Southwest Georgia Financial Corporation Announces Earnings per Share of $0.18 for the Third Quarter of 2009
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- Southwest Georgia Financial Corporation Announces Earnings per Share of $0.18 for the Third Quarter of 2009
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-- Total loans grew 9.8% year-over-year
-- Total deposits were up 6.7%
-- Loan loss reserve coverage at 1.54%
-- Book value expands 9% to $9.83 per share from prior year
MOULTRIE, Ga.--(BUSINESS WIRE)-- Southwest Georgia Financial Corporation (NYSE Amex: SGB), a full service community bank holding company, today reported net income of $467 thousand, or $0.18 per diluted share, for the third quarter of 2009, up from a net loss of $2.67 million, or $1.05 per diluted share, for the third quarter of 2008. Reductions in salary and employee benefits of $264 thousand, or 13%, in the recent quarter helped to offset the effect of a $140 thousand provision for loan loss. Last year's third quarter results were negatively impacted by a $4.11 million non-cash loss related to the impairment of equity securities and a $1.00 million loss sustained by the commercial mortgage banking subsidiary.
DeWitt Drew, President and CEO commented, "Our position in our markets enabled us to attract new relationships resulting in another quarter of solid loan and core deposit growth. We were very pleased with our ability to manage and improve our funding costs. However, persistent economic and financial challenges for our customers and the markets we serve continue to impact credit quality and therefore, in the third quarter of 2009, we recorded a $140 thousand loan loss provision. For the nine-month period, we have provisioned $386 thousand. This compares with no provision in the corresponding periods of 2008 and is directly reflective of the weak economic environment in Georgia."
Return on average equity for the third quarter of 2009 was 7.71% compared with a negative 42.53% for the same period in 2008. Return on average assets for the quarter was 0.67%, an increase from negative 3.99% when compared with the same period in 2008.
Balance Sheet Trends and Asset Quality
At September 30, 2009, total assets were $278.4 million, compared with $266.1 million at the end of last year's third quarter. This increase was primarily due to loan and core deposit growth. Total net loans increased $13.9 million, or 9.8%, to $154.9 million compared with $141.1 million at September 30, 2008. Year-over-year quarter-end total deposits were up $14.1 million, or 6.7%, to $223.2 million.
The loan loss reserve coverage over total loans declined to 1.54%, while nonperforming assets to total assets grew to 1.94%, a 54 basis point increase over last year. The level of nonperforming assets was due primarily to one large foreclosed commercial property. That property has been under construction and the cost of improvements are now fully funded. Southwest Georgia Financial Corporation's total risk-based capital ratio was 15.74% at September 30, 2009, significantly exceeding the regulatory guidelines for a well capitalized financial institution (see accompanying table).
Shareholders' equity was $25.0 million as of September 30, 2009, up from $22.9 million at September 30, 2008. On a per share basis, book value at quarter end was $9.83, up from $8.98 at the end of the 2008 third quarter. The increase in shareholders' equity and book value per share were primarily due to the net income retained in the current year. The Company has approximately 2.55 million shares of common stock outstanding.
Revenue and Expenses
Net interest income for the third quarter of 2009 improved slightly to $2.49 million compared with $2.43 million for the same period in 2008, as lower costs of deposits and borrowings more than offset the decline in interest income. Net interest income after a $140 thousand provision for loan losses for the third quarter of 2009 was $2.35 million. The Company did not recognize a provision in the 2008 third quarter. For the third quarter of 2009, total interest income was $3.40 million and total interest expense was $912 thousand compared with $3.71 million and $1.28 million, respectively, from the same period a year ago. The Company's net interest margin was 4.13% for the third quarter of 2009, down slightly from the same period last year.
Noninterest income, which was 27.5% of the Company's total revenue for the quarter, increased to $1.29 million when compared with a negative $2.84 million for the third quarter of 2008. As previously noted, the 2008 third quarter was impacted by a $4.11 million non-cash loss on the impairment of equity securities. Excluding the non-cash charge, noninterest income in the third quarter of 2009 improved $30 thousand over the prior year period. Mortgage banking services revenue was relatively flat when compared with the third quarter of 2008. Trust services and retail brokerage services revenue decreased $32 thousand and $33 thousand, respectively, in the third quarter of 2009. These decreases were offset by an increase in service charges on deposit accounts of $72 thousand, or 18.0%, when compared with last year's third quarter.
Total noninterest expense for the third quarter of 2009 decreased $1.21 million, or 28.7%, to $3.02 million from $4.23 million for the third quarter of last year. Excluding the $1.0 million loss related to mortgage banking services in the third quarter of 2008, total noninterest expense improved $211 thousand over last year. In the third quarter of 2009, salaries and employee benefits decreased $264 thousand, or 13.5%. Other operating expenses increased $58 thousand when compared with the prior year's third quarter mainly due to $41 thousand in higher legal expenses, which were related to the mortgage banking services loss, and an $87 thousand increase in FDIC insurance assessment.
Mr. Drew continued, "Our growth in loans, deposits and our ability to maintain a solid net interest margin reflect the success we are having in this challenging environment. The bank remains very well-capitalized, and by continuing to provide our customers with superior products and services, we believe we are well-positioned to take advantage of the current market and grow our balance sheet as we extend our footprint into the Valdosta market. We continue to pursue acquisition opportunities, but recognize our limitations. We are not willing to overextend ourselves and jeopardize our current franchise for growth."
Review of First Nine Months of 2009
For the first nine months of 2009, net income was $1.11 million, or $0.43 per diluted share, compared with a net loss of $1.16 million, or $0.46 per diluted share, for the same period in 2008. Negatively impacting the 2009 year-to-date results were a $677 thousand decline in income from mortgage banking services and a $386 thousand increase in loan loss provision. The first nine months of 2008 were impacted by the unusual losses at our mortgage banking subsidiary and on the impairment of equity securities.
For the first nine months of this year, return on average equity increased to 6.19% compared with negative 5.89% for the same period last year. Return on average assets increased to 0.54% for the current nine-month period, compared with negative 0.56% for the same period in 2008.
Reduced interest paid on deposits and borrowings for the first nine months of 2009 more than offset the $1.31 million decline in total interest income when compared with the same period in 2008. This resulted in a $203 thousand increase in net interest income to $7.32 million for the first nine months of 2009, compared with $7.11 million for the same period in 2008. The Company recognized a $386 thousand provision for loan losses which reduced net interest income after provision to $6.93 million for the nine months of 2009, compared with $7.11 million for the same period in 2008. Net interest margin improved 15 basis points to 4.11% for the first nine months of 2009, when compared with the same period a year ago.
For the first nine months of 2009, noninterest income was $3.72 million, up from $358 thousand in the same period of 2008. Excluding last year's loss on the impairment of equity securities of $4.11 million, 2009 year-to-date noninterest income was down $745 thousand when compared with the same period last year. The majority of the decline was a result of a drop in mortgage banking services revenue of $677 thousand, or 39.5%, when compared with same period last year. Other contributing factors included income from insurance services which decreased $67 thousand and revenue from trust services and retail brokerage services which decreased $55 thousand and $85 thousand, respectively. These decreases were partially offset by an increase in service charges on deposit accounts of $116 thousand in the first nine months of 2009, when compared with the same period last year.
Noninterest expense decreased $826 thousand to $9.36 million for the first nine months of 2009 compared with the same period last year, primarily due to a nonrecurring third quarter 2008 mortgage banking loss of $1.00 million. Excluding this loss, noninterest expense increased $176 thousand when compared with the nine months ended September 30, 2008. Driving the increase were other operating expenses which were higher due to increased legal and FDIC insurance fees of $774 thousand and $341 thousand, respectively, offset partially by a decrease in salary and employee benefits of $628 thousand. The salary and employee benefits decline was primarily a result of staff reductions.
Dividends
In March of 2009, the Company suspended its regular cash dividend. The decision enabled the Company to have financial flexibility by retaining equity necessary to support efforts to capture greater market share, grow its loan portfolio, and expand outside of its historic footprint. Conditions will continue to be evaluated, and when the economic environment stabilizes, the Company will consider a dividend payout.
About Southwest Georgia Financial Corporation
Southwest Georgia Financial Corporation is a state-chartered bank holding company with approximately $278 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, and a loan production office located in 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, 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,
ASSETS 2009 2008 2008
Cash and due from banks $ 8,542 $ 7,470 $ 6,951
Interest-bearing deposits in 4,151 30 28
banks
Federal funds sold 0 0 0
Investment securities 78,674 83,212 87,282
available for sale
Investment securities held to 9,653 12,108 13,108
maturity
Federal Home Loan Bank stock, 1,650 1,618 1,618
at cost
Loans, less unearned income 157,377 149,070 143,468
and discount
Allowance for loan losses (2,428 ) (2,376 ) (2,387 )
Net loans 154,949 146,694 141,081
Premises and equipment 7,362 5,783 5,979
Foreclosed assets, net 3,867 211 211
Intangible assets 900 1,056 1,108
Other assets 8,676 9,115 8,742
Total assets $ 278,424 $ 267,297 $ 266,108
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits:
NOW accounts $ 23,542 $ 25,283 $ 26,839
Money market 39,366 35,701 35,179
Savings 21,467 21,213 21,883
Certificates of deposit 30,289 28,755 29,294
$100,000 and over
Other time accounts 73,486 64,216 64,806
Total interest-bearing 188,150 175,168 178,001
deposits
Noninterest-bearing deposits 35,004 39,373 31,081
Total deposits 223,154 214,541 209,082
Federal funds purchased 0 430 6,230
Other borrowings 5,000 15,000 15,114
Long-term debt 21,000 10,000 10,000
Accounts payable and accrued 4,233 4,010 2,795
liabilities
Total liabilities 253,387 243,981 243,221
Shareholders' equity:
Common stock - par value $1;
5,000,000 shares
authorized; 4,293,835 shares 4,294 4,294 4,294
issued (*)
Additional paid-in capital 31,702 31,701 31,702
Retained earnings 15,619 14,512 14,806
Accumulated other (464 ) (1,077 ) (1,801 )
comprehensive income
Total 51,151 49,430 49,001
Treasury stock - at cost (**) (26,114 ) (26,114 ) (26,114 )
Total shareholders' equity 25,037 23,316 22,887
Total liabilities and $ 278,424 $ 267,297 $ 266,108
shareholders' equity
* Common stock - shares 2,547,837 2,547,837 2,547,837
outstanding
** 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 2009* 2008* 2009* 2008*
income:
Interest and $ 2,386 $ 2,386 $ 7,023 $ 7,090
fees on loans
Interest and dividend on
securities available for 905 1,173 2,758 3,080
sale
Interest on
securities 104 132 316 817
held to
maturity
Dividends on
Federal Home 2 10 2 60
Loan Bank
stock
Interest on
federal funds 0 0 0 90
sold
Interest on
deposits in 6 12 22 290
banks
Total interest 3,403 3,713 10,121 11,427
income
Interest
expense:
Interest on 710 1,048 2,228 3,521
deposits
Interest on
federal funds 1 16 1 16
purchased
Interest on
other 12 191 134 603
borrowings
Interest on 189 29 442 174
long-term debt
Total interest 912 1,284 2,805 4,314
expense
Net interest 2,491 2,429 7,316 7,113
income
Provision for 140 0 386 0
loan losses
Net interest income
after provision for 2,351 2,429 6,930 7,113
losses on loans
Noninterest
income:
Service
charges on 472 400 1,321 1,205
deposit
accounts
Income from 47 79 158 213
trust services
Income from
retail 53 86 188 273
brokerage
services
Income from
insurance 231 240 796 863
services
Income from
mortgage 411 417 1,038 1,715
banking
services
Net gain on
the sale or 0 0 0 13
abandonment of
assets
Net gain on
the sale of 0 0 0 0
credit card
portfolio
Net gain on
the sale of 34 0 34 0
securities
Net (loss) on the
impairment of equity 0 (4,105 ) 0 (4,105 )
securities
Other income 46 42 183 181
Total
noninterest 1,294 ( 2,841 ) 3,718 358
income (loss)
Noninterest
expense:
Salary and
employee 1,693 1,957 4,865 5,493
benefits
Occupancy 219 227 637 654
expense
Equipment 167 165 495 489
expense
Data
processing 170 169 520 472
expense
Amortization
of intangible 52 52 156 175
assets
Losses related
to mortgage 0 1,002 0 1,002
banking
services
Other
operating 719 661 2,691 1,905
expense
Total
noninterest 3,020 4,233 9,364 10,190
expense
Income (loss)
before income 625 (4,645 ) 1,284 (2,719 )
tax expense
Provision for 158 (1,979 ) 177 (1,556 )
income taxes
Net income $ 467 $ (2,666 ) $ 1,107 $ (1,163 )
(loss)
Net income
(loss) per $ 0.18 $ (1.05 ) $ 0.43 $ (0.46 )
share, basic
Net income
(loss) per $ 0.18 $ (1.05 ) $ 0.43 $ (0.46 )
share, diluted
Dividends paid $ - $ 0.14 $ 0.07 $ 0.42
per share
Basic weighted
average shares 2,547,837 2,547,837 2,547,837 2,547,956
outstanding
Diluted
weighted 2,547,837 2,553,653 2,547,837 2,552,591
average shares
outstanding
SOUTHWEST GEORGIA FINANCIAL CORPORATION
Financial Highlights
(Dollars in thousands except per share data)
At September 2009 2008
30
Assets $ 278,424 $ 266,108
Loans, less
unearned 157,377 143,468
income &
discount
Deposits 223,154 209,082
Shareholders' 25,037 22,887
equity
Book value 9.83 8.98
per share
Loan loss 1.54 % 1.66 %
reserve/loans
Nonperforming
assets/total 1.94 % 1.40 %
assets
Three Months Ended September 30, Nine Months Ended September 30,
2009 2008 2009 2008
Net income $ 467 $ (2,666 ) $ 1,107 $ (1,163 )
(loss)
Earnings
(loss) per 0.18 (1.05 ) 0.43 (0.46 )
share, basic
Earnings
(loss) per 0.18 (1.05 ) 0.43 (0.46 )
share,
diluted
Dividends
paid per - 0.14 0.07 0.42
share
Return
on 0.67 % (3.99 )% 0.54 % (0.56 )%
assets
Return
on 7.71 % (42.53 )% 6.19 % (5.89 )%
equity
Net interest
margin (tax 4.13 % 4.19 % 4.11 % 3.96 %
equivalent)
Net charge
offs 0.57 % (0.01 )% 0.30 % 0.01 %
(recoveries)/
average loans
Quarterly 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr Averages 2009 2009 2009 2008 2008 Assets $ 278,502 $ 274,125 $ 272,771 $ 266,865 $ 267,371 Loans, less unearned 154,422 150,043 148,824 145,900 138,768 income & discount Deposits 225,634 226,345 223,387 214,420 216,554 Equity 24,237 23,752 23,504 23,017 25,065 Return on 0.67 % 0.38 % 0.56 % (0.17 )% (3.99 )% assets Return on 7.71 % 4.37 % 6.48 % (2.02 )% (42.53 )% equity Net income $ 467 $ 259 $ 381 $ (116 ) $ (2,666 ) (loss) Net income (loss) per $ 0.18 $ 0.10 $ 0.15 $ (0.04 ) $ (1.05 ) share, basic Net income (loss) per $ 0.18 $ 0.10 $ 0.15 $ (0.04 ) $ (1.05 ) share, diluted Dividends paid per $ - $ - $ 0.07 $ 0.14 $ 0.14 share
SOUTHWEST GEORGIA FINANCIAL CORPORATION
Risk-Based Capital Ratios
Southwest Georgia
Financial Regulatory Guidelines
Corporation
Risk-Based Capital 30-Sep-09 For Well Capitalized Minimum Guidelines
Ratios
Tier 1 capital 14.49% 6.00% 4.00%
Total risk based 15.74% 10.00% 8.00%
capital
Tier 1 leverage 8.85% 5.00% 3.00%
ratio
Southwest Georgia Regulatory Guidelines
Bank
Risk-Based Capital 30-Sep-09 For Well Capitalized Minimum Guidelines
Ratios
Tier 1 capital 13.84% 6.00% 4.00%
Total risk based 15.09% 10.00% 8.00%
capital
Tier 1 leverage 8.45% 5.00% 3.00%
ratio
Source: Southwest Georgia Financial Corporation
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