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, 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 April 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 MARCH 31, 2000
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TABLE OF CONTENTS
PAGE #
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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) -
March 31, 2000 and December 31, 1999. 2
b. Consolidated statements of income (unaudited) -
for the three months ended March 31, 2000 and 1999. 3
c. Consolidated statements of comprehensive income
(unaudited) - for the the three months ended
March 31, 2000 and 1999. 4
d. Consolidated statements of cash flows (unaudited)
for the three months ended March 31, 2000 and 1999. 5
e. Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 6
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION 8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 9
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SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, 2000 and December 31, 1999
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
<S> <C> <C>
Cash and due from banks $ 8,149,462 $ 8,137,993
Interest-bearing deposits with banks 3,216,218 6,613,723
Federal funds sold 0 1,635,000
Investment securities available
for sale, at fair value 15,968,490 15,889,295
Investment securities held to
maturity (estimated fair value
of $74,689,973 and $69,310,826) 76,679,154 70,878,137
Total investment securities 92,647,644 86,767,432
Loans 115,542,749 110,748,201
Less: Unearned income ( 121,506) ( 129,347)
Allowance for loan losses ( 1,924,623) ( 1,944,023)
Loans, net 113,496,620 108,674,831
Premises and equipment 5,153,198 4,692,292
Other assets 7,109,491 6,538,381
Total assets $229,772,633 $223,059,652
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest bearing $ 25,245,666 $ 24,684,967
NOW accounts 36,403,348 37,560,205
Money Market 12,057,781 8,522,025
Savings 13,591,779 13,408,727
Certificates of deposit $100,000 and over 26,122,992 25,166,442
Other time accounts 72,240,520 72,729,833
Total deposits 185,662,086 182,072,199
Federal funds purchased and securities
sold under repurchase agreements 1,625,000 0
Other borrowed funds 1,500,000 1,500,000
Long-term debt 8,000,000 8,000,000
Other liabilities 2,424,893 1,830,560
Total liabilities 199,211,979 193,402,759
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 1,981,342 1,790,254
Retained earnings 28,103,247 27,494,425
Accumulated other comprehensive income ( 451,421) ( 534,354)
Treasury stock 364,057 shares for 2000 and
380,624 shares for 1999, at cost ( 2,072,514) ( 2,093,432)
Total stockholders' equity 30,560,654 29,656,893
Total liabilities and stockholders' equity $229,772,633 $223,059,652
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SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
For The Three Months
Ended March 31,
2000 1999
<S> <C> <C>
Interest income:
Interest and fees on loans $2,810,291 $2,919,669
Interest and dividend on securities
available for sale 186,498 125,952
Interest on taxable securities held to maturity 1,112,197 1,035,015
Interest on tax exempt securities available for sale 142,910 119,706
Interest on tax exempt securities held to maturity 44,600 32,850
Interest on federal funds sold 9,986 28,638
Interest on deposits with banks 118,141 187,879
Total interest income 4,424,623 4,449,709
Interest expense:
Interest on deposits 1,570,238 1,619,511
Interest on federal funds purchased and
securities sold under repurchase agreements 783 5,049
Interest on other borrowings 20,096 21,487
Interest on long-term debt 119,802 118,800
Total interest expense 1,710,919 1,764,847
Net interest income 2,713,704 2,684,862
Provision for loan losses 45,000 45,000
Net interest income after
provision for loan losses 2,668,704 2,639,862
Noninterest income:
Service charges on deposit accounts 235,376 234,743
Fees for trust services 58,494 74,215
Net gain on the sale of assets 3,804 0
Income from Southwest Ga. Insurance Services 267,886 0
Other income 79,797 162,051
Total noninterest income 645,357 471,009
Noninterest expense:
Salaries and employee benefits 1,215,071 1,034,415
Occupancy expense 126,746 116,921
Equipment expense 121,786 111,200
Data processing expense 132,182 125,859
Other operating expenses 416,283 375,853
Total noninterest expenses 2,012,068 1,764,248
Income before income taxes 1,301,993 1,346,623
Provision for income taxes 350,500 407,600
Net income $ 951,493 $ 939,023
Earnings per share of common stock:
Net income, basic and diluted $ 0.36 $ 0.37
Dividends paid 0.13 0.12
Average shares outstanding 2,635,908 2,565,599
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SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<CAPTION>
For The Three Months
Ended March 31,
2000 1999
<S> <C> <C>
Net income $ 951,493 $ 939,023
Other comprehensive income, net of tax:
Unrealized holding gains(losses) arising
during the period 125,656 (174,601)
Federal income tax expense 42,723 (1,034)
Other comprehensive income, net of tax: 82,933 (173,567)
Total comprehensive income $1,034,426 $765,456
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SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
For The Three Months
Ended March 31,
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Net income $ 951,493 $ 939,023
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 45,000 45,000
Depreciation 133,761 126,783
Net amortization and accretion of
investment securities 12,933 25,494
Amortization of intangibles 17,210 22,098
Net loss (gain) on sale and disposal of assets ( 3,804) ( 12,839)
Changes in:
Other assets ( 117,417) ( 150,859)
Other liabilities 551,610 336,580
Net cash provided by operating activities 1,590,786 1,331,280
Investing activities:
Proceeds from maturities of securities held
to maturity 6,000,000 7,000,000
Proceeds from sale of securities available for sale 46,997 0
Purchase of securities held to maturity (11,814,486) (9,067,504)
Purchase of securities available for sale 0 (2,168,359)
Net change in other short-term investments 1,635,000 ( 115,000)
Net change in loans ( 5,064,789) ( 238,230)
Purchase of premises and equipment ( 595,006) ( 21,712)
Proceeds from sales of other assets 119,685 37,000
Net change in interest-bearing deposits with banks 3,397,505 7,391,010
Payment for business acquisition ( 56,737) 0
Net cash used for investing activities ( 6,331,831) 2,817,205
Financing activities:
Net change in deposits 3,589,887 (4,461,791)
Net change in federal funds purchased and
securities sold under repurchase agreements 1,625,000 0
Cash dividends declared ( 342,673) ( 307,872)
Payment for common stock ( 119,700) 0
Net cash required for financing activities 4,752,514 (4,769,663)
Increase (decrease) in cash and due from bank 11,469 ( 621,178)
Cash and due from banks - beginning of period 8,137,993 7,284,746
Cash and due from banks - end of period $ 8,149,462 $ 6,663,568
NONCASH ITEMS:
Increase in foreclosed properties
and decrease in loans $ 198,000 $ 136,000
Unrealized gain(loss) on securities AFS 82,933 ( 173,567)
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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.
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, 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 March 31, 2000,
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, 2000, total capital increased $904 thousand
to $30.6 million. Also, the Company continues to maintain a healthy level of
capital adequacy as measured by its equity-to-asset ratio of 13.30 percent as
of March 31, 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.
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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.
Comparison of Statements of Income
The Company's net income after taxes for the three month period ending March
31, 2000, was $951 thousand compared to $939 thousand for the same period in
1999, representing an increase of $12 thousand or 1.33 percent. For the first
three months of 2000, the Company earned a net income of $ .36 per share
compared to $ .37 per share in 1999. This three month growth in earnings is
primarily attributable to decreased interest expense.
Total interest income decreased $25 thousand comparing the three months ended
March 31, 2000 to the same period in 1999. The majority of the decrease in
interest income occurred in interest and fees on loans. This decrease in
interest and fees on loans is primarily related to the decline of $2.2 million
in average volume of loans for the first quarter of 2000 compared to the same
period last year. Also, decreases in interest on federal funds sold and
interest on deposits with banks were related to the Bank becoming more fully
invested in long-term securities during the first quarter of 2000.
The total interest expense decreased $54 thousand or 3.1 percent in the first
quarter of 2000 compared to the same period in 1999. Over this period, the
average balances on interest-bearing deposits grew more than $6.3 million or
3.8 percent. The decrease in interest expense is primarily related to
decreases in rates on time deposits. The rate on time deposits decreased 10
basis points while the rate on savings, NOWs, and money market account
deposits increased 9 basis points comparing the first three 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
first quarter of 2000 increased $29 thousand, or 1.1 percent, compared to the
same period in 1999. Net interest income for the 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 tax equivalent net
interest margin was 5.50 percent and 5.30 percent during the three months
ended March 31, 2000 and 1999.
Noninterest income increased $174 thousand, or 37.0 percent, for the three
months ended March 31, 2000 compared to the same period a year ago. This
increase was primarily attributed to income from Southwest Georgia Insurance
Services, Inc.
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Total noninterest expenses increased $248 thousand, or 14.0 percent, for the
three months ended March 31, 2000, compared to the same period in 1999. This
increase in other noninterest expenses primarily resulted from increased
expenses related to Southwest Georgia Insurance Services, Inc. Other
increases in noninterest expenses resulted from growth of normal 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 three months of 2000, total assets increased $6.7 million, or
nearly 3.0 percent, over December 31, 1999, and increased $3.2 million, or 1.4
percent, over March 31, 1999.
The Company's loan portfolio of $115.5 million increased 4.3 percent from the
December 31, 1999, level of $110.7 million. Loans, the major use of funds,
represent 50.3 percent of total assets.
Investment securities and other short-term investments represent 41.7 percent
of total assets. Investment securities increased $5.9 million since December
31, 1999. Other short-term investments decreased $5.0 million since December
31, 1999. This resulted in an overall increase in investments of $0.9
million.
Deposits, the primary source of the Company's funds, increased from $182.1
million at December 31, 1999, to $185.7 million at March 31, 2000, an increase
of 2.0 percent. This growth in deposits occurred primarily in money market
accounts and certificates of deposit. At March 31, 2000, total deposits
represented 80.8 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 1.67 percent of total loans outstanding at March 31, 2000, and was
1.76 percent of total loans outstanding at December 31, 1999. Management
considers the allowance for loan losses as of March 31, 2000, adequate to
cover potential losses in the loan portfolio.
PART II. - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
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
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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.
On April 27, 2000, the Bank acquired the Harrell Insurance Services, Inc., an
insurance agency in Camilla, Georgia. This agency will be merged with the
Bank's Southwest Georgia Insurance Services, Inc. subsidiary. The Harrell
Insurance Agency currently produces approximately $75,000 in annual
commissions.
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, 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: May 12, 2000 BY: s/George R. Kirkland
GEORGE R. KIRKLAND
SENIOR VICE-PRESIDENT
FINANCIAL AND ACCOUNTING OFFICER
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