SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1998
[ ] Transition report under Section 13 or 15(d) of the Exchange Act.
For the transition period from __________ to __________
Commission file number 0-20099
SOUTHWEST GEORGIA FINANCIAL CORPORATION
(Exact Name Of Small Business Issuer as specified in its Charter)
Georgia 58-1392259
(State Or Other Jurisdiction Of (I.R.S. Employer
Incorporation Or Organization) Identification No.)
201 FIRST STREET, S.E., MOULTRIE, GEORGIA 31768
Address Of Principal Executive Offices
(912) 985-1120
Registrant's Telephone Number, Including Area Code
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
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) (has been subject to such filing
requirements for the past 90 days.)
YES X NO ___________
Indicate the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Class Outstanding At July 15, 1998
Common Stock, $1 Par Value 3,000,000
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
TABLE OF CONTENTS
PAGE #
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements are provided for Southwest Georgia
Financial Corporation as required by this Item 1.
a. Consolidated balance sheets - June 30, 1998 and
December 31, 1997. 2
b. Consolidated statements of income - for the six months
and the three months ended June 30, 1998 and 1997. 3
c. Consolidated statements of cash flows for the six months ended
June 30, 1998 and 1997. 4
d. Notes to Consolidated Financial Statements 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 6
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 9
<PAGE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and therefore do not include
all information and footnotes necessary for a fair presentation of financial
position, results of operations, and changes in financial position in
conformity with generally accepted accounting principles. The interim
financial statements furnished reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the results for the
interim periods presented.
<PAGE>
<TABLE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 1998 and December 31, 1997
<CAPTION>
June 30, December 31,
ASSETS 1998 1997
<S> <C> <C>
Cash and due from banks $ 5,825,689 $ 6,067,222
Interest-bearing deposits with banks 7,532,302 12,178,724
Federal funds sold 1,985,000 2,125,000
Investment securities available for sale, at fair value 4,591,532 2,184,531
Investment securities held to maturity (estimated
fair value of $77,237,181 and $65,350,520) 76,565,062 64,640,817
Total investment securities 81,156,594 66,825,348
Loans 114,332,271 119,686,763
Less: Unearned income (133,782) (142,668)
Allowance for loan losses (1,912,674) (1,998,822)
Loans, net 112,285,815 117,545,273
Premises and equipment 4,537,670 3,925,835
Other assets 5,043,100 5,289,259
Total assets $ 218,366,170 $ 213,956,661
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest bearing $ 20,264,800 $ 21,366,320
NOW accounts 40,134,943 35,497,778
Money Market 8,739,424 9,719,999
Savings 14,074,760 13,742,235
Certificates of deposit $100,000 and over 21,595,126 20,484,022
Other time accounts 75,519,586 75,625,128
Total deposits 180,328,639 176,435,482
Federal funds purchased and securities
sold under repurchase agreements 365,000 1,300,300
Other borrowed funds 1,500,000 1,500,000
Long-term debt 8,000,000 8,000,000
Other liabilities 1,865,569 1,804,814
Total liabilities 192,059,208 189,040,596
Stockholders' equity:
Common stock - par value $1; authorized
5,000,000 shares; issued 3,000,000 shares 3,000,000 3,000,000
Capital surplus 2,086,028 2,029,134
Retained earnings 23,610,140 22,294,875
Treasury stock 434,401 shares for 1998 and
437,808 shares for 1997, at cost (2,389,206) (2,407,944)
Total stockholders' equity 26,306,962 24,916,065
Total liabilities and stockholders' equity $ 218,366,170 $ 213,956,661
</TABLE>
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<TABLE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
For The Three Months For The Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 3,271,659 $ 3,122,354 $ 6,335,617 $ 6,200,563
Dividends on securities available for sale 84,952 145,334 168,976 170,348
Interest on taxable securities held to maturity 1,216,610 1,178,241 2,380,870 2,329,832
Interest on tax exempt securities available for sale 21,078 0 21,078 0
Interest on tax exempt securities held to maturity 5,043 9,375 5,043 18,750
Interest on federal funds sold 26,691 21,195 56,778 44,416
Interest on deposits with banks 89,401 26,250 199,235 87,642
Total interest income 4,715,434 4,502,749 9,167,597 8,851,551
Interest expense:
Interest on deposits 1,761,293 1,643,331 3,496,792 3,274,066
Interest on federal funds purchased and
securities sold under repurchase agreements 6,343 31,015 15,384 62,774
Interest on other borrowings 22,380 22,266 45,067 43,716
Interest on long-term debt 120,120 120,120 238,920 238,920
Total interest expense 1,910,136 1,816,732 3,796,163 3,619,476
Net interest income 2,805,298 2,686,017 5,371,434 5,232,075
Provision for loan losses 70,000 45,000 130,000 90,000
Net interest income after
provision for loan losses 2,735,298 2,641,017 5,241,434 5,142,075
Noninterest income:
Service charges on deposit accounts 232,670 219,702 469,999 428,322
Fees for trust services 72,635 65,258 154,542 132,513
Other income 69,065 82,872 244,623 187,698
Total noninterest income 374,370 367,832 869,164 748,533
Noninterest expense:
Salaries and employee benefits 958,488 970,254 1,910,411 1,923,017
Occupancy expense 109,043 94,722 214,382 189,114
Equipment expense 102,379 107,944 204,531 216,768
Data processing expense 112,311 84,607 211,422 174,623
Other operating expenses 367,476 412,478 755,447 825,958
Total noninterest expenses 1,649,697 1,670,005 3,296,193 3,329,480
Income before income taxes 1,459,971 1,338,844 2,814,405 2,561,128
Provision for income taxes 492,700 421,700 934,900 804,800
Net income * $ 967,271 $ 917,144 $ 1,879,505 $ 1,756,328
Earnings per share of common stock:
Net income, basic and diluted $ 0.37 $ 0.36 $ 0.73 $ 0.69
Dividends paid 0.11 0.10 0.22 0.20
Average shares outstanding 2,564,967 2,560,791 2,564,120 2,560,791
</TABLE>
* The Company has no other comprehensive income for the reported periods.
<PAGE>
<TABLE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For The Six Months
Ended June 30,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,879,505 $ 1,756,328
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 130,000 90,000
Depreciation 233,700 224,942
Net amortization and accretion of investment securities 19,952 (62,903)
Net loss (gain) on sale and disposal of assets (226) 2,665
Changes in:
Other assets 208,383 (35,503)
Other liabilities 60,755 (481,356)
Net cash provided by operating activities 2,532,069 1,494,173
Investing activities:
Proceeds from maturities of securities held
to maturity 10,000,000 10,030,000
Proceeds from sale of securities available for sale 69,300 0
Purchase of securities held to maturity (22,313,433) (8,814,279)
Purchase of securities available for sale (2,107,064) 0
Net change in other short-term investments 140,000 260,000
Net change in loans 5,129,458 (1,066,152)
Purchase of premises and equipment (845,534) (326,012)
Proceeds from sales of other assets 38,000 131,033
Net change in interest-bearing deposits with banks 4,646,422 781,199
Net cash used for investing activities (5,242,851) 995,789
Financing activities:
Net change in deposits 3,893,157 (2,279,331)
Net change in federal funds purchased and
securities sold under repurchase agreements (935,300) (216,646)
Cash dividends declared (564,240) (512,160)
Proceeds from sale of treasury stock 75,632 0
Net cash provided by (required for)
financing activities 2,469,249 (3,008,137)
Increase (decrease) in cash and due from bank (241,533) (518,175)
Cash and due from banks - beginning of period 6,067,222 7,353,763
Cash and due from banks - end of period $ 5,825,689 $ 6,835,588
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
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, Southwest Georgia
Financial Corporation's (the "Company") 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. The Company strives to maintain an adequate
liquidity position by managing the balances and maturities of interest-earning
assets and interest-earning liabilities so that the balance it has in
short-term investments at any given time will adequately cover any reasonably
anticipated immediate need for funds. Additionally, the subsidiary Southwest
Georgia Bank (the "Bank") maintains relationships with correspondent banks
which could provide funds to it on short notice, if needed.
The liquidity and capital resources of the Company are monitored on a periodic
basis by state and Federal regulatory authorities. As determined under
guidelines established by these regulatory authorities, the Bank's liquidity
ratios at June 30, 1998, were considered satisfactory. At that date, the
Bank's short-term investments were adequate to cover any reasonably anticipated
immediate need for funds. The Company is aware of no events or trends likely
to result in a material change in liquidity. At June 30, 1998, the Company's
and the Bank's risk-based capital ratios were considered adequate based on
guidelines established by regulatory authorities. During the three months
ended June 30, 1998, total capital increased $730 thousand to $26.3 million.
Also, the Company continues to maintain a healthy level of capital adequacy as
measured by its equity-to-asset ratio of 12.05 percent as of June 30, 1998.
The Company is aware of no events or trends likely to result in a material
change in capital resources other than normal operations resulting in the
retention of net earnings and paying dividends to shareholders. Also, the
Company's management is not aware of any current recommendations by the
regulatory authorities which, if they were to be implemented, would have a
material effect on the Company's capital resources.
Results of Operations
The Company's results of operations are determined by its ability to
effectively manage interest income and expense, to minimize loan and investment
losses, to generate noninterest income, and to control noninterest expense.
Since interest rates are determined by market forces and economic conditions
beyond the control of the Company, the ability to generate net interest income
is dependent upon the Bank's ability to obtain an adequate spread between the
rate earned on interest-earning assets and the rate paid on interest-bearing
liabilities. Thus, the key performance measure for net interest income is the
interest margin or net yield, which is taxable-equivalent net interest income
divided by average earning assets.
<PAGE>
Comparison of Statements of Income
The Company's net income after taxes for the three month period ending June 30,
1998, was $967 thousand compared to $917 thousand for the same period in 1997,
representing an increase of $50 thousand or 5.45 percent. For the first six
months of 1998, the company earned a net income of $1.879 million or $ .73 per
share compared to $1.756 million or $ .69 per share in 1997. This six month
growth in earnings is primarily attributable to both increased interest and
noninterest income.
Total interest income increased $213 thousand comparing the three months ended
June 30, 1998 to the same period in 1997. For the first six months of 1998,
total interest income increased $316 thousand comparing the same period in
1997. The majority of the increase in interest income occurred in interest and
fees on loans, interest and dividends on investment securities and in interest
on deposits with banks. Increases in interest from both securities and
deposits with banks are related to the growth in average volume of investment
securities and interest-bearing deposits with banks. Increases in interest
from loans are due to a higher discount accretion on purchased loans.
The total interest expense increased $93 thousand or 5.1 percent in the second
quarter of 1998 compared to the same period in 1997. The total interest
expense for the six month period ending June 30, 1998, increased $177 thousand
or 4.9 percent compared to the same period in 1997. Over this period, the
average balances on interest- bearing deposits grew more than $6 million or
3.9 percent. The increase in interest expense is primarily related to
increases in volume of time deposits. The rate on time deposits increased 21
basis points while the rate on savings deposits declined 6 basis points
comparing the first six months of 1998 to the same period in 1997.
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. Net interest income for the
second quarter of 1998 increased $119 thousand, or 4.4 percent, compared to
the same period in 1997. Net interest income for the first six months of 1998
was $5.371 million compared to $5.232 million for the same period in 1997.
Net interest income for the quarter and the six month period is determined
primarily by the volume of earning assets and the various rate spreads between
these assets and their funding sources. The Company's net interest margin was
5.62 percent and 5.61 percent during the three months ended June 30, 1998 and
1997 and was 5.40 percent and 5.42 percent during the six months ended June 30,
1998 and 1997.
Other income increased $6 thousand, or 1.6 percent, for the first three months
of 1998 compared to the same period a year ago. Other income for the six
months ended June 30, 1998, increased $121 thousand compared to the same
period in 1997. This increase in other noninterest income primarily relates
to an increase in income from insurance commissions, security sales
commissions, service charges on deposit accounts, trust department income, and
other real estate owned.
Total other expenses decreased nearly $21 thousand, or more than 1.25 percent,
for the three months ended June 30, 1998, and other expenses decreased $33
thousand for the six months ended June 30, 1998, compared to the same periods
in 1997. This decrease in other noninterest expenses primarily resulted from
decreases in amortization of premium on purchased deposits, salary and employee
<PAGE>
benefits, and legal expense partially offset by increases in the occupancy
expense and data processing expense. Management will continue to monitor
expenses closely in an effort to achieve all cost efficiencies available.
Comparison of Financial Condition Statements
During the first six months of 1998, total assets increased $4.4 million, or
nearly 2.1 percent, over December 31, 1997, and increased $10.6 million, or
5.1 percent, over June 30, 1997.
The Company's loan portfolio of $114.3 million declined 4.5 percent from the
December 31, 1997, level of $119.7 million. Loans, the major use of funds,
represent 52.4 percent of total assets.
Investment securities and other short-term investments represent 41.5 percent
of total assets. Investment securities increased $14.3 million since
December 31, 1997. Other short-term investments decreased $4.8 million since
December 31, 1997. This resulted in an overall increase in investments of
$9.5 million.
Deposits, the primary source of the Company's funds, increased from $176.4
million at December 31, 1997, to $180.3 million at June 30, 1998, an increase
of 2.2 percent. The significant amount of deposit growth occurred in NOW
accounts deposits. At June 30, 1998, total deposits represented 82.6 percent
of total assets.
The allowance for loan losses represents a reserve for potential losses in the
loan portfolio. The adequacy of the allowance for loan losses is evaluated
monthly based on a review of all significant loans, with a particular emphasis
on nonaccruing, past due, and other loans that management believes require
attention. Other factors used in determining the adequacy of the reserve are
management's judgment about factors affecting loan quality and management's
assumptions about the local and national economy. The allowance for loan
losses was 1.67 percent of total loans outstanding at June 30, 1998, and
December 31, 1997. Management considers the allowance for loan losses as of
June 30, 1998, adequate to cover potential losses in the loan portfolio.
<PAGE>
PART II. - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Date - April 28, 1998 - annual shareholders' meeting.
(b) Elected the following directors:
Cecil W. Alvis Glenn D. Moon
Albert W. Barber Richard L. Moss
Leo T. Barber, Jr. Lee C. Redding
John H. Clark Roy Reeves
Robert M. Duggan Jack Short
E. J. McLean, Jr. Johnny R. Slocumb
Director Emeritus:
Mrs. Kenneth V. Cope
J. Reeves Haley
Mrs. Hugh Turner
(c) The following matter was voted on at the annual
shareholders' meeting.
Number Of Percent Of
Votes Cast Outstanding Shares
(1) Election Of
Directors 2,057,488 80.00%
Against 18,686 .90%
Total Shares Voted 2,076,174 80.90%
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits 27.1 - Financial Data Schedule
b. There have been no reports filed on Form 8-K for the quarter ended
June 30, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SOUTHWEST GEORGIA FINANCIAL CORPORATION
Date: August 06, 1998 BY: s/George R. Kirkland
GEORGE R. KIRKLAND
SENIOR VICE-PRESIDENT
FINANCIAL AND ACCOUNTING OFFICER
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 5826
<INT-BEARING-DEPOSITS> 7532
<FED-FUNDS-SOLD> 1985
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2484
<INVESTMENTS-CARRYING> 78610
<INVESTMENTS-MARKET> 81684
<LOANS> 114198
<ALLOWANCE> 1913
<TOTAL-ASSETS> 218366
<DEPOSITS> 180329
<SHORT-TERM> 1865
<LIABILITIES-OTHER> 1866
<LONG-TERM> 8000
<COMMON> 3000
0
0
<OTHER-SE> 23307
<TOTAL-LIABILITIES-AND-EQUITY> 218366
<INTEREST-LOAN> 6336
<INTEREST-INVEST> 2576
<INTEREST-OTHER> 256
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<INTEREST-DEPOSIT> 3497
<INTEREST-EXPENSE> 3796
<INTEREST-INCOME-NET> 5371
<LOAN-LOSSES> 130
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</TABLE>
