Southwest Georgia Financial Corporation Reports Record Earnings for 2018

Southwest Georgia Financial Corporation (the “Company”) (NYSE American: SGB), a full-service community bank holding company, today reported results of operations for the fourth quarter and year ended December 31, 2018. Comparisons are to prior-year periods unless otherwise noted.

“2018 was a strong year, highlighted by 14% loan growth and 15% deposit growth. And, while the record level of earnings certainly benefited from lower corporate tax rates, it also reflects significant investments made throughout the organization that were necessary to grow organically in the markets in which we currently operate,” commented DeWitt Drew, President and CEO. “We remain encouraged by our entry into the Tifton market and are keenly focused on achieving strong results in 2019.”

Income Highlights

• Achieved record annual net income of $4.7 million, up $875 thousand, or 23%. On a per diluted share basis, earnings were $1.84, up 23%. Net interest income increased 8%, or $1.3 million, to $18.6 million, primarily due to growth in average total loans of $32.2 million and an improved asset mix. Further benefiting net income was a 57% decrease in income tax expense due to the 2017 Tax Cuts and Jobs Act.
• Growth in net interest income more than offset a higher provision, which reflected strong loan growth, and $736 thousand increase in noninterest expense that was due in large part to investments made in people, products and processes, and infrastructure, including the completion of a full service banking center in Tifton, GA.
• Fourth quarter net income was $1.2 million, or $0.46 per diluted share, consistent with the fourth quarter last year when excluding the $419 thousand deferred tax impairment charge in last year’s period. Net interest income for the quarter increased $324 thousand to $4.8 million due to an $818 thousand increase in interest and fees on loans, which was partially offset by a $568 thousand increase in interest on deposit accounts.

Balance Sheet Trends

• Total assets grew more than 9% to $534.7 million, driven by healthy loan growth of $46.6 million, or 14%, to $376.8 million at period end.
• Growth in the loan portfolio was funded by an increase in total deposits of $58.6 million, or nearly 15%, to $455.6 million at December 31, 2018. Given the increasing rate environment and a new business checking product aimed at retaining deposits, the mix has shifted with interest-bearing deposits up 31% to $351.9 million and noninterest-bearing deposits down 19% to $103.7 million. Federal Home Loan Bank Advances were down $15.4 million at year-end due to the strong deposit gathering activities during the year.

Capital Management

• Book value grew 6% to $17.20 per share.
• The Company has a Total Risk-Based Capital Ratio of 12.91%, a Common Equity Tier 1 Capital Ratio of 12.02%, and a Leverage Capital Ratio of 8.97%, all measurably above the federal “well capitalized” standard.
• In December 2018, the Company paid a quarterly cash dividend of $0.12 per common share and for the full year paid $0.47 per share, up 7%. 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, January 22, 2019 at 1:00 p.m. ET. Management will review the financial and operating results for the fourth quarter and full year 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, January 29, 2019. To listen to the archived call, dial [phone] and enter conference ID number 13686181, 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 $535 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, and branch offices located in Baker County, Worth County, Lowndes County, and 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)			(Audited)
				December 31,			December 31,			December 31,
				2018			2017			2016
ASSETS
Cash and due from banks			$	14,051		$	11,143		$	7,700
Interest-bearing deposits in banks				21,448			22,995			18,819
Certificates of deposit in other banks				2,732			1,985			0
Investment securities available for sale				58,314			54,364			53,566
Investment securities held to maturity				36,827			44,591			54,603
Federal Home Loan Bank stock, at cost				1,820			2,438			1,874
Loans, less unearned income and discount				376,750			330,173			292,524
Allowance for loan losses				(3,429)			(3,044)			(3,124)
Net loans				373,321			327,129			289,400
Premises and equipment				14,574			12,250			11,209
Bank properties held for sale				0			212			212
Foreclosed assets, net				128			759			127
Intangible assets				4			20			35
Bank owned life insurance				6,717			6,553			5,357
Other assets				4,765			4,633			5,599
Total assets			$	534,701		$	489,072		$	448,501
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Interest bearing business checking			$	28,071		$	0		$	0
NOW accounts				35,816			25,871			47,420
Money market				158,730			129,040			95,659
Savings				31,849			30,794			29,007
Certificates of deposit $100,000 and over				47,808			46,053			43,235
Other time accounts				49,671			37,579			39,524
Total interest-bearing deposits				351,945			269,337			254,845
Noninterest-bearing deposits				103,695			127,669			116,648
Total deposits				455,640			397,006			371,493
Other borrowings				10,457			17,971			8,448
Long-term debt				21,171			29,057			26,029
Accounts payable and accrued liabilities				3,650			3,895			4,109
Total liabilities				490,918			447,929			410,079
Shareholders' equity:
Common stock - par value $1; 5,000,000 shares
authorized; 2,545,776 shares issued (*)				2,546			4,294			4,294
Additional paid-in capital				18,419			31,701			31,701
Retained earnings				25,005			33,021			30,333
Accumulated other comprehensive income				(2,187)			(1,630)			(1,786)
Total				43,783			67,386			64,542
Treasury stock - at cost (**)				(0)			(26,243)			(26,120)
Total shareholders' equity				43,783			41,143			38,422
Total liabilities and shareholders' equity			$	534,701		$	489,072		$	448,501
* 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 Twelve Months
			Ended December 31,							Ended December 31,
			2018*				2017*			2018*				2017
Interest income:
Interest and fees on loans			$	5,122			$	4,303		$	18,762			$	16,299
Interest and dividend on securities available for sale				368				322			1,427				1,318
Interest on securities held to maturity				236				282			1,027				1,198
Dividends on Federal Home Loan Bank stock				33				29			145				101
Interest on deposits in banks				128				70			485				195
Interest on certificates of deposit in other banks				13				12			48				35
Total interest income				5,900				5,018			21,894				19,146
Interest expense:
Interest on deposits				900				333			2,383				1,154
Interest on federal funds purchased				0				0			1				1
Interest on other borrowings				57				110			396				224
Interest on long-term debt				159				116			542				523
Total interest expense				1,116				559			3,322				1,902
Net interest income				4,784				4,459			18,572				17,244
Provision for loan losses				226				75			830				300
Net interest income after provision for losses on loans				4,558				4,384			17,742				16,944
Noninterest income:
Service charges on deposit accounts				279				218			1,015				1,005
Income from trust services				56				55			235				219
Income from retail brokerage services				125				82			399				362
Income from insurance services				409				365			1,604				1,523
Income from mortgage banking services				1				1			2				155
Net gain (loss) on the sale or disposition of assets				(72	)			0			(80	)			(9	)
Net gain (loss) on the sale of securities				(165	)			0			(165	)			187
Net gain on extinguishment of debt				318				0			318				0
Other income				213				239			868				870
Total noninterest income				1,164				960			4,196				4,312
Noninterest expense:
Salary and employee benefits				2,478				2,297			9,638				9,251
Occupancy expense				275				279			1,195				1,124
Equipment expense				349				217			933				850
Data processing expense				357				368			1,445				1,513
Amortization of intangible assets				4				4			16				16
Other operating expense				825				727			3,338				3,075
Total noninterest expense				4,288				3,892			16,565				15,829
Income before income tax expense				1,434				1,452			5,374				5,427
Provision for income taxes				275				735			691				1,620
Net income			$	1,159			$	717		$	4,682			$	3,807
Net income per share, basic			$	0.46			$	0.28		$	1.84			$	1.49
Net income per share, diluted			$	0.46			$	0.28		$	1.84			$	1.49
Dividends paid per share			$	0.12			$	0.11		$	0.47			$	0.44
Basic weighted average shares outstanding				2,545,776				2,541,505			2,545,565				2,541,505
Diluted weighted average shares outstanding				2,545,776				2,541,499			2,545,565				2,541,504

SOUTHWEST GEORGIA FINANCIAL CORPORATION Financial Highlights (Dollars in thousands except per share data)
At December 31					2018									2017
Assets					$	534,701								$	489,072
Loans, less unearned income & discount					$	376,750								$	330,173
Deposits					$	455,640								$	397,006
Shareholders' equity					$	43,783								$	41,143
			Three Months Ended December 31,									Twelve Months Ended December 31,
			2018				2017					2018				2017
Performance Data & Ratios
Net income			$	1,159			$	717				$	4,682			$	3,807
Earnings per share, basic			$	0.46			$	0.28				$	1.84			$	1.49
Earnings per share, diluted			$	0.46			$	0.28				$	1.84			$	1.49
Dividends paid per share			$	0.12			$	0.11				$	0.47			$	0.44
Return on assets				0.87%				0.59%					0.92%				0.80%
Return on equity				10.77%				6.91%					11.09%				9.41%
Net interest margin (tax equivalent)				3.94%				4.08%					3.99%				4.09%
Dividend payout ratio				26.37%				39.07%					25.55%				29.44%
Efficiency ratio				71.11%				69.32%					71.60%				70.75%
Asset Quality Data & Ratios
Total nonperforming loans			$	1,205			$	1,675				$	1,205			$	1,675
Total nonperforming assets			$	1,333			$	2,434				$	1,333			$	2,434
Net loan charge offs (recoveries)			$	(126)			$	239				$	444			$	381
Reserve for loan losses to total loans				0.91%				0.92%					0.91%				0.92%
Nonperforming loans/total loans				0.32%				0.51%					0.32%				0.51%
Nonperforming assets/total assets				0.25%				0.50%					0.25%				0.50%
Net charge offs (recoveries) / average loans				(0.13%)				0.29%					0.13%				0.12%
Capital Ratios
Average common equity to average total assets				8.12%				8.53%					8.27%				8.55%
Common equity Tier 1 capital ratio				12.02%				12.64%					12.02%				12.64%
Tier 1 capital ratio				12.02%				12.64%					12.02%				12.64%
Tier 1 leverage ratio				8.65%				8.72%					8.65%				8.72%
Total risk based capital ratio				12.91%				13.55%					12.91%				13.55%
Book value per share			$	17.20			$	16.19				$	17.20			$	16.19
Tangible book value per share			$	17.20			$	16.18				$	17.20			$	16.18

Quarterly				4th Qtr				3rd Qtr				2nd Qtr				1st Qtr				4th Qtr
Averages				2018				2018				2018				2018				2017
Assets				$	529,955			$	509,416			$	504,308			$	497,562			$	486,699
Loans, less unearned income & discount				$	373,324			$	356,981			$	337,092			$	331,822			$	330,842
Deposits				$	444,256			$	417,092			$	412,133			$	405,827			$	396,746
Equity				$	43,016			$	42,581			$	41,747			$	41,466			$	41,502
Return on assets					0.87%				0.90%				0.91%				0.99%				0.59%
Return on equity					10.77%				10.74%				11.00%				11.89%				6.91%
Net income				$	1,159			$	1,144			$	1,148			$	1,232			$	717
Net income per share, basic				$	0.46			$	0.45			$	0.45			$	0.48			$	0.28
Net income per share, diluted				$	0.46			$	0.45			$	0.45			$	0.48			$	0.28
Dividends paid per share				$	0.12			$	0.12			$	0.12			$	0.11			$	0.11

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