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 March 31, 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 April 30, 1998
Common Stock, $1 Par Value 3,000,000
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SOUTHWEST GEORGIA FINANCIAL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1998
<CAPTION>
TABLE OF CONTENTS
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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 - March 31, 1998
and December 31, 1997. 2
b. Consolidated statements of income - for the
three months ended March 31, 1998 and 1997. 3
c. Consolidated statements of cash flows for the
three months ended March 31, 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 6. EXHIBITS AND REPORTS ON FORM 8-K 8
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SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31, 1998 and December 31, 1997
<CAPTION>
March 31, December 31,
ASSETS 1998 1997
<S> <C> <C>
Cash and due from banks $ 6,690,815 $ 6,067,222
Interest-bearing deposits with banks 4,235,042 12,178,724
Federal funds sold 2,100,000 2,125,000
Investment securities available
for sale, at fair value 2,484,108 2,184,531
Investment securities held to
maturity (estimated fair value
of $79,200,297 and $65,350,520) 78,610,304 64,640,817
Total investment securities 81,094,412 66,825,348
Loans 117,653,431 119,686,763
Less: Unearned income (139,649) (142,668)
Allowance for loan losses (1,942,382) (1,998,822)
Loans, net 115,571,400 117,545,273
Premises and equipment 4,073,215 3,925,835
Other assets 5,395,077 5,289,259
Total assets $ 219,159,961 $ 213,956,661
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest bearing $ 20,501,970 $ 21,366,320
NOW accounts 40,714,628 35,497,778
Money Market 10,038,280 9,719,999
Savings 14,157,396 13,742,235
Certificates of deposit $100,000 and over 20,366,193 20,484,022
Other time accounts 75,609,795 75,625,128
Total deposits 181,388,262 176,435,482
Federal funds purchased and securities
sold under repurchase agreements 555,000 1,300,300
Other borrowed funds 1,500,000 1,500,000
Long-term debt 8,000,000 8,000,000
Other liabilities 2,138,911 1,804,814
Total liabilities 193,582,173 189,040,596
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 2,051,495 2,029,134
Retained earnings 22,925,085 22,294,875
Treasury stock 436,144 shares for 1998 and
437,808 shares for 1997, at cost (2,398,792) (2,407,944)
Total stockholders' equity 25,577,788 24,916,065
Total liabilities and stockholders' equity $ 219,159,961 $ 213,956,661
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SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
For The Three Months
Ended March 31,
1998 1997
<S> <C> <C>
Interest income:
Interest and fees on loans $ 3,063,958 $ 3,078,209
Dividends on securities available for sale 84,024 25,014
Interest on taxable securities held to maturity 1,164,260 1,151,591
Interest on tax exempt securities held to maturity 0 9,375
Interest on federal funds sold 30,087 23,221
Interest on deposits with banks 109,834 61,392
Total interest income 4,452,163 4,348,802
Interest expense:
Interest on deposits 1,735,499 1,630,735
Interest on federal funds purchased and
securities sold under repurchase agreements 9,041 31,759
Interest on other borrowings 22,687 21,450
Interest on long-term debt 118,800 118,800
Total interest expense 1,886,027 1,802,744
Net interest income 2,566,136 2,546,058
Provision for loan losses 60,000 45,000
Net interest income after
provision for loan losses 2,506,136 2,501,058
Noninterest income:
Service charges on deposit accounts 237,329 208,620
Fees for trust services 81,907 67,255
Other income 175,558 104,826
Total noninterest income 494,794 380,701
Noninterest expense:
Salaries and employee benefits 951,923 952,763
Occupancy expense 105,339 94,392
Equipment expense 102,152 108,824
Data processing expense 99,111 90,016
Other operating expenses 387,971 413,480
Total noninterest expenses 1,646,496 1,659,475
Income before income taxes 1,354,434 1,222,284
Provision for income taxes 442,200 383,100
Net income * $ 912,234 $ 839,184
Earnings per share of common stock:
Net income, basic and diluted $ 0.36 $ 0.33
Dividends paid 0.11 0.10
Average shares outstanding 2,563,264 2,560,791
* The Company has no other comprehensive income for the reported periods.
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SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For The Three Months
Ended March 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 912,234 $ 839,184
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 60,000 45,000
Depreciation 116,850 112,419
Net amortization and accretion of
investment securities 2,881 ( 46,561)
Net loss (gain) on sale and disposal of assets 0 0
Changes in:
Other assets ( 105,816) 40,258
Other liabilities 334,097 164,350
Net cash provided by operating activities 1,320,246 1,154,650
Investing activities:
Proceeds from maturities of securities held
to maturity 4,775,000 5,015,000
Proceeds from sale of securities
available for sale 69,300 0
Purchase of securities held to maturity (19,116,246) ( 8,814,279)
Net change in other short-term investments 25,000 950,000
Net change in loans 1,913,873 ( 2,996,882)
Purchase of premises and equipment ( 264,230) ( 90,398)
Proceeds from sales of other assets 0 31,000
Net change in interest-bearing
deposits with banks 7,943,682 1,122,992
Net cash used for investing activities ( 4,653,621) ( 4,782,567)
Financing activities:
Net change in deposits 4,952,780 2,978,917
Net change in federal funds purchased and
securities sold under repurchase agreements ( 745,300) 65,300
Cash dividends declared ( 282,024) ( 256,080)
Proceeds from sale of treasury stock 31,512 0
Net cash provided by (required for)
financing activities 3,956,968 2,788,137
Increase (decrease) in cash and due from bank 623,593 ( 839,780)
Cash and due from banks - beginning of period 6,067,222 7,353,763
Cash and due from banks - end of period $ 6,690,815 $ 6,513,983
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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.
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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 March 31, 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 March 31, 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 March 31, 1998, total capital increased $662 thousand
to $25.6 million. Also, the Company continues to maintain a healthy level of
capital adequacy as measured by its equity-to-asset ratio of 11.67 percent as
of March 31, 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 share-
holders. 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.
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Comparison of Statements of Income
The Company's net income before taxes for the three month period of 1998
was $1.354 million compared to $1.222 million for the same period in 1997.
This $132 thousand or 10.8 percent increase in earnings before taxes is
primarily attributable to several noninterest income items in the first three
months of 1998.
Total interest income increased $103 thousand comparing the first three
months in 1998 to the same period in 1997. The majority of the increase in
interest income occurred in 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.
The total interest expense increased $83 thousand or 4.6 percent in the
first three months of 1998 compared to the same period in 1997. Over this
period, the average balances on interest- bearing deposits grew more than $5
million or 3.3 percent. The increase in interest expense is primarily related
to increases in volume of time deposits. The rate on time deposits increased
20 basis points while the rate on savings deposits declined 4 basis points
comparing the first three 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 three months of 1998 increased $20 thousand, or nearly 1 percent, compared
to the same period in 1997. The $2.566 million of net interest income for this
quarter 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 5.18 percent and 5.21 percent during the three months ended
March 31, 1998 and 1997, respectively, a decrease of 3 basis points. These
variances are primarily attributable to fluctuations in the average rates
charged and fees earned on loans.
Other income increased $114 thousand, or nearly 30 percent, for the first
three months of 1998 compared to the same period a year ago. This increase in
other noninterest income primarily relates to an increase in income from
insurance commissions, security sales commissions, service charges on deposit
accounts, and other real estate owned.
Total other expenses decreased nearly $13 thousand, or less than 1
percent, for the first three months of 1998 compared to the same period in
1997. This decrease in other noninterest expenses primarily resulted from
decreases in amortization of premium on purchased deposits and legal expense
partially offset by increases in the occupancy expense, data processing
expense, and directors' fees. Management will continue to monitor expenses
closely in an effort to achieve all cost efficiencies available.
Comparison of Financial Condition Statements
During the first three months of 1998, total assets increased $5.2
million, or 2.4 percent, over December 31, 1997, and increased $5.8 million, or
2.8 percent, over March 31, 1997.
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The Company's loan portfolio of $117.6 million declined 1.7 percent from
the December 31, 1997, level of $119.7 million. Loans, the major use of funds,
represent 53.7 percent of total assets.
Investment securities and other short-term investments represent 37
percent of total assets. Investment securities increased $14.3 million since
December 31, 1997. Other short-term investments decreased $7.9 million since
December 31, 1997. This resulted in an overall increase in investments of $6.3
million.
Deposits, the primary source of the Company's funds, increased from $176.4
million at December 31, 1997, to $181.4 million at March 31, 1998, an increase
of 2.8 percent. The significant amount of deposit growth occurred in NOW
accounts deposits. At March 31, 1998, total deposits represented 82.8 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 1.65 percent and 1.67 percent of total loans outstanding at
March 31, 1998, and December 31, 1997, respectively. Management considers the
allowance for loan losses as of March 31, 1998, adequate to cover potential
losses in the loan portfolio.
PART II. - OTHER INFORMATION
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
March 31, 1998.
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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: May 11, 1998 BY: s/George R. Kirkland
GEORGE R. KIRKLAND
SENIOR VICE-PRESIDENT
FINANCIAL AND ACCOUNTING OFFICER
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<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 6691
<INT-BEARING-DEPOSITS> 4235
<FED-FUNDS-SOLD> 2100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2484
<INVESTMENTS-CARRYING> 78610
<INVESTMENTS-MARKET> 81684
<LOANS> 117514
<ALLOWANCE> 1942
<TOTAL-ASSETS> 219160
<DEPOSITS> 181388
<SHORT-TERM> 2055
<LIABILITIES-OTHER> 2139
<LONG-TERM> 8000
<COMMON> 3000
0
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<OTHER-SE> 22578
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<INTEREST-DEPOSIT> 1735
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