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 September 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 October 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 SEPTEMBER 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) - September 30, 2000
and December 31, 1999. 2
b. Consolidated statements of income (unaudited) - for the nine
months and the three months ended September 30, 2000 and 1999. 3
c. Consolidated statements of comprehensive income (unaudited)
- for the nine months and the three months ended September 30,
2000 and 1999. 5
d. Consolidated statements of cash flows (unaudited) for the
nine months ended September 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. EXHIBITS AND REPORTS ON FORM 8-K 11
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SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30, 2000 and December 31, 1999
<CAPTION>
September 30, December 31,
ASSETS 2000 1999
<S> <C> <C>
Cash and due from banks $ 6,786,736 $ 8,137,993
Interest-bearing deposits with banks 14,395,217 6,613,723
Federal funds sold 2,000,000 1,635,000
Investment securities available for
sale, at fair value 16,126,324 15,889,295
Investment securities held to maturity (estimated
fair value of $68,268,251 and $69,310,826) 69,184,883 70,878,137
Total investment securities 85,311,207 86,767,432
Loans 122,348,883 110,748,201
Less: Unearned income (118,239) (129,347)
Allowance for loan losses (1,834,987) (1,944,023)
Loans, net 120,395,657 108,674,831
Premises and equipment 4,984,421 4,692,292
Other assets 6,985,870 6,538,381
Total assets $240,859,108 $223,059,652
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest bearing $ 25,776,563 $ 24,684,967
NOW accounts 37,769,347 37,560,205
Money Market 17,678,227 8,522,025
Savings 12,773,400 13,408,727
Certificates of deposit $100,000 and over 27,549,050 25,166,442
Other time accounts 73,330,607 72,729,833
Total deposits 194,877,194 182,072,199
Federal funds purchased 0 0
Other borrowed funds 5,000,000 1,500,000
Long-term debt 8,000,000 8,000,000
Other liabilities 2,482,044 1,830,560
Total liabilities 210,359,238 193,402,759
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 29,084,213 27,494,425
Accumulated other comprehensive income (275,962) (534,354)
Treasury stock 440,907 shares for 2000 and
380,624 shares for 1999, at cost (3,341,932) (2,093,432)
Total stockholders' equity 30,499,870 29,656,893
Total liabilities and stockholders' equity $240,859,108 $223,059,652
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SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
For The Three Months
Ended September 30,
2000 1999
<S> <C> <C>
Interest income:
Interest and fees on loans $3,154,183 $2,857,486
Interest and dividend on securities
available for sale 184,938 169,683
Interest on taxable securities held to maturity 1,060,485 1,083,529
Interest on tax exempt securities available for sale 142,910 122,772
Interest on tax exempt securities held to maturity 41,352 32,850
Interest on federal funds sold 3,098 11,242
Interest on deposits with banks 145,435 93,684
Total interest income 4,732,401 4,371,246
Interest expense:
Interest on deposits 1,851,132 1,494,284
Interest on federal funds purchased 10,157 0
Interest on other borrowings 93,358 20,317
Interest on long-term debt 122,107 121,440
Total Interest expense 2,076,754 1,636,041
Net interest income 2,655,647 2,735,205
Provision for loan losses 55,000 45,000
Net interest income after
provision for loan losses 2,600,647 2,690,205
Noninterest income:
Service charges on deposit accounts 240,143 252,665
Fees for trust services 65,537 63,515
Income from insurance services 210,909 210,680
Net gain on the sale of assets 6,157 38,839
Net (loss) on the sale of securities (3,059) 0
Other income 87,185 21,955
Total noninterest income 606,872 587,654
Noninterest expense:
Salaries and employee benefits 1,191,379 1,176,476
Occupancy expense 143,666 149,042
Equipment expense 123,783 119,118
Data processing expense 131,642 129,093
Other operating expenses 538,426 431,259
Total noninterest expenses 2,128,896 2,004,988
Income before income taxes 1,078,623 1,272,871
Provision for income taxes 244,700 343,500
Net income $ 833,923 $ 929,371
Earnings per share of common stock:
Net income, basic and diluted $ 0.33 $ 0.36
Dividends paid, basic and diluted 0.13 0.12
Average shares outstanding 2,582,289 2,619,376
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SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
For The Nine Months
Ended September 30,
2000 1999
<S> <C> <C>
Interest income:
Interest and fees on loans $ 8,929,154 $ 8,948,677
Interest and dividend on securities
available for sale 557,129 406,558
Interest on taxable securities held to maturity 3,288,899 3,176,737
Interest on tax exempt securities available for sale 428,729 365,249
Interest on tax exempt securities held to maturity 130,552 98,550
Interest on federal funds sold 14,519 68,810
Interest on deposits with banks 340,961 415,556
Total interest income 13,689,943 13,480,137
Interest expense:
Interest on deposits 5,139,213 4,659,233
Interest on federal funds purchased 18,183 9,761
Interest on other borrowings 155,754 62,778
Interest on long-term debt 361,690 360,360
Total Interest expense 5,674,840 5,092,132
Net interest income 8,015,103 8,388,005
Provision for loan losses 145,000 135,000
Net interest income after
provision for loan losses 7,870,103 8,253,005
Noninterest income:
Service charges on deposit accounts 715,418 728,323
Fees for trust services 187,441 210,939
Income from insurance services 690,741 765,961
Net gain on the sale of assets 4,961 38,839
Net (loss) on the sale of securities (3,059) 0
Other income 335,285 254,069
Total noninterest income 1,930,787 1,998,131
Noninterest expense:
Salaries and employee benefits 3,630,117 3,655,894
Occupancy expense 402,506 403,965
Equipment expense 366,626 370,275
Data processing expense 393,753 382,797
Other operating expenses 1,563,335 1,485,160
Total noninterest expenses 6,356,337 6,298,091
Income before income taxes 3,444,553 3,953,045
Provision for income taxes 843,100 1,104,800
Net income $ 2,601,453 $ 2,848,245
Earnings per share of common stock:
Net income, basic and diluted $ 1.00 $ 1.09
Dividends paid 0.39 0.36
Average shares outstanding 2,612,494 2,619,376
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SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<CAPTION>
For The Three Months
Ended September 30,
2000 1999
<S> <C> <C>
Net income $ 833,923 $ 929,371
Other comprehensive income, net of tax:
Unrealized holding gains(losses) arising
during the period 234,178 (133,967)
Federal income tax expense 79,621 (487)
Other comprehensive income, net of tax: 154,557 (133,480)
Total comprehensive income $ 988,480 $ 795,891
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SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<CAPTION>
For The Nine Months
Ended September 30,
2000 1999
<S> <C> <C>
Net income $2,601,453 $2,848,245
Other comprehensive income, net of tax:
Unrealized holding gains(losses) arising
during the period 391,503 (778,226)
Federal income tax expense 133,111 (2,008)
Other comprehensive income, net of tax: 258,392 (776,218)
Total comprehensive income $2,859,845 $2,072,027
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SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
For The Nine Months
Ended September 30,
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,601,453 $ 2,848,245
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 145,000 135,000
Depreciation 403,575 413,746
Net amortization and accretion
of investment securities 23,972 66,785
Amortization of intangibles 58,179 66,294
Net loss (gain) on sale and disposal of assets 5,193 132,801
Changes in:
Other assets ( 90,253) ( 134,223)
Other liabilities 517,431 262,290
Net cash provided by operating activities 3,664,550 3,790,938
Investing activities:
Proceeds from maturities of securities held
to maturity 10,475,000 15,050,000
Proceeds from sale of securities
available for sale 3,162,954 366,400
Purchase of securities held to maturity (11,814,486) (17,022,250)
Purchase of securities available for sale 0 ( 2,168,359)
Net change in other short-term investments ( 365,000) 2,225,000
Net change in loans (12,083,826) ( 204,734)
Purchase of premises and equipment ( 723,545) ( 434,266)
Proceeds from sales of other assets 297,285 198,000
Net change in interest-bearing
deposits with banks ( 7,781,494) 10,887,500
Cash equivalents acquired from acquisition 0 124,281
Payment for business acquisition ( 56,749) 0
Net cash used for investing activities (18,889,861) 9,021,572
Financing activities:
Net change in deposits 12,804,995 (11,743,738)
Net change in federal funds purchased and
securities sold under repurchase agreements 3,500,000 ( 365,000)
Cash dividends declared ( 1,013,497) ( 936,522)
Payment for common stock ( 1,417,444) 0
Net cash required for financing activities 13,874,054 (13,045,260)
Increase (decrease) in cash and due from bank ( 1,351,257) ( 232,750)
Cash and due from banks - beginning of period 8,137,993 7,284,746
Cash and due from banks - end of period $ 6,786,736 $ 7,051,996
NONCASH ITEMS:
Increase in foreclosed properties
and decrease in loans $ 218,000 $ 2,103,529
Unrealized gain(loss) on securities AFS $ 258,392 $( 776,218)
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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 September 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 September 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 nine
months ended September 30, 2000, total capital increased $843 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 12.66 percent as
of September 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. As of September 30, 2000, the Company has repurchased
91 thousand shares at an average price of $15.58 per share.
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
September 30, 2000, was $834 thousand compared to $929 thousand for the same
period in 1999, representing a decrease of $95 thousand or 10.3 percent. For
the first nine months of 2000, the Company earned a net income of $2.601
million or $ 1.00 per share compared to $2.848 million or $ 1.09 per share
in 1999. The company's third quarter earnings were lower than the same period
in 1999 mainly due to an expected increase in interest expense on deposits and
short-term borrowings partially offset by an increase in interest income and
fees on loans.
Total interest income increased $361 thousand comparing the three months ended
September 30, 2000 to the same period in 1999. For the first nine months of
2000, total interest income increased $210 thousand comparing the same period
in 1999. The majority of the increase in interest income for the first nine
months of 2000 occurred in interest and dividends on investment securities
partially offset by a decrease in interest on deposits with banks. Increases
in interest from securities are related to the growth in average volume of
investment securities. Decreases in interest on deposits with banks are
related to a decline in the average volume of interest bearing deposits with
banks.
The total interest expense increased $440 thousand or 26.9 percent in the
third quarter of 2000 compared to the same period in 1999. The total interest
expense for the nine month period ending September 30, 2000, increased $583
thousand or 11.4 percent compared to the same period in 1999. Over this
period, the average balances on interest-bearing deposits declined $155
thousand or less than 1.0 percent. The increase in interest expense is
primarily related to increases in the rate on interest-bearing deposits. The
rate on time deposits increased 50 basis points while the rate on savings
deposits increased 26 basis points comparing the first nine 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
third quarter of 2000 decreased $79 thousand, or 2.9 percent, compared to the
same period in 1999. Net interest income for the first nine months of 2000
was $8.015 million compared to $8.388 million for the same period in 1999.
Net interest income for the quarter and the nine 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
5.17 percent and 5.57 percent during the three months ended September 30, 2000
and 1999 and was 5.32 percent and 5.58 percent during the nine months ended
September 30, 2000 and 1999.
Other income increased $19 thousand, or 3.3 percent, for the three months
ended September 30, 2000 compared to the same period a year ago. The majority
of this increase was primarily attributable to increases in security sales
commission and other fees partially offset by decreases in income from the
service charges on deposit accounts and net gain on sale of assets. Other
income for the nine months ended September 30, 2000, decreased $67 thousand
compared to the same period in 1999. The majority, or $167 thousand of the
decrease was due to expenses related to foreclosed real estate property and
$75 thousand was attributable to decreases in income from insurance services
partially offset by increases in security sales commission and other fees.
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Total other expenses increased $124 thousand, or 6.2 percent, for the three
months ended September 30, 2000, and other expenses increased $59 thousand
for the nine months ended September 30, 2000, compared to the same periods
in 1999. The majority of the increase in other expense for both the quarter
and year-to-date periods is attributed to expenses related to the operations
of foreclosed real estate property and to merger and acquisition costs
associated with the insurance agency and the securities sales area
operations. 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 nine months of 2000, total assets increased $17.8 million, or
nearly 8.0 percent, over December 31, 1999, and increased $20.9 million, or
9.5 percent, over September 30, 1999.
The Company's loan portfolio of $122.2 million increased 10.5 percent from the
December 31, 1999, level of $110.6 million. Loans, the major use of funds,
represent 50.7 percent of total assets.
Investment securities and other short-term investments represent 42.2 percent
of total assets. Investment securities decreased $1.5 million since
December 31, 1999. Other short-term investments increased $8.1 million since
December 31, 1999. This resulted in an overall increase in investments of
$6.6 million.
Deposits, the primary source of the Company's funds, increased from $182.1
million at December 31, 1999, to $194.9 million at September 30, 2000, an
increase of 7.03 percent. Deposits growth occurred primarily in money market
accounts and time deposits partially offset by a decrease in savings accounts.
At September 30, 2000, total deposits represented 80.9 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 1.50 percent of total loans outstanding at September 30, 2000,
compared to 1.76 percent of loans outstanding at December 31, 1999.
Management considers the allowance for loan losses as of September 30, 2000,
adequate to cover potential losses in the loan portfolio.
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PART II. - OTHER INFORMATION
ITEM 5. 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
September 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: November 10, 2000 BY: s/George R. Kirkland
GEORGE R. KIRKLAND
SENIOR VICE-PRESIDENT
FINANCIAL AND ACCOUNTING OFFICER
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