SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
[ X ] Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 2002 or,
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______ to ______.
Commission file number 0-20099
SOUTHWEST GEORGIA FINANCIAL CORPORATION
(Exact Name of Registrant as specified in its charter)
Georgia 58-1392259
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 First Street, S. E.
Moultrie, Georgia 31768
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (229) 985-1120
Securities registered pursuant to Section 12(b) of this Act:
Title of each class Name of each exchange on which registered
Common Stock $1 Par Value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers in response to
Item 405 of Regulation S-K is not contained in this form, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ X ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes No X
Aggregate market value of voting stock held by nonaffiliates of the registrant
as of June 28, 2002: $32,248,123 based on 1,943,829 shares at the price of
$16.59 per share.
As of March 24, 2003, 3,300,000 shares of the $1.00 par value Common Stock of
Southwest Georgia Financial Corporation were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended December 31, 2002, furnished to the Commission pursuant to Rule 14a-3(b),
are incorporated by reference into Part II.
Portions of the Registrant's definitive Proxy Statement for the 2003 annual
meeting of shareholders, to be filed with the Commission are incorporated by
reference into Part III.
PART I
Item 1 - Business
Southwest Georgia Financial Corporation (the "Registrant") is a Georgia
bank holding company organized in 1980, which acquired 100% of the
outstanding shares of Southwest Georgia Bank (the "Bank"), formerly known
as Moultrie National Bank, in 1981. The Registrant's primary business is
providing banking services to individuals and businesses principally in
Colquitt County, Baker County, Thomas County, and the surrounding counties
of southwest Georgia through the Bank. In December of 2001, the Bank
acquired the remaining 50 percent of the common stock of Empire Financial
Services, Inc. ("Empire"), a commercial mortgage banking firm. The Bank
acquired half of the common stock of Empire in May 1997 and owned the firm
jointly until the fourth quarter of 2001. The Bank commenced operations as
a national banking association in 1928. Currently, it is an FDIC insured,
state-chartered Federal Reserve member bank. However, in February, 2003,
the Bank requested to withdraw from the Federal Reserve effective April
30, 2003. Once completed, the Bank's primary regulator will be the FDIC
rather than the Federal Reserve.
The Registrant's executive office is located at 201 First Street, S. E.,
Moultrie, Georgia 31768, and its telephone number is (229) 9851120.
All references herein to the Registrant include Southwest Georgia
Financial Corporation, the Bank, and Empire unless the context indicates a
different meaning.
General
The Registrant is a registered bank holding company. All of the
Registrant's activities are currently conducted by the Bank and Empire.
The Bank is community-oriented and offers such customary banking services
as consumer and commercial checking accounts, NOW accounts, savings
accounts, certificates of deposit, lines of credit, Mastercard and VISA
accounts, and money transfers. The Bank finances commercial and consumer
transactions, makes secured and unsecured loans, and provides a variety of
other banking services. The Bank has a trust department that performs
corporate, pension, and personal trust services and acts as trustee,
executor, and administrator for estates and as administrator or trustee of
various types of employee benefit plans for corporations and other
organizations. The Bank operates Southwest Georgia Insurance Services
Division, an insurance agency that offers property and casualty insurance,
life, health, and disability insurance. Empire, a subsidiary of the Bank,
is a commercial mortgage banking firm that offers commercial mortgage
banking services.
Markets
The Registrant conducts banking activities in Colquitt, Baker, and Thomas
Counties and the surrounding counties of Georgia. Agriculture plays an
important part in the Colquitt, Baker, and Thomas County economy.
Colquitt and Thomas County grow a large portion of Georgia's produce crops,
including turnips, cabbage, sweet potatoes, and squash, and are home to
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Markets, Continued
producers of tobacco, peanuts, cotton, and pork. In addition,
manufacturing firms employ a large number of Colquitt and Thomas County
residents, and apparel, lumber and wood products, and textile
manufacturers are also located in the Colquitt and Thomas County area.
Baker County's major crops are cotton and peanuts, and major employers
there are service industries and retail stores. Approximately 41,000,
3,600 and 43,000 persons reside in Colquitt, Baker and Thomas Counties,
respectively. Empire provides mortgage banking services which includes
underwriting, construction, and longterm financing of commercial
properties throughout the Southeastern United States.
Deposits
The Bank offers a full range of depository accounts and services to both
consumers and businesses. At December 31, 2002, the Registrant's deposit
base, totaling $189,923,350, consisted of $28,924,659 in noninterest-
bearing demand deposits (15.23% of total deposits), $48,627,381 in
interest-bearing demand deposits including money market accounts (25.60%
of total deposits), $18,193,291 in savings deposits (9.58% of total
deposits), $68,080,299 in time deposits in amounts less than $100,000
(35.85% of total deposits), and $26,097,720 in time deposits of $100,000
or more (13.74 % of total deposits).
Loans
The Bank makes both secured and unsecured loans to individuals, firms, and
corporations; and both consumer and commercial lending operations include
various types of credit for the Bank's customers. Secured loans include
first and second real estate mortgage loans. The Bank also makes direct
installment loans to consumers on both a secured and unsecured basis. At
December 31, 2002, consumer installment, real estate (including
construction and mortgage loans), and commercial (including financial and
agricultural) loans represented approximately 9.7%, 81.6% and 8.7%,
respectively, of the Bank's total loan portfolio.
Lending Policy
The current lending policy of the Bank is to offer consumer and commercial
credit services to individuals and entities that meet the Bank's credit
standards. The Bank provides each lending officer with written guidelines
for lending activities. Lending authority is delegated by the Board of
Directors of the Bank to loan officers, each of whom is limited in the
amount of secured and unsecured loans which can be made to a single
borrower or related group of borrowers.
The Loan Committee of the Bank's Board of Directors is responsible for
approving and monitoring the loan policy and providing guidance and
counsel to all lending personnel. It also approves all extensions of
credit over $100,000. The Loan Committee is composed of the Chief
Executive Officer, President, and other executive officers of the Bank, as
well as certain Bank Directors.
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Servicing and Origination Fees on Loans
The Registrant through its subsidiary, Empire, recognizes as income in the
current period all loan origination and brokerage fees collected on loans
originated and closed for investing participants. Loan servicing fees are
based on a percentage of loan interest paid by the borrower and recognized
over the term of the loan as loan payments are received. The Bank's
subsidiary, Empire, does not directly fund any mortgages and acts as a
service-oriented broker for participating mortgage lenders. Fees charged
for continuing servicing fees are comparable with market rates charged in
the industry. In 2002, income received from mortgage banking services was
$3,021,047 compared with $2,441,945 in 2001. Most all of this income was
from Empire except for $51,083 in 2002 and $18,936 in 2001 which were
mortgage banking income from the Bank.
Loan Review and Nonperforming Assets
The Bank regularly reviews its loan portfolio to determine deficiencies
and corrective action to be taken. Senior lending officers conduct
periodic review of borrowers with total direct and indirect indebtedness
of $100,000 or more and perform an ongoing review of all past due loans. A
summary report of past due loans is reviewed monthly by the Loan
Committee, which also reviews all loans over $100,000, whether current or
past due, at least annually.
Asset/Liability Management
The Loan Committee is charged with establishing policies to manage the
assets and liabilities of the Bank. Its task is to manage asset growth,
net interest margin and liquidity, and capital in order to maximize income
and reduce interest rate risk. To meet these objectives while maintaining
prudent management of risks, the Loan Committee directs the Bank's overall
acquisition and allocation of funds. At its monthly meetings, the Loan
Committee reviews and discusses the monthly asset and liability funds
budget and income and expense budget in relation to the actual composition
and flow of funds; the ratio of the amount of rate sensitive assets to the
amount of rate sensitive liabilities; the ratio of loan loss reserve to
outstanding loans; and other variables, such as expected loan demand,
investment opportunities, core deposit growth within specified categories,
regulatory changes, monetary policy adjustments, and the overall state of
the local, state, and national economy.
Investment Policy
The Bank's investment portfolio policy is to maximize income consistent
with liquidity, asset quality, and regulatory constraints. The policy is
reviewed periodically by the Board of Directors. Individual transactions,
portfolio composition, and performance are reviewed and approved monthly
by the Board of Directors.
Employees
The Bank has 113 full-time employees. The Bank is not a party to any
collective bargaining agreement, and the Bank believes that its employee
relations are good. None of the Bank's
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Employees, continued
executive officers, except Mr. Clark and Mr. Dyer, are employed pursuant
to any employment contract. See Exhibit 10.3 and Exhibit 10.10, which are
incorporated herein by reference.
Competition
The banking business is highly competitive. The Bank competes with six
other depository institutions in Colquitt County. There are no other
competing depository institutions in Baker County. The Bank competes with
eight other depository institutions within Thomas County. The Bank also
competes with other financial service organizations located outside
Colquitt, Baker, and Thomas Counties, including brokers, finance
companies, credit unions and certain governmental agencies. To the extent
that banks must maintain noninterest earning reserves against deposits,
they may be at a competitive disadvantage when compared with other
financial service organizations that are not required to maintain reserves
against substantially equivalent sources of funds. Further, changes in
the laws applicable to banks, savings and loan associations, and other
financial institutions and the increased competition from investment
bankers, brokers, and other financial service organizations may have a
significant impact on the competitive environment in which the Bank
operates. See "Supervision and Regulation."
At December 31, 2002, the Registrant's total consolidated deposits and
assets were $189,923,350 and $240,467,639, respectively. The Registrant's
bank subsidiary is ranked as the largest among seven depository
institutions in Colquitt County, Georgia.
Monetary Policies
The results of operations of the Bank are affected by credit policies of
monetary authorities, particularly the Federal Reserve. The instruments
of monetary policy employed by the Federal Reserve include open market
operations in U. S. Government securities, changes in the discount rate on
bank borrowings, and changes in reserve requirements against bank
deposits. In view of changing conditions in the national economy and in
the money markets, as well as the effect of action by monetary and fiscal
authorities, including the Federal Reserve, no prediction can be made as
to possible future changes in interest rates, deposit levels, loan demand,
or the business and earnings of the Bank.
Payment of Dividends
The Registrant is a legal entity separate and distinct from the Bank. Most
of the revenues of the Registrant result from dividends paid to
it by the Bank. Statutory and regulatory restrictions exist that are
applicable to the payment of dividends by the Bank as well as by the
Registrant to its shareholders.
The Bank is a state chartered bank regulated by the Department of Banking
and Finance (the "DBF") and the Federal Reserve. Under the regulations of
the DBF, dividends may not be declared out of the retained earnings of a
state bank without first obtaining the written permission of the DBF
unless such bank meets all the following requirements:
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Payment of Dividends, Continued
(a) Total classified assets as of the most recent examination of the bank
do not exceed 80% of equity capital (as defined by regulation);
(b) The aggregate amount of dividends declared or anticipated to be
declared in the calendar year does not exceed 50% of the net
profits after taxes but before dividends for the previous
calendar year; and,
(c) The ratio of equity capital to adjusted assets is not less than 6%.
The payment of dividends by the Registrant and the Bank may also be
affected or limited by other factors, such as the requirement to maintain
adequate capital above regulatory guidelines. In addition, if, in the
opinion of the applicable regulatory authority, a bank under
its jurisdiction is engaged in or is about to engage in an unsafe or
unsound practice (which, depending upon the financial condition of the
bank, could include the payment of dividends), such authority may require,
after notice and hearing, that such bank cease and desist from such
practice. In addition to the formal statutes and regulations, regulatory
authorities consider the adequacy of the Bank's total capital in relation
to its assets, deposits, and other such items. Capital adequacy
considerations could further limit the availability of dividends to the
Bank. At December 31, 2002, retained earnings of the Bank totaled $23.1
million of which $10.5 million has been appropriated in order for the Bank
to provide adequate lending limits. The remaining $12.6 million of
retained earnings are available from the Bank to pay dividends. For 2002
the Registrant's cash dividend payout to stockholders was 35.1% of net
income.
After the Bank has withdrawn from the Federal Reserve, it will be
regulated by the FDIC. The FDIC has issued a policy statement providing
that insured banks should generally only pay dividends out of current
operating earnings.
Supervision and Regulation
The Registrant is a registered bank holding company subject to regulation
by the Board of Governors of the Federal Reserve System (the "Federal
Reserve") under the Bank Holding Company Act of 1956, as amended (the
"Act"). The Registrant is required to file financial information with the
Federal Reserve periodically and is subject to periodic examination by the
Federal Reserve.
The Act requires every bank holding company to obtain the Federal
Reserve's prior approval before (1) it may acquire direct or indirect
ownership or control of more than 5% of the voting shares of any bank that
it does not already control; (2) it or any of its non-bank subsidiaries
may acquire all or substantially all of the assets of a bank; and (3) it
may merge or consolidate with any other bank holding
company. In addition, a bank holding company is generally prohibited from
engaging in, or acquiring, direct or indirect control of the voting shares
of any company engaged in non-banking activities. This prohibition does
not apply to activities listed in the Act or found by the Federal Reserve,
by order or regulation, to be closely related to
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Supervision and Regulation, Continued
banking or managing or controlling banks as to be a proper incident
thereto. Some of the activities that the Federal Reserve has determined
by regulation or order to be closely related to banking include:
making or servicing loans and certain types of leases;
performing certain data processing services;
acting as fiduciary or investment or financial advisor;
providing brokerage services;
underwriting bank eligible securities;
underwriting debt and equity securities on a limited basis through
separately capitalized subsidiaries; and
making investments in corporations or projects designed primarily
to promote community welfare.
Although the activities of bank holding companies have traditionally
been limited to the business of banking and activities closely related or
incidental to banking (as discussed above), the GrammLeach-Bliley Act
became effective in 2000, and relaxed the previous limitations thus
permitting bank holding companies to engage in a broader range of
financial activities. Specifically, bank holding companies may elect to
become financial holding companies which may affiliate with securities
firms and insurance companies and engage in other activities that are
financial in nature. Among the activities that will be deemed "financial
in nature" include:
lending, exchanging, transferring, investing for others or
safeguarding money or securities;
insuring, guaranteeing, or indemnifying against loss, harm,
damage, illness, disability, or death, or providing and issuing
annuities, and acting as principal, agent, or broker with
respect thereto;
providing financial, investment, or economic advisory services,
including advising an investment company;
issuing or selling instruments representing interests in pools of
assets permissible for a bank to hold directly; and
underwriting, dealing in or making a market in securities.
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Supervision and Regulation, Continued
A bank holding company may become a financial holding company under
this statute only if each of its subsidiary banks is well
capitalized, is well managed and has at least a satisfactory rating under
the Community Reinvestment Act. A bank holding company that falls out of
compliance with such requirement may be required to cease engaging in
certain activities. Any bank holding company that does not elect to
become a financial holding company remains subject to the current
restrictions of the Bank Holding Company Act.
Under this legislation, the Federal Reserve Board serves as the primary
"umbrella" regulator of financial holding companies with supervisory
authority over each parent company and limited authority over its
subsidiaries. The primary regulator of each subsidiary of a financial
holding company will depend on the type of activity conducted by the
subsidiary. For example, broker-dealer subsidiaries will be regulated
largely by securities regulators and insurance subsidiaries will be
regulated largely by insurance authorities.
The Registrant has no immediate plans to register as a financial holding
company.
The Registrant is an "affiliate" of the Bank under the Federal Reserve
Act, which imposes certain restrictions on (1) loans by the Bank to the
Registrant (2) investments in the stock or securities of the Registrant by
the Bank, (3) the Bank's taking the stock or securities of an "affiliate"
as collateral for loans by the Bank to a borrower, and (4) the purchase of
assets from the Registrant by the Bank. Further, a bank holding company
and its subsidiaries are prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit, lease or sale of
property or furnishing of services.
The Registrant must also register with the Georgia Department of Banking
and Finance ("DBF") and file periodic information with the DBF. As part
of such registration, the DBF requires information with respect to the
financial condition, operations, management and intercompany relationships
of the Registrant and the Bank and related matters. The DBF may also
require such other information as is necessary to keep itself informed as
to whether the provisions of Georgia law and the regulations and orders
issued thereunder by the DBF have been complied with, and the DBF may
examine the Registrant and the Bank.
The Bank, as a member of the Federal Reserve System, is subject to the
supervision of, and is regularly examined by, the Federal Reserve and DBF.
In addition, both the FDIC and the DBF must grant prior approval of any
merger, consolidation, or other corporate reorganization involving the
Bank. A bank can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC in connection with the default of a
commonly-controlled institution.
After the Bank has withdrawn from the Federal Reserve, it will be subject
to the supervision of, and will be regularly examined by, the FDIC rather
than the Federal Reserve.
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Capital Adequacy
The Federal Reserve and the FDIC have implemented substantially identical
risk-based rules for assessing bank and bank holding company capital
adequacy. These regulations establish minimum capital standards in
relation to assets and off-balance sheet exposures as adjusted for credit
risk. Banks and bank holding companies are required to have (1) a minimum
level of total capital to risk-weighted assets of eight percent; (2) a
minimum Tier One Capital to risk-weighted assets of four percent; and (3)
a minimum stockholders' equity to risk-weighted assets of four percent.
In addition, the Federal Reserve and the FDIC have established a minimum
three percent leverage ratio of Tier One Capital to total assets for the
most highly rated banks and bank holding companies. "Tier One Capital"
generally consists of common equity not including unrecognized gains and
losses on securities, minority interests in equity accounts of
consolidated subsidiaries and certain perpetual preferred stock less
certain intangibles. The Federal Reserve and the FDIC will require a bank
holding company and a bank, respectively, to maintain a leverage ratio
greater than three percent if either is experiencing or anticipating
significant growth or is operating with less than well-diversified risks
in the opinion of the Federal Reserve. The Federal Reserve and the FDIC
use the leverage ratio in tandem with the risk-based ratio to assess the
capital adequacy of banks and bank holding companies. The FDIC, the Office
of the Comptroller of the Currency (the "OCC") and the Federal Reserve have
amended, effective January 1, 1997, the capital adequacy standards to provide
for the consideration of interest rate risk in the overall determination of
a bank's capital ratio, requiring banks with greater interest rate risk to
maintain adequate capital for the risk. The revised standards have not
had a significant effect on the Registrant's capital requirements.
In addition, Section 38 to the Federal Deposit Insurance Act implemented
the prompt corrective action provisions that Congress enacted as a part of
the Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"1991 Act"). The "prompt corrective action" provisions set forth five
regulatory zones in which all banks are placed largely based on their
capital positions. Regulators are permitted to take increasingly harsh
action as a bank's financial condition declines. Regulators are also
empowered to place in receivership or require the sale of a bank to
another depository institution when a bank's capital leverage ratio
reaches 2%. Bettercapitalized institutions are generally subject to less
onerous regulation and supervision than banks with lesser amounts of capital.
The Federal Reserve has adopted regulations implementing the prompt
corrective action provisions of the 1991 Act which place financial
institutions in the following five categories based upon capitalization
ratios: (1) a "well capitalized" institution has a total risk-based
capital ratio of at least 10 percent, a Tier One risk-based ratio of at
least 6 percent, and a leverage ratio of at least 5 percent; (2) an
"adequately capitalized" institution has a total risk-based ratio of at
least 8 percent, a Tier One risk-based ratio of at least 4 percent, and a
leverage ratio of at least 4 percent; (3) an "undercapitalized"
institution has a total risk-based capital ratio of under 8 percent, a
Tier One risk-based capital ratio of under 4 percent, or a leverage ratio
of under 4 percent; (4) a "significantly undercapitalized" institution has
a total risk-based capital ratio of under 6 percent, a Tier One risk-based
ratio of under 3 percent, or a leverage ratio of under 3 percent; and (5)
a "critically undercapitalized" institution has a leverage ratio of 2
percent or less. An institution in any of the three undercapitalized
categories would be prohibited from declaring dividends or making capital
distributions. The
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Capital Adequacy, continued
regulations also establish procedures for "downgrading" an institution to
a lower capital category based on supervisory factors other than capital.
The Bank, at December 31, 2002, would be considered to be a "well
capitalized" institution if solely viewed on the basis of capital ratios.
After the Bank has withdrawn from the Federal Reserve, it will be subject
to FDIC regulations regarding capital adequacy rather than Federal Reserve
regulations. The FDIC regulations are not materially different from the
Federal Reserve regulations.
Available Information
The Registrant is subject to the information requirements of the
Securities Exchange Act of 1934, which means that it is required to file
certain reports, proxy statements, and other information, all of which are
available at the Public Reference Section of the Securities and Exchange
Commission at Room 1024, 450 Fifth Street, NW, Washington, D.C. 20549.
You may also obtain copies of the reports, proxy statements, and other
information from the Public Reference Section of the SEC, at prescribed
rates, by calling 1-800-SEC-0330. The SEC maintains a World Wide Web site
on the Internet at www.sec.gov where you can access reports, proxy,
information and registration statements, and other information regarding
registrants that file electronically with the SEC through the EDGAR system.
The Registrant's Internet website address is www.sgfc.com.
Executive Officers Of The Registrant
Executive officers are elected by the Board of Directors annually in May
and hold office until the following May unless they resign or are removed
from office by the Board of Directors.
The executive officers of the Registrant and their ages, positions with
the Registrant, and terms of office as of January 31, 2003, are as
follows:
Officer Of The
Name (Age) Principal Position Registrant Since
DeWitt Drew Chief Executive Officer and President 1999
(46) of the Registrant and Bank
John J. Cole, Jr. Executive Vice President of the 1984
(52) Registrant and Executive Vice President
and Cashier of the Bank
George R. Kirkland Senior Vice President and Treasurer 1991
(52) of the Registrant and Senior Vice
President and Comptroller of the Bank
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Executive Officers Of The Registrant, Continued
Officer Of The
Name (Age) Principal Position Registrant Since
C. Wallace Sansbury Senior Vice President of the Registrant 1996
(60) and Bank
Randall L. Webb, Jr. Senior Vice President of the Registrant 1994
(54) and Bank
Geraldine A. Ferrone Senior Vice President of the Registrant 1995
(56) and Bank
J. Larry Blanton Senior Vice President of the Registrant 2000
(56) and Bank
Susan T. Whittle Senior Vice President of the Registrant 2001
(44) and Bank
J. David Dyer, Jr. Senior Vice President of the Registrant 2002
(55) and Bank
Judy M. Owens Vice President of the Registrant 1993
(58) and Bank
Robert M. Carlton, Jr. Vice President of the Registrant 1995
(61) and Bank
Peggy C. Weeks Vice President and Secretary of the 1997
(65) Registrant and Bank
Richard E. Holland Vice President of the Registrant 1998
(57) and Bank
Barbara P. Hall Vice President of the Registrant 1999
(53) and Bank
Hiller M. Gammage, Jr. Vice President of the Registrant 2000
(72) and Bank
G. Larry Kirkland Vice President of the Registrant 2000
(52) and Bank
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Executive Officers Of The Registrant, Continued
Officer Of The
Name (Age) Principal Position Registrant Since
Danny E. Singley Vice President of the Registrant 2002
(48) and Bank
Steven C. Johnson Vice President of the Registrant 2002
(39) and Bank
The following is a brief description of the business experience of the
executive officers of the Registrant. Except as otherwise indicated, each
executive officer has been engaged in their present or last employment, in
the same or similar position, for more than five years.
Mr. Drew became Chief Executive Officer and President of both the Bank and
the Registrant in 2002. Previously he has served as Chief Operating
Officer and President of both the Bank and the Registrant since 2001 and
Executive Vice President of the Bank and Registrant since 1999. Also, he
had been Senior Vice President and Loan Administrator at Citizens Bank in
Russellville, Alabama since 1993.
Mr. Cole became Executive Vice President and Cashier of the Bank and
Executive Vice President of the Registrant in 2002. Previously, he had
been Senior Vice President and Cashier of the Bank and Senior Vice
President of the Registrant since 1992. Also, he had served as Senior
Vice President and Comptroller of the Bank from 1986 to 1992 and Vice
President and Treasurer of the Registrant since 1984.
Mr. Kirkland became Senior Vice President and Treasurer of the Registrant
and Senior Vice President and Comptroller of the Bank in 1993. Previously
he had been Vice President and Comptroller of the Bank and Vice President
and Treasurer of the Registrant since 1991.
Mr. Sansbury became Senior Vice President of the Bank and Registrant in
December 1996. Previously, he had been Executive Vice President and
Senior Credit Officer at Regions Bank in Ellijay, Georgia, from 1994 to
1996 and an Officer of Nationsbank of Georgia, N.A. from 1983 to 1994.
Mr. Dyer became Senior Vice President of the Bank and Registrant in 2002.
Previously, he has served and continues to serve as Chief Executive
Officer and President of Empire, now a wholly owned subsidiary of the Bank
acquired in December 2001. Mr. Dyer has served as Chief Executive Officer
and President of Empire since forming the firm in 1985.
Mr. Webb became Senior Vice President of the Bank and Registrant in 1997.
Previously, he had been Vice President of the Bank and Registrant since
1994 and Assistant Vice President of the Bank since 1984.
Mrs. Ferrone became Senior Vice President in 2000 and Vice President of
the Bank and Registrant in 1995. Previously, she had been Assistant Vice
President of the Bank since 1988.
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Executive Officers Of The Registrant, Continued
Mr. Blanton became Senior Vice President of the Bank and Registrant in
2001. Previously, he has served as Vice President of the Bank and
Registrant since 2000 and in various other positions with the bank since
1999. Also, he had been an agent with Moultrie Insurance Agency since
1993.
Mrs. Whittle became Senior Vice President of the Bank and the Registrant
in 2001. Previously, she had been Senior Vice President and Senior Lender
at Citizens Bank in Russellville, Alabama since 1999. Also, she had been
First Vice President and District Executive at Citizens Bank since 1995.
Mrs. Owens became Vice President of the Bank and Vice President of the
Registrant in 1993. Previously, she had been Assistant Vice President and
Trust Officer of the Bank from 1991 to 1993 and Assistant Trust Officer of
the Bank since 1984.
Mr. Carlton became Vice President of the Bank and Registrant in 1995.
Previously, he had been Assistant Vice President of the Bank since 1992.
Also, he had served as Vice President and Cashier of Citizens and Southern
National Bank of Georgia from 1969 to 1991.
Mrs. Weeks became Secretary in 2000 and Vice President of the Bank and
Registrant in 1997. Previously, she had been Assistant Vice President of
the Bank since 1994 and has served in various other positions with the
Bank since 1991.
Mr. Holland became Vice President of the Bank and Registrant in 1998.
Previously, he had been Vice President City Manager of Nationsbank
Florida, N.A. from 1993 to 1998. Also, he
had been Vice President Administration of C&S/Sovran Corporation from 1987
to 1993.
Mrs. Hall became Vice President of the Bank and Registrant in 1999.
Previously, she had been Assistant Vice President of the Bank since 1995
and has served in various other positions with the Bank since 1974.
Mr. Gammage became Vice President of the Bank and Registrant in 2000.
Previously, he had been owner of Financial Planning Concepts, Inc., in
Moultrie, Georgia.
Mr. Kirkland became Vice President of the Bank and Registrant in 2000.
Previously, he had been Assistant Vice President of the Bank since 1995
and has served in various other positions with the Bank since 1991.
Mr. Singley became Vice President of the Bank and Registrant in 2002.
Previously he has served in various other positions with the Bank from
1975 until 1982. Also, he had served as office manager for Pidcock
Tobacco Warehouse from 1983 until being reemployed with the Bank in 2002.
Mr. Johnson became Vice President of the Bank and Registrant in 2002.
Previously, he had been Assistant Vice President of the Bank since 1999
and has served in various other positions with the Bank since 1995.
Selected Statistical Information
-13-
The statements below show, for the periods indicated, the daily average
balances outstanding for the major categories of earning assets and
interest-bearing liabilities and the average interest rate earned or paid
thereon. Except for percentages, all data is in thousands of dollars.
Distribution of Assets, Liabilities, and Shareholders' Equity;
Interest Rates and Interest Differentials
Average Balance Sheets and Net Interest Income Analysis
Condensed average balance sheets for the years indicated are presented
below:
Year Ended December 31, 2002
Average
Balance Interest Rate
(Thousands Of Dollars)
ASSETS
Cash and due from banks $ 8,966 $ - - %
Earning assets:
Interest-bearing deposits 3,661 56 1.53%
Loans, net (a) (b) (c) 112,618 9,280 8.24%
Taxable investment securities
held to maturity 78,031 4,596 5.89%
Nontaxable investment securities
held to maturity (c) 3,130 220 7.03%
Nontaxable investment securities
available for sale (c) 13,340 875 6.56%
Other investment securities
available for sale 1,352 61 4.51%
Federal funds sold 1,399 22 1.57%
Total earning assets 213,531 15,110 7.08%
Premises and equipment 5,539
Other assets 8,333
Total assets $236,369
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits $ 26,521 $ - - %
Interest-bearing liabilities:
Savings deposits 64,617 961 1.49%
Time deposits 97,354 3,007 3.09%
Federal funds purchased 99 2 2.02%
Other borrowings 12,749 459 3.60%
Total interest-bearing liabilities 174,819 4,429 2.53%
Other liabilities 2,837
Total liabilities 204,177
Common stock 3,051
Surplus 2,900
Retained earnings 32,364
Less treasury stock ( 6,123)
Total shareholders' equity 32,192
Total liabilities and shareholders' equity $236,369
Net interest income and margin $10,681 5.00%
-14-
Distribution of Assets, Liabilities, and Shareholders' Equity; Interest
Rates and Interest Differentials
Average Balance Sheets and Net Interest Income Analysis
Condensed average balance sheets for the years indicated are presented
below:
Year Ended December 31, 2001
Average
Balance Interest Rate
(Thousands Of Dollars)
ASSETS
Cash and due from banks $ 6,424 $ - - %
Earning assets:
Interest-bearing deposits 4,478 225 5.02%
Loans, net (a) (b) (c) 121,787 11,751 9.65%
Taxable investment securities
held to maturity 77,313 4,742 6.13%
Nontaxable investment securities
held to maturity (c) 3,481 226 6.49%
Nontaxable investment securities
available for sale (c) 12,702 866 6.82%
Other investment securities
available for sale 1,159 76 6.56%
Federal funds sold 965 48 4.97%
Total earning assets 221,885 17,934 8.08%
Premises and equipment 5,080
Other assets 6,539
Total assets $239,928
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits $ 26,647 $ - - %
Interest-bearing liabilities:
Savings deposits 63,403 1,359 2.14%
Time deposits 108,477 6,072 5.60%
Federal funds purchased 324 11 3.40%
Other borrowings 8,131 484 5.95%
Total interest-bearing liabilities 180,335 7,926 4.40%
Other liabilities 2,253
Total liabilities 209,235
Common stock 3,000
Surplus 2,034
Retained earnings 30,751
Less treasury stock ( 5,092)
Total shareholders' equity 30,693
Total liabilities and shareholders' equity $239,928
Net interest income and margin $10,008 4.51%
-15-
Distribution of Assets, Liabilities, and Shareholders' Equity; Interest
Rates and Interest Differentials, Continued
Average Balance Sheets and Net Interest Income Analysis, Continued
Year Ended December 31, 2000
Average
Balance Interest Rate
(Thousands Of Dollars)
ASSETS
Cash and due from banks $ 6,111 $ - - %
Earning assets:
Interest-bearing deposits 8,649 552 6.38%
Loans, net (a) (b) (c) 116,899 11,990 10.26%
Taxable investment securities
held to maturity 70,819 4,472 6.31%
Nontaxable investment securities
held to maturity (c) 4,001 258 6.45%
Nontaxable investment securities
available for sale (c) 11,952 866 7.25%
Other investment securities
available for sale 1,908 819 42.92%
Federal funds sold 682 47 6.89%
Total earning assets 214,910 19,004 8.84%
Premises and equipment 4,719
Other assets 6,790
Total assets $232,530
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits $ 27,286 $ - - %
Interest-bearing liabilities:
Savings deposits 61,411 1,485 2.42%
Time deposits 100,177 5,686 5.68%
Federal funds purchased 270 18 6.67%
Other borrowings 11,127 705 6.34%
Total interest-bearing liabilities 172,985 7,894 4.56%
Other liabilities 1,928
Total liabilities 202,199
Common stock 3,000
Surplus 1,997
Retained earnings 28,105
Less treasury stock ( 2,771)
Total shareholders' equity 30,331
Total liabilities and shareholders' equity $232,530
Net interest income and margin $11,110 5.17%
Interest Rates
(a) Average loans are shown net of unearned income and the allowance for
loan losses. Nonperforming loans are included.
(b) Interest income includes loan fees as follows (in thousands):
2002 - $444, 2001 - $544, and 2000 - $550.
(c) Reflects taxable equivalent adjustments using a tax rate of 34 percent
for 2002, 2001, and 2000.
-16-
Interest Differentials
The following table sets forth, for the indicated years ended
December 31, a summary of the changes in interest paid resulting from
changes in volume and changes in rate. The change due to volume is
calculated by multiplying the change in volume by the prior year's rate.
The change due to rate is calculated by multiplying the change in rate by
the prior year's volume. The change attributable to both volume and rate
is calculated by multiplying the change in volume by the change in rate.
(a)
Due To
Increase Changes In
2002 2001 (Decrease) Volume Rate
(Thousands Of Dollars)
Interest earned on:
Interest-bearing deposits $ 56 $ 225 $( 169) $( 35) $( 134)
Loans, net (b) 9,280 11,751 (2,471) (840) (1,631)
Taxable investment
securities held to maturity 4,596 4,742 ( 146) 45 ( 191)
Nontaxable investment
securities held to
maturity (b) 220 226 ( 6) ( 35) 29
Nontaxable investment
securities available
for sale (b) 875 866 9 36 ( 27)
Other securities
available for sale 61 76 ( 15) 18 ( 33)
Federal funds sold 22 48 ( 26) 52 ( 78)
Total interest income 15,110 17,934 (2,824) (759) (2,065)
Interest paid on:
Savings deposits 961 1,359 ( 398) 27 ( 425)
Time deposits 3,007 6,072 (3,065) (571) (2,494)
Federal funds purchased 2 11 ( 9) ( 6) ( 3)
Other borrowings 459 484 ( 25) ( 82) 57
Total interest expense 4,429 7,926 (3,497) (632) (2,865)
Net interest earnings $10,681 $10,008 $ 673 $(127) $ 800
-17-
Interest Differentials, Continued
(a)
Due To
Increase Changes In
2001 2000 (Decrease) Volume Rate
(Thousands Of Dollars)
Interest earned on:
Interest-bearing deposits $ 225 $ 552 $( 327) $(227) $( 100)
Loans, net (b) 11,751 11,990 ( 239) 569 ( 808)
Taxable investment
securities held to maturity 4,742 4,472 270 391 ( 121)
Nontaxable investment
securities held to
maturity (b) 226 258 ( 32) ( 34) 2
Nontaxable investment
securities available
for sale (b) 866 866 0 0 0
Other securities
available for sale 76 819 ( 743) (235) ( 508)
Federal funds sold 48 47 1 1 0
Total interest income 17,934 19,004 (1,070) 465 (1,535)
Interest paid on:
Savings deposits 1,359 1,485 ( 126) 49 ( 175)
Time deposits 6,072 5,686 386 465 ( 79)
Federal funds purchased 11 18 ( 7) 6 ( 13)
Other borrowings 484 705 ( 221) (180) ( 41)
Total interest expense 7,926 7,894 32 340 ( 308)
Net interest earnings $10,008 $11,110 $(1,102) $ 125 $(1,227)
-18-
Interest Differentials, Continued
(a)
Due To
Increase Changes In
2000 1999 (Decrease) Volume Rate
(Thousands Of Dollars)
Interest earned on:
Interest-bearing deposits $ 552 $ 595 $( 43) $(184) $ 141
Loans, net (b) 11,990 11,734 256 551 ( 295)
Taxable investment
securities held to maturity 4,472 4,231 241 171 70
Nontaxable investment
securities held to
maturity (b) 258 207 51 45 6
Nontaxable investment
securities available
for sale (b) 866 750 116 85 31
Other securities
available for sale 819 970 ( 151) ( 33) ( 118)
Federal funds sold 47 80 ( 33) (132) 99
Total interest income 19,004 18,567 437 503 ( 66)
Interest paid on:
Savings deposits 1,485 1,231 254 27 227
Time deposits 5,686 4,944 742 50 692
Federal funds purchased 18 10 8 6 2
Other borrowings 705 565 140 101 39
Total interest expense 7,894 6,750 1,144 184 960
Net interest earnings $11,110 $11,817 $( 707) $ 319 $(1,026)
(a) Volume and rate components are in proportion to the relationship of the
absolute dollar amounts of the change in each.
(b) Reflects taxable equivalent adjustments using a tax rate of 34 percent
for 2002, 2001, and 2000 in adjusting interest on nontaxable loans and
securities to a fully taxable basis.
-19-
Investment Portfolio
The carrying values of investment securities for the indicated years are
presented below:
Year Ended December 31,
2002 2001 2000
(Thousands Of Dollars)
Securities held to maturity:
U. S. Government Agencies $ 59,541 $ 55,478 $ 62,477
State and municipal 5,609 4,995 5,639
Total securities held to maturity $ 65,150 $ 60,473 $ 68,116
Securities available for sale:
Equity securities $ 2,179 $ 1,537 $ 2,284
U. S. Government Agencies 21,024 9,313 6,034
State and municipal 13,311 12,468 12,651
Mortgage backed 3,541 4,594 1,668
Total securities available for sale $ 40,055 $ 27,912 $ 22,637
The following table shows the maturities of debt securities at December
31, 2002, and the weighted average yields (for nontaxable obligations on a
fully taxable basis assuming a 34% tax rate) of such securities.
MATURITY
After One After Five
Within But Within But Within After
One Year Five Years Ten Years Ten Years
Amount Yield Amount Yield Amount Yield Amount Yield
(Thousands Of Dollars)
Debt Securities:
U. S.
Government
Agencies $12,006 5.71% $55,386 5.55% $13,173 5.08% $ - - %
State and
municipal 480 6.73% 2,726 6.49% 8,479 6.81% 7,236 6.90%
Mortgage
backed - - % 242 5.39% 1,728 5.98% 1,570 6.45%
Total $12,486 5.75% $58,354 5.59% $23,380 5.77% $ 8,806 6.82%
-20-
Investment Portfolio, continued
The calculation of weighted average yields is based on the cost and
effective yields of each security weighted for the scheduled maturity of
each security. At December 31, 2002 and 2001, securities carried at
approximately $34,394,000 and $27,318,000, respectively, were pledged to
secure public and trust deposits as required by law.
Loan Portfolio
Types of Loans
The amount of loans outstanding for the indicated years are shown in the
following table according to type of loan.
Year Ended December 31,
2002 2001 2000 1999 1998
(Thousands Of Dollars)
Commercial, financial and
agricultural $ 9,273 $ 11,142 $ 16,871 $ 19,144 $ 15,490
Real estate - mortgage 86,452 100,453 95,959 80,558 88,767
Other 40 35 91 176 150
Installment 10,223 9,979 11,092 10,870 11,219
Total loans 105,988 121,609 124,013 110,748 115,626
Less:
Unearned income 54 60 123 129 128
Allowance for loan losses 1,900 1,883 1,795 1,944 2,003
Net loans $104,034 $119,666 $122,095 $108,675 $113,495
Loan Maturities and Sensitivity to Changes in Interest Rates
The following table shows the distribution of the commercial, financial
and agricultural loan portfolio, excluding real estate mortgage and
consumer loans at December 31, 2002.
Commercial,
Financial and
Agricultural
(Thousands Of Dollars)
Distribution of loans which are due:
In one year or less $ 5,534
After one year but within five years 3,190
After five years 549
Total $ 9,273
-21-
Loan Maturities and Sensitivity to Changes in Interest Rates, Continued
The following table shows, for the selected loans above due after one
year, the amounts which have predetermined interest rates and the amounts
which have floating or adjustable interest rates at December 31, 2002.
Loans With
Predetermined Loans With
Rates Floating Rates Total
(Thousands Of Dollars)
Commercial, financial
and agricultural $ 2,159 $ 1,580 $ 3,739
Risk Elements In The Loan Portfolio
The following table presents information concerning outstanding balances
of nonperforming loans for the indicated years ended December 31.
Nonperforming loans comprise: (a) loans accounted for on a nonaccrual
basis ("nonaccrual loans"); (b) loans which are contractually past due 90
days or more as to interest or principal payments and still accruing
("past-due loans"); (c) loans for which the terms have been renegotiated
to provide a reduction or deferral of interest or principal because of a
deterioration in the financial position of the borrower ("renegotiated
loans"); and (d) loans now current but where there are serious doubts as
to the ability of the borrower to comply with present loan repayment terms
("potential problem loans").
Nonaccrual Past-Due Renegotiated Potential
Loans Loan Loans Problem Loans Total
(Thousands Of Dollars)
December 31, 2002 $ 1,529 $ 3 $ 0 $ 408 $ 1,940
December 31, 2001 $ 424 $ 178 $ 0 $ 52 $ 654
December 31, 2000 $ 742 $ 1,402 $ 0 $ 1,464 $ 3,608
December 31, 1999 $ 858 $ 488 $ 0 $ 287 $ 1,633
December 31, 1998 $ 1,806 $ 281 $ 0 $ 289 $ 2,376
The Registrant follows a policy of continuing to accrue interest on
consumer and bank card loans that are contractually past due up to the
time of charging the loan amount against the allowance for loan losses.
-22-
Summary of Loan Loss Experience
The following table is a summary of average loans outstanding during the
reported periods, changes in the allowance for loan losses arising from
loans charged off and recoveries on loans previously charged off by loan
category, and additions to the allowance which have been charged to
operating expenses.
Year Ended December 31,
2002 2001 2000 1999 1998
(Thousands Of Dollars)
Average loans outstanding $114,586 $123,668 $118,809 $113,211 $115,773
Amount of allowance for
loan losses at beginning
of period $ 1,883 $ 1,795 $ 1,944 $ 2,003 $ 1,999
Amount of loans charged off
during period:
Commercial, financial and
agricultural 226 69 360 174 201
Real estate - mortgage 113 18 27 13 37
Installment 258 261 112 123 127
Total loans charged off 597 348 499 310 365
Amount of recoveries during period:
Commercial, financial, and
agricultural 25 18 81 9 31
Real estate - mortgage 5 2 5 4 2
Installment 50 36 44 58 56
Total loans recovered 80 56 130 71 89
Net loans charged off
during period 517 292 369 239 276
Additions to allowance for
loan losses charged to operating
expense during period 534 380 220 180 280
Amount of allowance for
loan losses at end
of period $ 1,900 $ 1,883 $ 1,795 $ 1,944 $ 2,003
Ratio of net charge-offs
during period to average
loans outstanding for
the period .45% .24% .31% .21% .24%
The allowance is based upon management's analysis of the portfolio under
current and expected economic conditions. This analysis includes a study
of loss experience, a review of delinquencies, and an estimate of the
possibility of loss in view of the risk characteristics of the portfolio.
Based on the above factors, management considers the current allowance to
be adequate.
-23-
Allocation of Allowance For Loan Losses
Management has allocated the allowance for loan losses within the
categories of loans set forth in the table below according to amounts
deemed reasonably necessary to provide for possible losses. The amount of
the allowance applicable to each category and the percentage of loans in
each category to total loans are presented below.
December 31, 2002 December 31, 2001 December 31, 2000
Percent Percent Percent
Of Loans Of Loans Of Loans
Alloca- In Alloca- In Alloca- In
Category tion Category tion Category tion Category
(Thousands Of Dollars)
Domestic:
Commercial, financial
and agricultural $ 166 8.7% $ 173 9.2% $ 244 13.6%
Real estate - mortgage 1,550 81.6% 1,555 82.6% 1,389 77.4%
Installment 184 9.7% 155 8.2% 162 9.0%
Total $1,900 100.0% $1,883 100.0% $1,795 100.0%
December 31, 1999 December 31, 1998
Percent Percent
Of Loans Of Loans
Alloca- In Alloca- In
Category tion Category tion Category
(Thousands Of Dollars)
Domestic:
Commercial, financial
and agricultural $ 336 17.3% $ 268 13.4%
Real estate - mortgage 1,413 72.7% 1,538 76.8%
Installment 195 10.0% 197 9.8%
Total $1,944 100.0% $2,003 100.0%
The calculation is based upon total loans including unearned interest.
Management believes that the portfolio is well diversified and, to a large
extent, secured without undue concentrations in any specific risk area.
Control of loan quality is regularly monitored by management and is
reviewed by the Bank's Board of Directors which meets monthly.
Independent external review of the loan portfolio is provided by
examinations conducted by regulatory authorities. The amount of additions
to the allowance for loan losses charged to operating expense for the
periods indicated were based upon many factors, including actual charge
offs and evaluations of current and prospective economic conditions in the
market area. Management believes the allowance for loan losses is adequate
to cover any potential loan losses.
-24-
Deposits
The average amounts of deposits for the last three years are presented
below.
Year Ended December 31,
2002 2001 2000
(Thousands Of Dollars)
Domestic Bank Offices
Noninterest-bearing
demand deposits $ 26,521 $ 26,647 $ 27,286
NOW accounts 34,198 34,998 36,009
Money market deposit accounts 14,153 16,262 12,272
Savings 16,266 12,143 13,130
Time deposits 97,354 108,477 100,177
Total interest-bearing 161,971 171,880 161,588
Total average deposits $ 188,492 $ 198,527 $ 188,874
The maturity of certificates of $100,000 or more as of December 31, 2002,
are presented below.
(Thousands Of Dollars)
3 months or less $ 9,442
Over 3 months through 6 months 6,579
Over 6 months through 12 months 8,757
Over 12 months 1,320
Total outstanding $ 26,098
-25-
Return On Equity And Assets
Certain financial ratios are presented below.
Year Ended December 31,
2002 2001 2000
Return on average assets 1.52% 1.34% 1.44%
Return on average equity 11.19% 10.49% 11.08%
Dividend payout ratio
(dividends declared
divided by net income) 35.13% 39.30% 39.91%
Average equity to average
assets ratio 13.62% 12.79% 13.04%
Item 2 - Property
The executive offices of the Registrant and the main banking office of the
Bank are located in a 19,000 square foot facility at 201 First Street, S.
E., Moultrie, Georgia. A 5,000 square foot building was renovated for the
Bank's Operations Center located at 10 Second Avenue, Moultrie, Georgia.
The Trust and Investment Division of the Bank is located in an 11,000
square foot office building located at 25 Second Avenue, Moultrie,
Georgia. A vacant building located across the street from the main office
at 205 Second Street, S. E., Moultrie, Georgia, was renovated for the
Bank's Administrative Services Division offices, training and meeting
rooms, record storage, and the drive-thru teller facility. The Registrant
occupies a 4,400 square foot Baker County branch banking office located at
the intersection of Highways 91 and 200, Newton, Georgia. The Registrant
acquired a 3,900 square foot branch banking office located at 1102 West
Harris Street, Pavo, Thomas County, Georgia. Southwest Georgia Insurance
Services Division occupies a 5,600 square-foot building located at 501
South Main Street, Moultrie, Georgia. Empire operates from its
headquarters located at 121 Executive Parkway, Milledgeville, Georgia.
All of these facilities are adequate for present operations.
All the buildings and land, which include parking and ten drive-in teller
stations, are owned by the Bank. There are two automated teller machines
on the Bank's main office premises, one in the Baker County branch office
and the Thomas County branch office, and one additional automated teller
machine located in Doerun, Georgia. These automated teller machines are
linked to the STAR network of automated teller machines.
-26-
Item 3 - Legal Proceedings
There are no material pending legal proceedings to which the Registrant or
the Bank is a party or to which any of their property is subject.
Item 4 - Submission of Matters to a Vote of Security Holders
There were no matters submitted during the fourth quarter of 2002 for a
vote of the security holders through the solicitation of proxies or
otherwise.
-27-
PART II
Item 5 - Market for Registrant's Common Equity and Related Stockholder
Matters
Market for common equity and related stockholder matters appear under the
caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 10 through 16 of the Registrant's 2002
Annual Report to Shareholders and is incorporated herein by reference.
Item 6 - Selected Financial Data
Five years of selected financial data appears on page 1 of the
Registrant's 2002 Annual Report to Shareholders and is incorporated herein
by reference.
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Management's discussion and analysis of financial condition and results of
operation appears under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations" on pages 10 through 16
of the Registrant's 2002 Annual Report to Shareholders and is incorporated
herein by reference. For further information about the Registrant, see
Selected Statistical Information on pages 14 - 26 of this report on Form
10-K.
Item 7A - Quantitative and Qualitative Disclosures About Market Risk
Management's quantitative and qualitative information about market risk
appears under the caption "Quantitative and Qualitative Disclosures About
Market Risk" on pages 15 through 16 of the Registrant's 2002 Annual Report
to Shareholders and is incorporated herein by reference.
Item 8 - Financial Statements and Supplementary Data
The report of independent auditors, the consolidated financial statements,
and notes to the consolidated financial statements on pages 17 through 37
of the Registrant's 2002 Annual Report to Shareholders are incorporated
herein by reference.
-28-
Item 9 - Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
On September 3, 2002, Draffin & Tucker, LLP ("Draffin") announced to the
Registrant that it would resign as the Registrant's independent auditors
after its completion of its review of the Form 10-Q for the period ended
September 30, 2002 because it did not expect to meet certain new
requirements which would allow it to audit companies that file reports
with the Securities and Exchange Commission.
The reports of Draffin on the Registrant's financial statements for the
past two fiscal years did not contain an adverse opinion or a disclaimer
of opinion and were not qualified or modified as to uncertainty, audit
scope or accounting principles.
In connection with the audits of the Registrant's financial statements for
each of the two most recent fiscal years, and through November 14, 2002,
there were no disagreements with Draffin on any matters of accounting
principles or practices, financial statement disclosure or auditing scope
and procedures which, if not resolved to the satisfaction of Draffin,
would have caused Draffin to make reference to the matter in their report.
On October 23, 2002, the Audit Committee of the Board of Directors of the
Registrant approved the engagement of Thigpen, Jones, Seaton & Co., P.C.
("Thigpen"), and on October 25, 2002, the Registrant entered into an
agreement with Thigpen to engage them as their independent auditors.
During the two most recent fiscal years of the Registrant and through
November 14, 2002, the Registrant did not consult with Thigpen on matters
(i) regarding the application of accounting principles to a specified
transaction or the type of audit opinion that might be rendered on the
Registrant's financial statements, or (ii) which concerned the subject
matter of a disagreement or event identified in response to paragraph
(a)(1)(iv) of Item 304 of Regulation S-K with the former auditor.
The Registrant may have interacted from time to time with Thigpen with
respect to Empire, a wholly owned subsidiary of the Registrant which it
acquired one hundred percent of the stock on December 6, 2001. At the
time of the Registrant's acquisition of the subsidiary, Thigpen served as
the subsidiary's independent auditors and continues to serve the
subsidiary in that capacity.
-29-
PART III
Item 10 - Directors and Executive Officers of the Registrant
The information contained under the heading "Information About Nominees
For Director" in the definitive Proxy Statement to be used in connection
with the solicitation of proxies for the Registrant's annual meeting of
shareholders to be held on May 27, 2003, to be filed with the Commission,
is incorporated herein by reference. Information on Form 10-K relating to
the executive officers of the Registrant is included in Item 1 of this
report.
Item 11 - Executive Compensation
The information contained under the heading "Executive Compensation" in
the definitive Proxy Statement to be used in connection with the
solicitation of proxies for the Registrant's annual meeting of
shareholders to be held on May 27, 2003, to be filed with the Commission,
is incorporated herein by reference.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
and Stock Related Matters
The information contained under the heading "Voting Securities and
Principal Holders" and "Equity Compensation Plan Information" in the
definitive Proxy Statement to be used in connection with the solicitation
of proxies for the Registrant's annual meeting of shareholders to be held
on May 27, 2003, to be filed with the Commission, is incorporated herein
by reference. For purposes of determining the aggregate market value of
the Registrant's voting stock held by nonaffiliates, shares held by all
directors and executive officers of the Registrant have been excluded.
The exclusion of such shares is not intended to, and shall not, constitute
a determination as to which persons or entities may be "affiliates" of the
Registrant as defined by the Securities and Exchange Commission.
Item 13 - Certain Relationships and Related Transactions
The information contained under the heading "Certain Relationships and
Related Transactions" in the definitive Proxy Statement to be used in
connection with the solicitation of proxies for the Registrant's annual
meeting of shareholders to be held on May 27, 2003, to be filed with the
Commission, is incorporated herein by reference.
-30-
Item 14 - Controls and Procedures
The Registrant's management, including the Chief Executive Officer and
Chief Financial Officer, supervised and participated in an evaluation of
its disclosure controls and procedures (as defined in federal securities
rules) within 90 days prior to the filing of this report. Based on, and
as of the date of, that evaluation, the Registrant's Chief Executive
Officer and Chief Financial Officer have concluded that the Registrant's
disclosure controls and procedures were effective in accumulating and
communicating information to management, including the Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosures of that information under the
Securities and Exchange Commission's rules and forms and that the
Registrant's disclosure controls and procedures are designed to ensure
that the information required to be disclosed in reports that are filed or
submitted by the Registrant under the Securities Exchange Act is recorded,
processed, summarized and reported within the time periods specified in
the Securities and Exchange Commission's rules and forms.
There were no significant changes in the Registrant's internal controls or
in other factors that could significantly affect these controls subsequent
to the date of their evaluation.
Item 15 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K
a.Exhibits:
The exhibits filed as part of this registration statement are as follows:
Exhibit Number Description Of Exhibit
3.1 Articles of Incorporation of Southwest Georgia Financial
Corporation, as amended and restated (included as Exhibit 3.1
to the Registrant's Form 10-KSB dated December 31, 1996,
previously filed with the commission and incorporated
herein by reference).
3.2 By-Laws of the Registrant as amended (included as Exhibit 3.2
to the Registrant's Form 10-KSB dated December 31, 1995,
previously filed with the Commission and incorporated
herein by reference).
10.1 Pension Retirement Plan of the Registrant, as amended and
restated (included as Exhibit 10.1 to the Registrant's Form
10-K dated December 31, 2000, previously filed with the
commission and incorporated herein by reference).
10.2 Form of Directors' Deferred Compensation Plan of the
Registrant (included as Exhibit 10.3 to the Registrant's Form
S18 dated January 23, 1990, previously filed with the
Commission and incorporated herein by reference).*
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Item 15 - Exhibits, Financial Statement Schedules, and Reports on
Form 8-K, continued
10.3 Employment Agreement of John H. Clark, as amended (included
as Exhibit 10.3 to the Registrant's Form 10-K dated
December 31, 1997, previously filed with the Commission and
incorporated herein by reference).*
10.4 Directors' and Executive Officers' Stock Purchase Plan of the
Registrant dated March 18, 1992 (included as Exhibit 10.7
to the Registrant's Form 10-KSB dated December 31, 1992,
previously filed with the Commission and incorporated
herein by reference).*
10.6a Supplemental Retirement Plan of the Registrant dated December
21, 1994 (included as Exhibit 10.11 to the Registrant's
Form 10-KSB dated December 31, 1994, previously filed
with the Commission and incorporated herein by reference).*
10.6b Trust under the Registrant's Supplemental Retirement Plan, as
amended (included as Exhibit 10.6b to the Registrant's Form
10-K dated December 31, 1997, previously filed with the
Commission and incorporated herein by reference).*
10.7 Employee Stock Ownership Plan and Trust of the Registrant as
amended (included as Exhibit 10.7 to the Registrant's Form
10-K dated December 31, 2000, previously filed with the
commission and incorporated herein by reference).
10.8 Dividend Reinvestment and Share Purchases Plan of the
Registrant as amended and restated by Amendment No. 1
(included as Exhibit 99 to the Registrant's Form S3DPOS
dated September 30, 1998, previously filed with the
Commission and incorporated herein by reference).
10.9 Key Individual Stock Option Plan of the Registrant dated March
19, 1997 (included as Exhibit 10.9 to the Registrant's Form
10-K dated December 31, 1997, previously filed with the
Commission and incorporated herein by reference).*
10.10 Employment agreement of J. David Dyer, Jr.*
13 Southwest Georgia Financial Corporation Annual Report to
Shareholders for the fiscal year ended December 31, 2002.
With the exception of information expressly incorporated
herein, the 2002 Annual Report to Shareholders is not deemed
to be filed as part of this Report on Form 10-K.
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Item 15 - Exhibits, Financial Statement Schedules, and Reports on Form 8-
K, continued
16 Letter of change of certifying accountant (included as Exhibit
16 to the Registrant's Form 8-K dated November 20, 2002,
previously filed with Commission and incorporated herein by
reference).
21 Subsidiaries of the Registrant.
23.1 Consent of Thigpen, Jones, Seaton & Co., P.C..
23.2 Consent of Draffin & Tucker, LLP.
99.1 Certification by Chief Executive Officer, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
99.2 Certification by Chief Financial Officer, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this form.
b. A Form 8-K was filed by the Registrant on November 20, 2002, to report
a change in the Registrant's independent auditors.
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Exhibit Index
Exhibit
Number Description Of Exhibit Page Number
13 Southwest Georgia Financial Corporation Annual 39
Report to Shareholders for the fiscal year ended
December 31, 2002. With the exception of
information expressly incorporated herein, the 2002
Annual Report to Shareholders is not deemed to be
filed as part of this Report on Form 10-K.
10.10 Employment agreement of J. David Dyer, Jr. 72
21 Subsidiaries of the Registrant. 89
23.1 Consent of Thigpen, Jones, Seaton & Co., P.C. 90
23.2 Consent of Draffin & Tucker, LLP. 91
99.1 Certification by Chief Executive Officer, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. 92
99.2 Certification by Chief Financial Officer, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. 93
-34-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Southwest Georgia Financial Corporation
(Registrant)
Date:March 26, 2003 By: /s/ DeWitt Drew
DEWITT DREW
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ DeWitt Drew Date: March 26, 2003
DEWITT DREW
President and Chief Executive Officer
[Principal Executive Officer]
/s/ George R. Kirkland Date: March 26, 2003
GEORGE R. KIRKLAND
Senior Vice-President and Treasurer
[Principal Financial and Accounting Officer]
/s/ John H. Clark Date: March 26, 2003
JOHN H. CLARK
Chairman of the Board of Directors
-35-
SIGNATURES, Continued
/s/ Cecil H. Barber Date: March 26, 2003
CECIL H. BARBER
Director
/s/ Michael J. McLean Date: March 26, 2003
MICHAEL J. MCLEAN
Director
/s/ Richard L. Moss Date: March 26, 2003
RICHARD L. MOSS
Director
/s/ Roy Reeves Date: March 26, 2003
ROY REEVES
Director
/s/ Johnny R. Slocumb Date: March 26, 2003
JOHNNY R. SLOCUMB
Director
/s/ Violet K. Weaver Date: March 26, 2003
VIOLET K. WEAVER
Director
/s/ C. Broughton Williams Date: March 26, 2003
C. BROUGHTON WILLIAMS
Director
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CERTIFICATIONS
I, DeWitt Drew, certify that:
1. I have reviewed this annual report on Form 10-K of Southwest Georgia
Financial Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: March 26, 2003
By: /s/DeWitt Drew
DeWitt Drew
President and Chief Executive Officer
Southwest Georgia Financial Corporation
-37-
CERTIFICATIONS
I, George R. Kirkland, certify that:
1. I have reviewed this annual report on Form 10-K of Southwest Georgia
Financial Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors:
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: March 26, 2003
By: /s/George R. Kirkland
George R. Kirkland
Senior Vice-President and Treasurer
Southwest Georgia Financial Corporation
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