Southwest Georgia Financial Corporation Reports 7% Earnings Growth for Second Quarter 2018

Southwest Georgia Financial Corporation (the “Company”) (NYSE American: SGB), a full-service community bank holding company, today reported results of operations for the second quarter and six months ended June 30, 2018. Comparisons are to prior-year period unless otherwise noted.

“We are encouraged by our results both in the second quarter and year-to-date as we continued to achieve higher earnings and balance sheet growth. During the recent quarter, we completed the modifications to our deposit offerings, highlighted by the introduction of an interest bearing business checking account. We see this new product as a valuable retention tool and early results have been positive as our customers moved just under $30 million in deposits into that product,” commented DeWitt Drew, President and CEO. “Weather and construction delays on our Tifton location have us behind schedule, but we are working toward a late summer opening.”

Second Quarter and Six-Month Income Highlights

• Net income increased 7% to $1.15 million, or $0.45 per diluted share, from $1.07 million, or $0.42 per diluted share. Net interest income improved 5% to $4.6 million, primarily due to growth in average total loans of $24.2 million. An increase in provision for loan losses of $65 thousand and an increase in other operating expenses partially offset growth in net interest income.
• For the six months ended June 30, 2018, net income was up over 11% to $2.4 million, or $0.94 per diluted share, due mostly to increases in net interest income of 7% and lower effective tax rates in the first half of 2018. Partially offsetting were higher provisions for loan losses, which more than doubled due to continued strong loan growth, increased overhead expenses of $225 thousand, or 15%, and lower noninterest income.

Balance Sheet Trends

• Total assets at June 30, 2018, were $508.2 million, up 8%, or $37.8 million. Total loans grew 7%, or $23.2 million, to $345.9 million, and were funded by a 6% growth in total deposits. Higher levels of liquidity are being held due to the Company’s strong loan pipeline as well as concerns about higher interest rates causing disintermediation.
• Total deposits were up $24.2 million to $415.4 million at June 30, 2018, with a noticeable shift from noninterest-bearing deposits to the new interest bearing business checking account offering.
• Federal Home Loan Bank Advances were up $12.6 million providing further funding for loan growth and liquidity. The average cost of all interest bearing liabilities increased 22 basis points to 0.81%.

Capital Management

• Book value per share grew 4% to $16.47 at June 30, 2018.
• In June 2018, the Company paid a quarterly cash dividend of $0.12 per common share, an increase from $0.11 per common share in March 2018. Southwest Georgia Financial Corporation or its predecessor, Southwest Georgia Bank, has paid cash dividends for 90 consecutive years.

Webcast and Conference Call

The Company will host a conference call and webcast on Tuesday, July 24, 2018 at 1:00 p.m. ET. Management will review the financial and operating results for the second quarter 2018, as well as the Company’s strategy and outlook. A question and answer session will follow the formal discussion.

The conference call can be accessed by calling [phone]. Alternatively, the webcast can be monitored at www.sgb.bank.

A telephonic replay will be available from 4:00 p.m. ET on the day of the teleconference until Tuesday, July 31, 2018. To listen to the archived call, dial [phone] and enter conference ID number 13680878, or access the webcast replay at www.sgb.bank/investor-relations, where a transcript will be posted once available.

About Southwest Georgia Financial Corporation

Southwest Georgia Financial Corporation is a state-chartered bank holding company with approximately $508 million in assets headquartered in Moultrie, Georgia. Its primary subsidiary, Southwest Georgia Bank, offers comprehensive financial services to consumer, business, and government customers. The current banking facilities include the main office located in Colquitt County, branch offices located in Baker County, Worth County and Lowndes County, and a loan production office located in Tift County. In addition to conventional banking services, the Company provides investment planning and management, trust management, and commercial and individual insurance products. Insurance products and advice are provided by Southwest Georgia Insurance Services, which is located in Colquitt County. The Company routinely posts news and other important information on its website. More information on Southwest Georgia Financial Corporation and Southwest Georgia Bank can be found at: www.sgb.bank.

SAFE HARBOR STATEMENT

This news release contains forward-looking statements, as defined by federal securities laws, including statements about the Company’s financial outlook. These statements are based on current expectations and are provided to assist in the understanding of future financial performance. Such performance involves risks and uncertainties that may cause actual results to differ materially from those expressed or implied in any such statements. Important factors that could cause actual results to differ materially from those contemplated today include a change in the Company’s capital structure, new or expanded regulatory requirements, the success of the Company’s growth strategy, customer preferences, the interest rate environment and other factors described in the Company’s filings with the Securities and Exchange Commission, including its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q under the sections entitled “Forward-Looking Statements” and “Risk Factors”. The Company undertakes no obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as otherwise required by law.

Financial tables follow.

SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CONDITION
(Dollars in thousands except per share data)
			(Unaudited)				(Audited)				(Unaudited)
			June 30,				December 31,				June 30,
			2018				2017				2017
ASSETS
Cash and due from banks		$	7,786			$	11,143			$	8,009
Interest-bearing deposits in banks			27,292				22,995				8,086
Certificates of deposit in other banks			1,985				1,985				1,985
Investment securities available for sale			59,281				54,364				58,142
Investment securities held to maturity			41,189				44,591				50,221
Federal Home Loan Bank stock, at cost			2,475				2,438				1,905
Loans, less unearned income and discount			345,852				330,173				322,636
Allowance for loan losses			(3,193	)			(3,044	)			(3,096	)
Net loans			342,659				327,129				319,540
Premises and equipment			13,693				12,250				11,399
Bank properties held for sale			212				212				212
Foreclosed assets, net			38				759				0
Intangible assets			12				20				27
Bank owned life insurance			6,636				6,553				5,423
Other assets			4,895				4,633				5,356
Total assets		$	508,153			$	489,072			$	470,305
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Interest bearing business checking		$	29,315			$	0			$	0
NOW accounts			54,043				25,871				49,290
Money Moneyt			115,022				129,040				101,346
Savings			32,831				30,794				30,054
Certificates of deposit $250,000 and over			22,472				22,662				16,944
Other time accounts			63,449				60,970				60,160
Total interest-bearing deposits			317,132				269,337				257,794
Noninterest-bearing deposits			98,305				127,669				133,435
Total deposits			415,437				397,006				391,229
Other borrowings			19,471				17,971				8,448
Long-term debt			27,557				29,057				26,029
Accounts payable and accrued liabilities			3,754				3,895				4,284
Total liabilities			466,219				447,929				429,990
Shareholders' equity:
Common stock - par value $1; 5,000,000 shares    authorized; 4,293,835 shares issued (*)
			4,294				4,294				4,294
Additional paid-in capital			5,459				31,701				31,701
Retained earnings			34,815				33,021				31,912
Accumulated other comprehensive income			(2,634	)			(1,630	)			(1,472	)
Total			41,934				67,386				66,435
Treasury stock - at cost (**)			0				(26,243	)			(26,120	)
Total shareholders' equity			41,934				41,143				40,315
Total liabilities and shareholders' equity		$	508,153			$	489,072			$	470,305
* Common stock - shares outstanding			2,545,776				2,541,505				2,547,437
** Treasury stock - shares			0				1,752,330				1,746,398

SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED INCOME STATEMENT (unaudited*)
(Dollars in thousands except per share data)
		For the Three Months							For the Six Months
		Ended June 30,							Ended June 30,
Interest income:		2018*			2017*				2018*			2017*
Interest and fees on loans		$	4,472		$	4,041			$	8,765		$	7,826
Interest and dividend on securities available for sale			363			344				693			670
Interest on securities held to maturity			262			309				540			625
Dividends			35			23				68			47
Interest on deposits in banks			148			40				266			90
Interest on certificates of deposit in other banks			12			10				23			11
Total interest income			5,292			4,767				10,355			9,269
Interest expense:
Interest on deposits			481			269				854			541
Interest on federal funds purchased			0			1				0			1
Interest on other borrowings			117			26				233			52
Interest on long-term debt			127			139				252			277
Total interest expense			725			435				1,339			871
Net interest income			4,567			4,332				9,016			8,398
Provision for loan losses			140			75				356			150
Net interest income after provision for losses on loans			4,427			4,257				8,660			8,248
Noninterest income:
Service charges on deposit accounts			266			257				491			527
Income from trust services			63			55				122			109
Income from retail brokerage services			97			108				185			197
Income from insurance services			417			378				805			811
Income from mortgage banking services			1			66				1			139
Net gain (loss) on the sale or disposition of assets			7			(10	)			0			(10	)
Net gain on the sale of securities			0			43				0			167
Other income			209			203				450			444
Total noninterest income			1,060			1,100				2,054			2,384
Noninterest expense:
Salary and employee benefits			2,388			2,320				4,729			4,618
Occupancy expense			295			276				584			555
Equipment expense			187			212				377			418
Data processing expense			351			384				705			771
Amortization of intangible assets			4			4				8			8
Other operating expense			907			772				1,724			1,499
Total noninterest expense			4,132			3,968				8,127			7,869
Income before income tax expense			1,355			1,389				2,587			2,763
Provision for income taxes			207			315				207			624
Net income		$	1,148		$	1,074			$	2,380		$	2,139
Net income per share, basic		$	0.45		$	0.42			$	0.94		$	0.84
Net income per share, diluted		$	0.45		$	0.42			$	0.94		$	0.84
Dividends paid per share		$	0.12		$	0.11			$	0.23		$	0.22
Basic weighted average shares outstanding			2,545,776			2,547,437				2,545,351			2,547,437
Diluted weighted average shares outstanding			2,545,776			2,547,437				2,545,351			2,547,437

SOUTHWEST GEORGIA FINANCIAL CORPORATION
Financial Highlights
(Dollars in thousands except per share data)
At June 30						2018										2017
Assets						$	508,153									$	470,305
Loans, less unearned income & discount						$	345,852									$	322,636
Deposits						$	415,437									$	391,229
Shareholders' equity						$	41,934									$	40,315
		Three Months Ended June 30,										Six Months Ended June 30,
		2018						2017				2018							2017
Performance Data & Ratios
Net income		$	1,148					$	1,074			$	2,380						$	2,139
Earnings per share, basic		$	0.45					$	0.42			$	0.94						$	0.84
Earnings per share, diluted		$	0.45					$	0.42			$	0.94						$	0.84
Dividends paid per share		$	0.12					$	0.11			$	0.23						$	0.22
Return on assets			0.91	%					0.92	%			0.95	%						0.91	%
Return on equity			11.00	%					10.69	%			11.44	%						10.80	%
Net interest margin (tax equivalent)			3.96	%					4.15	%			3.97	%						4.06	%
Dividend payout ratio			24.42	%					26.11	%			24.60	%						26.20	%
Efficiency ratio			71.10	%					70.34	%			71.01	%						70.25	%
Asset Quality Data & Ratios
Total nonperforming loans		$	1,720					$	1,285			$	1,720						$	1,285
Total nonperforming assets		$	1,758					$	1,293			$	1,758						$	1,293
Net loan charge offs		$	118					$	141			$	206						$	179
Reserve for loan losses to total loans			0.92	%					0.96	%			0.92	%						0.96	%
Nonperforming loans/total loans			0.50	%					0.40	%			0.50	%						0.40	%
Nonperforming assets/total assets			0.35	%					0.27	%			0.35	%						0.27	%
Net charge offs / average loans			0.14	%					0.18	%			0.12	%						0.12	%
Capital Ratios
Average common equity to average total assets			8.28	%					8.56	%			8.31	%						8.47	%
Common equity Tier 1 capital ratio			12.68	%					12.54	%			12.68	%						12.54	%
Tier 1 capital ratio			12.68	%					12.54	%			12.68	%						12.54	%
Tier 1 leverage ratio			8.81	%					8.79	%			8.81	%						8.79	%
Total risk based capital ratio			13.59	%					13.50	%			13.59	%						13.50	%
Book value per share		$	16.47					$	15.83			$	16.47						$	15.83
Tangible book value per share		$	16.47					$	15.81			$	16.47						$	15.81

Quarterly Averages			2nd Qtr					1st Qtr					4th Qtr						3rd Qtr						2nd Qtr
			2018					2018					2017						2017						2017
Assets			$	504,308				$	497,562				$	486,699					$	471,643					$	469,201
Loans, less unearned income & discount			$	337,092				$	331,822				$	330,842					$	324,206					$	312,848
Deposits			$	412,133				$	405,827				$	396,746					$	385,989					$	390,268
Equity			$	41,747				$	41,466				$	41,502					$	41,089					$	40,169
Return on assets				0.91	%				0.99	%				0.59	%					0.81	%					0.92	%
Return on equity				11.00	%				11.89	%				6.91	%					9.26	%					10.69	%
Net income			$	1,148				$	1,232				$	717					$	952					$	1,074
Net income per share, basic			$	0.45				$	0.48				$	0.28					$	0.37					$	0.42
Net income per share, diluted			$	0.45				$	0.48				$	0.28					$	0.37					$	0.42
Dividends paid per share			$	0.12				$	0.11				$	0.11					$	0.11					$	0.11

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