* Southwest Georgia Financial continues to have capital ratios among the best in the industry * Net loss reflects impairment of equity securities and loss related to sale of commercial property at mortgage banking subsidiary
MOULTRIE, Ga., Oct. 30, 2008 (GLOBE NEWSWIRE) -- Southwest Georgia Financial Corporation (AMEX:SGB), a full service community bank holding company, today reported a net loss of $2.666 million for the third quarter of 2008 compared with net income of $778 thousand for the third quarter of 2007. On a per diluted share basis, the net loss was $1.05 for the third quarter of 2008, compared with income per share of $0.30 for the third quarter of 2007. As was disclosed by the Company on September 29, 2008, third quarter results were negatively impacted by a $4.105 million non-cash loss related to the impairment of equity securities and a $1.002 million loss sustained by our commercial mortgage banking subsidiary. The non-cash loss on the impairment of equity securities was an accounting mark-to-market rule requiring it to be reflected through income. Excluding these unusual items, net income would have been $418 thousand, or $0.16 per diluted share, for the third quarter.
Return on average equity for the third quarter of 2008 was a negative 42.53% compared with a return on average equity of 11.17% for the same period in 2007. Return on average assets for the quarter was a negative 3.99%, compared with a return of 1.09% for the third quarter of 2007.
DeWitt Drew, President and CEO of Southwest Georgia Financial commented, "Although the quarter's results were impacted by similar issues facing banks all over the country, we continue to have capital ratios, a measure of our financial stability, that are among the best in the industry. Our total risk based capital ratio now stands at 17.29%, which is more than 70 percent in excess of the regulatory standard for a 'well-capitalized' bank." Southwest Georgia Financial Corporation and Southwest Georgia Bank had total risk based and tier one capital ratios of 17.29% and 15.28%, respectively, at September 30, 2008 (see accompanying table).
Balance Sheet Trends and Asset Quality
At September 30, 2008, total assets were $266.1 million, compared with $284.1 million at the end of last year's third quarter. This decline was primarily due to normal day to day changes in deposits and general market conditions, as well as reduction in debt. Total loans increased $16.3 million to $143.5 million compared with September 30, 2007. While quarter-end total deposits of $209.1 million were down compared with the previous year, quarterly average deposits were flat at $216.6 million.
The loan loss reserve coverage over total loans declined to 1.66%, while nonperforming assets to total assets grew to 1.40%, a 53 basis point increase over last year. This level of nonperforming assets is due primarily to one large commercial real estate loan.
Shareholders' equity was $22.9 million as of September 30, 2008, down from $28.0 million at September 30, 2007. On a per share basis, book value at quarter end was $8.98, down from $10.90 at the end of the 2007 third quarter. The decrease in shareholders' equity and book value per share were mainly due to these unusual losses. The Company has approximately 2.55 million shares of common stock outstanding and its capital ratios well exceed the required regulatory levels.
Revenue
Net interest income for the third quarter of 2008 was $2.429 million compared with $2.265 million for the same period in 2007. For the third quarter 2008, total interest income was $3.713 million and total interest expense was $1.284 million, compared with $4.093 million and $1.828 million, respectively, in the third quarter of 2007. Interest income was impacted by a 3.25% drop in the prime rate since August 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 80 basis points for the current quarter compared with a year ago. The Company's net interest margin improved to 4.19% for the third quarter of 2008 compared with 3.71% from the same period a year ago.
Noninterest income was a negative $2.841 million for the third quarter of 2008, due primarily to the $4.105 million loss on the impairment of Fannie Mae and Freddie Mac preferred stock. In addition, mortgage banking services income decreased $190 thousand from last year's third quarter, to $417 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 11.9% from the same period a year ago to $400 thousand for the quarter and insurance services revenue decreased to $240 thousand, a 6.6% decrease compared with the third quarter of 2007. Last year's third quarter benefited from a $248 thousand gain recognized on the sale of the retail credit card portfolio. Offsetting these reductions in noninterest income, trust and brokerage services revenue increased 10.7% from the same period a year ago.
Total noninterest expense for the third quarter of 2008 increased 41.3% to $4.233 million from $2.995 million for the third quarter of last year. The bulk of this increase occurred as a result of the $1.002 million loss related to mortgage banking services, as our commercial mortgage banking subsidiary sustained a loss from the cost of covering the shortfall realized by participant banks on the sale of a foreclosed commercial property. The quarterly increase in salary and employee benefits from a year ago of $286 thousand was due to settlement of a compensation agreement and staffing a new loan production office in Valdosta, where the Company plans to expand its operating footprint. The decline in amortization of intangible assets reflects the lower value of intangibles relative to the prior year. Lower data processing expense was mainly attributable to the sale of the Company's retail credit card portfolio in last year's third quarter. Other operating expenses increased with the Company's expansion effort with its newly opened loan production office in Valdosta, GA.
Mr. DeWitt Drew, President and CEO of Southwest Georgia Financial, commented, "Excluding the impairment of the Fannie Mae and Freddie Mac preferred stock and the loss related to the commercial property sale at Empire, our net income was still nearly 50% below the 2007 quarter. This disappointing performance reflects the overall economic weakness in our market area, the costs of expansion and the mix of our earnings assets. However, our loan portfolio remains strong and our core deposit base remains at a level fairly consistent with recent periods. We are well positioned to benefit when the air clears regarding the financial crisis and the economy begins to turn around."
Review of First Nine Months of 2008
For the first nine months of 2008, the net loss was $1.163 million, or $0.46 per diluted share, compared with net income of $2.410 million, or $0.93 per diluted share, for the same period in 2007. Excluding the unusual loss at our mortgage banking subsidiary and the loss on the impairment of equity securities, net income would have been $1.921 million, or $0.75 per diluted share, for the nine-month period.
Return on average equity was a negative 5.89%, compared with a return of 11.55% in the same period last year, while return on average assets was a negative 0.56% compared with a return of 1.11% for the same period in 2007.
Net interest income for the first nine months of 2008 increased to $7.113 million compared with $6.897 million for the same period in 2007. Net interest margin was 3.96% for the first nine months of 2008, an improvement of 26 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 a higher yield on investment securities.
For the first nine months of 2008, noninterest income was $358 thousand, down 93.5% from the same period in 2007. The majority of the decline was a result of the $4.105 million loss on the impairment of Fannie Mae and Freddie Mac preferred stock recognized in the third quarter. Service charges on deposit accounts decreased $87 thousand, and income from insurance services decreased $25 thousand when compared to the same nine-month period last year. In the third quarter of 2007, a gain of $248 thousand was recognized from the sale of the retail credit card portfolio.
Noninterest expense increased $1.028 million for the first nine months of 2008 compared with the same period last year. As previously mentioned, a loss related to mortgage banking services of $1.002 million was the major increase in the noninterest expense category. The increase in occupancy and other operating expense is mostly related to a new loan production office, while the decrease in data processing expense reflects the sale of our retail credit card portfolio in the 2007 period. Amortization of purchased mortgage servicing intangibles decreased as several intangible assets were fully amortized during the first nine-months of 2008.
Dividends
During the third quarter of 2008, the Company paid a regular $0.14 per share quarterly cash dividend. This is the 80th consecutive year the Southwest Georgia Financial has paid a cash dividend. The dividend currently has a yield of approximately 3.7% at an annual dividend rate of $0.56 per share.
About Southwest Georgia Financial Corporation
Southwest Georgia Financial Corporation is a state-chartered bank holding company with approximately $266 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
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.
SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CONDITION
(Dollars in thousands except per share data)
(Unaudited) (Audited) (Unaudited)
Sept. 30, Dec. 31, Sept. 30,
2008 2007 2007
---------- ---------- ----------
ASSETS
Cash and due from banks $ 6,951 $ 8,736 $ 10,057
Interest-bearing deposits in banks 28 9,998 132
Federal funds sold 0 0 0
Investment securities available
for sale 87,282 31,188 31,389
Investment securities held to
maturity 13,108 88,226 98,236
Federal Home Loan Bank stock, at
cost 1,618 1,653 1,945
Loans, less unearned income and
discount 143,468 119,008 127,225
Allowance for loan losses (2,387) (2,399) (2,412)
---------- ---------- ----------
Net loans 141,081 116,609 124,813
---------- ---------- ----------
Premises and equipment 5,979 6,291 6,363
Foreclosed assets, net 211 90 2,347
Intangible assets 1,108 1,283 1,386
Other assets 8,742 7,579 7,446
---------- ---------- ----------
Total assets $ 266,108 $ 271,653 $ 284,114
========== ========== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits:
NOW accounts $ 26,839 $ 23,086 $ 50,100
Money market 35,179 42,031 15,427
Savings 21,883 20,561 21,112
Certificates of deposit $100,000
and over 29,294 29,589 29,933
Other time accounts 64,806 66,153 66,439
---------- ---------- ----------
Total interest-bearing deposits 178,001 181,420 183,011
Noninterest-bearing deposits 31,081 35,373 33,183
---------- ---------- ----------
Total deposits 209,082 216,793 216,194
---------- ---------- ----------
Federal funds purchased 6,230 0 5,125
Other borrowings 15,114 10,114 16,500
Long-term debt 10,000 15,000 15,229
Accounts payable and accrued
liabilities 2,795 3,228 3,064
---------- ---------- ----------
Total liabilities 243,221 245,135 256,112
---------- ---------- ----------
Shareholders' equity:
Common stock - par value $1;
5,000,000 shares authorized;
4,293,835 shares issued (*) 4,294 4,294 4,292
Additional paid-in capital 31,702 31,701 31,678
Retained earnings 14,806 17,039 18,088
Accumulated other comprehensive
income (1,801) (466) (382)
---------- ---------- ----------
Total 49,001 52,568 53,676
Treasury stock - at cost (**) (26,114) (26,050) (25,674)
---------- ---------- ----------
Total shareholders' equity 22,887 26,518 28,002
---------- ---------- ----------
Total liabilities and
shareholders' equity $ 266,108 $ 271,653 $ 284,114
========== ========== ==========
* Common stock - shares
outstanding 2,547,837 2,549,637 2,569,843
** Treasury stock - shares 1,745,998 1,744,198 1,722,012
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: 2008* 2007* 2008* 2007*
--------- --------- --------- --------
Interest and fees on
loans $ 2,386 $ 2,723 $ 7,090 $ 7,874
Interest and dividend on
securities available for
sale 1,173 326 3,080 1,009
Interest on securities
held to maturity 132 1,009 817 3,053
Dividends on Federal Home
Loan Bank stock 10 29 60 91
Interest on federal funds
sold 0 0 90 0
Interest on deposits in
banks 12 6 290 108
--------- --------- --------- --------
Total interest income 3,713 4,093 11,427 12,135
--------- --------- --------- --------
Interest expense:
Interest on deposits 1,048 1,412 3,521 4,179
Interest on federal funds
purchased 16 78 16 87
Interest on other
borrowings 191 156 603 415
Interest on long-term debt 29 182 174 557
--------- --------- --------- --------
Total interest expense 1,284 1,828 4,314 5,238
--------- --------- --------- --------
Net interest income 2,429 2,265 7,113 6,897
Provision for loan losses 0 0 0 0
--------- --------- --------- --------
Net interest income after
provision for losses on
loans 2,429 2,265 7,113 6,897
--------- --------- --------- --------
Noninterest income:
Service charges on deposit
accounts 400 454 1,205 1,292
Income from trust services 79 68 213 208
Income from retail
brokerage services 86 81 273 253
Income from insurance
services 240 257 863 888
Income from mortgage
banking services 417 607 1,715 2,445
Net gain on the sale or
abandonment of assets 0 1 13 13
Net gain on the sale of
credit card portfolio 0 248 0 248
Net (loss) on the
impairment of equity
securities (4,105) 0 (4,105) 0
Other income 42 63 181 192
--------- --------- --------- --------
Total noninterest income (2,841) 1,779 358 5,539
--------- --------- --------- --------
Noninterest expense:
Salary and employee
benefits 1,957 1,671 5,493 5,378
Occupancy expense 227 223 654 635
Equipment expense 165 164 489 476
Data processing expense 169 180 472 515
Amortization of intangible
assets 52 121 175 364
Losses related to mortgage
banking services 1,002 0 1,002 0
Other operating expense 661 636 1,905 1,794
--------- --------- --------- --------
Total noninterest expense 4,233 2,995 10,190 9,162
--------- --------- --------- --------
Income before income tax
expense (4,645) 1,049 (2,719) 3,274
Provision for income taxes (1,979) 271 (1,556) 864
--------- --------- --------- --------
Net income (loss) $ (2,666) $ 778 (1,163) $ 2,410
========= ========= ========= =========
Net income (loss) per
share, basic $ (1.05) $ 0.30 $ (0.46) $ 0.93
========= ========= ========= =========
Net income (loss) per
share, diluted $ (1.05) $ 0.30 $ (0.46) $ 0.93
========= ========= ========= =========
Dividends paid per share $ 0.14 $ 0.14 $ 0.42 $ 0.42
========= ========= ========= =========
Basic weighted average
shares outstanding 2,547,837 2,574,964 2,547,956 2,592,786
========= ========= ========= =========
Diluted weighted average
shares outstanding 2,553,653 2,584,309 2,552,591 2,602,783
========= ========= ========= =========
SOUTHWEST GEORGIA FINANCIAL CORPORATION
Financial Highlights
(Dollars in thousands except per share data)
At September 30 2008 2007
---------- ----------
Assets $ 266,108 $ 284,114
Loans, less unearned income & discount 143,468 127,225
Deposits 209,082 216,194
Shareholders' equity 22,887 28,002
Book value per share 8.98 10.90
Loan loss reserve/loans 1.66% 1.90%
Nonperforming assets/total assets 1.40% 0.87%
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2008 2007 2008 2007
-------- -------- -------- --------
Net income (loss) $ (2,666) $ 778 $ (1,163) $ 2,410
Earnings (loss) per share,
basic (1.05) 0.30 (0.46) 0.93
Earnings (loss) per share,
diluted (1.05) 0.30 (0.46) 0.93
Dividends paid per share 0.14 0.14 0.42 0.42
Return on assets (3.99)% 1.09% (0.56)% 1.11%
Return on equity (42.53)% 11.17% (5.89)% 11.55%
Net interest margin (tax
equivalent) 4.19% 3.71% 3.96% 3.70%
Net charge offs (recoveries)
/ average loans (0.01)% 0.01% 0.01% 0.02%
Quarterly 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
Averages 2008 2008 2008 2007 2007
Assets $267,371 $278,348 $287,826 $280,458 $285,527
Loans, less
unearned income
& discount 138,768 129,876 123,691 123,617 127,668
Deposits 216,554 226,261 228,165 218,977 216,872
Equity 25,065 26,727 27,246 27,913 27,854
Return on assets (3.99)% 1.10% 1.03% (0.99)% 1.09%
Return on equity (42.53)% 11.43% 10.85% (9.91)% 11.17%
Net income
(loss) $ (2,666) $ 764 $ 739 $ (692) $ 778
Net income
(loss) per
share, basic $ (1.05) $ 0.30 $ 0.29 $ (0.27) $ 0.30
Net income (loss)
per share,
diluted $ (1.05) $ 0.30 $ 0.29 $ (0.27) $ 0.30
Dividends paid
per share $ 0.14 $ 0.14 $ 0.14 $ 0.14 $ 0.14
SOUTHWEST GEORGIA FINANCIAL CORPORATION
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Risk Based Capital Ratios
-------------------------
---------------------------------------------
Southwest Georgia
Financial Corporation Regulatory Guidelines
---------------------------------------------------------------------
For Well Minimum
Risk Based Capital Ratios 30-Sep-08 Capitalized Guidelines
---------------------------------------------------------------------
Tier 1 capital 15.92% 6.00% 4.00%
Total risk based capital 17.29% 10.00% 8.00%
Tier 1 leverage ratio 8.64% 5.00% 3.00%
---------------------------------------------
Southwest Georgia Bank Regulatory Guidelines
---------------------------------------------------------------------
For Well Minimum
Risk Based Capital Ratios 30-Sep-08 Capitalized Guidelines
---------------------------------------------------------------------
Tier 1 capital 14.03% 6.00% 4.00%
Total risk based capital 15.28% 10.00% 8.00%
Tier 1 leverage ratio 8.46% 5.00% 3.00%