Southwest Georgia Financial Corporation Reports Results For The Third Quarter Of 2010

Southwest Georgia Financial Corporation (NYSE Amex: SGB), a full service community bank holding company, today reported net income of $239 thousand for the third quarter of 2010, down $228 thousand, when compared with net income of $467 thousand for the third quarter of 2009. This decrease was mainly the result of lower noninterest income which was impacted by lower income from mortgage banking services and a provision for market value change of foreclosed property. Net interest income and noninterest expense remained relatively flat compared with last year’s third quarter. On a per diluted share basis, earnings decreased to $0.09 for the third quarter of 2010 from $0.18 for the third quarter of 2009.

DeWitt Drew, President and CEO, commented, “Our third quarter results, although positive, continued to be challenged by low interest rates and the sluggish economic environment. With interest rates remaining at historic lows, we expect this tough operating environment to continue for the near-term. Our expansion into the Valdosta market is proving worthwhile. We are seeing solid loan growth there and are now experiencing some deposit growth there as well, since opening the new full-service banking center in June of this year.”

Return on average equity for the third quarter of 2010 decreased to 3.49% compared with 7.71% for the same period in 2009. Return on average assets for the quarter was 0.31%, a decrease of 36 basis points when compared with the same period in 2009.

For the first nine months of 2010, net income was $1.55 million compared with net income of $1.11 million 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. Earnings per diluted share for the first nine months of 2010 were $0.61, up 41.9% compared with earnings per diluted share of $0.43 for the same period in 2009. Year-to-date return on average equity increased to 7.74% compared with 6.19% for the same period last year, while return on average assets increased 15 basis points to 0.69%.

Balance Sheet Trends and Asset Quality

At September 30, 2010, total assets were $310.9 million, up from $278.4 million at the end of last year’s third quarter, and up from $291.0 million at December 31, 2009. This increase was due to higher overnight interest-bearing balances with the Federal Reserve Bank funded by an end of quarter spike in public deposits. Loan balances at the end of the current quarter were $161.3 million, up slightly from the 2009 year-end balance, and up $3.9 million, or 2.5%, from the end of September 2009.

The loan loss reserve coverage to total loans was 1.86% at the end of the third quarter of 2010 compared with 1.54% at the end of the third quarter of 2009. Nonperforming assets were reduced to $3.7 million, or 1.18% of total assets, in the third quarter of 2010, down from $5.6 million, or 2.01% of total assets in the same period last year. There were $3.1 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, “Beginning in the latter part of 2009, we began repositioning our investment portfolio. We sold longer-term mortgage backed securities that had substantial prepayment speed risk in the current environment. We shortened the duration of the portfolio and have managed to maintain about the same level of net interest income. We also made the decision to sell our portfolio of corporate notes and reduce credit risk.”

Total deposits were up 13.7% to $253.6 million at the end of the third quarter of 2010 from the end of the third quarter of 2009. The quarter-end deposit balance was above normal from large deposits in a public account of approximately $15 million. Quarterly average deposits were up 7.9% to $243.4 million compared with $225.6 million in the same quarter last year. The year-over-year average increase was primarily due to higher money market and transactional account balances.

Shareholders’ equity grew to $27.3 million as of September 30, 2010 compared with $25.0 million at September 30, 2009, and $25.5 million at the end of 2009. On a per share basis, book value was $10.72 at the end of the third quarter, up from $9.83 at the end of the third quarter in 2009. The Corporation maintained a strong capital position with a total risk-based capital ratio of 17.43% at September 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.

Revenue and Expenses

Net interest income before provision for loan losses remained relatively flat at $2.47 million for the third quarter of 2010 compared with $2.49 million for the same period in 2009. During the current quarter, the Corporation provisioned $150 thousand for loan losses compared with a $140 thousand for the same period of the prior year. Total interest income decreased to $3.17 million when compared with $3.40 million in the third quarter of 2009, reflecting lower interest income from investment securities of $359 thousand partially offset by higher interest and fees earned on loans of $117 thousand. The Corporation’s net interest margin was 3.76% for the third quarter of 2010, down 37 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 or lower yielding securities. Total interest expense was $706 thousand for the third quarter of 2010, down $206 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 65 basis points for the quarter compared with the same period a year ago.

Noninterest income, which was 24.2% of the Corporation’s total revenue for the quarter, decreased $282 thousand, or 21.8%, to $1.01 million when compared with last year’s third quarter. The majority of this decrease was related to the previously noted $102 thousand decline in mortgage banking revenue. Also negatively impacting noninterest income was service charges on deposit accounts, which decreased $70 thousand, or 14.8%, and a provision for market value changes in foreclosure property of $75 thousand in the third quarter of 2010. Also, we recognized a $24 thousand loss on the sale of other assets. These decreases were partially offset by revenue from trust, retail brokerage, and insurance services which increased $19 thousand, $5 thousand, and $6 thousand, respectively, compared with the prior year’s third quarter.

Total noninterest expense increased slightly to $3.07 million from $3.01 million for the third quarter of 2009. Most of this increase was related to the opening of the Valdosta banking center in June and was primarily in salary and employee benefits of $46 thousand, as well as in occupancy, equipment, and data processing expenses. Increases in noninterest expense were partially offset by a decrease in other operating expenses of $55 thousand due to lower legal fees compared with the same period last year.

Review of First Nine Months of 2010

Net interest income for the nine months of 2010 was 3.9% higher at $7.60 million compared with $7.32 million for the same period in 2009, primarily due to $617 thousand lower interest paid on deposits. Net interest income after the $450 thousand provision for loan losses was $7.15 million for the first nine months of 2010 compared with $6.93 million in net interest income after a provision for loan losses of $386 thousand for the same period in 2009. Net interest margin was 3.92% for the first nine months of 2010, down from 4.11% in the same period a year ago.

For the first nine months of 2010, noninterest income was $3.94 million, up 5.9% from the same period in 2009. The majority of the increase was due to a $535 thousand gain on the sale of securities recognized in the second quarter of 2010. Income from insurance services increased $52 thousand, or 6.5%, when compared with the nine-month period in 2009. Revenue from trust services and income from retail brokerage services increased $29 thousand and $41 thousand, respectively when compared with the same period in 2009. These increases in revenue were partially offset by a $200 thousand provision for change in market value of foreclosed properties and a decrease in service charges on deposit accounts of $133 thousand, or 10.1%, when compared with the same period of 2009.

Noninterest expense decreased $341 thousand to $9.02 million for the first nine months of 2010 compared with the same period last year. The change was due to a $745 thousand, or 27.7%, decrease in other operating expenses, a reflection of lower legal expense and insurance assessments to the FDIC. This decline was partially offset by expenses due to the new Valdosta banking center which is reflected primarily in higher salary and employee benefits, occupancy, equipment, and data processing expenses.

Mr. Drew concluded, “We are focused on and have had recent success in strengthening our balance sheet and improving our credit quality. However, given the state of our local economy, we expect continued pressure. We are also anticipating the costs of regulatory compliance to increase in the future for all financial institutions due to recently enacted legislation and regulation.”

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 $311 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)
September 30, December 31, September 30,
2010 2009 2009
ASSETS
Cash and due from banks $ 4,908 $ 10,050 $ 8,542
Interest-bearing deposits in banks 38,893 13,247 4,151
Investment securities available for sale 40,452 62,008 78,674
Investment securities held to maturity 44,535 24,195 9,653
Federal Home Loan Bank stock, at cost 1,650 1,650 1,650
Loans, less unearned income and discount 161,297 160,230 157,377
Allowance for loan losses (3,002) (2,533) (2,428)
Net loans 158,295 157,697 154,949
Premises and equipment 9,175 7,777 7,362
Foreclosed assets, net 3,097 3,832 3,867
Intangible assets 693 848 900
Other assets 9,153 9,704 8,676
Total assets $ 310,851 $ 291,008 $ 278,424
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
NOW accounts $ 28,461 $ 25,075 $ 23,542
Money market 53,187 45,694 39,366
Savings 22,035 21,365 21,467
Certificates of deposit $100,000 and over 31,023 30,190 30,289
Other time accounts 67,921 72,085 73,486
Total interest-bearing deposits 202,627 194,409 188,150
Noninterest-bearing deposits 51,021 41,022 35,004
Total deposits 253,648 235,431 223,154
 
Other borrowings 5,000 5,000 5,000
Long-term debt 21,000 21,000 21,000
Accounts payable and accrued liabilities 3,890 4,047 4,233
Total liabilities 283,538 265,478 253,387
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 31,702
Retained earnings 17,622 16,325 15,619
Accumulated other comprehensive income (190) (676) (464)
Total 53,427 51,644 51,151
Treasury stock - at cost (**) (26,114) (26,114) (26,114)
Total shareholders' equity 27,313 25,530 25,037
Total liabilities and shareholders' equity $ 310,851 $ 291,008 $ 278,424
 
* 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 Nine Months

 
Ended September 30, Ended September 30,
Interest income: 2010* 2009* 2010* 2009*
Interest and fees on loans $ 2,503 $ 2,386 $ 7,467 $ 7,023
Interest and dividend on securities available for sale 397 905 1,615 2,758
Interest on securities held to maturity 253 104 704 316
Dividends on Federal Home Loan Bank stock 3 2 4 2
Interest on deposits in banks 17 6 47 22
Total interest income 3,173 3,403 9,837 10,121
 
Interest expense:
Interest on deposits 496 710 1,611 2,228
Interest on federal funds purchased 0 1 0 1
Interest on other borrowings 41 12 111 134
Interest on long-term debt 169 189 514 442
Total interest expense 706 912 2,236 2,805
Net interest income 2,467 2,491 7,601 7,316
Provision for loan losses 150 140 450 386
Net interest income after provision for losses on loans 2,317 2,351 7,151 6,930
 
Noninterest income:
Service charges on deposit accounts 402 472 1,188 1,321
Income from trust services 66 47 187 158
Income from retail brokerage services 58 53 229 188
Income from insurance services 237 231 848 796
Income from mortgage banking services 309 411 997 1,038
Provision for foreclosed property losses (75) 0 (200) 0
Net loss on the sale or abandonment of assets (24) 0 (21) 0
Net gain on the sale of securities 0 34 535 34
Other income 39 46 174 183
Total noninterest income 1,012 1,294 3,937 3,718
 
Noninterest expense:
Salary and employee benefits 1,739 1,693 5,178 4,865
Occupancy expense 238 219 653 637
Equipment expense 201 167 560 495
Data processing expense 178 170 530 520
Amortization of intangible assets 52 52 156 156
Other operating expense 664 719 1,946 2,691
Total noninterest expense 3,072 3,020 9,023 9,364
 
Income before income tax expense 257 625 2,065 1,284
Provision for income taxes 18 158 513 177
Net income $ 239 $ 467 $ 1,552 $ 1,107
Net income per share, basic $ 0.09 $ 0.18 $ 0.61 $ 0.43
Net income per share, diluted $ 0.09 $ 0.18 $ 0.61 $ 0.43
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 2,547,913 2,547,837
 
SOUTHWEST GEORGIA FINANCIAL CORPORATION
Financial Highlights
(Dollars in thousands except per share data)
               
At September 30 2010 2009
 
Assets $ 310,851 $ 278,424
Loans, less unearned income & discount $ 161,297 $ 157,377
Deposits $ 253,648 $ 223,154
Shareholders' equity $ 27,313 $ 25,037
 
Three Months Ended September 30, Nine Months Ended September 30,
Performance Data & Ratios 2010 2009 2010 2009
Net income $ 239 $ 467 $ 1,552 $ 1,107
Earnings per share, basic $ 0.09 $ 0.18 $ 0.61 $ 0.43
Earnings per share, diluted $ 0.09 $ 0.18 $ 0.61 $ 0.43
Dividends paid per share $ - $ - $ 0.10 $ 0.07
Return on assets 0.31% 0.67% 0.69% 0.54%
Return on equity 3.49% 7.71% 7.74% 6.19%
Net interest margin (tax equivalent) 3.76% 4.13% 3.92% 4.11%
Dividend payout ratio 0.00% 0.00% 16.42% 16.11%
Efficiency ratio 85.64% 77.52% 76.22% 82.32%
 
Asset Quality Data & Ratios
Total nonperforming loans $ 508 $ 1,527 $ 508 $ 1,527
Total nonperforming assets $ 3,657 $ 5,590 $ 3,657 $ 5,590
Net loan charge offs $ 57 $ 222 $ (20) $ 333
Reserve for loan losses to total loans 1.86% 1.54% 1.86% 1.54%
Nonperforming loans/total loans 0.31% 0.97% 0.31% 0.97%
Nonperforming assets/total assets 1.18% 2.01% 1.18% 2.01%
Net charge offs (recoveries)/ average loans 0.14% 0.57% (0.02)% 0.30%
 
Capital Ratios
Average common equity to average total assets 8.98% 8.70% 8.89% 8.66%
Tier 1 capital ratio 16.18% 14.49% 16.18% 14.49%
Tier 1 leverage ratio 8.76% 8.85% 8.76% 8.85%
Total risk based capital ratio 17.43% 15.74% 17.43% 15.74%
Book value per share $ 10.72 $ 9.83 $ 10.72 $ 9.83
Tangible book value per share $ 10.45 $ 9.47 $ 10.45 $ 9.47
                                     
         
Quarterly 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
Averages 2010 2010 2010 2009 2009
 
Assets $ 305,419 $ 298,618 $ 297,496 $ 287,348 $ 278,502
Loans, less unearned income & discount $ 160,584 $ 160,761 $ 160,451 $ 159,180 $ 154,422
Deposits $ 243,395 $ 242,010 $ 241,100 $ 230,903 $ 225,634
Equity $ 27,412 $ 26,727 $ 26,012 $ 25,402 $ 24,237
Return on assets 0.31% 1.21% 0.55% 0.98% 0.67%
Return on equity 3.49% 13.56% 6.26% 11.11% 7.71%
Net income $ 239 $ 906 $ 407 $ 706 $ 467
Net income per share, basic $ 0.09 $ 0.36 $ 0.16 $ 0.28 $ 0.18
Net income per share, diluted $ 0.09 $ 0.36 $ 0.16 $ 0.28 $ 0.18
Dividends paid per share $ - $ - $ 0.10 $ - $ -

Copyright Business Wire 2010

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