* Opened new loan production office in Valdosta, Georgia * Total loans increased $30.1 million or 25.3% in 2008 * Fiscal year net loss impacted by impairment of equity securities and loss in mortgage banking * Capital ratios remain well above regulatory requirements and among the best in the industry
MOULTRIE, Ga., Jan. 30, 2009 (GLOBE NEWSWIRE) -- Southwest Georgia Financial Corporation (NYSE Alternext:SGB), a full service community bank holding company, today reported a net loss for the fourth quarter of 2008 of $116 thousand, or $0.05 per diluted share, measurably improved when compared with a net loss of $692 thousand, or $0.27 per diluted share for the fourth quarter of 2007. Return on average equity was negative 2.02% for the quarter compared with negative 9.91% for the same period in 2007. Return on average assets for the quarter was negative 0.17%, compared with a return of negative 0.99% for the fourth quarter of 2007. Fourth quarter results were negatively impacted by a $785 thousand partial charge-off related to a large commercial real estate loan and an $825 thousand provision for loan losses.
For the year ended December 31, 2008, the net loss was $1.279 million, or $0.50 per diluted share, compared with net income of $1.718 million, or $0.66 per diluted share, for the same period in 2007. The decrease in annual net income was largely attributable to a $4.105 million non-cash loss related to the impairment of equity securities and a $1.002 million loss at our mortgage banking subsidiary during the third quarter. As mentioned, in the fourth quarter of 2008, we recognized a sizable charge-off and provision for loan losses.
DeWitt Drew, President and CEO of Southwest Georgia Financial commented, "2008 was one of the most difficult periods in the history of the financial services industry and a very challenging year for us. We continue to see weakness in our local economic environment which has resulted in a slowing of our growth plans. Nonetheless, we still managed to increase total loans by over 25%, driven equally by our new loan production office in Valdosta, Georgia and an increase in loans in our legacy market of Moultrie, Georgia. As can be expected, 2009 will be another challenging year. Yet, we expect that we can find opportunities to expand our market reach and grow segments of the Company."
Balance Sheet Trends and Asset Quality
At December 31, 2008, total assets were down slightly to $267.3 million from $271.7 million at the end of last year's fourth quarter. This decline was primarily due to a lower amount of interest-bearing deposits held at other banks and a lower fair value of our investment portfolio. Total loans increased $30.1 million, or 25.3%, to $149.1 million compared with $119.0 million at December 31, 2007. Total deposits of $214.5 million were down marginally with the previous year end.
Nonperforming assets to total assets declined to 1.10%. Nonperforming assets of $2.9 million were down from $3.3 million at the end of 2007. The level of nonperforming assets at the end of 2008 was due primarily to one large commercial real estate loan which was partially charged-off. The loan loss reserve coverage over total loans declined to 1.59%
Shareholders' equity was $23.3 million as of December 31, 2008, down from $26.5 million at December 31, 2007. On a per share basis, book value at year end was $9.15, down from $10.40 at the end of the 2007. The decrease in shareholders' equity and book value per share were mainly due to unusual losses experienced in the third and fourth quarters, as previously mentioned. The Company has approximately 2.55 million shares of common stock outstanding and its capital ratios well exceed the required regulatory levels (see accompanying table).
Revenue
Net interest income after provision for loan losses for the fourth quarter of 2008 was $1.662 million, which was impacted by the $825 thousand provision for loan losses. The significant increase in the loan loss provision reflects the impact of the charge offs experienced in the quarter. Net income was $2.016 million for the fourth quarter of 2007. Total interest income and total interest expense was $3.642 million and $1.155 million, respectively, in the fourth quarter of 2008 compared with $3.751 million and $1.735 million, respectively, in the fourth quarter of 2007. Interest income was impacted by a 5.0% drop in the prime rate since September 2007, which reduced interest earned on variable and adjustable rate loans. In addition, the Company holds a large, fully-secured loan placed on interest nonaccrual late last year. The decrease in total interest expense was primarily due to lower interest rates. The average rate paid on interest-bearing deposits decreased 103 basis points for the current quarter compared with a year ago. The Company's net interest margin improved to 4.26% for the fourth quarter of 2008 compared with 3.36% from the same period a year ago.
Noninterest income was $1.117 million for the fourth quarter of 2008. Mortgage banking services income decreased $63 thousand from last year's fourth quarter to $306 thousand as the credit crisis has made the mortgage funding environment challenging and has restricted loan opportunities. Revenue from service charges on deposit accounts decreased 9.2% from the same period a year ago to $403 thousand for the quarter and insurance services revenue decreased to $239 thousand, an 8.8% decrease compared with the fourth quarter of 2007. Trust and brokerage services revenue decreased $47 thousand, or 27.3%, from the same period a year ago.
Total noninterest expense for the fourth quarter of 2008 decreased 32.5% to $2.999 million from $4.441 million for the fourth quarter of last year. The bulk of this decrease is a result of the $1.587 million loss related to mortgage banking services in the fourth quarter of 2007. The decline in amortization of intangible assets reflects the full amortization of the mortgage banking intangibles during 2008. Other operating expenses increased with the Company's expansion effort with its newly opened loan production office in Valdosta, Georgia and in legal fees.
2008 Review
Return on average equity was a negative 5.04%, compared with a return of 6.17% in the same period last year, while return on average assets was a negative 0.47% compared with a return of 0.60% for the same period in 2007.
Net interest income after provision for loan losses for 2008 decreased to $8.775 million compared with $8.913 million for the same period in 2007. This increase in net interest income was offset by the impact of the $825 thousand provision for loan losses which was necessary due to the charge-offs experienced in the fourth quarter of 2008. Net interest margin was 4.04% for 2008, an improvement of 42 basis points from the same period a year ago. This improvement in margin was impacted by the lower interest rate environment on interest-bearing deposits along with the volume growth in loans and increase in yields on purchased securities.
Noninterest income for 2008 was $1.475 million, down 78.0% from the same period in 2007. The majority of the decline was a result of the $4.105 million non-cash loss on the impairment of Fannie Mae and Freddie Mac preferred stock recognized in the third quarter. The securities lost value as a result of the U.S. Government's actions to place these government sponsored enterprises in conservatorship. Revenues from mortgage banking services were down 28% to $2.021 million compared to 2007. Service charges on deposit accounts decreased $128 thousand, and income from insurance services decreased $48 thousand when compared with the same period last year. In 2007, a gain of $248 thousand was recognized from the sale of the retail credit card portfolio, and a net loss of $97 thousand was recognized because of the sale of foreclosed property related to one large commercial property.
Noninterest expense decreased $414 thousand to $13.189 million in 2008 compared with the same period last year. The major cause of the decrease in noninterest expense was a reduction of loss related to mortgage banking services of $608 thousand in 2008. The decline in amortization of intangible assets reflects the full amortization of the mortgage banking intangibles. The increase in occupancy and other operating expense is mostly related to a new loan production office in Valdosta, Georgia. Also, other operating expenses were up due to higher legal fees as it relates to mortgage banking services.
Dividends
During the fourth quarter of 2008, the Company declared a $0.07 per share quarterly cash dividend to be paid January 30, 2009. This is the 80th consecutive year that Southwest Georgia Financial has declared and paid a cash dividend. The dividend currently has a yield of approximately 3.2% at an annual dividend rate of $0.28 per share.
Summary
Mr. Drew commented, "The past year was one of unprecedented events and risks in the financial industry. We believe those risks persist and in many respects may be increasing. While we are encouraged by our growth in lending we feel it is necessary to continue the deleveraging process begun two years ago. Our exposure to the Federal Home Loan Bank will be reduced to a nominal amount by the end of the first quarter and we remain vigilant in monitoring and providing for changes in credit quality. In spite of our expansion efforts, in the near term we may be a slightly smaller company."
Mr. Drew concluded, "In December, after careful consideration of our strategy, our strong capital position and the known and potential constraints of the program, we elected to not participate in the U.S. Treasury Department's Capital Purchase Program. We continue to maintain capital ratios well above regulatory requirements and among the best in the industry and believe that we will continue to generate sufficient capital to pursue opportunities in 2009."
About Southwest Georgia Financial Corporation
Southwest Georgia Financial Corporation is a state-chartered bank holding company with approximately $267 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.
Southwest Georgia Financial Corp. and Southwest Georgia Bank routinely post news and other important information on their website: www.sgfc.com.
About NYSEAlternext US (NYSE-A)
In September 2008, the NYSE acquired the American Stock Exchange, where Southwest Georgia Financial Corporation's common stock was traded under the symbol "SGB". With the acquisition, the NYSE placed the majority of the AMEX-traded companies on their NYSEAlternext exchange. Therefore, Southwest Georgia Financial Corporation's common stock now trades on the NYSEAlternext US exchange under the same symbol, "SGB".
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.
Financial tables follow.
SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CONDITION
(Dollars in thousands except per share data)
(Unaudited)(Audited) (Audited)
Dec. 31, Dec. 31, Dec. 30,
ASSETS 2008 2007 2006
-------- -------- --------
Cash and due from banks $ 7,470 $ 8,736 $ 11,969
Interest-bearing deposits in banks 30 9,998 83
Federal funds sold 0 0 332
Investment securities available for sale 83,212 31,188 33,323
Investment securities held to maturity 12,108 88,226 102,233
Federal Home Loan Bank stock, at cost 1,618 1,653 1,967
Loans, less unearned income and discount 149,070 119,008 125,492
Allowance for loan losses (2,376) (2,399) (2,417)
------- ------- -------
Net loans 146,694 116,609 123,075
------- ------- -------
Premises and equipment 5,783 6,291 6,579
Foreclosed assets, net 211 90 0
Intangible assets 1,056 1,283 1,750
Other assets 9,115 7,579 7,205
------- ------- -------
Total assets $267,297 $271,653 $288,516
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
NOW accounts $ 25,283 $ 23,086 $ 55,013
Money market 35,701 42,031 24,377
Savings 21,213 20,561 22,228
Certificates of deposit $100,000 and
over 28,755 29,589 25,725
Other time accounts 64,216 66,153 65,978
------- ------- -------
Total interest-bearing deposits 175,168 181,420 193,321
Noninterest-bearing deposits 39,373 35,373 33,388
------- ------- -------
Total deposits 214,541 216,793 226,709
------- ------- -------
Federal funds purchased 430 0 0
Other borrowings 15,000 10,114 15,000
Long-term debt 10,000 15,000 15,229
Accounts payable and accrued
liabilities 4,010 3,228 3,621
------- ------- -------
Total liabilities 243,981 245,135 260,559
------- ------- -------
Shareholders' equity:
Common stock - par value $1; 5,000,000
shares authorized; 4,293,835 shares
issued (*) 4,294 4,294 4,289
Additional paid-in capital 31,701 31,701 31,644
Retained earnings 14,512 17,039 16,763
Accumulated other comprehensive income (1,077) (466) (483)
------- ------- -------
Total 49,430 52,568 52,213
Treasury stock - at cost (**) (26,114) (26,050) (24,256)
------- ------- -------
Total shareholders' equity 23,316 26,518 27,957
------- ------- -------
Total liabilities and shareholders'
equity $267,297 $271,653 $288,516
======= ======= =======
* Common stock - shares outstanding 2,547,837 2,549,637 2,639,643
** Treasury stock - shares 1,745,998 1,744,198 1,648,912
SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED INCOME STATEMENT (unaudited*)
(Dollars in thousands except per share data)
For the Three Months For the Twelve Months
Ended December 31, Ended December 31,
--------------------- ---------------------
Interest income: 2008* 2007* 2008* 2007
--------- --------- --------- ---------
Interest and fees on
loans $ 2,414 $ 2,383 $ 9,504 $ 10,257
Interest and
dividend on
securities available
for sale 1,108 321 4,188 1,331
Interest on
securities held to
maturity 118 953 935 4,005
Dividends on Federal
Home Loan Bank stock 2 28 63 119
Interest on federal
funds sold 0 0 90 0
Interest on deposits
in banks 0 66 290 174
--------- --------- --------- ---------
Total interest
income 3,642 3,751 15,070 15,886
--------- --------- --------- ---------
Interest expense:
Interest on deposits 905 1,404 4,425 5,583
Interest on federal
funds purchased 6 14 23 101
Interest on other
borrowings 165 180 769 594
Interest on long-term
debt 79 137 253 695
--------- --------- --------- ---------
Total interest
expense 1,155 1,735 5,470 6,973
--------- --------- --------- ---------
Net interest
income 2,487 2,016 9,600 8,913
Provision for loan
losses 825 0 825 0
--------- --------- --------- ---------
Net interest
income after
provision for
losses on
loans 1,662 2,016 8,775 8,913
--------- --------- --------- ---------
Noninterest income:
Service charges on
deposit accounts 403 444 1,608 1,736
Income from trust
services 56 79 269 286
Income from retail
brokerage services 69 93 341 346
Income from insurance
services 239 262 1,102 1,150
Income from mortgage
banking services 306 369 2,021 2,814
Net gain (loss) on
the sale or
abandonment of
assets 0 (110) 13 (97)
Net gain on the sale
of credit card
portfolio 0 0 0 248
Net gain (loss) on
the sale of
securities 0 0 0 0
Net (loss) on the
impairment of equity
securities 0 0 (4,105) 0
Other income 44 39 226 232
--------- --------- --------- ---------
Total noninterest
income 1,117 1,176 1,475 6,715
--------- --------- --------- ---------
Noninterest expense:
Salary and employee
benefits 1,660 1,634 7,152 7,011
Occupancy expense 208 204 863 840
Equipment expense 205 172 694 648
Data processing
expense 171 171 643 686
Amortization of
intangible assets 52 103 227 467
Losses related to
mortgage banking
services 3 1,587 979 1,587
Other operating
expense 700 570 2,631 2,364
--------- --------- --------- ---------
Total noninterest
expense 2,999 4,441 13,189 13,603
--------- --------- --------- ---------
Income before income
tax expense (220) (1,249) (2,939) 2,025
Provision for income
taxes (104) (557) (1,660) 307
--------- --------- --------- ---------
Net income (loss) $ (116) $ (692) $ (1,279) $ 1,718
========= ========= ========= =========
Net income (loss) per
share, basic $ (0.05) $ (0.27) $ (0.50) $ 0.66
========= ========= ========= =========
Net income (loss) per
share, diluted $ (0.05) $ (0.27) $ (0.50) $ 0.66
========= ========= ========= =========
Dividends paid per
share $ 0.14 $ 0.14 $ 0.56 $ 0.55
========= ========= ========= =========
Basic weighted
average shares
outstanding 2,547,837 2,557,659 2,547,926 2,583,932
========= ========= ========= =========
Diluted weighted
average shares
outstanding 2,548,657 2,564,285 2,552,486 2,593,021
========= ========= ========= =========
SOUTHWEST GEORGIA FINANCIAL CORPORATION
Financial Highlights
(Dollars in thousands except per share data)
At December 31 2008 2007
--------- ---------
Assets $ 267,297 $ 271,653
Loans, less unearned
income & discount 149,070 119,008
Deposits 214,541 216,793
Shareholders' equity 23,316 26,518
Book value per share 9.15 10.40
Loan loss reserve/loans 1.59% 2.02%
Nonperforming assets/
total assets 1.10% 1.22%
Three Months Ended Twelve Months Ended
--------------------- ---------------------
December 31, December 31,
2008 2007 2008 2007
--------- --------- --------- ---------
Net income (loss) $ (116) $ (692) $ (1,279) $ 1,718
Earnings (loss) per
share, basic (0.05) (0.27) (0.50) 0.66
Earnings (loss) per
share, diluted (0.05) (0.27) (0.50) 0.66
Dividends paid per
share 0.14 0.14 0.56 0.55
Return on assets (0.17)% (0.99)% (0.47)% 0.60%
Return on equity (2.02)% (9.91)% (5.04)% 6.17%
Net interest margin
(tax equivalent) 4.26% 3.36% 4.04% 3.62%
Net charge offs
(recoveries)/
average loans 2.28% 0.04% 0.63% 0.01%
---------------------------------------------------------------------
Quarterly 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr
Averages 2008 2008 2008 2008 2007
Assets $ 266,865 $ 267,371 $ 278,348 $ 287,826 $ 280,458
Loans,
less
unearned
income &
discount 145,900 138,768 129,876 123,691 123,617
Deposits 214,420 216,554 226,261 228,165 218,977
Equity 23,017 25,065 26,727 27,246 27,913
Return on
assets (0.17)% (3.99)% 1.10% 1.03% (0.99)%
Return on
equity (2.02)% (42.53)% 11.43% 10.85% (9.91)%
Net income
(loss) $ (116) $ (2,666) $ 764 $ 739 $ (692)
Net income
(loss)
per share,
basic $ (0.05) $ (1.05) $ 0.30 $ 0.29 $ (0.27)
Net income
(loss)
per share,
diluted $ (0.05) $ (1.05) $ 0.30 $ 0.29 $ (0.27)
Dividends
paid per
share $ 0.14 $ 0.14 $ 0.14 $ 0.14 $ 0.14
SOUTHWEST GEORGIA FINANCIAL CORPORATION
Risk Based Capital Ratios
-------------------------------------------
Southwest Georgia
Financial Corporation Regulatory Guidelines
---------------------------------------------------------------------
Risk Based Capital Ratios December 31, For Well Minimum
2008 Capitalized Guidelines
---------------------------------------------------------------------
Tier 1 capital 14.31% 6.00% 4.00%
Total risk based capital 15.55% 10.00% 8.00%
Tier 1 leverage ratio 8.72% 5.00% 3.00%
-------------------------------------------
Southwest Georgia Regulatory Guidelines
Bank
---------------------------------------------------------------------
Risk Based Capital Ratios December 31, For Well Minimum
2008 Capitalized Guidelines
---------------------------------------------------------------------
Tier 1 capital 13.80% 6.00% 4.00%
Total risk based capital 15.05% 10.00% 8.00%
Tier 1 leverage ratio 8.43% 5.00% 3.00%