UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 11-K
          
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934


The Savannah Bancorp, Inc. Employee Savings and Profit Sharing Plan 
        (Full title of the plan)


The Savannah Bancorp, Inc.
        (Name of issuer of the securities held pursuant to the plan)
 
      Georgia  
             0-18560                   
      58-1861820     
  (State  of  Incorporation) 
                           (SEC FileNo.)
    (Tax ID No.)
     
                                                                                                                  
         25 Bull Street, Savannah, GA 31401
(Address of the Plan and Principal Executive Offices of Issuer)


Check the appropriate box below if the Form 11-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
(X)
Annual report pursuant to Section 15(d) of  the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2011.
 
or
 
(  )
Transition report pursuant to section 15(d) of the Securities Exchange Act of 1934
For the Transition period from _____to           .
 








 

 
 
 
 
The Savannah Bancorp, Inc.
Employee Savings & Profit Sharing Plan

Contents





 
     
  Report of Independent Registered Public Accounting Firm    2
       
  Financial Statements    
       3
   Statements of net assets available for benefits    
       4
   Statement of changes in net assets available for benefits     
       
   Notes to financial statements    5-11
       
  Supplemental Schedule    
       
   Schedule H, line 4i, schedule of assets (held at year end)    12
 
                                                                                              










 
 
 





Report of Independent Registered Public Accounting Firm



The Participants and Administrator of
The Savannah Bancorp, Inc.
Employee Savings & Profit Sharing Plan


We have audited the accompanying statements of net assets available for benefits of the Savannah Bancorp, Inc. Employee Savings & Profit Sharing Plan (the Plan) as of December 31, 2011 and 2010, and the related statement of changes in net assets available for benefits for the year ended December 31, 2011. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2011 and 2010, and the changes in the net assets available for benefits for the year ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole.  The accompanying supplemental schedule of assets (held at year end) as of December 31, 2011 is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974.  This supplemental schedule is the responsibility of the Plan's management.  The supplemental schedule has been subjected to the auditing procedures applied in our audit of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.

Respectfully submitted,

/s/Hancock Askew & Co., LLP

Savannah, Georgia
June 28, 2012

 
 
 
The Savannah Bancorp, Inc.
Employee Savings & Profit Sharing Plan

Statements of Net Assets Available for Benefits



           
           
December 31,
 
2011
   
2010      
           
ASSETS
         
           
Investments, at fair value
         
Mutual funds
$
4,063,871
 
$
4,544,640
The Savannah Bancorp, Inc. Stock Fund
 
1,185,068
   
1,565,013
           
Total investments
 
5,248,939
   
6,109,653
           
Employee and employer contributions receivable
 
-
   
14,816
           
Net assets available for benefits
$
5,248,939
 
$
6,124,469
The accompanying notes are an integral part of these financial statements.


3 
 
 
The Savannah Bancorp, Inc.
Employee Savings & Profit Sharing Plan

Statement of Changes in Net Assets Available for Benefits



           
           
Year ended December 31,
       
2011 
           
ADDITIONS TO NET ASSETS
         
           
Investment income
         
Interest and dividends
     
$
82,418 
           
Net investment income
       
82,418 
           
Employee contributions
       
472,165 
           
Total additions
       
554,583 
           
DEDUCTIONS FROM NET ASSETS
         
           
Net depreciation in fair value of investments
       
765,321 
           
Benefits paid to participants
       
664,792 
           
Total deductions
       
1,430,113 
           
Net decrease
       
(875,530) 
           
Net assets available for benefits, beginning of year
       
6,124,469 
           
Net assets available for benefits, end of year
     
$
5,248,939 
The accompanying notes are an integral part of this financial statement.



  4
 
 
The Savannah Bancorp, Inc.
Employee Savings & Profit Sharing Plan

Notes to Financial Statements



     
     
1.
Description of
the Plan
The following description of The Savannah Bancorp, Inc. Employee Savings & Profit Sharing Plan (the Plan) provides only general information. The Plan Sponsor is The Savannah Bancorp, Inc. (the Company or Sponsor).  Participants should refer to the Summary Plan Description for a more complete description of the Plan’s provisions.
     
   
General
 
The Plan is a defined contribution plan of The Savannah Bancorp, Inc. and Subsidiaries.  The Plan covers all employees of The Savannah Bancorp, Inc. and Subsidiaries who meet eligibility requirements as defined in the Plan agreement. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended.
 
   
Eligibility
 
An employee is eligible to participate in the Plan upon the date of hire and attainment of age 21. To receive matching contributions and other employer contributions, the eligible employee must have completed one year of service. One year of service is defined as 1,000 hours of service during a calendar year.
     
   
Contributions
 
Plan participants may elect to contribute between 1% and 50% of pre-tax annual compensation, as defined in the Plan, up to the maximum allowable under the Internal Revenue Code (IRC). Employees may also contribute amounts representing distributions from other qualified defined contribution plans.
 
The Sponsor may match a discretionary percentage of the eligible participant’s elective deferrals, provided that the participant is employed on the last day of the Plan year unless separation of service during the year was due to death, permanent disability or retirement.  Catch-up contributions made by participants are not matched by the Sponsor.  The Company may also contribute to the Plan amounts which the Board of Directors deems appropriate.  If such additional discretionary contributions are made during the Plan year, they are allocated to the participants on the basis of a fixed amount of their annual compensation. No discretionary matching or profit sharing contributions were made by the Sponsor for the 2011 Plan year.



5
 
 

The Savannah Bancorp, Inc.
Employee Savings & Profit Sharing Plan

Notes to Financial Statements

 

       
       
1.
Description of
the Plan (cont.)
Participant Accounts
Each participant’s account balance is credited with the participant’s contributions, the Sponsor’s contributions, and earnings on the participant’s investments in their account.  Participants may direct the investment of their account balances into various investment options offered by the Plan.  Currently, the Plan offers twenty mutual funds and a unitized stock fund of the Sponsor as investment options for participants.
 
       
   
Vesting
 
Participants are immediately vested in their voluntary contributions plus actual earnings thereon. Vesting in the Sponsor’s matching and discretionary profit sharing contributions plus earnings is determined under the following schedule based upon years of service.
 
       
     
Years of Service
Percentage Vested
   
             
   
 Less than 2
 0%
 
   
                                        2
20%
 
   
                   3
40%
 
   
                             4
60%
 
   
                             5
80%
 
     
                6
  100%
   
             
   
Payment of Benefits
 
On termination of service due to death, disability or retirement, a participant or their beneficiary may elect to receive either a lump-sum amount equal to the value of the participant’s vested interest in his or her account, or annual installments until the balance is depleted.  For termination of service due to other reasons, a participant may receive the value of the vested interest in his or her accounts as a lump-sum distribution. Participants that have not separated from service with the Sponsor may withdraw funds from their vested account balance upon the attainment of age 59½. Additionally, under certain circumstances of financial hardship, a participant is allowed to withdraw funds from the Plan.
     
   
Plan Termination
 
Although it has not expressed any intent to terminate the Plan, the Company has the right to amend, modify or terminate the Plan at any time subject to the provisions of ERISA.  In the event of Plan termination, all participant accounts will become 100% vested.  These accounts, which are non-forfeitable, will continue to accrue investment earnings until benefits are paid to the participants in accordance with the terms of the Plan.
 
 
6
 
 
 
 
 
 
The Savannah Bancorp, Inc.
Employee Savings & Profit Sharing Plan

Notes to Financial Statements
 
 
 
     
     
1.
Description of
the Plan (cont.)
Administrative Expenses
 
Certain administrative expenses of the Plan are paid directly by the Sponsor.
     
   
Forfeited Accounts
 
Forfeitures of contributions are allocated amongst participants in the Plan. Forfeited matching contributions are allocated to all participants eligible to share in the allocations in the proportion that each participant’s elective deferrals for the year bears to the elective deferrals of all participants for the year. Forfeitures of all other contributions are allocated to all participants eligible to share in the allocations in the same proportion that each participant’s compensation for the year bears to the compensation of all other participants for the year. Unallocated forfeitures totaled $14,066 and $21,901 at December 31, 2011 and 2010, respectively.  In 2011, $21,901 was reallocated to eligible participants.
     
2.
Summary of Significant
Accounting Policies
Basis of Accounting
 
The financial statements of the Plan are presented on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.
 
   
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.
     
   
Investments
 
Investments in common stock are stated at fair value based upon quoted market prices at year-end. Units or shares of mutual funds (registered investment companies) are stated at fair value based upon the net asset value of shares quoted at market prices in an active market held by the Plan at year-end.
     
   
Payment of Benefits
 
Benefits to participants are recognized as a deduction from net assets when paid.
     

7 
 
 
The Savannah Bancorp, Inc.
Employee Savings & Profit Sharing Plan

Notes to Financial Statements


 
       
       
  3. Investments The fair value of individual investments that represent 5% or more of the Plan's net assets are as follows:
                 
                 
       December 31,    2011      2010
                 
       The Savannah Bancorp, Inc. stock fund  $  1,185,068    $  1,565,013
       Mutual funds          
       MFS Growth Allocation R3  $  873,152    $  *
       Federated Gov't Obligs Instl  $  643,540    $  *
       MFS Aggressive Growth Alloc R3  $  607,660    $  *
       MFS Moderate Allocation Fund Class R3  $  439,969    $  *
       MFS Conservative Allocation R3  $  379,572    $  *
       Vanguard 500 Index Inv  $  306,691    $  *
       Accessor Growth Allocation  $  *    $  1,105,549
       Accessor Aggressive Growth Allocation  $  *    $  800,630
       Accessor U.S. Gov't Money Market  $  *    $  778,613
       Accessor Balanced Allocation  $  *    $  414,644
       Dreyfus S&P 500  $  *    $  307,128
                 
     *  Investment did not represent 5% or more of Plan's net assets at respective year end.
                 
    During 2011 the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) depreciated in value as follows:
                 
                 
                 
   
 The Savannah Bancorp, Inc. Stock Fund
     $    (485,448) 
     Mutual Funds          (279,873) 
                 
     Net depreciation in fair value of investments      $    (765,321) 
 

 
 

 

 
 


 


8 
 
 
The Savannah Bancorp, Inc.
Employee Savings & Profit Sharing Plan

Notes to Financial Statements



           
           
4.
Related Party
Transactions
Certain Plan investments are managed by The Trust Company of Sterne, Agee & Leach, Inc.  The Trust Company of Sterne, Agee & Leach, Inc. is the Trustee as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions.
 
Certain Plan investments include common shares of The Savannah Bancorp, Inc., (the Company), a publicly traded bank holding company, whose shares are listed on the NASDAQ Global Market.  The Company stock investment option is available to participants at their individual election.  To facilitate investment in the stock of the Company, the Plan set up The Savannah Bancorp, Inc. Stock Fund (the Fund). The Fund holds shares of Company stock and invests in a money market fund.  The intent is for the Fund to invest 96% of its assets in stock of the Plan Sponsor.  On December 31, 2011, the Fund held 232,940 shares of Company stock valued at $1,153,053, and $32,015 in cash. On December 31, 2010, the Fund held 214,686 shares of Company stock valued at $1,503,651, and $61,362 in cash.  During 2011, the Fund purchased Company stock for $343,668.
 
Executive officers and anyone else considered an “insider” under the rules of the United States of America Securities and Exchange Commission (SEC) are subject to certain transactional limitations and the SEC insider reporting rules.
     
5.
Income Tax
Status
The Plan obtained its latest determination letter on March 31, 2008, in which the Internal Revenue Service stated that the prototype plan, as sponsored by The Trust Company of Sterne, Agee & Leach, Inc., was in compliance with applicable sections of the IRC. The Plan has been amended since receiving the determination letter. However, the Plan administrator and the Plan’s tax counsel believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the IRC.
     
6.
Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term, and that such changes could materially affect the amounts reported in the statements of net assets available for benefits.
 
 
 
9
 
 

The Savannah Bancorp, Inc.
Employee Savings & Profit Sharing Plan

Notes to Financial Statements


     
     
7.
Fair Value Measurement
Accounting standards establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).  The three levels of the fair value hierarchy are described below:
 
Basis of Fair Value Measurement
 
     Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
       
     Level 2 Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly;
       
     Level 3 Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
       
       
   
A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
 
The following tables set forth by level within the fair value hierarchy the Trust investment assets at fair value, as of December 31, 2011 and 2010.  Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
 
 
10
 
 
The Savannah Bancorp, Inc.
Employee Savings & Profit Sharing Plan

Notes to Financial Statements



 
     
     
7.
Fair Value Measurement
(cont.)
Investment Assets at Fair Value as of December 31, 2011
             
 
 
 
  Level 1
 
Level 2
Level 3
    Total
             
 
Mutual funds
                 
 
Domestic stock funds
$
538,851
 $
  -
 
$
-
$
538,851
 
Bond funds
 
786,787
    -    
-
 
786,787
 
Blended funds
 
2,738,233
    -    
-
 
2,738,233
    Total mutual funds  
4,063,871
    -    
-
 
4,063,871
    The Savannah Bancorp, Inc. Stock Fund  
1,185,068
 
  -
 
 
-
 
1,185,068
                     
  Total investment assets at fair value
$
5,248,939
$
-
 
$
-
$
5,248,939
           
 
Investment Assets at Fair Value as of December 31, 2010
           
   
  Level 1
 
Level 2
Level 3
    Total
                     
 
Mutual funds
                 
 
Domestic stock funds
$
82,290
 $
  -
 
$
-
$
82,290
 
Bond funds
 
1,226,814
    -    
-
 
1,226,814
 
Blended funds
 
3,235,536
    -    
-
 
3,235,536
 
Total mutual funds
 
4,544,640
    -    
-
 
4,544,640
  The Savannah Bancorp, Inc. Stock Fund   1,565,013   -
 
 
-
 
1,565,013
                     
    Total investment assets at fair value  $              6,109,653  $   -     $  -   $  6,109,653
                     



11 
 
 
The Savannah Bancorp, Inc.
Employee Savings & Profit Sharing Plan
EIN: 58-1820860 Plan Number:001
 
 
Schedule H, Line 4i, Schedule of Assets (Held at Year End)



 
               
 December 31, 2011            
               
 (a)  (b)    (c)  (d)      (e)
  Identity of Issuer, Borrower, Lessor, or Similar Party   Description of Investment, Including Maturity Dare, Rate of Interest, Collateral, Par or Maturity Value  Cost      Current Value
 * The Trust Company of Sterne, Agee & Leach, Inc.   The Savannah Bancorp, Inc Stock Fund  **    $  1,185,068 
               
  American Beacon   American Beacon Intl EQ IDX Inst  **         127,047 
      American Beacon Intmd Bd Instl  **              5,590 
  Calvert   Calvert Equity Y  **      58,748 
  Columbia   Columbia Dividend Income Z  **      13,727 
  Federated   Federated Govt Obligs Instl  **      643,540 
  MFS   MFS Aggressive Growth Alloc R3  **      607,660 
      MFS Conservative Allocation R3  **      379,572 
      MFS Growth Allocation R3  **      873,152 
      MFS Moderate Allocation Fund  **      439,969 
  T. Rowe Price   T. Rowe Price Retiremt 2015 Adv  **      100,134 
      T. Rowe Price Retiremt 2020 Adv  **      46,451 
      T. Rowe Price Retiremt 2025 Adv  **      15,833 
      T. Rowe Price Retiremt 2030 Adv  **      99,388 
      T. Rowe Price Retiremt 2035 Adv  **      6,074 
      T. Rowe Price Retiremt 2040 Adv  **      105,483 
      T. Rowe Price Retiremt Inc Adv  **      39,852 
 
Vanguard
  Vanguard 500 Index Inv  **      306,691 
      Vanguard Balanced Index Inv  **      10,598 
      Vanguard Mid Cap Index Inv  **      32,638 
      Vanguard Total Bd Mkt Idx Inv  **      151,724 
 
             $ 5,248,939 
 
 *  Denotes party-in-interest to the Plan.        
 **  Cost information has not been included in column (d) because all investments are participant directed.  
 


12
 
 
 
 
 
Signatures
 
     Pursuant to the requirements of the Securities and Exchange Act of 1934, the persons who administer the employee benefit plan have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
                                         The Savannah Bancorp, Inc.
                                         Employee Savings & Profit Plan
                                         June 28, 2012
 
 
                                        /s/ Michael W. Harden, Jr .
                                         By: Michael W. Harden, Jr. CFO
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