Southwest Georgia Financial Corporation (NYSE Amex: SGB), a full service community bank holding company, today reported net income of $304 thousand, or $0.12 per diluted share, for the fourth quarter of 2010, down from a net income of $706 thousand, or $0.28 per diluted share, for the fourth quarter of 2009. The decline in net income was partially a result of an increase in salaries and employee benefits of $298 thousand mostly attributed to additional staffing at the new banking center in Valdosta, Georgia. The fourth quarter earnings comparison reflected a $221 thousand nonrecurring gain on the sale of securities recognized in last year's fourth quarter. Also, other decreases in income were in service charges on deposit accounts and provision for market value changes in foreclosed property.

Return on average equity for the fourth quarter of 2010 decreased to 4.42% compared with 11.11% for the same period in 2009. Return on average assets for the quarter was 0.40%, a decrease of 58 basis points when compared with the same period in 2009.

For the year ended December 31, 2010, net income was $1.86 million, or $0.73 per diluted share, compared with a net income of $1.81 million, or $0.71 per diluted share, for the same period in 2009. Year to date net earnings increases occurred mainly in net interest income, gain on sales of securities, reductions in legal fees and FDIC insurance assessment expenses. Return on average equity decreased to 6.89% for 2010 compared with 7.48% for the same period last year. Return on average assets decreased to 0.62% compared with 0.65% for the same period in 2009.

DeWitt Drew, President and CEO of Southwest Georgia Financial commented, ?The economic downturn continues to challenge our region, however, our strength and stability in the market and our focused efforts enabled us to achieve solid results in 2010. We continued to invest in our people and communities, fully aware of the near-term impact that would have on earnings.?

Mr. Drew continued, ?While we made progress in establishing our presence in Valdosta with our new banking center, there is more to be done to drive market share growth. Accordingly, we announced in early January the strategic hiring of four new team members with significant experience in the market area.?

Balance Sheet Trends and Asset Quality

At December 31, 2010, total assets increased $5.4 million, or 1.9%, to $296.4 million from $291.0 million at the end of last year's fourth quarter. The bulk of the increase in assets and changes in the asset mix occurred in investment securities growing $15 million primarily due to reduction in cash and due from banks balances and employing funds from deposit growth. Also, total loans decreased $2.5 million to $157.7 million compared with $160.2 million at December 31, 2009.

The loan loss reserve coverage to total loans was 1.75% at the end of the fourth quarter of 2010 compared with 1.58% at the end of the fourth quarter of 2009. Nonperforming assets were reduced to $3.5 million, or 1.19% of total assets, in the fourth quarter of 2010, down from $5.5 million, or 1.88% of total assets in the same period last year. There were $3.3 million of foreclosed properties in nonperforming assets at the end of the current quarter compared with $3.8 million at the prior year end.

Mr. Drew noted, ?Credit quality continued to improve in the fourth quarter as our nonperforming assets declined 35.4% year-over-year. We are encouraged by the progress made in credit quality metrics, but recognize that an extremely difficult operating environment still exists. We will continue to monitor credit trends and maintain an appropriate level of reserve, while preserving the strength of our balance sheet.?

Total deposits of $239.5 million were up $4.1 million, or 1.7%, compared with the previous year-end, due mainly to increases in money market and NOW accounts. Average deposits were up $13.2 million to $244.1 million for the fourth quarter of 2010 when compared with the same period last year.

Shareholders' equity was $26.8 million as of December 31, 2010, up from $25.5 million at December 31, 2009. On a per share basis, book value at year end was $10.51, up from $10.02 at the end of 2009. The Corporation maintained a strong capital position with a total risk-based capital ratio of 17.58% at December 31, 2010, in excess of the minimum regulatory guidelines of 10% for a well capitalized financial institution. The Corporation has approximately 2.5 million shares of common stock outstanding.

Quarterly Revenue and Expenses

Net interest income for the fourth quarter of 2010 decreased slightly to $2.53 million compared with $2.61 million for the same period in 2009, reflecting lower interest income partially offset by lower costs of deposits. During the quarter, the Corporation provisioned $150 thousand for loan losses compared with the same amount for the fourth quarter of 2009. Total interest income decreased to $3.18 million when compared with $3.48 million in the fourth quarter of last year, reflecting lower interest income from investment securities, of $270 thousand, and slightly lower interest and fees earned on loans of $26 thousand. The Corporation's net interest margin was 3.84% for the fourth quarter of 2010, down 38 basis points from the same period last year. The decline in net interest margin was mainly impacted from securities which were either sold, called or matured, and reinvested into lower yielding securities or overnight balances carried at the Federal Reserve Bank. Total interest expense was $653 thousand for the fourth quarter of 2010, down $214 thousand from the same period a year ago, primarily due to a lower interest rate environment. The average rate paid on interest-bearing time deposits decreased 64 basis points for the quarter compared with the same period a year ago.

Noninterest income, which was 26.6% of the Corporation's total revenue for the quarter, decreased to $1.15 million when compared with $1.41 million for the fourth quarter of 2009. Revenue from service charges on deposit accounts decreased 14.8% to $379 thousand for the current quarter when compared with the same period a year ago. Also negatively impacting noninterest income was a provision for market value changes in foreclosure property of $75 thousand in the fourth quarter of 2010. These decreases were partially offset by revenue from mortgage banking services which increased $64 thousand compared with the prior year's fourth quarter as well as a gain on the disposition of a split dollar life insurance policy. Last year's fourth quarter was positively impacted by a $221 thousand gain on the sale of investment securities.

Total noninterest expense increased to $3.15 million from $2.83 million for the fourth quarter of 2009. Most of the increase was related to staffing the new Valdosta banking center of $298 thousand, as well as an increase in occupancy and equipment expenses of $37 thousand. All other categories of noninterest expense remained relatively flat.

2010 Results

Net interest income after provision for loan losses for 2010 increased $139 thousand to $9.53 million compared with $9.39 million for the same period in 2009 primarily due to $783 thousand in lower interest paid on deposits, which more than offset the $580 thousand decline in total interest income. A decline in interest on securities was due to the sale of longer-term mortgage-backed securities and high risk corporate notes. The Corporation recognized a $600 thousand provision for loan losses in 2010, compared with a provision for loan losses of $536 thousand in 2009. Net interest margin declined 24 basis points to 3.90% for 2010, when compared with the same period a year ago.

For 2010, noninterest income was $5.09 million, down from $5.12 million in the same period of 2009. The majority of the decline was a result of a $275 thousand provision for changes in market value of foreclosed properties and a decrease in service charges on deposit accounts of $199 thousand compared with same period last year. These decreases were partially offset by a $535 thousand gain on the sale of securities compared with a $255 thousand gain in 2009. Other increases in income occurred from insurance, trust, retail brokerage, and mortgage banking services activities which increased $56 thousand, $28 thousand, $34 thousand and $24 thousand, respectively.

Noninterest expense decreased slightly to $12.18 million in 2010 compared with $12.19 million in the same period last year. A decrease of $749 thousand, or 21.9%, in other operating expenses was mainly due to lower legal expense and insurance assessments to the FDIC. This decline was partially offset by increased expenses related to the new Valdosta banking center.

Mr. Drew concluded, ?Although the economy is slowly recovering, regulatory burdens continue to outpace growth opportunities. Despite those challenges, we will continue to focus on providing superior customer service and proactive support and advice to our customers and believe that our strategic positioning, strong balance sheet and capital levels position us to sustain our franchise, capture market share and build customer loyalty.?

Dividends

In February 2010, the Corporation paid a cash dividend of $0.10 per common share. The Corporation's objective is to retain sufficient equity required to support efforts to capture greater market share and expand outside of its historic footprint.

About Southwest Georgia Financial Corporation

Southwest Georgia Financial Corporation is a state-chartered bank holding company with approximately $296 million in assets headquartered in Moultrie, Georgia. Its primary subsidiary, Southwest Georgia Bank, offers comprehensive financial services to consumer, business, and governmental customers. The current banking facilities include the main office located in Colquitt County, and branch offices located in Baker County, Thomas County, Worth County, and Lowndes County. In addition to conventional banking services, the bank provides investment planning and management, trust management, mortgage banking, and commercial and individual insurance products. Insurance products and advice are provided by Southwest Georgia Insurance Services which is located in Colquitt County. Mortgage banking for primarily commercial properties is provided by Empire Financial Services, Inc., a mortgage banking services firm.

More information on Southwest Georgia Financial Corp. and Southwest Georgia Bank can be found at its website: www.sgfc.com.

SAFE HARBOR STATEMENT

This news release contains certain brief forward-looking statements concerning the Company's outlook. The Company cautions that any forward-looking statements are summary in nature involve risks and uncertainties and are subject to change based on various important factors, many of which may be beyond the Company's control. Accordingly, the Company's future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. The following factors, among others, could affect the Company's actual results and could cause actual results in the future to differ materially from those expressed or implied in any forward-looking statements included in this release: the ability of the bank to manage the interest rate environment, the success of reducing operating costs, overall economic conditions, customer preferences, the impact of competition, the ability to execute its strategy for growth. Additional information regarding these risks and other factors that could cause the Company's actual results to differ materially from our expectations is contained in the Company's filings with the Securities and Exchange Commission. Except as otherwise required by federal securities laws, Southwest Georgia Financial undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF CONDITION
(Dollars in thousands except per share data)
           
(Unaudited) (Audited) (Audited)
December 31, December 31, December 31,
2010   2009   2008  
ASSETS
Cash and due from banks $ 5,112 $ 10,050 $ 7,470
Interest-bearing deposits in banks 10,959 13,247 30
Investment securities available for sale 54,946 62,008 83,212
Investment securities held to maturity 46,255 24,195 12,108
Federal Home Loan Bank stock, at cost 1,650 1,650 1,618
 
Loans, less unearned income and discount 157,733 160,230 149,070
Allowance for loan losses (2,755 ) (2,533 ) (2,376 )
Net loans 154,978   157,697   146,694  
Premises and equipment 9,221 7,777 5,783
Foreclosed assets, net 3,288 3,832 211
Intangible assets 641 848 1,056
Other assets 9,354   9,704   9,115  
 
Total assets $ 296,404   $ 291,008   $ 267,297  
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
NOW accounts $ 29,239 $ 25,075 $ 25,283
Money market 50,468 45,694 35,701
Savings 22,635 21,365 21,213
Certificates of deposit $100,000 and over 32,472 30,190 28,755
Other time accounts 65,859   72,085   64,216  
Total interest-bearing deposits 200,673 194,409 175,168
Noninterest-bearing deposits 38,858   41,022   39,373  
Total deposits 239,531   235,431   214,541  
 
Federal funds purchased 0 0 430
Other borrowings 5,000 5,000 15,000
Long-term debt 21,000 21,000 10,000
Accounts payable and accrued liabilities 4,098   4,047   4,010  
Total liabilities 269,629   265,478   243,981  
Shareholders' equity:
Common stock - par value $1; 5,000,000 shares
authorized; 4,293,835 shares issued (*) 4,294 4,294 4,294
Additional paid-in capital 31,701 31,701 31,701
Retained earnings 17,772 16,325 14,512
Accumulated other comprehensive income (878 ) (676 ) (1,077 )
Total 52,889 51,644 49,430
Treasury stock - at cost (**) (26,114 ) (26,114 ) (26,114 )
Total shareholders' equity 26,775   25,530   23,316  
Total liabilities and shareholders' equity $ 296,404   $ 291,008   $ 267,297  
 
* Common stock - shares outstanding 2,547,837 2,547,837 2,547,837
** Treasury stock - shares 1,745,998 1,745,998 1,745,998
SOUTHWEST GEORGIA FINANCIAL CORPORATION
CONSOLIDATED INCOME STATEMENT (unaudited*)
(Dollars in thousands except per share data)
                 
For the Three Months For the Twelve Months
Ended December 31, Ended December 31,
Interest income: 2010*   2009* 2010*   2009
Interest and fees on loans $ 2,476 $ 2,502 $ 9,944 $ 9,524
Interest and dividend on securities available for sale 426 852 2,041 3,610
Interest on securities held to maturity 265 109 969 425
Dividends on Federal Home Loan Bank stock 2 2 5 5
Interest on deposits in banks 11   11 58   33
Total interest income 3,180   3,476 13,017   13,597
 
Interest expense:
Interest on deposits 442 656 2,054 2,885
Interest on federal funds purchased 0 0 0 1
Interest on other borrowings 44 36 154 169
Interest on long-term debt 167   175 681   617
Total interest expense 653   867 2,889   3,672
Net interest income 2,527 2,609 10,128 9,925
Provision for loan losses 150   150 600   536
Net interest income after provision for losses on loans 2,377   2,459 9,528   9,389
 
Noninterest income:
Service charges on deposit accounts 379 445 1,567 1,766
Income from trust services 54 55 241 213
Income from retail brokerage services 72 78 300 266
Income from insurance services 277 274 1,125 1,069
Income from mortgage banking services 353 289 1,351 1,327
Provision for foreclosed property losses (75 ) 0 (275 ) 0
Net gain on the sale or disposition of assets 52 0 31 0
Net gain on the sale of securities 0 221 535 255
Other income 40   44 214   228
Total noninterest income 1,152   1,406 5,089   5,124
 
Noninterest expense:
Salary and employee benefits 1,793 1,495 6,971 6,360
Occupancy expense 239 209 891 846
Equipment expense 178 171 739 667
Data processing expense 162 166 692 686
Amortization of intangible assets 52 52 208 208
Other operating expense 730   735 2,676   3,425
Total noninterest expense 3,154   2,828 12,177   12,192
 
Income before income tax expense 375 1,037 2,440 2,321
Provision for income taxes 71   331 584   508
Net income $ 304   $ 706 $ 1,856   $ 1,813
 
Net income per share, basic $ 0.12   $ 0.28 $ 0.73   $ 0.71
Net income per share, diluted $ 0.12   $ 0.28 $ 0.73   $ 0.71
Dividends paid per share $ -   $ - $ 0.10   $ 0.07
Basic weighted average shares outstanding 2,547,837   2,547,837 2,547,837   2,547,837
Diluted weighted average shares outstanding 2,547,837   2,547,837 2,547,894   2,547,837

SOUTHWEST GEORGIA FINANCIAL CORPORATION

Financial Highlights

(Dollars in thousands except per share data)

           
At December 31 2010 2009
Assets $ 296,404 $ 291,008
Loans, less unearned income & discount $ 157,733 $ 160,230
Deposits $ 239,531 $ 235,431
Shareholders' equity $ 26,775 $ 25,530
 
Three Months Ended December 31, Twelve Months Ended December 31,
Performance Data & Ratios 2010 2009 2010 2009
Net income $ 304 $ 706 $ 1,856 $ 1,813
Earnings per share, basic $ 0.12 $ 0.28 $ 0.73 $ 0.71
Earnings per share, diluted $ 0.12 $ 0.28 $ 0.73 $ 0.71
Dividends paid per share $ - $ - $ 0.10 $ 0.07
Return on assets 0.40 % 0.98 % 0.62 % 0.65 %
Return on equity 4.42 % 11.11 % 6.89 % 7.48 %
Net interest margin (tax equivalent) 3.84 % 4.22 % 3.90 % 4.14 %
Dividend payout ratio - - 13.73 % 9.84 %
Efficiency ratio 83.21 % 68.16 % 77.91 % 78.53 %
 
Asset Quality Data & Ratios
Total nonperforming loans $ 186 $ 1,521 $ 186 $ 1,521
Total nonperforming assets $ 3,542 $ 5,484 $ 3,542 $ 5,484
Net loan charge offs $ 398 $ 45 $ 378 $ 379
Reserve for loan losses to total loans 1.75 % 1.58 % 1.75 % 1.58 %
Nonperforming loans/total loans 0.12 % 0.95 % 0.12 % 0.95 %
Nonperforming assets/total assets 1.19 % 1.88 % 1.19 % 1.88 %
Net charge offs (recoveries)/ average loans 0.99 % 0.11 % 0.24 % 0.25 %
 
Capital Ratios
Average common equity to average total assets 9.14 % 8.84 % 8.95 % 8.71 %
Tier 1 capital ratio 16.33 % 14.90 % 16.33 % 14.90 %
Tier 1 leverage ratio 8.97 % 8.83 % 8.97 % 8.83 %
Total risk based capital ratio 17.58 % 16.14 % 17.58 % 16.14 %
Book value per share $ 10.51 $ 10.02 $ 10.51 $ 10.02
Tangible book value per share $ 10.26 $ 9.69 $ 10.26 $ 9.69
Selected Financial Data
(Dollars in thousands except per share data)
                           
Quarterly4th Qtr3rd Qtr2nd Qtr1st Qtr4th Qtr
Averages20102010201020102009
Assets $ 301,355 $ 305,419 $ 298,618 $ 297,496 $ 287,348
Loans, less unearned income & discount $ 159,635 $ 160,584 $ 160,761 $ 160,451 $ 159,180
Deposits $ 244,120 $ 243,395 $ 242,010 $ 241,100 $ 230,903
Equity $ 27,532 $ 27,412 $ 26,727 $ 26,012 $ 25,402
Return on assets 0.40 % 0.31 % 1.21 % 0.55 % 0.98 %
Return on equity 4.42 % 3.49 % 13.56 % 6.26 % 11.11 %
Net income $ 304 $ 239 $ 906 $ 407 $ 706
Net income per share, basic $ 0.12 $ 0.09 $ 0.36 $ 0.16 $ 0.28
Net income per share, diluted $ 0.12 $ 0.09 $ 0.36 $ 0.16 $ 0.28
Dividends paid per share $ - $ - $ - $ 0.10 $ -

Investors and Media:
George R. Kirkland, 229-873-3830
Senior Vice President and Treasurer
investorinfo@sgfc.com