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, 2000
[ ] 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, 2000
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 JUNE 30, 2000
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 (unaudited) - June 30, 2000 and
December 31, 1999. 2
b. Consolidated statements of income (unaudited) - for the six
months and the three months ended June 30, 2000 and 1999. 3
c. Consolidated statements of comprehensive income (unaudited)
- for the six months and the three months ended June 30,
2000 and 1999. 5
d. Consolidated statements of cash flows (unaudited) for the
six months ended June 30, 2000 and 1999. 6
e. Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7
PART II - OTHER INFORMATION
ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
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<TABLE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, 2000 and December 31, 1999
<CAPTION>
June 30, December 31,
ASSETS 2000 1999
<S> <C> <C>
Cash and due from banks $ 5,934,774 $ 8,137,993
Interest-bearing deposits with banks 3,588,886 6,613,723
Federal funds sold 0 1,635,000
Investment securities available for
sale, at fair value 15,951,657 15,889,295
Investment securities held to maturity (estimated
fair value of $71,413,500 and $69,310,826) 73,668,524 70,878,137
Total investment securities 89,620,181 86,767,432
Loans 121,152,287 110,748,201
Less: Unearned income (124,869) (129,347)
Allowance for loan losses (1,895,282) (1,944,023)
Loans, net 119,132,136 108,674,831
Premises and equipment 5,075,976 4,692,292
Other assets 7,123,005 6,538,381
Total assets $230,474,958 $223,059,652
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest bearing $ 23,790,123 $ 24,684,967
NOW accounts 35,207,688 37,560,205
Money Market 11,369,366 8,522,025
Savings 13,364,598 13,408,727
Certificates of deposit $100,000 and over 27,074,745 25,166,442
Other time accounts 72,507,064 72,729,833
Total deposits 183,313,584 182,072,199
Federal funds purchased 1,460,000 0
Other borrowed funds 5,000,000 1,500,000
Long-term debt 8,000,000 8,000,000
Other liabilities 2,164,325 1,830,560
Total liabilities 199,937,909 193,402,759
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 2,033,551 1,790,254
Retained earnings 28,581,143 27,494,425
Accumulated other comprehensive income (430,519) (534,354)
Treasury stock 396,907 shares for 2000 and
380,624 shares for 1999, at cost (2,647,126) (2,093,432)
Total stockholders' equity 30,537,049 29,656,893
Total liabilities and stockholders' equity $230,474,958 $223,059,652
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<TABLE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
For The Three Months
Ended June 30,
2000 1999
<S> <C> <C>
Interest income:
Interest and fees on loans $2,964,680 $3,171,522
Interest and dividend on securities
available for sale 185,693 110,923
Interest on taxable securities held to maturity 1,116,217 1,058,193
Interest on tax exempt securities available for sale 142,909 122,771
Interest on tax exempt securities held to maturity 44,600 32,850
Interest on federal funds sold 1,435 28,930
Interest on deposits with banks 77,385 133,993
Total interest income 4,532,919 4,659,182
Interest expense:
Interest on deposits 1,717,843 1,545,438
Interest on federal funds purchased 7,243 4,712
Interest on other borrowings 42,300 20,974
Interest on long-term debt 119,781 120,120
Total Interest expense 1,887,167 1,691,244
Net interest income 2,645,752 2,967,938
Provision for loan losses 45,000 45,000
Net interest income after
provision for loan losses 2,600,752 2,922,938
Noninterest income:
Service charges on deposit accounts 239,899 240,915
Fees for trust services 63,410 73,209
Income from Southwest Ga. Insurance Services 211,946 555,281
Net loss on the sale of assets (5,000) 0
Other income 29,354 70,063
Total noninterest income 539,609 939,468
Noninterest expense:
Salaries and employee benefits 1,223,667 1,445,003
Occupancy expense 132,094 138,002
Equipment expense 121,057 139,957
Data processing expense 129,929 127,845
Other operating expenses 469,677 678,048
Total noninterest expenses 2,076,424 2,528,855
Income before income taxes 1,063,937 1,333,551
Provision for income taxes 247,900 353,700
Net income $ 816,037 $ 979,851
Earnings per share of common stock:
Net income, basic and diluted $ 0.31 $ 0.36
Dividends paid 0.13 0.12
Average shares outstanding 2,619,616 2,619,376
</TABLE>
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<TABLE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
For The Six Months
Ended June 30,
2000 1999
<S> <C> <C>
Interest income:
Interest and fees on loans $5,774,971 $6,091,191
Interest and dividend on securities
available for sale 372,191 236,875
Interest on taxable securities held to maturity 2,228,414 2,093,208
Interest on tax exempt securities available for sale 285,819 242,477
Interest on tax exempt securities held to maturity 89,200 65,700
Interest on federal funds sold 11,421 57,568
Interest on deposits with banks 195,526 321,872
Total interest income 8,957,542 9,108,891
Interest expense:
Interest on deposits 3,288,081 3,164,949
Interest on federal funds purchased 8,026 9,761
Interest on other borrowings 62,396 42,461
Interest on long-term debt 239,583 238,920
Total Interest expense 3,598,086 3,456,091
Net interest income 5,359,456 5,652,800
Provision for loan losses 90,000 90,000
Net interest income after
provision for loan losses 5,269,456 5,562,800
Noninterest income:
Service charges on deposit accounts 475,275 475,658
Fees for trust services 121,904 147,424
Income from Southwest Ga. Insurance Services 479,832 555,281
Net loss on the sale of assets (1,196) 0
Other income 109,151 232,114
Total noninterest income 1,184,966 1,410,477
Noninterest expense:
Salaries and employee benefits 2,438,738 2,479,418
Occupancy expense 258,840 254,923
Equipment expense 242,843 251,157
Data processing expense 262,111 253,704
Other operating expenses 885,960 1,053,901
Total noninterest expenses 4,088,492 4,293,103
Income before income taxes 2,365,930 2,680,174
Provision for income taxes 598,400 761,300
Net income $1,767,530 $1,918,874
Earnings per share of common stock:
Net income, basic and diluted $ 0.67 $ 0.73
Dividends paid 0.26 0.24
Average shares outstanding 2,627,762 2,619,376
</TABLE>
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<TABLE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<CAPTION>
For The Three Months
Ended June 30,
2000 1999
<S> <C> <C>
Net income $ 816,037 $ 979,851
Other comprehensive income, net of tax:
Unrealized holding gains(losses) arising
during the period 31,669 (469,658)
Federal income tax expense 10,767 (487)
Other comprehensive income, net of tax: 20,902 (469,171)
Total comprehensive income $ 836,939 $ 510,680
</TABLE>
<TABLE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<CAPTION>
For The Six Months
Ended June 30,
2000 1999
<S> <C> <C>
Net income $1,767,530 $1,918,874
Other comprehensive income, net of tax:
Unrealized holding gains(losses) arising
during the period 157,325 (644,259)
Federal income tax expense 53,491 (1,521)
Other comprehensive income, net of tax: 103,834 (642,738)
Total comprehensive income $1,871,364 $1,276,136
</TABLE>
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<TABLE>
SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
For The Six Months
Ended June 30,
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,767,530 $ 1,918,874
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 90,000 90,000
Depreciation 268,668 261,720
Net amortization and accretion
of investment securities 21,746 49,585
Amortization of intangibles 36,577 44,196
Net loss (gain) on sale and disposal of assets 8,788 132,739
Changes in:
Other assets (187,256) (334,813)
Other liabilities 280,274 255,034
Net cash provided by operating activities 2,286,327 2,417,335
Investing activities:
Proceeds from maturities of securities held
to maturity 9,000,000 12,050,000
Proceeds from sale of securities
available for sale 97,317 366,400
Purchase of securities held to maturity (11,814,486) (16,022,250)
Purchase of securities available for sale 0 (2,168,359)
Net change in other short-term investments 1,635,000 (255,000)
Net change in loans (10,765,305) 1,624,924
Purchase of premises and equipment (680,377) (77,193)
Proceeds from sales of other assets 272,285 198,000
Net change in interest-bearing
deposits with banks 3,024,837 9,111,125
Cash equivalents acquired from acquisition 0 124,281
Payment for business acquisition (56,749) 0
Net cash used for investing activities (9,287,478) 4,951,928
Financing activities:
Net change in deposits 1,241,385 (7,559,169)
Net change in federal funds purchased and
securities sold under repurchase agreements 4,960,000 (365,000)
Cash dividends declared (680,815) (622,197)
Payment for common stock (722,638) 0
Net cash required for financing activities 4,797,932 (8,546,366)
Increase (decrease) in cash and due from bank (2,203,219) (1,177,103)
Cash and due from banks - beginning of period 8,137,993 7,284,746
Cash and due from banks - end of period $ 5,934,774 $ 6,107,643
NONCASH ITEMS:
Increase in foreclosed properties
and decrease in loans $ 218,000 $136,000
Unrealized gain(loss) on securities AFS $ 103,834 $( 642,738)
</TABLE>
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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.
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.
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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, 2000, 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, 2000, the Company's and the Bank's risk-based capital ratios were
considered adequate based on guidelines established by regulatory
authorities. During the six months ended June 30, 2000, total capital
increased $880 thousand to $30.5 million. Also, the Company continues to
maintain a healthy level of capital adequacy as measured by its equity-to-
asset ratio of 13.25 percent as of June 30, 2000. 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.
Acquisition
In January 2000, the Company acquired the Dillard Insurance Agency located
in Moultrie, Georgia. The insurance agency was merged into Southwest
Georgia Insurance Services, Inc., which is a subsidiary of Southwest Georgia
Bank. Also in February 2000, the Company acquired Financial Planning
Concepts, Inc., a personal financial planning and investment services firm
located in Moultrie, Georgia. This acquired firm was merged into the Trust
and Investment Division of Southwest Georgia Bank
In January of this year, the Company announced a share repurchase program
where it may repurchase up to 150,000 shares, or approximately 6%, of its
common stock from time to time through January 31, 2001. The Board of
Directors approved this common stock repurchase program in view of the
strong capital position of Southwest Georgia Financial Corporation and its
subsidiary, Southwest Georgia Bank.
In May of 2000, Southwest Georgia Financial Corporation acquired ownership
of the Harrell Insurance Agency which is located in Camilla, Georgia. The
agency was merged into Southwest Georgia Insurance Services which is a
division of Southwest Georgia Bank. The insurance division operates an
office in Colquitt County d/b/a Moultrie Insurance Agency.
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 after taxes for the three month period ending June
30, 2000, was $816 thousand compared to $980 thousand for the same period in
1999, representing a decrease of $164 thousand or 16.7 percent. For the
first six months of 2000, the Company earned a net income of $1.768 million
or $ .67 per share compared to $1.919 million or $ .73 per share in 1999.
The company's second quarter earnings were lower than the same period in
1999 mainly due to net losses and merger expenses related to insurance
agency operations as well as decreased non-recurring income from purchased
loans.
Total interest income decreased $126 thousand comparing the three months
ended June 30, 2000 to the same period in 1999. For the first six months of
2000, total interest income decreased $151 thousand comparing the same
period in 1999. The majority of the decrease in interest income occurred in
interest and fees on loans and in interest on deposits with banks partially
offset by increases in interest and dividends on investment securities.
Decreases in interest and fees on loans are related to a $307 thousand six-
month decrease in discount accretion on purchased loans. Decreases in
interest on deposits with banks are related to a decline in the average
volume of interest bearing deposits with banks. Increases in interest from
securities are related to the growth in average volume of investment
securities.
The total interest expense increased $196 thousand or 11.6 percent in the
second quarter of 2000 compared to the same period in 1999. The total
interest expense for the six month period ending June 30, 2000, increased
$142 thousand or 4.1 percent compared to the same period in 1999. Over this
period, the average balances on interest-bearing deposits declined $3.4
million or 2.1 percent. The increase in interest expense is primarily
related to increases in the rate on interest-bearing deposits. The rate on
time deposits increased 23 basis points while the rate on savings deposits
increased 21 basis points comparing the first six months of 2000 to the same
period in 1999.
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 2000 decreased $322 thousand, or 10.8 percent,
compared to the same period in 1999. Net interest income for the first six
months of 2000 was $5.359 million compared to $5.653 million for the same
period in 1999. 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 5.31 percent and 5.50 percent during the
three months ended June 30, 2000 and 1999 and was 5.40 percent and 5.59
percent during the six months ended June 30, 2000 and 1999.
Other income decreased $400 thousand, or 42.6 percent, for the three months
ended June 30, 2000 compared to the same period a year ago. In 1999 the
company recognized $555 thousand of revenues from merged insurance
operations. That amount represented nine months of operations for the
merged entity. Although the $212 thousand second quarter 2000 income from
Southwest Georgia Insurance Services appears to be a significant decrease,
it results from just three months of operations. Other income for the six
months ended June 30, 2000, decreased $226 thousand compared to the same
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period in 1999. The majority, or $125 thousand of the decrease was due to
expenses related to foreclosed real estate property and $75 thousand was
attributable to decreases in income from the insurance agency subsidiary
relating to the merger transaction in 1999.
Total other expenses decreased $452 thousand, or 17.9 percent, for the three
months ended June 30, 2000, and other expenses decreased $205 thousand for
the six months ended June 30, 2000, compared to the same periods in 1999.
The majority, or $446 thousand, of the decrease in overhead expenses relates
to the effect of the insurance agency merger with McLaughlin, Edwards, and
Robison, Inc. in 1999. Other increases in noninterest expense compared to
the same period a year ago occurred in the normal course of operations.
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 2000, total assets increased $7.4 million, or
nearly 3.3 percent, over December 31, 1999, and increased $6.9 million, or
3.0 percent, over June 30, 1999.
The Company's loan portfolio of $121.0 million increased 9.4 percent from
the December 31, 1999, level of $110.6 million. Loans, the major use of
funds, represent 52.5 percent of total assets.
Investment securities and other short-term investments represent 40.4
percent of total assets. Investment securities increased $2.9 million since
December 31, 1999. Other short-term investments decreased $4.7 million
since December 31, 1999. This resulted in an overall decrease in
investments of $1.8 million.
Deposits, the primary source of the Company's funds, increased slightly from
$182.1 million at December 31, 1999, to $183.3 million at June 30, 2000, an
increase of .68 percent. Deposits growth occurred primarily in money market
accounts and time deposits partially offset by a decrease in NOW accounts.
At June 30, 2000, total deposits represented 79.5 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 1.57 percent of total
loans outstanding at June 30, 2000, compared to 1.76 percent of loans
outstanding at December 31, 1999. Management considers the allowance for
loan losses as of June 30, 2000, adequate to cover potential losses in the
loan portfolio.
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PART II. - OTHER INFORMATION
ITEM 5 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Date - April 25, 2000 - annual shareholders' meeting.
(b) Elected the following directors:
Cecil W. Alvis Lee C. Redding
Cecil H. Barber Roy H. Reeves
John H. Clark Johnny R. Slocumb
Robert M. Duggan Violet K. Weaver
Michael J. McLean C. Broughton Williams
Richard L. Moss
Director Emeritus:
Albert W. Barber
Leo T. Barber, Jr.
Mrs. Kenneth V. Cope
E. J. McLean, Jr.
Jack Short
Mrs. Hugh Turner
<TABLE>
(c) The following matter was voted on at the annual
shareholders' meeting.
<CAPTION>
Number Of Percent Of
Votes Cast Outstanding Shares
<S> <C> <C>
(1) Election Of
Directors 1,960,484 74.00%
Against 9,852 .50%
Total Shares Voted 1,970,336 74.50%
</TABLE>
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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 June 30, 2000.
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: July 10, 2000 BY: s/George R. Kirkland
GEORGE R. KIRKLAND
SENIOR VICE-PRESIDENT
FINANCIAL AND ACCOUNTING OFFICER
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