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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-KSB
(Mark One)
[ X ] Annual report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required] for the
fiscal year ended December 31, 1995 or,
[ ] Transition report pursuant to section 13 or 15(d) of
the Securities Exchange Act of 1934 [No Fee Required]
for the transition period from
to .
Commission file number 0-20099
SOUTHWEST GEORGIA FINANCIAL CORPORATION
(Exact Name of Registrant as specified in its charter)
Georgia 58-1392259
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
201 First Street, S. E.
Moultrie, Georgia 31768
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code)
(912) 985-1120
Securities registered pursuant to Section 12(b) of this Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
$1.00 Par Value
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the past
90 days.
YES X NO
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [ X ]
State issuer's revenues for its most recent fiscal year. $ 18,339,282
Aggregate market value of voting stock held by nonaffiliates of the
Registrant as of March 1, 1996: $16,051,406
based on 755,005 shares at the price of $21.26 per share.
As of March 20, 1996, 1,500,000 shares of the $1.00 par value Common
Stock of Southwest Georgia Financial Corporation were outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended December 31, 1995, furnished to the Commission pursuant to Rule 14a-
3(b), are incorporated by reference into Part II.
Portions of the Registrant's definitive Proxy Statement for the 1996 annual
meeting of shareholders, filed with the Commission, and Annual Report to
Shareholders for the fiscal year ended December 31, 1995, furnished to the
Commission pursuant to Rule 14a-3(b), are incorporated by reference into
Part III.
Transitional Small Business Disclosure Format (check one):
YES NO X
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PART I
Item 1 - Description Of Business
Southwest Georgia Financial Corporation (the "Registrant") is a
Georgia bank holding company organized in 1980, which acquired
100% of the outstanding shares of Southwest Georgia Bank (the
"Bank") formerly known as Moultrie National Bank in 1981. The
Registrant's sole business is providing banking services to
individuals and businesses principally in Colquitt County, Baker
County and their surrounding counties of Southwest Georgia
through the Bank, its only subsidiary. The Bank commenced
operations as a national banking association in 1928. Currently,
it is an FDIC insured, state-chartered commercial bank.
The Registrant's executive office is located at 201 First Street,
S. E. Moultrie, Georgia 31768, and its telephone number is (912)
985-1120.
All references herein to the Registrant include Southwest Georgia
Financial Corporation and the Bank unless the context indicates a
different meaning.
General
The Registrant is a registered bank holding company. All of the
Registrant's activities are currently conducted by the Bank. The
Bank is community-oriented and offers such customary banking
services as consumer and commercial checking accounts, NOW accounts,
savings accounts, certificates of deposit, lines of credit,
Mastercard and VISA on an agency basis, accounts and money
transfers. The Bank finances commercial and consumer
transactions, makes secured and unsecured loans, and provides a
variety of other banking services. The Bank has a trust
department that performs corporate, pension and personal trust
services and acts as trustee, executor and administrator for
estates and as administrator or trustee of various types of
employee benefit plans for corporations and other organizations.
Effective December 2, 1994, the Registrant completed the
acquisition of certain assets and the assumption of deposits of
Baker County Bank in Newton, Georgia. The Registrant acquired
approximately $15.2 million of assets which included cash and due
from bank balances, investment securities, certain loans and
accrued interest receivables, and bank premises and equipment.
Also, the Registrant assumed approximately $15.2 million of
deposits and other liabilities. The acquisition was accounted
for as a purchase.
In December 1994, the Registrant's wholly owned subsidiary,
Moultrie National Bank, changed its name to Southwest Georgia
Bank. This name change became imperative by a need for the
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Registrant's subsidiary to expand beyond the limits of Moultrie
and Colquitt County in order to grow and continue to prosper. Also in
December 1994, the Registrant's subsidiary, Southwest Georgia
Bank, became a state chartered bank regulated by the Department
of Banking and Finance ("DBF") and the FDIC.
Markets
The Registrant conducts banking activities in Colquitt and Baker
Counties and their surrounding counties of Georgia. Agriculture
plays an important part in the Colquitt and Baker County economy.
Colquitt County grows a large portion of Georgia's produce crops,
including turnips, cabbage, sweet potatoes and squash. Also,
Colquitt County is home to producers of tobacco, peanuts, cotton
and pork. Manufacturing firms employ a large number of Colquitt
County residents. Apparel, lumber and wood products and textile
manufacturers are located in the Colquitt County area. Baker
County's major crops are cotton and peanuts. The remaining major
employers are service industries and retail stores.
Approximately 37,000 and 3,600 persons reside in Colquitt and
Baker Counties, respectively.
Deposits
The Bank offers a full range of depository accounts and services
to both consumers and businesses. At December 31, 1995, the
Bank's deposit base, totaling $173,809,956 consisted of
$21,509,590 in noninterest-bearing demand deposits (12.38 percent
of total deposits), $47,909,238 in interest-bearing demand
deposits (including money market accounts) (27.56 percent of
total deposits), $14,568,071 in savings deposits (8.38 percent of
total deposits), $72,130,873 in time deposits in amounts less
than $100,000 (41.50 percent of total deposits), and $17,692,184
in time deposits of $100,000 or more (10.18 percent of total
deposits).
Loans
The Bank makes both secured and unsecured loans to individuals,
firms and corporations, and both consumer and commercial lending
operations include various types of credit for the Bank's
customers. Secured loans include first and second real estate
mortgage loans. The Bank also makes direct installment loans to
consumers on both a secured and unsecured basis. At December 31,
1995, consumer installment, real estate (including construction
and mortgage loans) and commercial, financial and agricultural
loans represented approximately 10.0%, 74.8% and 15.2%,
respectively, of the Bank's total loan portfolio.
Lending Policy
The current lending policy of the Bank is to offer consumer and
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commercial credit services to individuals and entities that meet
the Bank's credit standards. The Bank provides each lending
officer with written guidelines for lending activities. Lending
authority is delegated by the Board of Directors of the Bank to
loan officers, each of whom is limited in the amount of secured and
unsecured loans which can be made to a single borrower or related group of
borrowers.
The Loan Committee (the "Committee") of the Bank's Board of
Directors is responsible for approving and monitoring the loan
policy and providing guidance and counsel to all lending
personnel. The Committee also approves all extensions of credit
over $100,000. The Committee is composed of the President and
the other executive officers of the Bank, as well as certain Bank
Directors.
Loan Review and Nonperforming Assets
The Bank regularly reviews its loan portfolio to determine
deficiencies and corrective action to be taken. Senior lending
officers conduct periodic review of borrowers with total direct
and indirect indebtedness of $100,000 or more and perform an
ongoing review of all past due loans. A summary report of past
due loans is reviewed monthly by the Committee, which also
reviews all loans over $100,000, whether current or past due, at
least annually.
Asset/Liability Management
The Committee is charged with establishing policies to manage the
assets and liabilities of the Bank. The Committee's task is to
manage asset growth, net interest margin and liquidity and
capital in order to maximize income and reduce interest rate
risk. To meet these objectives while maintaining prudent
management of risks, the Committee directs the Bank's overall
acquisition and allocation of funds. At its monthly meetings,
the Committee reviews and discusses the monthly asset and
liability funds budget and income and expense budget in relation
to the actual composition and flow of funds, the ratio of the
amount of rate sensitive assets to the amount of rate sensitive
liabilities; the ratio of loan loss reserve to outstanding loans;
and other variables, such as expected loan demand, investment
opportunities, core deposit growth within specified categories,
regulatory changes, monetary policy adjustments and the overall
state of the local, state and national economy.
Investment Policy
The Bank's investment portfolio policy is to maximize income
consistent with liquidity, asset quality and regulatory
constraints. The policy is reviewed periodically by the Board of
Directors. Individual transactions, portfolio composition and
performance are reviewed and approved monthly by the Board of
Directors.
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Employees
The Bank has 97 full-time employees. The Bank is not a party to
any collective bargaining agreement, and the Bank believes that
its employee relations are good. None of the Bank's executive
officers, except Mr. Clark, is employed pursuant to any
employment contract. See Exhibit 10.4, which is incorporated
herein by reference.
Competition
The banking business is highly competitive. The Bank competes
with two other depository institutions in Colquitt County and no
depository institution in Baker County. The Bank also competes
with other financial service organizations located outside
Colquitt and Baker Counties, including brokers, finance
companies, credit unions and certain governmental agencies. To
the extent that banks must maintain noninterest-earning reserves
against deposits, they may be at a competitive disadvantage when
compared with other financial service organizations that are not
required to maintain reserves against substantially equivalent
sources of funds. Further, changes in the laws applicable to
banks, savings and loan associations and other financial
institutions and the increased competition from investment
bankers and brokers and other financial service organizations may
have a significant impact on the competitive environment in which
the Bank operates. See "Supervision and Regulation."
At December 31, 1995, the Bank ranked, on the basis of total
deposits and assets of $173,809,956 and $207,363,938
respectively, as the largest among three depository institutions
in Colquitt County, Georgia.
Monetary Policies
The results of operations of the Bank are affected by credit
policies of monetary authorities, particularly the Board of
Governors of the Federal Reserve System (the "Federal Reserve").
The instruments of monetary policy employed by the Federal
Reserve include open market operations in U. S. Government
securities, changes in the discount rate on member bank
borrowings and changes in reserve requirements against member
bank deposits. In view of changing conditions in the national
economy and in the money markets, as well as the effect of action
by monetary and fiscal authorities, including the Federal
Reserve, no prediction can be made as to possible future changes
in interest rates, deposit levels, loan demand or the business
and earnings of the Bank.
Payment of Dividends
The Registrant is a legal entity separate and distinct from the
Bank. Most of the revenues of the Registrant result from
dividends paid to it by the Bank. Statutory and regulatory
restrictions exist that are applicable to the payment of
dividends by the Bank as well as by the Registrant to its
shareholders.
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The Bank is a state chartered bank regulated by the DBF and the
FDIC. Under the regulations of the DBF, dividends may not be
declared out of the retained earnings of a state bank without
first obtaining the written permission of the DBF unless such
bank meets all the following requirements:
(a) Total classified assets as of the most recent
examination of the bank do not exceed 80% of equity
capital (as defined by regulation);
(b) The aggregate amount of dividends declared or
anticipated to be declared in the calendar year does
not exceed 50% of the net profits after taxes but
before dividends for the previous calendar year; and,
(c) The ratio of equity capital to adjusted assets is not
less than 6%.
The payment of dividends by the Company and the Bank may also be
affected or limited by other factors, such as the requirement to
maintain adequate capital above regulatory guidelines. In
addition, if, in the opinion of the applicable regulatory
authority, a bank under its jurisdiction is engaged in or is
about to engage in an unsafe or unsound practice (which,
depending upon the financial condition of the bank, could include
the payment of dividends), such authority may require, after
notice and hearing, that such bank cease and desist from such
practice. The FDIC has issued a policy statement providing that
insured banks should generally only pay dividends out of current
operating earnings. At
December 31, 1995, retained earnings available from the Bank to
pay dividends totalled $13.6 million. For 1995, the Company's
cash dividend payout to stockholders was 26.8% of net income.
Supervision and Regulation
The Registrant is a registered bank holding company subject to
regulation by the Federal Reserve under the Bank Holding Company
Act of 1956, as amended (the "Act"). As a bank holding company,
the Registrant is required to file with the Federal Reserve an
annual report of its operations at the end of each fiscal year
and such additional information as the Federal Reserve may
require pursuant to the Act. The Federal Reserve may also make
examinations of the Registrant.
The Act requires every bank holding company to obtain prior
approval of the Federal Reserve (i) before it may acquire direct
or indirect ownership or control of more than five percent (5%)
of the voting shares of any bank that is not already controlled;
(ii) before it or any of its subsidiaries, other than a bank, may
acquire all or substantially all of the assets of a bank; and
(iii) before it may merge or consolidate with any other bank
holding company. In addition, a bank holding company is
generally prohibited from engaging in non-banking
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activities or acquiring direct or indirect control of voting
shares of any company engaged in
such activities. This prohibition does not apply to activities
found by the Federal Reserve, by order or regulation, to be so
closely related to banking or managing or controlling banks as to
be a proper incident thereto. Some of the activities that the
Federal Reserve has determined by regulation or order to be
closely related to banking are: making or servicing loans and
certain types of leases; performing certain data processing
services; acting as fiduciary or investment or financial
advisors; providing full service brokerage under certain
conditions;
underwriting bank eligible securities; underwriting debt and
equity securities on a limited basis through separately
capitalized subsidiaries; and making investments in corporations
or projects designed primarily to promote community welfare.
The laws of Georgia require annual registration with the
Department of Banking and Finance (the "DBF") by all Georgia bank
holding companies. Such registration includes information with
respect to the financial condition, operations, management and
intercompany relationships of a bank holding company and its
subsidiaries and related matters. The DBF may also require such
other information as is necessary to keep itself informed as to
whether the provisions of Georgia law and the regulations and
orders issued thereunder by the DBF have been complied with; and
the DBF may make examinations of the Company and of the Bank.
The Bank, as a state banking association, is subject to the
supervision of, and is regularly examined by, the FDIC and DBF.
Both the FDIC and the DBF must grant prior approval of any
merger, consolidation or other corporate reorganization involving
the Bank. A bank can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC in connection
with the default of a commonly-controlled institution.
The Registrant and the Bank are "affiliates" under the Federal
Reserve Act, which imposes certain restrictions on (i) loans by
the Bank to affiliates, (ii) investments in the stock of
affiliates by the Bank, (iii) the Bank's taking the stock of
affiliates as collateral for loans by it to a borrower, and (iv)
the purchase of assets from the Company by the Bank. Further, a
bank holding company and its subsidiaries are prohibited from
engaging in certain tie-in arrangements in connection with any
extensions of credit, lease or sale of property or furnishing of
services.
Capital Adequacy
The Federal Reserve and FDIC have implemented substantially
identical risk-based rules for assessing bank and bank holding
company capital adequacy. These regulations establish minimum
capital standards in relation to assets and off-balance sheet
exposures, as adjusted for credit risk. Banks and bank holding
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companies are required to have (1) a minimum standard of total
capital (as defined) to risk rated assets of eight percent (8%);
(2) a minimum Tier One Capital (as defined) to risk rated assets
of four percent (4%); and (3) a minimum stockholders' equity to
risk based assets of four percent (4%). In addition, the Federal
Reserve and the FDIC have established a minimum of three percent
(3%) leverage ratio of Tier One Capital to total assets for the
most highly rated banks. "Tier One Capital" generally consists
of common equity, minority interests in equity accounts of
consolidated subsidiaries and certain perpetual preferred stock
less certain intangibles. The Federal Reserve and the FDIC will
require a bank holding company to maintain a leverage ratio
greater than three percent (3%) if it is experiencing or
anticipating significant growth or is operating with less than
well-diversified risks in the opinion of the Federal Reserve.
The Federal Reserve and the FDIC use the leverage ratio in tandem
with the risk-based ratio to assess capital adequacy of banks and
bank holding companies. The FDIC, the Office of Comptroller
of Currency ("OCC"), and the Federal Reserve have proposed amending
the capital adequacy standards to provide for the consideration of
interest rate risk in the overall determination of a bank's capital
ratio, requiring banks with greater interest rate risk to maintain
adequate capital for the risk. The proposed revisions are not expected
to have a significant effect on the Company's capital requirements, if
adopted in their current form.
Effective December 19, 1992, a new section 38 to the Federal
Deposit Insurance Corporation Act implemented the prompt
corrective action provisions that Congress enacted as a part of
the Federal Deposit Insurance Corporation Improvement Act of 1991
(the "1991 Act"). The "prompt corrective action" program based
upon five regulatory zones for banks in which all banks would be
placed, largely based on their capital positions. Regulators are
permitted to take increasingly harsh action as a bank's financial
condition declines. Regulators are also empowered to place in
receivership or require the sale of a bank to another depository
institution when a bank's capital leverage ratio reaches two
percent. Better capitalized institutions will generally be
subject to less onerous regulation and supervision than banks
with lesser amounts of capital. The FDIC has adopted regulations
implementing the prompt corrective action provisions of the 1991
Act, which place financial institutions in the following five
categories based upon capitalization ratios: (1) a "well
capitalized" institution has a total risk-based capital ratio of
at least 10%, a Tier One risk-based ratio of at least 6 percent
and a leverage ratio of at least 5 percent; (2) an "adequately
capitalized" institution has a total risk-based ratio of at least
8 percent, a Tier One risk-based ratio of at least 4 percent and
a leverage ratio of at least 4 percent; (3) an "undercapitalized"
institution has a total risk-based capital ratio of under 8
percent, a Tier One risk-based capital ratio of under 4 percent
or a leverage ratio of under 4 percent; (4) a "significantly
undercapitalized" institution has a total risk-based capital
ratio of under 6 percent, a Tier One risk-based ratio of under 3
percent or a leverage ratio of under 3 percent; and (5) a
"critically undercapitalized" institution has a leverage ratio of
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2 percent or less. Any institution in any of the three
undercapitalized categories would be prohibited from declaring
dividends or making capital distributions. The proposed
regulations also establish procedures for "downgrading" an
institution to a lower capital category based on supervisory
factors other than capital. The Bank at December 31, 1995 would
be considered to be a "well capitalized" institution if solely
viewed on the basis of capital ratios. As an institution drops
below the "well capitalized" category, it becomes subject to
increasing scrutiny, decreasing management flexibility, and
increasingly harsh regulatory actions. It is therefore important
for banks to remain in the "well capitalized" category
notwithstanding the minimum capital ratios described above. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Capital Resources and Dividends",
contained on page 15 of the Registrant's 1995 Annual Report to
Shareholders, which is incorporated herein by reference, for the
Registrant's capital position.
Recent Legislation
On April 19, 1995, the four federal bank regulatory agencies
adopted revisions to the regulations promulgated pursuant to the
Community Reinvestment Act (the "CRA") which are intended to set
distinct assessment standards for financial institutions. The
revised regulations contain three evaluation tests: (1) a
lending test which will compare the institution's market share of
loans in low and moderate income areas to its market share of
loans in its entire service area and the percentage of a bank's
outstanding loans to low and moderate income areas or
individuals, (ii) a services test which will evaluate the
provisions of services that promote the availability of credit to
low and moderate income areas, and (iii) an investment test,
which will evaluate an institution's record of investments in
organizations designed to foster community development, small and
minority-owned businesses and affordable housing lending,
including state and local government housing or revenue bonds.
The regulations are designed to reduce some paperwork
requirements of the current regulations and provide regulators,
institutions and community groups with a more objective and
predictable manner with which to evaluate the CRA performance of
financial institutions. The rule became effective on January 1,
1996, at which time evaluation under streamlined procedures began
for institutions with assets of less than $250 million that are
owned by a holding company with total assets of less than $1
billion. It is not expected that these regulations will have any
appreciable impact upon the Registrant and the Bank.
Congress and various federal agencies (including, in addition to
the bank regulatory agencies, HUD, the Federal Trade Commission
and the Department of Justice) (collectively the "Federal
Agencies") responsible for implementing the nation's fair lending
laws have been increasingly concerned that prospective home
buyers and other borrowers are experiencing discrimination in
their efforts to obtain loans. In recent years, the Department
of Justice has filed suit against financial institutions, which
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it determined had discriminated, seeking fines and restitution
for borrowers who allegedly suffered from discriminatory
practices. Most, if not all, of these suits have been settled
(some for substantial sums) without a full adjudication on the
merits.
On March 8, 1994, the Federal Agencies, in an effort to clarify
what constitutes lending discrimination and specify the factors
the agencies will consider in determining if lending
discrimination exists, announced a joint policy statement
detailing specific discriminatory practices prohibited under the
Equal Opportunity Act and the Fair Housing Act. In the policy
statement, three methods of proving lending discrimination were
identified: (1) overt evidence of discrimination, when a lender
blatantly discriminates on a prohibited basis,
(2) evidence of disparate treatment, when a lender treats
applicants differently based on a prohibited factor even where
this is no showing that the treatment was motivated by prejudice
or a conscious intention to discriminate against a person, and
(3) evidence of disparate impact, when a lender applies a
practice uniformly to all applicants, but the practice has a
discriminatory effect, where such practices are neutral on their
face and are applied equally, unless the practice can be
justified on the basis of business necessity.
On September 23, 1994, President Clinton signed the Reigle
Community Development and Regulatory Improvement Act of 1994 (the
"Regulatory Improvement Act"). The Regulatory
Improvement Act contains funding for community development
projects through banks and community development financial
institutions and also numerous regulatory relief provisions
designed to eliminate certain duplicative regulations and
paperwork requirements.
On September 29, 1994, President Clinton signed the Reigle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the
"Federal Interstate Bill") which amends federal law to permit a
bank holding company to acquire existing banks in any state
effective September 29, 1995, and any interstate bank holding
company is permitted to merge its various bank subsidiaries into
a single bank with interstate branches after May 31, 1977.
States have the authority to authorize interstate branching prior
to June 1, 1997, or alternatively, to opt out of interstate
branching prior to that date. The Georgia Financial Institutions
Code was amended in 1994 to permit the acquisition of a Georgia
bank or bank holding company by out-of-state bank holding
companies beginning July 1, 1995. On September 29, 1995, the
interstate banking provisions of the Georgia Code were superseded
by the Federal Interstate Bill.
On January 26, 1996, the Georgia legislature adopted a bill (the
"Georgia Intrastate Bill") to permit, effective July 1, 1996, any
Georgia bank or group of affiliated banks under one holding
company to establish new or additional branch banks in up to
three counties within the State Of Georgia in which it does not
currently have operations. After July 1, 1998, all restrictions
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on state-wide branching would be removed. Prior to adoption of
the Georgia Intrastate Bill, Georgia only permitted branching
within a county, via merger or consolidation with an existing
bank or in certain other limited circumstances. Although
Governor Miller has not yet signed the Georgia Intrastate Bill
into law, he is expected to do so.
FDIC Insurance Agreements
The Bank is subject to FDIC deposit insurance assessments for the
Bank Insurance Fund (the "BIF"). In the first six months of
1995, the Bank was assessed $.23 per $100 of deposits based upon
a risk-based system whereby banks are assessed on a sliding scale
depending upon their placement in nine separate supervisory
categories, from $.23 per $100 of deposits for the healthiest
banks (those with the highest capital, best management and best
overall condition) to as much as $.31 per $100 of deposits for
the less-healthy institutions, for an average of $.259 per $100
of deposits.
On August 8, 1995, the FDIC lowered the BIF premium for healthy
banks 83% from $.23 per $100 in deposits to $.04 per $100 in
deposits, while retaining the $.31 level for the riskiest banks.
The average assessment rate was therefore reduced from $.232 to
$.044 per $100 of deposits. The new rate took effect on
September 29, 1995. On September 15, 1995, the FDIC refunded
$89,130 to the Bank for premium overpayments in the second and
third quarter of 1995. On November 14, 1995, the FDIC again
lowered the BIF premium for healthy banks from $.04 per $100 of
deposits to zero for the highest rated institutions (92% of the
industry). As a result, the Bank will pay the legally required
annual minimum payment of $2,000 per year for insurance
beginning in January 1996. In addition, the Bank will pay an
estimated $77,000 in insurance premiums with respect to certain
OAKAR (Thrift) deposits acquired from the Resolution Trust
Corporation which are assessed at $.23 per $100 of deposits
beginning in January 1996. Had the current rates been in effect
for all of 1994 and 1995, the annual FDIC insurance premiums
paid by the Bank would have been reduced by $270,000 and
$160,000, respectively.
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Executive Officers Of The Registrant
Executive officers are elected by the Board of Directors annually
in April and hold office until the following April unless they
sooner resign or are removed from office by the Board of
Directors.
The executive officers of the Registrant, and their ages,
positions with the Registrant and terms of office as of January
31, 1996 are as follows:
<TABLE>
<CAPTION>
Officer Of The
Name (Age) Principal Position Registrant Since
<S> <S> <C>
John H. Clark President and Director of the 1980
(58) Registrant and Bank
Cecil Alvis Executive Vice President of the 1982
(61) Registrant and Bank
Violet K. Weaver Senior Vice President and Secretary 1981
(60) of the Registrant and Bank
John J. Cole, Jr. Senior Vice President of the 1984
(45) Registrant and Bank
George R. Kirkland Senior Vice President and Comptroller 1991
(45) of the Registrant and Bank
Lamar F. Seay Vice President of the Registrant 1992
(56) and Bank
C. Broughton Williams Senior Vice President of the Registrant 1993
(59) and Bank
Judy M. Owens Vice President of the Registrant 1993
(51) and Bank
Randall L. Webb, Jr. Vice President of the Registrant 1994
(47) and Bank
Geraldine A. Ferrone Vice President of the Registrant 1995
(49) and Bank
Robert M. Carlton, Jr. Vice President of the Registrant 1995
and Bank
Margaret H. Lewis Vice President of the Registrant 1995
(51) and Bank
</TABLE>
The following is a brief description of the business experience
of the executive officers of the Registrant. Except as otherwise
indicated, each executive officer has been engaged in their
present or last employment, in the same or similar position, for
more than five years.
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Mr. Clark has served as President and Director of the Bank since
1978 and as President and Director of the Registrant since 1980.
Mr. Alvis became Executive Vice President of the Bank and
Registrant in 1993. Previously, he had been Senior Vice
President of the Bank since 1986 and as Vice President of the
Registrant since 1982.
Mrs. Weaver has served as Senior Vice President and Secretary of
the Bank since 1986 and became Senior Vice President and
Secretary of the Registrant in 1992. Previously she had been
Vice President and Secretary of the Registrant since 1990 and
Vice President and Secretary of the Bank from 1976 to 1986.
Mr. Cole became Senior Vice President and Cashier of the Bank and
Senior Vice President of the Registrant in 1992. Previously he
had been Senior Vice President and Comptroller of the Bank from
1986 to 1992 and Vice President and Treasurer of the Registrant
since 1984.
Mr. Kirkland became Senior Vice President and Comptroller of the
Bank and Registrant in 1993. Previously he had been Vice
President and Comptroller of the Bank and Vice President and
Treasurer of the Registrant since 1991. Also, he had served as
Vice President of Duval Federal Savings Association from 1990 to
1991 and with Florida National Bank from 1986 to 1990.
Mr. Seay became Vice President of the Registrant in 1992 and had
served as Vice President of the Bank since 1988.
Mr. Williams became Senior Vice President of the Bank and
Registrant in 1994. Previously, he had been Vice President of
the Bank and Registrant since 1993. Also, he had served as
Moultrie City President and Chairman of the Local Board of
Advisory Directors of NationsBank of Georgia N.A. from 1987 to
1992 and with Citizens and Southern National Bank of Georgia from
1959 to 1987.
Mrs. Owens became Vice President and Trust Officer of the Bank
and Vice President of the Registrant in 1993. Previously she had
been Assistant Vice President and Trust Officer of the Bank from
1991 to 1993 and Assistant Trust Officer of the Bank since 1984.
Mr. Webb became Vice President of the Bank and Registrant in
1994. Previously, he had been Assistant Vice President of the
Bank since 1984.
Mrs. Ferrone became Vice President of the Bank and Registrant in
1995. Previously, she had been Assistant Vice President of the
Bank since 1988.
12
<PAGE>
Mr. Carlton became Vice President of the Bank and Registrant in
1995. Previously, he had been Assistant Vice President of the
Bank since 1992. Also, he had served as Vice President and
Cashier of Citizens and Southern National Bank of Georgia from
1969 to 1991.
Mrs. Lewis became Vice President of the Bank and Registrant in
1995. Previously, she had been Assistant Vice President of the
Bank since 1986.
Selected Statistical Information
The statements below show, for the periods indicated, the daily
average balances outstanding for the major categories of interest
bearing assets and interest bearing liabilities, and the average
interest rate earned or paid thereon. Except for percentages,
all data is in thousands of dollars.
13
<PAGE>
Distribution of Assets, Liabilities and Shareholders' Equity;
Interest Rates and Interest Differentials
Average Balance Sheets and Net Interest Income Analysis
Condensed average balance sheets for the years indicated are
presented below:
<TABLE>
<CAPTION>
Year Ended December 31, 1995
Average
Balance Interest Rate
ASSETS (Thousands Of Dollars)
<S> <C> <C> <C>
Cash and due from banks $ 6,213 $ - - %
Interest earning assets:
Interest bearing deposits 3,982 234 5.88%
Loans, net (a) (b) (c) 113,515 12,068 10.63%
Taxable investment securities
held-to-maturity 63,856 4,173 6.54%
Nontaxable investment securities (c)
held-to-maturity 500 56 11.20%
Other short-term investments
held-to-maturity 1,295 92 7.10%
Federal funds sold and securities
purchased with agreements to resell 2,798 163 5.83%
Total interest earning assets 185,946 16,786 9.03%
Premises and equipment 2,875
Other assets 6,780
Total assets $ 201,814
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits $ 19,094 $ - - %
Interest bearing liabilities:
Savings deposits 61,805 1,850 2.99%
Time deposits 88,316 4,703 5.33%
Federal funds purchased and securities
sold under agreements to repurchase 2,230 120 5.38%
Other borrowings 9,500 569 5.99%
Total interest bearing liabilities 161,851 7,242 4.47%
Other liabilities 1,724
Total liabilities 182,669
Common stock 1,500
Surplus 1,932
Retained earnings 18,216
Less treasury stock( 2,503)
Total shareholders' equity 19,145
Total liabilities and shareholders' equity $ 201,814
Net interest income and margin $ 9,544 5.13%
</TABLE>
14
<PAGE>
Distribution of Assets, Liabilities and Shareholders' Equity;
Interest Rates and Interest Differentials, Continued
Average Balance Sheets and Net Interest Income Analysis, Continued
<TABLE>
<CAPTION>
Year Ended December 31, 1994
Average
Balance Interest Rate
ASSETS (Thousands Of Dollars)
<S> <C> <C> <C>
Cash and due from banks $ 6,093 $ - - %
Interest earning assets:
Interest bearing deposits 2,140 109 5.09%
Loans, net (a) (b) (c) 110,523 10,801 9.77%
Taxable investment securities
held-to-maturity 56,353 3,602 6.39%
Nontaxable investment securities (c)
held-to-maturity 500 56 11.20%
Other short-term investments
held-to-maturity 1,246 76 6.10%
Federal funds sold and securities
purchased with agreements to resell 4,507 176 3.91%
Total interest earning assets 175,269 14,820 8.46%
Premises and equipment 2,387
Other assets 3,736
Total assets $ 187,485
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits $ 16,836 $ - - %
Interest bearing liabilities:
Savings deposits 60,360 1,763 2.92%
Time deposits 77,441 3,320 4.29%
Federal funds purchased and securities
sold under agreements to repurchase 4,947 185 3.74%
Other borrowings 9,500 550 5.79%
Total interest bearing liabilities 152,248 5,818 3.82%
Other liabilities 1,463
Total liabilities 170,547
Common stock 1,500
Surplus 1,901
Retained earnings 16,108
Less treasury stock ( 2,571)
Total shareholders' equity 16,938
Total liabilities and shareholders' equity $ 187,485
Net interest income and margin $ 9,002 5.14%
</TABLE>
15
<PAGE>
Interest Rates
(a) Average loans are shown net of unearned income and the
allowance for loan losses. Nonperforming loans are included.
(b) Interest income includes loan fees as follows (in thousands):
1995 - $358 and
1994 - $392.
(c) Reflects taxable equivalent adjustments using a tax rate of
34 percent for 1995 and 1994.
Interest Differentials
The following table sets forth, for the indicated years ended
December 31, a summary of the changes in interest paid resulting
from changes in volume and changes in rate. The change due to
volume is calculated by multiplying the change in volume by the
prior year's rate. The change due to rate is calculated by
multiplying the change in rate by the prior year's volume. The
change attributable to both volume and rate is calculated by
multiplying the change in volume by the change in rate.
<TABLE>
<CAPTION>
(a)
Due To
Increase Changes In
1995 1994 (Decrease) Volume Rate
(Thousands Of Dollars)
<S> <C> <C> <C> <C> <C>
Interest earned on:
Interest bearing deposits $ 234 $ 109 $ 125 $ 106 $ 19
Loans, net (b) 12,068 10,801 1,267 298 969
Taxable investment securities held-to-maturity 4,173 3,602 571 489 82
Nontaxable investment
securities (b) held-to-
maturity 56 56 - - -
Other held-to-maturity 92 76 16 3 13
Federal funds sold and
securities purchased
under agreements to resell 163 176 ( 13) 44 ( 57)
Total interest income 16,786 14,820 1,966 940 1,026
Interest paid on:
Savings deposits 1,850 1,763 87 42 45
Time deposits 4,703 3,320 1,383 507 876
Federal funds purchased
and securities sold under
agreements to repurchase 120 185 ( 65) ( 316) 251
Other borrowings 569 550 19 - 19
Total interest expense 7,242 5,818 1,424 233 1,191
Net interest earnings $ 9,544 $ 9,002 $ 542 $ 707 $ ( 165)
</TABLE>
16
<PAGE>
Interest Differentials, Continued
<TABLE>
<CAPTION>
(a)
Due To
Increase Changes In
1994 1993 (Decrease) Volume Rate
(Thousands Of Dollars)
<S> <C> <C> <C> <C> <C>
Interest earned on:
Interest bearing deposits $ 109 $ 16 $ 93 $ 76 $ 17
Loans, net (b) 10,801 10,631 170 189 ( 19)
Taxable investment
securities held-to-maturity 3,602 3,692 ( 90) 487 ( 577)
Nontaxable investment
securities (b) held-to-
maturity 56 103 ( 47) ( 42) ( 5)
Other held-to-maturity 76 64 12 4 8
Federal funds sold and
securities purchased
under agreements to resell 176 242 ( 66) ( 250) 184
Total interest income 14,820 14,748 72 464 ( 392)
Interest paid on:
Savings deposits 1,763 1,677 86 130 ( 44)
Time deposits 3,320 3,607 ( 287) ( 122) ( 165)
Federal funds purchased
and securities sold under
agreements to repurchase 185 286 ( 101) ( 84) ( 17)
Other borrowings 550 586 ( 36) 28 ( 64)
Total interest expense 5,818 6,156 ( 338) ( 48) ( 290)
Net interest earnings $ 9,002 $ 8,592 $ 410 $ 512 $ ( 102)
</TABLE>
(a) Volume and rate components are in proportion to the
relationship of the absolute dollar amounts of the change in
each.
(b) Reflects taxable equivalent adjustments using a tax rate of
34 percent for 1995 and 1994, in adjusting interest on
nontaxable loans and securities to a fully taxable basis.
17
<PAGE>
Investment Portfolio
The carrying values of investment securities for the indicated
years are presented below:
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
(Thousands Of Dollars)
<S> <C> <C> <C>
U. S. Treasury and other
U. S. Government agencies $ 69,519 $ 61,846 $ 55,093
State and municipal 500 500 500
Other investments 1,308 1,247 1,243
Total investment
securities $ 71,327 $ 63,593 $ 56,836
</TABLE>
The following table shows the maturities of investment securities
at December 31, 1995 and the weighted average yields (for
nontaxable obligations on a fully taxable basis assuming a 34%
tax rate) of such securities.
<TABLE>
MATURITY
<CAPTION>
After One After Five
Within But Within But Within After
One Year Five Years Ten Years Ten Years
Amount Yield Amount Yield Amount Yield Amount Yield
(Thousands Of Dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U. S. Treasury and
Other U. S.
Government
Agencies $ 10,992 6.92% $ 58,527 6.36% $ - - $ - -
State and
municipal - - 500 11.36% - - - -
Other
investments - - 1,308 7.10% - - - -
Total $ 10,992 6.92% $ 60,335 6.42% $ - - $ - -
</TABLE>
The calculation of weighted average yields is based on the cost
and effective yields of each security weighted for the scheduled
maturity of each security. At December 31, 1995 and 1994,
securities carried at approximately $25,310,000 and $23,875,000,
respectively, were pledged to secure public and trust deposits as
required by law.
18
<PAGE>
Loan Portfolio
Types of Loans
The amount of loans outstanding for the indicated years are shown
in the following table according to type of loan.
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
(Thousands Of Dollars)
<S> <C> <C> <C>
Commercial, financial and
agricultural $ 17,706 $ 14,827 $ 11,397
Real estate - construction - - 12
Real estate - mortgage 87,319 92,301 89,472
Other 45 60 156
Installment 11,700 11,343 9,386
Total loans 116,770 118,531 110,423
Less:
Unearned income 177 236 233
Allowance for loan losses 2,140 2,028 1,825
Net loans $ 114,453 $ 116,267 $ 108,365
</TABLE>
Loan Maturities and Sensitivity to Changes in Interest Rates
The following table shows the maturity distribution of the
commercial, financial and agricultural loan portfolio, excluding
real estate mortgage and consumer loans at
December 31, 1995.
<TABLE>
<CAPTION>
Commercial,
Financial
and
Agricultural
(Thousands Of Dollars)
<S> <C>
Maturity distribution of loans which are due:
In one year or less $ 12,101
After one year but within five years 3,975
After five years 1,630
Total $ 17,706
</TABLE>
19
<PAGE>
Loan Maturities and Sensitivity to Changes in Interest Rates,
Continued
The following table shows for the above selected loans due after
one year, the amounts which have predetermined interest rates and
the amounts which have floating or adjustable interest rates at
December 31, 1995.
<TABLE>
<CAPTION>
Loans With
Predetermined Loans With
Rates Floating Rates Total
(Thousands Of Dollars)
<S> <C> <C> <C>
Commercial, financial
and agricultural $ 1,590 $ 4,015 $ 5,605
</TABLE>
Risk Elements In The Loan Portfolio
The following table presents information concerning outstanding
balances of nonperforming loans at December 31, 1995 and 1994.
Nonperforming loans comprise: (a) loans accounted for on a
nonaccrual basis ("nonaccrual loans"); (b) loans which are
contractually past due 90 days or more as to interest or
principal payments ("past-due loans"); (c) loans, the terms of
which have been renegotiated to provide a reduction or deferral
of interest or principal because of a deterioration in the
financial position of the borrower ("renegotiated loans"); and
(d) loans now current where there are serious doubts as to the
ability of the borrower to comply with present loan repayment
terms ("potential problem loans").
<TABLE>
<CAPTION>
Nonaccrual Past-Due Renegotiated Potential
Loans Loans Loans Problem Loans Total
(Thousands Of Dollars)
<S> <C> <C> <C> <C> <C>
December 31, 1995 $ 304 $ 35 $ 72 $ 302 $ 713
December 31, 1994 $ 3,910 $ 97 $ - $ 1,266 $ 5,273
</TABLE>
The Registrant follows a policy of continuing to accrue interest
on consumer and bank card loans that are contractually past due
up to the time of charging the loan amount against the allowance
for loan losses.
20
<PAGE>
Summary of Loan Loss Experience
The following table is a summary of average loans outstanding
during the reported periods, changes in the allowance for loan
losses arising from loans charged off and recoveries on loans
previously charged off by loan category, and additions to the
allowance which have been charged to operating expenses.
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993 1992
(Thousands Of Dollars)
<S> <C> <C> <C> <C>
Average amount of net
loans outstanding $ 113,515 $ 110,523 $ 108,586 $ 104,304
Amount of allowance for
loan losses at beginning
of period $ 2,028 $ 1,825 $ 1,657 $ 1,159
Reserve for loan losses of
acquired affiliate - 162 - -
Amount of loans charged off
during period:
Commercial, financial and
agricultural 35 12 65 7
Real estate - mortgage 51 10 80 32
Installment 127 99 46 74
Total loans charged off 213 121 191 113
Amount of recoveries during period:
Commercial, financial, and
agricultural - 1 1 2
Real estate - mortgage 11 2 4 17
Installment 54 39 24 37
Total loans recovered 65 42 29 56
Net loans charged off
during period 148 79 162 57
<PAGE>
Additions to allowance for
loan losses charged to operating
expense during period 260 120 330 555
Amount of allowance for
loan losses at end
of period $ 2,140 $ 2,028 $ 1,825 $ 1,657
Ratio of net charge-offs
during period to average
loans outstanding for
the period .13% .07% .15% .05%
21
<PAGE>
The allowance is based upon management's analysis of the
portfolio under current and expected economic conditions. This
analysis includes a study of loss experience, a review of
delinquencies and an estimate of the possibility of loss in view
of the risk characteristics of the portfolio. Based on the above
factors, management considers the current allowance to be
adequate.
Allocation of Allowance For Loan Losses
Management has allocated the allowance for loan losses within the
categories of loans set forth in the table below according to
amounts deemed reasonably necessary to provide for possible
losses. The amount of the allowance applicable to each category
and the percentage of loans in each category to total loans are
presented below:
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
Percent Of Percent Of
Loans In Loans In
Category Allocation Category Allocation Category
(Thousands Of Dollars)
<S> <S> <C> <C> <C>
Domestic:
Commercial, financial
and agriculture $ 449 13.7% $ 440 12.5%
Real estate - mortgage 1,476 76.2% 1,388 77.8%
Installment 215 10.1% 200 9.7%
Foreign N/A N/A N/A N/A
Total $ 2,140 100.0% $ 2,028 100.0%
</TABLE>
The calculation is based upon total loans including unearned
interest. Management believes that the portfolio is well
diversified and, to a large extent, secured, without undue
concentrations in any specific risk area. Control of loan
quality is regularly monitored by management and is reviewed by
the Bank's Board of Directors, which meets monthly. Independent
external review of the loan portfolio is provided by examinations
conducted by regulatory authorities. The amount of additions to
the allowance for loan losses charged to operating expense for
the periods indicated were based upon many factors, including
actual charge offs and evaluations of current and prospective
economic conditions in the market area. Management believes the
allowance for loan losses is adequate to cover any potential loan
losses.
22
<PAGE>
Deposits
The average amounts of deposits for the last three years are
presented below.
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
(Thousands Of Dollars)
Domestic Bank Offices
<S> <C> <C> <C>
Non-interest bearing
demand deposits $ 19,094 $ 16,836 $ 15,622
NOW accounts 35,773 31,325 27,837
Money market deposit
accounts 10,104 9,426 11,489
Savings 15,928 19,609 16,519
Time deposits 88,316 77,441 80,228
Total interest bearing 150,121 137,801 136,073
Total average deposits $ 169,215 $ 154,637 $ 151,695
</TABLE>
The maturity of certificates of $100,000 or more as of December
31, 1995 are presented below:
<TABLE>
<CAPTION>
(Thousands Of Dollars)
<S> <C>
3 months or less $ 4,226
Over 3 months through 6 months 2,933
Over 6 months through 12 months 3,535
Over 12 months 6,998
Total outstanding $ 17,692
</TABLE>
Return On Equity And Assets
Certain financial ratios are presented below:
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Return on average assets 1.46% 1.42% 1.38%
Return on average equity 15.40% 15.76% 17.90%
Dividend payout ratio
(dividends declared
divided by net income) 26.79% 26.61% 25.33%
Average equity to average
assets ratio 9.49% 9.03% 7.72%
</TABLE>
23
<PAGE>
Item 2 - Description of Property
The executive offices of the Registrant and the main banking
office of the Bank are located in a 19,000 square foot facility
at 201 First Street, S. E. Moultrie, Georgia. Also, in 1991 the
Registrant acquired an 11,000 square foot federal branch banking
office, and an adjacent 5,000 square foot building was renovated
in 1992 for the Bank's operations center. The Trust division has
been relocated to the federal branch building located at 25
Second Avenue, Moultrie, Georgia. In 1993, the Registrant
purchased a vacant building and lot located across the street
from the main office at 205 Second Street, S. E., Moultrie,
Georgia. This building was renovated for the Bank's
Administrative Services Division offices, training and meeting
rooms, and record storage. In 1994, the Registrant acquired a
4,400 square foot Baker County branch banking office located at
the intersection of Highway 91 and 200, Newton, Georgia. All of
these facilities are adequate for present operations.
All the buildings and land, which includes parking and ten drive-
in teller stations, are owned by the Bank. There are two
automated teller machines on the Bank's main office premises, one
in the federal branch office, and two additional automated teller
machines located in Doerun and Norman Park, Georgia. These
automated teller machines are linked to the Honor network of
automated teller machines.
Item 3 - Legal Proceedings
There are no material pending legal proceedings to which the
Registrant or the Bank is a party or to which any of their
property is subject.
Item 4 - Submission of Matters to a Vote of Security Holders
There were no matters submitted during the fourth quarter of 1995
for a vote of the security holders through the solicitation of
proxies or otherwise.
PART II
Item 5 - Market For Common Equity and Related Stockholder Matters
(a) There currently is no public market for the common stock of
the registrant.
(b) As of December 31, 1995 there were 612 holders of record of
the Registrant's common stock.
(c) The Registrant declared an annual dividend on its common
stock of $.62 per share which amounted to $790,078 for the
year 1995.
The Bank has paid annual cash dividends on common stock for
sixty-eight consecutive years. It is the present intention
of the Board of Directors to continue to pay cash dividends
on its common stock, subject to the earnings of the Bank and
regulatory requirements.
24
<PAGE>
Item 6 - Management's Discussion and Analysis or Plan of
Operation
Management's discussion and analysis or plan of operation appears
under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operation" on pages 6 through
15 of the Registrant's 1995 Annual Report to Shareholders and is
incorporated herein by reference. For further information about
the Registrant, see selected statistical information on pages 12-
22 of this report on Form 10-KSB.
Item 7 - Financial Statements
The report of independent auditors, the consolidated financial
statements and notes to the consolidated financial statements on
pages 19 through 41 of the Registrant's 1995 Annual Report to
Shareholders are incorporated herein by reference.
Item 8 - Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
During the Registrant's two most recent fiscal years, the
Registrant did not change accountants and had no disagreement
with its accountants on any matter of accounting principles or
practices or financial statement disclosure.
PART III
Item 9 - Directors, Executive Officers, Promoters and Control
Persons: Compliance With Section 16(a) of the Exchange Act
The information contained under the heading "Information About
Nominees For Director" in the definitive Proxy Statement used in
connection with the solicitation of proxies for the Registrant's
annual meeting of shareholders to be held on May 14, 1996,
filed with the Commission, is incorporated herein by reference.
Information on Form 10-KSB relating to the executive officers of
the Registrant is included in Item 1 of this report.
Item 10 - Executive Compensation
The information contained under the heading "Executive
Compensation" in the definitive Proxy Statement used in
connection with the solicitation of proxies for the Registrant's
annual meeting of shareholders to be held on May 14, 1996,
filed with the Commission, is incorporated herein by reference.
Item 11 - Security Ownership of Certain Beneficial Owners and
Management
The information contained under the heading "Voting Securities
and Principal Holders" in the definitive Proxy Statement used in
connection with the solicitation of proxies for the Registrant's
annual meeting of shareholders to be held on May 14, 1996,
filed with the Commission, is incorporated herein by
reference. For purposes of determining the aggregate market
value of the
25
<PAGE>
Registrant's voting stock held by nonaffiliates, shares held by
all directors and executive officers of the Registrant have been
excluded. The exclusion of such shares is not intended to, and
shall not, constitute a determination as to which persons or
entities may be "affiliates" of the Registrant as defined by the
Securities and Exchange Commission.
Item 12 - Certain Relationships and Related Transactions
The information contained under the heading "Certain
Relationships and Related Transactions" in the definitive Proxy
Statement used in connection with the solicitation of proxies for
the Registrant's annual meeting of shareholders to be held on
May 14, 1996, filed with the Commission, is incorporated herein
by reference.
Item 13 - Exhibits and Reports on Form 8-K
a. Exhibits:
The exhibits filed as part of this registration statement are
as follows:
Exhibit Number Description Of Exhibit
3.1 Articles of Incorporation of Southwest Georgia
Financial Corporation, as amended (included as
Exhibit 3.1 to the Registrant's Form 10-KSB
dated December 31, 1992, previously filed with
the Commission and incorporated herein by
reference).
3.2 By-Laws of the Registrant as amended.
10.1 Pension Retirement Plan of the Registrant, as
amended and restated (included as Exhibit 10.1
to the Registrant's Form 10-KSB dated December
31, 1994 and previously filed with the
Commission and incorporated herein by
reference).*
10.2 Form of Directors Deferred Compensation Plan of
the Registrant (included as Exhibit 10.3 to the
Registrant's Form S-18 dated January 23, 1990
previously filed with the Commission and
incorporated herein by reference).*
10.3 Employment Agreement of John H. Clark (included
as Exhibit 10.4 to the Registrant's Form S-18
dated January 23, 1990 previously filed with the
Commission and incorporated herein by
reference).*
26
<PAGE>
10.4 Directors and Executive Officers' Stock Purchase
Plan of the Registrant dated March 18, 1992
(included as Exhibit 10.7 to the Registrant's
Form 10-KSB dated December 31, 1992, previously
filed with the Commission and incorporated
herein by reference).*
10.5 Advances, specific collateral pledged and
security agreement between the Federal Home Loan
Bank of Atlanta and the Bank dated January 27,
1992 and confirmation of credit services
transaction for new money advances in the amount
of $4,000,000 dated February 10, 1992,
$2,500,000 dated September 4, 1992 and
$1,500,000 dated September 8, 1992 (included as
Exhibit 10.10 to the Registrant's Form 10-KSB
dated December 31, 1992, previously filed with
the Commission and incorporated herein by
reference).
10.6 Supplemental Retirement Plan of the Registrant
dated December 21, 1994 and the Trust under the
Registrant's Supplemental Retirement Plan dated
December 21, 1994 (included as Exhibit 10.11 to
the Registrant's Form 10-KSB dated December 31,
1994, previously filed with the Commission and
incorporated herein by reference).
10.7 Purchase and Assumption Agreement between the
Baker County Bank, Newton, Georgia, and
Southwest Georgia Bank, Moultrie, Georgia, a
subsidiary of the Registrant, dated May 12,
1994, and Amendment No. 1 to the Purchase and
Assumption Agreement dated October 25, 1994
(included as Exhibit 10.12 to the Registrant's
Form 10-KSB dated December 31, 1994, previously
filed with the Commission and incorporated
herein by reference).
10.8 Employee Stock Ownership Plan and Trust of the
Registrant as amended by Amendment No. 2
(included as Exhibit 10.13 to the Registrant's
Form 10-KSB dated December 31, 1994, previously
filed with the Commission and incorporated
herein by reference).*
13 Southwest Georgia Financial Corporation Annual
Report to Shareholders for the fiscal year ended
December 31, 1995. With the exception of
27
<PAGE>
information expressly incorporated herein, the
1995 Annual Report to Shareholders is not deemed
to be filed as part of this Report on Form 10-KSB.
22 Subsidiaries of the Registrant.
99 Proxy Statement relating to the 1996 Annual Meeting of
Shareholders.
*Management contract or compensatory plan or arrangement required
to be filed as an exhibit to this form.
b. No reports on Form 8-K were filed by the Registrant during
the fourth quarter of 1995.
Exhibit Index
Exhibit Number Description Of Exhibit Page Number
3.2 By-Laws of the Registrant as amended. 31
13 Southwest Georgia Financial Corporation Annual 47
Report to Shareholders for the fiscal year ended
December 31, 1995. With the exception of
information expressly incorporated herein, the
1995 Annual Report to Shareholders is not
deemed to be filed as part of this Report on
Form 10-KSB.
22 Subsidiaries of the Registrant. 81
99 Proxy Statement relating to the 1996 Annual 82
Meeting of Shareholders.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Southwest Georgia Financial Corporation
(Registrant)
Date: March 20, 1996 By: /s/ John H. Clark
JOHN H. CLARK, PRESIDENT
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
/s/ John H. Clark Date: March 20, 1996
JOHN H. CLARK
President and Director
[Principal Executive Officer]
/s/ George R. Kirkland Date: March 20, 1996
GEORGE R. KIRKLAND
Senior Vice-President and Treasurer
[Principal Financial and Accounting Officer]
/s/ Leo T. Barber, Jr. Date: March 20, 1996
LEO T. BARBER, JR.
Chairman and Director
/s/ Albert W. Barber Date: March 20, 1996
ALBERT W. BARBER
Director
/s/ Jack Short Date: March 20, 1996
JACK SHORT
Director
/s/ Robert M. Duggan Date: March 20, 1996
ROBERT M. DUGGAN
Director
/s/ Richard L. Moss Date: March 20, 1996
RICHARD L. MOSS
Director
/s/ E. J. McLean, Jr. Date: March 20, 1996
E. J. MCLEAN, JR.
Director
29
<PAGE>
/s/ Johnny R. Slocumb Date: March 20, 1996
JOHNNY R. SLOCUMB
Director
/s/ Roy Reeves Date: March 20, 1996
ROY REEVES
Director
/s/ Glenn D. Moon Date: March 20, 1996
GLENN D. MOON
Director
/s/ Lee C. Redding Date: March 20, 1996
LEE C. REDDING
Director
/s/ R. Bradford Burnette Date: March 20, 1996
R. BRADFORD BURNETTE
Director
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As Amended March 20, 1996
BY-LAWS
OF
SOUTHWEST GEORGIA FINANCIAL CORPORATION
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office
shall be in the State of Georgia, County of Colquitt.
Section 2. Other Offices. The corporation may also
have offices at such other places both within and without the
State of Georgia as the board of directors may from time to
time determine and the business of the corporation may require
or make desirable.
ARTICLE II
SHAREHOLDERS' MEETINGS
Section 1. Annual Meeting. The annual meeting of
the shareholders of the corporation shall be held on the
fourth Tuesday of April of each year, or at such other time as
the Board of Directors of the Corporation may determine, at
the principal office of the Corporation or at such other place
in the United States as may be determined by the Board of
Directors, for the purpose of electing directors and
transacting such other business as may properly be brought
before the meeting.
Section 2. Special Meetings. Special meetings of
the shareholders shall be held at the principal office of the
corporation or at such other place in the United States as may
be designated in the notice of said meetings, upon call of the
chairman of the board of directors or the president and shall
be called by the president or the secretary when so directed
by the board of directors or at the request in writing of
shareholders owning at least 50% of the issued and outstanding
capital stock of the corporation entitled to vote thereat.
Any such request shall state the purposes for which the
meeting is to be called.
Section 3. Notice of Meetings. Written notice of
every meeting of shareholders, stating the place, date and
hour of the meetings, shall be given personally or by mail to
each shareholder of record entitled to vote at such meeting
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not less than 10 nor more than 50 days before the date of the
meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail with first
class postage thereon prepaid addressed to the shareholder at
his address as it appears on the corporation's record of
stockholders. Attendance of a shareholder at a meeting of
shareholders shall constitute a waiver of notice of such
meeting and of all objections to the place or time of meeting,
or the manner in which it has been called or convened, except
when a shareholder attends a meeting solely for the purpose of
stating, at the beginning of the meeting, any such objection
to the transaction of any business. Notice need not be given
to any shareholder who signs a waiver of notice, in person or
by proxy, either before or after the meeting.
Section 4. Quorum. The holders of a majority of the
stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a
quorum for the transaction of business at all meetings of the
shareholders except as otherwise provided by statute, by the
articles of incorporation, or by these by-laws. If a quorum
is not present or represented at any meeting of the
shareholders, a majority of the shareholders entitled to vote
thereat, present in person or represented by proxy, may
adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than 30
days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting
shall be given to each shareholder of record entitled to vote
at the meeting.
Section 5. Order of Business. At the annual meeting
of shareholders the order of business shall be as follows:
1. Call to order
2. Proof of notice of meeting
3. Reading of minutes of last annual meeting
4. Election of directors
5. Miscellaneous business
Section 6. Voting. Except as otherwise provided by
the Articles of Incorporation, when a quorum is present at any
meeting, the vote of the holders of a majority of the stock
having voting power present in person or represented by proxy
shall decide any question brought before such meeting, unless
the question is one upon which by express provision of law or
of the articles of incorporation, a different vote is
required, in which case such express provision shall govern
and control the decision of the question. Except as otherwise
provided by the Articles of Incorporation, each shareholder
shall at every meeting of the shareholders be entitled to one
vote in person or by proxy for each share of the capital stock
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having voting power registered in his name on the books of the
corporation, but no proxy shall be voted or acted upon after
11 months from its date, unless otherwise provided in the
proxy.
Section 7. Consent of Shareholders. Any action
required or permitted to be taken at any meeting of the
shareholders may be taken without a meeting if all of the
shareholders consent thereto in writing, setting forth the
action so taken. Such consent shall have the same force and
effect as a unanimous vote of shareholders.
Section 8. List of Shareholders. The corporation
shall keep at its registered office or principal place of
business, or at the office of its transfer agent of registrar,
a record of its shareholders, giving their names and addresses
and the number, class and series, if any, of the shares held
by each. The officer who has charge of the stock transfer
books of the corporation shall prepare and make, before every
meeting of shareholders or any adjournment thereof, a complete
list of the shareholders entitled to vote at the meeting or
any adjournment thereof, arranged in alphabetical order, with
the address of and the number and class and series, if any, of
shares held by each. The list shall be produced and kept open
at the time and place of the meeting and shall be subject to
inspection by any shareholder during the whole time of the
meeting for the purposes thereof. The said list may be the
corporation's regular record of shareholders if it is arranged
in alphabetical order or contains an alphabetical index.
Section 9. Shareholder Proposals. At any annual or
special meeting of the shareholders, no shareholder proposal,
resolution or recommendation (a"Shareholder Proposal"),
including, without limitation, nomination of a director or
slate of directors or a proposal to remove any director(s),
shall be considered unless advance notice thereof has been
timely given as provided herein and such proposals or
nominations are otherwise proper for consideration under
applicable law and the articles of incorporation and by-laws
of the corporation. Notice of any Shareholder Proposal to be
presented by any shareholder(s) at any meeting of shareholders
shall be delivered to the secretary of the corporation at its
principal executive office at least 15 days prior to the date
of the meeting. Any shareholder who gives notice of any such
proposal shall deliver herewith to the board of directors the
text of the Shareholder Proposal in writing and a letter which
includes the following:
(a) the purpose(s) for which the proposal or
resolution is desired;
(b) the name(s), address(es), and number of shares
held of record by said shareholder(s)(or owned
beneficially and represented by a nominee
certificate on file with the corporation);
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(c) the number of shares (by class) that have been
solicited with regard to the Shareholder
Proposal and the number of shares (by class)
the holders of which have agreed (in writing or
otherwise) to vote in any specific fashion on
said Shareholder Proposal;
(d) a written statement by said shareholder(s) that
he/they intend to continue ownership of such
voting shares through the date of the meeting
at which said Shareholder Proposal is proposed
to be addressed; and
(e) if the Shareholder Proposal relates to the
nomination of a director or slate of directors,
detailed information about such nominees,
including, without limitation, each person's
age, past and present employment, education,
beneficial ownership of shares in the
corporation, past and present financial
standing, the information regarding such person
required by paragraphs (a), (e), and (l) of
Item 401 of Regulation S-K adopted by the
Securities and Exchange Commission (or the
corresponding provisions of any regulation
subsequently adopted by the Securities and
Exchange Commission applicable to the
corporation), such person's signed consent to
serve as a director of the corporation if
elected, criminal history (including any
convictions, indictments or settlement
thereof), involvements in any past or pending
litigation or administrative proceedings
(including threatened involvement),
relationship and agreements (whether or not in
writing) with the shareholder(s)(and their
relatives, subsidiaries and affiliates)
introducing the Shareholder Proposal, past and
present relationships or dealings with the
corporation or any of its subsidiaries,
affiliates, directors or officers, and their
plans or proposals for managing the affairs of
the corporation (including, without limitation,
any termination of employees, any sales of 10%
or more of the corporation's assets (measured
by fair market value or book value), any
proposed merger, business combination or
recapitalization involving the corporation, and
any proposed dissolution or liquidation of the
corporation). Additionally, the letter must
set forth as to each proposed director nominee,
all information relating to such person that
would be required to be disclosed, or otherwise
required, pursuant to Section 13 or 14 of the
Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated
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thereunder (the "Exchange Act"), in connection
with any acquisition of shares or in connection
with the solicitation of proxies for the
election of directors, regardless of the
applicability of such provisions of the
Exchange Act.
The person presiding at the meeting, in addition to
making any other determinations that may be appropriate to the
conduct of the meeting, shall determine whether such notice
has been duly given and shall direct that proposals and
nominees not be discussed or voted on if such notice has not
been given.
The provisions in this Section 9 shall be read in
accordance with and so as not to conflict with the rules and
regulations promulgated by the Securities and Exchange
Commission or by any stock exchange or securities market
system upon which the corporation's shares are listed or
traded. Nothing in these bylaws shall be deemed to require
the consideration at any meeting of shareholders of any
Shareholder Proposal which, under applicable law, the
corporation may refuse to present for consideration.
ARTICLE III
DIRECTORS
Section 1. Powers. Except as otherwise provided by
any legal agreement among shareholders, the property, affairs
and business of the corporation shall be managed and directed
by its board of directors, which may exercise all powers of
the corporation and do all lawful acts and things which are
not prohibited by law, by any legal agreement among
shareholders, by the articles of incorporation or by these by-
laws directed or required to be exercised or done by the
shareholders.
Section 2. Number, Election and Term. The number of
directors which shall constitute the whole Board shall not be
less than five (5) nor more than twenty-five (25) persons
qualified to become directors under applicable laws. The
exact number within such minimum and maximum limits to be
fixed and determined from time to time by resolution of a
majority of the full Board or by resolution of the
shareholders at any meeting thereof. Each director elected
shall hold office until his successor is elected and qualified
or until his earlier resignation, removal from office or
death. Directors shall be natural persons who have attained
the age of eighteen (18) years, but need not be residents of
the State of Georgia or shareholders of the Corporation.
Section 3. Vacancies. Vacancies, including
vacancies resulting from any increase in the number of
directors, but not including vacancies resulting from removal
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from office by the shareholders, may be filled by a majority
vote of the directors then in office, though less than a
quorum, or by a sole remaining director, and a director so
chosen shall hold office until the next annual election and
until his successor is duly elected and qualified unless
sooner displaced. If there are no directors in office, then
vacancies shall be filled through election by the
shareholders.
Section 4. Meetings and Notice. The board of
directors of the corporation may hold meetings, both regular
and special, either within or without the State of Georgia.
Regular meetings of the board of directors may be held without
notice at such time and place as shall from time to time be
determined by resolution of the board. Special meetings of
the board may be called by the chairman of the board or
president or by any three directors on one day's oral,
telegraphic or written notice duly given or served on each
director personally, or three days' notice deposited, first
class postage prepaid, in the United States mail. Such notice
shall state a reasonable time, date and place of meeting, but
the purpose need not be stated therein. Notice need not be
given to any director who signs a waiver of notice either
before or after the meeting. Attendance of a director at a
meeting shall constitute a waiver of notice of such meeting
and waiver of all objections to the place and time of the
meeting, or the manner in which it has been called or convened
except when the director states, at the beginning of the
meeting, any such objection or objections to the transaction
of business.
Section 5. Quorum. At all meetings of the board a
majority of directors shall constitute a quorum for the
transaction of business, and the act of a majority of the
directors present at any meeting at which there is a quorum
shall be the act of the board, except as may be otherwise
specifically provided by law, by the articles of
incorporation, or by these by-laws. If a quorum shall not be
present at any meeting of the board, the directors present
thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum
shall be present.
Section 6. Conference Telephone Meeting. Unless the
articles of incorporation or these by-laws otherwise provide,
members of the board of directors, or any committee designated
by such board, may participate in a meeting of such board or
committee by means of conference telephone or similar
communications equipment whereby all persons participating in
the meeting can hear each other. Participation in such a
meeting shall constitute presence in person.
Section 7. Consent of Directors. Unless otherwise
restricted by the articles of incorporation or these by-laws,
any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be
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taken without a meeting, if all members of the board or
committee, as the case may be, consent thereto in writing,
setting forth the action so taken, and the writing or writings
are filed with the minutes of the proceedings of the board or
committee. Such consent shall have the same force and effect
as a unanimous vote of the board.
Section 8. Committees. The board of directors may
by resolution passed by a majority of the whole board,
designate from among its members one or more committees, each
committee to consist of two or more directors. The board may
designate one or more directors as alternate members of any
committee, who may replace any absent member at any meeting of
such committee. Any such committee, to the extent provided in
the resolution, shall have and may exercise all of the
authority of the board of directors in the management of the
business and affairs of the corporation except that it shall
have no authority with respect to (1) amending the articles of
incorporation or these by-laws; (2) adopting a plan of merger
or consolidation; (3) the sale, lease, exchange or other
disposition of all or substantially all of the property and
assets of the corporation; and (4) a voluntary dissolution of
the corporation or a revocation thereof. Such committee or
committees shall have such name or names as may be determined
from time to time by resolution adopted by the board of
directors. A majority of each committee may determine its
action and may fix the time and places of its meetings, unless
otherwise provided by the board of directors. Each committee
shall keep regular minutes of its meetings and report the same
to the board of directors when required.
Section 9. Removal of Directors. Except as
otherwise provided by the Articles of Incorporation, at any
shareholders' meeting with respect to which notice of such
purpose has been given, any director may be removed from
office, with or without cause, by the vote of shareholders
representing a majority of the issued and outstanding capital
stock entitled to vote for the election of directors, and his
successor may be elected at the same or any subsequent meeting
of shareholders; provided that to the extent any vacancy
created by such removal is not filled by such an election
within 60 days after such removal, the remaining directors
shall, by majority vote, fill any such vacancy.
Section 10. Compensation of Directors. Directors
shall be entitled to such reasonable compensation for their
services as directors or members of any committee of the board
as shall be fixed from time to time by resolution adopted by
the board and/or the shareholders, and shall also be entitled
to reimbursement for any reasonable expenses incurred in
attending any meeting of the board or any such committee.
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ARTICLE IV
OFFICERS
Section 1. Number. The officers of the corporation
shall be chosen by the board of directors and shall be a
president, a secretary and a treasurer. The board of
directors may also choose a chairman of the board, one or more
vice-presidents, assistant secretaries and assistant
treasurers. Any number of offices, except the offices of
president and secretary may be held by the same person. The
board of directors may appoint such other officers and agents
as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the board.
Section 2. Compensation. The salaries of all
officers and agents of the corporation shall be fixed by the
board of directors or a committee or officer appointed by the
board.
Section 3. Term of Office. Unless otherwise
provided by resolution of the board of directors, the
principal officers shall be chosen annually by the board at
the first meeting of the board following the annual meeting of
shareholders of the corporation, or as soon thereafter as is
conveniently possible. Subordinate officers may be elected
from time to time. Each officer shall serve until his
successor shall have been chosen and qualified, or until his
death, resignation or removal.
Section 4. Removal. Any officer may be removed from
office at any time, with or without cause, by the board of
directors whenever in its judgment the best interest of the
corporation will be served thereby.
Section 5. Vacancies. Any vacancy in an office
resulting from any cause may be filled by the board of
directors.
Section 6. Powers and Duties. Except as hereinafter
provided, the officers of the corporation shall each have such
powers and duties as generally pertain to their respective
offices, as well as such powers and duties as from time to
time may be conferred by the board of directors.
(a) President. The president shall be the chief
executive officer of the corporation, shall preside at
all meetings of the shareholders and (unless the board shall
have created an office of chairman of the board) the
board of directors, shall have general and active
management of the business of the corporation and shall see
that all orders and resolutions of the board of directors are
carried into effect. He shall execute bonds, mortgages and
other contracts requiring a seal, under the seal of the
corporation, except where required or permitted by law to
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be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated
by the board of directors to some other officer or agent of
the corporation.
(b) Vice-President. In the absence of the president
or in the event of his inability or refusal to
act, the vice-president (or in the event there be more than
one vice-president, the vice-presidents in the order
designated, or in the absence of any designation, then in
the order of their election) shall perform the duties of
the president, and when so acting, shall have all the powers
of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other
duties and have such other powers as the board of directors
may from time to time prescribe.
(c) Secretary. The secretary shall attend all
meetings of the board of directors and all meetings of
the shareholders and record all the proceedings of the
meetings of the corporation and of the board of directors in
a book to be kept for that purpose and shall perform like
duties for the standing committees when required. He shall
give, or cause to be given, notice of all meetings of the
shareholders and special meetings of the board of
directors, and shall perform such other duties as may be
prescribed by the board of directors or president, under
whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested
by his signature or by the signature of such assistant
secretary. The board of directors may give general
authority to any other officer to affix the seal of the
corporation and to attest the affixing by his signature.
(d) Assistant Secretary. The assistant secretary or
if there be more than one, the assistant secretaries in
the order determined by the board of directors (or if there
be no such determination, then in the order of their
election), shall, in the absence of the secretary or in
the event of his inability or refusal to act, perform the
duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
(e) Treasurer. The treasurer shall have the
custody of the corporate funds and securities and shall keep
full and accurate accounts of receipts and disbursements
in books belonging to the corporation and shall deposit all
moneys and other valuable effects in the name and to the
credit of the corporation in such depositories as may be
designated by the board of directors. He shall disburse the
funds of the corporation as may be ordered by the board of
directors, taking proper vouchers for such disbursements,
and shall render to the president and the board of
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directors, at its regular meetings, or when the board of
directors so requires, an account of all his transactions as
treasurer and of the financial condition of the
corporation. If required by the board of directors, he shall
give the corporation a bond (which shall be renewed
every six years) in such sum and with such surety or
sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the
restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging
to the corporation.
(f) Assistant Treasurer. The assistant treasurer,
or if there shall be more than one, the assistant treasurers
in the order determined by the board of directors (or if
there be no such determination, then in the order of their
election) shall, in the absence of the treasurer or in
the event of his inability or refusal to act, perform the
duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
Section 7. Voting Securities of Corporation. Unless
otherwise ordered by the board of directors, the president
shall have full power and authority on behalf of the corporation
to attend and to act and vote at any meetings of security holders
of corporations in which the corporation may hold securities, and
at such meetings shall possess and may exercise any and all rights
and powers incident to the ownership of such securities which the
corporation might have possessed and exercised if it had
been present. The board of directors by resolution from time
to time may confer like powers upon any other person or
persons.
ARTICLE V
CERTIFICATE
Section 1. Form of Certificate. Every holder of
fully-paid stock in the corporation shall be entitled to have
a certificate in such form as the board of directors may from
time to time prescribe.
Section 2. Lost Certificates. The board of
directors may direct that a new certificate be issued in place
of any certificate theretofore issued by the corporation and
alleged to have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming the
certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the board of
directors may, in its discretion and as a condition precedent
to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate, or his legal representative,
to advertise the same in such manner as it shall require
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and/or to give the corporation a bond in such
sum as it may direct as indemnity against any claim that may
be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 3. Transfers. (a) Transfers of shares of the
capital stock of the corporation shall be made only on the
books of the corporation by the registered holder thereof, or
by his duly authorized attorney, or with a transfer clerk or
transfer agent appointed as provided in Section 5 of this
Article, and on surrender of the certificate or certificates
for such shares properly endorsed and the payment of all taxes
thereon.
(b) The corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such
owner, and for all other purposes, and shall not be bound to
recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as
otherwise provided by law.
(c) Shares of capital stock may be transferred by
delivery of the certificates therefor, accompanied either by
an assignment in writing on the back of the certificates or by
separate written power of attorney to sell, assign and
transfer the same, signed by the record holder thereof, or by
his duly authorized attorney-in-fact, but no transfer shall
affect the right of the corporation to pay any dividend upon
the stock to the holder of record as the holder in fact
thereof for all purposes, and no transfer shall be valid,
except between the parties thereto, until such transfer shall
have been made upon the books of the corporation as herein
provided.
(d) The board may, from time to time, make such
additional rules and regulations as it may deem expedient, not
inconsistent with these by-laws or the articles of
incorporation, concerning the issue, transfer and registration
of certificates for shares of the capital stock of the
corporation.
Section 4. Record Date. In order that the
corporation may determine the shareholders entitled to notice
of or to vote at any meeting of shareholders or any
adjournment thereof, or to express consent to corporate action
in writing without a meeting, or entitled to receive payment
of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of
any other lawful action, the board of directors may fix, in
advance, a record date, which shall not be more than 50 days
and, in case of a meeting of shareholders, not less than 10
days prior to the date on which the particular action
requiring such determination of stockholders is to be taken.
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If no record date is fixed for the determination of
shareholders entitled to notice of and to vote at any meeting
of shareholders, the record date shall be at the close of
business
on the day next preceding the day on which the notice is
given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held.
If no record date is fixed for other purposes, the record date
shall be at the close of business on the day next preceding
the day on which the board of directors adopts the resolution
relating thereto. A determination of shareholders of record
entitled to notice of or to vote at a meeting of shareholders
shall apply to any adjournment of the meeting unless the board
of directors shall fix a new record date for the adjourned
meeting.
Section 5. Transfer Agent and Registrar. The board
of directors may appoint one or more transfer agents or one or
more transfer clerks and one or more registrars, and may
require all certificates of stock to bear the signature or
signatures of any of them.
ARTICLE VI
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital
stock of the corporation, subject to the provisions of the
articles of incorporation, if any, may be declared by the
board of directors at any regular or special meetings,
pursuant to law. Dividends may be paid in cash, in property,
or in shares of the corporation's capital stock, subject to
the provisions of the articles of incorporation. Before
payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing
or maintaining any property of the corporation, or for such
other purpose as the directors shall think conducive to the
interest of the corporation, and the directors may modify or
abolish any such reserve in the manner in which it was
created.
Section 2. Fiscal Year. The fiscal year of the
corporation shall be fixed by resolution of the board of
directors.
Section 3. Seal. The corporate seal shall have
inscribed thereon the name of the corporation, the year of its
organization and the words "Corporate Seal" and "Georgia".
The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise. In the
event it is inconvenient to use such a seal at any time, the
signature of the corporation followed by the word "Seal"
enclosed in parentheses shall be deemed the seal of the
corporation.
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Section 4. Annual Statements. Not later than four
months after the close of each fiscal year, and in any case
prior to the next annual meeting of stockholders, the
corporation shall prepare:
(1) A balance sheet showing in reasonable detail the
financial condition of the corporation as of the close of
its fiscal year, and
(2) A profit and loss statement showing the results
of its operations during its fiscal year.
Upon written request, the corporation promptly shall mail to
any shareholder of record a copy of the most recent such
balance sheet and profit and loss statement.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Right of Indemnification and Standards of
Conduct. Every person (and the heirs and legal
representatives of such person) who is or was a director or
officer of this corporation or any other corporation of which
he served as such at the request of this corporation and of
which this corporation directly or indirectly is a shareholder
or creditor, or in which, or in the stocks, bonds, securities
or other obligations of which it is in any way interested, may
in accordance with Section 2 hereof be indemnified for any
liability and expense that may be incurred by him in
connection with or resulting from any threatened, pending or
completed action suit or proceedings, whether civil, criminal,
administrative or investigative (whether brought by or in the
right of this corporation or otherwise), or in connection with
any appeal relating thereto, in which he may become involved,
as a party or prospective party or otherwise, by reason of his
being or having been a director or officer of this corporation
or such other corporation, or by reason of any action taken or
not taken in his capacity as such director or officer or as a
member of any committee appointed by the board of directors of
this corporation to act for, in the interest of, or on behalf
of this corporation, whether or not he continues to be such at
the time such liability or expense shall have been incurred;
provided such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of this corporation and, in addition, with respect
to any criminal action or proceeding, did not have reasonable
cause to believe that his conduct was unlawful. As used in
this Article, the terms "liability" and "expense" shall
include, but shall not be limited to, counsel fees and
disbursements and amounts of judgments, fines or penalties,
and amounts paid in compromise of settlement by a director or
officer. The termination of any claim, action, suit or
proceeding, by judgment, order, compromise, settlement (with
or without court approval) or conviction or upon a plea of
43
<PAGE>
guilty or of nolo contendere, or its equivalent, shall not
create a presumption that a director or officer did not meet
the standards of conduct set forth in this Section.
Section 2. Determination of Right of
Indemnification.
Every person (and the heirs and legal representative of such
person) referred to in Section 1 hereof who has been wholly
successful, on the merits or otherwise, with respect to any
claim, action, suit or proceeding of the character described
in Section 1 hereof shall be entitled to indemnification as of
right without any further action or approval by the board of
directors. Except as provided in the immediately preceding
sentence, any indemnification under Section 1 next above shall
be made at the discretion of this corporation, but only if (a)
the board of directors, acting by majority vote of a quorum
consisting of directors who were not parties to such claim,
action, suit or proceeding, present or voting, shall find that
the director or officer has met the standard of conduct set
forth in Section 1 hereof, or (b) if no such quorum of the
board exists, independent legal counsel selected by any Judge
of the United States District Court for the Middle District of
Georgia, Thomasville Division, at the request of either the
corporation or the person seeking indemnification, shall
deliver to the corporation their written opinion that such
director or officer has met such standards, or (c) the holders
of a majority of stock then entitled to vote for the election
of directors shall determine by affirmative vote that such
director or officer has met such standards.
Notwithstanding the foregoing, no officer or
director who was or is a party to any action or suit by or in
the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was an officer or
director of this or such other corporation shall be
indemnified in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to
this corporation unless and except to the extent that the
Court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability
and in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such
expenses as the Court shall deem proper.
Section 3. Advance of Expenses. Expenses incurred
with respect to any claim, action, suit or proceeding of the
character described in Section 1 of this Article VII may be
advanced by the corporation prior to the final disposition
thereof upon receipt of an undertaking by or on behalf of the
recipient to repay such amount unless it shall ultimately be
determined that he is entitled to indemnification under this
Article.
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<PAGE>
Section 4. Rights of Indemnification Cumulative.
The rights of indemnification provided in this Article VII
shall be in addition to any rights to which any such director
or officer or other person may otherwise be entitled under any
by-law, agreement, vote of shareholders, or otherwise, and
shall be in addition to the power of the corporation to
purchase and maintain insurance on behalf of any such director
or officer or other person against any liability asserted against
him and incurred by him in such capacity, or arising out of his
status as such, regardless of whether the corporation would have
the power to indemnify him against such liability under this
Article or otherwise.
Section 5. Statement to Stockholders. If any
expenses or other amounts are paid by way of indemnification,
otherwise than by court order or action by the shareholders or
by an insurance carrier pursuant to insurance maintained by
the corporation, the corporation shall, not later than the
next annual meeting of shareholders unless such meeting is
held within three months from the date of such payment, and,
in any event, within 15 months from the date of such payment,
send by first class mail to its shareholders of record at the
time entitled to vote for the election of directors a
statement specifying the persons paid, the amounts paid, and
the nature and status at the time of such payment of the
litigation on threatened litigation.
ARTICLE VIII
AMENDMENTS
Except as otherwise provided by the Articles of
Incorporation, the board of directors shall have power to
alter, amend or repeal the by-laws or adopt new by-laws by
majority vote of all of the directors, but any by-laws adopted
by the board of directors may be altered, amended or repealed
and new by-laws adopted, by the shareholders by majority vote
of all of the shares having voting power.
ARTICLE IX
FAIR PRICE REQUIREMENTS
All of the requirements of Part 2 of Article 11 of
the Georgia Business Corporation Code (currently codified in
Sections 14-2-1110 through 14-2-1113), as may be in effect
from time to time (the "Fair Price Statute"), shall apply to
all "business combinations" (as currently defined in Section
14-2-1110 of the Georgia Business Corporation Code) involving
the Corporation. The requirements of the Fair Price Statute
shall be in addition to the requirements of any provisions in
the Corporation's Articles of Incorporation, as amended, and
nothing contained in such provisions of the Corporation's
Articles of Incorporation, as amended, shall be deemed to
limit the provisions contained in the Fair Price Statute.
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ARTICLE X
BUSINESS COMBINATIONS
All of the requirements of Part 3 of Article 11 of
the Georgia Business Corporation Code (currently codified in
Sections 14-2-1131 through 14-2-1133), as may be in effect
from time to time (the "Business Combination Statute"), shall
apply to all "business combinations" (as currently defined in
Section 14-2-1131 of the Georgia Business Corporation Code)
involving the Corporation. The requirements of the Business
Combination Statute shall be in addition to the requirements
of any provisions in the Corporation's Articles of
Incorporation, as amended, and nothing contained in such
provisions of the Corporation's Articles of Incorporation, as
amended, shall be deemed to limit the provisions contained in
the Business Combination Statute.
46
<PAGE>
Management's Discussion And Analysis Of Financial
Condition And Results Of Operations
December 31, 1995
Introduction
The following financial review presents management's discussion
and analysis of significant changes in the consolidated financial
position and results of operations of Southwest Georgia Financial
Corporation ("Corporation" or the "Company"). This commentary
should be read in conjunction with information provided in the
Consolidated Financial Statements and accompanying footnotes.
Earnings Overview
The Company's net income for 1995 increased 10.5 percent to $2.9
million from the $2.7 million earned in 1994. Between 1994 and
1993, net income increased 5.1 percent. In 1995, the Company's
earnings per share increased to $2.32 compared to $2.11 in both
1994 and 1993.
The Company continues to show strong key performance measurements
in both return on average assets and return on average
stockholders' equity. In 1995, the Company's return on average
assets, which reflects utilization of assets, was 1.46 percent
compared to 1.42 percent in 1994. Return on average
stockholders' equity, which measures return on stockholders'
investment, was 15.40 percent in 1995 compared to 15.76 percent
in 1994.
The $280 thousand increase in net earnings for 1995 was primarily
attributable to higher net interest income, income received from
other real estate owned, and decreases in both Federal Deposit
Insurance Corporation assessments and bank examination fees.
Also, the operation of the Baker County branch, acquired in
December 1994, contributed significantly to the Company's growth
in net earnings.
RESULTS OF OPERATIONS
Net Interest Income
The primary source of revenue for the Company is net interest
income, which is the difference between total interest income on
earning assets and interest expense on interest-bearing sources
of funds. This level of net interest income continues to impact
the Company's earnings performance in a positive way. Net
interest income for 1995 increased $545 thousand, or 6 percent,
compared to 1994. The amount of net interest income is determined
primarily by the volume of earning assets and the various rate
spreads between these assets and their funding sources.
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The key performance measure for net interest income is the net
interest margin, defined as taxable equivalent net interest
income divided by average earning assets. The Company's net
interest margin remained relatively stable at 5.13 percent for
1995 compared to 5.14 percent for 1994.
After a year of rising rates in 1994, the interest rates peaked
in February 1995 and remained at this level to mid-year. At that
time, rates began a slight decline which continued throughout the
remainder of the year. The prime interest rate changed three
times during 1995. The Company's base rate reached a high of 11
percent during the first part of 1995 and then declined to 10.50
percent by December 31, 1995. This favorable level of loan rates
provided the Company with additional interest income from prime
related loans during 1995.
A key factor influencing the Company's interest rate margins has
been the Company's mix of earning assets and interest-bearing
liabilities. Interest income from earning assets increased
nearly $2 million in 1995 compared to 1994, while interest
expenses increased $1.4 million for the same period. This $545
thousand increase in net interest income resulted primarily from
the growth in earning assets purchased from the Baker County Bank
in December 1994. The majority of the $15 million in deposits
assumed in the acquisition was invested in investment securities,
with the remaining funds being used to support $5 million in
loans. Another factor which had a positive effect on the
Company's net interest income for 1995 was the increase in
interest income which resulted from rises in prime-related loan
rates during the first half of the year.
Non-Interest Income
Non-interest income totaled $1.6 million for 1995, representing
an increase of approximately $500 thousand, or 46 percent, from
1994. This increase in non-interest income was primarily
attributable to a $251 thousand decline in losses on the sale of
securities and a $115 thousand increase in net income received
from the operation of and sales of other real estate owned. Also,
growth occurred in all of the traditional, bank-related fee
categories. The largest components of non-interest income are
service charges and fees on deposit accounts, and these increased
6.5 percent in 1995 when compared to 1994. In addition, income
from insurance commissions rose over 40 percent in 1995. During
December 1995, the Company moved nearly a third of its investment
securities to the available-for-sale category and sold them in
order to reposition these funds in higher-yielding investment
securities. Overall, the Company incurred a $133 thousand loss
on the sale of securities compared to the $384 thousand loss
sustained in 1994. During 1994, the Company sold some investment
securities that were purchased through acquisition and which did
not meet the required specifications for the investment
portfolio.
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Non-Interest Expense
Non-interest expense totaled $6.3 million for 1995, an increase
of 9.9 percent compared to 1994. A large part of this increase
resulted from the operation of the Baker County branch which was
acquired in December 1994. Representing over one-half of the
total non-interest expense, salaries and employee benefits
increased nearly 8.5 percent from 1994. This increase reflected
primarily staff, merit, and promotional increases. The majority
of this increase in salary and employee benefits was due to the
operation of the Baker County branch. The level of full-time
equivalent employees increased by 5 to a total of 97, comparing
December 31, 1995, to the prior year-end.
Net occupancy expenses increased $68 thousand or nearly 12
percent in 1995 compared to 1994. This significant increase from
the previous year resulted primarily from the higher
depreciation, utility, and maintenance expenses associated with
the operation of the newly acquired branch.
The other operating expense components of non-interest expense
increased $231 thousand or nearly 11.5 percent in 1995 compared
to 1994. The primary causes for this increase were the expenses
of operating another branch office, additional charitable
contributions, and increases in legal and professional fees.
The Company continues to emphasize the importance of strong
budgetary controls and is committed to maintaining a level of
non-interest expenses that keeps it in line with business volume
levels. Also, management will continue to monitor expenses
closely with emphasis on seeking out more efficient and cost
effective ways to operate.
FINANCIAL CONDITION
Earning Assets
The Company, primarily through its banking subsidiary Southwest
Georgia Bank, acts as a financial intermediary. As such, its
financial condition should be considered in terms of how the
Company manages its sources and uses of funds. During 1995,
total average assets of $202 million increased $14.3 million, or
7.6 percent, compared to 1994.
The Company's earning assets, which include loans, investment
securities, Federal Home Loan Bank deposits, and federal funds
sold, averaged $186 million in 1995. This year's average earning
assets represented a 6.1 percent increase from $175 million in
1994. The earning asset mix remained relatively stable during
the year. For 1995, average earning assets were comprised of 61
percent in loans, 35 percent in investment securities, and 4
percent in federal funds sold and Federal Home Loan Bank
deposits. The ratio of earning assets to total assets decreased
during 1995 to 92.1 percent compared to 93.5 percent in 1994.
Some factors which influenced this drop in 1995 were increases in
bank premises and equipment and growth in other real estate
owned.
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Loans
Loans are one of the Company's largest earning assets and users
of funds, and because of their importance, most of the other
assets and liabilities are managed to accommodate the needs of
the loan portfolio. During 1995, average net loans represented
61 percent of average earning assets and 56 percent of average
total assets. Average total loans increased $3.0 million, or
nearly 2.7 percent, in 1995. Loan demand from the local service
area has been relatively flat for the past several years. After
the execution of a purchase option with Baker County Bank to
acquire certain assets in December 1994, the Company increased
its loan portfolio by approximately $5 million. The loan
category of commercial, financial, and agricultural loans
increased 19.4 percent from its December 31, 1994, level. Also,
real estate loans decreased 5.4 percent, while consumer loans
increased 3 percent from the level of the previous year.
As a result of the lack of loan growth, the ratio of total loans
to total deposits at year-end decreased to 67.1 percent in 1995
from 69.5 percent in 1994. The mix of the loan portfolio for the
1995 year-end consisted of 34.7 percent of loans secured by 1-4
family residences, 2.9 percent of loans secured by multifamily
residences, 4.9 percent of loans secured by farmland, and 32.3
percent of loans secured by nonfarm and nonresidential
properties. Also, included in the mix of the loan portfolio were
15.2 percent of loans for other commercial, industrial and
agricultural purposes, and 10 percent of loans to individuals for
household, family and other personal expenditures.
Allowance and Provision for Possible Loan Losses
The allowance for possible loan losses was $2.1 million, or 1.84
percent of total loans outstanding, at December 31, 1995. This
level represented a $111 thousand increase from the corresponding
1994 year-end amount, which was 1.71 percent of total loans
outstanding. The provision for loan losses was $260 thousand in
1995, exceeding the prior year's provision by $140 thousand.
This provision reflected management's assessment of the adequacy
of the allowance for loan losses to absorb write-offs in the loan
portfolio. The Company's level of allowance for possible loan
losses was considered adequate based on regular review and
evaluation of all significant loans, with particular emphasis on
non-accruing, past due, and other loans that management had
identified as potential problems.
The Company adopted Statement of Financial Accounting Standards
No. 114, "Accounting by Creditors for Impairment of a Loan", as
of January 1, 1995. This new accounting standard requires that a
loan which meets the definition of impairment be measured at the
present value of expected future cash flows using the loan's
effective interest rate, or as a practical expedient, either at
the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. A loan is
considered impaired when, based on current information and
events, it is probable that a creditor will be unable to collect
all amounts due according to the contractual terms of the loan
agreement.
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The Company's management has not changed the lending practices
and philosophy which have provided them with an exceptionally low
charge-off record over the past several years. Also, management
has an extensive loan review program in place which provides for
the regular examination and evaluation of the risk elements
within the loan portfolio. The adequacy of the allowance for
loan losses is regularly evaluated based on the review of all
significant loans, with particular emphasis on non-accruing, past
due, and other loans that management has identified as potential
problems.
Non-Performing Assets
Non-performing assets are defined as being all non-accrual and
renegotiated loans and other real estate acquired by foreclosure
and held for sale. The level of non-performing assets decreased
$2.7 million comparing year-end 1995 to year-end 1994.
Primarily, this decrease resulted from the sale of other real
estate owned. Non-performing assets were approximately $2.8
million, or 2.4 percent of total loans and other real estate, as
of December 31, 1995, compared to $5.5 million, or 4.6 percent of
total loans and other real estate, at year-end 1994.
Investment Securities and Federal Funds Sold
The Company's investment securities consist primarily of U.S.
Government and U.S. Government agency securities. The investment
portfolio serves several important functions for the Company, and
investment decisions are designed to complement loan demand and
satisfy pledging requirements in the most profitable way
possible. The investment portfolio is a source of liquidity when
loan demand exceeds funding availability. It is a vehicle for
adjusting balance sheet sensitivity to cushion against adverse
rate movements and is a means of improving profitability.
In November 1995, the Financial Accounting Standards Board
("FASB") released a special report entitled "A Guide to
Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities--Questions and
Answers." This FASB guide provided financial institutions with a
one-time, no-questions-asked opportunity to reclassify securities
among the Trading, Available-for-Sale, and Held-to-Maturity
accounts without calling into question the integrity of the
classifications. The Company reclassified $21 million of
investment securities from the Held-to-Maturity account to the
Available-for-Sale account. Also, the Company took the
opportunity to sell these Available-for-Sale account securities
in order to reposition the investment portfolio at a higher
yield. The Company's investment portfolio provides adequate
liquidity by maintaining a staggered maturing portfolio for one
to five years.
The investment portfolio increased from $63.6 million to $71.3
million in comparing year-end 1995 to 1994, an increase of $7.7
million, or nearly 12 percent. The average investment portfolio
increased from $58.1 million to $65.7 million. During 1994, the
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Company sold approximately $7 million in investment securities
that were purchased through acquisition and which did not meet
the required specifications for the investment portfolio.
Average investment securities accounted for 35 percent of the
average earning assets and 33 percent of the average total
assets. At December 31, 1995, the investment securities had a
market value of $73.0 million and a carrying value of $71.3
million. The Company will continue to actively manage the size,
components, and maturity structure of the investment securities
portfolio. Future investment strategies will continue to be
based on profit objectives, economic conditions, and efforts to
maximize the balance sheet capacity.
Average federal funds sold and Federal Home Loan Bank deposits
represented approximately 3.6 percent of the average earning
assets for 1995 compared to 3.8 percent in 1994. These short-term
money market investments were used by the Company as liquid
investment vehicles for short-term funds.
Deposits and Other Interest-Bearing Liabilities
The Company's deposits increased $3.6 million or 2.1 percent from
year-end 1994 to 1995. The majority of this increase occurred in
certificates of deposit and NOW account deposits.
The Company's 1995 level of average deposits grew slightly from
the previous year. Average deposits, the primary source of the
Company's funds, increased $14.6 million during 1995 compared to
1994. The Company's deposit base mix and sources of deposit
growth have been significantly influenced by deregulation of
interest rates and increased competition in the financial
services industry. The Company's average core deposits remained
relatively stable at approximately 84 percent of average total
deposits when compared to the previous year. Core deposits are
defined as total deposits less public funds and time deposits of
$100 thousand or more. This strong base of core deposits, which
has a lower cost than purchased funds, provides funds for lending
and investment activities. The average total deposits of $169.2
million increased nearly 9.5 percent from the 1994 level, while
average money market deposit accounts increased by only $.7
million during 1995. Average savings, time deposits, and other
interest-bearing deposits increased $12 million, while average
demand deposits grew $2.3 million during 1995 compared to 1994.
During 1995, the Company's deposit mix continued to change by
shifting out of savings into time deposits and NOW account
deposits. This deposit mix change was primarily influenced by
the higher rates being paid on certificates of deposit as
compared to other interest-bearing deposits. At December 31,
1995, the Company had a total of $17.7 million in certificates of
deposit with a value of $100 thousand or more each. This was a
16.2 percent increase from the $15.2 million total in 1994.
The Company maintains a large base of customer funds as
securities sold under agreements to repurchase, although the 1995
average of $2.2 million of such funds, represented a decrease of
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$1.8 million when compared to 1994. Also, the Company continues
to borrow $1.5 million from the Federal Home Loan Bank to support
its community investment program lending.
Long-term debt remained stable at $8 million comparing December
31, 1995 to year-end 1994. This source of funds from the Federal
Home Loan Bank provides funding for the Company to support its
residential mortgage lending.
Interest Rate Sensitivity
Net interest income, the Company's primary source of earnings,
can fluctuate with significant interest rate movements. To
lessen the impact of these movements, interest rate sensitivity
management seeks to maximize net interest income while remaining
within prudent ranges of risk. The Company attempts to
accomplish this objective by structuring the balance sheet so
that the differences in repricing opportunities between assets
and liabilities are minimized. Interest rate sensitivity refers
to the responsiveness of earning assets and interest-bearing
liabilities to changes in market interest rates. The Company's
interest rate risk management is carried out by the
Asset/Liability Management Committee which operates under
policies and guidelines established by management. The Company
maintains an investment portfolio which staggers maturities and
provides some flexibility over time in managing exposure to
changes in interest rates. These imbalances in the repricing
opportunities at any point in time constitute a financial
institution's interest rate sensitivity.
The Company uses a number of tools to measure interest rate risk.
One of the indicators for the Company's interest rate sensitivity
position is the measurement of the difference between its rate-
sensitive assets and rate-sensitive liabilities, which is
referred to as the "gap." The table below presents the Company's
interest rate sensitivity gap at December 31, 1995. The
information in the table is presented at a static point in time.
The analysis displays the earliest possible repricing opportunity
for each asset and liability category based upon contractual
maturities and repricing. At year-end 1995, the Company's six
months cumulative rate-sensitive assets represented 89.7 percent
of the cumulative rate-sensitive liabilities. At this level, the
cumulative gap was $6.5 million in 1995 compared to $.2 million
in 1994. This increase illustrates the Company's ability to
manage its exposure to interest rate risk. In a declining rate
environment, the Company has become more liability-sensitive at
six months. This position will be made more profitable to the
Company by repricing more liabilities than assets at lower rates.
During the previous two years, the Company's exposure to interest
rate risk declined as a result of the Company acquiring long-term
funds from the Federal Home Loan Bank for a fixed rate of
interest to support real estate mortgage lending. However, since
all interest rates and yields do not adjust at the same velocity,
the interest rate sensitivity gap is only a general indicator of
the potential effects of interest rate changes on net interest
income. The Company's asset and liability mix is monitored to
ensure that the effects of interest rate movements in either
direction are not significant over time.
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Interest Rate Sensitivity Analysis
<TABLE>
December 31, 1995
<CAPTION>
Due In Due In Due In Due In Due
0-30 31-90 91-180 181-365 Over
Days Days Days Days One Year Total
(Thousands Of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans $ 35,995 $ 2,569 $ 7,428 $ 15,702 $ 52,758 $ 114,452
Investment
securities 2,002 2,211 2,015 5,972 59,128 71,328
Federal funds sold
and Federal
Home Loan Bank 4,502 - - - - 4,502
Total earning
assets 42,499 4,780 9,443 21,674 111,886 190,282
<PAGE>
Supporting sources
of funds:
Savings and time
deposits 19,117 12,710 17,741 19,927 72,112 141,607
Money market
accounts 10,693 - - - - 10,693
Short-term
borrowings 670 150 2,160 330 - 3,310
Long-term debt - - - - 8,000 8,000
Total interest-
bearing
liabilities 30,480 12,860 19,901 20,257 80,112 163,610
Non-rate related
sources - - - - 26,672 26,672
Total supporting
sources of
funds 30,480 12,860 19,901 20,257 106,784 $ 190,282
Interest rate
sensitivity
gap $ 12,019 $( 8,080) $(10,458) $ 1,417 $ 5,102
Cumulative interest
rate sensitivity
gap $ 12,019 $ 3,939 $( 6,519) $( 5,102) $ -
Cumulative
sensitivity
ratio 139.43% 109.09% 89.69% 93.89% 100.00%
</TABLE>
54
<PAGE>
Interest Rate Sensitivity Analysis
<TABLE>
<CAPTION>
December 31, 1994
Due In Due In Due In Due In Due
0-30 31-90 91-180 181-365 Over
Days Days Days Days One Year
(Thousands Of Dollars)
<S> <C> <C> <C> <C> <C>
Interest rate
sensitivity gap $ 13,516 $( 8,324) $( 5,404) $( 875) $ 1,087
Cumulative interest
rate sensitivity gap $ 13,516 $ 5,192 $( 212) $( 1,087) $ -
Cumulative sensitivity
ratio 152.14% 113.25% 99.63% 98.59% 100.00%
</TABLE>
Liquidity
Liquidity management involves the ability to meet the cash flow
requirements of customers who may be either depositors wanting to
withdraw their funds or borrowers needing assurance that
sufficient funds will be available to meet their credit needs.
In the ordinary course of business, the Company's cash flows are
generated from interest and fee income, as well as from loan
repayments and the maturity or sale of other earning assets. In
addition, liquidity is continuously provided through the
acquisition of new deposits and borrowings or the rollover of
maturing deposits and borrowings. Many factors affect the
ability to accomplish these liquidity objectives successfully
including the economic environment, the Company's asset/liability
mix, and the Company's overall reputation and credit standing in
the marketplace.
The Consolidated Statement of Cash Flow details the Company's
cash flow from operating, investing, and financing activities.
During 1995, operating activities generated cash flow of $2.4
million, while financing activities provided $1.5 million.
Investing activities consumed $4.9 million of this, resulting in
a net decrease in cash and cash equivalents of $1.0 million.
Generally, growth in loans has been funded by an increase in
deposits. Excess cash from acquired deposits that were not used
to meet loan demand was invested in securities. Cash produced
from operations continues to provide cash primarily for the
payment of dividends and repayment of long-term debt. During
1995, the $8 million in long-term borrowings from the Federal
Home Loan Bank provided a source of funding for real estate
mortgage lending.
Liability liquidity represents the Company's ability to renew or
replace its short-term borrowings and deposits as they mature or
are withdrawn. The Company's deposit mix includes a significant
amount of core deposits which are defined as total deposits less
public funds and time deposits of $100 thousand or more. These
funds are stable in that they are generally accounts of
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<PAGE>
individual customers who are concerned not only with rates paid,
but with the value of services received, such as efficient
operations performed by helpful personnel. Total core deposits
represented 83.6 percent of total deposits at December 31, 1995,
compared to 86.2 percent in 1994.
Asset liquidity is provided through ordinary business activity
such as cash which is received from interest and fee payments as
well as from maturing loans and investments. Additional sources
include marketable securities and short-term investments which
can be easily converted to cash without significant loss. The
Company's investment securities maturing within one year or less
amounted to $11 million at December 31, 1995, which represented
15.4 percent of the investment securities portfolio.
The Company's management is not aware of any known trends,
events, or uncertainties that will have or that are reasonably
likely to have a material effect on the Company's liquidity or
operations. Management is not aware of any current
recommendations by regulatory authorities which, if they were to
be implemented, would have such an effect.
Capital Resources and Dividends
Capital adequacy, a measure of the amount of capital needed to
sustain asset growth, continues to be a point of concentrated
interest for the entire banking industry. The Company continues
to maintain a healthy level of capital adequacy as measured by
its average equity to average assets ratio of 9.5 percent in 1995
and 9.0 percent in 1994.
The Federal Reserve Board has issued guidelines regarding risk-
based capital requirements for U.S. banks and bank holding
companies. Overall, these guidelines redefine the components of
capital, require higher levels of capital for higher risk assets
and lower levels of capital for lower risk assets, and include
certain off-balance-sheet items in the calculation of capital
requirements. The risk-based capital regulations require banks
to maintain an 8 percent ratio, of which 4 percent must consist
primarily of tangible common shareholders' equity (tier one
capital). At year-end 1995, the Company was well in excess of
the minimum requirements under the guidelines with a total risk-
based capital ratio of 18.19 percent, a tier one risk-based
capital ratio of 16.93 percent, and a leverage ratio of 9.41
percent.
The Company has a policy objective of paying out a portion of
earnings in dividends to its shareholders. The Company's
dividend payout was $790.1 thousand in 1995 and $710.2 thousand
in 1994.
The Company's management is not aware of any current
recommendation by the regulatory authorities which if they were
to be implemented would have a material effect on the Company's
capital resources.
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<PAGE>
The following table presents the risk-based capital and leverage
ratios for year-end 1995 and 1994 in comparison to the minimum
regulatory guidelines:
<TABLE>
<CAPTION>
Minimum
Risk-Based December 31, December 31, Regulatory
Capital Ratios 1995 1994 Guidelines
<S> <C> <C> <C>
Tier One Risk-Based 16.93% 15.30% 4.00%
Total Risk-Based 18.19% 16.56% 8.00%
Leverage 9.41% 8.36% 3.00%
</TABLE>
57
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
MOULTRIE, GEORGIA
__________
CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1995 and 1994
58
<PAGE>
C O N T E N T S
__________
Pages
Independent Auditor's Report 1
Consolidated Financial Statements:
Balance Sheets 2
Statements of Income 3
Statements of Changes in Stockholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6-23
59
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Directors and Stockholders of Southwest
Georgia Financial Corporation
We have audited the consolidated balance sheets of Southwest
Georgia Financial Corporation and Subsidiary as of December
31, 1995 and 1994, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for
each of the years in the three year period ended December 31,
1995. These consolidated financial statements are the
responsibility of the Corporation's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall consolidated 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 consolidated
financial position of Southwest Georgia Financial Corporation
and Subsidiary at December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the years
in the three year period ended December 31, 1995, in
conformity with generally accepted accounting principles.
Albany, Georgia
February 1, 1996
60
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
<TABLE>
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
__________
<CAPTION>
ASSETS 1995 1994
<S> <C> <C>
Cash and due from banks $ 7,645,411 $ 8,683,397
Interest-bearing deposits with banks 4,416,595 3,193,994
Federal funds sold 85,000 2,695,000
Securities to be held to maturity 71,327,387 63,592,559
Loans, less allowance for loan losses and
unearned income of $2,139,532 and $177,172
in 1995; $2,028,323 and $236,236 in 1994 114,453,181 116,267,132
Premises and equipment, net 3,271,607 2,566,559
Other assets 6,164,757 5,447,992
Total assets $ 207,363,938 $ 202,446,633
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:Deposits:
Non-interest bearing $ 21,509,590 $ 21,188,512
Interest bearing:
NOW accounts 37,271,361 35,505,628
Money market 10,637,877 9,184,800
Savings 14,568,071 18,917,735
Certificates of deposit over $100,000 17,692,184 15,228,152
Other time accounts 72,130,873 70,190,604
Total interest bearing 152,300,366 149,026,919
Total deposits 173,809,956 170,215,431
Federal funds purchased and securities
sold under repurchase agreements 1,810,000 3,238,000
Other borrowed funds 1,500,000 1,500,000
Long-term debt 8,000,000 8,000,000
Other liabilities 2,239,058 1,786,178
Total liabilities 187,359,014 184,739,609
Stockholders' equity:
Common stock - par value $1; authorized
5,000,000 shares; issued 1,500,000 shares 1,500,000 1,500,000
Capital surplus 1,961,067 1,913,216
Retained earnings 18,992,226 16,833,400
Treasury stock 222,579 shares for
1995 and 230,872 for 1994, at cost ( 2,448,369) ( 2,539,592)
Total stockholders' equity 20,004,924 17,707,024
Total liabilities and stockholders' equity $ 207,363,938 $ 202,446,633
</TABLE>
The accompanying notes are an integral part of these financial statements.
61
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1995, 1994 and 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 12,055,893 $ 10,785,212 $ 10,611,862
Interest and dividends on
investment securities:
Taxable 4,265,179 3,677,791 3,756,242
Tax exempt 37,500 37,500 67,944
Interest on other short-term
investments 397,131 285,772 258,135
Total interest income 16,755,703 14,786,275 14,694,183
Interest expense:
Deposits 6,553,867 5,083,170 5,284,660
Other borrowings 688,544 735,101 871,695
Total interest expense 7,242,411 5,818,271 6,156,355
Net interest income 9,513,292 8,968,004 8,537,828
Provision for loan losses 260,000 120,000 330,000
Net interest income after
provision for loan losses 9,253,292 8,848,004 8,207,828
Other income:
Service fees 820,989 770,749 737,149
Other 762,590 312,585 1,050,535
Total other income 1,583,579 1,083,334 1,787,684
Other expense:
Salaries and employee benefits 3,470,069 3,199,114 3,022,396
Net occupancy expense 611,626 543,999 570,713
Other operating expenses 2,251,072 2,019,630 2,400,628
Total other expenses 6,332,767 5,762,743 5,993,737
Income before income taxes 4,504,104 4,168,595 4,001,775
Provision for income taxes 1,555,200 1,499,800 1,463,000
Net income $ 2,948,904 $ 2,668,795 $ 2,538,775
Earnings per share of common stock:
Net income $ 2.32 $ 2.11 $ 2.11
Weighted average shares outstanding 1,272,811 1,266,434 1,205,749
</TABLE>
The accompanying notes are an integral part of these financial statements.
62
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
for the years ended December 31, 1995 and 1994 and 1993
__________
<CAPTION> Total
Common Capital Retained Treasury Stockholders'
Stock Surplus Earnings Stock Equity
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1992 $ 1,500,000 $ 1,500,000 $ 12,979,132 $(3,960,000) $ 12,019,132
Net income - - 2,538,775 - 2,538,775
Sale of treasury
stock - 395,515 - 1,372,448 1,767,963
Cash dividend $.51
per share - - ( 643,146) - ( 643,146)
Balance at December 31,
1993 1,500,000 1,895,515 14,874,761 (2,587,552) 15,682,724
Net income - - 2,668,795 - 2,668,795
Sale of treasury
stock - 17,701 - 47,960 65,661
Cash dividend $.56
per share - - ( 710,156) - ( 710,156)
Balance at December 31,
1994 1,500,000 1,913,216 16,833,400 (2,539,592) 17,707,024
Net income - - 2,948,904 - 2,948,904
Sale of treasury
stock - 47,851 - 91,223 139,074
Cash dividend $.62
per share - - ( 790,078) - ( 790,078)
Balance at December 31,
1995 $ 1,500,000 $ 1,961,067 $ 18,992,226 $(2,448,369) $ 20,004,924
</TABLE>
The accompanying notes are an integral part of these financial statements.
63
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1995, 1994, and 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,948,904 $ 2,668,795 $ 2,538,775
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 260,000 120,000 330,000
Depreciation 353,385 328,836 342,040
Amortization of intangible assets 396 17,821 17,821
Net amortization and accretion of investment
securities 96,311 494,044 518,223
Net realized loss (gain) on sale of
investment securities 132,908 384,247 ( 1,000)
Net gain on sale and disposal of assets ( 15,110) ( 956) ( 6,487)
Changes in:
Other assets ( 1,851,481) ( 1,932,775) ( 67,809)
Other liabilities 452,880 ( 255,516) 244,735
Net cash provided by operating activities 2,378,193 1,824,496 3,916,298
Investing activities:
Proceeds from sales/maturing of investment
securities 34,312,969 18,196,796 18,500,000
Purchase of investment securities (42,277,016) (25,831,860) (22,694,012)
Net decrease in other short-term investments 2,610,000 5,470,000 585,000
Net (increase) decrease in loans
not held for sale 1,553,951 ( 8,021,687) ( 826,476)
Purchase of premises and equipment ( 1,072,772) ( 466,206) ( 632,005)
Proceeds from sales of other assets 1,163,769 107,424 267,575
Net (increase) decrease in interest bearing
deposits with banks ( 1,222,601) ( 3,039,510) 7,597
Net cash used for investing activities ( 4,931,700) (13,585,043) ( 4,792,321)
Financing activities:
Net increase in deposits 3,594,525 15,092,707 3,494,491
Net decrease in short-term borrowings ( 1,428,000) ( 2,257,645) ( 1,694,000)
Repayment of long-term borrowings - - ( 477,200)
Cash dividends paid ( 790,078) ( 710,156) ( 643,146)
Proceeds from sale of treasury stock 139,074 65,661 1,767,963
Net cash provided by financing activities 1,515,521 12,190,567 2,448,108
Increase (decrease) in cash and due from bank ( 1,037,986) 430,020 1,572,085
Cash and due from banks - beginning of year 8,683,397 8,253,377 6,681,292
Cash and due from banks - end of year $ 7,645,411 $ 8,683,397 $ 8,253,377
Cash paid during the year for:
Income taxes $ 1,577,750 $ 1,497,574 $ 1,452,000
Interest paid $ 7,101,621 $ 5,759,497 $ 6,228,409
</TABLE>
The accompanying notes are an integral part of these financial statements.
64
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
The accounting and reporting policies of Southwest Georgia
Financial Corporation and Subsidiary (The Corporation)
conform to generally accepted accounting principles and to
general practices within the banking industry. The
following is a description of the more significant of
those policies.
Principles of Consolidation
The consolidated financial statements include the accounts
of Southwest Georgia Financial Corporation and its wholly
owned Subsidiary, Southwest Georgia Bank (formerly known
as Moultrie National Bank). All significant intercompany
accounts and transactions have been eliminated in the
consolidation.
Investment Securities
Investments in securities are accounted for as securities
to be held to maturity. The Corporation has the positive
intent and ability to hold these securities to maturity.
Investments are reported at cost, adjusted for
amortization of premiums and accretion of discounts which
are recognized in interest income using the interest
method over the period to maturity. Gains or losses on
the sale of investment securities are recognized upon
disposition of the related security.
Premises and Equipment
Premises and equipment are carried at cost, less
accumulated depreciation, computed on straight-line or
accelerated rates over the estimated useful lives of the
assets.
Allowance For Possible Loan Losses
The determination of the balance of the allowance for
possible loan losses is based on management's evaluation
of the loan portfolio under current economic conditions.
The evaluation includes a study of loss experience,
adequacy of collateral, a review of delinquencies and an
estimate of the possibility of loss based upon the risk
characteristics of the portfolio. Recognized losses are
charged to the reserve and subsequent recoveries are
credited to the reserve.
Earnings Per Share
Earnings per share are based on the weighted average
number of common shares outstanding during the year.
65
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
__________
1. Summary of Significant Accounting Policies, Continued
Retirement Plans
The Corporation and its subsidiary have pension plans
covering substantially all employees. The Corporation
makes annual contributions to the plans in amounts not
exceeding the regulatory requirements.
Income Taxes
Provisions for income taxes are based on taxes payable or
refundable for the current year (after exclusion of non-
taxable income such as interest on state and municipal
securities) and deferred taxes on temporary differences
between the amount of taxable income and pretax financial
income and between the tax bases of assets and liabilities
and their reported amounts in the financial statements.
Deferred tax liabilities are included in the financial
statements at currently enacted income tax rates
applicable to the period in which the deferred tax
liabilities are expected to be realized or settled as
prescribed in FASB Statement No. 109, "Accounting for
Income Taxes". As changes in tax laws or rates are
enacted, deferred tax liabilities are adjusted through the
provision for income taxes.
Statement of Cash Flows
For purposes of the Statement of Cash Flows, the
Corporation considers cash and due from banks to include
cash on hand and amounts due from banks, including
interest bearing and non-interest bearing deposits in
other banks.
Loans and Interest Income
Loans are generally reported at principal amounts
outstanding less unearned income and the allowance for
loan losses. Interest income on consumer loans, made on a
discount basis, is recognized in a manner that results in
a level-yield on the principal amounts outstanding.
The policy of the Corporation is to discontinue the
accrual of interest on loans when payment of principal or
interest is ninety days or more in arrears and the loans
are otherwise considered collectible. Interest income on
non-accrual loans is recognized only to the extent
payments are received.
66
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
__________
2. Investment Securities
The carrying amounts of securities to be held to maturity
as shown in the consolidated balance sheets and their
approximate market values at December 31 were as follows:
<TABLE>
<CAPTION>
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
<S> <C> <C> <C> <C>
December 31, 1995:
U. S. Treasury and
U. S. Government
Agency Securities $ 69,519,544 $ 1,663,663 $ 4,894 $ 71,178,313
State and municipal
securities 500,000 24,478 - 524,478
Other securities 1,307,843 - - 1,307,843
Total $ 71,327,387 $ 1,688,141 $ 4,894 $ 73,010,634
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
December 31, 1994:
U. S. Treasury and
U. S. Government
Agency Securities $ 61,845,716 $ 19,664 $ 2,080,412 $ 59,784,968
State and municipal
securities 500,000 20,594 - 520,594
Other securities 1,246,843 - - 1,246,843
Total $ 63,592,559 $ 40,258 $ 2,080,412 $ 61,552,405
</TABLE>
67
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
__________
2. Investment Securities, Continued
At December 31, 1995 and 1994, securities with a par value
of $25,412,000 and $23,000,000, respectively were pledged
as collateral for public deposits and other purposes as
required by law.
There were no investments in obligations of state and
municipal subdivisions which exceeded 10 percent of the
Corporation's stockholders' equity at December 31, 1995.
The carrying amount and estimated market value of debt
securities at December 31, 1995, by contractual maturity,
are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the
right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
Carrying Amount Market Value
<S> <C> <C>
Due in one year or less $ 10,992,062 $ 11,098,080
Due from one to five years 60,335,325 61,912,554
Due from five to ten years - -
Total $ 71,327,387 $ 73,010,634
</TABLE>
Proceeds from sale of debt securities investments in 1995,
1994 and 1993 were $21,062,969, $6,196,796 and $501,000,
respectively. A loss of $132,908 and $384,247 was
realized on the sale in 1995 and 1994. A gain of $1,000
was realized on the sale in 1993.
68
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
__________
3. Loans
The composition of the Corporation's loan portfolio at
December 31, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Commercial, financial and agricultural loans $ 17,706,016 $ 14,827,384
Real estate mortgage loans 87,318,792 92,301,201
Other loans 44,698 59,970
Consumer loans 11,700,379 11,343,136
Loans outstanding 116,769,885 118,531,691
Unearned discount ( 177,172) ( 236,236)
Total loans 116,592,713 118,295,455
Allowance for loan losses ( 2,139,532) ( 2,028,323)
Net loans $ 114,453,181 $ 116,267,132
</TABLE>
The Corporation's only significant concentration of credit
at December 31, 1995, occurs in real estate loans which
totaled approximately $87 million. However, this amount
is not concentrated in any specific market or geographic
area.
In the normal course of business, the Corporation's
banking subsidiary has made loans at prevailing interest
rates and terms to directors and executive officers of the
Corporation and its subsidiary, and to their affiliates.
The aggregate indebtedness to the Bank of these related
parties approximated $1,046,893 and $2,316,312, at
December 31, 1995 and 1994, respectively. During 1995,
approximately $254,378 of such loans were made and
repayments totaled approximately $1,573,282. None of
these loans were restructured, nor were any related party
loans charged-off during 1995.
69
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
__________
3. Loans, Continued
Allowance for Loan Losses
The allowance for loan losses is analyzed as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Balance, January 1 $ 2,028,323 $ 1,825,096
Reserve for loan losses of acquired affiliate - 161,756
Provision charged to operations 260,000 120,000
Loans charged off ( 213,527) ( 120,841)
Recoveries 64,736 42,312
Balance, December 31 $ 2,139,532 $ 2,028,323
</TABLE>
Loans placed on non-accrual status amounted to $304,164 at December
31, 1995. Past due loans over ninety days amounted to $246,025.
4. Bank Premises and Equipment
The amounts reported as bank premises and equipment are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Land $ 456,034 $ 444,800
Building 3,170,738 2,487,347
Furniture and equipment 2,807,022 2,470,633
6,433,794 5,402,780
Less accumulated depreciation (3,162,187) 2,836,221
Total $ 3,271,607 $ 2,566,559
</TABLE>
Depreciation of premises and equipment was $353,385,
$328,836 and $342,040 in 1995, 1994 and 1993,
respectively.
70
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
__________
5. Short-Term Borrowings
Federal funds purchased generally mature within one to
four days. Securities sold under repurchase agreements
mature within one year or less. Other borrowed funds
consist of a Federal Home Loan Bank advance with interest
at 6.21% due May 1996.
The Federal Reserve Board requires that banks maintain
reserves based on their average deposits in the form of
vault cash and average deposit balances at the Federal
Reserve Banks. For the year ended December 31, 1995, the
Corporation's subsidiary banks' reserve requirements
averaged approximately $1,292,000.
6. Long-Term Debt
Long-term debt of $8,000,000 at December 31, 1995
consisted of borrowings from the Federal Home Loan Bank.
The money was borrowed to provide funding to support
residential mortgage lending. The funds were financed for
eight years at a fixed rate of 6.02 percent and are
collateralized by the Corporation's investment securities.
The borrowings can be repaid any time subject to an
interest penalty, if the future borrowing rates are lower
than the acquired borrowing rate.
No required annual principal payments on long-term debt
are due for the four years subsequent to December 31,
1995. The Federal Home Loan Bank borrowing is due
December 15, 2002.
7. Pension Plan
The Bank has a noncontributory defined benefit pension
plan which covers all employees who have attained the age
of 21 years and completed one year of continuous service.
The Bank is providing for the cost of this plan as
benefits are accrued based upon actuarial determinations
employing the aggregate funding method as of
December 31, 1992.
71
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
__________
7. Pension Plan, Continued
The table of actuarially computed benefit obligations and
net assets of the Plan at December 31, 1995, 1994 and 1993
is presented below.
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Actuarial present value of
benefit obligations:
Accumulated benefit obligation,
including vested benefits
of $2,500,874, $2,131,042,
and $2,148,206 for 1995,
1994 and 1993, respectively $ 2,649,241 $ 2,241,779 $ 2,227,385
Projected benefit obligation for
service rendered to date $(3,283,093) $(2,830,948) $(2,860,068)
Plan assets at fair value, primarily
bond and mutual funds 3,491,715 3,036,750 2,888,445
Plan assets in excess of
(less than) projected
benefit obligation 208,622 205,802 28,377
Accrued pension cost $ 208,622 $ 205,802 $ 28,377
Net pension cost of 1995, 1994 and 1993
included the following components:
Service cost - benefits earned during
the period $ 182,915 $ 172,162 $ 156,918
Interest cost on projected benefit
obligations 219,400 221,665 203,983
Actual return on plan assets ( 339,549) ( 43,367) ( 157,418)
Net amortization and deferral - - ( 39,483)
Net periodic pension
cost (credit) $ 62,766 $ 350,460 $ 164,000
</TABLE>
Assumptions used to determine net periodic pension costs as of
December 31, 1995, 1994, and 1993 respectively were:
13
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
__________
7. Pension Plan, Continued
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Discount rates 7.75% 7.75% 7.75%
Rates of increase in compensation levels 6.00% 6.00% 6.00%
Expected long-term rate of return
on plan assets 7.75% 7.75% 7.75%
</TABLE>
At December 31, 1995, the plan assets included cash and
cash equivalents, U. S. Treasury Bonds and Notes and
investment in other government agencies.
8. Employee Stock Ownership Plan
The Corporation has a nondiscriminatory Employee Stock
Ownership Plan and Trust to be administered by an
independent trustee. The plan was established to purchase
and hold Southwest Georgia Financial Corporation stock for
all eligible employees. Contributions to the plan are
made solely by the Corporation and are at the discretion
of the Board of Directors. The contributions were
$348,595 in 1995, $324,826 in 1994, and $314,951 in 1993.
9. Directors Deferred Compensation Plan
The Corporation has a voluntary deferred compensation plan
for the Board of Directors administered by an insurance
company. The plan stipulates that if a director
participates in the Plan for four years, the Bank will pay
the director future monthly income for ten years beginning
at normal retirement age, and that the Bank will make
specified monthly payments to the director's beneficiaries
in the event of his or her death prior to the completion
of such payments. The plan is funded by actual life
insurance policies with the Bank as the named beneficiary.
72
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
__________
10. Directors and Executive Officers Stock Purchase Plan
The Corporation has adopted a stock purchase plan for the
executive officers and directors of Southwest Georgia
Financial Corporation. The stock offering is exempt under
the Securities Act of 1933 Regulation D and additionally
exempt under Georgia law.
Under the plan, participants may elect to contribute up to
$300 monthly of salary or directors fees and receive
company common stock with an aggregate value of 1.5 times
their contribution. The expense incurred during 1995,
1994 and 1993 on the part of the corporation totaled
$24,900, $21,725 and $22,200 respectively.
11. Income Taxes
Components of income tax expense for 1995, 1994 and 1993
are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Current payable $ 1,484,200 $ 1,511,200 $ 1,471,600
Deferred tax payable (receivable) 71,000 ( 11,400) ( 8,600)
Total income taxes $ 1,555,200 $ 1,499,800 $ 1,463,000
</TABLE>
The reasons for the difference between the federal income taxes in
the consolidated statements of income and the amount computed by
applying the statutory federal income tax rate to income taxes are
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Taxes at statutory income
tax rate $ 1,801,642 $ 1,667,438 $ 1,600,710
Reductions in taxes resulting
from the exempt income ( 20,719) ( 22,827) ( 35,901)
Other timing differences ( 225,723) ( 144,811) ( 101,809)
Total income taxes $ 1,555,200 $ 1,499,800 $ 1,463,000
</TABLE>
73
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
__________
11. Income Taxes, Continued
The sources of timing differences for tax reporting purposes and the
related deferred taxes recognized in 1995, 1994 and 1993 are
summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Accretion of discount (net
of maturities) $ 90,000 $ 12,600 $ 19,200
Gain on disposition of
discounted bonds (19,000) (24,000) (27,800)
Total deferred taxes $ 71,000 $(11,400) $( 8,600)
</TABLE>
12. Related Party Transactions
The Employee Stock Ownership Plan and Trust of Southwest
Georgia Financial Corporation presently holds 232,888
shares of the Corporation's stock of which 31,083 shares
have been pledged as security on a note with Bank South.
13. Commitments, Contingent Liabilities and Financial
Instruments With Off-Balance-Sheet Risk
In the normal course of business, various claims and
lawsuits are pending against the Corporation. Management,
after reviewing with counsel all actions and proceedings,
considers that the aggregate liability or loss, if any,
resulting therefrom will not be material.
The Corporation is a party to financial instruments with
off-balance-sheet risk in the normal course of business to
meet the financing needs of its customers and to reduce
its own risk exposure to fluctuations in interest rates.
These financial instruments include
commitments to extend credit in the form of loans or
through letters of credit. The instruments involve to
varying degrees, elements of credit and interest rate risk
in excess of the amounts recognized in the Consolidated
Balance Sheets. The contract or notional amounts of the
instruments reflect the extent of involvement the
Corporation has in particular classes of financial
instruments.
Commitments to extend credit are contractual obligations
to lend to a customer as long as all established
contractual conditions are satisfied. Commitments
generally have fixed expiration dates or other termination
clauses and may require payment of a fee by a customer.
74
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
__________
13. Commitments, Contingent Liabilities and Financial
Instruments With Off-Balance-Sheet Risk, Continued
Standby letters of credit and financial guarantees are
conditional commitments issued by the Corporation to
guarantee the performance of a customer to a third party.
Standby letters of credit and financial guarantees are
generally terminated through the performance of a
specified condition or through the lapse of time.
The Corporation's exposure to credit loss in the event of
non-performance by the other party to commitments to
extend credit and standby letters of credit is represented
by the contractual or notional amounts of these
instruments. As these off-balance-sheet financial
instruments have essentially the same credit risk involved
in extending loans, the Corporation generally uses the
same credit and collateral policies in making these
commitments and conditional obligations as it does for on-
balance-sheet instruments. For interest rate contracts,
the notional amount does not represent exposure to credit
loss. Instead, the amount potentially subject to credit
loss is substantially less. Since many of the commitments
to extend credit and standby letters of credit are
expected to expire without being drawn upon, the
contractual or notional amounts do not represent future
cash requirements.
The contractual or notional amounts of financial
instruments having credit risk in excess of that reported
in the Consolidated Balance Sheets are as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
<S> <C> <C>
Financial instruments whose contract
amounts represent credit risk:
Commitments to extend credit $ 21,150,000 $ 11,573,000
Standby letters of credit and
financial guarantees $ 10,000 $ 35,000
</TABLE>
14. Disclosures About Fair Value of Financial Instruments
The following methods and assumptions were used to
estimate the fair value of each class of financial
instruments for which it is practicable to estimate that
value:
Cash and Short-Term Investments
For those short-term investments, the carrying amount is a
reasonable estimate of fair value.
75
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
14. Disclosures About Fair Value of Financial Instruments, Continued
Investment Securities
For U. S. Government and U. S. Government Agency
securities, fair values are based on market prices or
dealer quotes. For other investment securities, fair
value equals quoted market price if available. If a
quoted market price is not available, fair value is
estimated using quoted market prices for similar
securities as the basis for a pricing matrix.
Loans
For all homogenous categories of loans, the fair value is
estimated by discounting the future cash flows using the
current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same
remaining maturities.
Deposits
The fair value of demand deposits, savings accounts, and
certain money market deposits is the amount payable on
demand at December 31, 1995. The fair value of fixed-
maturity certificates of deposit is estimated by
discounting the future cash flows using the rates
currently offered for deposits of similar remaining
maturities.
Short-Term Borrowings and Securities Sold Under Repurchase Agreements
For those short-term borrowings, the carrying amount is a
reasonable estimate of fair value. The fair value of
securities sold under repurchase agreements is estimated
by discounting the future cash flow using the rates
currently offered for securities sold under repurchase
agreements of similar remaining maturities.
Long-Term Debt
Rates currently available to the Bank for debt with
similar terms and remaining maturities are used to
estimate fair value of existing debt.
Commitments to Extend Credit and Standby Letters of Credit
The fair value of commitments is estimated using the fees
currently charged to enter into similar agreements, taking
into account the remaining terms of the agreements, and
the present credit worthiness of the counterparties. For
fixed rate loan commitments, fair value also considers the
difference between current levels of interest rates and
the committed
76
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
__________
14. Disclosures About Fair Value of Financial Instruments, Continued
Commitments to Extend Credit and Standby Letters of
Credit, Continued
rates. The fair value of guarantees and letters of credit
is based on fees currently charged for similar agreements
or on the estimated cost to terminate them or otherwise
settle the obligations with the counterparties.
The estimated fair values of the Bank's financial
instruments are as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
Carrying Fair Carrying Fair
Amount Value Amount Value
(Thousands Of Dollars) (Thousands Of Dollars)
<S> <C> <C> <C> <C>
Financial assets:
Cash $ 7,645 $ 7,645 $ 8,683 $ 8,683
Investment securities 71,327 73,011 63,593 61,552
Short-term investments 4,502 4,502 5,889 5,889
Loans 116,593 115,078 118,295 115,209
Less: allowance
for loan losses 2,140 2,140 2,028 2,028
Financial liabilities:
Deposits 173,810 173,351 170,215 170,042
Securities sold under
agreements to repurchase 1,810 1,817 3,238 3,238
Short-term borrowings 1,500 1,502 1,500 1,485
Long-term debt 8,000 8,039 8,000 6,969
Unrecognized financial
instruments:
Commitments to extend
credit 21,150 21,150 11,573 11,573
Standby letters of credit 10 10 35 35
</TABLE>
15. Supplemental Financial Data
Components of other operating expense in excess of 1 percent of
gross revenue for the respective periods are as follows:
<TABLE>
<CAPTION>
Years Ended December 31
1995 1994 1993
<S> <C> <C> <C>
Data processing $ 312,644 $ 277,706 $ 270,730
FDIC assessment fees $ 236,789 $ 348,468 $ 335,723
Purchased deposit fees $ 220,908 $ 257,700 $ 294,552
Charitable contributions $ 198,154 $ - $ -
</TABLE>
77
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
__________
16. Parent Only Condensed Financial Information of Southwest Georgia
Financial Corporation
Condensed balance sheets as of December 31, 1995 and 1994, and
condensed statements of income and expense and condensed statements
of cash flows for each of the years ended December 31, 1995 and
1994, for Southwest Georgia Financial Corporation (Parent Only) are
as follows:
<TABLE>
Condensed Balance Sheets
as of December 31, 1995 and 1994
(Thousands Of Dollars)
___________
<CAPTION>
ASSETS 1995 1994
<S> <C> <C>
Cash $ 3,835 $ 3,353
Investment in consolidated wholly
owned bank subsidiary, at equity 16,584 14,720
Other assets 51 45
Total assets $ 20,470 $ 18,118
LIABILITIES AND STOCKHOLDERS' EQUITY
Other liabilities $ 465 $ 411
Stockholders' equity:
Common stock, $1 par value; authorized
5,000,000 shares; issued 1,500,000 shares 1,500 1,500
Capital surplus 1,961 1,913
Retained earnings 18,992 16,834
Treasury stock, 222,579 shares for
1995 and 230,872 shares for 1994 ( 2,448) ( 2,540)
Total stockholders' equity 20,005 17,707
Total liabilities and stockholders' equity $ 20,470 $ 18,118
</TABLE>
78
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
__________
16. Parent Only Condensed Financial Information of Southwest Georgia
Financial Corporation, Continued
<TABLE>
Condensed Statements of Income and Expense
for the years ended December 31, 1995, 1994 and 1993
(Thousands of Dollars)
__________
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Income:
Dividend received from
bank subsidiary $ 1,000 $ 1,000 $ 1,000
Other 177 150 78
Total income 1,177 1,150 1,078
Expenses:
Interest expense - - 10
Other 40 77 63
Total expense 40 77 73
Income before income taxes
and equity in undistributed
income of bank subsidiary 1,137 1,073 1,005
Income tax benefit - allocated
from consolidated return ( 51) ( 26) 4
Income before equity
in undistributed
income of subsidiary 1,086 1,047 1,009
Equity in undistributed income
of subsidiary 1,863 1,622 1,530
Net income 2,949 2,669 2,539
Retained earnings - beginning
of year 16,834 14,875 12,979
Dividends ( 791) ( 710) ( 643)
Retained earnings - end of year $ 18,992 $ 16,834 $ 14,875
</TABLE>
79
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
__________
16. Parent Only Condensed Financial Information of Southwest Georgia
Financial Corporation, Continued
<TABLE>
Condensed Statements of Cash Flows
for the years ended December 31, 1995, 1994 and 1993
(Thousands Of Dollars)
__________
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Operating activity:
Net income $ 2,949 $ 2,669 $ 2,539
Adjustments to reconcile
net income to net cash provided
by operating activities:
Equity in undistributed
earnings of subsidiary (1,863) (1,622) (1,530)
Changes in:
Other assets ( 6) 16 42
Other liabilities 54 411 ( 14)
Net cash provided by
operating activities 1,134 1,474 1,037
Dividends paid to stockholders ( 791) ( 710) ( 643)
Repayment of long-term borrowings - - ( 477)
Sale of treasury stock 139 65 1,768
Net cash provided (used)
for financing activities ( 652) ( 645) 648
Increase in cash 482 829 1,685
Cash - beginning of year 3,353 2,524 839
Cash - end of year $ 3,835 $ 3,353 $ 2,524
Supplemental information:
Interest paid $ - $ - $ 24
</TABLE>
The amount of dividends paid to the parent company from
the subsidiary bank is limited by various banking
regulatory agencies. The amount of dividends available
from the subsidiary bank for payment in 1996, without
prior approval from the banking regulatory agencies is
approximately $2,766,000.
80
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
__________
16. Parent Only Condensed Financial Information of Southwest
Georgia Financial Corporation, Continued
Banking regulatory agencies have approved guidelines to
implement a risk-based capital framework that makes
capital requirements more sensitive to the risk profiles
of individual banking companies. These guidelines define
capital as either Core (Tier One) capital or Supplementary
(Tier Two) capital. Tier One capital consists primarily
of tangible common stockholders' equity while Tier Two
capital is comprised of certain debt instruments and a
portion of the reserve for loan losses. Risk-based
capital regulations required banks to maintain an 8
percent total risk-based capital ratio of which 4 percent
must consist primarily of tangible common stockholders'
equity (Tier One capital). The Company's ratios under
these rules at December 31, 1995 are 18.19 percent total
risk-based capital and 16.93 percent Tier One risk-based
capital. The Company's leverage ratio at December 31,
1995 was 9.41 percent.
As a result of regulatory limitations at December 31,
1995, approximately $13,818,000 of the parent company's
investment in net assets of the subsidiary bank of
$16,584,000, as shown in the accompanying condensed
balance sheets, was restricted from transfer by the
subsidiary bank to the parent company in the form of cash
dividends.
17. Business Combination
Effective December 2, 1994, the Company completed the
acquisition of certain assets and the assumption of
deposits of Baker County Bank in Newton, Georgia. The
Company acquired approximately $15.2 million of assets
which included cash and due from bank balances, investment
securities, certain loans and accrued interest
receivables, and premises and equipment. Also, the
Company assumed approximately $15.2 million of deposits
and other liabilities. The acquisition was accounted for
as a purchase.
80
<PAGE>
<PAGE>
Exhibit 22
Subsidiaries of the Registrant
Southwest Georgia Financial Corporation
1) Southwest Georgia Bank
Moultrie, Georgia
81
April 22, 1996
Dear Fellow Shareholder:
On behalf of the Board of Directors, I am pleased to
extend to you an invitation to attend the Annual Meeting of
Shareholders of Southwest Georgia Financial Corporation ("the
Company") to be held on Tuesday, May 14, 1996, at 4:30 P.M.
at the Colquitt County Arts Center, 401 Seventh Avenue, S.W.,
Moultrie, Georgia.
The notice of the meeting and Proxy Statement which appear
on the following pages contain information about matters which
are to be considered at the meeting. On February 23, 1996,
the Board of Directors unanimously voted to approve certain
amendments (collectively, the "Proposed Amendments") to the
Articles of Incorporation, having determined that such
amendments are advisable and in the best interest of the
Company and its shareholders. These Proposed Amendments are
described in detail within the Proxy Statement and Exhibits A-F.
The Proposed Amendments are designed to afford certain
protections from possible hostile takeover actions against
Southwest Georgia Financial Corporation and to ensure that all
shareholders of the Company will receive fair treatment in the
event of any hostile, unsolicited offer to acquire or take
control of the Company. We are not aware of any current
effort to acquire control of the Company and are proposing
these amendments in order to maintain the ability of the Board
of Directors to protect shareholder interests in the future.
The Proposed Amendments are not intended to prevent a
friendly acquisition of the Company. They are, however
designed to encourage any prospective acquiror to negotiate
with your representatives on the Board of Directors and to
preserve the flexibility of the Directors in any possible
future negotiations.
In order to ensure that your shares are voted at the
meeting, please complete, date, sign and return the Proxy in
the enclosed postage-paid envelope at your earliest
convenience. Before voting, please read carefully the
sections in the Proxy Statement which describe the Proposed
Amendments and their purposes and effects. Every shareholder's
vote is important, whether you own a few shares or many. I
look forward to seeing you at the meeting.
Sincerely,
John H. Clark
President
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
P.O. Box 849
201 First Street, S.E.
Moultrie, Georgia 31768
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 14, 1996
The annual meeting of shareholders of Southwest Georgia Financial
Corporation ("the Company") will be held on Tuesday, May 14, 1996, at 4:30
P.M. at the Colquitt County Arts Center, 401 Seventh Avenue, S.W., Moultrie,
Georgia, for the purposes of considering and voting upon:
1. The election of twelve directors to constitute the Board of
Directors to serve until the next annual meeting and until their
successors are elected and qualified; and
2. To consider and act upon a proposal to amend the Company's
Articles of Incorporation to authorize the issuance of up to
3,000,000 shares of Preferred Stock, $1.00 par value per share;
and
3. To consider and act upon a proposal to amend the Company's
Articles of Incorporation to authorize the Board of Directors to
consider constituencies when evaluating a business combination
proposal; and
4. To consider and act upon a proposal to amend the Company's
Articles of Incorporation to eliminate cumulative voting for
directors; and
5. To consider and act upon a proposal to amend the Company's
Articles of Incorporation to provide for the limitation of
director liability; and
6. To consider and act upon a proposal to amend the Company's
Articles of Incorporation to require the affirmative vote of the
holders of 80% of the issued and outstanding shares entitled to
vote thereon to amend the Articles of Incorporation or the By-Laws
of the Company; and
7. To consider and act upon a proposal to amend the Company's
Articles of Incorporation to enact a provision to govern potential
business combination transactions with interested shareholders;
and
8. To consider and act upon a proposal to amend the Company's
Articles of Incorporation to provide that directors can be removed
only for cause by the affirmative vote of the holders of 80% of
the issued and outstanding shares entitled to vote thereon; and
9. In the discretion of management, to adjourn the Annual
Meeting to permit solicitation of additional proxies in the
event there are not sufficient affirmative votes to approve
one or more amendments to the Articles of Incorporation.
10. Such other matters as may properly come before the meeting or any
adjournment thereof.
Only shareholders of record at the close of business on April 15, 1996
will be entitled to notice of and to vote at the meeting or any adjournment
thereof.
A Proxy Statement and a Proxy solicited by the Board of Directors are
enclosed herewith. Please sign, date and return the Proxy promptly in the
enclosed business reply envelope. If you attend the meeting you may, if you
wish, withdraw your Proxy and vote in person.
Also enclosed is the Company's 1995 Annual Report to Shareholders, which
contains financial data and other information about the Company.
By Order of the Board of Directors,
JOHN H. CLARK
President
April 22, 1996
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE
ENCLOSED SELF-ADDRESSED ENVELOPE.
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
P.O. Box 849
201 First Street, S.E.
Moultrie, Georgia 31768
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of Southwest Georgia Financial Corporation
(the "Company") for use at the Annual Meeting of Shareholders of the Company
to be held on May 14, 1996, and any adjournment thereof, for the purposes
set forth in the accompanying notice of the meeting. The expenses of this
solicitation, including the cost of preparing and mailing this Proxy
Statement, will be paid by the Company. Copies of solicitation materials
may be furnished to banks, brokerage houses and other custodians, nominees
and fiduciaries for forwarding to beneficial owners of shares of the
Company's Common Stock, and normal handling charges may be paid for such
forwarding service. In addition to solicitations by mail, directors and
regular employees of the Company may solicit Proxies in person or by
telephone. It is anticipated that this Proxy Statement and the
accompanying Proxy will first be mailed to shareholders on April 22, 1996.
The record of shareholders entitled to vote at the Annual Meeting of
Shareholders was taken as of the close of business on April 15, 1996. On that
date, the Company had outstanding and entitled to vote 1,277,421 shares of
Common Stock, par value $1.00 per share.
Any Proxy given pursuant to this solicitation may be revoked by any
shareholder who attends the meeting and gives oral notice of his or her
election to vote in person, without compliance with any other formalities. In
addition, any Proxy given pursuant to this solicitation may be revoked prior
to the meeting by delivering a signed writing revoking it or a duly executed
Proxy bearing a later date to the Secretary of the Company at Southwest Georgia
Financial Corporation, P.O. Box 849, Moultrie, Georgia 31776-0849. If the
Proxy is properly completed and returned by the shareholder and is not revoked,
it will be voted at the meeting in the manner specified thereon. If the Proxy
is returned but no choice is specified thereon, it will be voted for all the
persons named below under the caption "Information about Nominees for
Director" and each of the proposals set forth below.
In the event there is not a sufficient number of
affirmative votes to approve the amendments to the Articles of
Incorporation, management of the Company may seek to adjourn
the Annual Meeting to permit solicitation of additional
proxies. The place and date to which the Annual Meeting would
be adjourned would be announced at the Annual Meeting. Pursuant to
Section 14-2-705 of the Georgia Corporate Code ("Georgia Code") in the
event of such an adjournment, the Company would not be
obligated to notify stockholders not attending the Annual
Meeting of the adjournment or to fix in advance thereof a new
record date, as long as the record date set for the original meeting date
is within 120 days before the adjourned meeting date. Such an
adjournment would not invalidate any proxies previously filed.
Approval of an adjournment would require the affirmative
vote of a majority of the shares of the Company represented in
person or by proxy at the Annual Meeting. In the absence of
<PAGE>
a vote "against" or an abstention with respect to adjournment, the proxy
holder may vote in favor of the proposal. However, proxies directing a
vote against a majority of the proposed amendments to the Articles of
Incorporation will not be voted to adjourn the Annual Meeting without
specific authority indicated on the proxy card.
The Company will furnish without charge a copy of its Annual Report
on Form 10-KSB filed with the Securities and Exchange Commission for the
fiscal year ended December 31, 1995, including financial statements and
schedules, to any record or any beneficial owner of its Common Stock as
of March 18, 1996 who requests a copy of such report. Any request for
the Form 10-KSB report should be in writing addressed to:
Mr. George R. Kirkland
Southwest Georgia Financial Corporation
P.O. Box 849
Moultrie, Georgia 31776-0849
If the person requesting the report was not a shareholder of record
on April 15, 1996, the request must include a representation that the
person was a beneficial owner of Common Stock on that date. Copies of
any exhibits to the Form 10-KSB will also be furnished on request and
upon the payment of the Company's expense in furnishing the exhibits.
VOTING SECURITIES AND PRINCIPAL HOLDERS
The following table sets forth as of April 1, 1996, beneficial
ownership of the Company's Common Stock by each "person" (as that term is
defined by the Securities and Exchange Commission) known by the Company to be
the beneficial owner of more that 5% of the Company's voting securities and by
all directors and officers of the Company as a group.
<TABLE>
<CAPTION>
Name And Address of Number of Shares
Beneficial Owner Owned Beneficially Percent of Class
- ------------------- ------------------ ----------------
<S> <C> <C>
Leo T. Barber, Jr. 242,571 (1,2) 18.99%
617 Third Street, S.W.
Moultrie, Georgia 31768
Albert W. Barber 230,121 (1,3,4) 18.01%
118 Dogwood Circle
P.O. Box 627
Moultrie, Georgia 31768
The Employee Stock Ownership Plan 232,888 18.23%
and Trust of Southwest Georgia
Financial Corporation
201 First Street, S.E.
Moultrie, Georgia 31768
All Directors and Officers as a Group 509,359 39.87%
(23 persons)
________________
</TABLE>
(1) Includes 129,825 shares held by the Louise W. Barber Trust, of which
Leo T. Barber, Jr. and Albert W. Barber are joint trustees. Also includes
62,420 shares held by the L.T.B., Sr., Trust of which Leo T. Barber, Jr.
and Albert W. Barber serve as co-trustees.
(2) Includes 3,000 shares held in the name of Mr. Leo T. Barber's wife.
(3) Includes 1,300 shares held in the name of Mr. Albert W. Barber's wife.
(4) Includes 2,000 shares held by the Estate of Sue Barber Fontenot, of
which Albert W. Barber serves as executor.
At each election for directors every shareholder entitled to vote at such
election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected
and for whose election he has a right to vote, or to cumulate his votes by
giving one candidate as many votes as the number of such directors multiplied
by the number of his shares shall equal, or by distributing such votes on the
same principle among any number of such candidates. The Company has proposed
to eliminate cumulative voting rights in future elections of directors. See
"Proposal 4 -- Elimination of Cumulative Voting Rights." Cumulative voting
allows a shareholder to multiply the number of votes they are entitled to cast
by the number of directors for whom they are entitled to vote and cast the
product for a single candidate or distribute the product among two or more
candidates.
<PAGE>
NOMINATION AND ELECTION OF DIRECTORS
The bylaws of the Company provide that the Board of Directors shall consist
of not less than five nor more than twenty-five directors. The exact number
of directors is currently set at twelve by Board resolution. The number of
directors may be increased or decreased within the foregoing range from time
to time by the Board of Directors or resolution of the shareholders. The
terms of office for directors continue until the next Annual Meeting of
Shareholders and until their successors are elected and qualified or until
earlier resignation, removal from office or death.
Each Proxy executed and returned by a shareholder will be voted as
specified thereon by the shareholder. If no specification is made, the
Proxy will be voted for the election of the nominees named below to constitute
the entire Board of Directors. In the event that any nominee withdraws or
for any reason is not able to serve as a director, the Proxy will be voted
for such other person as may be designated by the Board of Directors as
substitute nominee, but in no event will the Proxy be voted for more than
twelve nominees. Management of the Company has no reason to believe that any
nominee will not serve if elected. All the nominees are currently directors of
the Company.
Directors are elected by a plurality of the votes cast by the holders of
the shares entitled to vote in the election at a meeting at which a quorum is
present. A quorum is present when the holders of a majority of the shares
outstanding on the record date are present at a meeting in person or by proxy.
An abstention would not be considered to be one of the "votes cast" for
purposes of the first sentence of this paragraph, but would be included in
determining whether a majority of the outstanding shares is represented for
determining whether a quorum is present at a meeting.
INFORMATION ABOUT NOMINEES FOR DIRECTOR
The following information as of April 1, 1996, has been furnished by
the respective nominees for Director. Except as otherwise indicated, each
nominee has been or was engaged in his present or last principal employment,
in the same or a similar position, for more than five years.
<TABLE>
<CAPTION>
Number of Shares
Information Owned Beneficially
Name (Age) About Nominee (Percent of Class)
- ---------- --------------- -------------------
<S> <S> <C>
John H. Clark (58) President and Director of Southwest 37,890
Georgia Bank (the "Bank") since 1978, (2.97%) (1)
Mr. Clark has served as President
and Director of the Company since 1980.
Leo T. Barber, Jr. (73) A Director of the Bank since 1951 and of 242,571
the Company since 1981, Mr. Leo Barber is (18.99%) (2)
Chairman of the Board of both the Bank and the
Company. He is a general partner of South Georgia
Finance Company, a family investment company.
Also, he is President of South Georgia
Investment Company, a rental and investment
company.
Albert W. Barber (66) A Director of the Company and Bank since 1990, 230,121
Mr. Albert Barber is a general partner of South (18.01%) (3)
Georgia Finance Company, a family investment
company. Also, he is Vice President and Treasurer
of South Georgia Investment Company, a rental and
investment company.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <S> <C>
R. Bradford Burnette (56) President and Chief Executive Officer of Park Avenue 161*
Bank, which is located in Valdosta, Georgia.
Mr. Burnette was elected as Director of the Bank
and the Company by the Board in 1995. Mr. Burnette
is standing for election as Director of the
Company for the first time at the Company's
1996 Annual Meeting.
Robert M. Duggan (64) A Director of the Bank since 1980 and of 15,751
the Company since 1981, Mr. Duggan is a (1.23%)
retired President of Davis Gas Company
and is currently self employed as a tree
farmer.
E. J. McLean, Jr. (73) A Director of the Company since 1981 and of 24,411
the Bank since 1980, Mr. McLean is a retired (1.91%)
Vice President and active consultant of McLean
Engineering Company, Inc., a consulting
engineering firm.
Glenn D. Moon (66) A Director of the Bank and the Company since 5,501*
1995, Mr. Moon is a retired Senior Vice
President and Trust Officer of the Bank and
the Company.
Richard L. Moss (44) A Director of the Bank since 1980 and of the 10,136*
Company since 1981, Mr. Moss is
President of Moss Farms.
Lee C. Redding (49) A Director of the Bank and the Company since 10,129*
1995, Dr. Redding is a Dentist and owner
of a family dental practice since 1976.
Roy H. Reeves (36) A Director of the Bank and the Company since 13,523
1991, Mr. Reeves is Secretary-Treasurer of (1.06%)
Kelly-Reeves Furniture Company and managing
partner with Reeves Properties, a property
rental company.
Jack Short (73) A Director of the Bank since 1975 and of the 12,636*
Company since 1981, Mr. Short is Vice Chairman
of the Board of both the Bank and the Company.
Also, he is a Partner in the law firm of Short
and Fowler.
Johnny R. Slocumb (43) A Director of the Bank and the Company since 13,661
1991, Mr. Slocumb is owner of the Slocumb (1.07%)
Company, a company which offers real estate
and insurance services.
</TABLE>
- ---------------------
* Less than one percent (1%)
(1) Includes 21,731 shares allocated to the account of Mr. Clark in the
Employee Stock Ownership Plan and Trust, over which shares Mr. Clark
exercises voting power.
(2) Includes 129,825 shares owned of record by the Louise W. Barber Trust,
of which Mr. Leo T. Barber is co-trustee, 62,420 shares owned of record
by the L.T.B.,Sr.,Trust of which Mr. Barber is co-trustee,
and 3,000 shares owned of record by Mr. Barber's wife.
(3) Includes 129,825 shares owned of record by the Louise W. Barber Trust,
of which Mr. Albert Barber is co-trustee, 62,420 shares owned by the
L.T.B.,Sr.,Trust of which Mr. Barber is co-trustee, 1,300 shares owned of
record by Mr. Barber's wife, and 2,000 shares owned by the Estate of
Sue Barber Fontenot, of which Mr. Barber is executor.
There are no family relationships between any director, executive
officer or nominee for director of the Company or any of its subsidiaries with
the exception of two directors, Leo T. Barber, Jr. and Albert W. Barber, who
are brothers.
EXECUTIVE COMPENSATION
The Company did not pay any remuneration to its officers during the year
ended December 31, 1995. The following table sets forth the annual and other
compensation paid or accrued for each of the last three fiscal years, including
directors' fees, for John H. Clark, who is the President and Director of the
Company and the Bank. No other executive officers of the Company were paid
$100,000 or more in salary, bonus and directors' fees during 1995.
<TABLE>
Summary Compensation Table
<CAPTION>
Name and Principal Annual Compensation All Other
------------------------------------------------
Position During 1995 Year Salary Bonus Other Compensation
- -------------------- ---- ------ ----- ------ ------------
<S> <C> <C> <C> <C> <C>
John H. Clark 1995 143,400 35,000 1,800 (1) 27,750 (2)
President of the Company and 1994 139,400 36,000 1,800 (1) 27,151 (2)
the Bank 1993 133,508 36,000 1,800 (1) 28,351 (2)
</TABLE>
(1) Amount represents fair market value of discount on stock purchased under
the Company's stock plan for officers and directors, which allows a
participant to receive Common Stock in lieu of salary and directors'
fees, up to certain limits, with a value of 150% of the cash
compensation foregone by each participant.
(2) Amount includes Bank's contributions to defined contribution plan of
$22,500, contribution to supplementary retirement plan of $3,900, and
premiums for group term life insurance of $1,350.
The Company has never granted restricted stock, options, stock
appreciation rights or similar awards to any of its present or past executive
officers.
Compensation of Directors
Compensation. The Board of Directors of the Bank consists of the same
members as the Board of Directors of the Company. In 1995, the Chairman, Vice
Chairman and each Director of the Bank received an annual fee of $6,000,
$4,200, and $2,400, respectively, and $100 per Bank's Board meeting
attended. Also, each Director of the Bank received $50 per Bank's Board
committee meeting attended. The Directors of the Company are not compensated
for membership on the Company's Board of Directors.
Employment Contracts and Termination of Employment and Change in Control
Arrangements
On November 21, 1989, the Company entered into an employment agreement
(the "Agreement") with John H. Clark, employing Mr. Clark as Chief Executive
Officer until ten (10) years after the date of the Agreement (the "Term") or
until the Agreement is earlier terminated. Under the Agreement the Board of
Directors of the Bank or Company has discretion to determine Mr. Clark's
compensation , based upon the financial successes of and the contribution
of Mr. Clark to the Bank and the Company. Benefits of the kind customarily
granted to other executives of the Bank and Company, including disability
insurance, medical insurance for life and life insurance, identical to that
provided to Mr. Clark at the commencement of the Term, until age 65 and
thereafter with life insurance comparable to that provided to retirees at the
commencement of the Term, shall be granted to Mr. Clark under the Agreement.
In determining Mr. Clark's compensation under the Agreement, the Board
subjectively considers Mr. Clark's tenure with the Bank and Company and the
growth in assets and the results of operations of the Company during
Mr. Clark's tenure.
Mr. Clark's employment may be terminated for cause if Mr. Clark violates
or breaches any material term of the Agreement, habitually neglects his duties
or is convicted of a felony. If Mr. Clark is terminated for cause, the Bank
and the Company will have no further financial obligation to Mr. Clark.
If Mr. Clark's employment terminates for any reason, Mr. Clark agrees not
to provide banking services or solicit certain bank customers within certain
geographical limits within five years of such termination. In consideration
for such non-compete agreement and services rendered, if Mr. Clark's
employment is terminated without cause prior to the end of the Term, Mr. Clark
will receive a termination payment annually during the remainder of the Term.
The amount of such annual payment will depend upon the year of termination,
and can vary from an annual payment of $100,000 for the remaining four years
of the Term to a single payment of $125,000 if Mr. Clark were terminated
during the last year of the Term.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Bank from time to time has had, and expects to have in the future,
banking transactions in the ordinary course of business with officers and
directors of the Company and their related interests, on substantially the
same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other persons, and such transactions
have not involved more than the normal risk of collectibility or presented
other unfavorable features.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held 12 regular meetings during 1995. All of the
directors attended at least seventy-five percent (75%) of the Board and
committee meetings held during their tenure as directors.
The Company has a personnel committee of the Board of Directors. This
committee is composed of three members, John H. Clark, Leo T. Barber, Jr., and
Jack Short. The committee, which recommends compensation levels for the
Bank's employees, held two meetings during 1995. The Company has no standing
audit or nominating committee of the Board of Directors or committee
performing similar functions.
<PAGE>
DISSENTERS' RIGHTS
Any shareholder of record of Common Stock who objects to the
amendment to the Articles of Incorporation to eliminate
cumulative voting rights ("Proposal no. 4," described below) and who fully
complies with Section 14-2-1301, et seq. of the Georgia Code will be entitled
to demand and receive payment in cash of an amount equal to the fair value
of all, but not less than all, of his shares of Common Stock ("dissenters'
rights") if the amendment to the Articles of Incorporation to eliminate
cumulative voting rights is approved. A shareholder who objects to any other
proposed amendment to the articles of incorporation described below will not
be entitled to dissenters' rights. A shareholder of record may assert
dissenters' rights with respect to Proposal no. 4 as to fewer than all the
shares registered in his name only if he dissents with respect to all
shares beneficially owned by any one beneficial owner and
notifies the Company in writing of the name and address of each
person on whose behalf he asserts dissenters' rights. For the
purpose of determining the amount to be received in connection
with the exercise of statutory dissenters' rights under the
Georgia Code, the fair value of a dissenting shareholder's Common
Stock equals the value of the shares immediately before the date
on which the amendment to the Articles of Incorporation to
eliminate cumulative voting rights is approved, excluding any
appreciation or depreciation in anticipation of such amendment.
Any Company shareholder desiring to receive payment of the
fair value of his Common Stock in accordance with the
requirements of the Georgia Code:
(a) must deliver to the Company, prior to the time the
shareholder vote on Proposal no. 4, the amendment to the Articles of
Incorporation to eliminate cumulative voting rights, is taken, a
written notice of his intent to demand payment for his shares if
such amendment is approved;
(b) must not vote his shares in favor of such amendment;
and
(c) must demand payment and deposit stock certificates
representing Company Common Stock in accordance with the terms of
a notice which will be sent to the shareholder by the Company no
later than 10 days after such amendment is approved.
A filing of the written notice of intent to dissent with
respect to the amendment to the Articles of Incorporation to
eliminate cumulative voting rights should be sent to:
John Clark, President
Southwest Georgia Financial Corporation
201 First Street, S.E.
Moultrie, GA 31768.
A VOTE AGAINST PROPOSAL NO. 4, THE AMENDMENT TO ELIMINATE CUMULATIVE VOTING
RIGHTS, ALONE WILL NOT SATISFY THE REQUIREMENTS FOR THE SEPARATE
WRITTEN NOTICE OF INTENT TO DISSENT TO THE AMENDMENT, THE
SEPARATE WRITTEN DEMAND FOR PAYMENT OF THE FAIR VALUE OF SHARES
OF COMPANY COMMON STOCK AND THE DEPOSIT OF THE STOCK
CERTIFICATES, WHICH ARE REFERRED TO IN CONDITIONS (A) AND (C)
ABOVE. RATHER, A DISSENTING SHAREHOLDER MUST SEPARATELY COMPLY
WITH ALL OF THOSE CONDITIONS.
Within ten days of the later of the date on which Proposal no. 4, the
amendment to the Articles of Incorporation to eliminate
cumulative voting rights, is approved, or receipt of a payment
demand by a shareholder who deposits his stock certificates in
accordance with the dissenters' notice sent to those shareholders
who notify the Company of their intent to dissent and take
appropriate steps to dissent, described in (a), (b) and (c)
above, the Company must offer to pay to each dissenting
shareholder the amount the Company estimates to be the fair value
of the dissenting shareholder's shares, plus accrued interest.
Such offer must be accompanied by:
(a) The Company's balance sheet as of the end of a fiscal
year ending not more than 16 months before the date of making
payment, an income statement for that year, a statement of
changes in shareholders' equity for that year, and the latest
available interim financial statements, if any;
(b) An explanation of how the interest was calculated;
(c) A statement of the dissenting shareholder's right to
demand payment of a different amount under Section 14-2-1327 of
the Georgia Code; and
(d) A copy of the dissenters' rights provisions of the
Georgia Code.
If the dissenting shareholder accepts the Company's offer by
written notice to the Company within 30 days after the Company's
offer, or is deemed to have accepted the offer by reason of
failing to respond to such offer within such 30-day period, the
Company must make payment for the dissenting shareholder's shares
within 60 days after the making of the offer or the date on which
the amendment to eliminate cumulative voting rights is approved
by shareholders, whichever is later. Upon payment of the agreed
value, the dissenting shareholder will cease to have any interest
in his shares of Common Stock.
If within 30 days after the Company offers payment for the
shares of the dissenting shareholder, the dissenting shareholder
does not accept the Company's estimate of fair value of his
shares and interest due thereon and demands payment of his own
estimate of the fair value of the shares and interest due
thereon, then the Company, within 60 days after receiving the
payment demand of a different amount from a dissenting
shareholder, must file an action in a court of competent
jurisdiction in Colquitt County, Georgia, requesting that the
fair value of such shares be found and determined. The Company
must make all dissenting shareholders whose demands remain
unsettled parties to the proceedings. If the Company does not
commence the proceeding within such 60-day period, it shall be
required to pay each dissenting shareholder whose demand remains
unsettled the amount demanded by the dissenting shareholder who
did not accept the Company's estimate of the fair value of the
shares of Common Stock.
The foregoing does not purport to be a complete statement of
the provisions of the Georgia Code related to statutory
dissenters' rights and is qualified in its entirety by reference
to the dissenters' rights provisions of the Georgia Code, which
are reproduced in full in Appendix A to this Proxy Statement and
which are incorporated herein by reference.
<PAGE>
AMENDMENTS TO ARTICLES OF INCORPORATION
PROPOSALS 2 THROUGH 8
Introduction
The Board of Directors has approved unanimously all of the amendments
described below (collectively, the "Proposed Amendments") to the Articles of
Incorporation, as amended of the Company (collectively, the "Articles of
Incorporation"),having determined that such amendments are advisable and in the
best interests of the Company and its shareholders. The Proposed Amendments are
set forth in Exhibits A-F attached hereto and are described in detail below.
If the Proposed Amendments are approved by the shareholders, the
amendments as set forth in Exhibits A-F hereto will be reflected in the
Articles of Incorporation. If not all of the amendments proposed hereby are
approved by the shareholders, only those amendments which are approved will be
reflected in the Articles of Incorporation. The Company believes that its
officers and directors will vote shares of Common Stock owned by each of them
in favor of the Proposed Amendments, but it has not polled its officers and
directors about this matter; therefore no assurances can be given in this
regard.
Adoption of the Proposed Amendments could have a significant effect on
the ability of shareholders and the Company to benefit from mergers,
tender offers, acquisitions or assumptions of control which may be
opposed by the incumbent Board of Directors and may render such
transactions more difficult, even if beneficial to some or all
shareholders. Accordingly, before voting, shareholders are urged to read
carefully the following sections of this Proxy Statement which describe
the Proposed Amendments and their purposes and effects. The Company believes
that the following descriptions are complete in all material respects, but
they are are qualified in their entirety by the full text of the Proposed
Amendments to the Articles of Incorporation.
The Proposed Amendments
General. The Proposed Amendments would (i) amend the Company's Articles
of Incorporation to authorize the issuance of 3,000,000 shares of Preferred
Stock $1.00 par value per share; (ii) amend the Company's Articles of
Incorporation to authorize the Board of Directors to consider, in addition to
the effects of any transaction on the Company and its shareholders, the
interests of employees, customers, suppliers and creditors of the Company and
the Bank and the communities in which the Company and the Bank are located, and
any other factors and interests the Board considers appropriate
("constituencies") when evaluating a transaction; (iii) amend the Company's
Articles of Incorporation to eliminate cumulative voting for directors; (iv)
amend the Company's Articles of Incorporation to provide for the limitation of
director liability; (v) amend the Company's Articles of Incorporation to re-
quire the affirmative vote of the holders of 80% of the issued and outstanding
shares entitled to vote thereon to amend the Articles of Incorporation or the
By-Laws of the Company; (vi) amend the Company's Articles of Incorporation to
enact a provision to govern potential business combination transactions with
interested shareholders; and (vii) amend the Company's Articles of
Incorporation to provide that directors can be removed only for cause by the
affirmative vote of the holders of 80% of the issued and outstanding shares
entitled to vote thereon.
Purpose and Effect of the Proposed Amendments. A principal purpose of
the Proposed Amendments is to supplement and strengthen existing
provisions of the Articles of Incorporation and By-Laws and to discourage
certain types of transactions that involve an actual or threatened change
of control of the Company that the Board believes is not in the Company's
best interests. These provisions are intended to make any change in the
control of the Board more difficult and time-consuming and thereby
encourage potential acquirors to negotiate with the Board prior to
commencing any takeover of the Company. The provisions would reduce the
vulnerability of the Company to an unsolicited proposal for the takeover
of the Company which is (i) unfair in that it does not contemplate the
acquisition of all of the outstanding shares or (ii) at a price that is
unfair or under conditions that are unfair. The Board believes that as a
general rule such unsolicited proposals are not in the best interests of
the Company and its shareholders because (i) in cases where a potential
acquiror seeks to acquire less than all shares of a company the acquiror
will often pay a premium for a controlling interest in the company,
without affording all shareholders the opportunity to receive the same
economic benefits; for instance, an acquiror may seek to pay cash to
acquire a controlling interest and then to pay remaining shareholders a
lower price than paid for the acquisition of control or to pay for such
shares in a less desirable form, (ii) a non-negotiated takeover bid may
be timed to take advantage of temporarily depressed stock prices, and
(iii) a non-negotiated takeover may be designed to foreclose or minimize
the possibility of more favorable competing bids or alternative
transactions. If such provisions are approved, the Board could reject a
transaction that it deems not in the Company's best interest even if
supported by some or all of the shareholders and even if some or all
shareholders are offered a premium for their shares over the then current
market value or over their cost basis in such shares.
The Proposed Amendments are also intended to discourage accumulations of
substantial blocks of the Company's stock and "surprise" takeovers and to
provide management and the Board with sufficient time and information to
evaluate properly takeover or business combination proposals. The Proposed
Amendments should also promote conditions conducive to continuity and
stability of the Board and its management and policies.
The Board believes that it is in a better position to negotiate
effectively on behalf of all shareholders than the individual shareholders of
the Company in that the Board is likely to be more knowledgeable than any
individual shareholder in assessing the business and prospects of the Company.
Accordingly, the Board is of the view that negotiations between the Company
and a potential acquiror would increase the likelihood that shareholders would
receive the best possible price for their shares from anyone desiring to
obtain control of the Company.
Possible Disadvantages of the Proposed Amendments and Other
Considerations. The Proposed Amendments, if adopted, may make more difficult
or discourage a proxy contest or the assumption of control of the Company or
the consummation of a business combination by a holder of a substantial block
of the Company's stock. Adoption of the Proposed Amendments also may make
more difficult the removal of the incumbent Board or the enlargement of the
Board and thus could increase the likelihood that incumbent directors will
retain their position. If adopted, the Proposed Amendments also could have
the effect of discouraging a third party from making a tender offer or
otherwise attempting to obtain control of the Company, even though such an
attempt might be beneficial to the Company and some or all of the
shareholders, and could discourage offers by third parties that may be at a
significant premium to the then-current market value of the Company's Common
Stock. Nevertheless, the Board believes that the benefits of enhancing its
ability to negotiate with the proponent of an unfriendly or unsolicited
proposal to take over or restructure the Company outweigh the disadvantages of
discouraging such proposals.
The proposals are not being submitted in response to any specific effort
of which the Board is aware to accumulate the Company's Common Stock or to
obtain control of the Company. The Board believes, however, that it is
desirable for the shareholders to adopt the Proposed Amendments at this time
to provide the Company with a degree of flexibility in negotiations should
such efforts occur in the future.
The Board believes that the Proposed Amendments will have no material
adverse effect on the present market value of the Company's Common Stock.
Since the 1980's,companies throughout the United States have adopted provisions
in their Articles of Incorporation and bylaws similar to the Proposed
Amendments. As a result, the Board believes shareholders are accustomed to the
adoption of such provisions by companies with respect to which they own equity
interests. The Board believes that its shareholders and the communities in
which the Company does business, generally the market area for its Common Stock
(which is not publicly traded), will not consider the Proposed Amendments, if
adopted, to negatively impact the value of their ownership interests in the
Company.
Proposal No. 2 - Authorization of Preferred Stock
The Board of Directors proposes that Article V of the Company's Articles
of Incorporation amended to authorize the issuance of up to 3,000,000 shares
of Preferred Stock, par value $1.00 per share. The terms of the Preferred
Stock are set forth as Exhibit A to this Proxy Statement and are incorporated
herein by reference. If approved by the shareholders, the Board would have
the authority to issue the Preferred Stock in one or more series and to fix or
alter the designation, powers, preferences, rights, qualifications,
limitations and restrictions of the shares of each such series, including the
dividend rights, dividend rate, conversion rights, voting rights, rights and
terms of redemption (including sinking fund provision), liquidation
preferences and the number of shares constituting any such series, without any
further vote or action by the shareholders. The various series of Preferred
Stock, as determined by the Board of Directors from time to time, will not be
required to be on a parity with each other series and to share ratably in the
payment of dividends or as to assets on liquidation. Such determinations will
be made by the Board at the time that it establishes a particular series of
Preferred Stock and will take into account the circumstances pertinent at that
time. Shares of Preferred Stock reacquired by the Company from time to time
could, in the discretion of the Board of Directors, be reissued as shares of
the same or any other series.
The Board believes it is in the best interest of the Company to
establish authority for the issuance of Preferred Stock in order to meet the
possible future developments for which the issuance of such shares may be
desirable, or to provide for future acquisitions of desirable property or
securities of other businesses, or to sell shares for cash under circumstances
in which the Board deems such action to be in the best interest of the Company
and its shareholders, or for other corporate purposes. If authorization of
the Preferred Stock were postponed until specific needs arose, the time and
expense incident to shareholder action on each proposed issuance might deprive
the Company of a degree of flexibility in negotiation, which in the Board's
view is important to an effective use of such shares. Such flexibility will
be available if the shareholders authorize the creation of the new class of
Preferred Stock.
Shares of Preferred Stock could be issued with such rights, privileges
and preferences as would deter a future tender or exchange offer. It is
possible that the unissued shares of Preferred Stock could be used in the
future by the Board of Directors in such a manner as to discourage the
acquisition of control or some other transaction that some, or a majority, of
the shareholders might believe to be in their best interest, or in which the
shareholders might receive a premium for their stock over the market price of
such stock. To the extent that any series of Preferred Stock had conversion
rights, the exercise of such conversion rights could have the effect of
diluting the voting power of persons attempting to gain control of the
Company. The Board of Directors has no present intention to issue shares of
Preferred Stock to implement defensive or anti-takeover devices in the present
environment.
The full text of the proposed amendment to Section V of the Articles of
Incorporation is contained in Exhibit A to the Proxy Statement and is
incorporated herein by reference.
Adoption of the foregoing amendment to the Company's Articles of
Incorporation requires the approval of the holders of a majority of the issued
and outstanding Common Stock. Abstentions and broker non-votes will be
included in determining whether a quorum is present at the meeting, but would
have the effect of votes against the proposal. THE BOARD OF DIRECTORS
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSED AMENDMENT TO THE ARTICLES
OF INCORPORATION. UNLESS A VOTE "AGAINST" OR AN ABSTENTION IS INDICATED ON A
PROXY, THE PROXY WILL BE VOTED "FOR" THE PROPOSAL.
Proposal No. 3 - Authorization For Board of Directors to Consider
Constituencies
The Board of Directors has proposed the adoption of an amendment to the
Company's Articles of Incorporation that allows the Board to consider factors
in addition to the effects of any transaction on the Company and its
shareholders (the "Business Judgment Amendment").
Under present Georgia law, the directors of a corporation are
required to discharge their duties in good faith and with that
degree of diligence, care and skill that ordinarily prudent
men would exercise under similar circumstances in like
positions, whether in accepting or rejecting a solicitation
offer or pursuing other alternatives or defenses. The provisions of the
Company's articles of incorporation and bylaws guide directors in discharging
their duties. Actions taken by directors in accordance with their fiduciary
duties will generally be afforded the protections of the business judgment
rule. Historically, in the takeover context, the board's duty is to endeavor
to achieve the best possible result for its shareholders.
Often, a board may believe that their duties translate into a duty to
maximize the monetary gain of the shareholders although this is not a
requirement under the Georgia Code; a focus on price is often criticized
because it ignores other relevant factors. In order to define more fully
those factors the Board of Directors may consider to determine in good faith
their response to a tender offer or similar proposal, the Business Judgment
Amendment has been submitted for shareholder approval. In a transaction in
which an acquiror must negotiate with the Board, the Board may take account
of the underlying and long-term values of the Company's business, the
possibilities for more favorable terms, anticipated favorable developments in
the Company's business not yet reflected in the stock price and equal
treatment of all shareholders. By adopting Proposal No. 3, authorization for
the Board to consider constituencies, the shareholders would make it explicit
to potential acquirors that the Board may consider the foregoing factors,
among others, when negotiating with a potential acquiror. Historically, the
Company has not received an unsolicited takeover offer.
If the shareholders adopt the proposed amendment, the Board of Directors
would be expressly authorized, but not required, to consider other factors
when deciding what is in the best interests of the Company and its
shareholders. This expanded business judgment could be utilized by the Board
when deciding whether to accept, reject, or investigate a proposal or offer
for the Company or its securities. These factors could include, without
limitation, the interests of the employees, customers, suppliers and creditors
of the Company and its subsidiary, the communities in which offices of the
Company and its subsidiary are located and all other factors which the Board
considers appropriate. Additional factors could include, but would not be
limited to factors such as the adequacy of the purchase price compared not
only to the then-current market price, but also to the directors' estimates of
the future value of the Company, and the short-term and long-term interests of
the Company, including the possibility that the best interests of the Company
may be served by remaining independent from any other entity.
The Business Judgment Amendment could deter offers made directly to the
shareholders or the Company or result in the Board of Directors' rejecting an
offer or transaction that would provide shareholders a premium on their
investment. The adoption of this proposal could result in the Board of
Directors' justifying the rejection of business combination proposals
considered favorable by the shareholders on the grounds that the "other
factors considered" outweigh the short-term profit potential of the
acquisition proposal. On the other hand, this proposal frees the Board to
consider a broad range of criteria when carrying out their duties to the
Company and its shareholders, rather than being constrained by shareholder
monetary benefit. The Board believes that the Company and the shareholders
are best served by a full consideration of a broader spectrum of ramifications
on the Company's business, rather than restricting the scope of the Board's
inquiry.
While value to shareholders is a very important factor when weighing the
benefits of a proposal, the Board of Directors believes it appropriate also to
consider other relevant factors. For example, a takeover bid often places the
target company in the position of making a forced sale, sometimes when the
market price of its stock may be temporarily depressed. The Board of
Directors believes that frequently the consideration offered in such a
situation, even though it may be in excess of the then market price, is less
than that which could be obtained in a freely negotiated transaction.
Management, in a freely negotiated transaction, on the other hand, would have
the opportunity to seek a suitable partner at a time of its choosing and to
negotiate for the most favorable price and terms which reflect not only the
current but also the future value of the Company. If the Business Judgment
Amendment is approved by shareholders, the Board of Directors could consider
such factors.
The Board of Directors also believes that adoption of the Business
Judgment Amendment may create an attitude of confidence on the part of its
employees and customers which will be of immediate benefit to the Company. In
the opinion of the Board of Directors, approval of the Business Judgment
Amendment will strengthen its position in dealing with the Company's business.
Another effect of the proposed Business Judgment Amendment may be to dissuade
shareholders from engaging the Company in costly litigation when such
shareholders are displeased with Board action. Such litigation might require
significant management time, and, for example, might otherwise involve an
allegation by a shareholder that the Board of Directors breached an obligation
to shareholders by not limiting its evaluation of a takeover bid to the value
of the consideration being offered in relation to the then market price.
Litigation could be deterred because the Business
Judgment Amendment, by broadening the range of factors the
Board of Directors may consider when evaluating a proposal,
reduces the number of issues upon which a shareholder is
likely to be successful in a lawsuit alleging that the Board
of Directors violated its duties. The Board of Directors
believes that the Business Judgment Proposal would not deter
legitimate shareholder lawsuits, but instead would only deter
lawsuits where the only issue is the price of an offer or
similar transaction.
Another effect of the proposed amendment may be to discourage, in
advance, a tender offer or other proposal. The Business Judgment Amendment
would not make a tender offer or similar transaction regarded by the Board of
Directors as being in the best interests of the Company more difficult to
accomplish. However, it would permit the Board of Directors to determine that
a proposed transaction was not in the best interests of the Company (and thus
to oppose it) on the basis of the various factors deemed relevant. In some
cases, such opposition by the Board of Directors might have the effect of
maintaining the position of incumbent management.
The full text of the proposed amendment to the Articles of Incorporation
is contained in Exhibit B to the Proxy Statement and is incorporated herein by
reference.
Adoption of the foregoing amendment to the Company's Articles of
Incorporation requires the approval of the holders of a majority of the issued
and outstanding shares of Common Stock. Abstentions and broker non-votes
will be included in determining whether a quorum is present at the meeting,
but would have the effect of votes against the proposal. THE BOARD OF
DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSED AMENDMENT TO
THE ARTICLES OF INCORPORATION TO AUTHORIZE BOARD OF DIRECTORS TO CONSIDER
CONSTITUENCIES. UNLESS A VOTE "AGAINST" AN ABSTENTION IS INDICATED ON A
PROXY, THE PROXY WILL BE VOTED "FOR" THE PROPOSAL.
Proposal No. 4. - Elimination of Cumulative Voting Rights
The shareholders are being requested to approve an amendment to the
Company's Articles of Incorporation to eliminate cumulative voting in the
election of directors. Currently, the Articles of Incorporation provide for
cumulative voting rights. In an election of directors governed by cumulative
voting rights, the shareholders are entitled to multiply the number of votes
they are entitled to cast by the number of directors for whom they are
entitled to vote and cast the product for a single candidate or distribute the
product among two or more candidates.
Currently, to ensure the right to elect one board member through
cumulative voting, a shareholder must control one more share than the total
number of voting shares divided by the number of directors to be elected plus
one, or 1 + V/(D+1), where V is the number of voting shares, and D is the
number of directors to be elected. Therefore, using cumulative voting,
assuming that 12 directors are to be elected, and assuming all 1,277,421
of the currently issued and outstanding shares of the Company are voted, a
shareholder must control 98,264 shares to ensure the right to elect one
director. This amount is equal to approximately 7.69 percent of the total
number of outstanding shares of the Company. If cumulative voting is
eliminated, a shareholder would have to control greater than 50 percent of
the total number of shares voting in order to ensure the right to elect one or
more board member.
If the proposal is adopted, in all future elections of the Board of
Directors holders of a plurality of the shares actually voted (assuming that a
quorum is present) will be able to elect all of the directors being elected at
the time. The elimination of cumulative voting is not a departure from
the manner in which the Company's directors have been elected in the past.
Although the Company's Articles of Incorporation have always permitted
cumulative voting,such voting has never been used in the election of a
director to the Company's board. The elimination of cumulative voting will
make it more difficult for a minority shareholder or shareholders to obtain
representation on the Board of Directors without the concurrence of holders of a
majority of the shares. In addition, the proposal can function as an
anti-takeover device. It may under certain circumstances discourage or render
more difficult a merger, tender offer or proxy contest or discourage the
acquisition of large blocks of the Company's shares by persons who would not
make such an acquisition without assurances of the ability to attain
representation on the Board of Directors. On the other hand, the Board
believes that each director should represent the interests of all shareholders,
and that the presence on the Board of Directors of one or more directors
representing the interests of a minority shareholder or group of shareholders
could prevent the Company from operating in the most effective manner.
The proposal to eliminate cumulative voting is not in response to any
effort by a minority shareholder or group of shareholders to attain
representation on the Board of Directors or acquire greater influence in the
management of the Company's business, nor is the Company aware of any such
effort. Furthermore, it is not in response to any attempt to acquire control
of the Company, nor is the Company aware of any such attempt.
The proposed amendment to the Articles of Incorporation would delete in
its entirety Article VI of the Articles of Incorporation, as amended. Proposal
no. 4 gives rise to dissenters' rights. See "Dissenters' Rights" above.
Adoption of the foregoing amendment to the Company's Articles of
Incorporation requires the approval of the holders of a majority of the issued
and outstanding shares of Common Stock. Abstentions and broker non-votes
will be included in determining whether a quorum is present at the meeting,
but would have the effect of votes against the proposal. THE BOARD OF
DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSED AMENDMENT TO
THE ARTICLES OF INCORPORATION TO ELIMINATE CUMULATIVE VOTING IN THE ELECTION
OF DIRECTORS. UNLESS A VOTE "AGAINST" OR AN ABSTENTION IS INDICATED ON A
PROXY, THE PROXY WILL BE VOTED "FOR" THE PROPOSAL.
Proposal No. 5 - Limitation of Director Liability
The Board of Directors recommends that the shareholders adopt an
amendment to the Articles of Incorporation to limit, as allowed since 1989 by
the Georgia Business Corporation Code (the "Georgia Code"), director liability
for monetary damages to the Company, as described below. Under the present
provisions of the Company's Articles of Incorporation, there is no limitation
on the liability of directors. While adoption of the proposed amendment
affects the potential liability of members of the current Board of Directors,
and the current members are, therefore, interested in its adoption, the Board
is of the view that the proposed amendment is important to help assure the
ability of the Company to recruit and retain competent directors. The
Bank has in place a limitation on director liability to
the fullest extent allowed by the Georgia Financial Institutions Code,
although Georgia law does not allow for a limitation on liability to the
banking subsidiary.
Georgia law requires directors to discharge their duties in a manner
they believe in good faith to be in the best interest of the corporation, and
with the care which an ordinarily prudent person in a like position would
exercise under similar circumstances under the current Articles of the
Company, an action may be brought against a director for breach of his duties
by a shareholder in a derivative action on behalf of the corporation. Should
the Board of Directors fail to exercise such care, the Board's actions could
be enjoined or rescinded by court order or the directors could be personally
sued for damages.
Pursuant to Georgia law, the amendment would eliminate or limit the
personal liability of a director to the Company or its shareholders for mone-
tary damages for breach of the duty of care or other duty as a director. As
provided by law, the amendment would not eliminate or limit the
liability of a director for appropriating, in violation of his duties, any
business opportunity of the Company, engaging in intentional misconduct or a
knowing violation of law, obtaining an improper personal benefit, or
authorizing a dividend, stock repurchase or redemption or a distribution of
assets that is illegal under Section 14-2-832 of the Georgia Code. Therefore,
even if the proposed amendment were adopted, liability for monetary damages on
any of these grounds would still exist. Liability for monetary damages for
violations of federal securities laws would also be unaffected. Furthermore,
the proposed amendment would not limit or eliminate the right of the Company
or any shareholder to seek an injunction, a rescission or any other equitable
(non-monetary) relief in the event of a breach of a director's fiduciary
duties. In addition, pursuant to Georgia law, the amendment may not
eliminate or limit the liability of any director for any act
or omission that occurred prior to the date on which the
amendment is approved by shareholders.
The Board believes that the amendment to eliminate director's potential
liability for monetary damages to the Company is desirable due to
significant increases in the number and magnitude of lawsuits against
directors. Although the Company has been able to attract and retain
directors, obtain directors' liability insurance and there has been no actual
or threatened litigation involving the Company's directors, the Board
nevertheless believes that these changes may threaten the quality and
stability of the governance of the Company because directors may be deterred
from serving or from making entrepreneurial decisions because of the threat of
personal liability.
While the Board believes that the amendment is in the best interest of
the shareholders as outlined herein as well as the Company, such an amendment
will limit the remedies available to a shareholder dissatisfied with Board
decisions protected by the amendment, including responses to any takeover
proposals for the Company. A shareholder's only remedy under the Georgia Code
in such circumstances would be to sue to stop the completion of the Board's
action if the proposed amendment were adopted. In many instances, this remedy
may not be effective. Shareholders, for example, may not be aware of a
transaction or an event until it is too late to be prevented. In these cases,
shareholders in the Company could be injured by, and yet have no effective
remedy under the Georgia Code for, a Board decision which is negligent or even
grossly negligent, to the extent that such negligence is not deemed to
constitute intentional misconduct. In addition, although the Board
anticipates that the amendment may have positive effects outlined above, no
assurances can be given that such results would be achieved.
The Board believes that the level of fiduciary responsibility exercised
by directors stems primarily from their desire to act in the best interests of
the Company. Consequently, the Board believes that the level of fiduciary
responsibility exercised by directors will not be diminished by the proposed
amendment to limit director's liability.
The full text of the proposed amendment to the Articles of Incorporation
is contained in Exhibit C to the Proxy Statement and is incorporated herein by
reference.
Adoption of the foregoing amendment to the Company's Articles of
Incorporation requires the approval of the holders of a majority of the issued
and outstanding shares of Common Stock. Abstentions and broker non-voters
will be included in determining whether a quorum is present at the meeting,
but would have the effect of votes against the proposal. The Board of
Directors recommends that shareholders vote "FOR" the proposed amendment to
the Articles of Incorporation to limit the personal monetary liabilities of
the directors, as described above. Unless indicated otherwise, proxies will
be voted "FOR" the proposal.
Proposal 6 - Amendment to Articles of Incorporation to Require Vote of
Holders of 80% of the Issued and Outstanding Shares Entitled to Vote Thereon
to Amend Articles of Incorporation or By-Laws.
The Board of Directors proposes that the shareholders adopt an amendment
to the Company's Articles of Incorporation that would specifically provide
that the neither the Articles of Incorporation nor the By-Laws of the Company
can be amended without the affirmative vote the holders of 80% of the shares
issued and outstanding and entitled to vote thereon. The Georgia Code
provides that unless the Articles of Incorporation provide otherwise, the
Articles of Incorporation and the By-Laws can be amended by the affirmative
vote of the holders of a majority of the shares issued and outstanding. This
provision would protect defensive measures included in the Articles or By-
Laws, including the ones proposed for shareholder approval at the annual
meeting, by making more difficult future amendments to the Articles of
Incorporation or the By-Laws that could result in the deletion or revision of
such defensive measures. At the 1995, 1994 and 1993 annual meetings of
shareholders, 83.2%, 83.9% and 81%, respectively, of the issued and
outstanding shares of common stock were voted at the meetings.
The proposal, however, could allow the holders of 21% of the outstanding
capital stock to exercise an effective veto over a proposed amendment to the
Articles of Incorporation or the By-Laws, despite the fact that the holders of
79% of the shares favor the proposal; however, the Board believes that the
protection gained by implementing the proposal would outweigh this potential
disadvantage, because, without the implementation of this amendment, a
potential hostile acquiror could effectively overturn all protective aspects
of the Articles of Incorporation and the By-Laws merely by obtaining 51% of
the outstanding shares entitled to vote thereon.
The full text of the proposed amendment to the Articles of Incorporation
is contained in Exhibit D to the Proxy Statement and is incorporated herein by
reference.
Adoption of the foregoing amendment to the Company's Articles of
Incorporation requires the approval of the holders of a majority of the issued
and outstanding shares of Common Stock. Abstentions and broker non-votes will
be included in determining whether a quorum is present at the meeting, but
would have the effect of votes against the proposal. THE BOARD OF DIRECTORS
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSED AMENDMENT TO THE ARTICLES
OF INCORPORATION TO REQUIRE THE AFFIRMATIVE VOTE OF THE HOLDERS OF 80% OF THE
OUTSTANDING SHARES ENTITLED TO VOTE THEREON TO AMEND THE ARTICLES OF
INCORPORATION OR THE BY-LAWS OF THE COMPANY. UNLESS A VOTE "AGAINST" OR AN
ABSTENTION IS INDICATED ON A PROXY, THE PROXY WILL BE VOTED "FOR" THE PROPOSAL.
Proposal 7 - Amendment to Articles of Incorporation to require prior approval
of 75% of the Board or a 75% vote of all shares and a 75% vote of
disinterested shares for a business combination with an interested
shareholder.
The Board of Directors recommends that a new Article IX be added to the
Company's Articles of Incorporation. Proposed Article IX (the "Supermajority
Amendment") would require that certain procedural safeguards for the
protection of noncontrolling shareholders be observed by an Interested
Shareholder (as defined below) seeking to effect certain business
combinations. Under the Supermajority Amendment, if a proposed Business
Combination (as defined below) is not approved by three-fourths of all
directors, the Business Combination must be approved by the affirmative vote
of the holders of at least 75% of the outstanding shares of Common Stock of
the Company, including the affirmative vote of the holders of at least 75% of
the outstanding shares of Common Stock held by shareholders other than the
controlling shareholder.
Increase of Shareholder Vote for Certain Business Combinations. At the
present time, Georgia law and the Company's Articles of Incorporation require
that after the Board of Directors (i) adopts a plan of merger or share
exchange or (ii) approves the sale, lease, exchange or other disposition of
all or substantially all of the Company's property, such plan of merger or
share exchange or disposition of property must be approved by the vote of the
holders of at least a majority of the outstanding common stock of the Company
(except that (i) a parent corporation owning at least 90 percent of the
outstanding shares of each class of a subsidiary corporation may merge the
subsidiary into itself or (ii) if the Company is insolvent the Board of
Directors may approve the sale, lease, exchange or other disposition of all or
substantially all of the Company's property without approval of any
shareholders). Other business combinations do not require shareholder
approval under Georgia law or the Company's present Articles of
Incorporation. The Supermajority Amendment would require the approval of
the holders of at least 75% of the outstanding shares of Common Stock of the
Company, including the affirmative vote of the holders of at least 75% of
the outstanding shares of Common Stock other than shares held by an Interested
Shareholder (the "75%/75% shareholder vote") for a Business Combination
involving an Interested Shareholder, unless the transaction is approved
by three-fourths of all directors. In the event the transaction is so
approved by the directors, the normal majority requirements of Georgia law
would apply or, for certain transactions as noted above, no shareholder
vote would be necessary. Thus, depending upon the circumstances, the
Supermajority Amendment could require the 75%/75% shareholder vote for a
business combination involving an Interested Shareholder, where presently
(as described above), either a majority vote or no vote is presently required
under Georgia law or the Company's Articles of Incorporation.
A "Business Combination" includes:
(i) any merger or consolidation of the Company or any Subsidiary (as defined
in Exhibit E) with (a) any Interested Shareholder or (b) any other corporation
(whether or not itself an Interested Shareholder) which is, or after such
merger or consolidation would be, an Affiliate (as defined in Exhibit E) of an
Interested Shareholder which is, or after such merger or consolidation would
be, an Affiliate or an Interested Shareholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Shareholder or any Affiliate of any Interested Shareholder of any
assets of the Company or any Subsidiary having an aggregate Fair Market Value
(as hereinafter defined) of $1,000,000 or more; or
(iii) the issuance or transfer by the Company or any Subsidiary (in one
transaction or a series of transactions) of any securities of the Company or
any Subsidiary to any Interested Shareholder or any Affiliate of any
Interested Shareholder in exchange for cash, securities or other property (or
a combination thereof) having an aggregate Fair Market Value of $1,000,000 or
more; or
(iv) the adoption of any plan or proposal for the liquidation or dissolution
of the Company proposed by or on behalf of an Interested Shareholder or any
Affiliate of any Interested Shareholder; or
(v) any reclassification of securities (including any reverse stock split),
or recapitalization of the Company, or any merger or consolidation of the
Company with any of its Subsidiaries or any other transaction (whether or not
with or into or otherwise involving an Interested Shareholder) which has the
effect, directly or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible securities of the
Company or any Subsidiary which is directly or indirectly owned by any
Interested Shareholder or any Affiliate of any Interested Shareholder.
An "Interested Shareholder" will include any person (other than the
Company, any Subsidiary or either the Company or any Subsidiary acting as
trustee or in a similar fiduciary capacity) who or which:
(i) is the beneficial owner of more than 10% of the outstanding Common
Stock; or
(ii) is an Affiliate of the Company and at any time within the two-year
period immediately prior to the date in question was the beneficial owner,
directly or indirectly, of 10% or more of the then outstanding Common Stock;
or
(iii) acquired any shares of Common Stock which were at any time within the
two-year period immediately prior to the date in question beneficially owned
by any Interested Shareholder, if such acquisition shall have occurred in the
course of a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1993.
Exceptions to the Supermajority Requirements. The 75%/75% shareholder
vote would not be required if the transaction is approved by three-fourths of
all directors.
One purpose of proposed Article IX is to discourage attempts by other
corporations or groups to acquire control of the Company, without negotiation
with management, through the acquisition of a substantial number of shares of
the Company's stock followed by a forced merger. The Board of Directors
believes that such a merger generally is not in the best interests of the
Company or its shareholders because such transactions often treat minority
shareholders unfairly. Such forced mergers may result in noncontrolling
shareholders being cashed out at a price less than that paid to holders of
a controlling interest in the Company or the consideration paid to
shareholders in a forced merger might be illiquid securities. The Board
currently believes that a transaction that is fair to all shareholders
would be priced at a level in and a form of consideration and undertaken at a
time that takes into account all of the Company's constituencies as well
as the short and long term prospects for the Company, as well as all other
factors relevant at the time.
A merger transaction effected without negotiations with the Board
of Directors might be in the interests of shareholders where management
refuses to consider a legitimate business combination transaction. The
Supermajority Amendment would make it more difficult to effect such a merger
and may therefore discourage any attempt to do so. Proposed Article IX would
also serve to reduce the danger of possible conflicts of interest between the
Interested Shareholder on the one hand and the Company and its other
shareholders on the other.
Shareholders should recognize that adoption of the Supermajority
Amendment could enable a minority of the shareholders of the Company to
prevent a transaction favored by a majority of the shareholders.
Additionally, in some circumstances, the Board of Directors could, by
withholding its consent to such a transaction, cause the 75%/75% shareholder
vote to be required to approve the transaction, thereby enabling management to
retain control over the affairs of the Company and their present positions
with the Company.
Tender offers or other nonopen market acquisitions of stock are usually
made at prices above the prevailing market price of a company's stock. In
addition, acquisitions of stock by persons attempting to acquire control
through market purchases may cause the market price of the stock to reach
levels which are higher than would otherwise be the case. The Supermajority
Amendment may discourage such purchases, particularly those of less than all
the Company's shares, and may thereby deprive holders of the Company's stock
of an opportunity to sell their stock at a temporarily higher price, because
of the potentially higher vote requirements for shareholder approval of any
subsequent Business Combination. The Supermajority Amendment may therefore
decrease the likelihood that a tender offer will be made and, as a result, may
adversely affect the shareholders who would desire to participate in a tender
offer.
Another effect of adoption of the Supermajority Amendment would be to
give veto power to the holders of a majority of the outstanding Common Stock
with respect to a Business Combination which is opposed by the directors, but
which a majority of shareholders may believe to be desirable and beneficial.
In addition, since only the directors would have the authority to eliminate
the 75%/75% shareholder vote required by the Supermajority Amendment through
their power to approve Business Combinations, the Supermajority Amendment may
tend to insulate current management against the possibility of a takeover bid
which would result in their removal.
The full text of the proposed amendment to the Articles of Incorporation
is contained in Exhibit E to the Proxy Statement and is incorporated herein by
reference.
Adoption of the foregoing amendment to the Company's Articles of
Incorporation requires the approval of the holders of a majority of the issued
and outstanding shares of Common Stock. Abstentions and broker non-votes
will be included in determining whether a quorum is present at the meeting,
but would have the effect of votes against the proposal. THE BOARD OF
DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE SUPERMAJORITY PROVISION
OF SECTION IX OF THE ARTICLES OF INCORPORATION. UNLESS A VOTE "AGAINST" OR AN
ABSTENTION IS INDICATED ON A PROXY, THE PROXY WILL BE VOTED "FOR" THE PROPOSAL.
Proposal 8 - Removal of Directors only for Cause Upon Approval of Holders of
80% of Outstanding Shares Entitled to Vote Thereon.
The Board of Directors recommends that shareholders adopt an amendment
to the Articles of Incorporation to provide that any director or the entire
board of directors may only be removed for cause upon the approval of the
holders of 80% of the outstanding shares entitled to vote thereon, as allowed
by the Georgia Code. The Company's Articles of Incorporation and Bylaws
currently provide that the holders of a majority of the issued and outstanding
Common Stock can remove a director without cause.
This proposal is designed to prevent a significant shareholder from
avoiding Board scrutiny of a proposed business combination by merely removing
directors with conflicting views. This proposal is similar to Proposal No. 6,
also being considered at the annual meeting, which requires an 80% vote to
amend the Company's Articles of Incorporation or By-laws. Both proposals are
designed to ensure the effective use of the protective measures such as the
Business Judgment Amendment and the Supermajority Amendment. This provision
would encourage individuals or groups who desire to propose takeover bids or
similar transactions to negotiate with the Board of Directors. This amendment
would make it more difficult for the shareholders to remove a member of the
Board of Directors than to elect one.
The addition of the "for cause" requirement to remove a director means that
the shareholders must have some expressed reason to remove the director.
These reasons could include, but would not be limited to, finding that the
director committed some action harmful to the Company or committed a
crime or some action involving fraud, dishonesty, gross negligence, willful
misconduct, moral turpitude.
The potential disadvantage of this provision is that outside of the
context of an acquisition attempt, it may make serve as an impediment to a
more legitimate need to remove a director; however this disadvantage is
lessened because shareholders may elect the full Board at the annual meeting
each year by a plurality vote. Thus, if a significant shareholder nominates
directors in accordance with procedures in the bylaws he could elect new
members of the Board at an annual meeting. Additionally, under the proposed
amendment, a director could retain his or her position on the Board of
Directors despite the fact that 79.9% of the shareholders may support his or
her removal.
The full text of the proposed amendment to the Articles of Incorporation
is contained in Exhibit F to the Proxy Statement and is incorporated herein by
reference.
Adoption of the foregoing amendment to the Company's Articles of
Incorporation requires the approval of the holders of a majority of the issued
and outstanding shares of Common Stock. Abstentions and broker non-votes will
be included in determining whether a quorum is present at the meeting, but
would have the effect of votes against the proposal. THE BOARD OF DIRECTORS
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSED AMENDMENT TO THE ARTICLES
OF INCORPORATION TO PROVIDE THAT DIRECTORS CAN BE REMOVED ONLY FOR CAUSE BY
THE AFFIRMATIVE VOTE OF HOLDERS OF 80% OF THE OUTSTANDING SHARES ENTITLED TO
VOTE THEREON. UNLESS A VOTE "AGAINST" OR AN ABSTENTION IS INDICATED ON A
PROXY, THE PROXY WILL BE VOTED "FOR" THE PROPOSAL.
INFORMATION CONCERNING THE COMPANY'S ACCOUNTANTS
Draffin & Tucker was the principal independent public accountant for the
Company during the year ended December 31, 1995. Representatives of Draffin &
Tucker are expected to be present at the annual meeting and will have the
opportunity to make a statement if they desire to do so and to respond to
appropriate questions. The Company anticipates that Draffin & Tucker will be
the Company's accountants for the current fiscal year.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the Company's 1997
Annual Meeting of Shareholders must be received by November 14, 1996, in order
to be eligible for inclusion in the Company's Proxy Statement and Proxies for
that meeting.
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
Management of the Company knows of no matters other than those stated
above that are to be brought before the meeting. If any other matters should
be presented for consideration and voting, however, it is the intention of the
persons named as proxies in the enclosed Proxy to vote in accordance with
their judgment as to what is in the best interest of the Company.
By order of the Board of Directors,
John H. Clark
President
April 22, 1996
<PAGE>
APPENDIX A
Georgia Dissenters' Rights Statutes
14-2-1301. Definitions.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a
beneficial owner of shares held in a voting trust or by a nominee
as the record shareholder.
(2) "Corporate action" means the transaction or other
action by the corporation that creates dissenters' rights under
Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a
dissenter before the corporate action, or the surviving or
acquiring corporation by merger or share exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to
dissent from corporate action under Code Section 14-2-1302 and
who exercises that right when and in the manner required by Code
Sections 14-2-1320 through 14-2-1327.
(5) "Fair value," with respect to a dissenter's shares,
means the value of the shares immediately before the effectuation
of the corporate action to which the dissenter objects, excluding
any appreciation or depreciation in anticipation of the corporate
action.
(6) "Interest" means interest from the effective date of
the corporate action until the date of payment, at a rate that is
fair and equitable under all the circumstances.
(7) "Record shareholder" means the person in whose name
shares are registered in the records of a corporation or the
beneficial owner of shares to the extent of the rights granted by
a nominee certificate on file with a corporation.
(8) "Shareholder" means the record shareholder or the
beneficial shareholder. (Code 1981, Section 14-2-1301, enacted
by Ga. L. 1988, p. 1070, Section 1; Ga. L. 1993, p. 1231, Section
16.)
14-2-1302. Right to dissent.
(a) A record shareholder of the corporation is entitled to
dissent from, and obtain payment of the fair value of his shares
in the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the
corporation is a party:
(A) If approval of the shareholders of the
corporation is required for the merger by Code Section
14-2-1103 or the articles of incorporation and the
shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is
merged with its parent under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which
the corporation is a party as the corporation whose shares
will be acquired, if the shareholder is entitled to vote on
the plan;
(3) Consummation of a sale or exchange of all or
substantially all of the property of the corporation if a
shareholder vote is required on the sale or exchange
pursuant to Code Section 14-2-1202, but not including a sale
pursuant to court order or a sale for cash pursuant to a
plan by which all or substantially all of the net proceeds
of the sale will be distributed to the shareholders within
one year after the date of sale;
(4) An amendment of the articles of incorporation that
materially and adversely affects rights in respect of a
dissenter's shares because it:
(A) Alters or abolishes a preferential right of
the shares;
(B) Creates, alters, or abolishes a right in
respect of redemption, including a provision respecting
a sinking fund for the redemption or repurchase, of the
shares;
(C) Alters or abolishes a preemptive right of the
holder of the shares to acquire shares or other
securities;
(D) Excludes or limits the right of the shares to
vote on any matter, or to cumulate votes, other than a
limitation by dilution through issuance of shares or
other securities with similar voting rights;
(E) Reduces the number of shares owned by the
shareholder to a fraction of a share if the fractional
share so created is to be acquired for cash under Code
Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part
of the shares of the class; or
(5) Any corporate action taken pursuant to a
shareholder vote to the extent that Article 9 of this
chapter, the articles of incorporation, bylaws, or a
resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain
payment for their shares.
(b) A shareholder entitled to dissent and obtain payment
for his shares under this article may not challenge the corporate
action creating his entitlement unless the corporate action fails
to comply with procedural requirements of this chapter or the
articles of incorporation or bylaws of the corporation or the
vote required to obtain approval of the corporate action was
obtained by fraudulent and deceptive means, regardless of whether
the shareholder has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article,
there shall be no right of dissent in favor of the holder of
shares of any class or series which, at the record date fixed to
determine the shareholders entitled to receive notice of and to
vote at a meeting at which a plan of merger or share exchange or
a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national
securities exchange or held of record by more than 2,000
shareholders, unless:
(1) In the case of a plan of merger or share exchange,
the holders of shares of the class or series are required
under the plan of merger or share exchange to accept for
their shares anything except shares of the surviving
corporation or another publicly held corporation which at
the effective date of the merger or share exchange are
either listed on a national securities exchange or held of
record by more than 2,000 shareholders, except for scrip or
cash payments in lieu of fractional shares; or
(2) The articles of incorporation or a resolution of
the board of directors approving the transaction provides
otherwise. (Code 1981, Section 14-2-1302, enacted by Ga. L.
1988, p. 1070, Section 1; Ga. L. 1989, p. 946, Section 58.)
14-2-1303. Dissent by nominees and beneficial owners.
A record shareholder may assert dissenters' rights as
to fewer than all the shares registered in his name only if he
dissents with respect to all shares beneficially owned by any one
beneficial shareholder and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this
Code section are determined as if the shares as to which he
dissents and his other shares were registered in the names of
different shareholders. (Code 1981, Section 14-2-1303, enacted by
Ga. L. 1988, p. 1070, Section 1.)
14-2-1320. Notice of dissenters' rights.
(a) If proposed corporate action creating dissenters'
rights under Code Section 14-2-1302 is submitted to a vote at a
shareholders' meeting, the meeting notice must state that
shareholders are or may be entitled to assert dissenters' rights
under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters' rights under
Code Section 14-2-1302 is taken without a vote of shareholders,
the corporation shall notify in writing all shareholders entitled
to assert dissenters' rights that the action was taken and send
them the dissenters' notice described in Code Section 14-2-1322
no later than ten days after the corporate action was taken.
(Code 1981, Section 14-2-1320, enacted by Ga. L. 1988, p. 1070,
Section 1; Ga. L. 1993, p. 1231, Section 17.)
14-2-1321. Notice of intent to demand payment.
(a) If proposed corporate action creating dissenters'
rights under Code Section 14-2-1302 is submitted to a vote at a
shareholders' meeting, a record shareholder who wishes to assert
dissenters' rights:
(1) Must deliver to the corporation before the vote is
taken written notice of his intent to demand payment for his
shares if the proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed
action.
(b) A record shareholder who does not satisfy the
requirements of subsection (a) of this Code section is not
entitled to payment for his shares under this article. (Code
1981, Section 14-2-1321, enacted by Ga. L. 1988, p. 1070, Section
1.)
14-2-1322. Dissenters' notice.
(a) If proposed corporate action creating dissenters'
rights under Code Section 14-2-1302 is authorized at a
shareholders' meeting, the corporation shall deliver a written
dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten
days after the corporate action was taken and must:
(1) State where the payment demand must be sent and
where and when certificates for certificated shares must be
deposited;
(2) Inform holders of uncertificated shares to what
extent transfer of the shares will be restricted after the
payment demand is received;
(3) Set a date by which the corporation must receive
the payment demand, which date may not be fewer than 30 nor
more than 60 days after the date the notice required in
subsection (a) of this Code section is delivered; and
(4) Be accompanied by a copy of this article. (Code
1981, Section 14-2-1322, enacted by Ga. L. 1988, p. 1070,
Section 1.)
14-2-1323. Duty to demand payment.
(a) A record shareholder sent a dissenters' notice
described in Code Section 14-2-1322 must demand payment and
deposit his certificates in accordance with the terms of the
notice.
(b) A record shareholder who demands payment and deposits
his shares under subsection (a) of this Code section retains all
other rights of a shareholder until these rights are cancelled or
modified by the taking of the proposed corporate action.
(c) A record shareholder who does not demand payment or
deposit his share certificates where required, each by the date
set in the dissenters' notice, is not entitled to payment for his
shares under this article. (Code 1981, Section 14-2-1323,
enacted by Ga. L. 1988, p. 1070, Section 1.)
14-2-1324. Share restrictions.
(a) The corporation may restrict the transfer of
uncertificated shares from the date the demand for their payment
is received until the proposed corporate action is taken or the
restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as
to uncertificated shares retains all other rights of a
shareholder until these rights are cancelled or modified by the
taking of the proposed corporate action. (Code 1981, Section 14-
2-1324, enacted by Ga. L. 1988, p. 1070, Section 1.)
14-2-1325. Offer of payment.
(a) Except as provided in Code Section 14-2-1327, within
ten days of the later of the date the proposed corporate action
is taken or receipt of a payment demand, the corporation shall by
notice to each dissenter who complied with Code Section 14-2-1323
offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued
interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a
fiscal year ending not more than 16 months before the date
of payment, an income statement for that year, a statement
of changes in shareholders' equity for that year, and the
latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the
fair value of the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand
payment under Code Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by
written notice to the corporation within 30 days after the
corporation's offer or is deemed to have accepted such offer by
failure to respond within said 30 days, payment for his or her
shares shall be made within 60 days after the making of the offer
or the taking of the proposed corporate action, whichever is
later. (Code 1981, Section 14-2-1325, enacted by Ga. L. 1988, p.
1070, Section 1; Ga. L. 1989, p. 946, Section 59; Ga. L. 1993, p.
1231, Section 18.)
14-2-1326. Failure to take action.
(a) If the corporation does not take the proposed action
within 60 days after the date set for demanding payment and
depositing share certificates, the corporation shall return the
deposited certificates and release the transfer restrictions
imposed on uncertificated shares.
(b) If, after returning deposited certificates and
releasing transfer restrictions, the corporation takes the
proposed action, it must send a new dissenters' notice under Code
Section 14-2-1322 and repeat the payment demand procedure. (Code
1981, Section 14-2-1326, enacted by Ga. L. 1988, p. 1070, Section
1; Ga. L. 1990, p. 257, Section 20.)
14-2-1327. Procedure if shareholder dissatisfied with payment or
offer.
(a) A dissenter may notify the corporation in writing of
his own estimate of the fair value of his shares and amount of
interest due, and demand payment of his estimate of the fair
value of his shares and interest due, if:
(1) The dissenter believes that the amount offered
under Code Section 14-2-1325 is less than the fair value of
his shares or that the interest due is incorrectly
calculated; or
(2) The corporation, having failed to take the
proposed action, does not return the deposited certificates
or release the transfer restrictions imposed on
uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment
under this Code section and is deemed to have accepted the
corporation's offer unless he or she notifies the corporation of
his or her demand in writing under subsection (a) of this Code
section within 30 days after the corporation offered payment for
his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the
time set forth in subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information
required under subsection (b) of Code Section 14-2-1325, and
the corporation shall provide the information to the
shareholder within ten days after receipt of a written
demand for the information; and
(2) The shareholder may at any time, subject to the
limitations period of Code Section 14-2-1332, notify the
corporation of his own estimate of the fair value of his
shares and the amount of interest due and demand payment of
his estimate of the fair value of his shares and interest
due. (Code 1981, Section 14-2-1327, enacted by Ga. L. 1988,
p. 1070, Section 1; Ga. L. 1989, p. 946, Section 60; Ga. L.
1990, p. 257, Section 21; Ga. L. 1993, p. 1231, Section 19.)
14-2-1330. Court action.
(a) If a demand for payment under Code Section 14-2-1327
remains unsettled, the corporation shall commence a proceeding
within 60 days after receiving the payment demand and petition
the court to determine the fair value of the shares and accrued
interest. If the corporation does not commence the proceeding
within the 60 day period, it shall pay each dissenter whose
demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding, which
shall be a non-jury equitable valuation proceeding, in the
superior court of the county where a corporation's registered
office is located. If the surviving corporation is a foreign
corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the
registered office of the domestic corporation merged with or
whose shares were acquired by the foreign corporation was
located.
(c) The corporation shall make all dissenters, whether or
not residents of this state, whose demands remain unsettled
parties to the proceeding, which shall have the effect of an
action quasi in rem against their shares. The corporation shall
serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the
manner provided by law for the service of a summons and
complaint, and upon each nonresident dissenting shareholder
either by registered or certified mail or by publication, or in
any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding
is commenced under subsection (b) of this Code section is plenary
and exclusive. The court may appoint one or more persons as
appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described
in the order appointing them or in any amendment to it. Except
as otherwise provided in this chapter, Chapter 11 of Title 9,
known as the "Georgia Civil Practice Act," applies to any
proceeding with respect to dissenters' rights under this chapter.
(e) Each dissenter made a party to the proceeding is
entitled to judgment for the amount which the court finds to be
the fair value of his shares, plus interest to the date of
judgment. (Code 1981, Section 14-2-1330, enacted by Ga. L. 1988,
p. 1070, Section 1; Ga. L. 1989, p. 946, Section 61; Ga. L. 1993,
p. 1231, Section 20.)
14-2-1331. Court costs and counsel fees.
(a) The court in an appraisal proceeding commenced under
Code Section 14-2-1330 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of
appraisers appointed by the court, but not including fees and
expenses of attorneys and experts for the respective parties. The
court shall assess the costs against the corporation, except that
the court may assess the costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent
the court finds the dissenters acted arbitrarily, vexatiously, or
not in good faith in demanding payment under Code Section 14-2-
1327.
(b) The court may also assess the fees and expenses of
attorneys and experts for the respective parties, in amounts the
court finds equitable;
(1) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not
substantially comply with the requirements of Code Sections
14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in
favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in good faith with respect
to the rights provided by this article.
(c) If the court finds that the services of attorneys for
any dissenter were of substantial benefit to other dissenters
similarly situated, and that the fees for those services should
not be assessed against the corporation, the court may award to
these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited. (Code 1981, Section
14-2-1331, enacted by Ga. L. 1988, p. 1070, Section 1.)
14-2-1332. Limitation of actions.
No action by any dissenter to enforce dissenters'
rights shall be brought more than three years after the corporate
action was taken, regardless of whether notice of the corporate
action and of the right to dissent was given by the corporation
in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322. (Code 1981, Section 14-2-1332, enacted
by Ga. L. 1988, p. 1070, Section 1.)
<PAGE>
Exhibit A
As amended, Section V of the Articles of Incorporation would read, in its
entirety, as follows:
"V.
The corporation shall have the authority to issue not more than
8,000,000 shares, consisting of 5,000,000 shares to be known as common stock,
having a par value of $1.00 per share and 3,000,000 shares of preferred stock,
having a par value of $1.00 (herein called the "Preferred Stock"). Except as
otherwise required by law or as provided in this Article V, holders of Common
Stock will be entitled to one vote per share on all matters to be voted on by
the Corporation's shareholders. In the event of any dissolution, liquidation
or winding up of the affairs of the Corporation, whether voluntary or
involuntary, after payment or provision for payment of the debts and other
liabilities of the Corporation, and the payment of any liquidation preference
with respect to any other class of capital stock of the Corporation which has
a liquidation preference over the Common Stock, the remaining assets and funds
of the Corporation shall be divided equally among and paid ratably to the
holders of the Common Stock as a single class. All cross-references in each
subdivision of this Section V. refer to other paragraphs in such subdivision
unless otherwise indicated.
Subject to the provisions of any applicable law and these Articles of
Incorporation (as from time to time amended), shares of Preferred Stock may be
issued from time to time in one or more series as may be determined by the
Board of Directors. The Board of Directors is authorized to determine or
alter the designations, voting powers, preferences, and relative,
participating, optional or other special rights, and qualifications,
limitations and restrictions on such rights, as the Board of Directors may
authorize by resolutions duly adopted prior to the issuance of any shares of a
series of Preferred Stock, including, but not limited to: (i) the distinctive
designation of each series and the number of shares that will constitute such
series (except that any decrease in the number of shares constituting such
series shall not be below the number of shares of such series then
outstanding); (ii) the voting rights, if any, of shares of such series and
whether the shares of any such series having voting rights shall have multiple
votes per share; (iii) the dividend rate on the shares of any such series, any
restrictions, limitations, or conditions upon the payment of such dividends,
whether such dividends shall be cumulative, the relative priority of the
payments of dividends, if any, and the dates on which such dividends are
payable; (iv) the prices at which, and the terms and conditions on which, the
shares of such series may be redeemed, if such shares are redeemable; (v) the
purchase or sinking fund provisions, if any, for the purchase or redemption of
shares of such series; (vi) any preferential amount payable upon shares of
such series in the event of the liquidation, dissolution, or winding-up of the
Company, or the distribution of its assets; (vii) the prices or rates of
conversion at which, and the terms and conditions on which, the shares are
convertible; and (viii) any other relative preferences, rights, restrictions,
or limitations of that series, including, without limitation, any obligation
of the Corporation to repurchase shares of that series upon the occurrence of
specified events.
The Corporation may purchase its own shares of capital stock out of
unreserved and unrestricted earned surplus and capital surplus available
therefor and as otherwise provided by law.
The Board of Directors may from time to time distribute to shareholders
out of capital surplus of the Corporation a portion of its assets, in cash or
in property."
<PAGE>
Exhibit B
As amended, a new Section VI would be added to the Articles of Incorporation
and would read, in its entirety, as follows:
"VI
In discharging the duties of their respective positions and in
determining what is believed to be in the best interests of the Corporation,
the Board of Directors of the Corporation, committees of the Board of
Directors, and individual directors, in addition to considering the effects of
any action on the Corporation or its Shareholders, may consider interests of
the employees, customers, suppliers, and creditors of the Corporation and its
subsidiaries, the communities in which offices or other establishments of the
Corporation and its subsidiaries are located, and all other factors such
directors consider pertinent; provided, however, that such consideration shall
be deemed solely to grant discretionary authority to the directors and shall
not be deemed to provide to any constituency any right to be considered.
Exhibit C
As amended, a new Section VII would be added to the Articles of Incorporation
and would read, in its entirety, as follows:
"VII
No director of the Corporation shall be personally liable to the Corporation
or its shareholders for monetary damages for breach of his duty of care or
other duty as a director, provided, that this provision shall eliminate or
limit the liability of a director only to the extent permitted from time to
time by the Georgia Business Corporation Code or any successor laws or laws."
Exhibit D
As amended, a new Section VIII would be added to the Articles of
Incorporation and would read, in its entirety, as follows:
"VIII
Except as otherwise provided by law, any amendment or repeal of any provision
of the Articles of Incorporation or the By-Laws of the Corporation requires
the affirmative vote of holders of 80% of the shares of capital stock of the
Corporation then issued and outstanding and entitled to vote on such matters."
Exhibit E
As amended, a new Section IX would be added to the Articles of Incorporation
and would read, in its entirety, as follows:
"IX.
I.(A)In addition to any affirmative vote required by law, and subject to
the provisions of any series of Preferred Stock which may at the time be
outstanding, the affirmative vote of the holders of not less than 75% of the
outstanding shares of Common Stock of the Corporation and the affirmative vote
of the holders of not less than 75% of the outstanding shares of Common Stock
of the Corporation other than those beneficially owned (as defined below) by
an Interested Shareholder (as defined below) (the "two-tier requirement"),
shall be required for the approval or authorization of any Business
Combination (as defined below) of the Corporation with such Interested
Shareholder; provided that the two-tier voting requirement shall not be
applicable if the Business Combination was approved by three-fourths of all
Directors.
<PAGE>
(B)The term "Business Combination" as used in this Article IX shall
mean:
(i)any merger or consolidation of the Corporation or any Subsidiary (as
hereafter defined) with (a) any Interested Shareholder (as hereinafter
defined) or (b) any other corporation (whether or not itself an
Interested Shareholder) which is, or after such merger or consolidation
would be, an Affiliate (as hereinafter defined) of an Interested
Shareholder; or
(ii)any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with
any Interested Shareholder or any Affiliate of any Interested
Shareholder of any assets of the Corporation or any Subsidiary having an
aggregate Fair Market Value (as hereinafter defined) of $1,000,000 or
more; or
(iii)the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary to any Interested Shareholder or any
Affiliate of any Interested Shareholder in exchange for cash, securities
or other property (or a combination thereof) having an aggregate Fair
Market Value of $1,000,000 or more; or
(iv)the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Shareholder or any Affiliate of any Interested Shareholder; or
(v)any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
other transaction (whether or not with or into or otherwise involving an
Interested Shareholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any
class of equity or convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned by any Interested
Shareholder or any Affiliate of any Interested Shareholder.
II. For purposes of this Article IX:
(A)A "person" shall mean any individual, firm, corporation or other
entity.
(B)"Interested Shareholder" shall mean any person (other than the
Corporation, any Subsidiary or either the Corporation or any Subsidiary
acting as Trustee or in a similar fiduciary capacity) who or which:
(i)is the beneficial owner of more than 10% of the outstanding Common
Stock; or
(ii)is an Affiliate of the Corporation and at any time within the two-
year period immediately prior to the date in question was the beneficial
owner, directly or indirectly, of 10% or more of the then outstanding
Common Stock; or
(iii)acquired any shares of Common Stock which were at any time within
the two-year period immediately prior to the date in question
beneficially owned by any Interested Shareholder, if such acquisition
shall have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning of the
Securities Act of 1993.
(C)A person shall be a "beneficial owner" of any Common Stock:
(i)which such person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns, directly or indirectly; or
(ii)which such person or any of its Affiliates or Associates has,
directly or indirectly, (a) the right to acquire (whether such right is
exercisable immediately or only after the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options or otherwise, or
(b) the right to vote pursuant to any agreement, arrangement or
understanding; or
(iii)which are beneficially owned, directly or indirectly, by any other
person with which such person or any of its Affiliates or Associates has
any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares of Common Stock.
(D)For the purposes of determining whether a person is an Interested
Shareholder pursuant to paragraph B of this Section II, the number of
shares of Common Stock deemed to be outstanding shall include shares
deemed owned through application of paragraph C(ii)(a) of this Section
II but shall not include any other shares of Common Stock which may be
issuable pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants or options, or otherwise.
(E)
(i)An "Affiliate" of a specified person is a person that directly,
through one or more intermediaries, controls, or is controlled by, or is
under common control with, the person specified.
(ii)The term "Associate" used to indicate a relationship with any person
means (1) any firm, corporation or other entity (other than the
Corporation or any Subsidiary) of which such person is an officer or
partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of equity securities, (2) any trust or other estate in
which such person has a substantial beneficial interest or as to which
such person serves as trustee or in a similar fiduciary capacity, and
(3) any relative or spouse or such person, or any relative of such
spouse who has the same home as such person.
(F)"Subsidiary" means any corporation of which a majority of any class
of equity securities is owned, directly or indirectly, by the
Corporation unless owned solely as trustee or other similar fiduciary
capacity.
(G)"Fair Market value" means: (i) in the case of stock, the closing
sales price of a share of such stock on the Composite Tape on the New
York Stock Exchange-Listed Stocks, or, if such stock is not quoted on
the Composite Tape, on the New York Stock Exchange, or, if such stock is
not listed on such Exchange, on the principal United States securities
exchange registered under the Securities Exchange Act of 1934, as
amended, on which such stock is listed, or, if such stock is not listed
on any such exchange, the closing sales price or the sales price or the
average of the bid and asked prices reported with respect to a share of
such stock on the National Association of Securities Dealers, Inc.
Automated Quotation System or any system then in use, or if no such
quotations are available, the fair market value on the date in question
of a share of such stock as determined by the Board in good faith; and
(ii) in the case of property other than cash or stock, the fair market
value of such property on the date in question as determined by the
Board in good faith.
(H)The term "acquire" or "acquired" means the acquisition of beneficial
ownership.
(I)The Directors of the Corporation shall have the power and duty to
determine for the purposes of this Article IX, on the basis of
information known to them after reasonable inquiry, (i) whether a person
is an Interested Shareholder, (ii) the number of shares of Common Stock
beneficially owned by any person, (iii) whether a person is a Affiliate
or Associates or another, and (iv) whether the assets which are the
subject of any Business Combination have, or the consideration to be
received for the issuance or transfer of securities by the Corporation
or any Subsidiary in any Business Combination has, an aggregate Fair
Market Value of $1,000,000 or more.
(K)Nothing contained in this Article IX shall be construed to relieve
any Interested Shareholder of any of its Affiliates or Associates from
any fiduciary obligation imposed by law.
<PAGE>
Exhibit F
As amended, a new Section X would be added to the Articles of
Incorporation and would read, in its entirety, as follows:
"X
"A director of the Corporation may be removed only for cause and upon the
affirmative vote of the holders of 80% of the issued and outstanding shares
entitled to vote on such matter."
<PAGE>
COMMON STOCK
OF
SOUTHWEST GEORGIA FINANCIAL CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE 1996
ANNUAL MEETING OF SHAREHOLDERS.
The undersigned hereby appoint(s) E. J. McLean, Jr. and John
J. Cole, Jr., or either of them with power of substitution to
each, as Proxies of the undersigned to vote the Common Stock of
the undersigned at the Annual Meeting of Shareholders of
SOUTHWEST GEORGIA FINANCIAL CORPORATION (the "Company") to be
held on May 14, 1996, and any adjournment thereof.
1. Election of Directors (Please check either A or B)
A. I (we) grant authority to vote FOR all
nominees for director listed below except as
marked to the contrary in the space provided:
Albert W. Barber; Leo T. Barber, Jr.; R.
Bradford Burnette; John H. Clark; Robert M.
Duggan; E. J. McLean, Jr.; Glenn D. Moon;
Richard L. Moss; Lee C. Redding; Roy H. Reeves;
Jack Short; and Johnny R. Slocumb.
Instructions: To withhold authority to vote
for any of the individual nominees listed
above, write the name(s) of the nominee(s) on
the lines provided below.
________________________________________________________________
________________________________________________________________
________________________________________________________________
B. I (we) withhold authority to vote for all of
the nominees listed above.
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" THE ELECTION
AS DIRECTORS OF THE PERSONS NAMED IN THE PROXY AND
ACCOMPANYING PROXY STATEMENT AND, UNLESS INSTRUCTIONS
TO THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED,
THIS PROXY WILL BE SO VOTED.
2. Amendment of the Company's Articles of Incorporation to
authorize the issuance of up to 3,000,000 shares of Preferred
Stock, $1.00 par value per share (Please check either A, B,
or C)
A. ____ FOR
B. ____ AGAINST
C. ____ ABSTAIN
3. Amendment of the Company's Articles of Incorporation to
authorize the Board of Directors to consider constituencies when
evaluating a business combination proposal (Please check either A, B, or
C)
A. ____ FOR
B. ____ AGAINST
C. ____ ABSTAIN
<PAGE>
COMMON STOCK
OF
SOUTHWEST GEORGIA FINANCIAL CORPORATION
4. Amendment of the Company's Articles of Incorporation to
eliminate cumulative voting for directors (Please check either A, B,
or C)
A. ____ FOR
B. ____ AGAINST
C. ____ ABSTAIN
5. Amendment of the Company's Articles of Incorporation to
provide for the limitation of director liability (Please check either A,
B, or C)
A. ____ FOR
B. ____ AGAINST
C. ____ ABSTAIN
6. Amendment of the Company's Articles of Incorporation to
require the affirmative vote of the holders of 80% of the issued and
outstanding shares entitled to vote thereon to amend the Articles of
Incorporation or the By-Laws of the Company (Please check either A, B, or
C)
A. ____ FOR
B. ____ AGAINST
C. ____ ABSTAIN
7. Amendment of the Company's Articles of Incorporation to
enact a provision to govern potential business combination
transactions with interested shareholders (Please check either A, B, or
C)
A. ____ FOR
B. ____ AGAINST
C. ____ ABSTAIN
8. Amendment of the Company's Articles of Incorporation to
provide that directors can be removed only for cause by the affirmative
vote of the holders of 80% of the issued and outstanding shares
entitled to vote thereon (Please check either A, B, or C)
A. ____ FOR
B. ____ AGAINST
C. ____ ABSTAIN
<PAGE>
COMMON STOCK
OF
SOUTHWEST GEORGIA FINANCIAL CORPORATION
9. In the discretion of management, to adjourn the Annual
Meeting to permit solicitation of additional proxies in the
event there are not sufficient affirmative votes to approve
one or more amendments to the Articles of Incorporation.
(Please check either A, B, or C)
A. _____ FOR
B. _____ AGAINST
C. _____ ABSTAIN
10. Other Matters to Come Before the Meeting
I (we) grant the Proxies authority to vote in accordance
with their best judgment with respect to any other matters
that may properly come before the meeting.
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" EACH OF THE
FOREGOING PROPOSALS AND, UNLESS THE VOTE OF THE SHAREHOLDER INDICATES
OTHERWISE, THIS PROXY WILL BE SO VOTED.
X _____________________________
X _____________________________
Please sign this Proxy exactly as
name appears at left. In the case
of joint tenants, each joint owner
must sign. Note: When signing as an
attorney, trustee, administrator or
guardian, please give your title as
such.
Date Signed: _____________________
<PAGE>
COMMON STOCK OF
SOUTHWEST GEORGIA FINANCIAL CORPORATION
DIRECTIONS FOR VOTING COMMON STOCK ALLOCATED
TO A PARTICIPANT'S ACCOUNT PURSUANT TO THE
SOUTHWEST GEORGIA FINANCIAL CORPORATION
EMPLOYEE STOCK OWNERSHIP TRUST
A PROXY IS SOLICITED FROM SOUTHWEST GEORGIA BANK TRUST DEPARTMENT
AS TRUSTEE BY THE BOARD OF DIRECTORS FOR THE 1996 ANNUAL MEETING
OF SHAREHOLDERS.
The undersigned participant in the Employee Stock Ownership
Plan ("ESOP") hereby directs Southwest Georgia Bank Trust
Department as Trustee of the Southwest Georgia Financial
Corporation Employee Stock Ownership Trust to vote those shares
of Common Stock of Southwest Georgia Financial Corporation
allocated to the undersigned's account in connection with the
Annual Meeting of Shareholders of SOUTHWEST GEORGIA FINANCIAL
CORPORATION (the "Company") to be held on May 14, 1996, and any
adjournment thereof.
1. Election of Directors (Please check either A or B)
A. I grant authority to vote FOR all nominees
for director listed below except as marked to
the contrary in the space provided:
Albert W. Barber; Leo T. Barber, Jr.; R.
Bradford Burnette; John H. Clark; Robert M.
Duggan; E. J. McLean, Jr.; Glenn D. Moon;
Richard L. Moss; Lee C. Redding; Roy H. Reeves;
Jack Short; and Johnny R. Slocumb.
Instructions: To withhold authority to vote
for any of the individual nominees listed
above, write the name(s) of the nominee(s) on
the lines provided below.
_________________________________________________________________________
_________________________________________________________________________
__________________________________________________________________________
B. I withhold authority to vote for all of the
nominees listed above.
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" THE ELECTION
AS DIRECTORS OF THE PERSONS NAMED IN THE PROXY AND
ACCOMPANYING PROXY STATEMENT AND, UNLESS INSTRUCTIONS
TO THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED,
THIS PROXY WILL BE SO VOTED.
2. Amendment of the Company's Articles of Incorporation to
authorize the issuance of up to 3,000,000 shares of Preferred
Stock, $1.00 par value per share (Please check either A, B,
or C)
A. ____ FOR
B. ____ AGAINST
C. ____ ABSTAIN
<PAGE>
COMMON STOCK OF
SOUTHWEST GEORGIA FINANCIAL CORPORATION
3. Amendment of the Company's Articles of Incorporation to
authorize the Board of Directors to consider constituencies when
evaluating a business combination proposal (Please check either A, B, or
C)
A. ____ FOR
B. ____ AGAINST
C. ____ ABSTAIN
4. Amendment of the Company's Articles of Incorporation to
eliminate cumulative voting for directors (Please check either A, B,
or C)
A. ____ FOR
B. ____ AGAINST
C. ____ ABSTAIN
5. Amendment of the Company's Articles of Incorporation to
provide for the limitation of director liability (Please check either A,
B, or C)
A. ____ FOR
B. ____ AGAINST
C. ____ ABSTAIN
6. Amendment of the Company's Articles of Incorporation to
require the affirmative vote of the holders of 80% of the issued and
outstanding shares entitled to vote thereon to amend the Articles of
Incorporation or the By-Laws of the Company (Please check either A, B, or
C)
A. ____ FOR
B. ____ AGAINST
C. ____ ABSTAIN
7. Amendment of the Company's Articles of Incorporation to
enact a provision to govern potential business combination
transactions with interested shareholders (Please check either A, B, or
C)
A. ____ FOR
B. ____ AGAINST
C. ____ ABSTAIN
<PAGE>
COMMON STOCK OF
SOUTHWEST GEORGIA FINANCIAL CORPORATION
8. Amendment of the Company's Articles of Incorporation to
provide that directors can be removed only for cause by the affirmative
vote of the holders of 80% of the issued and outstanding shares entitled
to vote thereon (Please check either A, B, or C)
A. ____ FOR
B. ____ AGAINST
C. ____ ABSTAIN
9. In the discretion of management, to adjourn the Annual
Meeting to permit solicitation of additional proxies in the
event there are not sufficient affirmative votes to approve
one or more amendments to the Articles of Incorporation.
(Please check either A, B, or C)
A. _____ FOR
B. _____ AGAINST
C. _____ ABSTAIN
10. Other Matters to Come Before the Meeting
I grant the Trustee authority to vote in accordance with
their best judgment with respect to any other matters that
may properly come before the meeting.
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" EACH OF THE
FOREGOING PROPOSALS AND, UNLESS THE VOTE OF THE SHAREHOLDER INDICATES
OTHERWISE, THIS PROXY WILL BE SO VOTED.
X ___________________________________
Please sign this Proxy exactly as name appears
at left. Note: When signing as an attorney,
trustee, administrator or guardian, please
give your title as such.
Date Signed: ________________________
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