SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 2006
[ ] Transition report under Section 13 or 15(d) of the Exchange Act.
For the transition period from __________ to __________
Commission file number 1-12053
SOUTHWEST GEORGIA FINANCIAL CORPORATION
(Exact Name Of Small Business Issuer as specified in its Charter)
Georgia 58-1392259
(State Or Other Jurisdiction Of (I.R.S. Employer
Incorporation Or Organization) Identification No.)
201 FIRST STREET, S.E., MOULTRIE, GEORGIA 31768
Address Of Principal Executive Offices
(229) 985-1120
Registrant's Telephone Number, Including Area Code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the
Act).
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Class Outstanding At July 15, 2006
Common Stock, $1 Par Value 4,270,980
SOUTHWEST GEORGIA FINANCIAL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2006
TABLE OF CONTENTS
PAGE #
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements are provided for Southwest
Georgia Financial Corporation as required by this Item 1.
a. Consolidated balance sheets - June 30, 2006 (unaudited) and
December 31, 2005 (audited). 2
b. Consolidated statements of income (unaudited) - for the six
months and the three months ended June 30, 2006 and 2005. 3
c. Consolidated statements of comprehensive income (unaudited) -
for the six months and the three months ended June 30, 2006
and 2005. 4
d. Consolidated statements of cash flows (unaudited) for the six
months ended June 30, 2006 and 2005. 5
e. Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 20
ITEM 4. CONTROLS AND PROCEDURES 21
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 22
ITEM 6. EXHIBITS 23
SIGNATURE 24
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SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 2006 and December 31, 2005
(Unaudited) (Audited)
June 30, December 31,
2006 2005
ASSETS
Cash and due from banks $ 13,346,170 $ 11,699,277
Interest-bearing deposits in banks 4,278,247 10,156,067
Federal funds sold 0 3,550,000
Investment securities available for sale,
at fair value 47,099,188 48,042,924
Investment securities held to maturity (fair value
approximates $101,700,799 and $104,601,359) 105,772,570 106,778,632
Federal Home Loan Bank stock, at cost 2,197,000 2,205,200
Total investment securities 155,068,758 157,026,756
Loans 121,484,274 104,675,241
Less: Unearned income (39,951) (40,837)
Allowance for loan losses (2,423,413) (2,453,689)
Loans, net 119,020,910 102,180,715
Premises and equipment, net 6,766,880 6,840,298
Foreclosed assets, net 0 0
Intangible assets 2,759,251 3,004,693
Other assets 7,468,905 6,815,899
Total assets $308,709,121 $301,273,705
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
NOW accounts $ 57,665,523 $ 51,604,863
Money Market 18,193,742 17,079,484
Savings 23,929,439 25,481,261
Certificates of deposit $100,000 and over 24,613,739 23,691,032
Other time accounts 65,869,441 67,077,882
Total interest-bearing deposits 190,271,884 184,934,522
Noninterest-bearing deposits 36,896,894 36,909,869
Total deposits 227,168,778 221,844,391
Federal funds purchased 0 0
Other borrowed funds 5,000,000 5,000,000
Long-term debt 30,342,857 30,342,857
Other liabilities 5,757,329 4,233,637
Total liabilities 268,268,964 261,420,885
Stockholders' equity:
Common stock - $1 par value, 5,000,000 shares
authorized, 4,270,980 shares issued 4,270,980 4,266,680
Capital surplus 31,319,234 31,265,216
Retained earnings 16,716,686 15,258,388
Accumulated other comprehensive income (1,792,753) (1,223,252)
Treasury stock, at cost 1,024,912 shares for 2006
and 1,008,912 shares for 2005 (10,073,990) (9,714,212)
Total stockholders' equity 40,440,157 39,852,820
Total liabilities and stockholders' equity $308,709,121 $301,273,705
SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For The Three Months
Ended June 30,
2006 2005
Interest income:
Interest and fees on loans $ 2,295,672 $ 1,865,916
Interest on taxable securities available for sale 331,542 406,873
Interest on taxable securities held to maturity 1,054,168 1,117,593
Interest on tax exempt securities available for sale 158,684 161,900
Interest on tax exempt securities held to maturity 50,725 48,710
Dividends 30,673 23,786
Interest on federal funds sold 16,740 0
Interest on deposits in banks 26,518 27,539
Total interest income 3,964,722 3,652,317
Interest expense:
Interest on deposits 1,236,005 788,520
Interest on federal funds purchased 6,200 3,500
Interest on other short-term borrowings 30,713 18,773
Interest on long-term debt 267,847 260,306
Total interest expense 1,540,765 1,071,099
Net interest income 2,423,957 2,581,218
Provision for loan losses 0 20,000
Net interest income after provision for loan losses 2,423,957 2,561,218
Noninterest income:
Service charges on deposit accounts 430,720 393,636
Income from trust services 74,154 75,416
Income from retail brokerage services 68,149 72,402
Income from insurance services 280,932 257,598
Income from mortgage banking services 1,513,906 1,365,624
Net gain(loss) on disposition of assets (455) 33,443
Other income 34,876 39,042
Total noninterest income 2,402,282 2,237,161
Noninterest expense:
Salaries and employee benefits 1,882,485 1,886,122
Occupancy expense 205,145 199,641
Equipment expense 163,224 178,749
Data processing expense 171,014 162,235
Amortization of intangible assets 122,721 122,721
Other operating expenses 597,741 609,853
Total noninterest expenses 3,142,330 3,159,321
Income before income taxes 1,683,909 1,639,058
Provision for income taxes 465,899 398,713
Net income $ 1,218,010 $ 1,240,345
Earnings per share of common stock:
Net income, basic $ 0.38 $ 0.38
Net income, diluted $ 0.37 $ 0.38
Dividends declared $ 0.13 $ 0.13
Weighted average shares outstanding 3,249,631 3,268,314
Diluted average shares outstanding 3,270,568 3,297,451
SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For The Six Months
Ended June 30,
2006 2005
Interest income:
Interest and fees on loans $ 4,280,199 $ 3,577,744
Interest on taxable securities available for sale 663,719 814,722
Interest on taxable securities held to maturity 2,127,094 2,282,671
Interest on tax exempt securities available for sale 317,359 318,201
Interest on tax exempt securities held to maturity 101,452 105,911
Dividends 60,519 45,910
Interest on federal funds sold 132,704 0
Interest on deposits in banks 105,839 79,933
Total interest income 7,788,885 7,225,092
Interest expense:
Interest on deposits 2,308,460 1,507,717
Interest on federal funds purchased 6,200 3,500
Interest on other short-term borrowings 61,088 39,160
Interest on long-term debt 532,923 517,389
Total interest expense 2,908,671 2,067,766
Net interest income 4,880,214 5,157,326
Provision for loan losses 0 40,000
Net interest income after provision for loan losses 4,880,214 5,117,326
Noninterest income:
Service charges on deposit accounts 833,805 731,246
Income from trust services 149,118 147,639
Income from retail brokerage services 138,085 131,892
Income from insurance services 645,173 566,672
Income from mortgage banking services 2,546,315 2,238,081
Net gain(loss) on disposition of assets 5,077 36,043
Other income 131,229 136,843
Total noninterest income 4,448,802 3,988,416
Noninterest expense:
Salaries and employee benefits 3,669,792 3,645,409
Occupancy expense 414,539 407,841
Equipment expense 319,208 346,254
Data processing expense 343,587 355,652
Amortization of intangible assets 245,442 245,442
Other operating expenses 1,188,077 1,209,063
Total noninterest expenses 6,180,645 6,209,661
Income before income taxes 3,148,371 2,896,081
Provision for income taxes 845,263 648,176
Net income $ 2,303,108 $ 2,247,905
Earnings per share of common stock:
Net income, basic $ 0.71 $ 0.69
Net income, diluted $ 0.70 $ 0.68
Dividends declared $ 0.26 $ 0.26
Weighted average shares outstanding 3,252,793 3,271,869
Diluted average shares outstanding 3,278,633 3,302,259
SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
For The Three Months
Ended June 30,
2006 2005
Net income $ 1,218,010 $ 1,240,345
Other comprehensive income, net of tax:
Unrealized gain(loss) on securities
available for sale (484,043) 848,821
Unrealized gain(loss) on pension
plan benefits 0 0
Federal income tax expense(benefit) (164,575) 288,599
Other comprehensive income(loss), net of tax: (319,468) 560,222
Total comprehensive income $ 898,542 $ 1,800,567
SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
For The Six Months
Ended June 30,
2006 2005
Net income $ 2,303,108 $ 2,247,905
Other comprehensive income, net of tax:
Unrealized gain(loss) on securities
available for sale (862,880) (215,252)
Unrealized gain(loss) on pension
plan benefits 0 0
Federal income tax expense(benefit) (293,379) (73,186)
Other comprehensive income(loss), net of tax: (569,501) (142,066)
Total comprehensive income $ 1,733,607 $ 2,105,839
SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For The Three Months
Ended June 30,
2006 2005
Cash flows from operating activities:
Net income $ 2,303,108 $ 2,247,905
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 0 40,000
Depreciation 389,100 394,814
Net amortization and accretion of
investment securities 1,356 7,028
Amortization of intangibles 245,442 245,442
Net loss (gain) on sale and disposal of assets (5,077) (36,043)
Net change in funds related to mortgage
banking activities 1,292,366 (1,986,972)
Increase in other assets, net (674,306) (15,371)
Decrease (increase) in other liabilities, net 524,705 12,292
Net cash provided by operating activities 4,076,694 909,095
Cash flows from investing activities:
Proceeds from maturities of securities
held to maturity 3,000,000 10,500,000
Proceeds from maturities of securities
available for sale 91,762 363,318
Purchase of securities held to maturity (2,000,000) (2,325,000)
Purchase of securities available for sale 0 (255,400)
Net change in other short-term investments 3,550,000 0
Net change in loans (16,840,195) (7,403,641)
Purchase of premises and equipment (316,937) (244,022)
Proceeds from sales of other assets 29,632 225,743
Net change in interest-bearing deposits in banks 5,877,820 (301,221)
Net cash provided(used) for investing activities (6,607,918) 559,777
Cash flows from financing activities:
Net change in deposits 5,324,387 (4,529,839)
Payment of short-term and portion of long term debt 0 (5,000,000)
Payment of long-term debt 0 (60,000)
Proceeds from issuance of long-term debt 0 5,000,000
Cash dividends declared (844,810) (850,002)
Proceeds from the exercise of stock options 58,318 46,511
Payment for common stock (359,778) (324,950)
Net cash provided(used) for financing activities 4,178,117 (5,718,280)
Increase(decrease) in cash and due from banks 1,646,893 (4,249,408)
Cash and due from banks - beginning of period 11,699,277 13,366,631
Cash and due from banks - end of period $13,346,170 $ 9,117,223
NONCASH ITEMS:
Increase in foreclosed properties and
decrease in loans $ 0 $ 189,434
Unrealized gain(loss) on securities
available for sale $ (569,502) $ (142,067)
SOUTHWEST GEORGIA FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
Southwest Georgia Financial Corporation (the "Corporation"), a bank-holding
company organized under the laws of Georgia, provides deposit, lending, and
other financial services to businesses and individuals primarily in the
Southwest region of Georgia. The Corporation and its subsidiaries are
subject to regulation by certain federal and state agencies.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do
not include all information and footnotes necessary for a fair presentation
of financial position, results of operations, and changes in financial
position in conformity with generally accepted accounting principles. The
interim financial statements furnished reflect all adjustments which are, in
the opinion of management, necessary to a fair statement of the results for
the interim periods presented. The interim consolidated financial
statements should be read in conjunction with the Corporation's 2005 Annual
Report on Form 10K.
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NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Southwest Georgia Financial
Corporation and Subsidiaries conform to generally accepted accounting
principles and to general practices within the banking industry. The
following is a description of the more significant of those policies.
Principles of Consolidation
The consolidated financial statements include the accounts of Southwest
Georgia Financial Corporation and its wholly-owned Subsidiaries, Southwest
Georgia Bank (the "Bank") and Empire Financial Services, Inc. ("Empire").
All significant intercompany accounts and transactions have been eliminated
in the consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for loan losses and the
valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans. In connection with these evaluations, management
obtains independent appraisals for significant properties.
A substantial portion of the Corporation's loans are secured by real estate
located primarily in Georgia. Accordingly, the ultimate collection of these
loans may be susceptible to changes in the real estate market conditions of
this market area.
Interest-Bearing Deposits in Banks
Interest bearing deposits in banks mature within one year and are carried at
cost.
Securities
Debt securities that management has the positive intent and ability to hold
to maturity are classified as "held to maturity" and recorded at amortized
cost. Securities not classified as held to maturity or trading, including
equity securities with readily determinable fair values, are classified as
"available for sale" and recorded at fair value with unrealized gains and
losses reported in other comprehensive income.
-7-
Purchase premiums and discounts are recognized in interest income using the
interest method over the terms of the securities. Declines in the fair
value of held-to-maturity and available-for-sale securities below their cost
that are deemed to be other than temporary are reflected in earnings as
realized losses. In estimating other-than-temporary impairment losses,
management considers (1) the length of time and the extent to which the fair
value has been less than cost, (2) the financial condition and near-term
prospects of the issuer, and (3) the intent and ability of the Corporation
to retain its investment in the issuer for a period of time sufficient to
allow for any anticipated recovery in fair value. Gains and losses on the
sale of securities are recorded on the trade date and are determined using
the specific identification method.
Long-Lived Assets
Premises and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation has been calculated primarily using the
straight-line method for buildings and building improvements over the assets
estimated useful lives. Equipment and furniture are depreciated using the
modified accelerated recovery system method over the assets estimated useful
lives for financial reporting and income tax purposes for assets purchased
on or before December 31, 2003. For assets acquired after December 31,
2003, the Corporation used the straight-line method of depreciation. The
following estimated useful lives are used for financial statement purposes:
Land improvements 5 - 31 years
Building and improvements 10 - 40 years
Machinery and equipment 5 - 10 years
Computer equipment 3 - 5 years
Office furniture and fixtures 5 - 10 years
All of the Corporation's leases are operating leases and are not capitalized
as assets for financial reporting purposes. Maintenance and repairs are
charged to expense and betterments are capitalized.
Long-lived assets are evaluated regularly for other-than-temporary
impairment. If circumstances suggest that their value may be impaired and
the write-down would be material, an assessment of recoverability is
performed prior to any write-down of the asset. Impairment on intangibles
is evaluated at each balance sheet date or whenever events or changes in
circumstances indicate that the carrying amount should be assessed.
Impairment, if any, is recognized through a valuation allowance with a
corresponding charge recorded in the income statement.
Loans and Allowances for Loan Losses
Loans are stated at principal amounts outstanding less unearned income and
the allowance for loan losses. Interest income is credited to income based
on the principal amount outstanding at the respective rate of interest
except for interest on certain installment loans made on a discount basis
which is recognized in a manner that results in a level-yield on the
principal outstanding.
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Accrual of interest income is discontinued on loans when, in the opinion of
management, collection of such interest income becomes doubtful. Accrual of
interest on such loans is resumed when, in management's judgment, the
collection of interest and principal becomes probable.
Fees on loans and costs incurred in origination of most loans are recognized
at the time the loan is placed on the books. Because loan fees are not
significant, the results on operations are not materially different from the
results which would be obtained by accounting for loan fees and costs as
amortized over the term of the loan as an adjustment of the yield.
A loan is considered impaired when, based on current information and events,
it is probable that the Corporation will be unable to collect the scheduled
payments of principal or interest when due according to the contractual
terms of the loan agreement. Factors considered by management in
determining impairment include payment status, collateral value, and the
probability of collecting scheduled principal and interest payments when
due. Loans that experience insignificant payment delays and payment
shortfalls generally are not classified as impaired. Management determines
the significance of payment delays and payment shortfalls on a case-by-case
basis, taking into consideration all of the circumstances surrounding the
loan and the borrower, including the length of the delay, the reasons for
the delay, the borrower's prior payment record, and the amount of the
shortfall in relation to the principal and interest owed. Impairment is
measured on a loan by loan basis for commercial and construction loans by
either the present value of expected future cash flows discounted at the
loan's effective interest rate, the loan's obtainable market price, or the
fair value of the collateral if the loan is collateral dependent.
Large groups of smaller balance homogeneous loans are collectively evaluated
for impairment. Accordingly, the Corporation does not separately identify
individual consumer and residential loans for impairment disclosures.
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes the collection of the principal is unlikely.
The allowance is an amount which management believes will be adequate to
absorb estimated losses on existing loans that may become uncollectible
based on evaluation of the collectibility of loans and prior loss
experience. This evaluation takes into consideration such factors as
changes in the nature and volume of the loan portfolios, current economic
conditions that may affect the borrowers' ability to pay, overall portfolio
quality, and review of specific problem loans.
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based upon changes in economic
conditions. Also, various regulatory agencies, as an integral part of their
examination process, periodically review the Corporation's allowance for
loan losses. Such agencies may require the Corporation to recognize
additions to the allowance based on their judgments of information available
to them at the time of their examination.
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Foreclosed Assets
Properties acquired through, or in lieu of, loan foreclosure are held for
sale and are initially recorded at the lower of cost or fair value at the
date of foreclosure, establishing a new cost basis. Subsequent to
foreclosure, valuations are periodically performed by management and the
assets are carried at the lower of carrying amount or fair value less cost
to sell. Revenue and expenses from operations and changes in the valuation
allowance are included in net expenses from foreclosed assets.
Credit Related Financial Instruments
In the ordinary course of business, the Corporation has entered into
commitments to extend credit, including commitments under credit card
arrangements, commercial letters of credit, and standby letters of credit.
Such financial instruments are recorded when they are funded.
Retirement Plans
The Corporation and its subsidiaries have pension plans covering
substantially all employees. The Corporation makes annual contributions to
the plans in amounts not exceeding the regulatory requirements.
Income Taxes
The Corporation and the Bank file a consolidated income tax return. The
Bank's subsidiary provides for income taxes based on its contribution to
income taxes (benefits) of the consolidated group.
Deferred income tax assets and liabilities result from temporary differences
between the tax basis of assets and liabilities and their reportable amounts
in the financial statements that will result in taxable or deductible
amounts in future years. Recognition of deferred tax assets is based on
management's belief that it is more likely than not that the tax benefit
associated with certain temporary differences and tax credits will be
realized.
Recent Accounting Pronouncements
In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment".
SFAS No. 123(R) replaces SFAS No. 123, "Accounting for Stock-Based
Compensation", and supersedes APB Opinion No. 25, "Accounting for Stock
Issued to Employees". This Statement requires compensation costs related to
share-based payment transactions to be recognized in the financial
statements over the period that an employee provides service in exchange for
the award. Public companies are required to adopt the new standard using
either a modified prospective method or may elect to restate prior periods
using the modified retrospective method. Under the modified prospective
method, companies are required to record compensation cost for new and
modified awards over the related vesting period of such awards prospectively
and record compensation cost prospectively for the unvested portion, at the
date of adoption, of previously issued and outstanding awards over the
remaining vesting period of such awards. No change to prior periods
presented is permitted under the modified prospective method. SFAS No.
-10-
123(R) is effective for periods beginning after June 15, 2005. Effective
July 1, 2005, the Corporation has adopted this new standard using the
modified prospective method. All required details of stock option awards
are disclosed in Note 9 of the December 31, 2005 consolidated financial
statements.
In December 2003, the FASB issued SFAS No. 132 (revised 2003), "Employers'
Disclosures about Pensions and Postretirement Benefits". This Statement
requires additional disclosures about the assets, obligations and cash flows
of defined benefit pension and postretirement plans, as well as the expense
recorded for such plans. As of December 31, 2005, the Corporation has
disclosed the required elements related to its defined benefit pension plan
in Note 9 to these consolidated financial statements.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Corporation considers cash and
cash equivalents to include cash on hand, noninterest-bearing deposit
amounts due from banks, and highly liquid debt instruments purchased with an
original maturity of three months or less.
Trust Department
Trust income is included in the accompanying consolidated financial
statements on the cash basis in accordance with established industry
practices. Reporting of such fees on the accrual basis would have no
material effect on reported income.
Servicing and Origination Fees on Loans
The Corporation from its subsidiary, Empire, recognizes as income in the
current period all loan origination and brokerage fees collected on loans
originated and closed for investing participants. Loan servicing fees are
based on a percentage of loan interest paid by the borrower and recognized
over the term of the loan as loan payments are received. Empire does not
directly fund any mortgages and acts as a service-oriented broker for
participating mortgage lenders. Fees charged for continuing servicing fees
are comparable with market rates charged in the industry. Based on these
facts and after a thorough analysis and evaluation of deferred mortgage
servicing costs as defined under FASB 122 and amended by FASB 140, they are
insignificant and immaterial to be recognized. Late charges assessed on
past due payments are recognized as income by the Corporation when
collected.
Advertising Costs
It is the policy of the Corporation to expense advertising costs as they are
incurred. The Corporation does not engage in any direct-response
advertising and accordingly has no advertising costs reported as assets on
its balance sheet.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
In addition to historical information, this Form 10-Q report contains
forward-looking statements within the meaning of the federal securities
laws. The Corporation cautions that there are various factors that could
cause actual results to differ materially from the anticipated results or
other expectations expressed in the Corporation's forward-looking
statements; accordingly, there can be no assurance that such indicated
results will be realized.
These factors include asset quality; the adequacy of the allowance for loan
losses; technology difficulties or failures; the Corporation's ability to
execute its business strategy; the loss of key personnel; competition;
changes in regulation and monetary policy; legislative and regulatory
initiatives regarding deregulation and restructuring of the banking
industry; acquisitions or dispositions of assets or internal restructuring,
that may be pursued by the Corporation; changes in or application of
environmental and other laws and regulations to which the Corporation is
subject; political, legal and local economic conditions and developments;
financial market conditions and the results of financing efforts; changes in
commodity prices and interest rates; weather, natural disasters and other
catastrophic events; and other factors discussed in the Corporation's other
filings with the Securities and Exchange Commission.
Readers are cautioned not to place undue reliance on any forward-looking
statements made by or on behalf of the Corporation. Any such statement
speaks only as of the date the statement was made. The Corporation
undertakes no obligation to update or revise any forward-looking statements.
Additional information with respect to factors that may cause results to
differ materially from those contemplated by such forward-looking statements
is included in the Corporation's current and subsequent filings with the
Securities and Exchange Commission.
Overview
The Corporation is a full-service community bank holding company
headquartered in Moultrie, Georgia. The community of Moultrie has been
served by the Corporation and its predecessors since 1928. We provide
comprehensive financial services to consumer, business and governmental
customers, which, in addition to conventional banking products, include a
full range of mortgage banking, trust, investment and insurance services.
Our primary market area incorporates Colquitt County, where we are
headquartered, and Baker, Thomas, and Worth Counties, each contiguous with
Colquitt County. We have four full service banking facilities and six
automated teller machines.
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Our strategy is to:
* maintain the diversity of our revenue, including growth in both interest
and noninterest income through a broad base of business,
* strengthen our sales and marketing efforts while developing our employees
to provide the best possible service to our customers,
* expand our market share where opportunity exists, and
* grow outside of our current geographic footprint, through acquisitions,
into areas proximate to our current market area.
The Corporation's profitability, like most financial institutions, is
dependent to a large extent upon net interest income, which is the
difference between the interest received on earning assets, such as loans,
securities and federal funds sold, and the interest paid on interest-bearing
liabilities, principally deposits and borrowings. Net interest income is
highly sensitive to the fluctuations in interest rates. This quarter the
Federal Reserve Bank increased short-term rates .50%. Since July 2004,
short-term rates were increased seventeen times, or 4.25%, by June 30, 2006.
Our profitability, as in any business, is impacted as well by operating
expenses such as salaries and employee benefits, occupancy and other
operating expenses, including income taxes.
Our lending activities are significantly influenced by regional and local
economic factors. Some specific factors include changes in population,
demographics of the population, competition among lenders, interest rate
conditions and prevailing market rates on competing investments, customer
preferences and levels of personal income and savings in the Corporation's
primary market area.
To address interest rate fluctuations out of our control, we manage our
balance sheet in an effort to diminish the impact of sudden interest rates
changes by broadening our revenue sources to reduce the risk and exposure of
our financial results to the impact of changes in interest rates, which is
outside of our control.
As a result of our strategy to diversify revenue, noninterest income has
grown over the last few years and was 99% of second quarter 2006 net
interest income and 38% of second quarter 2006 total revenue. Sources of
noninterest income include our insurance agency and Empire, the
Corporation's commercial mortgage banking subsidiary, as well as fees on
customer accounts, trust and retail brokerage services.
Critical Accounting Policies
In the course of the Corporation's normal business activity, management must
select and apply many accounting policies and methodologies that lead to the
financial results presented in the consolidated financial statements of the
Corporation. Management considers the accounting policy relating to the
allowance for loan losses to be a critical accounting policy because of the
uncertainty and subjectivity inherent in estimating the levels of allowance
needed to cover probable credit losses within the loan portfolio and the
material effect that these estimates can have on the Corporation's results
of operations. We believe that the allowance for loan losses as of June 30,
2006 is adequate, however, under adversely different conditions or
assumptions, future additions to the allowance may be necessary. There have
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been no significant changes in the methods or assumptions used in our
accounting policies that require material estimates and assumptions. Note 1
to the Consolidated Financial Statements provides a description of our
significant accounting policies and contributes to the understanding of how
our financial performance is reported.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity management involves the ability to meet the cash flow requirements
of customers who may be either depositors wanting to withdraw their funds or
borrowers needing assurance that sufficient funds will be available to meet
their credit needs. In the ordinary course of business, the Corporation's
cash flows are generated from interest and fee income as well as from loan
repayments and the maturity or sale of other earning assets. In addition,
liquidity is continuously provided through the acquisition of new deposits
and borrowings or the rollover of maturing deposits and borrowings. The
Corporation strives to maintain an adequate liquidity position by managing
the balances and maturities of interest-earning assets and interest-earning
liabilities so its short-term investments balance, at any given time, will
adequately cover any reasonably anticipated immediate need for funds.
Additionally, the Bank maintains relationships with correspondent banks that
could provide funds on short notice, if needed.
The liquidity and capital resources of the Corporation are monitored on a
periodic basis by state and Federal regulatory authorities. As determined
under guidelines established by these regulatory authorities, the Bank's
liquidity ratios at June 30, 2006, were considered satisfactory. At that
date, the Bank's short-term investments were adequate to cover any
reasonably anticipated immediate need for funds. The Corporation is aware
of no events or trends likely to result in a material change in liquidity.
At June 30, 2006, the Corporation's and the Bank's risk-based capital ratios
were considered adequate based on guidelines established by regulatory
authorities. During the six months ended June 30, 2006, total capital
increased $587 thousand to $40.4 million. The majority of this increase was
a result of net earnings growth partially offset by a decrease in
accumulated other comprehensive income related to unrealized losses on
available for sale securities. Under a share repurchase program adopted by
the Board in January 2000, the Corporation repurchased 16,000 shares of its
common stock during the first six months of 2006 at an average price of
$22.86 per share. There are approximately 100,000 shares authorized to be
repurchased under the current program. Also, the Corporation continues to
maintain a healthy level of capital adequacy as measured by its equity-to-
asset ratio of 13.10% as of June 30, 2006. The Corporation is not aware of
any events or trends likely to result in a material change in capital
resources other than the effects of normal operations on the retention of
net earnings, repurchasing shares, and paying dividends to shareholders.
Also, the Corporation's management is not aware of any current
recommendations by the regulatory authorities which, if they were
implemented, would have a material effect on the Corporation's capital
resources.
RESULTS OF OPERATIONS
The Corporation's results of operations are determined by its ability to
effectively manage interest income and expense, to minimize loan and
investment losses, to generate noninterest income and to control noninterest
expense. Since interest rates are determined by market forces and economic
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conditions beyond the control of the Corporation, the ability to generate
net interest income is dependent upon the Bank's ability to obtain an
adequate spread between the rate earned on interest-earning assets and the
rate paid on interest-bearing liabilities. Thus, the key performance
measure for net interest income is the interest margin or net yield, which
is taxable-equivalent net interest income divided by average earning assets.
Performance Summary
The Corporation's net income after taxes for the three-month period ended
June 30, 2006, was $1.218 million compared with net income of $1.240 million
for the same period in 2005, representing a slight decrease of $22 thousand.
Growth in noninterest revenue helped to offset the decline in net interest
income while expenses have remained relatively stable. Our growth in
noninterest revenue reflects the effectiveness of our diversified sources of
revenue.
On a per share basis, net income for the second quarter was $.37 per diluted
share compared with $.38 per diluted share for the same quarter in 2005.
The weighted average common diluted shares outstanding for the quarter were
3.271 million, down less than 1.0% or 26,883 average diluted shares from the
comparable quarter a year ago. This decrease in average quarterly diluted
shares was due to the Corporation's stock repurchase program. Because of
our strong capital position, we continued with the stock repurchase program
that began in January 2000.
On a year-to-date basis, net income was $2.303 million compared with $2.248
million for the same period in 2005. Year-to-date earnings per diluted
share were $.70 versus $.68 for the same period in 2005. Net income for the
first six months this year improved 2.5% and earnings per diluted share
increased 2.9%. Major factors contributing to the year-to-date improvement
in earnings included increases of $308 thousand of mortgage banking services
income, a $103 thousand improvement on service charges on deposit accounts,
and a $79 thousand increase in income from insurance services. Continued
growth in noninterest revenue has more than offset the decline in net
interest income for the six-month period.
We measure our performance on selected key ratios, which are provided for
the previous five quarterly periods ended June 30, 2006.
2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
2006 2006 2005 2005 2005
Return on average total assets 1.60% 1.40% 1.19% 1.61% 1.66%
Return on average total equity 12.11% 10.85% 8.88% 11.91% 12.66%
Average shareholders' equity to
average total assets 13.20% 12.92% 13.36% 13.51% 13.09%
Net interest margin
(tax equivalent) 3.66% 3.68% 3.78% 4.02% 3.95%
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Comparison of Statements of Income for the Quarter
Noninterest income, which was 37.7% of the Corporation's total revenue for
the quarter, was $2.402 million for the second quarter, up 7.4% from the
same period in 2005. The largest contributor to noninterest income,
mortgage banking services, increased 10.8% to $1.514 million from last
year's first quarter. The level and timing of recognizing income from the
mortgage banking business is dependent on many factors related to
originating and closing relatively large commercial mortgage loans, and
therefore can fluctuate from quarter to quarter. Currently, the mortgage
banking business has a strong pipeline of projects. In addition to fees
generated through the lending process, it also earns fees for servicing a
$512 million portfolio of non-recourse loans. Revenue from service charges
on deposit accounts increased 9.4% from the same period a year ago to $431
thousand for the quarter. Revenue from insurance services improved to $281
thousand, an 9.1% increase over the second quarter of 2005.
Total interest income increased $312 thousand, or 8.6%, for the three months
ended June 30, 2006 compared with the same period in 2005. This improvement
for the three-month period resulted from increases in interest and fees on
loans and interest on federal funds sold. These increases were partially
offset by decreases in interest on investment securities.
Total interest expense increased $470 thousand, or 43.8%, in the second
quarter of 2006 compared with the same period in 2005. Interest on deposits
increased $447 thousand, or 56.7%, during the second quarter of 2006, while
interest on other short-term borrowings increased $15 thousand and interest
on long-term debt increased $8 thousand during the period. Looking ahead,
the challenge will be to manage funding costs in a rising rate environment.
Our focus on cost discipline, retaining and expanding customer
relationships, and identifying acquisition opportunities are central to the
core components of our growth strategy.
The primary source of revenue for the Corporation is net interest income,
which is the difference between total interest income on earning assets and
interest expense on interest-bearing sources of funds. Net interest income
for the second quarter of 2006 was $2.424 million compared with $2.581
million for the same period in 2005. The decrease was due primarily to
funding costs increasing at a faster rate than increases in interest income
on loans and short term investments. As a result, the Corporation's net
interest margin was 3.66% for the second quarter of 2006, down 29 basis
points from the same period a year ago. Total interest expense was $1.541
million for the second quarter, up $470 thousand from the same period a year
ago, due primarily to increased interest expense on deposits. The average
rate paid on interest-bearing deposits increased 93 basis points for the
quarter compared with the same period a year ago. Higher funding costs have
impacted our ability to grow net interest income, and our challenge
continues to be managing these costs in a rising rate environment.
Provision for loan losses was $0 for the second quarter compared with $20
thousand in the same quarter of 2005. Noninterest expense decreased to
$3.142 million from $3.159 million for the second quarter of last year. The
largest component of noninterest expense, salaries and employee benefits,
decreased slightly to $1.882 million for the second quarter from $1.886
million a year ago. Occupancy and data processing expenses showed some
slight increases, but all other major categories of noninterest expense were
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either relatively flat or had decreases in the second quarter of 2006 when
compared with the second quarter of 2005.
Comparison of Statements of Income for the Six-month Period
Total noninterest income increased $460 thousand for the six months ended
June 30, 2006, compared with the same period in 2005. For the first six
months of 2006, the largest component of noninterest income, mortgage
banking income, was $2.5 million, up from $2.2 million in 2005. Also,
service charges on deposit accounts increased $103 thousand, or 14.1%, and
income from insurance services increased 13.8% to $645 thousand when
comparing the first six months of 2006 to the same period last year.
Revenue from trust services and retail brokerage services also had increases
in the first six months of 2006 compared with the same period in 2005.
These increases were partially offset by slight decreases in net gain on
sale or abandonment of assets and other income.
For the first six months of 2006, total interest income increased $564
thousand when comparing it with the same period in 2005. The basis for the
increase in the six-month period of 2006 was primarily due to increases in
both interest and fees on loans and interest on short-term investments. The
average volume of loans increased $10.8 million for the six-month period
compared with the same period last year.
The total interest expense for the six-month period ended June 30, 2006
increased $841 thousand, or 40.7%, compared with the same period in 2005.
Over this period, the average balances on interest-bearing deposits
increased $1.1 million. However, the increase in interest expense was
primarily related to higher rates paid on interest-bearing deposits and
increased interest expense on a larger average volume of long-term debt.
The rate on time deposits increased 110 basis points comparing the first six
months of 2006 with the same period in 2005. Interest on long-term debt
increased $16 thousand, or 3%, for the first six months of 2006, while
interest on other short-term borrowings increased $25 thousand for the first
six months of 2006. This increase resulted from the higher average long-
term borrowings from the Federal Home Loan Bank.
Net interest income for the first six months of 2006 declined slightly to
$4.9 million compared with the same period in 2005. During the six-month
period ended June 30, 2006, the Corporation's net interest margin was 3.67%
compared with 3.92% for the same period in 2005.
The six-month provision for loan losses of $0 was $40 thousand less than in
the comparable period of 2005. Total noninterest expenses decreased by $29
thousand for the six months ended June 30, 2006 compared with the same
period in 2005. Salary and employee benefits and occupancy expense each
increased while all other noninterest expense categories decreased or were
unchanged when comparing the first six months of 2006 to the same period
last year.
Comparison of Financial Condition Statements
At June 30, 2006, total assets were $308.7 million, a 2.5% increase from
December 31, 2005. The majority of the increase in assets was a result of
increases in total loans of $16.8 million and in cash and due from banks of
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$1.6 million. These increases were partially offset by declines of $5.9
million in interest-bearing deposits in banks, federal funds sold of $3.6
million, and $2.0 million in investment securities.
The Corporation's loan portfolio of $121.5 million increased nearly 16.1%
from the December 31, 2005, level of $104.7 million. Some of this loan
growth was originated from strong local economic development due to
affordability of real estate and abundance of natural resources. The
Corporation continues to be conservative in its lending practices in order
to maintain a quality loan portfolio. Loans, a major use of funds,
represent 39.4% of total assets.
Investment securities and other short-term investments which include federal
funds sold and interest-bearing deposits in banks represent 51.6% of total
assets. Investment securities decreased $2.0 million and short-term
investments decreased $9.5 million since December 31, 2005. This resulted
in an overall decrease in investments of $11.5 million.
Deposits increased to $227.2 million at the end of the second quarter of
2006, up $9.2 million from the same period in 2005 and up $5.3 million from
the end of last year. At June 30, 2006, total deposits represented 73.6% of
total assets.
The following table shows the major contractual obligations for the
Corporation.
Long-term debt consist of the following:
June 30, December 31, June 30,
2006 2005 2005
Advance from Federal Home Loan Bank
with a 3.21% fixed rate of interest
maturing June 29, 2015.
(convertible to a variable rate at
option of Federal Home Loan Bank
on June 29, 2007). $ 5,000,000 $ 5,000,000 $ 5,000,000
Advance from Federal Home Loan Bank
with a 2.85% fixed rate of interest
maturing March 11, 2013.
(convertible to a variable rate at
option of Federal Home Loan Bank
on March 11, 2008). 5,000,000 5,000,000 5,000,000
Advance from Federal Home Loan Bank
with a 4.00% fixed rate of interest
maturing August 6, 2012,
(convertible to a variable rate at
option of Federal Home Loan Bank
on August 6, 2007). 5,000,000 5,000,000 5,000,000
Advance from Federal Home Loan Bank
with a 3.85% fixed rate of interest
maturing April 30, 2014,
(convertible to a variable rate at
option of Federal Home Loan Bank on
April 30, 2009). 10,000,000 10,000,000 10,000,000
Advance from Federal Home Loan Bank
with a 3.08% fixed rate of interest
maturing August 13, 2014,
(convertible to a variable rate at
option of Federal Home Loan Bank on
August 13, 2007). 5,000,000 5,000,000 5,000,000
Advance from Federal Home Loan Bank
with a 2.43% fixed rate of interest
maturing October 28, 2014,
(convertible to a variable rate at
option of Federal Home Loan Bank on
October 30, 2006)(Moved to short-term
borrowings). 0 0 5,000,000
Advance from Federal Home Loan Bank
with a 5.21% fixed rate of interest
due in annual installments maturing
December 17, 2008. 342,857 342,857 457,143
Total long-term debt $30,342,857 $30,342,857 $35,457,143
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The allowance for loan losses represents a reserve for potential losses in
the loan portfolio. The adequacy of the allowance for loan losses is
evaluated monthly based on a review of all significant loans, with a
particular emphasis on nonaccruing, past due, and other loans that
management believes require attention.
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 2.00% of total loans outstanding at June 30, 2006, compared with
2.35% of loans outstanding at December 31, 2005. Non-performing assets as a
percentage of total assets was .03%, a 22 basis point improvement over last
year. Management considers the allowance for loan losses as of June 30,
2006, adequate to cover potential losses in the loan portfolio.
Off-Balance Sheet Arrangements
In the normal course of business, we are a party to financial instruments
with off-balance-sheet risk to meet the financing needs of our customers and
reduce risk exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit in the form of loans or
through letters of credit. The instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amounts
recognized in the financial statements. Since many of the commitments to
extend credit and standby letters of credit are expected to expire without
being drawn upon, the contractual or notional amounts do not represent
future cash requirements.
Financial instruments whose contract amounts
represent credit risk (dollars in thousands): June 30, June 30,
2006 2005
Commitments to extend credit $ 24,741 $ 24,128
Standby letters of credit and financial guarantees $ 142 $ 142
The Corporation does not have any special purpose entities or off-balance
sheet financing arrangements.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Corporation's primary market risk lies within its exposure to interest
rate movement. The Corporation has no foreign currency exchange rate risk,
commodity price risk, or any other material market risk. The Corporation
has no trading investment portfolio. As a result, it does not hold any
market risk-sensitive instruments, which would be subject to a trading
environment characterized by volatile short-term movements in interest
rates. Also, the Corporation has no interest rate swaps, or other
derivative instruments, that are either designated and effective as hedges
or modify the interest rate characteristics of specified assets or
liabilities. The Corporation's primary source of earnings, net interest
income, can fluctuate with significant interest rate movements. To lessen
the impact of these movements, the Corporation seeks to maximize net
interest income while remaining within prudent ranges of risk by practicing
sound interest rate sensitivity management. The Corporation attempts to
accomplish this objective by structuring the balance sheet so differences in
repricing opportunities between assets and liabilities are minimized.
Interest rate sensitivity refers to the responsiveness of earning assets and
interest-bearing liabilities to changes in market interest rates. The
Corporation's interest rate risk management is carried out by the
Asset/Liability Management Committee operating under policies and guidelines
established by Management. The principal objective of asset/liability
management is to manage the levels of interest-sensitive assets and
liabilities to minimize net interest income fluctuations in times of
fluctuating market interest rates. To effectively measure and manage
interest rate risk, the Corporation uses computer simulations that determine
the impact on net interest income of numerous interest rate scenarios,
balance sheet trends and strategies. These simulations cover the following
financial instruments: short-term financial instruments, investment
securities, loans, deposits, and borrowings. These simulations incorporate
assumptions about balance sheet dynamics, such as loan and deposit growth
and pricing, changes in funding mix, and asset and liability repricing and
maturity characteristics. Simulations are run under various interest rate
scenarios to determine the impact on net income and capital. From these
computer simulations, interest rate risk is quantified and appropriate
strategies are developed and implemented. The Corporation maintains an
investment portfolio that staggers maturities and provides flexibility over
time in managing exposure to changes in interest rates. At any point in time,
any imbalances in the repricing opportunities constitute a financial
institution's interest rate sensitivity.
The Corporation uses a number of tools to measure interest rate risk. One
of the indicators for the Corporation's interest rate sensitivity position
is the measurement of the difference between its rate-sensitive assets and
rate-sensitive liabilities, referred to as the "gap." A gap analysis
displays the earliest possible repricing opportunity for each asset and
liability category based upon contractual maturities and repricing. As of
June 30, 2006, the Corporation's one-year cumulative rate-sensitive assets
represented 94% of the cumulative rate-sensitive liabilities compared with
79% for the same period in 2005. This change in the cumulative gap is a
result of the Corporation's management of its exposure to interest rate
risk. We are balanced to slightly liability-sensitive at the one year gap
position. This improved change to a more balanced position is mainly due to
the Corporation's growth in adjustable rate commercial loans. This balanced
position will decrease the Corporation's exposure to rising interest rates.
All interest rates and yields do not adjust at the same velocity; therefore,
the interest rate sensitivity gap is only a general indicator of the
potential effects of interest rate changes on net interest income. The
Corporation's asset and liability mix is monitored ensuring the effects of
interest rate movements in either direction are not significant over time.
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ITEM 4. CONTROLS AND PROCEDURES
The Corporation's management, including the Chief Executive Officer and
Chief Financial Officer, supervised and participated in an evaluation of the
effectiveness of its disclosure controls and procedures (as defined in
federal securities rules) as of the end of the period covered by this
report. Based on, and as of the date of, that evaluation, the Corporation's
Chief Executive Officer and Chief Financial Officer have concluded that the
Corporation's disclosure controls and procedures were effective in
accumulating and communicating information to management, including the
Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosures of that information under
the Securities and Exchange Commission's rules and forms and that the
Corporation's disclosure controls and procedures are designed to ensure that
the information required to be disclosed in reports that are filed or
submitted by the Corporation under the Securities Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms.
No changes were made to the Corporation's internal control over financial
reporting during this quarter that materially affected or could reasonably
likely to materially affect the Corporation's internal controls over
financial reporting.
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PART II. - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of the shareholders of the Corporation was held on May
23, 2006. Total shares eligible to vote amounted to 3,252,768. A total of
2,399,301 shares (73.76%) were represented by shareholders in attendance or
by proxy.
The following directors were elected to serve one year until the next annual
meeting.
Director Votes For Votes Withheld
Cecil H. Barber 2,392,492 6,809
John H. Clark 2,343,705 55,596
DeWitt Drew 2,389,748 9,553
Michael J. McLean 2,392,078 7,223
Richard L. Moss 2,390,871 8,430
Roy H. Reeves 2,380,836 18,465
Johnny R. Slocumb 2,381,517 17,784
C. Broughton Williams, Jr. 2,388,843 10,458
Director Emeritus:
Albert W. Barber
Leo T. Barber, Jr.
Mrs. Kenneth V. Cope
Robert M. Duggan
E. J. McLean, Jr.
Earl D. Moore
Jack Short
Mrs. Hugh Turner
Violet K. Weaver
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ITEM 6. EXHIBITS
Exhibit 31.1 Section 302 Certification of Periodic Financial Report by
Chief Executive Officer.
Exhibit 31.2 Section 302 Certification of Periodic Financial Report by
Chief Financial Officer.
Exhibit 32.1 Section 906 Certification of Periodic Financial Report by
Chief Executive Officer.
Exhibit 32.2 Section 906 Certification of Periodic Financial Report by
Chief Financial Officer.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SOUTHWEST GEORGIA FINANCIAL CORPORATION
BY: /s/ George R. Kirkland
GEORGE R. KIRKLAND
SENIOR VICE-PRESIDENT AND TREASURER
(FINANCIAL AND ACCOUNTING OFFICER)
Date: August 11, 2006
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