Southwest Georgia Financial Corp Reports Operating Results (10-Q)

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Aug 14, 2009
Southwest Georgia Financial Corp (SGB, Financial) filed Quarterly Report for the period ended 2009-06-30.

Southwest Georgia Financial Corporation is a state-chartered bank holding company with approximately hundred ninety 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 and Worth 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 has an office in Colquitt County. Mortgage banking for primarily commercial properties is provided by Empire Financial Services Inc. a mortgage banking services firm. Southwest Georgia Financial Corp has a market cap of $18 million; its shares were traded at around $7.09 with a P/E ratio of 19.8 and P/S ratio of 1.1. Southwest Georgia Financial Corp had an annual average earning growth of 8.1% over the past 5 years.

Highlight of Business Operations:

On a per share basis, net income for the second quarter decreased 67% to $.10

per diluted share compared with $.30 per diluted share for the same quarter

in 2008. The weighted average common diluted shares outstanding for the

quarter were 2.548 million, down eight thousand shares from second quarter

last year. The decrease in average quarterly diluted shares was due to the

expiration of some stock options during 2008 and a decrease in stock price.

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For the first six months of 2009, net income was $640 thousand compared with

net income of $1.503 million for the same period in 2008. Earnings per

diluted share for the first six months of 2009 were $0.25, down 57.6%

compared with earnings per diluted share of $0.59 for the same period in 2008.

Decreased net income was due to a $246 thousand increase in loan loss

provision, higher deposit insurance costs, higher legal expenses, and a

measurable decline in mortgage banking revenue.

We measure our performance on selected key ratios, which are provided for the

previous five quarterly periods ended June 30, 2009.


2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr

2009 2009 2008 2008 2008



Return on average total assets 0.38% 0.56% (0.17)% ( 3.99)% 1.10%

Return on average total equity 4.37% 6.48% (2.02)% (42.53)% 11.43%

Average shareholders\' equity

to Average total assets 8.66% 8.62% 8.61% 9.37% 9.60%

Net interest margin

(tax equivalent) 4.12% 4.07% 4.26% 4.19% 3.97%




Noninterest income, which was 26.5% of the Corporation\'s total revenue for

the quarter, was $1.207 million for the second quarter, down 18.8% from the

same period in 2008. Mortgage banking services revenue, which is a large

contributor to noninterest income, decreased $299 thousand, or 48.8%, from

last year\'s second quarter as the credit crisis has made the mortgage funding

environment challenging and has restricted loan opportunities. Regardless of

the economic situation, the mortgage banking business has a strong pipeline

of projects and also services a $384 million portfolio of non-recourse loans.

Trust services and retail brokerage services revenue decreased $6 thousand,

or 9.6%, and $23 thousand, or 23.9%, respectively, in the second quarter of

2009. These decreases were partially offset by a slight increase in revenue

from insurance services, and an increase in service charges on deposit

accounts of $46 thousand, or 11.4%, compared with last year\'s second quarter.

A recent change in our service charge rate structure on deposit accounts

influenced the increase.



For the first six months of 2009, noninterest income was $2.424 million, down

24.2% from the same period in 2008. The majority of the decline was a result

of lower mortgage banking services revenue which decreased $671 thousand, or

51.7%, from the same period last year. Income from insurance services

decreased $58 thousand, or 9.3%, when compared with the six-month period in

2008. Revenue from trust services and income from retail brokerage services

decreased $24 thousand and $52 thousand, respectively when compared with the

same period in 2008. These decreases in revenue were partially offset by an

increase in service charges on deposit accounts of $45 thousand, or 5.6%,

when compared with the same period last year as a change in service charge

rate structure on deposit accounts was implemented during the second quarter.



Other factors used in determining the adequacy of the reserve are

management\'s judgment about factors affecting loan quality and their

assumptions about the local and national economy. The allowance for loan

losses was 1.66% of total loans outstanding at June 30, 2009, compared with

1.59% of loans outstanding at December 31, 2008 and 1.80% at June 30, 2008.

Nonperforming assets totaled $2.6 million at June 30, 2009, or 0.97% of total

assets, compared with $3.2 million in nonperforming assets, or 1.19% of total

assets at June 30, 2008. The decrease in non-performing assets was primarily

related to the partial charge-off of one large commercial real estate loan in

our nonaccrual loans category in the fourth quarter of 2008. This loan was

moved to other real estate owned in the second quarter or 2009 due to

foreclosure of the project. Management considers the allowance for loan

losses as of June 30, 2009, adequate to cover potential losses in the loan

portfolio.



Southwest Georgia

Financial Corporation Regulatory Guidelines

For Well Minimum

Risk Based Capital Ratios June 30, 2009 Capitalized Guidelines



Tier 1 capital 14.62% 6.00% 4.00%

Total risk based capital 15.87% 10.00% 8.00%

Tier 1 leverage ratio 8.79% 5.00% 3.00%



Tier 1 capital 14.03% 6.00% 4.00%

Total risk based capital 15.29% 10.00% 8.00%

Tier 1 leverage ratio 8.41% 5.00% 3.00%




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