of the application of the net proceeds from this
offering depends upon many factors, including, but not limited to, the amount of
any such proceeds and actual funding requirements. Until the proceeds are used,
we may invest the proceeds, depending on our cash flow requirements, in short-
and long-term investments, including, but not limited to treasury bills,
commercial paper, certificates of deposit, securities issued by U.S. government
agencies, money market funds, repurchase agreements and other similar
investments.
DIVIDEND
POLICY
The
payment of dividends is assessed quarterly by our board of directors, in light
of credit quality trends, expected earnings performance, the Banks’ capacity to
declare and pay dividends to the Company and any applicable regulatory
restrictions. On April 21, 2009, our board of directors reduced the quarterly
dividend on our common stock from $0.125 per share to $0.020 per share for the
second quarter of 2009. On July 21, 2009, October 20, 2009 and
January 26, 2010, our board of directors declared and the Company subsequently
paid dividends of $0.020 per share of our common stock for the third and fourth
quarters of 2009 and the first quarter of 2010, respectively. On
April 20, 2010, our board of directors suspended the Company’s cash dividend,
effective beginning in the second quarter of 2010.
The
Federal Reserve, in its expectation that a bank holding company act as a source
of financial strength to its subsidiary banks, has reiterated the requirement to
inform and consult with the Federal Reserve before paying dividends that could
raise safety and soundness concerns. The Federal Reserve released a supervisory
letter advising bank holding companies, among other things, that as a general
matter, a bank holding company should inform the Federal Reserve and should
eliminate, defer or significantly reduce its dividends if (i) the bank holding
company’s net income available to shareholders for the past four quarters, net
of dividends previously paid during that period, is not sufficient to fully fund
the dividends, (ii) the bank holding company’s prospective rate of earnings is
not consistent with the bank holding company’s capital needs and overall current
and prospective financial condition, or (iii) the bank holding company will not
met, or is in danger of not meeting, its minimum regulatory capital adequacy
ratios.
Although
the Company is not presently subject to any direct regulatory restrictions on
dividends (other than those of Georgia corporate law), the Company's long-term
ability to pay cash dividends will depend on the amount of dividends paid by the
Banks and any other subsequently acquired entities. OCC regulations
restrict the amount of dividends which Savannah may pay without obtaining prior
approval. Based on such regulatory restrictions, Savannah is
restricted from paying dividends in a calendar year which exceed the current
year’s net income combined with the retained net profits of the preceding two
years without prior approval. Bryan may pay dividends equal to no
more than 50% of the prior year’s net income without prior approval from the
GDBF. The dividend payout plans of the Banks consider the objective
of maintaining their “well-capitalized” status. Regulatory
authorities could administratively impose limitations on the ability of the
Banks to pay dividends to the Company if such limits were deemed appropriate to
preserve certain capital adequacy requirements or in the interests of “safety
and soundness.”
As set forth in the “Risk Factors” section, the Company has a related party
promissory note (the “Note”) that contains certain financial covenants,
including the requirement that during the term of the Note, the dividends paid
by the Company, on a quarterly basis, do not exceed 50 percent of the Company’s
after tax net income for the preceding quarter. The Company’s non-compliance
with this covenant would result in an increase in the interest rate payable
pursuant to the Note by 200 basis points.
PRICE
RANGE OF COMMON STOCK
Our
common stock is listed and traded on The Nasdaq Global Market under the symbol
“SAVB.” As of March 5, 2010, there were 5,937,689 shares of our common stock
issued and outstanding, held by approximately 1,900 shareholders. The following
table sets forth for the periods indicated the range of the high and low
reported sales prices of our common stock on The Nasdaq Global Market, and the
cash dividends declared per share.
High Low Dividends
sale
price sale
price per
share
2010:
First
Quarter $11.09 $7.50 $0.02
2009:
Fourth
Quarter
$9.30 $7.00 $0.02
Third
Quarter $8.50
$6.65
$0.02
Second
Quarter $11.00 $6.50 $0.02
First
Quarter
$10.35
$5.59
$0.125
2008:
Fourth
Quarter $13.35 $7.80 $0.125
Third
Quarter $15.93 $11.14
$0.125
Second
Quarter $18.73
$12.55
$0.125
First
Quarter $19.97
$15.01
$0.125
On
June 9, 2010, the last reported sale price of our common stock on The
Nasdaq Global Market was $9.73 per share.
DESCRIPTION
OF CAPITAL STOCK
Our
articles of incorporation provide that we may issue up to 20 million shares of
common stock, $1.00 par value per share, and 10 million shares of preferred
stock, $1.00 par value per share. See “Description of Common Stock”
and “Description of Preferred Stock” on pages 21 and 22, respectively, in the
accompanying prospectus and the information incorporated by reference therein
for additional information regarding our common stock and preferred
stock.
CAPITALIZATION
The
following table sets forth our capitalization as of March 31, 2010:
·
|
on
an actual basis; and
|
·
|
on
an “as adjusted” basis to give effect to the issuance and sale
of 1,098,398 shares of common stock in this offering,
assuming that the underwriter’s over-allotment is not exercised, at a
price per share of $9.50, net of underwriting discounts and commissions
and estimated offering expenses.
|
The
following data should be read in conjunction with our historical consolidated
financial statements and related notes as of and for the three months ended
March 31, 2010 incorporated by reference in this prospectus
supplement.
|
|
March
31, 2010
|
|
|
|
Actual
|
|
|
As adjusted for
the
offering
|
|
|
|
(dollars
in thousands)
|
|
|
|
(unaudited)
|
|
|
|
|
|
Subordinated
debt:
|
|
|
|
Subordinated
debt to nonconsolidated subsidiaries *
|
|
$10,310
|
|
|
|
$10,310
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity:
|
|
|
|
|
|
|
|
|
Preferred stock,
$1.00 par value per share, 10,000,000 shares authorized, no shares
issued and outstanding and no shares outstanding, as
adjusted
|
|
-
|
|
|
|
-
|
|
|
Common
stock, $1.00 par value per share, 20,000,000 shares authorized,
5,938,189 shares issued (includes 500 shares of Treasury stock); 5,937,689
shares issued and outstanding; 7,036,087 shares issued and
outstanding, as adjusted
|
|
5,938
|
|
|
|
7,036
|
|
|
Treasury
stock, at cost, 500 shares
|
|
(1)
|
|
|
|
(1)
|
|
|
Additional
paid-in capital
|
|
38,644
|
|
|
|
47,331
|
|
|
Retained
earnings
|
|
32,776
|
|
|
|
32,776
|
|
|
Accumulated
other comprehensive income
|
|
548
|
|
|
|
548
|
|
|
|
|
|
|
|
|
|
|
|
Total
shareholders’ equity
|
|
77,905
|
|
|
|
87,690
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
capital ratios:
|
|
|
|
|
|
|
|
|
Tier
1 risk-based capital ratio
|
|
10.45
|
|
%
|
|
11.62
|
%
|
|
Total
risk-based capital ratio
|
|
11.71
|
|
|
|
12.89
|
|
|
Leverage
ratio
|
|
8.22
|
|
|
|
9.08
|
|
|
*
Total subordinated debt is the
aggregate outstanding principal balance due 2033 and 2034 owed by the Company to
the capital trusts before netting of the common securities in the amount of
$310.
We, and the underwriter, FIG Partners,
LLC, have entered into an underwriting agreement with respect to the common
stock being offered. Subject to the terms and conditions contained in the
underwriting agreement, the underwriter has agreed to
purchase 1,098,398 shares of our common stock.
The
underwriting agreement provides that the underwriter’s obligation to purchase
shares of our common stock depends on the satisfaction of the conditions
contained in the underwriting agreement, including, among other
conditions:
• the
continued accuracy of the representations and warranties made by us and the
performance of the covenants;
• the
absence of material adverse changes in the financial markets or in our
business; and
• our
delivery of customary closing documents and the delivery of legal opinions to
the underwriter.
Subject
to these conditions, the underwriter is committed to purchase and pay for all
shares of our common stock offered by this prospectus, if any such shares are
purchased. However, the underwriter is not obligated to purchase or pay for the
shares of our common stock covered by the underwriter’s over-allotment option
described below, unless and until such option is exercised.
Over-Allotment
Option
. We have granted the underwriter an option, exercisable no
later than 30 days after the date of the underwriting agreement, to
purchase up to an aggregate of 164,759 additional shares of common
stock at the public offering price, less the underwriting discounts and
commissions set forth on the cover page of this prospectus. We will be obligated
to sell these shares of common stock to the underwriter to the extent the
over-allotment option is exercised. The underwriter may exercise this option
only to cover over-allotments, if any, made in connection with the sale of our
common stock offered by this prospectus.
Commissions and
Expenses
. The underwriter proposes to offer our common stock
directly to the public at the offering price set forth on the cover page of this
prospectus and to dealers at the public offering price less a concession not in
excess of $0.095 per share. The underwriter may allow, and the dealers may
re-allow, a concession not in excess of $0.285 per share on sales to other
brokers and dealers. After the public offering of our common stock, the
underwriter may change the offering price, concessions and other selling
terms.
The
following table shows the per share and total underwriting discounts and
commissions that we will pay to the underwriter and the proceeds we will receive
before other expenses related to this offering. These amounts are shown assuming
both no exercise and full exercise of the underwriter’s option to purchase
additional shares of our common stock.
|
|
|
Total Without
Over-
Allotment
Exercise
|
Total With
Over-
Allotment
Exercise
|
|
|
Public
offering price
|
|
$
|
10,434,781
|
$11,999,991.50
|
|
|
Underwriting
discount and commissions payable by us (1)
|
|
$
|
434,913
|
$
513,173.50
|
|
|
Proceeds
to us (before expenses) (1)
|
|
$
|
9,999,868
|
$11,486,818.00
|
|
|
(1)
The underwriting discount is
$0.475 per share, except with respect to the sale of 228,490 shares to be
sold to certain of our shareholders for which the underwriting discount is
$0.095 per share.
In compliance with the guidelines of the
Financial Industry Regulatory Authority, or FINRA, the aggregate maximum
discount, commission, agency fees, or other items constituting underwriting
compensation to be received by any FINRA member or independent broker-dealer
will not exceed 8% of any offering pursuant to this prospectus and any
applicable prospectus supplement.
Indemnity
. We have
agreed to indemnify the underwriter, and persons who control the underwriter,
against certain liabilities, including liabilities under the Securities Act, and
to contribute to payments that the underwriter may be required to make in
respect of these liabilities.
Lock-Up Agreement
. We
and each of our directors and executive officers, have agreed, for a period of
90 days from the date of this prospectus not to, without the prior written
consent of the underwriter, (a) directly or indirectly, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of any shares of our common stock or any securities
convertible into or exercisable or exchangeable for shares of our common stock
or file any registration statement under the Securities Exchange Act of 1933, as
amended, with respect to any of the foregoing or (b) enter into any swap or any
other agreement or any transaction that transfers, in whole or in part, directly
or indirectly, the economic consequence of ownership of the shares of our common
stock, whether any such swap or transaction described in clause (a) or (b) above
is to be settled by delivery of shares of our common stock or such other
securities, in cash or otherwise, subject to certain specified
exceptions.
The
90-day restricted period described above is subject to extension under limited
circumstance. In the event that either (a) during the period that
begins on the date that is 15 calendar days plus 3 business days before the last
day of the applicable restricted period and ends on the last day of the
applicable restricted period, we issue an earnings release or material news or a
material event relating to us occurs, or (b) prior to the expiration of the
applicable restricted period, we announce that we will release earnings results
during the 16-day period beginning on the last day of the applicable restricted
period, the restrictions set forth in the underwriting agreement will continue
to apply until the expiration of the date that is 15 calendar days plus 3
business days after the date on which we issue the earnings release or the
material news or event related to us occurs.
Stabilization
. In
connection with this offering, the underwriter may engage in stabilizing
transactions, over-allotment transactions, syndicate covering transactions and
penalty bids.
·
|
Stabilizing
transactions permit bids to purchase shares of common stock so long as the
stabilizing bids do not exceed a specified maximum, and are engaged in for
the purpose of preventing or retarding a decline in the market price of
the common stock while the offering is in
progress.
|
·
|
Over-allotment
transactions involve sales by the underwriter of shares of common stock in
excess of the number of shares the underwriter is obligated to purchase.
This creates a syndicate short position which may be either a covered
short position or a naked short position. In a covered short position, the
number of shares of common stock over-allotted by the underwriter is not
greater than the number of shares that they may purchase in the
over-allotment option. In a naked short position, the number of shares
involved is greater than the number of shares in the over-allotment
option. The underwriter may close out any short position by exercising
their over-allotment option and/or purchasing shares in the open
market.
|
S-36
·
|
Syndicate
covering transactions involve purchases of common stock in the open market
after the distribution has been completed in order to cover syndicate
short positions. In determining the source of shares to close out the
short position, the underwriter will consider, among other things, the
price of shares available for purchase in the open market as compared with
the price at which the underwriter may purchase shares through exercise of
the over-allotment option. If the underwriter sells more shares than could
be covered by exercise of the over-allotment option and, therefore, have a
naked short position, the position can be closed out only by buying shares
in the open market. A naked short position is more likely to be created if
the underwriter is concerned that after pricing there could be downward
pressure on the price of the shares in the open market that could
adversely affect investors who purchase in the
offering.
|
·
|
Penalty
bids permit the underwriter to reclaim a selling concession from a
syndicate member when the common stock originally sold by that syndicate
member is purchased in stabilizing or syndicate covering transactions to
cover syndicate short positions.
|
These
stabilizing transactions, syndicate covering transactions and penalty bids may
have the effect of raising or maintaining the market price of our common stock
or preventing or retarding a decline in the market price of our common stock. As
a result, the price of our common stock in the open market may be higher than it
would otherwise be in the absence of these transactions. Neither we nor the
underwriter make any representation or prediction as to the effect that the
transactions described above may have on the price of our common stock. These
transactions may be effected on The Nasdaq Global Market, in the
over-the-counter market or otherwise and, if commenced, may be discontinued at
any time.
Passive Market
Making
. In connection with this offering, the underwriter and
selected dealers, if any, who are qualified market makers on The Nasdaq Global
Market, may engage in passive market making transactions in our common stock on
The Nasdaq Global Market in accordance with Rule 103 of Regulation M
under the Securities Act. Rule 103 permits passive market making activity
by the participants in our common stock offering. Passive market making may
occur before the pricing of our offering, or before the commencement of offers
or sales of our common stock. Each passive market maker must comply with
applicable volume and price limitations and must be identified as a passive
market maker. In general, a passive market maker must display its bid at a price
not in excess of the highest independent bid for the security. If all
independent bids are lowered below the bid of the passive market maker, however,
the bid must then be lowered when purchase limits are exceeded. Net purchases by
a passive market maker on each day are limited to a specified percentage of the
passive market maker’s average daily trading volume in the common stock during a
specified period and must be discontinued when that limit is reached. The
underwriter and other dealers are not required to engage in passive market
making and may end passive market making activities at any time.
Expense Reimbursement.
The
underwriter will bear its own out-of-pocket expenses;
provided, however,
that we
will reimburse the underwriter for
$50,000 of the costs and expenses
of the underwriter in connection with the offering (including, without
limitation, those reasonable fees related to outside counsel, due diligence,
travel and out-of-pocket expenses), and will reimburse the underwriter for up to
an additional $25,000 of reasonable, documented costs and expenses of the
underwriter in connection with the offering.
S-37
Our Relationship with the
Underwriter
. We expect FIG Partners, LLC and some of their
respective affiliates to perform financial advisory and investment banking
services for us in the ordinary course of their respective businesses in the
future, and may continue to receive compensation for such services.
Our
common stock is being offered by the underwriter, subject to prior sale, when,
as and if issued to and accepted by it, subject to approval of certain legal
matters by counsel for the underwriter and other conditions.
A
prospectus supplement and an accompanying prospectus in electronic format will
be made available on the Internet sites or through other online services
maintained by the underwriter and/or selling group members participating in this
offering, or by their affiliates. In those cases, prospective investors may view
offering terms online and, depending upon the particular underwriter or selling
group member, prospective investors may be allowed to place orders online. The
underwriter may agree with us to allocate specific number of shares for sale to
online brokerage account holders. Any such allocations for online distributions
will be made by the representative on the same basis as other
allocations.
Other
than the prospectus supplement and an accompanying prospectus in electronic
format, the information on the underwriter’s or selling group member’s website
and any information contained in any other website maintained by the underwriter
or selling group member is not part of the prospectus supplement and an
accompanying prospectus or the registration statement of which this prospectus
supplement and an accompanying prospectus forms a part, has not been approved
and/or endorsed by us or the underwriter or selling group member in its capacity
as underwriter or selling group member and should not be relied upon by
investors.
The
principal business address of FIG Partners, LLC is 1175 Peachtree St., NE, 100
Colony Square, Suite 2250, Atlanta, Georgia.
LEGAL
OPINIONS
Ellis,
Painter, Ratterree & Adams LLP, Savannah, Georgia and Alston & Bird LLP,
Atlanta, Georgia, will pass on certain legal matters in connection with the
validity of the common stock offered by this prospectus
supplement. J. Wiley Ellis, a partner at Ellis, Painter, Ratterree
& Adams LLP, serves as Chairman of the board of directors of the Company and
Savannah. He is also a director of Bryan and Minis. Nelson
Mullins Riley & Scarborough LLP, Greenville, South Carolina, has
represented the underwriter.
EXPERTS
The
audited consolidated financial statements of The Savannah Bancorp, Inc. and its
subsidiaries as of December 31, 2009 and 2008 and each of the years in the
three-year period ended December 31, 2009 incorporated by reference in this
prospectus supplement and accompanying prospectus have been audited by Mauldin
& Jenkins Certified Public Accountants, LLC, independent registered public
accountants, as set forth in their report thereon, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
Page Intentionally Left Blank
PROSPECTUS
THE
SAVANNAH BANCORP, INC.
Debt
Securities
Common
Stock
Preferred
Stock
Warrants
Rights
-----------------------------------------------------
We may
offer, from time to time, up to $12,000,000 of our debt securities, common
stock, preferred stock, warrants, or rights, which we collectively refer to as
the “securities.” We may offer and sell any combination of the
securities described in this prospectus in different series at times, in
amounts, at prices and on terms to be determined at or prior to the time of each
offering.
This
prospectus describes some of the general terms that may apply to these
securities. The specific terms of any securities to be offered will be described
in a supplement to this prospectus. The prospectus supplement may also add,
update or change information contained in this prospectus. You should read this
prospectus and the applicable prospectus supplement carefully before you make
your investment decision. This prospectus may not be used to sell securities
unless accompanied by a prospectus supplement.
We may
offer and sell these securities to or through one or more underwriters, dealers
and agents, or directly to purchasers, on a continuous or delayed basis. The
supplements to this prospectus will describe the terms of any offering of these
securities, including any underwriting arrangements. See “Plan of
Distribution.”
Our
common stock is listed on the NASDAQ Global Market under the trading symbol
“SAVB.” Each prospectus supplement will indicate if the securities offered
thereby will be listed on any securities exchange.
You should carefully read and
consider the risk factors included in our periodic reports and other information
that we file with the Securities and Exchange Commission before your invest in
our securities.
---------------------------------------
Neither
the Securities and Exchange Commission, any state securities commission, nor any
other regulatory body has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
___________________________________
Prospectus
dated December 2, 2009.
TABLE
OF CONTENTS
|
|
|
|
|
Important
Information
About This
Prospectus
|
1
|
Description
of Preferred Stock
|
22
|
Available
Information
|
1
|
Description
of Warrants
|
22
|
Incorporation
of Certain
|
|
Description
of Rights
|
23
|
Information by
Reference
|
2
|
Legal
Ownership and Book-Entry
|
|
Special
Note on Forward Looking
|
|
Issuance
|
23
|
Statements
and Risk Factors
|
2
|
Ratio
of Earnings to Fixed Charges
|
24
|
Company
Summary
|
4
|
Use
of Proceeds
|
24
|
Description
of Securities We May Offer
|
4
|
Plan
of Distribution
|
24
|
Description
of Debt Securities
|
5
|
Validity
of the Securities
|
26
|
Description
of Common Stock
|
21
|
Experts
|
26
|
|
|
|
|
|
|
|
|
IMPORTANT
INFORMATION ABOUT THIS PROSPECTUS
This
prospectus is part of a registration statement that we filed with the Securities
and Exchange Commission, or SEC, using a “shelf” registration process. Under
this shelf registration process, we may, from time to time, sell any combination
of the securities described in this prospectus in one or more offerings. This
prospectus provides you with a general description of the securities we may
offer. No person is authorized to give any information or represent anything not
contained in this prospectus or any prospectus supplement. We are only offering
the securities in places where sales of those securities are permitted. You
should not assume that the information contained in this prospectus and any
accompanying prospectus supplement or information incorporated by reference
herein or therein, is current as of any date other than the date of such
information. Our business, financial condition, results of operations and
prospects may have changed since that date. Each time we offer securities, we
will provide a prospectus supplement that will contain specific information
about the terms of that offering and the manner in which the securities will be
offered. We urge you to read this prospectus, any accompanying prospectus
supplement and other offering material together with additional information
described under the heading “Incorporation of Certain Information By
Reference.”
In
this prospectus, we refer to debt securities, common stock, preferred stock,
warrants and rights collectively as the “securities.” The terms “we,”
“our,” “ours” and “us” refer to The Savannah Bancorp, Inc. and our consolidated
subsidiaries, except that in the discussion of the capital stock and related
matters, these terms refer solely to The Savannah Bancorp, Inc. and not to any
of its subsidiaries.
AVAILABLE
INFORMATION
We are
required to file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any documents filed by us
at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference room. Our filings with the SEC are also available to the public
through the SEC’s Internet site at http://www.sec.gov and through the NASDAQ
Global Select Market, One Liberty Plaza, 165 Broadway, New York, NY 10006, on
which our common stock is listed.
We have
filed with the SEC a registration statement on Form S-3 relating to the
securities covered by this prospectus and any prospectus supplement. This
prospectus is a part of the registration statement and does not contain all the
information in the registration statement. Whenever a reference is made in this
prospectus or any prospectus supplement to a contract or other document, the
reference is only a summary and you should refer to the exhibits that are a part
of the registration statement for a copy of the contract or other document. You
may review a copy of the registration statement at the SEC’s public reference
room in Washington, D.C., as well as through the SEC’s Internet
site.
1
INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE
The SEC’s
rules allow us to incorporate by reference information into this prospectus.
This means that we can disclose important information to you by referring you to
another document. Any information referred to in this way is considered part of
this prospectus from the date we file that document. Any reports filed by us
with the SEC after the date of this prospectus will automatically update and,
where applicable, supersede any information contained in this prospectus or
incorporated by reference in this prospectus.
We
incorporate by reference into this prospectus the following documents or
information filed with the SEC (other than, in each case, documents or
information deemed to have been furnished and not filed in accordance with SEC
rules):
·
|
our
Annual Report on Form 10-K for the fiscal year ended December 31,
2008;
|
·
|
our
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2009, June
30, 2009 and September 30, 2009;
|
·
|
the
description of our common stock contained in our Registration Statement on
Form S-1 dated February 8, 1990 (including any amendment to that form that
we may have filed in the past, or may file in the future, for the purpose
of updating the description of our common stock);
and
|
·
|
all
documents filed by us under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, on or after the date of this
prospectus and before the termination of the applicable offering (except
for information furnished to the SEC that is not deemed to be “filed” for
purposes of the Exchange Act).
|
We will
provide without charge to each person, including any beneficial owner, to whom
this prospectus is delivered, upon his or her written or oral request, a copy of
any or all of the information that has been incorporated by reference into this
prospectus, excluding exhibits to those documents, unless they are specifically
incorporated by reference into those documents. These documents are available on
our website at http://www.savb.com. You can also request those documents from
our Corporate Secretary at the following address:
25 Bull
Street
Savannah,
Georgia 31401
(912)
629-6500
Except
as expressly provided above, no other information, including information on our
website, is incorporated by reference into this prospectus.
SPECIAL
NOTE ON FORWARD LOOKING STATEMENTS AND RISK FACTORS
Certain
of the statements in this prospectus and the other documents incorporated by
reference in this prospectus, particularly those anticipating future
performance, business prospects, growth and operating strategies, proposed
acquisitions, and similar matters, and those that include the words “believes,”
“anticipates,” “forecast,” “estimates” or similar expressions constitute
“forward-looking statements” within the meaning of Section 27A of the
Securities Act of 1933, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended. For those statements, The Savannah Bancorp
claims the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995. There can be
no assurance that the forward-looking statements will be accurate because they
are based on many assumptions, which involve risks and
uncertainties.
The
following important factors could cause future results to differ:
·
|
the
effects of the current economic crisis and general business conditions,
including, without limitation, the continuing dramatic deterioration of
the subprime, mortgage, credit and liquidity markets, as well as the
Federal Reserve’s actions with respect to interest
rates;
|
·
|
the
effects of and changes in trade, monetary and fiscal policies, as well as
legislative and regulatory changes, including changes in banking,
securities and tax laws and regulations, as well as changes affecting
financial institutions’ ability to lend and otherwise do business with
consumers;
|
2
·
|
the
risks of changes in interest rates and the yield curve on the levels,
composition and costs of deposits, loan demand, and the values of loan
collateral, securities, and interest rate sensitive assets and
liabilities;
|
·
|
risks
related to loans secured by real estate, including further adverse
developments in the real estate markets that would decrease the value and
marketability of collateral;
|
·
|
the
inability of the Company to raise additional capital or to pursue other
strategic initiatives;
|
·
|
adverse
conditions in the stock market and other capital markets and the impact of
those conditions on our capital markets and capital management activities,
including our investment and wealth management advisory
businesses;
|
·
|
changes
in the cost and availability of funding due to changes in the deposit
market and credit market, or the way in which the Company is perceived in
such markets;
|
·
|
the
effects of harsh weather conditions, including
hurricanes;
|
·
|
changes
in United States foreign or military
policy;
|
·
|
the
timely development of competitive new products and services by the Company
and the acceptance of those products and services by new existing
customers;
|
·
|
the
willingness of customers to accept third-party products marketed by
us;
|
·
|
the
willingness of customers to substitute competitors’ products and services
for the Company’s products and services and vice
versa;
|
·
|
the
impact of changes in financial services’ laws and regulations (including
laws concerning taxes, banking, securities and
insurance);
|
·
|
changes
in consumer spending and saving
habits;
|
·
|
the
effect of corporate restructuring, acquisitions or dispositions, including
the actual restructuring and other related charges and the failure to
achieve the expected gains, revenue growth or expense savings from such
corporate restructuring, acquisitions or
dispositions;
|
·
|
the
growth and profitability of our noninterest or fee income being less than
expected;
|
·
|
unanticipated
regulatory or judicial proceedings;
|
·
|
the
impact of changes in accounting policies by the SEC or the Financial
Accounting Standards Board;
|
·
|
the
limited trading activity of our common
stock;
|
·
|
the
effects of our lack of a diversified loan portfolio, including the risks
of geographic concentrations;
|
·
|
adverse
changes in the financial performance and/or condition of our borrowers,
which could impact the repayment of those borrowers' outstanding
loans;
|
·
|
the
success of the Company at managing the risks involved in the foregoing;
and
|
·
|
other
risks identified in The Savannah Bancorp’s SEC reports and public
announcements.
|
We do not
have any intention or obligation to update forward-looking statements to reflect
new information, future events or risks or the eventual outcome of the facts
underlying the forward-looking statements. New information, future
events or risks may cause the forward-looking events we discuss in this
prospectus not to occur or to occur in a manner different from what we
expect.
The risk
factors discussed in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2008 and as updated in any future filings with the SEC, could cause
our results to differ materially from those expressed in forward-looking
statements. There may also be other risks that we are unable to predict at this
time.
3
COMPANY
SUMMARY
The
Company was incorporated as a Georgia business corporation on October 5, 1989,
for the purpose of becoming a bank holding company. The Company
became a bank holding company within the meaning of the Federal Bank Holding
Company Act and the Georgia Bank Holding Company Act upon the acquisition of 100
percent of the common stock of The Savannah Bank, National Association
("Savannah") on August 22, 1990.
On
December 15 1998, the Company acquired Bryan Bancorp of Georgia, Inc. (“Bryan”),
the bank holding company for Bryan Bank & Trust (“Bryan Bank”), and Bryan
Bank became a wholly-owned subsidiary of the Company.
On
February 6, 2006, the Company formed Harbourside Community Bank (“Harbourside”),
a federal stock savings bank, located on Hilton Head Island, South
Carolina. Effective September 30, 2009, the Company merged the
charter of Harbourside into Savannah.
The
Company acquired all of the net assets of Minis & Co., Inc. (“Minis”) as of
August 31, 2007. The net assets of Minis were incorporated into a
new, wholly-owned subsidiary of the Company which operates under the name of
Minis & Co., Inc. Minis is a registered investment advisor based
in Savannah, Georgia, offering a full line of investment management
services.
On
September 30, 2008, the Company formed a new subsidiary, SAVB Holdings, LLC
(“SAVB Holdings”), to hold previously identified problem loans (including
problem and nonperforming loans) and foreclosed real estate (“OREO”) primarily
from its Harbourside subsidiary.
Savannah,
Bryan Bank, Minis and SAVB Holdings are the four operating subsidiaries of the
Company. The two bank subsidiaries, collectively, are referred to as
the “Subsidiary Banks” or “Banks”. Savannah received its charter from
the Office of the Comptroller of the Currency (“OCC”) to commence business and
opened for business on August 22, 1990. Bryan Bank received its
charter from the Georgia Department of Banking and Finance (“GDBF”) in December
1989. The deposits at the Subsidiary Banks are insured by the Federal
Deposit Insurance Corporation ("FDIC").
As of
September 30, 2009, Savannah had eight full service offices and one loan
production office, total assets of $766 million, total loans of $640
million, total deposits of $665 million, total shareholders’ equity of $61
million and $2.7 million in net income for the nine months then
ended. As of September 30, 2009, Bryan Bank had two full service
offices, total assets of $254 million, total loans of $212 million, total
deposits of $217 million, total shareholders’ equity of $22 million and net
income of $2.2 million for the nine months then ended. Harbourside
had a net loss of $2.4 million for the nine months ended September 30, 2009
prior to its merger with Savannah.
In
September 2005, the Company formed SAVB Properties, LLC for the primary purpose
of owning a 50 percent interest in two real estate
partnerships. Johnson Square Associates, a Georgia general
partnership, owns a seven-story, 35,000 square foot building at 25 Bull Street
on Johnson Square in downtown Savannah. The Company currently leases
approximately 25 percent of this space for its corporate headquarters and the
main office of Savannah. Whitaker Street Associates, a Georgia
Limited Partnership, owns the 80’ x 200’ parking lot directly across Whitaker
Street from 25 Bull Street.
Under an
agreement with the City of Savannah, the parking lot was recently re-developed
as part of a 3 acre, 1100 space underground parking garage. The
partnership’s surface parking lot was restored and now includes the structural
foundation adequate to support a 6-story building, the maximum height allowed on
this property by city ordinances. This lot adjoins Ellis Square, one
of Savannah’s original squares, which is being restored by the City of
Savannah.
DESCRIPTION OF SECURITIES WE MAY
OFFER
This
prospectus contains summary descriptions of our debt securities, common stock,
preferred stock, warrants and rights that we may offer from time to time. These
summary descriptions are not meant to be complete
4
descriptions
of each security. The particular terms of any security will be described in the
related prospectus supplement and other offering material.
DESCRIPTION OF DEBT
SECURITIES
General
Unless
stated otherwise in the applicable prospectus supplement, the following
description outlines the material terms of the senior debt securities and the
subordinated debt securities, which we collectively refer to as the debt
securities, that we may offer from time to time. The specific terms of any debt
securities we may offer and the extent, if any, to which these general terms and
provisions may or may not apply to the debt securities will be described in the
applicable prospectus supplement relating to the particular series of debt
securities.
We will
issue the senior debt securities under an indenture which we will enter into
with a trustee to be determined at the time of an offering of such securities.
We will issue the subordinated debt securities under a separate indenture which
we also will enter into with a trustee to be determined at the time of an
offering of such securities. The indentures will be subject to and governed by
the Trust Indenture Act of 1939, as amended, or the “Trust Indenture Act,” and
we may supplement the indentures from time to time after we execute them
according to their terms.
The
following description of the debt securities may not be complete and is subject
to and qualified in its entirety by reference to the form of either the senior
or the subordinated indenture relating to the particular series of debt
securities, each of which we have filed as an exhibit to the registration
statement that contains this prospectus. Capitalized terms used but not defined
in this description will have the meanings given to them in the indentures.
Wherever we refer to particular sections or defined terms of the indentures, it
is our intent that those sections or defined terms will be incorporated by
reference into this prospectus.
Terms
The debt
securities will be our direct, unsecured obligations. The indebtedness
represented by the senior debt securities will rank equally with all our other
unsecured and unsubordinated debt but will be subordinated to all of our
existing and future secured indebtedness, but only to the extent of the
applicable collateral. The indebtedness represented by the subordinated debt
securities will rank junior to our senior debt in right of payment, under the
terms set forth in the subordinated indenture, and will be subject to our prior
payment in full of our senior debt, all as described below under
“—Subordination.”
The
indentures will not limit the aggregate principal amount of debt securities that
we may issue; however, the amount of debt securities we offer will be limited to
the amount described on the cover of this prospectus. We may issue debt
securities, in one or more series from time to time, as our board of directors
may establish by resolution or as we may establish in one or more supplemental
indentures. We may issue debt securities with terms different from those of debt
securities we previously issued. We may issue debt securities of the same series
at more than one time and, unless prohibited by the terms of the series, we may
reopen a series for issuances of additional debt securities, without the consent
of the holders of the outstanding debt securities of that series. The debt
securities may be denominated and payable in foreign currencies or units based
on or related to foreign currencies. Special United States federal income tax
considerations applicable to any debt securities denominated in foreign
currencies will be described in the applicable prospectus
supplement.
Each
indenture will permit more than one trustee under the indenture, each with
respect to one or more series of the debt securities. Any trustee under an
indenture may resign or be removed with respect to one or more series of the
debt securities, and a successor trustee may be appointed to act with respect to
that series. Upon prior written notice, a trustee may be removed by act of the
holders of a majority in principal amount of the outstanding debt securities of
the series with respect to which the trustee acts as trustee. If two or more
persons are acting as trustee with respect to different series of debt
securities, each trustee will be a trustee of a trust under the applicable
indenture unrelated to the trust administered by any other trustee. Except as
otherwise stated in this prospectus, any action described in this prospectus to
be taken by each trustee may only be taken by the trustee with respect to the
one or more series of debt securities for which it is trustee under the
applicable indenture.
5
You
should refer to the applicable prospectus supplement relating to a particular
series of debt securities for the specific terms of the debt securities,
including, but not limited to:
(1) the
title of the debt securities of the series and whether the debt securities are
senior debt securities or subordinated debt securities;
(2) the aggregate principal amount
of the debt securities of the series;
(3) the
price (expressed as a percentage of the principal amount of the debt securities)
at which we will issue the debt securities of the series;
(4) the
terms, if any, by which holders may convert or exchange the debt securities of
the series into or for common stock or other of our securities or
property;
(5) if
the debt securities of the series are convertible or exchangeable, any
limitations on the ownership or transferability of the securities or property
into which holders may convert or exchange the debt securities;
(6) the
date or dates, or the method for determining the date or dates, on which we will
be obligated to pay the principal of the debt securities of the series and the
amount of principal we will be obligated to pay;
(7) the
rate or rates, which may be fixed or variable, at which the debt securities of
the series will bear interest, if any, or the method by which the rate or rates
will be determined;
(8) the
date or dates, or the method for determining the date or dates, from which any
interest will accrue on the debt securities of the series, the dates on which we
will be obligated to pay any such interest, the regular record dates if any, for
the interest payments, or the method by which the dates shall be determined, the
persons to whom we will be obligated to pay interest, and the basis upon which
interest shall be calculated if other than that of a 360-day year consisting of
twelve 30-day months;
(9) the
place or places where the principal of, and any premium, Make-Whole Amount (as
defined in the indentures), interest or Additional Amounts (as defined in the
indentures) on, the debt securities of the series will be payable, where the
holders of the debt securities may surrender debt securities for conversion,
transfer or exchange, and where notices or demands to or upon us in respect of
the debt securities and the indentures may be served;
(10) if
other than the trustee, the identity of each security registrar and/or paying
agent for debt securities of the series;
(11) the
period or periods during which, the price or prices (including any premium or
Make-Whole Amount) at which, the currency or currencies in which, and the other
terms and conditions upon which, we may redeem the debt securities of the
series, at our option, if we have such an option;
(12) any
obligation of ours to redeem, repay or purchase debt securities pursuant to any
sinking fund or analogous provision or at the option of a holder of debt
securities, and the terms and conditions upon which we will redeem, repay or
purchase all or a portion of the debt securities of the series pursuant to that
obligation;
(13) the
currency or currencies in which we will sell the debt securities and in which
the debt securities of the series will be denominated and payable;
(14) whether
the amount of payment of principal of, and any premium, Make-Whole Amount, or
interest on, the debt securities of the series may be determined with reference
to an index, formula or other method and the manner in which the amounts will be
determined;
(15) whether
the principal of, and any premium, Make-Whole Amount, interest or Additional
Amounts on, the debt securities of the series are to be payable, at our election
or at the election of the holder of the debt securities, in a currency or
currencies other than that in which the debt securities are denominated or
stated to be payable, the
6
period
or periods during which, and the terms and conditions upon which, this election
may be made, and the time and manner of, and identity of the exchange rate agent
with responsibility for, determining the exchange rate between the currency or
currencies in which the debt securities are denominated or stated to be payable
and the currency or currencies in which the debt securities will be
payable;
(16) any
provisions granting special rights to the holders of the debt securities of the
series at the occurrence of certain events;
(17) any
additions to, modifications of or deletions from the terms of the debt
securities with respect to the events of default or covenants contained in the
applicable indenture;
(18) whether
the debt securities of the series will be issued in definitive or book-entry
form, represented by a global security, and the related terms and
conditions;
(19) whether
the debt securities of the series will be in registered or bearer form and the
terms and conditions relating to the applicable form, and if in registered form,
the denomination in which we will issue the debt securities if other than $1,000
or a multiple of $1,000 and, if in bearer form, the denominations in which we
will issue the debt securities if other than $5,000 or a multiple of
$5,000;
(20) the
applicability, if any, of the defeasance or covenant defeasance provisions
described below under “ — Discharge, Defeasance and Covenant Defeasance” on any
series of debt securities;
(21) any
applicable United States federal income tax consequences, including whether and
under what circumstances we will pay any Additional Amounts as contemplated in
the applicable indenture on the debt securities, to any holder who is not a
United States person in respect of any tax, assessment or governmental charge
withheld or deducted and, if we will pay Additional Amounts, whether we will
have the option, and on what terms to redeem the debt securities instead of
paying the Additional Amounts;
(22) whether
we may extend the interest payment periods and, if so, the terms of any
extension;
(23) if
the principal amount payable on any maturity date will not be determinable on
any one or more dates prior to the maturity date, the amount which will be
deemed to be the principal amount as of any date for any purpose, including the
principal amount which will be due and payable upon any maturity other than the
maturity date, or the manner of determining that amount;
(24) any
other covenant or warranty included for the benefit of the debt securities of
the series;
(25) any
proposed listing of the debt securities of the series on any securities
exchange; and
(26) any
other terms of such debt securities not inconsistent with the provisions of the
applicable indenture.
The debt
securities of a series may provide for less than their entire principal amount
to be payable if we accelerate the maturity of the debt securities as a result
of the occurrence and continuation of an event of default. If this is the case,
the debt securities would have what is referred to as “original issue discount.”
Any special U.S. federal income tax, accounting and other considerations
applicable to original issue discount securities will be described in the
applicable prospectus supplement.
We may
issue debt securities of a series from time to time, with the principal amount
payable on any principal payment date, or the amount of interest payable on any
interest payment date, to be determined by reference to one or more currency
exchange rates, commodity prices, equity indices or other factors. Holders of
these debt securities may receive a principal amount on any principal payment
date, or a payment of interest on any interest payment date, that is greater
than or less than the amount of principal or interest otherwise payable on such
dates, depending upon the value on the applicable dates of the applicable
currency, commodity, equity index or other factors.
7
Information
as to the methods for determining the amount of principal or interest payable on
any date, the currencies, commodities, equity indices or other factors to which
the amount payable on such date is linked and certain additional tax
considerations will be described in the applicable prospectus
supplement.
The
indentures will not contain any provisions that afford holders of the debt
securities protection in the event we engage in a transaction in which we incur
or acquire a large amount of additional debt.
Denominations, Interest, Registration
and Transfer
Unless
stated otherwise in the applicable prospectus supplement, debt securities we
issue in registered form of any series will be issued in denominations of $1,000
and multiples of $1,000 and debt securities we issue in bearer form will be
issued in denominations of $5,000 and multiples of $5,000.
The
principal of, and any premium, Make-Whole Amount, or interest on, any series of
debt securities will be payable in the currency designated in the applicable
prospectus supplement and except as described otherwise in the applicable
prospectus supplement, at the corporate trust office of the trustee
.
At our option, however,
payment of interest may be made by check mailed to the address of the person
entitled to the interest payment as it appears in the security register for the
series or by wire transfer of funds to that person at an account maintained
within the United States. We will have the right to require a holder of debt
securities, in connection with any payment on such debt securities, to certify
information to us or, in the absence of such certification, we will be entitled
to rely on any legal presumption to enable us to determine our obligation, if
any, to deduct or withhold taxes, assessments or governmental charges from such
payment. We may at any time designate additional paying agents, remove any
paying agents, or approve a change in the office through which any paying agent
acts, except that we will be required to maintain a paying agent in each place
of payment for any series of debt securities. All monies we pay to a paying
agent for the payment of principal of, or any premium, Make-Whole Amount,
interest or Additional Amounts on, any debt security which remains unclaimed at
the end of two years after the principal, premium or interest has become due and
payable will be repaid to us, subject to any applicable law. After this time,
the holder of the debt security will be able to look only to us for
payment.
Any
interest we do not punctually pay on any interest payment date with respect to a
debt security will be defaulted interest and will cease to be payable to the
holder on the original regular record date and may either:
(1) be
paid to the holder at the close of business on a special record date for the
payment of defaulted interest to be fixed by the applicable trustee;
or
(2) be
paid at any time in any other lawful manner, all as more completely described in
the applicable indenture.
If the
defaulted interest is to be paid on a special record date, notice of the special
record date will be mailed to each holder of such debt security not less than
ten days before the special record date.
Subject
to certain limitations imposed on debt securities issued in book-entry form,
debt securities of any series will be exchangeable for other debt securities of
the same series and with the same total principal amount and authorized
denomination upon surrender of the debt securities at the corporate trust office
of the applicable trustee. In addition, subject to limitations imposed upon debt
securities issued in book-entry form, the debt securities of any series may be
surrendered for conversion, transfer or exchange at the corporate trust office
of the applicable trustee. Every debt security surrendered for conversion,
transfer or exchange will be duly endorsed or accompanied by a written
instrument of transfer. There will be no service charge on any transfer or
exchange of debt securities, but we may require payment by holders to cover any
tax or other governmental charge payable in connection with the transfer or
exchange.
If the
applicable prospectus supplement refers to us designating a transfer agent (in
addition to the applicable trustee) for any series of debt securities, we may at
any time remove the transfer agent or approve a change in the location at which
the transfer agent acts, provided that we maintain a transfer agent in each
place of payment for any series of debt securities. We may at any time designate
additional transfer agents with respect to any series of debt
securities.
8
Neither
we nor any trustee will be required to do any of the following:
(1) issue,
register the transfer of or exchange debt securities of any series during a
period beginning at the opening of business 15 days before there is a
selection of debt securities of that series to be redeemed and ending at the
close of business on the day of mailing or publication of the relevant notice of
redemption;
(2) register
the transfer of or exchange any debt security, or portion thereof, called for
redemption, except the unredeemed portion of any debt security being only
partially redeemed;
(3) exchange
any debt security in bearer form that is selected for redemption, except a debt
security in bearer form may be exchanged for a debt security in registered form
of that series and like denomination, provided that the debt security in
registered form shall be simultaneously surrendered for redemption or exchange;
or
(4) issue,
register the transfer of or exchange any debt security that has been surrendered
for repayment at the option of the holder, except the portion, if any, of the
debt security that is not to be repaid.
Book-Entry Delivery and
Settlement
Global Notes
We will
issue debt securities in the form of one or more global notes in definitive,
fully registered, book-entry form. The global notes will be deposited with or on
behalf of The Depository Trust Company, or “DTC,” and registered in the name of
Cede & Co., as nominee of DTC.
DTC, Clearstream and
Euroclear
Beneficial
interests in the global notes will be represented through book-entry accounts of
financial institutions acting on behalf of beneficial owners as direct and
indirect participants in DTC. Investors may hold interests in the global notes
through either DTC in the United States, Clearstream Banking, societe anonyme,
Luxembourg, which we refer to as “Clearstream,” or Euroclear Bank S.A./ N.V., as
operator of the Euroclear System, which we refer to as “Euroclear,” in Europe,
either directly if they are participants in such systems or indirectly through
organizations that are participants in such systems. Clearstream and Euroclear
will hold interests on behalf of their participants through customers’
securities accounts in Clearstream’s and Euroclear’s names on the books of their
U.S. depositaries, which in turn will hold such interests in customers’
securities accounts in the U.S. depositaries’ names on the books of
DTC.
DTC has
advised that:
(1) DTC
is a limited-purpose trust company organized under the New York Banking Law, a
“banking organization” within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a “clearing corporation” within the meaning of
the New York Uniform Commercial Code and a “clearing agency” registered under
Section 17A of the Exchange Act.
(2) DTC
holds securities that its participants deposit with DTC and facilitates the
settlement among participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in participants’ accounts, thereby eliminating the need for physical
movement of securities certificates.
(3) Direct
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and other organizations, some of whom, and/or their
representatives, own DTC.
(4) DTC
is owned by a number of its direct participants and by The New York Stock
Exchange, Inc., the American Stock Exchange LLC and the National Association of
Securities Dealers, Inc.
9
(5) Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a direct participant, either directly or
indirectly.
(6) The
rules applicable to DTC and its direct and indirect participants are on file
with the SEC.
Clearstream
has advised that it is incorporated under the laws of Luxembourg as a
professional depositary. Clearstream holds securities for its customers and
facilitates the clearance and settlement of securities transactions between its
customers through electronic book-entry changes in accounts of its customers,
thereby eliminating the need for physical movement of certificates. Clearstream
provides to its customers, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Clearstream interfaces with domestic
markets in several countries. As a professional depositary, Clearstream is
subject to regulation by the Luxembourg Commission for the Supervision of the
Financial Section. Clearstream customers are recognized financial institutions
around the world, including underwriters, securities brokers and dealers, banks,
trust companies, clearing corporations and other organizations and may include
the underwriters for any series of debt securities. Indirect access to
Clearstream is also available to others, such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Clearstream customer either directly or indirectly.
Euroclear
has advised that it was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Euroclear provides
various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries. Euroclear is operated by
Euroclear Bank S.A./N.V., which we refer to as the Euroclear Operator, under
contract with Euroclear Clearance Systems S.C., a Belgian cooperative
corporation, which we refer to as the Cooperative. All operations are conducted
by the Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for Euroclear on behalf of
Euroclear participants. Euroclear participants include banks (including central
banks), securities brokers and dealers, and other professional financial
intermediaries and may include the underwriters for any series of debt
securities. Indirect access to Euroclear is also available to other firms that
clear through or maintain a custodial relationship with a Euroclear participant,
either directly or indirectly.
We
understand that the Euroclear Operator is licensed by the Belgian Banking and
Finance Commission to carry out banking activities on a global basis. As a
Belgian bank, it is regulated and examined by the Belgian Banking and Finance
Commission.
We have
provided the descriptions of the operations and procedures of DTC, Clearstream
and Euroclear in this prospectus solely as a matter of convenience. These
operations and procedures are solely within the control of those organizations
and are subject to change by them from time to time. We do not take any
responsibility for these operations or procedures, and you are urged to contact
DTC, Clearstream and Euroclear or their participants directly to discuss these
matters.
We expect
that under procedures established by DTC:
(1) upon
deposit of the global notes with DTC or its custodian, DTC will credit on its
internal system the accounts of direct participants designated by the
underwriters with portions of the principal amounts of the global notes;
and
(2) ownership
of debt securities will be shown on, and the transfer of ownership thereof will
be effected only through, records maintained by DTC or its nominee, with respect
to interests of direct participants, and the records of direct and indirect
participants, with respect to interests of persons other than
participants.
The laws
of some jurisdictions may require that purchasers of securities take physical
delivery of those securities in definitive form. Accordingly, the ability to
transfer interests in debt securities represented by a global note to those
persons may be limited. In addition, because DTC can act only on behalf of its
participants, who in
10
turn act
on behalf of persons who hold interests through participants, the ability of a
person having an interest in notes represented by a global note to pledge or
transfer those interests to persons or entities that do not participate in DTC’s
system, or otherwise to take actions in respect of such interest, may be
affected by the lack of a physical definitive security in respect of such
interest.
So long
as DTC or its nominee is the registered owner of a global note, DTC or that
nominee will be considered the sole owner or holder of debt securities
represented by that global note for all purposes under the indenture. Except as
provided below, owners of beneficial interests in a global note will not be
entitled to have notes represented by that global note registered in their
names, will not receive or be entitled to receive physical delivery of
certificated notes and will not be considered the owners or holders thereof
under the indenture for any purpose, including with respect to the giving of any
direction, instruction or approval to the trustee. Accordingly, each holder
owning a beneficial interest in a global note must rely on the procedures of DTC
and, if that holder is not a direct or indirect participant, on the procedures
of the participant through which that holder owns its interest, to exercise any
rights of a holder of notes under the indenture or a global note.
Neither
we nor the trustee will have any responsibility or liability for any aspect of
the records relating to or payments made on account of debt securities by DTC,
Clearstream or Euroclear, or for maintaining, supervising or reviewing any
records of those organizations relating to the debt securities.
Payments
on debt securities represented by the global notes will be made to DTC or its
nominee, as the case may be, as the registered owner thereof. We expect that DTC
or its nominee, upon receipt of any payment on debt securities represented by a
global note, will credit participants’ accounts with payments in amounts
proportionate to their respective beneficial interests in the global note as
shown in the records of DTC or its nominee. We also expect that payments by
participants to owners of beneficial interests in the global note held through
such participants will be governed by standing instructions and customary
practice as is now the case with securities held for the accounts of customers
registered in the names of nominees for such customers. The participants will be
responsible for those payments.
Distributions
on debt securities held beneficially through Clearstream will be credited to
cash accounts of its customers in accordance with its rules and procedures, to
the extent received by the U.S. depositary for Clearstream.
Securities
clearance accounts and cash accounts with the Euroclear Operator are governed by
the Terms and Conditions Governing Use of Euroclear and the related Operating
Procedures of the Euroclear System, and applicable Belgian law, which we refer
to collectively as the “Terms and Conditions.” The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear participants and has no record of or relationship with persons holding
through Euroclear participants.
Distributions
on debt securities held beneficially through Euroclear will be credited to the
cash accounts of its participants in accordance with the Terms and Conditions,
to the extent received by the U.S. depositary for Euroclear.
Clearance and Settlement
Procedures
Initial
settlement for debt securities will be made in immediately available funds.
Secondary market trading between DTC participants will occur in the ordinary way
in accordance with DTC rules and will be settled in immediately available funds.
Secondary market trading between Clearstream customers and/or Euroclear
participants will occur in the ordinary way in accordance with the applicable
rules and operating procedures of Clearstream and Euroclear, as applicable, and
will be settled using the procedures applicable to conventional eurobonds in
immediately available funds.
Cross-market
transfers between persons holding directly or indirectly through DTC, on the one
hand, and directly or indirectly through Clearstream customers or Euroclear
participants, on the other, will be effected through DTC in accordance with DTC
rules on behalf of the relevant European international clearing system by its
U.S. depositary; however, such cross-market transactions will require delivery
of instructions to the relevant European
11
international
clearing system by the counterparty in such system in accordance with its rules
and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to the U.S. depositary to take
action to effect final settlement on its behalf by delivering or receiving debt
securities in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Clearstream
customers and Euroclear participants may not deliver instructions directly to
their U.S. depositaries.
Because
of time-zone differences, credits of debt securities received in Clearstream or
Euroclear as a result of a transaction with a DTC participant will be made
during subsequent securities settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in debt
securities settled during such processing will be reported to the relevant
Clearstream customers or Euroclear participants on such business day. Cash
received in Clearstream or Euroclear as a result of sales of debt securities by
or through a Clearstream customer or a Euroclear participant to a DTC
participant will be received with value on the DTC settlement date but will be
available in the relevant Clearstream or Euroclear cash account only as of the
business day following settlement in DTC.
Although
DTC, Clearstream and Euroclear have agreed to the foregoing procedures to
facilitate transfers of debt securities among participants of DTC, Clearstream
and Euroclear, they are under no obligation to perform or continue to perform
such procedures and such procedures may be changed or discontinued at any
time.
Certificated
Notes
Individual
certificates in respect of debt securities will not be issued in exchange for
the global notes, except in very limited circumstances. We will issue or cause
to be issued certificated notes to each person that DTC identifies as the
beneficial owner of debt securities represented by a global note upon surrender
by DTC of the global note if:
·
|
DTC
notifies us that it is no longer willing or able to act as a depositary
for such global note or ceases to be a clearing agency registered under
the Exchange Act and we have not appointed a successor depositary within
90 days of that notice or becoming aware that DTC is no longer so
registered;
|
·
|
an
event of default has occurred and is continuing, and DTC requests the
issuance of certificated notes; or
|
·
|
we
determine not to have the applicable series of debt securities of such
series represented by a global
note.
|
Neither
we nor the trustee will be liable for any delay by DTC, its nominee or any
direct or indirect participant in identifying the beneficial owners of debt
securities. We and the trustee may conclusively rely on, and will be protected
in relying on, instructions from DTC or its nominee for all purposes, including
with respect to the registration and delivery, and the respective principal
amounts, of the certificated notes to be issued.
Merger, Consolidation or
Sale
Each
indenture will provide that we may consolidate with, or sell, lease or otherwise
transfer all or substantially all of our assets to, or merge with or into, any
other corporation or trust or entity provided that:
(1) we
are the survivor in the merger, or the survivor, if not us, is an entity
organized under the laws of the United States or a state of the United States
and expressly assumes by supplemental indenture the due and punctual payment of
the principal of, and any premium, Make-Whole Amount, interest or Additional
Amounts on, all of the outstanding debt securities and the due and punctual
performance and observance of all of the covenants and conditions contained in
each indenture;
(2) immediately
after giving effect to the transaction and treating any indebtedness that
becomes an obligation of ours or one of our subsidiaries as a result of the
transaction, as having been incurred by us or the subsidiary at the time of the
transaction, there is no event of default under the indenture, and no event
which, after notice or the lapse of time, or both, would become an event of
default;
12
(3) if,
as a result of the transaction, our property or assets would be subject to an
encumbrance that would not be permitted under the indenture, we shall take steps
to secure the debt securities equally and ratably with all indebtedness secured
in the transaction; and
(4) certain
other conditions that are described in the indentures are met.
Upon any
such consolidation, merger, or sale, the successor corporation formed, or into
which we are merged or to which we are sold, shall succeed to, and be
substituted for, us under the indentures.
This
covenant would not apply to any recapitalization transaction, change of control
of us or a transaction in which we incur a large amount of additional debt
unless the transactions or change of control included a merger or consolidation
or transfer of substantially all of our assets. Unless stated otherwise in the
applicable prospectus supplement, there will be no covenants or other provisions
in the indentures providing for a put or increased interest or that would
otherwise afford holders of debt securities additional protection in the event
of a recapitalization transaction, a change of control of us or a transaction in
which we incur or acquire a large amount of additional debt.
Certain Covenants of the Debt
Securities
Unless
stated otherwise in the applicable prospectus supplement for a particular series
of debt securities, each indenture will contain the provisions described
below.
Except as
permitted under “— Merger, Consolidation or Sale” above, we will do or cause to
be done all things necessary to preserve and keep our legal existence, rights
and franchises in full force and effect; provided, however, that we will not be
required to preserve any right or franchise if we determine that the
preservation of that right or franchise is no longer desirable in the conduct of
our business and that its loss is not disadvantageous in any material respect to
the holders of any debt securities.
We will
cause all of our material properties used or useful in the conduct of our
business or the business of any of our subsidiaries to be maintained and kept in
good condition, repair and working order and supplied with all necessary
equipment and we will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements for those properties, as we in our
judgment believe is necessary so that we may carry on the business related to
those properties properly and advantageously at all times; provided, however,
that we will not be prevented from selling or otherwise disposing of our
properties or the properties of our subsidiaries in the ordinary course of
business.
We will
pay or discharge, or cause to be paid or discharged, before they become
delinquent,
(1) all
taxes, assessments and governmental charges levied or imposed upon us or any of
our subsidiaries or upon income, profits or property of us or our subsidiaries;
and
(2) all
lawful claims for labor, materials and supplies which, if unpaid, might by law
become a lien upon our property or any subsidiary of ours;
provided,
however, that we will not be required to pay or discharge or cause to be paid or
discharged any tax, assessment, charge or claim the amount, applicability or
validity of which is being contested in good faith by appropriate
proceedings.
We may
choose not to comply with any term, provision or condition of the foregoing
covenants, or with certain other terms, provisions or conditions with respect to
the debt securities of a series (except any such term, provision or condition
which could not be amended without the consent of all holders of such series),
if before or after the time for compliance with the covenant, term, provision or
condition, the holders of at least a majority in principal amount of all
outstanding debt securities of the series either waive compliance in that
instance or generally waive compliance with that covenant or condition. Unless
the holders expressly waive compliance with a covenant and the waiver has become
effective, our obligations and the duties of the trustee in respect of the term,
provision, or condition will remain in full force and effect.
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Any
additional covenants with respect to any series of debt securities will be
described in the applicable prospectus supplement.
Events of Default, Notice and
Waiver
Unless
stated otherwise in the applicable prospectus supplement for any series of debt
securities, each of the following “Events of Default” will be set forth in the
indentures and will be applicable to each series of debt securities we may issue
under those indentures:
(1) we
fail for 30 days to pay any installment of interest or any Additional
Amounts payable on any debt security of that series;
(2) we
fail to pay the principal of, or any premium or Make-Whole Amount on, any debt
security of that series when due, either at maturity, redemption or
otherwise;
(3) we
fail to make any sinking fund payment when due as required for any debt security
of that series;
(4) we
default in the performance of or breach any other covenant or agreement we made
in the indenture that is applicable to the debt securities of that series other
than a covenant added to the indenture solely for the benefit of another series
of debt securities, which default or breach has continued for 60 days after
written notice as provided for in accordance with the applicable indenture by
the applicable trustee or the holders of at least 25% in principal amount of the
outstanding debt securities of the affected series;
(5) we
default under a bond, debenture, note or other evidence of indebtedness for
money borrowed by us in an amount to be set forth in the indenture governing the
notes (other than non-recourse indebtedness) under the terms of the instrument
under which the indebtedness is issued or secured, which default has caused the
indebtedness to become due and payable earlier than it would otherwise have
become due and payable, and the acceleration has not been rescinded or annulled,
or the indebtedness is discharged, or there is deposited in trust enough money
to discharge the indebtedness, within 30 days after written notice was
provided to us in accordance with the indenture;
(6) certain
events of bankruptcy, insolvency or reorganization occur; and
(7) any
other event of default specified in the applicable prospectus supplement
occurs.
Acceleration of Debt
Securities
If there
is a continuing event of default under an indenture with respect to outstanding
debt securities of a series, then the applicable trustee or the holders of not
less than 25% of the total principal amount of the outstanding debt securities
of that series, voting as a single class, may declare immediately due and
payable the principal amount or other amount as may be specified in the terms of
the debt securities of, and any specified premium or Make-Whole Amount on, all
of the debt securities of that series. However, at any time after a declaration
of acceleration with respect to any or all debt securities of a series then
outstanding has been made, but before a judgment or decree for payment of the
money due has been obtained by the applicable trustee, the holders of not less
than a majority in principal amount of the outstanding debt securities of that
series may cancel the acceleration if:
(1) we
deposit with the applicable trustee all required payments of the principal of,
and any premium, Make-Whole Amount, interest or Additional Amounts, on the
applicable debt securities, plus certain fees, expenses, disbursements and
advances of the applicable trustee; and
(2) all
events of default, other than the nonpayment of accelerated principal, premium,
Make-Whole Amount or other amounts or interest, with respect to the applicable
debt securities have been cured or waived as provided in the
indenture.
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Each
indenture also will provide that the holders of not less than a majority in
principal amount of the applicable outstanding debt securities of any series may
waive any past default with respect to those debt securities and its
consequences, except a default consisting of:
(1) our
failure to pay the principal of, and any premium, Make-Whole Amount, interest or
Additional Amounts on, any debt security; or
(2) a
default relating to a covenant or provision contained in the applicable
indenture that cannot be modified or amended without the consent of the holders
of each outstanding debt security affected by the default.
The
trustee generally will be required to give notice to the holders of the debt
securities of each affected series within 90 days of a default of which the
trustee has actual knowledge under the indenture unless the default has been
cured or waived. The trustee may withhold a notice of default unless the default
relates to:
(1) our
failure to pay the principal of, or any premium, Make-Whole Amount, interest or
Additional Amounts on, a debt security of that series; or
(2) any
sinking fund installment for any debt security of that series, if the
responsible officers of the trustee consider it to be in the interest of the
holders.
Each
indenture will provide that no holder of debt securities of any series may
institute a proceeding with respect to the indenture or for any remedy under the
indenture, unless the applicable trustee fails to act, for 60 days, after
(1) it has received a written request to institute proceedings in respect
of an event of default from the holders of not less than 25% in principal amount
of the outstanding debt securities of the series, as well as an offer of
indemnity reasonably satisfactory to the trustee and (2) no direction
inconsistent with such written request has been given to the trustee during that
60 day period by the holders of a majority in principal amount of the
outstanding debt securities of the series. This provision will not prevent,
however, any holder of debt securities from instituting suit for the enforcement
of payment of the principal of, and any premium, Make-Whole Amount, interest or
Additional Amounts on, debt securities at their respective due
dates.
Subject
to provisions in each indenture relating to the trustee’s duties in case of
default, the trustee will not be under any obligation to exercise any of its
rights or powers under any indenture at the request or direction of any holders
of any series of debt securities then outstanding, unless the holders have
offered to the trustee security or indemnity satisfactory to it. Subject to
these provisions for the indemnification of the trustee, the holders of not less
than a majority in principal amount of the applicable outstanding debt
securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the applicable trustee, or
of exercising any trust or power conferred upon the trustee. However, the
trustee may refuse to follow any direction which is in conflict with any law or
the applicable indenture, which may involve the trustee in personal liability or
which may be unduly prejudicial to the holders of debt securities of the
applicable series not joining in the direction.
Within
120 days after the close of each fiscal year, we must deliver to each
trustee a certificate, signed by one of several specified officers, stating such
officer’s knowledge of our compliance with all the conditions and covenants
under the applicable indenture and, in the event of any noncompliance,
specifying such noncompliance and the nature and status of the
noncompliance.
Modification
of the Indenture
Modification
and amendment of an indenture may be made only with the consent of the holders
of not less than a majority in principal amount of all outstanding debt
securities issued under the indenture which are affected by the modification or
amendment. However, no modification or amendment may, without the consent of the
holder of each debt security affected, do any of the following:
(1) change
the stated maturity of the principal of, or any premium, Make-Whole Amount,
installment of principal of, interest or Additional Amounts payable on, any debt
security;
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(2) reduce
the principal amount of, or the rate or amount of interest on, any premium,
Make-Whole Amount payable on redemption of or any Additional Amounts payable
with respect to, any debt security;
(3) reduce
the amount of principal of an original issue discount security, indexed security
or any Make-Whole Amount that would be due and payable upon declaration of
acceleration of the maturity of an original issue discount security or indexed
security, or would be provable in bankruptcy, or adversely affect any right of
repayment of the holder of any debt security;
(4) change
the place of payment or the currency or currencies of payment of the principal
of, and any premium, Make-Whole Amount, interest or Additional Amounts on, any
debt security;
(5) impair
the right to institute suit for the enforcement of any payment on or with
respect to any debt security;
(6) reduce
the percentage of the holders of outstanding debt securities of any series
necessary to modify or amend the applicable indenture, to waive compliance with
certain provisions thereof or certain defaults and consequences thereunder, or
to reduce the quorum or voting requirements contained in the applicable
indenture;
(7) make
any change that adversely affects the right to convert or exchange any security
or decrease the conversion or exchange rate or increase the conversion or
exchange price of any security; or
(8) modify
any of the foregoing provisions or any of the provisions relating to the waiver
of certain past defaults or certain covenants, except to increase the required
percentage to effect such action or to provide that certain other provisions may
not be modified or waived without the consent of the holder of the debt
security.
We and
the relevant trustee may modify or amend an indenture, without the consent of
any holder of debt securities, for any of the following purposes:
(1) to
evidence the succession of another person to us as obligor under the
indenture;
(2) to
add to the covenants of the Company for the benefit of the holders of all or any
series of debt securities or to surrender any right or power conferred upon us
in the indenture;
(3) to
add events of default for the benefit of the holders of all or any series of
debt securities;
(4) to
add or change any provisions of an indenture to facilitate the issuance of, or
to liberalize certain terms of, debt securities in bearer form, or to permit or
facilitate the issuance of debt securities in uncertificated form, provided that
such action shall not adversely affect the interests of the holders of the debt
securities of any series in any material respect;
(5) to
add, change or eliminate any provisions of an indenture, provided that any such
addition, change or elimination shall
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become
effective only when there are no outstanding debt securities of any series
created prior to the change or elimination which are entitled to the
benefit of the applicable provision;
or
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not
apply to any outstanding debt securities created prior to the change or
elimination;
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(6) to
secure the debt securities;
(7) to
establish the form or terms of debt securities of any series, including the
provisions and procedures, if applicable, for the conversion of the debt
securities into our common stock or other of our securities or
property;
(8) to
provide for the acceptance or appointment of a successor trustee or facilitate
the administration of the trusts under an indenture by more than one
trustee;
(9) to
cure any ambiguity, defect or inconsistency in an indenture, provided that the
action does not adversely affect the interests of holders of debt securities of
any series issued under the indenture;
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(10) to
close an indenture with respect to the authentication and delivery of additional
series of debt securities or to qualify, or maintain qualification of, an
indenture under the Trust Indenture Act;
(11) to
supplement any of the provisions of an indenture to the extent necessary to
permit or facilitate defeasance and discharge of any series of the debt
securities; provided that, in each case above, the action does not adversely
affect the interests of the holders of the debt securities of any series in any
material respect; or
(12) to
make any provisions with respect to the conversion or exchange rights of the
holders of any debt securities, including providing for the conversion or
exchange of any debt securities into any of our securities or
property.
Subordination
Unless
stated otherwise in the applicable prospectus supplement for a particular series
of subordinated debt securities, or as described below, the following
subordinated indenture provisions will apply to the subordinated debt
securities.
The
subordinated debt securities will be unsecured and subordinated in right of
payment to all of our existing and future secured and senior debt. As a result,
upon any distribution to our creditors in a liquidation, dissolution,
bankruptcy, insolvency or reorganization, the payment of the principal of and
interest on the subordinated debt securities will be subordinated to the extent
provided in the subordinated indentures in right of payment to the prior payment
in full of all our senior debt and our secured debt. Our obligation to make
payments of the principal of and interest on the subordinated debt securities
will not otherwise be affected.
We may
not make payments of principal or interest on the subordinated debt securities
at any time we are in default on any payment with respect to our senior debt, or
we have defaulted on any of our senior debt resulting in the acceleration of the
maturity of the senior debt, or if there is a judicial proceeding pending with
respect to our default on our senior debt, and we have received notice of the
default. We may resume payments on the subordinated debt securities when the
default is cured or waived if the subordination provisions of the subordinated
indenture will permit us to do so at that time. After we have paid all of our
senior debt in full, holders of subordinated debt securities will still be
subrogated to the rights of holders of our senior debt for the amount of
distributions otherwise payable to holders of the subordinated debt securities
until the subordinated debt securities are paid in full.
If
payment or distribution on account of the subordinated debt securities of any
character or security, whether in cash, securities or other property, is
received by a holder of any subordinated debt securities, including any
applicable trustee, in contravention of any of the terms of the applicable
indenture and before all our senior debt has been paid in full, that payment or
distribution or security will be received in trust for the benefit of, and must
be paid over or delivered and transferred to, holders of our senior debt at the
time outstanding in accordance with the priorities then existing among those
holders for application to the payment of all senior debt remaining unpaid to
the extent necessary to pay all senior debt in full.
Upon
payment or distribution of assets to creditors upon insolvency, bankruptcy,
receivership, reorganization, marshalling of assets and liabilities or similar
proceedings or any liquidation, dissolution or winding up of or relating to our
company as a whole, whether voluntary or involuntary, the holders of all senior
debt securities will first be entitled to receive payment in full before holders
of the outstanding subordinated debt securities will be entitled to receive any
payment in respect of the principal of, premium, if any, or interest on the
outstanding subordinated debt securities.
After we
have paid in full all sums we owe on our senior debt, the holders of the
subordinated debt securities, if so issued, together with the holders of our
obligations ranking on a parity with the subordinated debt securities, will be
entitled to be paid from our remaining assets the amounts at the time due and
owing on the subordinated debt securities and the other obligations. We will
make payment on subordinated debt securities before we make any payment or other
distribution, whether in cash, property or otherwise, on account of any capital
stock or obligations ranking junior to subordinated debt
securities.
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By reason
of this subordination, if we become insolvent, holders of senior debt, as well
as certain of our general creditors, may receive more, and holders of
subordinated debt securities may receive less, than our other creditors,
including holders of any of our senior debt securities. This subordination will
not prevent the occurrence of any event of default on the subordinated debt
securities.
The
subordinated indenture will define senior debt as the principal, premium, if
any, unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to us whether or not a
claim for post-filing interest is allowed in such proceeding), fees, charges,
expenses, reimbursement and indemnification obligations, and all other amounts
payable under or in respect of the types of debt generally described
below:
(1) debt
for money we have borrowed;
(2) debt
evidenced by a bond, note, debenture, or similar instrument (including purchase
money obligations) whether or not given in connection with the acquisition of
any business, property or assets, whether by purchase, merger, consolidation or
otherwise, but not any account payable or other obligation created or assumed in
the ordinary course of business in connection with the obtaining of materials or
services;
(3) debt
which is a direct or indirect obligation which arises as a result of banker’s
acceptances or bank letters of credit issued for our account;
(4) debt
secured by any mortgage, pledge, lien, charge, encumbrance or any security
interest existing on our property;
(5) our
obligation as lessee under any lease of property which is reflected on our
balance sheet as a capitalized lease;
(6) any
deferral, amendment, renewal, extension, supplement, modification or refunding
of any liability of the kind described in any of the preceding paragraphs
(1) through (5);
(7) our
obligations to make payments under the terms of financial instruments such as
securities contracts and foreign currency exchange contracts, derivative
instruments and other similar financial instruments; and
(8) every
obligation or debt of the kind described in the preceding paragraphs
(1) through (7) of another person and all dividends of another person
the payment of which, in either case, we have guaranteed or for which we are
responsible or liable, directly or indirectly, as obligor or otherwise;
and
provided,
however, that, in computing our debt, any particular debt will be excluded
if:
(1) upon
or prior to the maturity thereof, we have deposited in trust with a depositary,
money (or evidence of indebtedness if permitted by the instrument creating such
indebtedness) in the necessary amount to pay, redeem or satisfy that debt as it
becomes due, and the amount so deposited will not be included in any computation
of our assets; and
(2) we
have delivered an officers’ certificate to the trustee that certifies that we
have deposited in trust with the depositary the sufficient amount.
Senior
debt will exclude the following:
(1) any
debt referred to in paragraphs (1) through (5) above as to which, in
the instrument creating or evidencing the debt or under which the debt is
outstanding, it is provided that the debt is not superior in right of payment to
our subordinated debt securities, or ranks equal with the subordinated debt
securities;
(2) our
subordinated debt securities;
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(3) any
debt of ours which when incurred and without respect to any election under
Section 1111(b) of the United States Bankruptcy Code of 1978, as amended, was
without recourse to us;
(4) any
debt of ours for wages payable to our executive officers and
directors;
(5) any
debt to any employee of ours; and
(6) all
other indebtedness of ours sold to any of our subsidiaries, including any
limited liability companies, partnerships or trusts established or to be
established by us, in each case where the subsidiary is a financing entity of
ours in connection with the issuance by such financing entity of securities that
are similar to the debt securities.
There
will be no limit on the amount of senior debt or other debt that we may incur in
the subordinated indentures.
Discharge, Defeasance and Covenant
Defeasance
Unless
stated otherwise in the applicable prospectus supplement, and, unless the terms
of a series of debt securities provides otherwise, under each indenture, we may
discharge our obligations to holders of any series of debt securities that have
not already been delivered to the applicable trustee for cancellation and that
either have become due and payable or will become due and payable within one
year (or are scheduled for redemption within one year). We can discharge these
obligations by irrevocably depositing with the applicable trustee funds in such
currency or currencies in which the debt securities are payable in an amount
sufficient to pay the entire indebtedness on the debt securities including the
principal of, and any premium, Make-Whole Amount, interest or Additional Amounts
payable on, the debt securities to the date of the deposit, if the debt
securities have become due and payable or to the stated maturity or redemption
date, as the case may be.
In
addition, if the terms of the debt securities of a series permit us to do so, we
may elect either of the following:
(1) to be
defeased and be discharged from any and all obligations with respect to the debt
securities of that series, except our obligations to:
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pay
any Additional Amounts upon the occurrence of certain tax and other
events,
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register
the transfer or exchange of the debt
securities,
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replace
temporary or mutilated, destroyed, lost or stolen debt
securities,
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maintain
an office or agency for the debt securities,
and
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to
hold moneys for payment in trust;
or
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(2) to
be defeased and discharged from our obligations with respect to the debt
securities of that series described under “— Certain Covenants of the Debt
Securities” or, if the terms of the debt securities of that series permit, our
obligations with respect to any other covenant.
If we
choose to defease and discharge our obligations under the covenants, any failure
to comply with the obligations imposed on us by the covenants will not
constitute a default or an event of default with respect to the debt securities
of that series. However, to make either election we must irrevocably deposit
with the applicable trustee, in trust, an amount, in the currency or currencies
in which the debt securities are payable, or in government obligations, or both,
that will provide sufficient funds to pay the principal of, and any premium,
Make-Whole Amount, interest or Additional Amounts on, the debt securities, and
any mandatory sinking fund or analogous payments on the debt securities, on the
relevant scheduled due dates or upon redemption.
We may
defease and discharge our obligations as described in the preceding paragraphs
only if, among other things:
(1) we
have delivered to the applicable trustee an opinion of counsel to the effect
that the holders of the debt securities will not recognize income, gain or loss
for United States federal income tax purposes as a result of the defeasance or
covenant defeasance described in the previous paragraphs and will be subject to
United States federal
19
income
tax on the same amounts, in the same manner and at the same times as would have
been the case if the defeasance or covenant defeasance had not occurred. In the
case of defeasance the opinion of counsel must refer to and be based upon a
ruling of the Internal Revenue Service or a change in applicable United States
federal income tax laws occurring after the date of the
indenture;
(2) any
defeasance does not result in, or constitute, a breach or violation of an
indenture or any other material agreement which we are a party to or obligated
under; and
(3) no
event of default, or event that with notice will be an event of default, has
occurred and is continuing with respect to any securities subject to a
defeasance.
Unless
otherwise provided in the applicable prospectus supplement, if, after we have
deposited funds and/or government obligations to effect defeasance or covenant
defeasance with respect to debt securities of any series:
(1) the
holder of a debt security of that series elects to receive payment in a currency
in which the deposit was made in respect of the debt security; or
(2) a
conversion event (as defined below) occurs in respect of the currency in which
the deposit was made;
the
indebtedness represented by the debt security shall be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of,
and any premium, Make-Whole Amount, interest or Additional Amounts on, the debt
security, as they become due, out of the proceeds yielded by converting the
amount so deposited in respect of the debt security into the currency in which
the debt security becomes payable as a result of the election or such cessation
of usage based on the applicable market exchange rate.
Unless
stated otherwise in the applicable prospectus supplement, “conversion event”
means the cessation of use of:
(1) a
currency, currency unit or composite currency issued by the government of one or
more countries other than the United States both by the government of the
country that issued such currency and for the settlement of transactions by a
central bank or other public institutions of or within the international banking
community; or
(2) any
currency unit or composite currency for the purposes for which it was
established.
Unless
stated otherwise in the applicable prospectus supplement, all payments of
principal of, and any premium, Make-Whole Amount, interest or Additional Amounts
on, any debt security that is payable in a foreign currency that ceases to be
used by its government of issuance will be made in United States
dollars.
In the
event we effect covenant defeasance with respect to any series of debt
securities and the debt securities are declared due and payable because of the
occurrence of any event of default other than:
(1) the
event of default described in clause (4) of the first paragraph under “—
Events of Default, Notice and Waiver,” which would no longer be applicable to
the debt securities of that series; or
(2) the
event of default described in clause (7) under “— Events of Default, Notice
and Waiver” with respect to a covenant as to which there has been covenant
defeasance;
then the
amount on deposit with the trustee will still be sufficient to pay amounts due
on the debt securities at the time of their stated maturity but may not be
sufficient to pay amounts due on the debt securities at the time of the
acceleration resulting from the event of default. In this case, we would remain
liable to make payment of such amounts due at the time of
acceleration.
The
applicable prospectus supplement may describe further provisions, if any,
permitting defeasance or covenant defeasance, including any modifications to the
provisions described above, with respect to a particular series of debt
securities.
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Conversion
and Exchange Rights
The terms
on which debt securities of any series are convertible into or exchangeable for
our common stock or other securities or property of ours will be set forth in
the applicable prospectus supplement. These terms will include:
(1) the
conversion or exchange price, or manner for calculating a price;
(2) the
exchange or conversion period; and
(3) whether
the conversion or exchange is mandatory, at the option of the holder, or at our
option.
The terms
may also include calculations pursuant to which the number of shares of our
common stock or other securities or property to be received by the holders of
debt securities would be determined according to the market price of our common
stock or other securities or property of ours as of a time stated in the
prospectus supplement.
The
conversion exchange price of any debt securities of any series that is
convertible into our common stock may be adjusted for any stock dividends, stock
splits, reclassification, combinations or similar transactions, as described in
the applicable prospectus supplement.
Governing Law
The
indentures will be governed by and will be construed in accordance with the laws
of the state of New York.
Redemption of Debt
Securities
If so
specified in the applicable prospectus supplement, debt securities of any series
may be wholly or partially redeemed at our option, at any time. The debt
securities may also be subject to optional or mandatory redemption on terms and
conditions described in the applicable prospectus supplement.
From and
after notice has been given as provided in the indenture, if funds for the
redemption of any debt securities called for redemption have been made available
on the redemption date, the debt securities will cease to bear interest on the
date fixed for the redemption specified in the notice, and the only right of the
holders of the debt securities will be to receive payment of the redemption
price.
DESCRIPTION
OF COMMON STOCK
The
following summary of the terms of our common stock, including our Articles of
Incorporation and Bylaws, may not be complete and is subject to, and qualified
in its entirety by reference to, the terms and provisions of our Articles of
Incorporation and Bylaws. You should refer to, and read this summary together
with, our Articles of Incorporation and Bylaws to review all of the terms of our
common stock that may be important to you.
Our
authorized common stock consists of 20,000,000 shares, $1.00 par value per share
("Common Stock"). As of the date of this prospectus, 5,932,346 shares
of Common Stock were issued and outstanding. All of such outstanding
shares of Common Stock are validly issued, fully paid and
nonassessable. Holders of record of Common Stock will be entitled to
receive dividends when and if declared by our Board of Directors out of our
funds legally available therefor. In the event of any liquidation,
dissolution or winding up of our affairs, whether voluntary or otherwise, after
payment or provision for payment of our debts and other liabilities, including
the liquidation preference of all classes of our preferred stock, if any, each
holder of Common Stock will be entitled to receive such holder's pro rata
portion of our remaining net assets, if any. Each share of Common
Stock has one vote, and there are no preemptive, subscription, conversion or
redemption rights. Shares of Common Stock do not have cumulative
voting rights, which means that the holders of a majority of the shares of
Common Stock voting for the election of directors can elect all of the
directors. Our common stock is listed on the NASDAQ Global Select
Market under the symbol “SAVB.”
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DESCRIPTION OF PREFERRED
STOCK
Our
Articles of Incorporation authorize the issuance of up to 10,000,000 shares of
preferred stock, $1.00 par value per share ("Preferred Stock"). As of
the date of this prospectus, no shares of Preferred Stock were
outstanding. The Preferred Stock constitutes what is commonly
referred to as "blank check" preferred stock. "Blank check" preferred
stock allows our Board of Directors, from time to time, to divide the Preferred
Stock into series, to designate each series, to cause us to issue shares of any
series, and to fix and determine separately for each series their relative
rights, preferences and privileges. Dividends on shares of Preferred
Stock, when and as declared by the Board of Directors out of any funds legally
available therefor, may be cumulative and may have a preference over Common
Stock as to the payment of such dividends. The provisions of a
particular series, as designated by the Board of Directors, may, among other
things, include restrictions on our ability to purchase shares of Common Stock
or to redeem a particular series of Preferred Stock. Depending upon
the voting rights granted to any series of Preferred Stock, issuance thereof
could result in a reduction in the power of the holders of Common
Stock. In the event of our dissolution, liquidation or winding up,
whether voluntary or involuntary, the holders of each series of the then
outstanding Preferred Stock may be entitled to receive, prior to the
distribution of any assets or funds to the holders of the Common Stock, a
liquidation preference established by the Board of Directors, together with all
accumulated and unpaid dividends. Depending upon the consideration
paid for Preferred Stock, the liquidation preference of Preferred Stock and
other matters, the issuance of Preferred Stock could result in a reduction in
the assets available for distribution to the holders of the Common Stock in the
event of our liquidation. Holders of Preferred Stock will not have
preemptive rights provided for by law to acquire any additional securities
issued by the Company. Once a series has been designated and shares
of the series are outstanding, the rights of holders of that series may not be
modified adversely except by a vote of at least a majority of the outstanding
shares constituting such series.
One of
the effects of the existence of authorized but unissued shares of Common Stock
or Preferred Stock may be to enable our Board of Directors to render it more
difficult or to discourage an attempt to obtain control of us by means of a
merger, tender offer at a control premium price, proxy contest or otherwise and
thereby protect the continuity of or entrench our management, which may have a
potentially adverse effect on the market price of the Common
Stock. If in the due exercise of its fiduciary obligations, for
example, the Board of Directors were to determine that a takeover proposal was
not in our best interests, the Board of Directors could cause such shares to be
issued without stockholder approval in one or more private placements or other
transactions that might prevent or render more difficult or make more costly the
completion of any attempted takeover transaction by diluting voting or other
rights of the proposed acquirer or insurgent stockholder group, by creating a
substantial voting block in institutional or other hands that might support the
position of the incumbent Board of Directors, by effecting an acquisition that
might complicate or preclude the takeover, or otherwise.
DESCRIPTION
OF WARRANTS
We may
issue warrants to purchase common stock or preferred stock or other securities.
We may issue warrants independently or together with other securities. Warrants
sold with other securities may be attached to or separate from the other
securities. We will issue warrants, if any, under one or more warrant agreements
between us and a warrant agent that we will name in the prospectus
supplement.
The
prospectus supplement relating to any warrants we offer will include specific
terms relating to the offering, including, among others, the aggregate number of
warrants offered, the exercise price of the warrants, the dates or periods
during which the warrants are exercisable and any other specific terms of the
warrants.
The
description in the applicable prospectus supplement and other offering material
of any warrants we offer will not necessarily be complete and will be qualified
in its entirety by reference to the applicable warrant agreement, which will be
filed with the SEC if we offer warrants. For more information on how you can
obtain copies of the applicable warrant agreement if we offer warrants, see
“Incorporation of Certain Information By Reference.” We urge you to read the
applicable warrant agreement and the applicable prospectus supplement and any
other offering material in their entirety.
22
We may
issue rights to purchase common stock or preferred stock or other securities. We
may issue rights independently or together with other securities. Rights sold
with other securities may be attached to or separate from the other
securities.
The
prospectus supplement relating to any rights we offer will include specific
terms relating to the offering, including, among others, the aggregate number of
rights offered, the exercise price of the rights, the dates or periods during
which the rights are exercisable and any other specific terms of the
rights.
The
description in the applicable prospectus supplement and other offering material
of any rights we offer will not necessarily be complete and will be qualified in
its entirety by reference to the applicable form of rights, which will be filed
with the SEC if we offer rights. For more information on how you can obtain
copies of the applicable subscription rights agreement if we offer rights, see
“Incorporation of Certain Information By Reference.” We urge you to read the
applicable form of rights and the applicable prospectus supplement and any other
offering material in their entirety.
LEGAL OWNERSHIP AND BOOK-ENTRY
ISSUANCE
The
securities offered by means of this prospectus may be issued in whole or in part
in book-entry form, meaning that beneficial owners of the securities will not
receive certificates representing their ownership interests in the securities,
except in the event the book-entry system for the securities is discontinued.
Securities issued in book-entry form will be evidenced by one or more global
securities that will be deposited with, or on behalf of, a depository identified
in the applicable prospectus supplement relating to the securities. The
Depository Trust Company is expected to serve as depository. Unless and
until it is exchanged in whole or in part for the individual securities
represented thereby, a global security may not be transferred except as a whole
by the depository for the global security to a nominee of such depository or by
a nominee of such depository to such depository or another nominee of such
depository or by the depository or any nominee of such depository to a successor
depository or a nominee of such successor. Global securities may be issued in
either registered or bearer form and in either temporary or permanent form. The
specific terms of the depository arrangement with respect to a class or series
of securities that differ from the terms described here will be described in the
applicable prospectus supplement.
Unless
otherwise indicated in the applicable prospectus supplement, we anticipate that
the following provisions will apply to depository arrangements.
Upon the
issuance of a global security, the depository for the global security or its
nominee will credit on its book-entry registration and transfer system the
respective principal amounts of the individual securities represented by such
global security to the accounts of persons that have accounts with such
depository, who are called “participants.” Such accounts will be designated by
the underwriters, dealers or agents with respect to the securities or by us if
we directly offer and sell the securities. Ownership of global securities will
be limited to the depository’s participants or persons that may hold interests
through such participants. Ownership of global securities will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by the applicable depository or its nominee (with respect to ownership interests
of participants) and records of the participants (with respect to ownership
interests of persons who hold through participants). The laws of some states
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and laws may impair the ability to
own, pledge or transfer beneficial interest in a global security.
So long
as the depository for a global security or its nominee is the registered owner
of such global security, such depository or nominee, as the case may be, will be
considered the sole owner or holder of the securities represented by such global
security for all purposes under the applicable instrument defining the rights of
a holder of the securities. Except as provided below or in the applicable
prospectus supplement, owners of global securities will not:
·
|
be
entitled to have any of the individual securities of the series
represented by such global security registered in their
names;
|
·
|
receive
or be entitled to receive physical delivery of any such securities in
definitive form; and
23
|
·
|
be
considered the owners or holders thereof under the applicable instrument
defining the rights of the holders of the
securities.
|
Payments
of amounts payable with respect to individual securities represented by a global
security registered in the name of a depository or its nominee will be made to
the depository or its nominee, as the case may be, as the registered owner of
the global security representing such securities. None of us, our officers and
directors or any paying agent or security registrar for an individual series of
securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the global security for such securities or for maintaining,
supervising or reviewing any records relating to such ownership
interests.
We expect
that the depository for a series of securities offered by means of this
prospectus or its nominee, upon receipt of any payment of dividend or other
amount in respect of a permanent global security representing any of such
securities, will immediately credit its participants’ accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of global securities for such securities as shown on the records of such
depository or its nominee. We also expect that payments by participants to
owners of such global security held through such participants will be governed
by standing instructions and customary practices, as is the case with securities
held for the account of customers in bearer form or registered in “street name.”
Such payments will be the responsibility of such participants.
If a
depository for a series of securities is at any time unwilling, unable or
ineligible to continue as depository and a successor depository is not appointed
by us within 90 days, we will issue individual securities of such series in
exchange for the global security representing such series of securities. In
addition, we may, at any time and in our sole discretion, subject to any
limitations described in the applicable prospectus supplement relating to such
securities, determine not to have any securities of such series represented by
one or more global securities and, in such event, will issue individual
securities of such series in exchange for the global security or securities
representing such series of securities.
The
information in this section concerning the depository and its book-entry systems
has been obtained from sources that we believe to be reliable, but we take no
responsibility for the accuracy thereof.
RATIO
OF EARNINGS TO FIXED CHARGES
The
Company’s consolidated ratios of earnings to fixed charges for each of the five
fiscal years ended December 31, 2008 and the nine months ended September
30, 2009 are as follows:
|
|
|
Years
Ended December 31,
|
|
|
9
Months Ended
September
30, 2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
Ratio
of Earnings to Fixed Charges (unaudited) (1):
Excluding
deposit interest
Including
deposit interest
|
0.96
1.00
|
|
3.98
1.37
|
|
3.79
1.39
|
|
5.08
1.66
|
|
6.52
1.93
|
|
4.98
2.00
|
|
(1)
|
Earnings
are defined as the sum of earnings before income taxes, fixed charges and
amortization of capitalized interest less capitalized interest. Fixed
charges are defined as interest expensed and capitalized plus interest
within rent expense, which is estimated to be one-third of rent
expense.
|
USE
OF PROCEEDS
Unless
otherwise specified in the applicable prospectus supplement, we intend to use
the net proceeds from the sale of securities for general corporate
purposes.
PLAN OF
DISTRIBUTION
We may
sell the securities being offered hereby in one or more of the following ways
from time to time:
24
·
|
to
underwriters or dealers for resale to the public or to institutional
investors;
|
·
|
directly
to institutional investors;
|
·
|
directly
to a limited number of purchasers or to a single
purchaser;
|
·
|
through
agents to the public or to institutional investors;
or
|
·
|
through
a combination of any of these methods of
sale.
|
If we use
underwriters or dealers in the sale, the securities will be acquired by the
underwriters or dealers for their own account and may be resold from time to
time in one or more transactions, including:
·
|
at
a fixed price or prices, which may be changed from time to
time;
|
·
|
in
“at the market offerings” within the meaning of the SEC’s
Rule 415(a)(4);
|
·
|
at
prices related to such prevailing market prices;
or
|
For each
series of securities, the prospectus supplement will set forth the terms of the
offering of the securities, including:
·
|
the
initial public offering price;
|
·
|
the
method of distribution, including the names of any underwriters, dealers
or agents;
|
·
|
the
purchase price of the securities;
|
·
|
our
net proceeds from the sale of the
securities;
|
·
|
any
underwriting discounts, agency fees, or other compensation payable to
underwriters or agents;
|
·
|
any
discounts or concessions allowed or reallowed or repaid to dealers;
and
|
·
|
the
securities exchanges on which the securities will be listed, if
any.
|
If we use
underwriters in the sale, they will buy the securities for their own account.
The underwriters may then resell the securities in one or more transactions at a
fixed public offering price or at varying prices determined at the time of sale
or thereafter. The obligations of the underwriters to purchase the securities
will be subject to certain conditions. The underwriters will be obligated to
purchase all the securities offered if they purchase any securities. Any initial
public offering price and any discounts or concessions allowed or re-allowed or
paid to dealers may be changed from time to time. In connection with an
offering, underwriters and selling group members and their affiliates may engage
in transactions to stabilize, maintain or otherwise affect the market price of
the securities in accordance with applicable law.
If we use
dealers in the sale, we will sell securities to such dealers as principals. The
dealers may then resell the securities to the public at varying prices to be
determined by such dealers at the time of resale. If we use agents in the sale,
they will use their reasonable best efforts to solicit purchases for the period
of their appointment. If we sell directly, no underwriters or agents would be
involved. We are not making an offer of securities in any jurisdiction that does
not permit such an offer.
Underwriters,
dealers and agents that participate in the securities distribution may be deemed
to be underwriters as defined in the Securities Act of 1933, as amended, or the
“Securities Act.” Any discounts, commissions or profit they receive when they
resell the securities may be treated as underwriting discounts and commissions
under the Securities Act. We may have agreements with underwriters, dealers and
agents to indemnify them against certain civil liabilities, including certain
liabilities under the Securities Act, or to contribute with respect to payments
that they may be required to make. Underwriters, dealers and agents may engage
in transactions with, or perform services for, us or our subsidiaries in the
ordinary course of their business.
Any debt
securities that we sell will be new issues of securities with no established
trading market, and unless otherwise specified in the applicable prospectus
supplement, we will not list any series of such securities on any exchange. It
has not presently been established whether the underwriters, if any, of any of
the securities will make a market in the securities. If the underwriters make a
market in the securities, such market making may be discontinued at any time
without notice. No assurance can be given as to the liquidity of the
trading market for the securities.
25
VALIDITY
OF THE SECURITIES
Alston
& Bird LLP, Atlanta, Georgia will pass upon the validity of any securities
we offer by this prospectus and any prospectus supplement. If the validity of
any securities is also passed upon by counsel for underwriters participating in
an offering of securities offered by this prospectus and any prospectus
supplement, the underwriters’ counsel will be named in the applicable prospectus
supplement.
EXPERTS
The
consolidated financial statements of The Savannah Bancorp, Inc. and subsidiaries
as of December 31, 2008 and 2007, and for each of the years in the two-year
period ended December 31, 2008, and management’s assessment of the effectiveness
of internal control over financial reporting as of December 31, 2008, have been
incorporated by reference herein in reliance upon the reports of Mauldin &
Jenkins, LLC, an independent registered public accounting firm and upon the
authority of said firm as an expert in accounting and auditing. The consolidated
statement of income, shareholders’ equity and cash flows for the year ended
December 31, 2006 incorporated by reference in this prospectus and in the
registration statement have been so incorporated in reliance upon the report of
BDO Seidman, LLP, an independent registered public accounting firm, incorporated
herein by reference, and upon the authority of said firm as an expert in
accounting and auditing.
26
1,098,398
Shares
Common
Stock
The
Savannah Bancorp, Inc.
PROSPECTUS
June
9, 2010
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