UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the commission only (as permitted by rule 14A-
6(E)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240-14a-12
SOUTHWEST GEORGIA FINANCIAL CORPORATON
(Exact name of Registrant as specified in its charter)
_________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing and registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No:
(3) Filing Party:
(4) Date Filed:
April 10, 2007
Dear Shareholder:
The Annual Meeting of the Shareholders of Southwest Georgia Financial
Corporation will be held on Tuesday, May 22, 2007, in the Southwest Georgia
Bank Administrative Services Building, 205 Second Street S.E., Moultrie,
Georgia, at 4:30 P.M. for the purposes set forth in the accompanying Notice
of Annual Meeting of Shareholders and Proxy Statement.
Again this year, we will have a special drawing for shareholders who attend
the meeting. We will give away four $500.00 savings bonds--you must be
present to win and you must be a shareholder of Southwest Georgia Financial
Corporation. (*Directors, officers, and staff of Southwest Georgia Bank and
Southwest Georgia Financial Corporation and their immediate families are not
eligible to participate in the drawing).
In order to ensure that your shares are voted at the meeting, please
complete, date, sign, and return the Proxy in the enclosed postage-paid
envelope at your earliest convenience. Every shareholder's vote is
important, no matter how many shares you own.
We encourage you to attend this annual meeting of the shareholders and join
us in the lobby immediately following the meeting for refreshments. We look
forward to your continued support and another good year in 2007.
Very truly yours,
/s/DeWitt Drew
DeWitt Drew
President and Chief Executive Officer
* Immediate family is considered to be husband, wife, and children living at
home.
SOUTHWEST GEORGIA FINANCIAL CORPORATION
P.O. Box 3488
201 First Street, S.E.
Moultrie, Georgia 31768
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 22, 2007
The annual meeting of shareholders of Southwest Georgia Financial
Corporation ("the Corporation") will be held on Tuesday, May 22, 2007, at
4:30 p.m. at the Southwest Georgia Bank Administrative Services Building,
205 Second Street, S.E., Moultrie, Georgia, for the purposes of considering
and voting upon:
1. The election of ten directors to constitute the Board of Directors to
serve until the next annual meeting and until their successors are elected
and qualified; and
2. Such other matters as may properly come before the meeting or any
adjournment thereof.
Only shareholders of record at the close of business on April 9, 2007, will
be entitled to notice of and to vote at the meeting or any adjournment
thereof.
A Proxy Statement and a Proxy solicited by the Board of Directors are
enclosed herewith. Even if you plan to attend the meeting in Moultrie,
Georgia, please provide us voting instructions in one of the following ways
as soon as possible:
(1) Please mark, sign, date, and return the Proxy promptly in the enclosed
business reply envelope;
(2) If your shares are held in "street-name", that is held for your account
by a broker, bank or other nominee, you will receive instructions from your
nominee which you must follow in order to have your shares voted.
If you attend the meeting you may, if you wish, withdraw your Proxy and vote
in person.
Also enclosed is the Corporation's 2006 Annual Report to Shareholders, which
contains financial data and other information about the Corporation.
By Order of the Board of Directors,
/s/DeWitt Drew
DeWitt Drew
President and
Chief Executive Officer
April 10, 2007
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE
COMPLETE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED SELF-
ADDRESSED ENVELOPE. IF YOU ARE PRESENT AT THE ANNUAL MEETING, YOU MAY, IF
YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND EXERCISE THE RIGHT TO VOTE YOUR
SHARES PERSONALLY.
SOUTHWEST GEORGIA FINANCIAL CORPORATION
P.O. Box 3488
201 First Street, S.E.
Moultrie, Georgia 31768
PROXY STATEMENT
April 10, 2007
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of Southwest Georgia Financial Corporation
for use at the Annual Meeting of Shareholders of the Corporation to be held
on May 22, 2007, and any postponement and adjournment thereof, for the
purposes set forth in the accompanying notice of the meeting. The expenses
of this solicitation, including the cost of preparing and mailing this Proxy
Statement, will be paid by the Corporation. Copies of solicitation
materials may be furnished to banks, brokerage houses, and other custodians,
nominees, and fiduciaries for forwarding to beneficial owners of shares of
the Corporation's Common Stock, and normal handling charges may be paid for
such forwarding service. In addition to solicitations by mail, directors
and regular employees of the Corporation may solicit Proxies in person or by
telephone. It is anticipated that this Proxy Statement and the accompanying
Proxy will first be mailed to shareholders on April 10, 2007.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
What is the purpose of the Annual Meeting?
At the Annual Meeting of Shareholders, shareholders will act upon the
matters set forth in the accompanying notice of meeting, including the
election of ten directors and any other matters that may properly come
before the meeting.
Who is entitled to vote?
All shareholders of record of the Corporation's common stock at the close of
business on April 9, 2007, which is referred to as the record date, are
entitled to receive notice of the Annual Meeting and to vote the shares of
common stock held by them on the record date. Each outstanding share of
common stock entitles its holder to cast one vote for each matter to be
voted upon.
How do I cast my vote?
You may vote your shares by marking, signing, dating and returning the Proxy
in the enclosed business reply envelope provided to you, or you may vote in
person at the Annual Meeting. If your shares of common stock are held in
"street name", that is held for your account by a broker, bank or other
nominee, you will receive instructions from your nominee which you must
follow in order to have your shares voted.
If the Proxy is returned but no choice is specified thereon, it will be
voted for all the persons named below under the caption "Information about
Nominees for Director".
What are the quorum and voting requirements?
A quorum is present when the holders of a majority of the shares outstanding
on the record date are present at the Annual Meeting of Shareholders in
person or by proxy. On the record date, the Corporation had outstanding and
entitled to vote 2,596,643 shares of Common Stock, par value $1.00 per
share.
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The required vote for each item of business at the Annual Meeting is as
follows:
1. For Proposal 1, the election of directors, those nominees receiving the
greatest number of votes at the Annual Meeting of Shareholders shall be
deemed elected, even though the nominees may not receive a majority of the
votes cast.
2. For any other business at the Annual Meeting, the vote of a majority of
the shares voted on the matter, assuming a quorum is present, shall be the
act of the shareholders on that matter, unless the vote of a greater number
is required by law.
How are votes counted?
Abstentions and "broker non-votes" will be counted only for purposes of
establishing a quorum, but will not otherwise affect the vote. "Broker non-
votes" are proxies received from brokers or other nominees holding shares on
behalf of their clients (in "street name") who have not been given specific
voting instructions from their clients with respect to non-routine matters.
Typically, the election of directors is considered a routine matter by
brokers and other nominees allowing them to have discretionary voting power
to vote shares they hold on behalf of their clients for the election of
directors.
Because directors are elected by a plurality of the votes cast, the
directors that get the most votes will be elected even if such votes do not
constitute a majority. Directors cannot be voted "against" and votes to
"withhold authority" to vote for a certain nominee will have no effect if
the nominee receives a plurality of the votes cast. For all other proposals
that come before the meeting, you may vote "for" or "against" the proposal.
If you hold your shares of common stock in your own name as a holder of
record, and you fail to vote your shares, either in person or by proxy, the
votes represented by your shares will be excluded entirely from the vote.
Will other matters be voted on at the Annual Meeting?
The Corporation is not aware of any other matters to be presented at the
Annual Meeting other than those described in this Proxy Statement. If any
other matters not described in the Proxy Statement are properly presented at
the meeting, proxies will be voted in accordance with the best judgment of
the proxy holders.
Can I revoke my Proxy instructions?
Any Proxy given pursuant to this solicitation may be revoked by any
shareholder who attends the meeting and gives oral notice of his or her
election to vote in person, without compliance with any other formalities.
In addition, any Proxy given pursuant to this solicitation may be revoked
prior to the meeting by delivering a signed writing revoking it or a duly
executed Proxy bearing a later date to the Secretary of the Corporation at
Southwest Georgia Financial Corporation, P.O. Box 3488, Moultrie, Georgia
31776-3488. Any shareholder of record as of the record date attending the
Annual Meeting may vote in person by ballot whether or not a Proxy has been
previously given, but the presence (without further action) of a shareholder
at the Annual Meeting will not constitute revocation of a previously given
Proxy.
Any shareholder holding shares in "street name" by a broker or other nominee
must contact the broker or nominee to obtain instructions for revoking the
Proxy instructions.
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What other information should I review before voting?
The 2006 Annual Report to Shareholders, including financial statements for
the year ended December 31, 2006, is enclosed with this Proxy Statement.
The Annual Report on Form 10-K except for the exhibits is part of the proxy
solicitation material. The Corporation will furnish without charge a copy
of its complete Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the fiscal year ended December 31, 2006, including
financial statements and schedules, to any record or any beneficial owner of
its Common Stock as of April 9, 2007, who requests a copy of such report.
Any request for the Form 10-K report should be in writing addressed to:
Mr. George R. Kirkland
Southwest Georgia Financial Corporation
P.O. Box 3488
Moultrie, Georgia 31776-3488
You may also obtain copies of the Corporation's Form 10-K from the SEC at
prescribed rates by writing to the Public Reference Section of the SEC, Room
1580, F. Street, N.E., Washington, D.C. 20549. Please call the SEC at (800)
SEC-0330 for further information.
If the person requesting the report was not a shareholder of record on April
9, 2007, the request must include a representation that the person was a
beneficial owner of Common Stock on that date. Copies of any exhibit to the
Form 10-K will be furnished on request and upon receipt of the payment of
the Corporation's expense in furnishing the exhibits.
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VOTING SECURITIES AND PRINCIPAL HOLDERS
The following table sets forth as of March 12, 2007, beneficial ownership of
the Corporation's Common Stock by each "person" (as that term is defined by
the Securities and Exchange Commission) known by the Corporation to be the
beneficial owner of more than 5% of the Corporation's common stock, by each
director and named executive officers of the Corporation and all such
persons as a group.
Amount and Nature of Percent
Name of Beneficial Owner Beneficial Ownership (1) of Class
The Employee Stock Ownership
Plan and Trust of Southwest
Georgia Financial Corporation 327,478 12.06%
John H. Clark 8,749 * (2)
Cecil H. Barber 34,447 1.27% (3)
DeWitt Drew 20,342 * (4)
Michael McLean 94,095 3.47% (5)
Richard L. Moss 25,715 * (6)
Roy H. Reeves 27,707 1.02% (7)
Johnny R. Slocumb 48,725 1.79%
M. Lane Ware 0 *
Marcus R. Wells 6,500 * (8)
C. Broughton Williams, Jr. 14,037 *
John J. Cole, Jr. 53,799 1.98% (9)
J. David Dyer, Jr. 2,376 *
George R. Kirkland 33,749 1.24% (10)
All Directors, Named Executive
Officers, and 5% Shareholders
as a Group (13 persons) 645,522 23.78%
* Indicates less than one percent (1%).
(1) Based on 2,714,748 shares outstanding as of March 12, 2007, which
includes shares underlying outstanding stock options exercisable within 60
days of the record date, which are deemed to be outstanding for purposes of
calculating the percentage owned by a holder.
(2) Includes (i) 2,706 shares owned of record by Mr. Clark's wife as to
which Mr. Clark disclaims beneficial ownership.
(3) Includes 3,300 presently exercisable stock options.
(4) Includes (i) 3,946 shares allocated to the account of Mr. Drew in the
Employee Stock Ownership Plan and Trust, over which shares Mr. Drew
exercises voting power and (ii) 13,200 presently exercisable stock options
granted to Mr. Drew.
(5) Includes (i) 57,357 shares of which Mr. McLean holds the voting power of
attorney for E. J. McLean, Jr., and (ii) 26,400 shares of which Mr. McLean
holds the voting power of attorney for Robert A. Cooper, Jr.
(6) Includes 22,299 shares pledged as collateral for loans.
(7) Includes 11,880 shares pledged as collateral for loans.
(8) Includes 6,000 shares of which Mr. Wells holds the voting power of
attorney for Hiller M. Gammage, Jr.
(9) Includes (i) 38,666 shares allocated to the account of Mr. Cole in the
Employee Stock Ownership Plan and Trust, over which shares Mr. Cole
exercises voting power and (ii) 3,300 presently exercisable stock options
granted to Mr. Cole.
(10) Includes (i) 9,585 shares allocated to the account of Mr. Kirkland in
the Employee Stock Ownership Plan and Trust, over which shares Mr. Kirkland
exercises voting power and (ii) 3,300 presently exercisable stock options
granted to Mr. Kirkland.
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ELECTION OF DIRECTORS
The bylaws of the Corporation provide that the Board of Directors shall
consist of not less than five nor more than 25 directors. The exact number
of directors is currently set at 11 by Board resolution. Because current
director John H. Clark will not run for reelection in 2007, the Board will
set the number of directors immediately after the Annual Meeting at 10.
The terms of office for directors continue until the next Annual Meeting of
Shareholders and until their successors are elected and qualified or until
earlier resignation, removal from office, or death.
Each Proxy executed and returned by a shareholder will be voted as specified
thereon by the shareholder. If no specification is made, the Proxy will be
voted for the election of the nominees named below to constitute the entire
Board of Directors. In the event that any nominee withdraws or for any
reason is not able to serve as a director, the Proxy will be voted for such
other person as may be designated by the Board of Directors as substitute
nominee. Management of the Corporation has no reason to believe that any
nominee will not serve if elected.
INFORMATION ABOUT NOMINEES FOR DIRECTOR
The following information as of April 9, 2007, has been furnished by the
respective nominees for director. John J. Cole., Jr. was elected to the
Board in January 2007. M. Lane Wear and Marcus R. Wells were each elected
to the Board in March 2007. Mr. Cole, Mr. Wear and Mr. Wells will stand for
election by the Corporation's shareholders for the first time at the
Corporation's 2007 Annual Meeting. Except as otherwise indicated, each
nominee has been or was engaged in his present or last principal employment,
in the same or a similar position, for more than five years.
Name (Age) Information about Nominee
Cecil H. Barber (42) A director of the Bank and the Corporation since
1999, Mr. Barber is Vice President of Barber
Contracting, a general contracting company.
John J. Cole, Jr. (56) A newly appointed director of the Bank and of the
Corporation. Mr. Cole became Executive Vice
President and Cashier of the Bank and Executive
Vice President of the Corporation in 2002.
Previously, he had been Senior Vice President and
Cashier of the Bank and Senior Vice President of
the Corporation since 1992. Previously, he has
served in various other positions with the Bank
since 1976 and the Corporation since 1981. Mr.
Cole is standing for election as Director of the
Company for the first time at the Corporation's
2007 Annual Meeting.
DeWitt Drew (50) Mr. Drew has been President and Chief Executive
Officer of the Bank and Corporation since May
2002. Previously, he served as President and Chief
Operating Officer during 2000 and 2001 and
Executive Vice President during 1999 for the Bank
and Corporation.
Michael J. McLean (60) Chairman of the Board of the Bank and Corporation
since 2006, Mr. McLean has been a director of the
Bank and Corporation since 1999. Mr. McLean is
the owner of McLean Engineering Company, Inc., an
engineering consulting firm.
Richard L. Moss (55) Vice Chairman of the Board of the Bank and
Corporation since 2006, Mr. Moss has been a
director of the Bank since 1980 and of the
Corporation since 1981. Mr. Moss is President of
Moss Farms.
Roy H. Reeves (47) A director of the Bank and the Corporation since
1991, Mr. Reeves is a partner of Reeves
Properties, L.P., a property rental company.
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Name (Age) Information about Nominee
Johnny R. Slocumb (54) A director of the Bank and the Corporation since
1991, Mr. Slocumb is owner of The Slocumb Company,
a company which offers real estate and insurance
services.
M. Lane Wear (55) A newly appointed director of the Bank and of the
Corporation. Mr. Wear is a Certified Public
Accountant and has been a partner with Vines,
Wear and Mangum, LLP since 1986. Mr. Wear is
standing for election as Director of the Company
for the first time at the Corporation's 2007
Annual Meeting.
Marcus R. Wells (49) A newly appointed director of the Bank and of the
Corporation. Mr. Wells is a licensed physical
therapist and has been owner and Chief Executive
Officer of Alliance Rehab, Inc., d/b/a Moultrie
Physical Therapy & Rehabilitation since January
2004. Previously, he was employed from 1999 to
March 2003 and was managing partner from April
2003 to December 2003 by Moultrie Physical Therapy
& Rehabilitation. Also, Mr. Wells is Chief
Executive Officer of POINT, Inc., (Prevention of
Occupational & Industrial Trauma) since 1998.
Mr. Wells is standing for election as Director of
the Company for the first time at the
Corporation's 2007 Annual Meeting.
C. Broughton Williams (70) A director of the Bank and the Corporation since
1999, Mr. Williams is a retired Senior Vice
President of the Bank and the Corporation. He is
owner of Williams Consulting & Development
Company, and managing member of F&W Properties,
L.L.C.
There are no family relationships between any director, executive officer,
or nominee for director of the Corporation or any of its subsidiaries.
Meetings and Composition of the Board of Directors
The Board of Directors held 12 regular meetings during 2006. All of the
directors, except for John H. Clark, attended at least seventy-five percent
(75%) of the Board and committee meetings held during their tenure as
directors. Directors are expected to be present at all Board of Directors
meetings of the Corporation.
The Board has determined that a majority of the members of the Board of
Directors are "independent" as defined under applicable federal securities
laws and listing standards of the American Stock Exchange. The
"independent" directors are Mr. Barber, Mr. Clark, Mr. McLean, Mr. Moss, Mr.
Reeves, Mr. Slocumb, Mr. Wear, Mr. Wells, and Mr. Williams. The independent
directors met in executive session without the non-independent directors and
management one time in 2006.
Committees of the Board of Directors
The Board of Directors has established three committees, a Personnel
Committee, an Audit Committee, and a Nominating Committee.
Personnel Committee
The Personnel Committee is composed of three members, Cecil Barber, Michael
J. McLean and Richard L. Moss. The Board of Directors has determined that
all of these directors are "independent" under applicable federal securities
laws and standards of the American Stock Exchange. The Personnel Committee
held six meetings during 2006.
The Personnel Committee is responsible for establishing and administering
the policies that govern the compensation arrangements for executive
officers and other employees. The Personnel Committee is also responsible
for oversight and administration of certain executive and employee
compensation and benefit plans, including the Pension Retirement Plan (the
"Pension Plan"), the Supplemental Retirement Plan (the "Supplemental Plan"),
the 401(K) Plan, the Director's and Executive Officer's Stock Purchase Plan
(the "Stock Purchase Plan") and the Key Individual Stock Option Plan (the
"Option Plan"). It periodically reviews and makes recommendations to the
Board with respect to Directors Compensation.
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Audit Committee
The Audit Committee presently consists of six directors, Michael J. McLean,
Richard L. Moss, Cecil H. Barber, Roy H. Reeves, C. Broughton Williams, and
Johnny R. Slocumb. The Audit Committee held 12 meetings during 2006.
The Board of Directors has determined that all of the members of the Audit
Committee are "independent" under applicable federal securities laws and
listing standards of the American Stock Exchange and have sufficient
knowledge in financial and accounting matters to serve on the Audit
Committee, including the ability to read and understand fundamental
financial statements. None of the members of the Audit Committee qualifies
as "financially sophisticated" under the listing standards of the American
Stock Exchange or an "audit committee financial expert" under the federal
securities laws. A recently appointed Director, Mr. Lane Wear, CPA if
elected to the Board in May will be appointed to the Audit Committee and can
qualify as an "audit committee financial expert".
The Audit Committee is responsible for recommending the selection of
independent auditors; meeting with the independent auditors to review the
scope and results of the audit; reviewing with management and the internal
auditor the systems of internal control and the internal audit reports; and
ascertaining that any and all operational deficiencies are satisfactorily
corrected. The Board of Directors has adopted a written Audit Committee
Charter that is annually reviewed and assessed. A copy of the Charter is
attached as Exhibit A.
Nominating Committee
The Board of Directors has a standing Nominating Committee that presently
consists of three members, C. Broughton Williams, Cecil Barber, and Richard
L. Moss. The Nominating Committee nominates all directors and presents a
slate of nominees for the Board of Directors to be approved by a majority of
independent directors. The Board has determined that all of the members of
the Nominating Committee are "independent" under applicable federal
securities laws and listing standards of the American Stock Exchange.
Director Nominations
A candidate for the Board of Directors must meet the eligibility
requirements set forth in the Corporation's bylaws and in any applicable
Board or committee resolutions. The Nominating Committee considers
qualifications and characteristics that it deems appropriate from time to
time when selecting individuals to be nominated for election to the Board of
Directors. These qualifications and characteristics may include, without
limitation, independence, integrity, business experience, education,
accounting and financial expertise, age, diversity, reputation, civic and
community relationships, and knowledge and experience in matters impacting
financial institutions. In addition, prior to nominating an existing
director for re-election to the Board of Directors, the Nominating Committee
will consider and review an existing director's Board and committee
attendance, performance, and length of Board service.
The Nominating committee will consider in accordance with the analysis
described above all director nominees properly recommended by shareholders.
Any shareholder wishing to recommend a candidate for consideration as a
possible director nominee for election at an upcoming meeting of
shareholders must provide written notice to Mr. George R. Kirkland,
Southwest Georgia Financial Corporation, P. O. Box 3488, Moultrie, GA 31776-
3488 pursuant to the deadlines described in "Shareholders Proposals and
Director Nominations."
Code of Ethical Conduct
The Corporation has adopted a Code of Ethics Policies and Procedures
designed to promote ethical conduct by all of the Corporation's directors,
officers, and employees. The Code of Ethics Policies and Procedures
includes a Code of Ethical Conduct for the Chief Executive Officer and
Senior Financial Officers which sets forth standards applicable to all
officers, directors, and employees but has provisions specifically
applicable to the Chief Executive Officer and the principal financial
officer. The Code of Ethics Policies and Procedures complies with the
federal securities law requirement that issuers have a code of ethics
applicable to the chief executive officer and principal financial officer,
and the American Stock Exchange requirement that listed companies have a
code of ethical conduct applicable to all directors, officers, and
employees. The Corporation's Code of Ethical Conduct applicable to the
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Chief Executive Officer and the principal financial officer was filed as
Exhibit 14 to its Annual Report on Form 10-K for the year ended December 31,
2003.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Overview and Philosophy
The objective of the Corporation's compensation program is to offer a
compensation package that will attract, motivate, reward, and retain high-
performing and dedicated employees. The package must balance competitive
need and individual performance with affordability. The package must also
provide financial security for employees and dependents upon retirement,
disability, or death. The compensation program is designed to reward
performance, longevity, professional growth, initiative, and increased
responsibility.
Administration
The Personnel Committee of the Corporation reviews, evaluates, and approves
compensation and benefits for all officers and also reviews general policy
matters relating to compensation and benefits of the other employees,
including DeWitt Drew, who is President and Chief Executive Officer of the
Corporation and the Bank, J. David Dyer, Jr., who is Senior Vice President
of the Corporation and the Bank and President and Chief Executive Officer of
Empire Financial Services, Inc., a subsidiary of the Bank, John J. Cole,
Jr., who is Executive Vice President of the Corporation and the Bank and
George R. Kirkland, who is Senior Vice President and Treasurer of the
Corporation and of the Bank, who are referred to herein as the "Named
Executive Officers". The executive officers recommend to the Personnel
Committee compensation for other employees based on comparison to
compensation data received from banking related compensation and benefits
surveys.
All remuneration paid to the Corporation's officers during the year ended
December 31, 2006, was paid by subsidiaries of the Corporation.
Elements of Compensation
Annual Base Salary and Cash Bonus. Executive officer annual base salary and
bonus awards are determined by the Personnel Committee with reference to
Corporation-wide, divisional, and individual performance for the previous
fiscal year based on a wide range of measures, which include comparisons
with competitors' performance and internal goals set before the start of
each fiscal year and by comparison to the level of executive officers'
compensation of other financial institutions of comparable size in
comparable markets. No relative weights are assigned for these factors.
The Personnel Committee believes that the most meaningful performance and
pay equity comparisons are made against companies of similar size and in
comparable markets. In keeping with this belief, the Committee consistently
participates in and uses compensation and benefit surveys from the Georgia
Bankers Association and the Bank Administration Institute and measures the
Corporation's performance with peer comparison from the Federal Financial
Institution Examining Council Peer Group Report. The 2006 earnings
performance for the Corporation, measured by return on assets, placed it in
the 45th percentile when compared to other similar one-bank holding
companies in the peer group. After adjusting ROA based on non-recurring
events listed below, would place the Corporation in approximately the top
80th percentile.
During 2006, the Personnel Committee set annual salary and bonus for the
Named Executive Officers in 2006 based primarily on Corporation-wide
performance. The Personnel Committee believes the returns on assets ("ROA")
and equity ("ROE") are the most appropriate measures for evaluating this
performance.
In 2006, the Corporation's net income was 30% lower than the previous year's
net income, and the ROA was 1.00% and ROE was 8.01%, compared to ROA of
1.44% and ROE of 10.93% in 2005. While net income, ROA and ROE were less
than the 2006 performance goals of $4.2 million in net income, ROA of 1.35%
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and ROE of 10.17%, certain non-recurring events occurred in 2006 that
affected the corporate net earnings causing it to not meet its 2006
performance goals. The first event was a tender offer to purchase from
shareholders 575,000 shares of corporate common stock that cost the
Corporation approximately $890,000. Another non-recurring event included
funding the defined pension plan with an additional $690,000 required
minimum contribution in connection with freezing that plan. Also, the
Corporation's mortgage servicing subsidiary had some large payoffs of
servicing loans which accelerated the amortization of the mortgage servicing
assets by $429,000. If these non-recurring events had not occurred in 2006,
the Corporation's net income would have been approximately $4.3 million with
a ROA of 1.41% and a ROE of 10.63%.
In view of the Corporation's 2006 performance and the non-recurring events,
the Named Executive Officer's received an increase in their annual salary of
between 4 and 6% and received bonuses equal to 0% to 30% of base salary as
compared to raises of 4 to 25% and bonuses of 0% to 23% of base salary in
2005. The Named Executive Officers' base salaries and annual bonuses for
2006 are listed in "Executive Compensation - Summary Compensation Table".
Equity Incentive Awards. The Personnel Committee believes that equity based
incentive compensation enhances the ability to competitively search, hire,
and retain a strong competent executive staff, as well as to encourage
corporate ownership among employees. The Corporation established the Option
Plan on March 19, 1997 to provide for the issuance of stock options to key
employees and directors of the Corporation. A maximum of 196,680 shares of
common stock have been authorized for issuance with respect to options
granted under the Option Plan. The Option Plan is administered by the
Personnel Committee of the Board of Directors and all stock option grants
are approved by the Board of Directors.
The Corporation granted 4,500 incentive options under the Option Plan in
fiscal year 2006 and there were no non-qualified options granted. None of
these options were granted to the Named Executive Officers.
Non-Equity Incentive Awards. The Corporation has entered into an employment
agreement with J. David Dyer, Jr., the Chief Executive Officer of the
Corporation's commercial mortgage loan subsidiary, Empire Financial
Services, Inc. ("Empire"). Under that agreement, Mr. Dyer is eligible to
earn incentive compensation equal to 15% of Empire's total net income before
taxes and staff bonuses in excess of $500,000 for each year. Mr. Dyer's
2006 non-equity incentive compensation is listed in "Executive Compensation
- Summary Compensation Table".
Retirement and Other Benefits
The Corporation offers retirement and other benefits that the Personnel
Committee believes provides employees with a highly competitive package of
benefits. The Corporation believes these forms of compensation enhance the
ability to competitively search, hire, and retain a strong competent
executive staff, and that the 401(k) Plan, ESOP and Stock Purchase Plan
encourage corporate ownership among employees.
Pension Plan. The Corporation's Pension Plan is a qualified noncontributory
defined benefit pension plan and is described in "Executive Compensation -
Pension Benefits". During the fourth quarter of 2006, the Corporation froze
the Pension Plan.
401(k) Plan. In place of the frozen Pension Plan, the Corporation adopted
the Southwest Georgia Bank 401(k) Plan effective January 1, 2007 (the
"401(k) Plan") for the benefit of most all of the employees who attain the
age of 21 years and complete a year of service. The 401(k) Plan is a
qualified defined contribution plan as provided for under Section 401(k) of
the Internal Revenue Code. This 401(k) Plan is a "safe-harbor" plan meaning
that the Corporation will match contributions dollar for dollar for the
first 4% of compensation that each participant defers into the 401(k) Plan
each payroll period. The 401(k) Plan allows for a discretionary match in
excess of 4% and for participants to defer up to 80% of their compensations,
subject to the maximum deferrals permitted under the Internal Revenue Code.
Employee Stock Ownership Plan. The Corporation has a qualified,
nondiscriminatory Employee Stock Ownership Plan ("ESOP") administered by an
ESOP Committee, and its assets are held and managed by a trustee. This ESOP
is designed to motivate and reward employees as corporate owners and to
provide to eligible employees additional retirement benefits. The ESOP
covers most all employees who have at least two years of service.
Contributions to the ESOP are at the discretion of the Board of Directors
and are allocated to participants who are actively employed on the last day
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of the plan year and who have a year of service for such year (as defined in
the ESOP). The annual amount of the contribution is determined by taking
into consideration the prevailing financial conditions and fiscal
requirements of the Corporation. The total annual contribution is limited
by the amount that the Corporation can deduct for federal income tax
purposes. Each eligible participant's contribution is based on a percentage
of annual compensation. This form of compensation plan supports the
Corporation's overall mission statement to attain motivated and dedicated
employees.
Supplemental Retirement Plan. The Corporation's Supplemental Plan is a non-
qualified retirement plan which provides benefits for any excess annual
retirement benefits which can not be paid under the Pension Plan and ESOP,
and is described in "Executive Compensation - Pension Benefits". There was
no impact to the ESOP part of this plan as a result of the frozen Pension
Plan.
Stock Purchase Plan. The Corporation has adopted the Stock Purchase Plan
for executive officers and directors of the Corporation. The plan provides
that participants may elect to contribute up to $500 monthly of salary or
directors' fees and receive corporate common stock with an aggregate value
of 1.5 times the contribution. The maximum level of monthly contribution is
set by the Board of Directors.
In 2006, the Corporation contributed $3,000 to the Stock Purchase Plan
accounts of Mr. Drew, Mr. Dyer and Mr. Kirkland and $1,500 to the Stock
Purchase Plan account of Mr. Cole.
Nonqualified Deferred Compensation. Mr. Dyer, under his employee agreement,
is provided deferred compensation as described in "Executive Compensation -
Nonqualified Deferred Compensation".
Insurance. The Corporation provides to all employees group term life
insurance benefit of 2.5 times their annual base salary not to exceed
$350,000. The Corporation paid premiums of $552, $1,032, $1,032 and $790,
respectively, for Mr. Drew, Mr. Dyer, Mr. Cole and Mr. Kirkland during 2006.
The excess premium paid over $50,000 of life insurance benefit is non-cash
compensation to the employee. Mr. Drew was the only management officer with
bank owned life insurance compensation of $700 during 2006.
Employment Contracts and Change in Control Arrangements
DeWitt Drew. On October 1, 2003, the Corporation and the Bank entered into
an employment agreement with DeWitt Drew. Under the employment agreement,
Mr. Drew serves as the President and Chief Executive Officer of the
Corporation and the Bank and is entitled to receive an annual base salary
(currently $185,000) which is subject to normal annual increases as shall be
determined by the Board of Directors of the Corporation from time to time.
The employment agreement commenced on October 1, 2003, and is for a rolling
five-year term that is extended for an additional day each day of his
employment. In addition to the base salary, Mr. Drew is eligible to earn
incentive or bonus compensation in accordance with such bonus plan as may be
established by the Board of Directors of the Corporation for the fiscal
year. Mr. Drew receives benefits of the kind customarily granted to other
executives of the Bank and the Corporation, including participation in the
Corporation's benefit plans. The Bank also pays the premiums on a $1
million split dollar life insurance policy for Mr. Drew. If Mr. Drew's
employment terminates for any reason, he agrees not to provide banking
services or solicit certain bank customers within certain geographical
limits for a period of two years after such termination.
If Mr. Drew is terminated for Cause (as defined in the Agreement) or if he
voluntarily terminates his employment, the Bank and the Corporation will
have no further financial obligation to him. The stock options that are
vested as of the termination date will be exercisable for 90 days and then
terminate. If Mr. Drew is terminated without cause or by Mr. Drew for Good
Reason (as defined) after a Change in Control (as defined), he is entitled
to the salary and medical benefits provided to him under the agreement for
the remainder of the then current term, subject to the terms and conditions
of the agreement. Any options he has been granted as of the termination
date will immediately vest and expire upon their normal expiration date in
the case of a change in control or one year in case of another termination
without cause. If Mr. Drew is terminated due to a disability, he shall
continue to receive his salary for the remainder of the then current term
and receive medical benefits until the earlier of the end of the then
current term or he is entitled to disability coverage. If Mr. Drew's
employment terminates because of death or disability, his options will vest
and will expire upon their normal expiration date. In the event of any such
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termination at December 31, 2006, Mr. Drew would have been entitled to
$946,754 which is the sum of his present salary and medical benefits for the
five-year term.
J. David Dyer. As of January 1, 2002, the Banks' subsidiary, Empire entered
into an employment agreement with J. David Dyer, Jr. that was amended on
November 15, 2006. Under the employment agreement, Mr. Dyer serves as
President and Chief Executive Officer of Empire and is entitled to receive
an annual base salary (currently $170,000) subject to normal annual
increases as determined by the Board of Directors from time to time. The
term of the employment agreement expires on September 30, 2007. The term
may be extended for an additional six month period ending March 31, 2008.
In addition to the base salary, Mr. Dyer is eligible to earn incentive or
bonus compensation. Unless otherwise agreed upon by the Board and Mr. Dyer,
his bonus for each year will be equal to 15% of Empire's total net income
before taxes and staff bonuses in excess of $500,000 for each year.
Additionally, for a period of two years after either the expiration of the
term or the date Mr. Dyer ceases to be employed by Empire, Mr. Dyer will not
engage in competitive activities within a certain geographical area.
Also, Empire maintains a deferred compensation account on Mr. Dyer's behalf
that was credited annually with $200,000 of deferred compensation on
December 31, 2002-2006. Monthly installment payments of $12,500 of the
deferred compensation commence six months after the date of Mr. Dyer's
termination and continue each month thereafter until the deferred
compensation account is exhausted.
John J. Cole, Jr. On February 28, 2006, the Corporation and the Bank
entered into an employment agreement with John Cole. Under the employment
agreement, Mr. Cole serves as an Executive Vice President of the Corporation
and the Bank and is entitled to receive an annual base salary (currently
$109,000) which is subject to normal annual increases as shall be determined
by the Board of Directors of the Corporation from time to time. The
employment agreement commenced on February 28, 2006, and is for a five-year
term. In addition to the base salary, Mr. Cole is eligible to earn
incentive or bonus compensation in accordance with such bonus plan as may be
established by the Board of Directors of the Corporation for the fiscal
year. Mr. Cole receives benefits of the kind customarily granted to other
executives of the Bank and the Corporation, including participation in the
pension benefit plans, disability insurance, medical insurance, and life
insurance pursuant to the agreement. If Mr. Cole's employment terminates
for any reason, he agrees not to provide banking services or solicit certain
bank customers within certain geographical limits for a period of two years
after such termination.
If Mr. Cole is terminated for Cause (as defined in the Agreement) or if he
voluntarily terminates his employment, the Bank and the Corporation will
have no further financial obligation to him. The stock options that are
vested as of the termination date will be exercisable for 90 days and then
terminate. If Mr. Cole is terminated without Cause or by Mr. Cole for Good
Reason (as defined) after a Change in Control (as defined), he is entitled
to the salary and medical benefits provided to him under the agreement for
the remainder of the then current term, subject to the terms and conditions
of the agreement. Any options he has been granted as of the termination
date will immediately vest and be exercisable for one year and then
terminate. If Mr. Cole is terminated due to a disability, he shall continue
to receive his salary for the remainder of the then current term and receive
medical benefits until the earlier of the end of the then current term or he
is entitled to disability coverage. If Mr. Cole's employment terminates
because of death or disability, his options will vest and will expire upon
their normal expiration date. In the event of any such termination at
December 31, 2006, Mr. Cole would have been entitled to $454,530 which is
the sum of his present salary for the remaining 4.2 year-term.
George R. Kirkland. On February 28, 2006, the Corporation and the Bank
entered into an employment agreement with George R. Kirkland. Under the
employment agreement, Mr. Kirkland serves as a Senior Vice President of the
Corporation and the Bank and is entitled to receive an annual base salary
(currently $85,000) which is subject to normal annual increases as shall be
determined by the Board of Directors of the Corporation from time to time.
The employment agreement commenced on February 28, 2006, and is for a five-
year term. In addition to the base salary, Mr. Kirkland is eligible to earn
incentive or bonus compensation in accordance with such bonus plan as may be
established by the Board of Directors of the Corporation for the fiscal
year. Mr. Kirkland receives benefits of the kind customarily granted to
other executives of the Bank and the Corporation, including participation in
the pension benefit plans, disability insurance, medical insurance, and life
insurance pursuant to the agreement. If Mr. Kirkland's employment
terminates for any reason, he agrees not to provide banking services or
solicit certain bank customers within certain geographical limits for a
period of two years after such termination.
-11-
If Mr. Kirkland is terminated for Cause (as defined in the Agreement) or if
he voluntarily terminates his employment, the Bank and the Corporation will
have no further financial obligation to him. The stock options that are
vested as of the termination date will be exercisable for 90 days and then
terminate. If Mr. Kirkland is terminated without cause or by Mr. Kirkland
for Good Reason (as defined) after a Change in Control (as defined), he is
entitled to the salary and medical benefits provided to him under the
agreement for the remainder of the then current term, subject to the terms
and conditions of the agreement. Any options he has been granted as of the
termination date will immediately vest and be exercisable for one year and
then terminate. If Mr. Kirkland is terminated due to a disability, he shall
continue to receive his salary for the remainder of the then current term
and receive medical benefits until the earlier of the end of the then
current term or he is entitled to disability coverage. If Mr. Kirkland's
employment terminates because of death or disability, his options will vest
and will expire upon their normal expiration date. In the event of any such
termination at December 31, 2006, Mr. Kirkland would have been entitled to
$354,450 which is the sum of his present salary for the remaining 4.2 year-
term.
Summary Compensation Table
The following table sets forth the annual and other compensation paid or
accrued in 2006 for the Named Executive Officers. No other executive
officers of the Corporation are required to be included in table and/or were
paid $100,000 or more in total compensation during 2006.
Summary Compensation Table
Annual Compensation
Change in
Pension
Value and
Non-Equity Nonqualified
Incentive Deferred
Name and Principal Base Plan Compensation All Other
Position During 2006 Year Salary Bonus Compensation Earnings Compensation(1) Total
DeWitt Drew 2006 $175,000 $52,500 $ 0 $ 24,330 $11,752 (2) $263,582
President and CEO of the
Corporation and the Bank
J. David Dyer, Jr. 2006 $165,000 $ 0 $290,598 $200,000 $ 4,032 $659,630
Senior Vice President of the
Corporation and the Bank
John J. Cole, Jr. 2006 $104,400 $12,750 $ 0 $ 24,662 $ 2,532 $144,344
Executive Vice President of
the Corporation and the Bank
George R. Kirkland 2006 $ 81,000 $ 7,000 $ 0 $ 14,885 $ 3,790 $106,675
Senior Vice President and
Treasurer of the Corporation
and the Bank
(1) Amounts shown include stock purchase plan contributions, group term
life insurance, and bank owned life insurance benefits.
(2) Includes director's fees for 2006 of $7,500.
-12-
Equity-Based Compensation
As discussed in "Executive Compensation - Compensation Discussion and
Analysis", the Corporation has established the Option Plan to provide for
the grant of stock options to officers of the Corporation. The plan is
administered by the Personnel Committee of the Board of Directors. No stock
options or stock awards were granted to the Named Executive Officers during
2006.
The following table provides information as of December 31, 2006, about
outstanding equity awards under the Corporation's Key Individual Stock
Option Plan. The Corporation has never granted any other type of stock
awards under the Option Plan or otherwise.
Outstanding Equity Awards at Fiscal Year-End Table
Option Awards
Equity Incentive Plan
Number of Securities Number of Securities Awards: Number of
Underlying Underlying Securities Underlying Option Option
Unexercised Options Unexercised Options Unexercised Unearned Exercise Expiration
Name (# exercisable) (# unexercisable) Options (#) Price ($) Date
DeWitt Drew 13,200 0 0 $13.07 10/20/2009
J. David Dyer, Jr. 0 0 0 0.00
John J. Cole, Jr. 3,300 0 0 19.31 4/29/2008
George R. Kirkland 3,300 0 0 19.31 4/29/2008
(1) Each stock option is exercisable for one share of the Corporation's
common stock. Stock options vest on the date of grant. The expiration
date of each option is 10 years after the date of grant.
The following table sets forth the number of shares acquired and the dollar
amounts realized by the Named Executive Officers during 2006 on the exercise
of stock options. No other stock awards were exercised or vested.
Option Exercises and Stock Vested Table
Option Awards
Number of Shares
Acquired on Value Realized
Name Exercise(#) on Exercise($)
DeWitt Drew 0 $ 0
J. David Dyer, Jr. 2,750 17,250
John J. Cole, Jr. 0 0
George R. Kirkland 0 0
(1) The value realized represents the difference between the closing price of
the Corporation's common stock on the date of exercise and the option
exercise price multiplied by the number of options exercise.
Pension Benefits
The Corporation maintains the Pension Plan was frozen effective December 31,
2006, due to the increasing costs to keep it funded. The cost of this plan
which represents the current and future benefits of current and retired
employees has been funded by the Corporation. These benefits accrue based
upon actuarial determinations employing the aggregate funding method. The
compensation covered by the Pension Plan has included total annual
compensation including bonuses and overtime pay. The employee benefits
earned through December 31, 2006, are preserved and the funds will be
maintained in a trust account to pay future benefits through retirement, but
new benefits will not accrue under the Pension Plan. The portion of
compensation which is considered covered compensation under the Pension Plan
equals the annual salary and bonus amounts indicated in "Executive
Compensation - Summary Compensation Table".
-13-
All executive officers who exceed the maximum covered compensation limited
by federal law of $220,000 are covered under the Corporation's Supplemental
Retirement Plan. Any excess annual retirement benefit which could not be
paid under the Pension Plan and ESOP because of the above federal limitation
will be payable under the Supplemental Plan. During 2006, only DeWitt Drew,
the Chief Executive Officer qualified for this Plan.
Generally, when a participant retires, both the Pension Plan and the
Supplemental Plan will pay to the participant benefits in the form of equal
monthly installments for such participant's life or could elect to have his
retirement benefits payable under one of several optional forms of payment.
The benefits are based on compensation and years of service and are taxable
to the participant. The normal retirement age defined in the plan is 65.
The following table sets forth the estimated annual benefits payable upon
retirement of the Named Executive Officers under the Pension Plan and
Supplemental Plan in the specified compensation and years of service
classifications indicated below. The disclosed amount for each Named
Executive Officer is the aggregate change in the actuarial present value of
the total benefits from all benefit plans.
Pension Benefits Table
Number of Years Present Value of Payments During
Credited Service Accumulated Benefit Last Fiscal Year
Name Plan Name (#) ($) ($)
DeWitt Drew Pension Plan and
Supplemental Plan 7 $282,015 $0
John J. Cole, Jr. Pension Plan 31 410,572 0
George R. Kirkland Pension Plan 15 274,923 0
Nonqualified Deferred Compensation
Mr. Dyer has been provided $1 million of deferred compensation under his
employment agreement as described in "Executive Compensation - Compensation
Discussion and Analysis". The following table discloses the final payment
of such deferred compensation paid, which was paid in 2006. None of the
other Named Executive Officers have been provided any nonqualified deferred
compensation.
Nonqualified Deferred Compensation Table
Executive Registrant Aggregate Aggregate
Contributions in Contributions in Earnings in Balance
Last Financial Last Financial Last Financial Aggregate Last Financial
Year Year Year Withdrawals Year
Name ($) ($) ($) ($) ($)
J. David Dyer, Jr. $0 $200,000 $78,106 $0 $1,247,580
Director Compensation
All of the members of the Board of Directors of the Corporation also serve
on the Bank's Board of Directors. Each Board member is compensated for his
board services by the Bank. The annual director fees for the Chairman, Vice
Chairman, and each director are $10,800, $7,200, and $3,600, respectively.
In addition, directors are paid $300 for each Board meeting attended and
$125 for each committee meeting attended (committee meeting attendance fees
are paid only to outside directors). A retired director emeritus at age 70
with at least seven year of directorship service is compensated $3,600 per
year. Directors may contribute their directors' fees to the Corporation's
Stock Purchase Plan and receive common stock of the Corporation with an
aggregate value of 1.5 times their contribution.
The Corporation has a voluntary deferred compensation plan for the Board of
Directors administered by an insurance company. The plan stipulates that if
a director participates in the Plan for four years, the Corporation will pay
-14-
the Director future monthly income for 10 years beginning at normal
retirement age, and the Corporation will make specified monthly payments to
the Director's beneficiaries in the event of his or her death prior to the
completion of such payments. The plan is funded by life insurance policies
with the Corporation as the named beneficiary. This plan is closed to new
director enrollment and participation. The current participants are John H.
Clark and Richard L. Moss.
The following table summarizes 2006 non-employee director compensation.
There were no option or stock awards granted to directors for 2006 and
directors do not participate in the Pension Plan or receive any non-
qualified deferred compensation. Mr. Drew was the only employee on the
Board of Directors for 2006 and his compensation for that service is
described in "Executive Compensation - Summary Compensation Table". The
Corporation believes that the total level of compensation for directors is
reasonably comparable with other small public traded community bank holding
companies' directors pay.
Director Compensation Table
Director All Other
Name of Director (1) Fees Earned Compensation Total
Cecil H. Barber $16,975 $ 3,000 $ 19,975
John H. Clark 11,650 198,127(2) 209,777
Michael J. McLean 19,275 3,000 22,275
Richard L. Moss 17,200 3,000 20,200
Roy H. Reeves 13,925 3,000 16,925
Johnny R. Slocumb 14,225 3,000 17,225
Violet K. Weaver 7,150 1,250 8,400
C. Broughton Williams 15,500 2,400 17,900
(1) Compensation for Mr. Cole, Mr. Wear and Mr. Wells is not included in this
disclosure of 2006 director compensation because each such director was
appointed in 2007. Compensation for Ms. Weaver is only provided through May
22, 2006 when she retired from the Board and did not stand for reelection at
the 2006 Annual Meeting.
(2) Includes for Mr. Clark, a retired executive officer of the Corporation,
annual retirement payments of $109,994 from the Pension and Supplemental
Plans, annual payments of $25,133 from the director deferred compensation
plan, annual payments of $60,000 for a consulting agreement, and $3,000
contributions to the Stock Purchase Plan.
Compensation Committee Interlocks and Insider Participation
The members who served during 2006 on the Personnel Committee, which
recommends compensation levels for the Corporation's executives and other
employees, were Michael J. McLean, Cecil Barber, and Richard L. Moss. No
member of the Personnel Committee has served as an officer or employee of
the Corporation at any time or engaged in any transaction that would be
required to be disclosed under "Certain Relationships and Related
Transactions".
None of the Corporation's executive officers serve as a director or member
of the compensation committee of any other entity that has an executive
officer serving as a member of the Corporation's Board of Directors or
Personnel Committee.
Committee Report on Executive Compensation
The Personnel Committee has reviewed and discussed the "Compensation
Discussion and Analysis" included with this proxy statement with management.
Based on such review and discussions, the Personnel Committee recommended to
the Board of Directors that it be included herein.
Cecil Barber
Michael J. McLean
Richard L. Moss
-15-
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Corporation has a written related person transaction policy that governs
the review, approval land ratification of any transaction that would be
required to be disclosed by the Corporation pursuant to Item 404 of
Regulation S-K under the Securities Act of 1933. The Board of Directors of
the Corporation or the Audit Committee must approve all such transactions
under the policy.
On June 23, 2006, Mr. John H. Clark, director, sold to the Employee Stock
Ownership Plan 10,000 shares of common stock for $21.40 per share and also,
on February 1, 2007, both Mr. Clark and his wife sold to the Corporation
25,000 shares of common stock for $19.435 per share in a private stock
repurchase transaction.
The Bank from time to time has had, and expects to have in the future,
banking transactions in the ordinary course of business with officers and
directors of the Corporation and other related persons, on substantially the
same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with unaffiliated third parties. Such
transactions have not involved more than the normal risk of collectibility
or presented other unfavorable features. At December 31, 2006, loans to
officers, directors, and principal shareholders of the Corporation and the
Bank and to other related persons amounted to $2,647,000. Also, during
2006, directors and executive officers had approximately $2,017,000 in
deposits with the Bank.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee operates pursuant to an Audit Committee Charter that was
adopted by the Board on May 24, 2000 and revised July 23, 2003. The
Corporation's management is responsible for its internal accounting controls
and the financial reporting process. The Corporation's independent
accountants, Thigpen, Jones, Seaton & Co., P.C. ("Thigpen"), are responsible
for performing an audit of the Corporation's consolidated financial
statements in accordance with auditing standards of the Public Company
Accounting Oversight Board and for expressing an opinion as to their
conformity with generally accepted accounting principals. The Audit
Committee's responsibility is to monitor and oversee these processes.
The Audit Committee was involved with the selection process and the approval
of Thigpen as the Corporation's principal independent auditors. Also, the
Audit Committee has approved Thigpen to provide some non-audit services
related to improving the Corporation's internal audit program and performing
an information technology audit.
In keeping with its responsibilities, the Audit Committee has reviewed and
discussed the Corporation's audited consolidated financial statements with
management and the independent accountants. The Audit Committee has
discussed with the Corporation's independent accountants the matters
required to be discussed by Statement on Auditing Standards No. 61,
"Communications with Audit Committee," as currently in effect. In addition,
the Audit Committee has received the written disclosures from the
independent accountants required by Independence Standards Board Standard
No.1, "Independence Discussions with Audit Committees," and has discussed
with the independent accountants their independence. The Audit Committee
has considered whether the provision of non-audit services by the
independent auditors is compatible with maintaining their independence.
The Audit Committee also discussed with management and the auditors the
quality and adequacy of the Corporation's internal controls over financial
reporting and the internal audit function's organization, responsibilities,
budget, and staffing.
Members of the Audit Committee rely without independent verification on the
information provided to them and on the representations made by management
and the independent accountants. Accordingly, the Audit Committee's
oversight does not provide an independent basis to determine that management
has maintained appropriate accounting and financial reporting principles or
appropriate internal controls and procedures designed to assure compliance
with accounting standards and applicable laws and regulations. Furthermore,
the Audit Committee's considerations and discussions referred to above do
not assure that the audit of the Corporation's financial statements has been
carried out in accordance with standards of the Public Company Accounting
Oversight Board, that the financial statements are presented in accordance
with generally accepted accounting principals or that the Corporation's
auditors are in fact "independent".
-16-
Based on the reports and discussions described in this report, and subject
to the limitations on the role and responsibilities of the committee
referred to above and in the Audit Committee Charter, the committee
recommended to the Board of Directors that the audited consolidated
financial statements of the Corporation be included in the Annual Report on
Form 10-K for the year ending December 31, 2006, for filing with the
Securities and Exchange Commission.
This report is respectfully submitted by the Audit Committee of the Board of
Directors.
Cecil H. Barber Michael J. McLean Richard L. Moss
Roy H. Reeves Johnny R. Slocumb C. Broughton Williams
INFORMATION CONCERNING THE COMPANY'S ACCOUNTANTS
Thigpen was the principal independent public accountant for the Corporation
during the years ended December 31, 2006 and 2005. Representatives of
Thigpen are expected to be present at the Annual Meeting and will have the
opportunity to make a statement if they desire to do so and to respond to
appropriate questions. The Corporation anticipates that Thigpen will be the
Corporation's accountants for the current fiscal year.
Audit Fees
The aggregate fees billed for professional services by Thigpen for the audit
of the Corporation and Empire's annual financial statements and reviews of
quarterly financial statements for 2006 and 2005 were $61,000 and $70,250,
respectfully.
Audit-Related Fees
The aggregate fees billed for professional services by Thigpen for an agreed
upon procedural review of the trust division and of the Bank's loan
portfolio for 2006 and 2005 were $8,250 and $8,000, respectively.
Tax Fees
The aggregate fees billed for professional services by Thigpen for tax
compliance for 2006 and 2005 were $4,850 and $4,450, respectfully.
All Other Fees
The aggregate fees billed for professional services by Thigpen for the
Corporation's pension plan audit and information technology audit in 2006
were $4,750, and $3,500, respectively. In 2005, the services performed and
fees billed for the pension plan audit and information technology audit were
$4,500 and $3,500, respectively.
The Audit Committee approves all audit and non-audit services performed by
the Corporation's independent public accountant.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, as
amended, each executive officer, director and beneficial owner of 10% or
more of the Corporation's Common Stock is required to file certain forms
with the Securities and Exchange Commission ("SEC"). Based solely on its
review of the copies of such reports received by the Corporation, or written
representations from certain reporting persons, the Corporation believes
that during the last fiscal year all Section 16 filing requirements
applicable to its reporting persons were fulfilled with the exception of one
delinquent filing of C. Wallace Sansbury, Executive Vice President. A Form
4 for Mr. Sansbury related to a sale of 248 shares of stock on March 9, 2006
was inadvertently filed late, but was subsequently filed on April 24, 2006.
-17-
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Any proposals of shareholders or recommendations for director nominees
intended to be presented at the Corporation's 2008 Annual Meeting of
Shareholders must be received by December 10, 2007, in order to be eligible
for inclusion in the Corporation's Proxy Statement and Proxy for that
meeting. The Corporation must be notified of any other matter intended to
be presented by a shareholder at the 2008 Annual Meeting no later than
February 24, 2008.
SHAREHOLDER COMMUNICATIONS
The Board of Directors maintains a process for shareholders to communicate
with the Board. Shareholders wishing to communicate with the Board of
Directors should send any communication in writing to Mr. George R.
Kirkland, Southwest Georgia Financial Corporation, P. O. Box 3488, Moultrie,
GA 31776-3488. Any such communication should state the number of shares
beneficially owned by the shareholder making the communication. The
communication will be forwarded to the full Board of Directors or to any
individual director or directors to whom the communication is directed
unless the communication is illegal or otherwise inappropriate.
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
Management of the Corporation knows of no matters other than those stated
above that are to be brought before the meeting. If any other matters
should be presented for consideration and voting, however, it is the
intention of the persons named as proxies in the enclosed Proxy to vote in
accordance with their judgment as to what is in the best interest of the
Corporation.
By order of the Board of Directors,
/s/DeWitt Drew
DeWitt Drew
President and
Chief Executive Officer
April 10, 2007
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Exhibit A
SOUTHWEST GEORGIA FINANCIAL CORPORATION
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
May 24, 2000
Amended July 23, 2003
CHARTER
I. PURPOSE
The primary function of the Audit Committee of Southwest Georgia Financial
Corporation (the "company") is to assist the Board of Directors in
fulfilling its oversight responsibilities by reviewing: the financial
reports and other financial information provided by the company to any
governmental body or the public; the company's systems of internal controls
regarding finance, accounting, legal compliance and ethics that management
and the Board have established; and the company's auditing, accounting and
financial reporting processes generally. Consistent with this function, the
Audit Committee should encourage continuous improvement of, and should
foster adherence to, the company's policies, procedures and practices at all
levels. The Audit Committee's primary duties and responsibilities are to:
* Serve as an independent and objective party to monitor the company's
financial reporting process and internal control system.
* Review and appraise the audit efforts of the company's external auditors
and internal auditing department.
* Provide an open avenue of communication among the external auditors, senior
management, the internal auditing department, and the Board of Directors.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the company's financial statements and
disclosures are complete and accurate and are in accordance with generally
accepted accounting principles and applicable rules and regulations. These
are the responsibilities of management and the independent auditor.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors, and
free from any relationship that, in the opinion of the Board, would
interfere with the exercise of his or her independent judgment as a member
of the Committee. All members of the Committee shall have a working
familiarity with basic finance and accounting practices.
A director will not be considered "independent" for purposes of serving as a
member of the company's Audit Committee if he or she:
* has been employed by the company or its affiliates in the current or past
three years;
* has accepted any compensation from the company or its affiliates except for
board service, retirement plan benefits, or non-discretionary compensation;
however, Audit Committee members are prohibited from receiving compensation
for consulting or advisory services;
* has an immediate family member who is, or has been in the past three years,
employed by the company or its affiliates as an executive officer; and
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* is an affiliated person of the company or any of its subsidiaries apart
from his or her capacity as a member of the board and any board committee.
The members of the Audit Committee shall be elected by the Board at the annual
organizational meeting of the Board. Unless a Chair is elected by the full
Board, the members of the Committee may designate a Chair by majority vote of
the full Committee membership.
III. MEETINGS
The Audit Committee shall meet monthly. Special meeting may be called by
the Chairman of the Audit Committee or at the request of the external
auditors or the director of internal auditing. The Committee may ask
members of management or others to attend the meetings and provide pertinent
information as necessary.
As part of its job to foster open communication, the Committee should
provide sufficient opportunity to meet with management, the director of the
internal auditing department, and the external auditors in separate
executive sessions to discuss any matters that the Committee or any of these
groups believe should be discussed privately.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties, the Audit Committee shall:
* Review and update this Charter periodically but not less than annually.
* Review the regular internal audit reports to management prepared by the
internal auditing department, any significant findings, regular progress
reports on the agreed upon internal audit program, and any changes to the
scope of the internal audit program.
* Submit the minutes of all meetings of the Audit Committee to, or review the
matters discussed at each committee meeting with, the Board of Directors
including any recommendations the Committee may deem appropriate.
* Review and concur in the appointment, replacement, reassignment, or
dismissal of the director of internal auditing.
* Review the internal audit function of the company including its
independence and the authority of its reporting obligations.
* Review the performance of the external auditors and be directly responsible
for the appointment, compensation, oversight, and termination of the
external auditors when circumstances warrant.
* On an annual basis, review and discuss with the external auditors all
significant relationships they have with the company to determine their
independence.
* Consider and approve, if appropriate, major changes to the company's
auditing and accounting principals and practices as suggested by the
external auditors, management, or the internal auditing department.
* Review the company's annual financial statements, and any interim reports
or other financial information submitted to the SEC or any governmental
body, or the public, including any certification, report, opinion, or review
rendered by the external auditors.
* Prepare a letter for inclusion in the annual report or proxy statement that
describes the Audit Committee's composition and responsibilities and how
they were discharged.
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V. OTHER MATTERS
To further enhance the Audit Committee's effectiveness and to ensure that
the committee is not dependent on management to investigate any matter
brought to its attention within the scope of its duties, the Audit Committee
shall:
* Have the authority to engage independent legal, financial or other advisors
as it may deem necessary to assist in the performance of its duties.
* Have access to "appropriate" funding for the payment of compensation to any
independent accountant engaged for the purpose of rendering or issuing an
audit report or related services and any advisors employed by the Audit
Committee.
Since the Audit Committee is dependent to a degree on the information
provided to it by management and internal and outside auditors, it is
imperative for the committee to cultivate open and effective channels of
information. Accordingly, the Audit Committee shall ensure that
"whistleblower" procedures are in place for the receipt, retention, and
treatment of complaints received by the company regarding accounting,
internal accounting controls, or auditing matters, including procedures for
the confidential, anonymous submission by employees of concerns regarding
questionable accounting or auditing matters.