Southwest Georgia Financial Corporation (NYSE Amex: SGB), a full service community bank holding company, today reported net income of $906 thousand for the second quarter of 2010, up 250%, or $647 thousand, when compared with net income of $259 thousand for the second quarter of 2009. The significant increase was the result of higher net interest income, a $628 thousand gain on the sale of securities, and operating expenses which declined $632 thousand. On a per diluted share basis, earnings increased to $0.36 for the second quarter of 2010 from $0.10 for the second quarter of 2009.

DeWitt Drew, President and CEO commented, “Results for the second quarter were significantly impacted by transactions in our investment portfolio. These transactions were due in part to our decision to exit positions held in corporate bonds. Many of those positions were intermediate or long-term, the obligors continue to struggle financially, and their debt had been downgraded by national ratings services. Also, our full-service banking center in Valdosta opened in June and we are excited about the potential in that market.”

Return on average equity for the second quarter of 2010 increased to 13.56% compared with 4.37% for the same period in 2009. Return on average assets for the quarter was 1.21%, an increase of 83 basis points when compared with the same period in 2009.

For the first six months of 2010, net income was $1.31 million compared with net income of $640 thousand for the same period in 2009. The growth in net income reflects a $535 thousand net gain on the sale of securities and a measurable decline in operating expenses related to legal fees and the FDIC insurance assessments. Earnings per diluted share for the first six months of 2010 were $0.52, up over 100% compared with earnings per diluted share of $0.25 for the same period in 2009. Year-to-date return on average equity increased to 9.96% compared with 5.42% for the same period last year, while return on average assets increased 41 basis points to 0.88%.

Strong Balance Sheet Growth; Asset Quality

At June 30, 2010, total assets were $296.7 million, up from $269.2 million at mid-year 2009, and up from $291.0 million at December 31, 2009. Loan balances at the end of the current quarter were $159.4 million, down slightly from the 2009 year-end balance, though up $8.4 million, or 5.5%, from the end of June 2009.

The loan loss reserve coverage to total loans was 1.83% at the end of the second quarter of 2010 compared with 1.66% at the end of the second quarter of 2009. Nonperforming assets were $4.2 million, or 1.40% of total assets, in the second quarter of 2010, down from $6.1 million, or 2.03% of total assets, in the first quarter, and $2.8 million, or 1.03% of total assets in the same period last year. Nonperforming assets increased over the prior year period primarily due to fully funding a large foreclosed commercial property in the last half of 2009. There were $3.7 million of foreclosed properties in nonperforming assets at the end of the current quarter compared with $3.8 million at the prior year end.

Mr. Drew noted, “We are beginning to see some signs of economic stabilization, however, the housing market remains severely stressed and high unemployment is likely to continue for the foreseeable future. Our higher level of nonperforming assets as well as the weak loan demand we have experienced through the first two quarters in 2010 were a direct result of these issues that are still very prevalent in our markets.”

Total deposits were up $18.9 million, or 8.6%, to $240.0 million at the end of the second quarter of 2010 from the end of the second quarter of 2009, and up $4.6 million when compared with the fourth quarter of 2009. The year-over-year increase was primarily due to higher money market and transactional account balances.

Shareholders’ equity grew to $27.1 million as of June 30, 2010 compared with $23.8 million at June 30, 2009, and $25.5 million at the end of 2009. On a per share basis, book value was $10.64 at the end of the second quarter, up from $9.34 at the end of the second quarter in 2009. The Corporation maintained a strong capital position with a total risk-based capital ratio of 17.58% at June 30, 2010, in excess of the minimum regulatory guidelines of 10% for a well capitalized financial institution. The Corporation has approximately 2.5 million shares of common stock outstanding.

Building Revenue While Maintaining Strong Cost Discipline

Net interest income before provision for loan losses improved to $2.64 million for the second quarter of 2010 compared with $2.44 million for the same period in 2009. During the current quarter, the Corporation provisioned $150 thousand for loan losses compared with a $60 thousand for the same period of the prior year. Total interest income increased slightly to $3.38 million when compared with $3.35 in the second quarter of 2009, reflecting higher interest and fees earned on loans of $220 thousand, partially offset by lower interest income from investment securities. The Corporation’s net interest margin was 4.07% for the second quarter of 2010, down 5 basis points from the same period last year. The decline in net interest margin was mainly impacted from the reinvestment of securities which were either called, matured, and/or sold into overnight balances carried at the Federal Reserve Bank. Some longer term mortgage-backed securities were sold in November 2009 and May 2010 to shorten the duration of our portfolio. Also, the remaining $5 million of corporate notes were sold in June to reduce credit risk in the portfolio. The Corporation recorded a $628 thousand net gain on the sale of securities during the second quarter. Due to the sales of higher yielding securities, total investment securities yield dropped 96 basis points compared with the same quarter a year ago. Total interest expense was $743 thousand for the second quarter of 2010, down $166 thousand from the same period a year ago, primarily due to a lower interest rate environment. The average rate paid on interest-bearing time deposits decreased 74 basis points for the quarter compared with the same period a year ago.

Noninterest income, which was 34.4% of the Corporation’s total revenue for the quarter, increased $567 thousand or 47.0%, to $1.77 million when compared with last year’s second quarter. The majority of this increase was related to previously noted $628 thousand gains on the sale of securities. Also positively impacting noninterest income was mortgage banking services revenue, which increased $47 thousand, or 15.0%, and trust services and retail brokerage services revenue, which increased $8 thousand and $38 thousand, respectively, in the second quarter of 2010. Income from insurance services also increased $24 thousand, or 9.0%. These increases were partially offset by a provision for market value changes in foreclosed property of $125 thousand and a decrease in service charges on deposit accounts of $52 thousand, or 11.5%, compared with the prior year’s second quarter.

Total noninterest expense decreased 11.6% to $3.01 million from $3.41 million for the second quarter of 2009. The decrease was primarily due to a $632 thousand decrease in other operating expenses when compared with the prior year’s second quarter as a result of lower legal expenses and FDIC insurance assessments. This decrease was partially offset by an increase in salaries and employee benefits of $215 thousand, or 13.9%, mainly due to staffing the Valdosta banking center and accruals for performance incentives and benefit plan expenses.

Review of First Six Months of 2010

Net interest income for the first six months of 2010 was 6.4% higher at $5.13 million compared with $4.83 million for the same period in 2009, primarily due to lower interest paid on deposits. Net interest income after provision for loan losses was $4.83 million for the first half of 2010 compared with $4.58 million for the same period in 2009. A provision for loan losses of $300 thousand was recognized in the first six months of 2010 compared with $246 thousand provision in the corresponding period of 2009. Net interest margin was 4.00% for the first six months of 2010, down slightly from 4.10% in the same period a year ago.

For the first six months of 2010, noninterest income was $2.93 million, up 20.7% from the same period in 2009. As previously noted, the majority of the increase was due to a $535 thousand gain on the sale of securities. Income from insurance services increased $45 thousand, or 8.0%, when compared with the six-month period in 2009. Revenue from trust services and income from retail brokerage services increased $10 thousand and $36 thousand, respectively when compared with the same period in 2009. These increases in revenue were partially offset by $122 thousand provision for change in market value of foreclosed properties and a decrease in service charges on deposit accounts of $63 thousand, or 7.4%, when compared with the same period of 2009.

Noninterest expense decreased $391 thousand for the first six months of 2010 compared with the same period last year. The change was due to a $689 thousand, or 34.9% decrease in other operating expenses, a reflection of lower legal expense and insurance assessments to the FDIC, partially offset by an increase in salary and employee benefits of $267 thousand, which was related to staffing Valdosta’s full-service banking center and increases in employee benefits.

Mr. Drew continued, “The fragile condition of the economy has caused us to become very cautious. Recently enacted legislation and promulgated regulation will have, in our view, significant and far reaching affect on the availability and cost of credit and other consumer financial products. We fully expect that all financial companies’ performance will be impacted as a result. We also see the current interest rate environment as particularly hazardous. While the yield curve remains steep, in order to capitalize on the steepness we would have to take an inordinate amount of interest rate risk. At this time, we have elected not to choose that course.”

Dividends and Share Repurchases

In February 2010, the Corporation paid a cash dividend of $0.10 per common share. The Corporation’s objective is to retain sufficient equity required to support efforts to capture greater market share and expand outside of its historic footprint.

About Southwest Georgia Financial Corporation

Southwest Georgia Financial Corporation is a state-chartered bank holding company with approximately $297 million in assets headquartered in Moultrie, Georgia. Its primary subsidiary, Southwest Georgia Bank, offers comprehensive financial services to consumer, business, and governmental customers. The current banking facilities include the main office located in Colquitt County, and branch offices located in Baker County, Thomas County, Worth County, and Lowndes County. In addition to conventional banking services, the bank provides investment planning and management, trust management, mortgage banking, and commercial and individual insurance products. Insurance products and advice are provided by Southwest Georgia Insurance Services which is located in Colquitt County. Mortgage banking for primarily commercial properties is provided by Empire Financial Services, Inc., a mortgage banking services firm.

More information on Southwest Georgia Financial Corp. and Southwest Georgia Bank can be found at its website: www.sgfc.com.

SAFE HARBOR STATEMENT

This news release contains certain brief forward-looking statements concerning the Company's outlook. The Company cautions that any forward-looking statements are summary in nature, involve risks and uncertainties and are subject to change based on various important factors, many of which may be beyond the Company's control. Accordingly, the Company's future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. The following factors, among others, could affect the Company's actual results and could cause actual results in the future to differ materially from those expressed or implied in any forward-looking statements included in this release: the ability of the bank to manage the interest rate environment, the success of reducing operating costs, overall economic conditions, customer preferences, the impact of competition, and the ability to execute its strategy for growth. Additional information regarding these risks and other factors that could cause the Company's actual results to differ materially from our expectations is contained in the Company’s filings with the Securities and Exchange Commission. Except as otherwise required by federal securities laws, Southwest Georgia Financial undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CONDITION
(Dollars in thousands except per share data)
   
(Unaudited) (Audited) (Unaudited)
June 30, December 31, June 30,
2010 2009 2009
ASSETS
Cash and due from banks $ 7,304 $ 10,050 $ 6,241
Interest-bearing deposits in banks 30,594 13,247 3,177
Investment securities available for sale 42,677 62,008 78,740
Investment securities held to maturity 35,638 24,195 10,384
Federal Home Loan Bank stock, at cost 1,650 1,650 1,380
 
Loans, less unearned income and discount 159,356 160,230 150,990
Allowance for loan losses (2,909 ) (2,533 ) (2,510 )
Net loans 156,447   157,697   148,480  
Premises and equipment 8,857 7,777 7,405
Foreclosed assets, net 3,670 3,832 2,439
Intangible assets 745 848 952
Other assets 9,159   9,704   9,969  
 
Total assets $ 296,741   $ 291,008   $ 269,167  
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
NOW accounts $ 30,134 $ 25,075 $ 29,106
Money market 48,124 45,694 33,253
Savings 22,760 21,365 21,440
Certificates of deposit $100,000 and over 31,915 30,190 29,324
Other time accounts 68,825   72,085   71,291  
Total interest-bearing deposits 201,758 194,409 184,414
Noninterest-bearing deposits 38,230   41,022   36,648  
Total deposits 239,988   235,431   221,062  
 
Other borrowings 5,000 5,000 0
Long-term debt 21,000 21,000 20,000
Accounts payable and accrued liabilities 3,643   4,047   4,313  
Total liabilities 269,631   265,478   245,375  
Shareholders' equity:
Common stock - par value $1; 5,000,000 shares
authorized; 4,293,835 shares issued (*) 4,294 4,294 4,294
Additional paid-in capital 31,701 31,701 31,701
Retained earnings 17,382 16,325 15,152
Accumulated other comprehensive income (153 ) (676 ) (1,241 )
Total 53,224 51,644 49,906
Treasury stock - at cost (**) (26,114 ) (26,114 ) (26,114 )
Total shareholders' equity 27,110   25,530   23,792  
Total liabilities and shareholders' equity $ 296,741   $ 291,008   $ 269,167  
 
* Common stock - shares outstanding 2,547,837 2,547,837 2,547,837
** Treasury stock - shares 1,745,998 1,745,998 1,745,998
SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED INCOME STATEMENT (unaudited*)
(Dollars in thousands except per share data)
       
For the Three Months For the Six Months
Ended June 30, Ended June 30,
Interest income: 2010* 2009* 2010* 2009*
Interest and fees on loans $ 2,564 $ 2,344 $ 4,965 $ 4,637
Interest and dividend on securities available for sale 558 896 1,219 1,853
Interest on securities held to maturity 241 99 451 213
Interest on deposits in banks  

15
    9    

29
    16
Total interest income  

3,378
    3,348     6,664     6,719
 
Interest expense:
Interest on deposits 535 734 1,116 1,519
Interest on other borrowings 35 0 70 122
Interest on long-term debt   173     175     344     253
Total interest expense   743     909     1,530     1,894
Net interest income 2,635 2,439 5,134 4,825
Provision for loan losses   150     60     300     246
Net interest income after provision for losses on loans   2,485     2,379     4,834     4,579
 
Noninterest income:
Service charges on deposit accounts 401 453 786 849
Income from trust services 67 59 121

111
Income from retail brokerage services 110 72 171 135
Income from insurance services 291 267 610 565
Income from mortgage banking services 360 314 689 627
Net loss on the sale or abandonment of assets & OREO provision (125 ) 0 (122 ) 0
Net gain on the sale of securities 628 0 535 0
Other income   42     43     135     137
Total noninterest income   1,774     1,207     2,925     2,424
 
Noninterest expense:
Salary and employee benefits 1,758 1,543 3,438 3,171
Occupancy expense 211 208 415

418
Equipment expense 185 164 360 328
Data processing expense 174 174

352
350
Amortization of intangible assets 52 52 104 104
Other operating expense  

633
    1,265     1,283     1,972
Total noninterest expense   3,013     3,406    

5,952
   

6,343
 
Income before income tax expense 1,246 180 1,807 660
Provision for income taxes   340    

(79
)   494     20
Net income $ 906   $ 259   $ 1,313   $ 640
 
Net income per share, basic $ 0.36   $ 0.10   $ 0.52   $ 0.25
Net income per share, diluted $ 0.36   $ 0.10   $ 0.52   $ 0.25
Dividends paid per share $ -   $ -   $ 0.10   $ 0.07
 
Basic weighted average shares outstanding   2,547,837     2,547,837     2,547,837     2,547,837
 
Diluted weighted average shares outstanding   2,547,837     2,547,837     2,547,952     2,547,837
SOUTHWEST GEORGIA FINANCIAL CORPORATION
Financial Highlights
(Dollars in thousands except per share data)
 
  At June 30   2010 2009
Assets $   296,741 $   269,167
Loans, less unearned income & discount $ 159,356 $ 150,990
Deposits $ 239,988 $ 221,062
Shareholders' equity $ 27,110 $ 23,792
 
 
Three Months Ended June 30, Six Months Ended June 30,
Performance Data & Ratios 2010 2009 2010 2009
Net income $   906 $   259 $   1,313 $   640
Earnings per share, basic $ 0.36 $ 0.10 $ 0.52 $ 0.25
Earnings per share, diluted $ 0.36 $ 0.10 $ 0.52 $ 0.25
Dividends paid per share $ - $ - $ 0.10 $ 0.07
Return on assets 1.21 % 0.38 % 0.88 % 0.47 %
Return on equity 13.56 % 4.37 % 9.96 % 5.42 %
Net interest margin (tax equivalent) 4.07 % 4.12 % 4.00 % 4.10 %
Dividend payout ratio 0.00 % 0.00 % 19.41 % 27.87 %
Efficiency ratio 66.87 % 90.59 % 72.12 % 84.82 %
 
Asset Quality Data & Ratios
Total nonperforming loans $ 455 $ 161 $ 455 $ 161
Total nonperforming assets $ 4,167 $ 2,785 $ 4,167 $ 2,785
Net loan charge offs $ (123 ) $ (14 ) $ (76 ) $ 111
Reserve for loan losses to total loans 1.83 % 1.66 % 1.83 % 1.66 %
Nonperforming loans/total loans 0.29 % 0.11 % 0.29 % 0.11 %
Nonperforming assets/total assets 1.40 % 1.03 % 1.40 % 1.03 %
Net charge offs (recoveries)/ average loans (0.31 )% (0.04 )% (0.10 )% 0.15 %
 
Capital Ratios
Average common equity to average total assets 8.95 % 8.66 % 8.85 % 8.64 %
Tier 1 capital ratio 16.33 % 14.62 % 16.33 % 14.62 %
Tier 1 leverage ratio 8.86 % 8.79 % 8.86 % 8.79 %
Total risk based capital ratio 17.58 % 15.87 % 17.58 % 15.87 %
Book value per share $ 10.64 $ 9.34 $ 10.64 $ 9.34
Tangible book value per share $ 10.35 $ 8.96 $ 10.35 $ 8.96
 
                         
 
Quarterly 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
Averages 2010 2010 2009 2009 2009
Assets $   298,618 $ 297,496 $   287,348 $ 278,502 $   274,125
Loans, less unearned income & discount $ 160,761 $ 160,451 $ 159,180 $ 154,422 $ 150,043
Deposits $ 242,010 $ 241,100 $ 230,903 $ 225,634 $ 226,345
Equity $ 26,727 $ 26,012 $ 25,402 $ 24,237 $ 23,752
Return on assets 1.21 % 0.55 % 0.98 % 0.67 % 0.38 %
Return on equity 13.56 % 6.26 % 11.11 % 7.71 % 4.37 %
Net income $ 906 $ 407 $ 706 $ 467 $ 259
Net income per share, basic $ 0.36 $ 0.16 $ 0.28 $ 0.18 $ 0.10
Net income per share, diluted $ 0.36 $ 0.16 $ 0.28 $ 0.18 $ 0.10
Dividends paid per share $ - $ 0.10 $ - $ - $ -

Copyright Business Wire 2010

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