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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, 1997 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) (912) 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
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-K is not contained in this form, and no disclosure will 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 ]
Aggregate market value of voting stock held by nonaffiliates of the
Registrant as of March 1, 1998: $30,809,717 based on 1,502,913 shares at the
price of $20.50 per share.
As of March 27, 1998, 3,000,000 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, 1997, 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 1998 annual
meeting of shareholders, filed with the Commission, and Annual Report to
Shareholders for the fiscal year ended December 31, 1997, furnished to the
Commission pursuant to Rule 14a-3(b), 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 sole business is
providing banking services to individuals and businesses principally in
Colquitt County, Baker County and their surrounding counties of southwest
Georgia through the Bank, its only subsidiary. The Bank commenced
operations as a national banking association in 1928. Currently, it is an
FDIC insured, state-chartered commercial bank.
The Registrant's executive office is located at 201 First Street, S. E.,
Moultrie, Georgia 31768, and its telephone number is (912) 985-1120.
All references herein to the Registrant include Southwest Georgia Financial
Corporation and the Bank unless the context indicates a different meaning.
Year 2000
The "year 2000" issue arises from the widespread use of computer programs
that rely on two-digit date codes to perform computations or
decision-making functions. Many of these programs may fail due to an
inability to properly interpret date codes beginning January 1, 2000. For
example, some programs may interpret "00" as the year 1900 instead of 2000.
In preparation for the year 2000, the Company and the Bank have implemented
a program to evaluate risks associated with the year 2000 issue. All areas
of the Company and the Bank were reviewed to determine the year 2000 status
of all outsourced systems and in-house systems and equipment.
To facilitate the assessment of both outsourced and in-house systems and
equipment of the Company and the Bank for year 2000 compliance, the systems
and equipment were segregated into two basic areas for evaluation. These
are: (1) systems or equipment that are deemed to be mission critical, and
(2) systems or equipment that are not deemed to be mission critical. All
mission critical systems were identified by the end of the third quarter of
1997. In a large number of instances it was determined that the systems
and equipment will not be affected by the year 2000 issue. Even for those
systems and equipment affected by the year 2000 issue, the Company
anticipates no material costs associated with year 2000 compliance. The
Company believes that all of its systems and equipment, outsourced and
in-house, will be year 2000-compliant by December 31, 1998. Also, the
Company believes that all testing of its systems and equipment alterations
to address the year 2000 issue should be well under way by December 31,
1998. Any Company or Bank mission critical systems or equipment determined
not to be year 2000-compliant will be monitored routinely until it is
determined that the system or equipment has become year 2000-compliant. In
addition to assessing its own systems and equipment for year 2000-compliance,
the Company and the Bank intends to canvass all large borrowers to determine
their awareness of and plans too address the year 2000 issue. There can be
no assurance, however, that the systems of the Company or the Bank or of any
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other companies, including those on which the Company and the Bank relies,
will be modified to address the year 2000 issue on a timely basis, or that the
failure by another company to properly modify its systems will not negatively
impact the systems or operations of the Company or the Bank.
General
The Registrant is a registered bank holding company. All of the
Registrant's activities are currently conducted by the Bank. 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.
Markets
The Registrant conducts banking activities in Colquitt and Baker Counties
and their surrounding counties of Georgia. Agriculture plays an important
part in the Colquitt and Baker County economy. Colquitt County grows a
large portion of Georgia's produce crops, including turnips, cabbage, sweet
potatoes, and squash. Also, Colquitt County is home to producers of
tobacco, peanuts, cotton, and pork. Manufacturing firms employ a large
number of Colquitt County residents. Apparel, lumber and wood products,
and textile manufacturers are located in the Colquitt County area. Baker
County's major crops are cotton and peanuts. The remaining major employers
are service industries and retail stores. Approximately 37,000 and 3,600
persons reside in Colquitt and Baker Counties, respectively.
Deposits
The Bank offers a full range of depository accounts and services to both
consumers and businesses. At December 31, 1997, the Registrant's deposit
base, totaling $176,435,482 consisted of $21,366,320 in noninterest-bearing
demand deposits (12.11 percent of total deposits), $45,217,777 in
interest-bearing demand deposits including money market accounts (25.63
percent of total deposits), $13,742,235 in savings deposits (7.79 percent
of total deposits), $75,625,128 in time deposits in amounts less than
$100,000 (42.86 percent of total deposits), and $20,484,022 in time
deposits of $100,000 or more (11.61 percent 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, 1997, consumer installment, real estate (including
construction and mortgage loans), and commercial (including financial and
agricultural) loans represented approximately 10.1%, 75.3% and 14.6%,
respectively, of the Bank's total loan portfolio.
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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 (the "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. The Committee also approves
all extensions of credit over $100,000. The Committee is composed of the
President and the other executive officers of the Bank, as well as certain
Bank Directors.
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 Committee, which also reviews all
loans over $100,000, whether current or past due, at least annually.
Asset/Liability Management
The Committee is charged with establishing policies to manage the assets
and liabilities of the Bank. The Committee's 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 Committee directs the Bank's
overall acquisition and allocation of funds. At its monthly meetings, the
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 102 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 executive officers, except Mr.
Clark, is employed pursuant to any employment contract. See Exhibit 10.4,
which is incorporated herein by reference.
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Competition
The banking business is highly competitive. The Bank competes with two
other depository institutions in Colquitt County but no depository
institution in Baker County. The Bank also competes with other financial
service organizations located outside Colquitt and Baker 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, 1997, the Registrant's total consolidated deposits and
assets are $176,435,482 and $213,956,661, respectively. The Registrant's
bank subsidiary is ranked as the largest among three 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 Board of Governors of the Federal
Reserve System (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 member bank
borrowings, and changes in reserve requirements against member 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 Deposit Insurance Corporation (the "FDIC").
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:
(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%.
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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. The FDIC
has issued a policy statement providing that insured banks should generally
only pay dividends out of current operating earnings. At December 31,
1997, retained earnings totaled $18.0 million of which $10.5 million has
been appropriated in order for the Bank to provide adequate lending limits
for a single borrower. The remaining $7.5 million of retained earnings are
available from the Bank to pay dividends. For 1997 the Registrant's cash
dividend payout to stockholders was 30.7% of net income.
Supervision and Regulation
The Registrant is a registered bank holding company subject to regulation
by the Federal Reserve under the Bank Holding Company Act of 1956, as
amended (the "Act"). As a bank holding company, the Registrant is required
to file with the Federal Reserve an annual report of its operations at the
end of each fiscal year and such additional information as the Federal
Reserve may require pursuant to the Act. The Federal Reserve may also make
examinations of the Registrant.
The Act requires every bank holding company to obtain prior approval of the
Federal Reserve (i) before it may acquire direct or indirect ownership or
control of more than five percent (5%) of the voting shares of any bank
that is not already controlled; (ii) before it or any of its subsidiaries,
other than a bank, may acquire all or substantially all of the assets of a
bank; and (iii) before it may merge or consolidate with any other bank
holding company. In addition, a bank holding company is generally
prohibited from engaging in non-banking activities or acquiring direct or
indirect control of voting shares of any company engaged in such
activities. This prohibition does not apply to activities found by the
Federal Reserve, by order or regulation, to be so closely related to
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 are: making or
servicing loans and certain types of leases; performing certain data
processing services; acting as fiduciary, investment or financial advisors;
providing full-service brokerage under certain conditions; 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.
The laws of Georgia require annual registration with the DBF by all Georgia
bank holding companies. Such registration includes information with
respect to the financial condition, operations, management, and
intercompany relationships of a bank holding company and its subsidiaries
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 make examinations of the Company and of the
Bank.
The Bank, as a state banking association, is subject to the supervision of,
and is regularly examined by, the FDIC and DBF. 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.
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The Registrant and the Bank are "affiliates" under the Federal Reserve Act,
which imposes certain restrictions on (i) loans by the Bank to affiliates,
(ii) investments in the stock of affiliates by the Bank, (iii) the Bank's
taking the stock of affiliates as collateral for loans by it
to a borrower, and (iv) the purchase of assets from the Company by the
Bank. Further, a bank holding company and its subsidiaries are prohibited
from engaging in certain tie-in arrangements in connection with any
extensions of credit, lease or sale of property, or furnishing of services.
Capital Adequacy
The Federal Reserve and 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
standard of total capital (as defined) to risk-rated assets of eight
percent (8%); (2) a minimum Tier One Capital (as defined) to risk-rated
assets of four percent (4%); and (3) a minimum stockholders' equity to
risk-based assets of four percent (4%). In addition, the Federal Reserve
and the FDIC have established a minimum of three percent (3%) leverage
ratio of Tier One Capital to total assets for the most highly rated banks.
"Tier One Capital" generally consists of common equity, 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 to maintain a leverage ratio greater
than three percent (3%) if it 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 capital
adequacy of banks and bank holding companies. The FDIC, the Office of
Comptroller of Currency ("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 Company's capital requirements.
Effective December 19, 1992, a new section 38 to the Federal Deposit
Insurance Corporation 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" program is based upon five regulatory zones for banks in
which all banks would be 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 a
bank in receivership or require the sale of a bank to another depository
institution when a bank's capital leverage ratio reaches two percent.
Better capitalized institutions will generally be subject to less onerous
regulation and supervision than banks with lesser amounts of capital. The
FDIC 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
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leverage ratio of under 3 percent; and (5) A "critically undercapitalized"
institution has a leverage ratio of 2 percent or less. Any institution in any
of the three undercapitalized categories would be prohibited from declaring
dividends or making capital distributions. The proposed 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, 1997, would be considered to be a "well capitalized" institution
if solely viewed on the basis of capital ratios. As an institution drops
below the "well capitalized" category, it becomes subject to increasing
scrutiny, decreasing management flexibility, and increasingly harsh regulatory
actions. It is therefore important for banks to remain in the "well
capitalized" category notwithstanding the minimum capital ratios described
above. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Capital Resources and Dividends" contained on pages 4
and 11 of the Registrant's 1997 Annual Report to Shareholders, which is
incorporated herein by reference, for the Registrant's capital position.
Recent Legislation
On April 19, 1995, the four federal bank regulatory agencies adopted
revisions to the regulations promulgated pursuant to the Community
Reinvestment Act (the "CRA") which are intended to set distinct assessment
standards for financial institutions. The revised regulations contain
three evaluation tests: (1) a lending test which will compare the
institution's market share of loans in low and moderate income areas to its
market share of loans in its entire service area and the percentage of a
bank's outstanding loans to low and moderate income areas or individuals,
(ii) a services test which will evaluate the provisions of services that
promote the availability of credit to low and moderate income areas, and
(iii) an investment test which will evaluate an institution's record of
investments in organizations designed to foster community development,
small and minority-owned businesses, and affordable housing lending,
including state and local government housing or revenue bonds. The
regulations are designed to reduce some paperwork requirements of the
current regulations and provide regulators, institutions, and community
groups with a more objective and predictable manner with which to evaluate
the CRA performance of financial institutions. The rule became effective
on January 1, 1996, at which time evaluation under streamlined procedures
began for institutions with assets of less than $250 million that are owned
by a holding company with total assets of less than $1 billion. It is not
expected that these regulations will have any appreciable impact upon the
Registrant and the Bank.
Congress, bank regulatory agencies, and various federal agencies such as
HUD, the Federal Trade Commission, and the Department of Justice
(collectively the "Federal Agencies") are responsible for implementing the
nation's fair lending laws and have been increasingly concerned that
prospective home buyers and other borrowers are experiencing discrimination
in their efforts to obtain loans. In recent years the Department of
Justice has filed suit against financial institutions which it determined
had discriminated against borrowers, seeking fines and restitution for
borrowers who allegedly suffered from discriminatory practices. Most, if
not all, of these suits have been settled (some for substantial sums)
without a full adjudication on the merits.
On March 8, 1994, the Federal Agencies, in an effort to clarify what
constitutes lending discrimination and specify the factors the agencies will
consider in determining if lending discrimination exists, announced a joint
policy statement detailing specific discriminatory practices prohibited under
the Equal Opportunity Act and the Fair Housing Act. In the policy statement,
three methods of proving lending discrimination were identified: (1) overt
evidence of discrimination, when a lender blatantly discriminates on a
prohibited basis; (2) evidence of disparate treatment, when a lender treats
applicants differently based on a prohibited factor even where this is no
showing that the treatment was motivated by prejudice or a conscious
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intention to discriminate against a person; and (3) evidence of disparate
impact, when a lender applies a practice uniformly to all applicants, but the
practice has a discriminatory effect, where such practices are neutral on
their face and are applied equally, unless the practice can be justified on
the basis of business necessity.
On September 23, 1994, President Clinton signed the Reigle Community
Development and Regulatory Improvement Act of 1994 (the "Regulatory
Improvement Act"). The Regulatory Improvement Act contains funding for
community development projects through banks and community development
financial institutions and also numerous regulatory relief provisions
designed to eliminate certain duplicative regulations and paperwork
requirements.
On September 29, 1994, President Clinton signed the Reigle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (the "Federal Interstate
Bill") which amends federal law to permit a bank holding company to acquire
existing banks in any state effective September 29, 1995. Further, any
interstate bank holding company is permitted to merge its various bank
subsidiaries into a single bank with interstate branches after May 31,
1997. States have the authority to authorize interstate branching prior to
June 1, 1997, or alternatively, to opt out of interstate branching prior to
that date. The Georgia Financial Institutions Code was amended in 1994 to
permit the acquisition of a Georgia bank or bank holding company by
out-of-state bank holding companies beginning July 1, 1995. On September
29, 1995, the interstate banking provisions of the Georgia Code were
superseded by the Federal Interstate Bill.
On January 26, 1996, the Georgia legislature adopted a bill (the "Georgia
Intrastate Bill") to permit, effective July 1, 1996, any Georgia bank or
group of affiliated banks under one holding company to establish up to an
aggregate of three new or additional branch banks anywhere within the State
of Georgia excluding any branches established by a bank in a county which
it is already located. After July 1, 1998, all restrictions on state-wide
branching are removed. Before adoption of the Georgia Intrastate Bill,
Georgia only permitted branching via merger or consolidation with an
existing bank or in certain other limited circumstances.
FDIC Insurance Agreements
The Bank is subject to FDIC deposit insurance assessments for the Bank
Insurance Fund (the "BIF"). In the first six months of 1995, the Bank was
assessed $.23 per $100 of deposits based upon a risk-based system whereby
banks are assessed on a sliding scale depending upon their placement in
nine separate supervisory categories. The scale ranges from $.23 per $100
of deposits for the healthiest banks (those with the highest capital, best
management, and best overall condition) to as much as $.31 per $100 of
deposits for the less-healthy institutions, for an average of $.259 per
$100 of deposits.
On August 8, 1995, the FDIC lowered the BIF premium for healthy banks 83%
from $.23 per $100 in deposits to $.04 per $100 in deposits, while
retaining the $.31 level for the riskiest banks. The average assessment
rate was therefore reduced from $.232 to $.044 per $100 of deposits. The
new rate took effect on September 29, 1995. On September 15, 1995, the
FDIC refunded $89,130 to the Bank for premium overpayments in the second
and third quarter of 1995. On November 14, 1995, the FDIC again lowered
the BIF premium for healthy banks from $.04 per $100 of deposits to zero
for the highest rated institutions (92% of the industry). Had the current
rates been in effect for all of 1994 and 1995, the annual FDIC insurance
premiums paid by the Bank would have been reduced by $270,000 and $160,000,
respectively. In 1996 the Bank paid $58,000 in insurance premiums with
respect to certain OAKER (Thrift) deposits acquired from the Resolution
Trust Corporation which are assessed at $.23 per $100 of deposits.
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On September 29, 1996, the Economic Growth and Regulatory Paperwork
Reduction Act of 1996 was enacted (the "1996 Act"). The 1996 Act's major
accomplishment was to provide for the recapitalization of the Savings
Association Insurance Fund ("SAIF") by levying a one-time special
assessment on SAIF deposits to bring the fund to a reserve ratio equal to
$.25 per $100 of insured deposits. Also, the 1996 Act provided that
beginning in 1997, BIF assessments would be used to help pay off the $780
million in annual interest payments on the $8 billion Financing Corporation
("FICO") bonds issued in the late 1980's as part of the government rescue
of the thrift industry. The law provides that BIF assessments for FICO
bond payments must be set at a rate equal to 20% of the SAIF rates for such
assessments for 1997, 1998, and 1999. After 1999 all FDIC insured
institutions will pay the same assessment rates. For the first six months
of 1997, the assessment for the FICO bond payments will be $.0132 per $100
of deposits for BIF deposits and $.0648 per $100 of deposits for SAIF
deposits. One of the provisions of the 1996 Act was to eliminate the
minimum $2,000 per year charge for deposit insurance. As a result, the
Bank paid no premium for deposit insurance in 1997 but paid a FICO bond
assessment of $35,688. It is estimated that the Bank will pay no premium
for deposit insurance in 1998 and will pay FICO bond assessments of
$35,000.
Executive Officers Of The Registrant
Executive officers are elected by the Board of Directors annually in April
and hold office until the following April unless they earlier 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, 1998, are as follows:
Officer Of The
Name (Age) Principal Position Registrant Since
John H. Clark Chief Executive Officer and Vice 1980
(60) Chairman of the Registrant and Bank
Cecil Alvis Chief Operating Officer and President 1982
(63) of the Registrant and Bank
Violet K. Weaver Executive Vice President and Secretary 1981
(62) of the Registrant and Bank
John J. Cole, Jr. Senior Vice President of the 1984
(47) Registrant and Senior Vice President
and Cashier of the Bank
George R. Kirkland Senior Vice President and Treasurer 1991
(47) of the Registrant and Senior Vice
President and Comptroller of the Bank
C. Broughton Williams Senior Vice President of the Registrant 1993
(61) and Bank
Frank E. Davis Senior Vice President of the Registrant 1996
(44) and Senior Vice President and Trust
Officer of the Bank
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C. Wallace Sansbury Senior Vice President of the Registrant 1996
(55) and Bank
Randall L. Webb, Jr. Senior Vice President of the Registrant 1994
(49) and Bank
Lamar F. Seay Vice President of the Registrant 1992
(58) and Bank
Judy M. Owens Vice President of the Registrant 1993
(53) and Vice President and Trust
Officer of the Bank
Geraldine A. Ferrone Vice President of the Registrant 1995
(51) and Bank
Robert M. Carlton, Jr. Vice President of the Registrant 1995
(56) and Bank
Margaret H. Lewis Vice President of the Registrant 1995
(53) and Bank
Charles H. Bannister Vice President of the Registrant 1997
(39) and Bank
John W. Gandy Vice President of the Registrant 1997
(44) and Bank
Guerry O. Holm Vice President of the Registrant 1997
(57) and Bank
Peggy C. Weeks Vice President of the Registrant 1997
(60) 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. Clark has served as Chief Executive Officer and Vice Chairman of the
Board of both the Bank and the Registrant since December 1996. Previously,
he has served as President and Director of the Bank since 1978 and
President and Director of the Registrant since 1980.
Mr. Alvis became Chief Operating Officer and President of the Bank and
Registrant in December 1996. Previously, he had been Executive Vice
President of the Bank and the Registrant since 1993. Also, he has served
as Senior Vice President of the Bank since 1986 and Vice President of the
Registrant since 1982.
Mrs. Weaver became Executive Vice President in December 1996. Previously,
she has served as Senior Vice President and Secretary of the Bank since
1986 and became Senior Vice President and Secretary of the Registrant in
1992. Previously, she had been Vice President and Secretary of the
Registrant since 1990 and Vice President and Secretary of the Bank from
1976 to 1986.
Mr. Cole became Senior Vice President and Cashier of the Bank and Senior
Vice President of the Registrant in 1992. Previously, he had been Senior
Vice President and Comptroller of the Bank from 1986 to 1992 and Vice
President and Treasurer of the Registrant since 1984.
-11-
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. Also, he had served as Vice
President of Duval Federal Savings Association from 1990 to 1991 and Vice
President of Florida National Bank from 1986 to 1990.
Mr. Williams became Senior Vice President of the Bank and Registrant in
1994. Previously, he had been Vice President of the Bank and Registrant
since 1993. Also, he had served as Moultrie City President and Chairman of
the Local Board of Advisory Directors of NationsBank of Georgia, N.A. from
1987 to 1992 and with Citizens and Southern National Bank of Georgia from
1959 to 1987.
Mr. Davis became Senior Vice President and Trust Officer of the Bank and
Senior Vice President of the Registrant in June 1996. Previously, he had
been Vice President and Trust Officer of First National Bank in
Gainesville, Georgia, from 1995 to 1996 and Vice President and Senior Trust
Officer of Centura Bank in Wilmington, N.C., from 1988 to 1995.
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. 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.
Mr. Seay became Vice President of the Registrant in 1992 and has served as
Vice President of the Bank since 1988.
Mrs. Owens became Vice President and Trust Officer 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.
Mrs. Ferrone became Vice President of the Bank and Registrant in 1995.
Previously, she had been Assistant Vice President of the Bank since 1988.
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. Lewis became Vice President of the Bank and Registrant in 1995.
Previously, she had been Assistant Vice President of the Bank since 1986.
Mr. Bannister became Vice President of the Bank and Registrant in 1997.
Previously, he had been Assistant Vice President of the Bank since 1993 and
has served in various other positions with the Bank since 1989.
Mr. Gandy became Vice President of the Bank and Registrant in 1997.
Previously, he had been Assistant Vice President of the Bank since 1993.
Also, he had been Assistant Vice President of Nationsbank of Georgia, N.A.,
since 1985.
Mr. Holm became Vice President of the Bank and Registrant in 1997.
Previously, he had been Assistant Vice President of the bank since 1996.
Also, he had been a Field Executive over sales, service, and marketing with
General Motors.
Mrs. Weeks became 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.
-12-
Selected Statistical Information
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, 1997
Average
Balance Interest Rate
ASSETS (Thousands Of Dollars)
Cash and due from banks $ 5,361 $ - - %
Earning assets:
Interest-bearing deposits 5,132 283 5.51%
Loans, net (a) (b) (c) 117,029 12,630 10.79%
Taxable investment securities
held to maturity 70,601 4,487 6.36%
Nontaxable investment securities (c)
held to maturity 248 29 11.69%
Other investment securities
available for sale 2,000 496 24.80%
Federal funds sold and securities
purchased with agreements to resell 1,870 101 5.40%
Total earning assets 196,880 18,026 9.16%
Premises and equipment 3,419
Other assets 5,578
Total assets $ 211,238
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits $ 20,918 $ - - %
Interest-bearing liabilities:
Savings deposits 60,612 1,600 2.64%
Time deposits 92,408 5,070 5.49%
Federal funds purchased and securities
sold under agreements to repurchase 1,939 107 5.52%
Other borrowings 9,500 572 6.02%
Total interest-bearing liabilities 164,459 7,349 4.47%
Other liabilities 2,026
Total liabilities 187,403
Common stock 3,000
Surplus 2,012
Retained earnings 21,238
Less treasury stock ( 2,415)
Total shareholders' equity 23,835
Total liabilities and shareholders' equity $ 211,238
Net interest income and margin $ 10,677 5.42%
-13-
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, 1996
Average
Balance Interest Rate
ASSETS (Thousands Of Dollars)
Cash and due from banks $ 6,136 $ - - %
Earning assets:
Interest-bearing deposits 2,778 151 5.44%
Loans, net (a) (b) (c) 113,123 12,302 10.87%
Taxable investment securities
held to maturity 70,362 4,525 6.43%
Nontaxable investment securities (c)
held to maturity 500 56 11.20%
Other investment securities
available for sale 1,388 99 7.13%
Federal funds sold and securities
purchased with agreements to resell 1,984 104 5.24%
Total earning assets 190,135 17,237 9.07%
Premises and equipment 3,327
Other assets 5,718
Total assets $ 205,316
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits $ 19,622 $ - - %
Interest-bearing liabilities:
Savings deposits 61,516 1,622 2.64%
Time deposits 89,227 4,902 5.49%
Federal funds purchased and securities
sold under agreements to repurchase 2,067 117 5.66%
Other borrowings 9,500 571 6.01%
Total interest-bearing liabilities 162,310 7,212 4.44%
Other liabilities 1,993
Total liabilities 183,925
Common stock 3,000
Surplus 1,972
Retained earnings 18,853
Less treasury stock ( 2,434)
Total shareholders' equity 21,391
Total liabilities and shareholders' equity $ 205,316
Net interest income and margin $ 10,025 5.27%
-14-
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): 1997 -
$470 and 1996 - $518.
(c) Reflects taxable equivalent adjustments using a tax rate of 34 percent
for 1997 and 1996.
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
1997 1996 (Decrease) Volume Rate
(Thousands Of Dollars)
Interest earned on:
Interest-bearing deposits $ 283 $ 151 $ 132 $ 130 $ 2
Loans, net (b) 12,630 12,302 328 416 ( 88)
Taxable investment
securities held to maturity 4,487 4,525 ( 38) 17 ( 55)
Nontaxable investment
securities (b) held to
maturity 29 56 ( 27) ( 29) 2
Other securities available for sale 496 99 397 60 337
Federal funds sold and
securities purchased
under agreements to resell 101 104 ( 3) ( 6) 3
Total interest income 18,026 17,237 789 588 201
Interest paid on:
Savings deposits 1,600 1,622 ( 22) ( 22) -
Time deposits 5,070 4,902 168 168 -
Federal funds purchased
and securities sold under
agreements to repurchase 107 117 ( 10) ( 7) ( 3)
Other borrowings 572 571 1 - 1
Total interest expense 7,349 7,212 137 139 ( 2)
Net interest earnings $ 10,677 $ 10,025 $ 652 $ 449 $ 203
-15-
Interest Differentials, Continued
(a)
Due To
Increase Changes In
1996 1995 (Decrease) Volume Rate
(Thousands Of Dollars)
Interest earned on:
Interest-bearing deposits $ 151 $ 234 $ ( 83) $( 66) $( 17)
Loans, net (b) 12,302 12,405 ( 103) ( 43) ( 60)
Taxable investment
securities held to maturity 4,523 4,173 352 417 ( 65)
Nontaxable investment
securities (b) held to
maturity 56 56 - - -
Other securities available for sale 99 92 7 7 -
Federal funds sold and
securities purchased
under agreements to resell 104 163 ( 59) ( 44) ( 15)
Total interest income 17,237 17,123 114 271 ( 157)
Interest paid on:
Savings deposits 1,622 1,850 ( 228) ( 9) ( 219)
Time deposits 4,902 4,703 199 49 150
Federal funds purchased
and securities sold under
agreements to repurchase 117 120 ( 3) ( 9) 6
Other borrowings 571 569 2 - 2
Total interest expense 7,212 7,242 ( 30) 31 ( 61)
Net interest earnings $ 10,025 $ 9,881 $ 144 $ 240 $ ( 96)
(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 1997 and 1996 in adjusting interest on nontaxable loans and
securities to a fully taxable basis.
-16-
Investment Portfolio
The carrying values of investment securities for the indicated years are
presented below:
Years Ended December 31,
1997 1996 1995
(Thousands Of Dollars)
Securities held to maturity:
U. S. Treasury and other
U. S. Government agencies $ 62,561 $ 71,475 $ 69,519
State and municipal 2,080 2,580 500
Total securities held to maturity $ 64,641 $ 74,055 $ 70,019
Securities available for sale:
Equity securities $ 2,185 $ 1,425 $ 1,308
Total securities available for sale $ 2,185 $ 1,425 $ 1,308
The following table shows the maturities of securities held to maturity at
December 31, 1997, and the weighted average yields (for nontaxable
obligations on a fully taxable basis assuming a 34% tax rate) of such
securities. All securities available for sale are equity securities with
no maturity.
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
Securities (Thousands Of Dollars)
Held to maturity:
U. S. Treasury and
Other U. S.
Government
Agencies $ 21,464 6.13% $ 41,097 6.53% $ - - $ - -
State and
municipal 50 7.00% 250 7.05% 430 7.41% 1,350 7.83%
Total $ 21,514 6.13% $ 41,347 6.53% $ 430 7.41% $ 1,350 7.83%
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, 1997 and 1996, securities carried at
approximately $24,872,000 and $24,653,000, respectively, were pledged to
secure public and trust deposits as required by law.
-17-
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.
Years Ended December 31,
1997 1996 1995
(Thousands Of Dollars)
Commercial, financial and
agricultural $ 17,076 $ 18,450 $ 17,706
Real estate - construction - - -
Real estate - mortgage 90,111 85,338 87,319
Other 448 208 45
Installment 12,052 12,369 11,700
Total loans 119,687 116,365 116,770
Less:
Unearned income 143 156 177
Allowance for loan losses 1,999 2,009 2,140
Net loans $ 117,545 $ 114,200 $ 114,453
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, 1997.
Commercial,
Financial
and
Agricultural
(Thousands Of Dollars)
Distribution of loans which are due:
In one year or less $ 12,533
After one year but within five years 3,586
After five years 957
Total $ 17,076
-18-
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, 1997.
Loans With
Predetermined Loans With
Rates Floating Rates Total
(Thousands Of Dollars)
Commercial, financial
and agricultural $ 675 $ 3,868 $ 4,543
Risk Elements In The Loan Portfolio
The following table presents information concerning outstanding balances of
nonperforming loans at December 31, 1997 and 1996. 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 ("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 Loans Loans Problem Loans Total
(Thousands Of Dollars)
December 31, 1997 $ 96 $ 385 $ 0 $ 211 $ 692
December 31, 1996 $ 225 $ 74 $ 70 $ 229 $ 598
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.
-19-
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.
Years Ended December 31,
1997 1996 1995 1994
(Thousands Of Dollars)
Average amount of net
loans outstanding $ 117,029 $ 113,123 $ 113,515 $ 110,523
Amount of allowance for
loan losses at beginning
of period $ 2,009 $ 2,140 $ 2,028 $ 1,825
Reserve for loan losses of
acquired affiliate - - - 162
Amount of loans charged off
during period:
Commercial, financial and
agricultural 69 234 35 12
Real estate - mortgage 11 1 51 10
Installment 234 136 127 99
Total loans charged off 314 371 213 121
Amount of recoveries during period:
Commercial, financial, and
agricultural 26 11 - 1
Real estate - mortgage 0 5 11 2
Installment 48 44 54 39
Total loans recovered 74 60 65 42
Net loans charged off
during period 240 311 148 79
Additions to allowance for
loan losses charged to operating
expense during period 230 180 260 120
Amount of allowance for
loan losses at end
of period $ 1,999 $ 2,009 $ 2,140 $ 2,028
Ratio of net charge-offs
during period to average
loans outstanding for
the period .21% .27% .13% .07%
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.
-20-
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, 1997 December 31, 1996
Percent Of Percent Of
Loans In Loans In
Category Allocation Category Allocation Category
(Thousands Of Dollars)
Domestic:
Commercial, financial
and agricultural $ 271 13.6% $ 402 15.9%
Real estate - mortgage 1,523 76.2% 1,406 73.8%
Installment 205 10.2% 201 10.3%
Total $ 1,999 100.0% $ 2,009 100.0%
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.
-21-
Deposits
The average amounts of deposits for the last three years are presented below.
Years Ended December 31,
1997 1996 1995
(Thousands Of Dollars)
Domestic Bank Offices
Noninterest-bearing
demand deposits $ 20,918 $ 19,622 $ 19,094
NOW accounts 34,332 34,020 35,773
Money market deposit
accounts 11,905 11,894 10,104
Savings 14,373 15,602 15,928
Time deposits 92,409 89,227 88,316
Total interest-bearing 153,019 150,743 150,121
Total average deposits $ 173,937 $ 170,365 $ 169,215
The maturity of certificates of $100,000 or more as of December 31, 1997,
are presented below.
(Thousands Of Dollars)
3 months or less $ 5,404
Over 3 months through 6 months 5,005
Over 6 months through 12 months 7,803
Over 12 months 2,272
Total outstanding $ 20,484
-22-
Return On Equity And Assets
Certain financial ratios are presented below.
Years Ended December 31,
1997 1996 1995
Return on average assets 1.62% 1.51% 1.46%
Return on average equity 14.37% 14.46% 15.40%
Dividend payout ratio
(dividends declared
divided by net income) 30.65% 21.52% 26.79%
Average equity to average
assets ratio 11.28% 10.42% 9.49%
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. Also, in 1991 the Registrant acquired an 11,000
square foot federal branch banking office, and an adjacent 5,000 square
foot building was renovated in 1992 for the Bank's operations center. The
Trust division has been relocated to the federal branch building located at
25 Second Avenue, Moultrie, Georgia. In 1993 the Registrant purchased a
vacant building and lot located across the street from the main office at
205 Second Street, S. E., Moultrie, Georgia. This building was renovated
for the Bank's Administrative Services Division offices, training and
meeting rooms, and record storage. In 1994 the Registrant acquired a 4,400
square foot Baker County branch banking office located at the intersection
of Highways 91 and 200, Newton, 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 federal branch office, and
two additional automated teller machines located in Doerun and Norman Park,
Georgia. These automated teller machines are linked to the Honor network
of automated teller machines.
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 1997 for a
vote of the security holders through the solicitation of proxies or
otherwise.
-23-
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 Operation" on pages 4 through 11 of the Registrant's 1997 Annual
Report to Shareholders and is incorporated herein by reference.
Item 6 - Selected Financial Data
Five years of selected financial data appears on page 2 and 3 of the
Registrant's 1997 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 4 through 11 of
the Registrant's 1997 Annual Report to Shareholders and is incorporated
herein by reference. For further information about the Registrant, see
selected statistical information on pages 12 - 22 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 12 and 13 of the Registrant's 1997 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 14 through 39
of the Registrant's 1997 Annual Report to Shareholders are incorporated
herein by reference.
Item 9 - Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
During the Registrant's two most recent fiscal years, the Registrant did
not change accountants and had no disagreement with its accountants on any
matter of accounting principles or practices or financial statement
disclosure.
-24-
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 used in connection with the
solicitation of proxies for the Registrant's annual meeting of shareholders
to be held on April 28, 1998, 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 used in connection with the solicitation of
proxies for the Registrant's annual meeting of shareholders to be held on
April 28, 1998, filed with the Commission, is incorporated herein by
reference.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
The information contained under the heading "Voting Securities and
Principal Holders" in the definitive Proxy Statement used in connection
with the solicitation of proxies for the Registrant's annual meeting of
shareholders to be held on April 28, 1998, 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 used in connection
with the solicitation of proxies for the Registrant's annual meeting of
shareholders to be held on April 28, 1998, filed with the Commission, is
incorporated herein by reference.
-25-
Item 14 - 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-KSB dated December 31, 1994, and 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 S-18 dated January 23, 1990, previously filed with the
Commission and incorporated herein by reference).*
10.3 Employment Agreement of John H. Clark, as amended.*
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).*
10.5 Advances, specific collateral pledged, and security
agreement between the Federal Home Loan Bank of Atlanta and
the Bank dated January 27, 1992, and confirmation of credit
services transaction for new money advances in the amount
of $4,000,000 dated February 10, 1992, $2,500,000 dated
September 4, 1992, and $1,500,000 dated September 8, 1992
(included as Exhibit 10.10 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.
10.7 Employee Stock Ownership Plan and Trust of the Registrant
as amended by Amendment No. 2 (included as Exhibit 10.13 to
the Registrant's Form 10-KSB dated December 31, 1994,
previously filed with the Commission and incorporated
herein by reference).*
-26-
Exhibit Number Description Of Exhibit
10.8 Dividend Reinvestment and Share Purchases Plan of the
Registrant dated April 23, 1997.
10.9 Key Individual Stock Option Plan of the Registrant dated
March 19, 1997.*
13 Southwest Georgia Financial Corporation Annual Report to
Shareholders for the fiscal year ended December 31, 1997.
With the exception of information expressly incorporated
herein, the 1997 Annual Report to Shareholders is not
deemed to be filed as part of this Report on Form 10-K.
22 Subsidiaries of the Registrant (included as Exhibit 22 to
the Registrant's Form 10-KSB dated December 31, 1995,
previously filed with the Commission and incorporated
herein by reference).
99 Proxy Statement relating to the 1998 Annual Meeting of
Shareholders.
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this form.
b. No reports on Form 8-K were filed by the Registrant during the fourth
quarter of 1997.
-27-
Exhibit Index
Exhibit Number Description Of Exhibit Page Number
10.3 Employment Agreement of John H. Clark, as amended. 32
10.6b Trust under the Registrant's Supplemental Retirement
Plan dated August 20, 1997. 34
10.8 Dividend Reinvestment and Share Purchase Plan of the
Registrant dated April 23, 1997. 35
10.9 Key Individual Stock Option Plan of the Registrant
dated March 19, 1997. 42
13 Southwest Georgia Financial Corporation Annual 51
Report to Shareholders for the fiscal year ended
December 31, 1997. With the exception of
information expressly incorporated herein, the
1997 Annual Report to Shareholders is not deemed
to be filed as part of this Report on Form 10-K.
99 Proxy Statement relating to the 1998 Annual Meeting 87
of Shareholders.
-28-
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 24, 1998 By: /s/ John H. Clark
JOHN H. CLARK
VICE CHAIRMAN 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/ John H. Clark Date: March 24, 1998
JOHN H. CLARK
Vice Chairman and Chief Executive Officer
[Principal Executive Officer]
/s/ George R. Kirkland Date: March 24, 1998
GEORGE R. KIRKLAND
Senior Vice-President and Treasurer
[Principal Financial and Accounting Officer]
/s/ Leo T. Barber, Jr. Date: March 24, 1998
LEO T. BARBER, JR.
Chairman and Director
/s/ Albert W. Barber Date: March 24, 1998
ALBERT W. BARBER
Director
/s/ Jack Short Date: March 24, 1998
JACK SHORT
Director
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SIGNATURES, Continued
/s/ Robert M. Duggan Date: March 24, 1998
ROBERT M. DUGGAN
Director
/s/ Richard L. Moss Date: March 24, 1998
RICHARD L. MOSS
Director
/s/ E. J. McLean, Jr. Date: March 24, 1998
E. J. MCLEAN, JR.
Director
/s/ Johnny R. Slocumb Date: March 24, 1998
JOHNNY R. SLOCUMB
Director
/s/ Roy Reeves Date: March 24, 1998
ROY REEVES
Director
/s/ Glenn D. Moon Date: March 24, 1998
GLENN D. MOON
Director
/s/ Lee C. Redding Date: March 24, 1998
LEE C. REDDING
Director
/s/ Cecil W. Alvis Date: March 24, 1998
CECIL W. ALVIS
Chief Operating Officer and Director
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