ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies
of Southwest Georgia Financial Corporation (the “Corporation”) and its direct and indirect subsidiaries, including
its wholly-owned banking subsidiary, Southwest Georgia Bank (the “Bank”), conform to U.S. generally accepted accounting
principles (“GAAP”) and to general practices within the banking industry. The following is a description of the more
significant of those policies.
Principles of Consolidation
The consolidated financial statements
include the accounts of the Corporation and its direct and indirect subsidiaries. All significant intercompany accounts and transactions
have been eliminated in the consolidation.
Nature of Operations
The Corporation offers comprehensive
financial services to consumer, business, and governmental entity customers through its banking offices in southwest Georgia. Its
primary deposit products are money market, NOW, savings and certificates of deposit, and its primary lending products are consumer
and commercial mortgage loans. In addition to conventional banking services, the Corporation provides investment planning and management,
trust management, and commercial and individual insurance products. Insurance products and advice are provided by the Bank’s
Southwest Georgia Insurance Services Division.
The Corporation’s primary
business is providing banking services through the Bank to individuals and businesses principally in the counties of Colquitt,
Baker, Worth, Lowndes, Tift and the surrounding counties of southwest Georgia. The Bank operates six branch offices in its trade
area. Trust and retail brokerage services are offered at an office building located at 25 2nd Avenue SW in Moultrie, and lending
services are offered in Valdosta at 3520 North Valdosta Road.
Use of Estimates
The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates.
Material estimates that
are particularly susceptible to significant change relate to the determination of the allowance for loan losses and the valuation
of real estate acquired in connection with foreclosures or in satisfaction of loans. In connection with these evaluations, management
obtains independent appraisals for significant properties.
A substantial portion of the Corporation’s
loans are secured by real estate located primarily in Georgia. Accordingly, the ultimate collection of these loans is susceptible
to changes in the real estate market conditions of this market area.
Cash and Cash Equivalents and
Statement of Cash Flows
For purposes of reporting cash
flows, the Corporation considers cash and cash equivalents to include all cash on hand, deposit amounts due from banks, interest-bearing
deposits in other banks, and federal funds sold.
The Corporation maintains its
cash balances in several financial institutions. Accounts at the financial institutions are secured by the Federal Deposit Insurance
Corporation (the “FDIC”) up to $250,000. The Corporation had uninsured deposits of $137,883 at December 31, 2019.
The Corporation also maintains
a cash balance in an account held with the Federal Home Loan Bank (FHLB).
The FHLB is not a financial institution,
and as a result, funds held are not subject to FDIC coverage. As of December 31, 2019, the Corporation had an outstanding balance
of $101,641 with the FHLB, which is entirely uninsured.
The Corporation also maintains
a cash balance in an account held with the Federal Reserve Bank of Atlanta. Although funds held by this institution are not insured
by the FDIC, funds are backed by the by the full faith and credit of the United States government. As of December 31, 2019, the
Corporation had an outstanding balance of $24,384,735 with the Federal Reserve Bank of Atlanta.
Investment Securities
Investment securities that management
has the positive intent and ability to hold to maturity are classified as “held to maturity” and recorded at amortized
cost. Securities not classified as held to maturity or trading are classified as available for sale and recorded at fair value
with unrealized gains and losses (net of tax effect) reported in other comprehensive income.
Purchase premiums and discounts
are recognized in interest income using the interest method over the terms of the securities. Declines in the fair value of held
to maturity and available for sale securities below their cost that are deemed to be other-than-temporarily impaired are reflected
in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) the length of time
and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer,
and (3) the intent and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow
for any anticipated recovery in fair value. Gains and losses on the sale of securities are recorded on the trade date and are determined
using the specific identification method.
Premises and Equipment
Premises and equipment are stated
at cost, less accumulated depreciation and amortization. Depreciation has been calculated primarily using the straight-line method
for buildings and building improvements over the assets estimated useful lives. Equipment and furniture are depreciated using the
modified accelerated recovery system method over the assets estimated useful lives for financial reporting and income tax purposes
for assets purchased on or before December 31, 2003. For assets acquired after 2003, the Corporation used the straight-line method
of depreciation. The following estimated useful lives are used for financial statement purposes:
Land improvements
|
5 – 31 years
|
Building and improvements
|
10 – 40 years
|
Machinery and equipment
|
5 – 10 years
|
Computer equipment
|
3 – 5 years
|
Office furniture and fixtures
|
5 – 10 years
|
All of the Corporation’s
leases are operating leases and are not capitalized as assets for financial reporting purposes. Maintenance and repairs are charged
to expense and betterments are capitalized.
Long-lived assets are evaluated
regularly for other-than-temporary impairment. If circumstances suggest that their value may be impaired and the write-down would
be material, an assessment of recoverability is performed prior to any write-down of the asset. Impairment on intangibles is evaluated
at each balance sheet date or whenever events or changes in circumstances indicate that the carrying amount should be assessed.
Impairment, if any, is recognized through a valuation allowance with a corresponding charge recorded in the income statement.
Bank Property Held for Sale
In 2016, the Bank’s former
branch in Pavo, Georgia, was transferred from premises to bank property held for sale and depreciation was discontinued. The property
was booked at the lower of cost or market value based on the current appraisal of $211,500. On November 30, 2018, the Corporation
sold this property and recorded a loss in the amount of $96,750.
Loans and Allowances for Loan Losses
Loans are stated at principal
amounts outstanding less unearned income and the allowance for loan losses. Interest income is credited to income based on the
principal amount outstanding at the respective rate of interest except for interest on certain installment loans made on a discount
basis which is recognized in a manner that results in a level-yield on the principal outstanding.
Accrual of interest income is
discontinued on loans when, in the opinion of management, collection of such interest income becomes doubtful. Accrual of interest
on such loans is resumed when, in management’s judgment, the collection of interest and principal becomes probable.
Fees on loans and costs incurred
in origination of most loans are recognized at the time the loan is placed on the books. Because loan fees are not significant,
the results on operations are not materially different from the results which would be obtained by accounting for loan fees and
costs as amortized over the term of the loan as an adjustment of the yield.
A loan is considered impaired
when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments
of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in
determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest
payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.
Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration
all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the
borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment
is measured on a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows
discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral
if the loan is collateral dependent.
Large groups of smaller balance
homogeneous loans are collectively evaluated for impairment. Accordingly, the Corporation does not separately identify individual
consumer and residential loans for impairment disclosures.
The allowance for loan losses
is established through a provision for loan losses charged to expense. Loans are charged against the allowance for loan losses
when management believes the collection of the principal is unlikely. The allowance is an amount which management believes will
be adequate to absorb estimated losses on existing loans that may become uncollectible based on evaluation of the collectability
of loans and prior loss experience. This evaluation takes into consideration such factors as changes in the nature and volume of
the loan portfolios, current economic conditions that may affect the borrowers’ ability to pay, overall portfolio quality,
and review of specific problem loans.
Management believes that the allowance
for loan losses is adequate. While management uses available information to recognize losses on loans, future additions to the
allowance may be necessary based upon changes in economic conditions. Also, various regulatory agencies, as an integral part of
their examination process, periodically review the Corporation’s allowance for loan losses. Such agencies may require the
Corporation to recognize additions to the allowance based on their judgments of information available to them at the time of their
examination.
Foreclosed Assets
In accordance with policy guidelines
and regulations, properties acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the
fair market value less costs to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations
are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to
sell. A valuation allowance is established to record market value changes in foreclosed assets. Revenue and expenses from operations
and changes in the valuation allowance are included in net expenses from foreclosed assets. There was no valuation allowance for
foreclosed asset losses at December 31, 2019. Foreclosed assets totaled $273,873 at December 31, 2019, up from $127,605 at December
31, 2018.
Intangible Assets
Intangible assets are amortized
over a determined useful life using the straight-line basis. These assets are evaluated annually as to the recoverability of the
carrying value. The remaining intangibles were fully amortized during the year ended December 31, 2019.
Credit Related Financial Instruments
In the ordinary course of business,
the Corporation has entered into commitments to extend credit, including commitments under credit card arrangements, commercial
letters of credit, and standby letters of credit. Such financial instruments are recorded when they are funded.
Retirement Plans
The Corporation and its direct
and indirect subsidiaries have post-retirement plans covering substantially all employees. The Corporation makes annual contributions
to the plans in amounts not exceeding the regulatory requirements.
Bank Owned Life Insurance
The Bank owns life insurance policies
on a group of employees. Banking laws and regulations allow the Bank to purchase life insurance policies on certain employees in
order to help offset the Bank’s overall employee compensation costs. The beneficial aspects of these life insurance policies
are tax-free earnings and a tax-free death benefit, which are realized by the Bank as the owner of the policies. The cash surrender
value of these policies is included as an asset on the balance sheet, and any increases in cash surrender value are recorded as
noninterest income on the statement of income. At December 31, 2019 and 2018, the policies had a value of $6,913,103 and $6,779,242,
respectively, and were 13.7% and 15.5%, respectively, of shareholders’ equity. These values are within regulatory guidelines.
Income Taxes
The Corporation and its direct
and indirect subsidiaries file a consolidated income tax return. Each subsidiary computes its income tax expense as if it filed
an individual return except that it does not receive any portion of the surtax allocation. Any benefits or disadvantages of the
consolidation are absorbed by the parent company. Each subsidiary pays its allocation of federal income taxes to the parent
company or receives payment from the parent company to the extent that tax benefits are realized.
The Corporation reports income
under the Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 740, Income Taxes, which
requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included
in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse. Recognition of deferred tax assets is based on management’s belief that
it is more likely than not that the tax benefit associated with certain temporary differences and tax credits will be realized.
The Corporation will recognize
a tax position as a benefit only if it is more likely than not that the tax position would be sustained in a tax examination, with
an examination being presumed to occur. The amount recognized is the largest amount of a tax benefit that is greater than fifty
percent likely of being realized on examination. No benefit is recorded for tax positions that do not meet the more than likely
than not test.
The Corporation recognizes penalties
related to income tax matters in income tax expense. The Corporation is subject to U.S. federal and Georgia state income
tax audit for returns for the tax period ending December 31, 2017 and subsequent years.
Accumulated Other Comprehensive
Income (Loss)
Accumulated other comprehensive
income (loss) includes all changes in shareholders’ equity during a period, except those resulting from transactions with
shareholders. Besides net income, other components of the Corporation’s accumulated other comprehensive income (loss) includes
the after tax effect of changes in the net unrealized gain/loss on securities available for sale and the unrealized gain/loss on
pension plan benefits.
Trust Department
Trust income is included in the
accompanying consolidated financial statements on the cash basis in accordance with established industry practices. Reporting of
such fees on the accrual basis would have no material effect on reported income.
Advertising Costs
It is the policy of the Corporation
to expense advertising costs as they are incurred. The Corporation does not engage in any direct-response advertising and accordingly
has no advertising costs reported as assets on its balance sheet. Costs that were expensed during 2019, 2018, and 2017 were $248,422,
$264,269, and $192,016, respectively.
Regulatory Developments
The Corporation and the Bank are
subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Corporation and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Corporation and the Bank must meet specific capital guidelines that involve quantitative
measures of their assets, liabilities and certain off-balance sheet items, as calculated under regulatory accounting practices.
The capital amounts and classifications are also subject to qualitative judgments by the federal banking agencies about components,
risk weightings and other factors.
Quantitative measures established
by regulation to ensure capital adequacy require the Corporation and the Bank to maintain minimum Tier 1 leverage, Tier 1 risk-based
capital and Total risk-based capital ratios. In July 2013, the Board of Governors of the Federal Reserve System published the Basel
III Capital Rules. These rules establish a comprehensive capital framework applicable to all depository institutions, certain bank
holding companies with total consolidated assets below a certain threshold and all and savings and loan holding companies except
for those that are substantially engaged in insurance underwriting or commercial activities. These rules implement higher minimum
capital requirements for banks and certain bank holding companies, include a new common equity Tier 1 capital requirement and establish
criteria that instruments must meet to be considered common equity Tier 1 capital, additional Tier 1 capital or Tier 2 capital.
The Basel III Capital Rules became
effective for the Bank on January 1, 2015, subject to a phase-in period, but are not applicable to bank holding companies, like
the Corporation, with less than $1 billion in total consolidated assets that meet certain criteria.
The minimum capital level requirements
applicable to the Bank under the Basel III Capital Rules are: (i) a common equity Tier 1 risk-based capital ratio of 4.5%;
(ii) a Tier 1 risk-based capital ratio of 6% (increased from 4%); (iii) a Total risk-based capital ratio of 8% (unchanged from
the rules effective for the year ended December 31, 2014); and (iv) a Tier 1 leverage ratio of 4% for all institutions. Common
equity Tier 1 capital will consist of retained earnings and common stock instruments, subject to certain adjustments.
The Basel III Capital Rules
set forth changes in the methods of calculating certain risk-weighted assets, which in turn affect the calculation of risk-based
ratios. The new risk weightings are more punitive for assets held by banks that are deemed to be of higher risk. These changes
were also effective beginning January 1, 2015.
The Basel III Capital Rules
also introduced a “capital conservation buffer” requiring an additional 2.50% common equity Tier 1 capital, which is
in addition to each capital ratio and was phased-in over a three-year period beginning in January 2016.
As of December
31, 2019, the Bank is considered to be well-capitalized under the Basel III Capital Rules. There have been no conditions or events
since December 31, 2019, that management believes has changed the Bank’s status as “well-capitalized.” The capital
ratios of the Corporation and Bank are presented in Note 15 of the Corporation’s Notes to Consolidated Financial Statements.
Adoption
of New Accounting Standards
In March
2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-05,
Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. The purpose of this ASU
is to codify the SEC's guidance issued in Staff Accounting Bulletin 118. The amendments in this update were effective upon issuance.
The adoption of ASU 2018-05 had no material impact on the Corporation’s consolidated financial statements.
In March
2018, FASB issued ASU 2018-04, Investment - Debt Securities (Topic 320) and Regulated Operations (Topic 980): Amendments to SEC
Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 117 and SEC Release No. 33-9273. The purpose of this ASU is to codify
the SEC's guidance issued in Staff Accounting Bulletin 117. The amendments in this update were effective upon issuance. The adoption
of ASU 2018-04 had no material impact on the Corporation’s consolidated financial statements.
In February
2018, FASB issued ASU 2018-03, Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10). This
Update clarifies certain aspects of the guidance issued in ASU 2016-01 including (i) an entity measuring an equity security using
the measurement alternative may make an irrevocable election to change its measurement approach to a fair value method under Topic
820 for that security and any identical or similar investments of the same issuer, (ii) fair value adjustments under the measurement
alternative should be as of the date the observable transaction for a similar security occurred, (iii) requiring the remeasurement
of the entire value of forward contracts and purchased options when observable transactions occur on the underlying equity securities,
(iv) financial liabilities for which the fair value option is elected should follow the guidance in paragraph 825-10-45-5, (v)
changes in the fair value of financial liabilities for which the fair value option is elected relating to the instrument-specific
credit risk should first be measured in the currency of denomination and then both components of the change in fair value should
be remeasured into the reporting entity's functional currency using end-of-period spot rates, and (vi) the prospective transition
approach should only be applied for instances in which the measurement alternative is applied. The guidance was effective for interim
periods beginning after June 15, 2018 and may be early adopted provided ASU 2016-01 was adopted. The Company adopted the amendments
in this ASU effective January 1, 2018. The adoption of ASU 2018-03 had no material impact on the Corporation’s consolidated
financial statements.
In February
2018, the FASB issued ASU No. 2018-02, Income Statement – Reclassification of Certain Tax Effects from Accumulated Other
Comprehensive Income. ASU 2018-02 provides guidance on accounting for the effects of the Tax Cuts and Jobs Act, which was enacted
in December, 2017. The guidance allows reclassification of the tax effects that were stranded in accumulated other comprehensive
income as a result of the tax rate change from accumulated other comprehensive income to retained earnings. This guidance is effective
for fiscal years beginning after December 15, 2018. The adoption of ASU 2018-02 had no material impact on the Corporation’s
consolidated financial statements.
In May 2017,
the FASB issued ASU No. 2017-09, “Stock Compensation, Scope of Modification Accounting.” This ASU clarifies when changes
to the terms of conditions of a share-based payment award must be accounted for as modifications. Companies will apply the modification
accounting guidance if the value, vesting conditions or classification of the award changes. The new guidance should reduce diversity
in practice and result in fewer changes to the terms of an award being accounted for as modifications, as the guidance will allow
companies to make certain non-substantive changes to awards without accounting for them as modifications. It does not change the
accounting for modifications. ASU No. 2017-09 is effective for interim and annual reporting periods beginning after December 15,
2017; early adoption is permitted. The adoption of ASU 2017-09 had no material impact on the Corporation’s consolidated financial
statements.
In March
2017, the FASB issued ASU No. 2017-08, Receivables – Nonrefundable Fees and Other Costs (Topic 310-20): Premium Amortization
on Purchased Callable Debt Securities. This ASU shortens the amortization period for certain callable debt securities held at a
premium. The premium on individual callable debt securities shall be amortized to the earliest call date. This guidance does not
apply to securities for which prepayments are estimated on a large number of similar loans where prepayments are probable and reasonable
estimable. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods
within those fiscal years. Early adoption is permitted. This update should be adopted on a modified retrospective basis with a
cumulative effect adjustment to retained earnings on the date of adoption. The adoption of ASU 2017-08 had no material impact on
the Corporation’s consolidated financial statements.
In March
2017, the FASB issued ASU No. 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic
Pension Cost and Net Periodic Postretirement Benefit Cost. The updated accounting guidance requires changes to the presentation
of the components of net periodic benefit cost on the income statement by requiring service cost to be presented with other employee
compensation costs and other components of net periodic pension cost to be presented outside of any subtotal of operating income.
This ASU also stipulates that only the service cost component of net benefit cost is eligible for capitalization. This ASU is effective
for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of ASU 2017-07
had no material impact on the Corporation’s consolidated financial statements.
In January
2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805), which provides a new framework for determining whether transactions
should be accounted for as acquisitions or disposals of assets or businesses. This ASU is effective for public business entities
for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption will be permitted and should apply
it to transactions that have not been reported in financial statements that have been issued or made available for issuance. The
adoption of ASU 2017-01 had no material impact on the Corporation’s consolidated financial statements.
Revenue
Recognition
On January
1, 2018, the Corporation adopted ASC Topic 606, using the modified retrospective method. Disclosures of revenue from contracts
with customers for periods beginning after January 1, 2018, are presented under ASC Topic 606 and have not materially changed
from the prior year amounts. Noninterest income, within the scope of this guidance, is recognized as services are transferred
to customers in an amount that reflects the considerations expected to be entitled to in exchange for those services. The Corporation's
revenue streams that were in scope include service charges on deposit accounts, income from insurance services, income from trust
services, Automated Teller Machine (“ATM”) surcharge and other noninterest income.
Services
Charges on Deposit Accounts - Service charges on deposit accounts primarily consist of monthly maintenance charges, analysis charges
and Non-sufficient funds (“NSF”) charges. The NSF charges and certain service charges are fixed and the performance
obligation is typically satisfied at the time of the related transaction. The consideration for analysis charges and monthly maintenance
charges are variable as the fee can be reduced if the customer meets certain qualifying metrics. The Corporation's performance
obligations are satisfied either at the time of the transaction or over the course of a month.
Income from
Insurance Services – Income from insurance services consists primarily of property and casualty insurance, life, health,
and disability insurance. Property and casualty, life, health, and disability insurance includes the brokerage of both personal
and commercial coverages. The placement of the policy is completion of the Corporation's performance obligation and revenue is
recognized at that time. The Corporation's commission is primarily a percentage of the premium.
Income from
Trust Services – Income from Trust services consists of revenue generated from services provided for corporate, pension,
and personal trusts, trustee services, and administrative services for employee benefit plans. The Corporation’s performance
obligation and revenue is recognized once the service has been performed.
ATM Surcharge
- ATM surcharge represents revenues earned from certain terminal activity. ATM surcharges primarily consist of charges assessed
to our customers for using a non-Bank ATM or a non-Bank customer using our ATM. Such surcharges generally are recognized concurrently
with the delivery of services on a daily basis.
Other - Other
noninterest income primarily consists of transaction based revenue where the performance obligation is satisfied concurrent with
the revenue recognition.
Recent
Accounting Pronouncements
In December
2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 removes
specific exceptions to the general principles in Topic 740. This update simplifies the accounting for income taxes by eliminating
certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating
income taxes in an interim period and the recognition for deferred tax liabilities for outside basis differences. The ASU also
improves financial statement preparers’ application for income tax-related guidance, simplifies GAAP for franchise taxes
and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis
of goodwill. ASU 2019-12 will be effective on January 1, 2021 and is being reviewed for any material impact on the Corporation’s
consolidated financial statements.
In
March 2019, the FASB issued ASU No. 2019-01, Leases: Codification Improvements. ASU 2019-01 provides clarification
to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance
sheet and disclosing essential information about leasing transactions. This ASU (1) allows the fair value of the underlying
asset reported by lessors that are not manufacturers or dealers to continue to be its cost and not fair value as measured
under the fair value definition, (2) allows for the payments received from sales-type and direct financing leases to continue
to be presented as results from investing activities in the statement of cash flows, and (3) clarifies that entities do not
have to disclose the effect of the lease standard on adoption year interim amounts. ASU 2019-01 will be effective on January
1, 2020 and is being reviewed for any material impact on the Corporation’s consolidated financial
statements.
In June
2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments, which is essentially the final rule on use of the “CECL” model, or current expected credit losses. Among
other things, the amendments in this ASU require the measurement of all expected credit losses for financial assets held at the
reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions
and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss
estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the
full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt
securities and purchased financial assets with credit deterioration. For SEC filers, the amendments in this ASU are effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with later effective dates
for smaller reporting companies, like the Corporation, and non-SEC registrant public companies and other organizations. Early
adoption will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2018. In December 2018, the federal bank regulatory agencies approved a final rule that modifies their regulatory
capital rules and provides institutions the option to phase in over a three-year period any day-one regulatory capital effects
of the new accounting standard. In October 2019, the FASB affirmed its previously proposed amendment to delay the effective date
for small reporting companies to interim and annual reporting periods beginning after December 15, 2022, including interim periods
within those fiscal years. Early adoption is permitted. The adoption of ASU No. 2016-13 is being reviewed for any material impact
on the Corporation’s consolidated financial statements.
2. INVESTMENT SECURITIES
Investment securities have been
classified in the consolidated balance sheets according to management’s intent. The amortized costs of securities as shown
in the consolidated balance sheets and their estimated fair values at December 31 were as follows:
Securities Available For
Sale:
December 31, 2019
|
|
Amortized
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Estimated
Fair Value
|
U.S. government treasury securities
|
|
$
|
3,972,502
|
|
|
$
|
54,688
|
|
|
$
|
0
|
|
|
$
|
4,027,190
|
|
U.S. government agency securities
|
|
|
37,508,686
|
|
|
|
1,014,199
|
|
|
|
24,759
|
|
|
|
38,498,126
|
|
State and municipal securities
|
|
|
4,352,782
|
|
|
|
181,538
|
|
|
|
0
|
|
|
|
4,534,320
|
|
Residential mortgage-backed securities
|
|
|
20,553,780
|
|
|
|
226,155
|
|
|
|
13,708
|
|
|
|
20,766,227
|
|
Total debt securities AFS
|
|
$
|
66,387,750
|
|
|
$
|
1,476,580
|
|
|
$
|
38,467
|
|
|
$
|
67,825,863
|
|
December 31, 2018
|
|
Amortized
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Estimated
Fair Value
|
U.S. government treasury securities
|
|
$
|
982,044
|
|
|
$
|
0
|
|
|
$
|
27,474
|
|
|
$
|
954,570
|
|
U.S. government agency securities
|
|
|
45,823,595
|
|
|
|
264,567
|
|
|
|
881,157
|
|
|
|
45,207,005
|
|
State and municipal securities
|
|
|
7,394,278
|
|
|
|
30,579
|
|
|
|
46,922
|
|
|
|
7,377,935
|
|
Residential mortgage-backed securities
|
|
|
4,769,668
|
|
|
|
21,579
|
|
|
|
17,180
|
|
|
|
4,774,067
|
|
Total debt securities AFS
|
|
$
|
58,969,585
|
|
|
$
|
316,725
|
|
|
$
|
972,733
|
|
|
$
|
58,313,577
|
|
Securities Held to Maturity:
December 31, 2019
|
|
Amortized
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Estimated
Fair Value
|
State and municipal securities
|
|
$
|
20,443,004
|
|
|
$
|
460,952
|
|
|
$
|
3,425
|
|
|
$
|
20,900,531
|
|
Residential mortgage-backed securities
|
|
|
5,043,957
|
|
|
|
173,092
|
|
|
|
0
|
|
|
|
5,217,049
|
|
Total securities HTM
|
|
$
|
25,486,961
|
|
|
$
|
634,044
|
|
|
$
|
3,425
|
|
|
$
|
26,117,580
|
|
December 31, 2018
|
|
Amortized
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Estimated
Fair Value
|
State and municipal securities
|
|
$
|
30,582,785
|
|
|
$
|
208,480
|
|
|
$
|
67,434
|
|
|
$
|
30,723,831
|
|
Residential mortgage-backed securities
|
|
|
6,244,288
|
|
|
|
49,490
|
|
|
|
7,282
|
|
|
|
6,286,496
|
|
Total securities HTM
|
|
$
|
36,827,073
|
|
|
$
|
257,970
|
|
|
$
|
74,716
|
|
|
$
|
37,010,327
|
|
At December 31, 2019, securities
with a carrying value of $61,695,810 and a market value of $63,183,218 were pledged as collateral for public deposits and other
purposes as required by law. Of these amounts, approximately $25,000,827 was over pledged and could be released if necessary for
liquidity needs. At December 31, 2018, securities with a carrying value of $59,182,556 and a market value of $58,502,416 were pledged
as collateral for public deposits and other purposes as required by law.
At December 31, 2019 and 2018,
we had both 1 – 4 family and multifamily mortgage loans pledged to secure Federal Home Loan Bank (“FHLB”) advances.
The FHLB requires the Bank to hold a minimum investment of stock, based on membership and the level of activity. As of December
31, 2019, this stock investment was $1,714,600.
There were no investments in obligations
of any state or municipal subdivisions which exceeded 10% of the Corporation’s shareholders’ equity at December 31,
2019.
The amortized cost and estimated
fair value of debt securities at December 31, 2019, by contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.
|
|
December 31, 2019
|
Available for Sale:
|
|
Amortized
Cost
|
|
Estimated
Fair
Value
|
Amounts maturing in:
|
|
|
|
|
One year or less
|
|
$
|
2,003,753
|
|
|
$
|
2,008,857
|
|
After one through five years
|
|
|
30,515,506
|
|
|
|
31,324,990
|
|
After five through ten years
|
|
|
13,117,995
|
|
|
|
13,522,004
|
|
After ten years
|
|
|
20,750,496
|
|
|
|
20,970,012
|
|
Total debt securities AFS
|
|
$
|
66,387,750
|
|
|
$
|
67,825,863
|
|
Held
to Maturity:
|
|
|
Amortized
Cost
|
|
|
|
Estimated
Fair
Value
|
|
Amounts maturing in:
|
|
|
|
|
|
|
|
|
One year or less
|
|
$
|
2,515,949
|
|
|
$
|
2,522,936
|
|
After one through five years
|
|
|
9,487,983
|
|
|
|
9,704,341
|
|
After five through ten years
|
|
|
8,864,208
|
|
|
|
9,094,103
|
|
After ten years
|
|
|
4,618,822
|
|
|
|
4,796,200
|
|
Total debt securities HTM
|
|
$
|
25,486,961
|
|
|
$
|
26,117,580
|
|
The following tables summarize
the activity of security sales by intention and year for years ending 2019, 2018, and 2017.
Securities Available For
Sale:
December 31,
|
|
2019
|
|
2018
|
|
2017
|
Proceeds of sales
|
|
$
|
9,358,503
|
|
|
$
|
2,879,000
|
|
|
$
|
5,741,211
|
|
Gross gains
|
|
$
|
174,283
|
|
|
$
|
0
|
|
|
$
|
186,610
|
|
Gross losses
|
|
|
0
|
|
|
|
(165,369
|
)
|
|
|
0
|
|
Net gains (losses) on sales of available for sale securities
|
|
$
|
174,283
|
|
|
$
|
(165,369
|
)
|
|
$
|
186,610
|
|
Securities Held to Maturity:
No held to maturity securities
were sold during the years ending 2019, 2018, and 2017.
Information pertaining to securities
with gross unrealized losses aggregated by investment category and length of time that individual securities have been in continuous
loss position, follows:
December 31, 2019
|
|
Less Than Twelve Months
|
|
Twelve Months or More
|
Gross Unrealized Losses
|
|
Fair
Value
|
|
Gross Unrealized Losses
|
|
Gross
Unrealized Losses
|
|
Fair
Value
|
Securities Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporarily impaired debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government agency securities
|
|
$
|
24,760
|
|
|
|
975,240
|
|
|
$
|
0
|
|
|
$
|
0
|
|
State and municipal securities
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Residential mortgage-backed securities
|
|
|
12,571
|
|
|
|
3,961,786
|
|
|
|
1,136
|
|
|
|
99,289
|
|
Total debt securities available for sale
|
|
$
|
37,331
|
|
|
$
|
4,937,026
|
|
|
$
|
1,136
|
|
|
$
|
99,289
|
|
Securities Held to Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporarily impaired debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
|
|
$
|
3,425
|
|
|
$
|
472,171
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Total securities held to maturity
|
|
$
|
3,425
|
|
|
$
|
472,171
|
|
|
$
|
0
|
|
|
$
|
0
|
|
December 31, 2018
|
|
Less Than Twelve Months
|
|
Twelve Months or More
|
Gross Unrealized Losses
|
|
Fair
Value
|
|
Gross Unrealized Losses
|
|
Gross
Unrealized Losses
|
|
Fair
Value
|
Securities Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporarily impaired debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government treasury securities
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
27,474
|
|
|
$
|
954,570
|
|
U.S. government agency securities
|
|
|
33,077
|
|
|
|
6,073,337
|
|
|
|
848,080
|
|
|
|
20,015,052
|
|
State and municipal securities
|
|
|
3,209
|
|
|
|
306,792
|
|
|
|
43,713
|
|
|
|
1,813,173
|
|
Residential mortgage-backed securities
|
|
|
14,199
|
|
|
|
3,032,237
|
|
|
|
2,981
|
|
|
|
129,410
|
|
Total debt securities available for sale
|
|
$
|
50,485
|
|
|
$
|
9,412,366
|
|
|
$
|
922,248
|
|
|
$
|
22,912,205
|
|
Securities Held to Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporarily impaired debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal securities
|
|
$
|
20,209
|
|
|
$
|
7,359,536
|
|
|
$
|
47,225
|
|
|
$
|
2,782,627
|
|
Residential mortgage-backed securities
|
|
|
5,671
|
|
|
|
879,487
|
|
|
|
1,611
|
|
|
|
89,464
|
|
Total securities held to maturity
|
|
$
|
25,880
|
|
|
$
|
8,239,023
|
|
|
$
|
48,836
|
|
|
$
|
2,872,091
|
|
Management evaluates securities
for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant
such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost,
(2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Corporation to retain
its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.
At December 31, 2019, four debt
securities had unrealized losses with aggregate depreciation of .75% from the Corporation’s amortized cost basis. At December
31, 2018, sixty-six securities had unrealized losses with aggregate depreciation of 2.35%. These unrealized losses relate principally
to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers
whether the securities are issued by the federal government, its agencies, or other governments, whether downgrades by bond rating
agencies have occurred, and the results of reviews of the issuer’s financial condition. Management has the ability to hold
debt securities until maturity, or for the foreseeable future if classified as available for sale. Also, no declines in debt securities
are deemed to be other-than-temporary.
3. LOANS AND ALLOWANCE FOR
LOAN LOSSES
The composition of the Corporation’s
loan portfolio at December 31, 2019 and 2018 was as follows:
|
|
2019
|
|
2018
|
Commercial, financial and agricultural loans
|
|
$
|
87,441,489
|
|
|
$
|
88,403,215
|
|
Real estate
|
|
|
|
|
|
|
|
|
Construction loans
|
|
|
28,826,099
|
|
|
|
24,890,536
|
|
Commercial mortgage loans
|
|
|
143,022,080
|
|
|
|
123,477,369
|
|
Residential loans
|
|
|
102,239,917
|
|
|
|
103,347,898
|
|
Agricultural loans
|
|
|
31,459,274
|
|
|
|
31,561,686
|
|
Consumer & other loans
|
|
|
5,093,661
|
|
|
|
5,086,984
|
|
Loans outstanding
|
|
|
398,082,520
|
|
|
|
376,767,688
|
|
Unearned interest and discount
|
|
|
(17,345
|
)
|
|
|
(17,451
|
)
|
Allowance for loan losses
|
|
|
(3,604,348
|
)
|
|
|
(3,428,869
|
)
|
Net loans
|
|
$
|
394,460,827
|
|
|
$
|
373,321,368
|
|
The Corporation’s only significant
concentration of credit at December 31, 2019, occurred in real estate loans which totaled approximately $306 million. However,
this amount was not concentrated in any specific segment within the market or geographic area.
At December 31, 2019, the lendable
collateral value of the 1-4 family and multifamily mortgage loans that were pledged to FHLB to secure outstanding advances was
$67,746,577. FHLB has a blanket lien on the 1-4 family and multifamily portfolios, which totaled $121,550,567.
Appraisal Policy
When a loan is first identified
as a problem loan, the appraisal is reviewed to determine if the appraised value is still appropriate for the collateral. For the
duration that a loan is considered a problem loan, the appraised value of the collateral is monitored on a quarterly basis. If
significant changes occur in market conditions or in the condition of the collateral, a new appraisal will be obtained.
Nonaccrual Policy
The Corporation does not accrue
interest on any loan (1) that is maintained on a cash basis due to the deteriorated financial condition of the borrower, (2) for
which payment in full of principal or interest is not expected, or (3) upon which principal or interest has been past due for ninety
days or more unless the loan is well secured and in the process of collection.
A loan subsequently placed on
nonaccrual status may be returned to accrual status if (1) all past due interest and principal is paid with expectations of any
remaining contractual principal and interest being repaid or (2) the loan becomes well secured and in the process of collection.
Loans placed on nonaccrual status
amounted to $241,078 and $1,204,861 at December 31, 2019 and 2018, respectively. There was one past due credit card loan in the
amount of $2,571 over 90 days and still accruing at December 31, 2019. There were no past due loans over 90 days and still accruing
at December 31, 2018. The accrual of interest is discontinued when the loan is placed on nonaccrual. Interest income that would
have been recorded on these nonaccrual loans in accordance with their original terms totaled $9,158 and $64,015 as of December
31, 2019 and 2018, respectively.
The following tables present an
age analysis of past due loans and nonaccrual loans segregated by class of loans.
|
|
Age Analysis of Past Due Loans
As of December 31, 2019
|
|
|
Current and < 30 Days Past
Due
|
|
30-59
Days Past Due
|
|
60-89
Days Past Due
|
|
90 Days or More
Past Due Loans
|
|
Total Past
Due Loans
|
|
Total
Loans
|
Commercial, financial and
agricultural loans
|
|
$
|
84,952,610
|
|
|
$
|
675,714
|
|
|
$
|
1,685,289
|
|
|
$
|
127,876
|
|
|
$
|
2,488,879
|
|
|
$
|
87,441,489
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction loans
|
|
|
28,548,384
|
|
|
|
227,383
|
|
|
|
0
|
|
|
|
0
|
|
|
|
227,383
|
|
|
|
28,775,767
|
|
Commercial mortgage loans
|
|
|
138,646,493
|
|
|
|
3,962,070
|
|
|
|
209,234
|
|
|
|
1
|
|
|
|
4,171,305
|
|
|
|
142,817,798
|
|
Residential loans
|
|
|
100,302,023
|
|
|
|
1,404,806
|
|
|
|
248,516
|
|
|
|
115,772
|
|
|
|
1,769,094
|
|
|
|
102,071,117
|
|
Agricultural loans
|
|
|
30,877,028
|
|
|
|
457,246
|
|
|
|
125,000
|
|
|
|
0
|
|
|
|
582,246
|
|
|
|
31,459,274
|
|
Consumer & other loans
|
|
|
4,887,890
|
|
|
|
61,404
|
|
|
|
34,265
|
|
|
|
0
|
|
|
|
95,669
|
|
|
|
4,983,559
|
|
Total loans
|
|
$
|
388,214,428
|
|
|
$
|
6,788,622
|
|
|
$
|
2,302,304
|
|
|
$
|
243,649
|
|
|
$
|
9,334,576
|
|
|
$
|
397,549,004
|
|
Overdrafts, in-process, and suspense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
533,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
398,082,520
|
|
|
|
Age Analysis of Past Due Loans
As of December 31, 2018
|
|
|
Current and < 30 Days Past
Due
|
|
30-59
Days Past Due
|
|
60-89 Days Past Due
|
|
90 Days or More Past Due
|
|
Total Past Due Loans
|
|
Total
Loans
|
Commercial, financial and
agricultural loans
|
|
$
|
88,119,660
|
|
|
$
|
222,516
|
|
|
$
|
247,397
|
|
|
$
|
36,157
|
|
|
$
|
283,555
|
|
|
$
|
88,403,215
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction loans
|
|
|
24,837,229
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
24,837,229
|
|
Commercial mortgage loans
|
|
|
122,454,819
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,022,550
|
|
|
|
1,022,550
|
|
|
|
123,477,369
|
|
Residential loans
|
|
|
101,630,920
|
|
|
|
1,424,282
|
|
|
|
1,560,913
|
|
|
|
146,154
|
|
|
|
146,153
|
|
|
|
103,337,986
|
|
Agricultural loans
|
|
|
31,240,367
|
|
|
|
321,319
|
|
|
|
321,319
|
|
|
|
0
|
|
|
|
0
|
|
|
|
31,561,686
|
|
Consumer & other loans
|
|
|
5,050,331
|
|
|
|
14,238
|
|
|
|
36,654
|
|
|
|
0
|
|
|
|
0
|
|
|
|
5,086,984
|
|
Total loans
|
|
$
|
373,333,325
|
|
|
$
|
1,982,355
|
|
|
$
|
2,166,283
|
|
|
$
|
1,204,861
|
|
|
$
|
3,371,144
|
|
|
$
|
376,704,469
|
|
Overdrafts, in-process, and suspense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
376,767,688
|
|
The following table presents nonaccrual
loans segregated by class of loans.
|
|
2019
|
|
2018
|
|
|
Nonaccrual
|
|
90
Days or
More Still
Accruing
|
|
Nonaccrual
|
|
90 Days or
More Still Accruing
|
Commercial, financial and
agricultural loans
|
|
$
|
125,305
|
|
|
$
|
2,571
|
|
|
$
|
36,157
|
|
|
$
|
0
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction loans
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Commercial mortgage loans
|
|
|
1
|
|
|
|
0
|
|
|
|
1,022,550
|
|
|
|
0
|
|
Residential loans
|
|
|
115,772
|
|
|
|
0
|
|
|
|
146,154
|
|
|
|
0
|
|
Agricultural loans
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Consumer & other loans
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Total loans
|
|
$
|
241,078
|
|
|
$
|
2,571
|
|
|
$
|
1,204,861
|
|
|
$
|
0
|
|
Impaired Loans
A loan is considered impaired
when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments
of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in
determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest
payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.
Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration
all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the
borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment
is measured on a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows
discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral
if the loan is collateral dependent.
At December 31, 2019 and 2018,
impaired loans amounted to $2,195,151 and $4,356,381, respectively. A reserve amount of $478,153 and $518,230, respectively, was
recorded in the allowance for loan losses for these impaired loans as of December 31, 2019 and 2018.
The following tables present impaired
loans, segregated by class of loans as of December 31, 2019 and 2018:
|
|
Unpaid
|
|
Recorded
Investment
|
|
|
|
Year-to-date
Average
|
|
Interest Income Received
|
December 31, 2019
|
|
Principal Balance
|
|
With No Allowance
|
|
With Allowance
|
|
Total
|
|
Related Allowance
|
|
Recorded Investment
|
|
During Impairment
|
Commercial, financial and
agricultural loans
|
|
$
|
1,247,947
|
|
|
$
|
62,475
|
|
|
$
|
1,098,818
|
|
|
$
|
1,161,293
|
|
|
$
|
430,318
|
|
|
$
|
939,937
|
|
|
$
|
83,335
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction loans
|
|
|
63,708
|
|
|
|
63,708
|
|
|
|
0
|
|
|
|
63,708
|
|
|
|
0
|
|
|
|
63,708
|
|
|
|
4,533
|
|
Commercial mortgage loans
|
|
|
847,287
|
|
|
|
249,582
|
|
|
|
154,439
|
|
|
|
404,021
|
|
|
|
47,690
|
|
|
|
365,940
|
|
|
|
47,663
|
|
Residential loans
|
|
|
581,217
|
|
|
|
553,468
|
|
|
|
0
|
|
|
|
553,468
|
|
|
|
0
|
|
|
|
525,698
|
|
|
|
34,193
|
|
Agricultural loans
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Consumer & other loans
|
|
|
12,661
|
|
|
|
0
|
|
|
|
12,661
|
|
|
|
12,661
|
|
|
|
145
|
|
|
|
12,661
|
|
|
|
936
|
|
Total loans
|
|
$
|
2,752,820
|
|
|
$
|
929,233
|
|
|
$
|
1,265,918
|
|
|
$
|
2,195,151
|
|
|
$
|
478,153
|
|
|
$
|
1,907,944
|
|
|
$
|
170,660
|
|
|
|
Unpaid
|
|
Recorded
Investment
|
|
|
|
Year-to-date
Average
|
|
Interest Income Received
|
December 31, 2018
|
|
Principal Balance
|
|
With No Allowance
|
|
With Allowance
|
|
Total
|
|
Related Allowance
|
|
Recorded Investment
|
|
During Impairment
|
Commercial, financial and
agricultural loans
|
|
$
|
184,899
|
|
|
$
|
87,525
|
|
|
$
|
568,816
|
|
|
$
|
656,341
|
|
|
$
|
276,392
|
|
|
$
|
370,038
|
|
|
$
|
52,411
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction loans
|
|
|
402,234
|
|
|
|
281,434
|
|
|
|
0
|
|
|
|
281,434
|
|
|
|
0
|
|
|
|
281,434
|
|
|
|
25,364
|
|
Commercial mortgage loans
|
|
|
1,787,305
|
|
|
|
1,277,611
|
|
|
|
333,892
|
|
|
|
1,611,503
|
|
|
|
51,854
|
|
|
|
1,544,299
|
|
|
|
45,403
|
|
Residential loans
|
|
|
1,801,002
|
|
|
|
1,027,647
|
|
|
|
752,443
|
|
|
|
1,780,090
|
|
|
|
188,368
|
|
|
|
1,594,390
|
|
|
|
127,806
|
|
Agricultural loans
|
|
|
12,526
|
|
|
|
12,526
|
|
|
|
0
|
|
|
|
12,526
|
|
|
|
0
|
|
|
|
12,526
|
|
|
|
5,530
|
|
Consumer & other loans
|
|
|
0
|
|
|
|
0
|
|
|
|
14,487
|
|
|
|
14,487
|
|
|
|
1,616
|
|
|
|
14,487
|
|
|
|
820
|
|
Total loans
|
|
$
|
4,187,966
|
|
|
$
|
2,686,743
|
|
|
$
|
1,669,638
|
|
|
$
|
4,356,381
|
|
|
$
|
518,230
|
|
|
$
|
3,817,174
|
|
|
$
|
257,334
|
|
For the period ending December
31, 2017, the average recorded investment for impaired loans was $3,789,822 and the interest income received during impairment
was $207,180.
At December 31, 2019 and 2018,
included in impaired loans were $3,384 and $7,458, respectively, of troubled debt restructurings.
Troubled Debt Restructurings
Loans are considered to have been
modified in a troubled debt restructuring, or TDR, when due to a borrower’s financial difficulty the Corporation makes certain
concessions to the borrower that it would not otherwise consider for new debt with similar risk characteristics. Modifications
may include interest rate reductions, principal or interest forgiveness, forbearance, and other actions intended to minimize economic
loss and to avoid foreclosure or repossession of the collateral. Each potential loan modification is reviewed individually and
the terms of the loan are modified to meet the borrower’s specific circumstances at a point in time. Not all loan modifications
are TDRs. However, performance prior to the modification, or significant events that coincide with the modification, are included
in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual status at the time
of loan modification or after a shorter performance period.
Loan modifications are reviewed
and recommended by the Corporation’s senior credit officer, who determines whether the loan meets the criteria for a TDR.
Generally, the types of concessions granted to borrowers that are evaluated in determining whether the loan is classified as a
TDR include:
·
Interest rate reductions – Occur when the stated interest rate
is reduced to a nonmarket rate or a rate the borrower would not be able to obtain elsewhere under similar circumstances.
·
Amortization or maturity date changes – Result when the amortization
period of the loan is extended beyond what is considered a normal amortization period for loans of similar type with similar collateral.
·
Principal reductions – Arise when the Corporation charges off a
portion of the principal that is not fully collateralized and collectability is uncertain; however, this portion of principal may
be recovered in the future under certain circumstances.
The following tables present the
amount of troubled debt restructuring by loan class, classified separately as accrual and nonaccrual at December 31, 2019 and 2018,
as well as those currently paying under restructured terms and those that have defaulted under restructured terms as of December
31, 2019 and 2018. Loans modified in a troubled debt restructuring are considered to be in default once the loan becomes 30 or
more days past due.
|
|
December 31, 2019
|
|
|
|
|
|
|
Under restructured terms
|
|
|
Accruing
|
|
Non-accruing
|
|
#
|
|
Current
|
|
#
|
|
Default
|
Commercial, financial, and
agricultural loans
|
|
$
|
3,384
|
|
|
$
|
0
|
|
|
|
1
|
|
|
$
|
3,384
|
|
|
|
0
|
|
|
$
|
0
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction loans
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Commercial mortgage loans
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Residential loans
|
|
|
0
|
|
|
|
0
|
|
|
|
1
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Agricultural loans
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Consumer & other loans
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Total TDR’s
|
|
$
|
3,384
|
|
|
$
|
0
|
|
|
|
1
|
|
|
$
|
3,384
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
Under restructured terms
|
|
|
|
Accruing
|
|
|
|
Non-accruing
|
|
|
|
#
|
|
|
|
Current
|
|
|
|
#
|
|
|
|
Default
|
|
Commercial, financial, and
agricultural loans
|
|
$
|
5,570
|
|
|
$
|
0
|
|
|
|
1
|
|
|
$
|
5,570
|
|
|
|
0
|
|
|
$
|
0
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction loans
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Commercial mortgage loans
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Residential loans
|
|
|
1,888
|
|
|
|
0
|
|
|
|
1
|
|
|
|
1,888
|
|
|
|
0
|
|
|
|
0
|
|
Agricultural loans
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Consumer & other loans
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Total TDR’s
|
|
$
|
7,458
|
|
|
$
|
0
|
|
|
|
2
|
|
|
$
|
7,458
|
|
|
|
0
|
|
|
$
|
0
|
|
The following table presents the
amount of troubled debt restructurings by types of concessions made, classified separately as accrual and nonaccrual at December
31, 2019 and 2018.
|
|
December 31, 2019
|
|
December 31, 2018
|
|
|
Accruing
|
|
Nonaccruing
|
|
Accruing
|
|
Nonaccruing
|
|
|
#
|
|
Balance
|
|
#
|
|
Balance
|
|
#
|
|
Balance
|
|
#
|
|
Balance
|
Type of concession:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment modification
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
Rate reduction
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Rate reduction, payment modification
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1
|
|
|
|
1,888
|
|
|
|
0
|
|
|
|
0
|
|
Forbearance of interest
|
|
|
1
|
|
|
|
3,384
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1
|
|
|
|
5,570
|
|
|
|
0
|
|
|
|
0
|
|
Total
|
|
|
1
|
|
|
$
|
3,384
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
2
|
|
|
$
|
7,458
|
|
|
|
0
|
|
|
$
|
0
|
|
As of December 31, 2019 and 2018,
the Corporation had a balance of $3,384 and $7,458, respectively, in troubled debt restructurings. The Corporation had no charge-offs
on such loans as of December 31, 2019, and no charge-offs as of December 31, 2018. The Corporation’s balance in the allowance
for loan losses allocated to such troubled debt restructurings was $0 at both December 31, 2019 and 2018. The Corporation had no
unfunded commitment to lend to a customer that has a troubled debt restructured loan as of December 31, 2019.
Credit Risk Monitoring and
Loan Grading
The Corporation employs several
means to monitor the risk in the loan portfolio including volume and severity of loan delinquencies, nonaccrual loans, internal
grading of loans, historical loss experience and economic conditions.
Loans are subject to an internal
risk-grading system which indicates the risk and acceptability of that loan. The loan grades used by the Corporation are for internal
risk identification purposes and do not directly correlate to regulatory classification categories or any financial reporting definitions.
The general characteristics of
the risk grades are as follows:
Grade 1 – Exceptional
– Loans graded 1 are characterized as having a very high credit quality, exhibit minimum risk to the Corporation and
have low administrative cost. These loans are usually secured by highly liquid and marketable collateral and a strong primary and
secondary source of repayment is available.
Grade 2 – Above Average
– Loans graded 2 are basically sound credits secured by sound assets and/or backed by the financial strength of borrowers
of integrity with a history of satisfactory payments of credit obligations.
Grade 3 – Acceptable
– Loans graded 3 are secured by sound assets of sufficient value and/or supported by the sufficient financial strength of
the borrower. The borrower will have experience in their business area or employed a reasonable amount of time at their current
employment. The borrower will have a sound primary source of repayment, and preferably a secondary source, which will allow repayment
in a prompt and reasonable period of time.
Grade 4 – Fair –
Loans graded 4 are those which exhibit some weakness or downward trend in financial condition and although the repayment history
is satisfactory, it requires supervision by bank personnel. The borrower may have little experience in their business area or employed
only a short amount of time at their current employment. The loan may be secured by good collateral; however, it may require close
supervision as to value and/or quality and may not have sufficient liquidation value to completely cover the loan.
Grade 5a – Watch –
Loans graded 5a contain a discernible weakness; however, the weakness is not sufficiently pronounced so as to cause concern
for the possible loss of interest or principal. Loans in this category may exhibit outward signs of stress, such as slowness in
financial disclosures or recent payments. However, such signs are not of long duration or of sufficient severity that default appears
imminent. Loans in this category are not so deficient as to cause alarm, but do require close monitoring for further deterioration
and possible downgrade.
Grade 5b – Other Assets
Especially Mentioned (OAEM) – Loans graded 5b may otherwise be classified more severely except that the loan is well
secured by properly margined collateral, it is generally performing in accordance with the original contract or modification thereof
and such performance has seasoned for a period of 90 days, or the ultimate collection of all principal and interest is reasonably
expected. Loans in this grade are unsupported by sufficient evidence of the borrower’s sound net worth or repayment capacity
or may be subject to third party action that would cause concern for future prompt repayment.
Grade 6 – Substandard
– Loans graded 6 contain clearly pronounced credit weaknesses that are below acceptable credit standards for the Corporation.
Such weaknesses may be due to either collateral deficiencies or inherent financial weakness of the borrower, but in either case
represents less than acceptable credit risk. Loans in this grade are unsupported by sufficient evidence of the borrower’s
sound net worth, repayment capacity or acceptable collateral.
Grade 7 – Doubtful
– Loans graded 7 have such pronounced credit weaknesses that the Corporation is clearly exposed to a significant degree of
potential loss of principal or interest. Theses loan generally have a defined weakness which jeopardizes the ultimate repayment
of the debt.
Grade 8 – Loss
– Loans graded 8 are of such deteriorated credit quality that repayment of principal and interest can no longer be
considered. These loans are of such little value that their continuance as an active bank asset is not warranted. As of
December 31, 2019 and 2018, all Grade 8 loans have been charged-off.
The following tables present internal
loan grading by class of loans at December 31, 2019 and 2018:
December 31, 2019
|
|
Commercial, Financial, and
Agricultural
|
|
Construction Real Estate
|
|
Commercial Real Estate
|
|
Residential Real Estate
|
|
Agricultural Real Estate
|
|
Consumer and Other
|
|
Total
|
Rating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grade 1- Exceptional
|
|
$
|
1,337,601
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
21,932
|
|
|
$
|
0
|
|
|
$
|
335,663
|
|
|
$
|
1,695,196
|
|
Grade 2- Above Avg.
|
|
|
1,000
|
|
|
|
485,000
|
|
|
|
892,053
|
|
|
|
184,901
|
|
|
|
1,352,739
|
|
|
|
29,220
|
|
|
|
2,944,913
|
|
Grade 3- Acceptable
|
|
|
23,863,615
|
|
|
|
4,863,194
|
|
|
|
36,268,643
|
|
|
|
27,923,193
|
|
|
|
16,118,982
|
|
|
|
1,307,088
|
|
|
|
110,344,716
|
|
Grade 4- Fair
|
|
|
59,884,319
|
|
|
|
23,272,247
|
|
|
|
102,519,640
|
|
|
|
68,280,386
|
|
|
|
13,535,352
|
|
|
|
3,393,268
|
|
|
|
270,885,212
|
|
Grade 5a- Watch
|
|
|
394,551
|
|
|
|
15,979
|
|
|
|
2,360,912
|
|
|
|
1,399,320
|
|
|
|
0
|
|
|
|
578
|
|
|
|
4,171,340
|
|
Grade 5b- OAEM
|
|
|
1,532
|
|
|
|
125,971
|
|
|
|
327,831
|
|
|
|
3,110,121
|
|
|
|
452,200
|
|
|
|
11,327
|
|
|
|
4,028,982
|
|
Grade 6- Substandard
|
|
|
1,730,710
|
|
|
|
63,708
|
|
|
|
653,001
|
|
|
|
1,293,986
|
|
|
|
0
|
|
|
|
16,517
|
|
|
|
3,757,922
|
|
Grade 7- Doubtful
|
|
|
228,161
|
|
|
|
0
|
|
|
|
0
|
|
|
|
26,078
|
|
|
|
0
|
|
|
|
0
|
|
|
|
254,239
|
|
Total loans
|
|
$
|
87,441,489
|
|
|
$
|
28,826,099
|
|
|
$
|
143,022,080
|
|
|
$
|
102,239,917
|
|
|
$
|
31,459,274
|
|
|
$
|
5,093,661
|
|
|
$
|
398,082,520
|
|
December 31, 2018
|
|
Commercial, Financial, and
Agricultural
|
|
Construction Real Estate
|
|
Commercial Real Estate
|
|
Residential Real Estate
|
|
Agricultural Real Estate
|
|
Consumer and Other
|
|
Total
|
Rating:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grade 1- Exceptional
|
|
$
|
1,237,602
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
22,905
|
|
|
$
|
0
|
|
|
$
|
210,045
|
|
|
$
|
1,470,552
|
|
Grade 2- Above Avg.
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
43,711
|
|
|
|
43,711
|
|
Grade 3- Acceptable
|
|
|
23,821,846
|
|
|
|
1,860,003
|
|
|
|
30,398,565
|
|
|
|
25,839,646
|
|
|
|
16,863,356
|
|
|
|
1,151,239
|
|
|
|
99,934,655
|
|
Grade 4- Fair
|
|
|
58,753,931
|
|
|
|
22,749,099
|
|
|
|
88,122,957
|
|
|
|
73,114,310
|
|
|
|
14,698,330
|
|
|
|
3,657,108
|
|
|
|
261,095,735
|
|
Grade 5a- Watch
|
|
|
473,616
|
|
|
|
0
|
|
|
|
2,411,710
|
|
|
|
722,441
|
|
|
|
0
|
|
|
|
6,206
|
|
|
|
3,613,973
|
|
Grade 5b- OAEM
|
|
|
3,079,098
|
|
|
|
0
|
|
|
|
446,841
|
|
|
|
1,299,587
|
|
|
|
0
|
|
|
|
2,168
|
|
|
|
4,827,694
|
|
Grade 6- Substandard
|
|
|
787,309
|
|
|
|
281,434
|
|
|
|
2,097,296
|
|
|
|
2,349,009
|
|
|
|
0
|
|
|
|
16,507
|
|
|
|
5,531,555
|
|
Grade 7- Doubtful
|
|
|
249,813
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
249,813
|
|
Total loans
|
|
$
|
88,403,215
|
|
|
$
|
24,890,536
|
|
|
$
|
123,477,369
|
|
|
$
|
103,347,898
|
|
|
$
|
31,561,686
|
|
|
$
|
5,086,984
|
|
|
$
|
376,767,688
|
|
Allowance
for Loan Losses Methodology
The allowance for loan losses
(ALL) is determined by a calculation based on segmenting the loans into the following categories: (1) impaired loans and nonaccrual
loans, (2) loans with a credit risk rating of 5b, 6, 7 or 8, (3) other outstanding loans, and (4) other commitments to lend. In
addition, unallocated general reserves are estimated based on migration and economic analysis of the loan portfolio.
The ALL is calculated by the addition
of the estimated loss derived from each of the above categories. The impaired loans and nonaccrual loans are analyzed on an individual
basis to determine if the future collateral value is sufficient to support the outstanding debt of the loan. If an estimated loss
is calculated, it is included in the estimated ALL until it is charged to the loan loss reserve. The calculation for loan risk
graded 5b, 6, 7 or 8, other outstanding loans and other commitments to lend is based on assigning an estimated loss factor based
on a twelve quarter rolling historical weighted average net loss rate. The estimated requirement for unallocated general reserves
from migration and economic analysis is determined by considering (1) trends in asset quality, (2) level and trends in charge-off
experience, (3) macroeconomic trends and conditions, (4) microeconomic trends and conditions and (5) risk profile of lending activities.
Within each of these categories, a risk factor percentage from a rating of excessive, high, moderate or low will be determined
by management and applied to the loan portfolio. By adding the estimated value from the migration and economic analysis to the
estimated reserve from the loan portfolio, a total estimated loss reserves is obtained. This amount is then compared to the actual
amount in the loan loss reserve. The calculation of ALL is performed on a monthly basis and is presented to the Loan Committee
and the Board of Directors.
Changes in the allowance for loan
losses are as follows:
|
|
2019
|
|
2018
|
|
2017
|
Balance, January 1
|
|
$
|
3,428,869
|
|
|
$
|
3,043,632
|
|
|
$
|
3,124,611
|
|
Provision charged to operations
|
|
|
856,677
|
|
|
|
829,500
|
|
|
|
300,000
|
|
Loans charged off
|
|
|
(750,757
|
)
|
|
|
(606,345
|
)
|
|
|
(447,747
|
)
|
Recoveries
|
|
|
69,559
|
|
|
|
162,082
|
|
|
|
66,768
|
|
Balance, December 31
|
|
$
|
3,604,348
|
|
|
$
|
3,428,869
|
|
|
$
|
3,043,632
|
|
The following tables detail activity
in the ALL by class of loans for the years ended December 31, 2019 and 2018. Allocation of a portion of the allowance to one category
of loans does not preclude its availability to absorb losses in other categories.
December 31, 2019
|
|
Commercial, Financial, and
Agricultural
|
|
Construction
Real Estate
|
|
Commercial
Real Estate
|
|
Residential
Real Estate
|
|
Agricultural
Real Estate
|
|
Consumer
and Other
|
|
Total
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance, December 31, 2018
|
|
$
|
402,251
|
|
|
$
|
1,043,027
|
|
|
$
|
1,210,302
|
|
|
$
|
458,871
|
|
|
$
|
108,878
|
|
|
$
|
205,540
|
|
|
$
|
3,428,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
|
|
|
179,241
|
|
|
|
56,220
|
|
|
|
274,550
|
|
|
|
226,540
|
|
|
|
0
|
|
|
|
14,206
|
|
|
|
750,757
|
|
Recoveries
|
|
|
20,029
|
|
|
|
0
|
|
|
|
3,368
|
|
|
|
39,812
|
|
|
|
0
|
|
|
|
6,350
|
|
|
|
69,559
|
|
Net charge-offs
|
|
|
159,212
|
|
|
|
56,220
|
|
|
|
271,182
|
|
|
|
186,728
|
|
|
|
0
|
|
|
|
7,856
|
|
|
|
681,198
|
|
Provisions charged to operations
|
|
|
258,307
|
|
|
|
48,417
|
|
|
|
420,195
|
|
|
|
147,666
|
|
|
|
(31,998
|
)
|
|
|
14,090
|
|
|
|
856,677
|
|
Balance at end of period, December 31, 2019
|
|
$
|
501,346
|
|
|
$
|
1,035,224
|
|
|
$
|
1,359,315
|
|
|
$
|
419,809
|
|
|
|
$ 76 880
|
|
|
$
|
211,774
|
|
|
$
|
3,604,348
|
|
Individually evaluated
for impairment
|
|
$
|
430,318
|
|
|
$
|
0
|
|
|
$
|
47,690
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
145
|
|
|
$
|
478,153
|
|
Collectively evaluated for impairment
|
|
|
71,028
|
|
|
|
1,035,224
|
|
|
|
1,311,625
|
|
|
|
419,809
|
|
|
|
76,880
|
|
|
|
211,629
|
|
|
|
3,126,195
|
|
Balance at end of period
|
|
$
|
501,346
|
|
|
$
|
1,035,224
|
|
|
$
|
1,359,315
|
|
|
$
|
419,809
|
|
|
$
|
76,880
|
|
|
$
|
211,774
|
|
|
$
|
3,604,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
for impairment
|
|
$
|
1,161,293
|
|
|
$
|
63,708
|
|
|
$
|
404,021
|
|
|
$
|
553,468
|
|
|
$
|
0
|
|
|
$
|
12,661
|
|
|
$
|
2,195,151
|
|
Collectively evaluated for impairment
|
|
|
86,280,196
|
|
|
|
28,762,391
|
|
|
|
142,618,059
|
|
|
|
101,686,449
|
|
|
|
31,459,274
|
|
|
|
5,081,000
|
|
|
|
395,887,369
|
|
Balance at end of period
|
|
$
|
87,441,489
|
|
|
$
|
28,826,099
|
|
|
$
|
143,022,080
|
|
|
$
|
102,239,917
|
|
|
$
|
31,459,274
|
|
|
$
|
5,093,661
|
|
|
$
|
398,082,520
|
|
At December 31, 2019, of the $2,195,151
loans that were individually evaluated for impairment, $2,195,151 were
deemed impaired.
December 31, 2018
|
|
Commercial, Financial, and
Agricultural
|
|
Construction
Real Estate
|
|
Commercial
Real Estate
|
|
Residential
Real Estate
|
|
Agricultural
Real Estate
|
|
Consumer
and Other
|
|
Total
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance, December 31, 2017
|
|
$
|
324,260
|
|
|
$
|
1,043,083
|
|
|
$
|
1,056,595
|
|
|
$
|
416,474
|
|
|
$
|
11,560
|
|
|
$
|
191,660
|
|
|
$
|
3,043,632
|
|
Charge-offs
|
|
|
548,460
|
|
|
|
783
|
|
|
|
43,349
|
|
|
|
6,909
|
|
|
|
0
|
|
|
|
6,844
|
|
|
|
606,345
|
|
Recoveries
|
|
|
12,025
|
|
|
|
0
|
|
|
|
590
|
|
|
|
0
|
|
|
|
147,252
|
|
|
|
2,215
|
|
|
|
162,082
|
|
Net charge-offs
|
|
|
536,435
|
|
|
|
783
|
|
|
|
42,759
|
|
|
|
6,909
|
|
|
|
(147,252
|
)
|
|
|
4,629
|
|
|
|
444,263
|
|
Provisions charged to operations
|
|
|
614,426
|
|
|
|
727
|
|
|
|
196,466
|
|
|
|
49,306
|
|
|
|
(49,934
|
)
|
|
|
18,509
|
|
|
|
829,500
|
|
Balance at end of period, December 31, 2018
|
|
$
|
402,251
|
|
|
$
|
1,043,027
|
|
|
$
|
1,210,302
|
|
|
$
|
458,871
|
|
|
$
|
108,878
|
|
|
$
|
205,540
|
|
|
$
|
3,428,869
|
|
Individually evaluated
for impairment
|
|
$
|
276,392
|
|
|
$
|
0
|
|
|
$
|
51,854
|
|
|
$
|
188,368
|
|
|
$
|
0
|
|
|
$
|
1,616
|
|
|
$
|
518,230
|
|
Collectively evaluated for impairment
|
|
|
125,859
|
|
|
|
1,043,027
|
|
|
|
1,158,448
|
|
|
|
270,503
|
|
|
|
108,878
|
|
|
|
203,924
|
|
|
|
2,910,639
|
|
Balance at end of period
|
|
$
|
402,251
|
|
|
$
|
1,043,027
|
|
|
$
|
1,210,302
|
|
|
$
|
458,871
|
|
|
$
|
108,878
|
|
|
$
|
205,540
|
|
|
$
|
3,428,869
|
|
Loans :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
for impairment
|
|
$
|
656,341
|
|
|
$
|
281,434
|
|
|
$
|
1,611,503
|
|
|
$
|
1,929,214
|
|
|
$
|
12,526
|
|
|
$
|
14,487
|
|
|
$
|
4,505,505
|
|
Collectively evaluated for impairment
|
|
|
87,746,874
|
|
|
|
24,609,102
|
|
|
|
121,865,866
|
|
|
|
101,418,684
|
|
|
|
31,549,160
|
|
|
|
5,072,497
|
|
|
|
372,262,183
|
|
Balance at end of period
|
|
$
|
88,403,215
|
|
|
$
|
24,890,536
|
|
|
$
|
123,477,369
|
|
|
$
|
103,347,898
|
|
|
$
|
31,561,686
|
|
|
$
|
5,086,984
|
|
|
$
|
376,767,688
|
|
At December 31, 2018, of the $4,505,505
loans that were individually evaluated for impairment, only $4,356,381 were deemed impaired.
The following table is a summary
of amounts included in the ALL for the impaired loans with specific reserves and the recorded balance of the related loans.
Year Ended December 31,
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Allowance for loss on impaired loans
|
|
$
|
478,153
|
|
|
$
|
518,230
|
|
|
$
|
331,779
|
|
Recorded balance of impaired loans
|
|
$
|
2,195,151
|
|
|
$
|
4,356,381
|
|
|
$
|
4,895,730
|
|
4. PREMISES AND EQUIPMENT
The amounts reported as bank premises
and equipment at December 31, 2019 and 2018, are as follows:
|
|
2019
|
|
2018
|
Land
|
|
$
|
3,715,432
|
|
|
$
|
3,842,146
|
|
Buildings
|
|
|
15,583,367
|
|
|
|
15,411,518
|
|
Furniture and equipment
|
|
|
11,155,784
|
|
|
|
10,767,592
|
|
Construction in process
|
|
|
0
|
|
|
|
4,892
|
|
|
|
|
30,454,583
|
|
|
|
30,026,148
|
|
Less accumulated depreciation
|
|
|
(16,607,214
|
)
|
|
|
(15,452,174
|
)
|
Total
|
|
$
|
13,847,369
|
|
|
$
|
14,573,974
|
|
Depreciation of premises and equipment
was $1,200,032, $1,036,986, and $881,000 in 2019, 2018, and 2017, respectively. The Corporation depreciates its long-lived assets
on various methods over their estimated productive lives, as more fully described in Note 1, Summary of Significant Accounting
Policies.
5. INTANGIBLE ASSETS
The following table lists the
Corporation’s account relationship intangible assets at December 31, 2019 and 2018. These assets were fully amortized in
March 2019.
|
|
2019
|
|
2018
|
Amortizing intangible assets:
|
|
|
|
|
|
|
|
|
Account relationships
|
|
$
|
0
|
|
|
$
|
3,907
|
|
Total intangible assets
|
|
$
|
0
|
|
|
$
|
3,907
|
|
The intangible assets’ carrying
amount, accumulated amortization and amortization expense for December 31, 2019 are as follows:
|
|
2019
|
Amortizing intangible assets
|
|
|
Account relationships:
|
|
|
|
|
Gross carrying amount
|
|
$
|
125,000
|
|
Accumulated amortization
|
|
|
125,000
|
|
Net carrying amount
|
|
$
|
0
|
|
Amortization expense
|
|
$
|
3,907
|
|
6. DEPOSITS
At December 31, 2019, the scheduled
maturities of certificates of deposit are as follows:
Amount
|
|
|
|
2020
|
|
|
$
|
66,752,872
|
|
|
2021
|
|
|
|
16,345,763
|
|
|
2022
|
|
|
|
4,903,070
|
|
|
2023
|
|
|
|
4,630,440
|
|
|
2024 and thereafter
|
|
|
|
31,016
|
|
|
Total
|
|
|
$
|
92,663,161
|
|
The amount of overdraft deposits
reclassified as loans were $98,082 and $70,003 for the years ended December 31, 2019 and 2018, respectively. At December 31, 2019,
there were 41 certificates of deposit totaling $23,582,708 that were at or above the FDIC insurance limit of $250,000.
7. SHORT-TERM BORROWED FUNDS
Federal funds purchased generally
mature within one to four days. On December 31, 2019, the Corporation did not have any federal funds purchased. The Corporation
had approximately $108,000,000 in unused federal funds and FHLB accommodations at December 31, 2019. The Corporation maintains
a line of credit with the Federal Reserve Bank’s Discount Window. The maximum amount that can be borrowed is dependent upon
the amount of unpledged securities held by the Corporation as the amount of borrowings must be fully secured.
Other short-term borrowed funds
consist of FHLB advances of $5,814,286 with interest at 1.78% as of December 31, 2019, and $10,457,143 with interest at 1.92% as
of December 31, 2018. $2.214 million and $4.457 million of short-term borrowings are short-term portions of long-term principal
reducing Federal Home Loan Bank advances as of December 31, 2019 and 2018, respectively.
Information concerning federal
funds purchased and FHLB short-term advances are summarized as follows:
|
|
2019
|
|
2018
|
Average balance during the year
|
|
$
|
6,545,280
|
|
|
$
|
17,305,184
|
|
Average interest rate during the year
|
|
|
1.89
|
%
|
|
|
2.29
|
%
|
Maximum month-end balance during the year
|
|
$
|
12,802,381
|
|
|
$
|
20,971,429
|
|
8. LONG-TERM DEBT
Long-term debt at December 31,
2019 and 2018, consisted of the following:
|
|
2019
|
|
2018
|
Advance from FHLB with 1.25% fixed rate of interest with annual installment payments maturing September 30, 2020.
|
|
$
|
0
|
|
|
$
|
1,600,000
|
|
Advance from FHLB with 1.94% fixed rate of interest with annual installment payments maturing December 16, 2022.
|
|
|
0
|
|
|
|
2,571,429
|
|
Advance from FHLB with a 1.80% fixed rate of interest maturing July 10, 2020.
|
|
|
0
|
|
|
|
2,000,000
|
|
Advance from FHLB with a 1.93% fixed rate of interest with annual installment payments maturing September 28, 2022.
|
|
|
0
|
|
|
|
6,000,000
|
|
Advance from FHLB with a 3.018% fixed rate of interest maturing Sept. 17, 2021.
|
|
|
0
|
|
|
|
3,000,000
|
|
Advance from FHLB with a 3.192% fixed rate of interest maturing Sept. 20, 2023.
|
|
|
3,000,000
|
|
|
|
3,000,000
|
|
Advance from FHLB with a 3.400% fixed rate of interest maturing Sept. 20, 2025.
|
|
|
3,000,000
|
|
|
|
3,000,000
|
|
Advance from FHLB with a 1.836% fixed rate of interest maturing June 24, 2021.
|
|
|
5,000,000
|
|
|
|
0
|
|
Advance from FHLB with a 1.951% fixed rate of interest with quarterly installment payments maturing June 26,2024.
|
|
|
3,500,000
|
|
|
|
0
|
|
Advance from FHLB with a 2.027% fixed rate of interest with quarterly installment payments maturing June 26, 2026.
|
|
|
3,928,571
|
|
|
|
0
|
|
Advance from FHLB with a 2.117% fixed rate of interest with quarterly installment payments maturing June 26, 2029.
|
|
|
4,250,000
|
|
|
|
0
|
|
Total long-term debt
|
|
$
|
22,678,571
|
|
|
$
|
21,171,429
|
|
The advances from FHLB
are collateralized by the pledging of a combination of 1-4 family residential mortgages and multifamily loans. At December 31,
2019, 1-4 family residential mortgage loans and multifamily loans with a lendable collateral value of $67,746,577 were pledged
to secure these advances. At December 31, 2018, 1-4 family residential mortgage loans and multifamily loans with a lendable collateral
value of $61,443,772 were pledged to secure these advances. The amount of FHLB Stock held is based on membership and level of
FHLB advances. At year end 2019 and 2018, the amount of stock held that is based on membership was $480,100 and $439,600, respectively,
and the amount of stock held that is based on the level of FHLB advances was $1,234,500 and $1,380,700, respectively. At December
31, 2019, the Corporation had approximately $108,000,000 of unused lines of credit with the FHLB.
The following are maturities of
long-term debt for the next five years. At December 31, 2019, there was no floating rate long-term debt.
Due in:
|
|
Fixed Rate Amount
|
|
2020
|
|
|
$
|
0
|
|
|
2021
|
|
|
|
6,107,143
|
|
|
2022
|
|
|
|
1,107,143
|
|
|
2023
|
|
|
|
4,107,143
|
|
|
2024
|
|
|
|
4,607,142
|
|
|
Later years
|
|
|
|
6,750,000
|
|
|
Total
long-term debt
|
|
|
$
|
22,678,571
|
|
9. EMPLOYEE BENEFITS AND RETIREMENT
PLANS
Pension Plan
The Corporation has a noncontributory
defined benefit pension plan which covers most employees who have attained the age of 21 years and completed one year of continuous
service. The Corporation is providing for the cost of this plan as benefits are accrued based upon actuarial determinations employing
the aggregate funding method.
The table of actuarially computed
benefit obligations and net assets and the related changes of the Plan at December 31, 2019, 2018, and 2017, is presented below.
|
|
2019
|
|
2018
|
|
2017
|
Change in Benefit Obligation
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$
|
11,792,602
|
|
|
$
|
12,745,058
|
|
|
$
|
13,149,559
|
|
Service cost
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Interest cost
|
|
|
639,233
|
|
|
|
657,845
|
|
|
|
712,228
|
|
Amendments
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Settlement
|
|
|
(105,416
|
)
|
|
|
(100,395
|
)
|
|
|
(129,172
|
)
|
Benefits paid
|
|
|
(1,162,037
|
)
|
|
|
(1,097,859
|
)
|
|
|
(1,116,643
|
)
|
Other – net
|
|
|
(114,386
|
)
|
|
|
(412,047
|
)
|
|
|
129,086
|
|
Benefit obligation at end of year
|
|
$
|
11,049,996
|
|
|
$
|
11,792,602
|
|
|
$
|
12,745,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Plan Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
$
|
9,679,754
|
|
|
$
|
10,672,811
|
|
|
$
|
10,574,145
|
|
Actual return on plan assets
|
|
|
1,200,176
|
|
|
|
(254,803
|
)
|
|
|
864,481
|
|
Employer contribution
|
|
|
700,000
|
|
|
|
460,000
|
|
|
|
480,000
|
|
Benefits paid
|
|
|
(1,267,453
|
)
|
|
|
(1,198,254
|
)
|
|
|
(1,245,815
|
)
|
Fair value of plan assets at end of year
|
|
$
|
10,312,477
|
|
|
$
|
9,679,754
|
|
|
$
|
10,672,811
|
|
|
2019
|
|
2018
|
|
2017
|
Funded status
|
|
$
|
(737,519
|
)
|
|
$
|
(2,112,848
|
)
|
|
$
|
(2,072,247
|
)
|
Unrecognized net actuarial (gain)/loss
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Unrecognized prior service cost
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Pension liability included in other liabilities
|
|
$
|
(737,519
|
)
|
|
$
|
(2,112,848
|
)
|
|
$
|
(2,072,247
|
)
|
Accumulated benefit obligation
|
|
$
|
11,049,996
|
|
|
$
|
11,792,602
|
|
|
$
|
12,745,058
|
|
Amount recognized in consolidated
balance sheet consist of the following:
|
|
|
2019
|
|
|
|
2018
|
|
|
|
2017
|
|
Accrued Pension
|
|
$
|
737,519
|
|
|
$
|
2,112,848
|
|
|
$
|
2,072,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
$
|
154,879
|
|
|
$
|
443,698
|
|
|
$
|
435,172
|
|
Accumulated other comprehensive income
|
|
|
582,640
|
|
|
|
1,669,150
|
|
|
|
1,637,075
|
|
Total
|
|
$
|
737,519
|
|
|
$
|
2,112,848
|
|
|
$
|
2,072,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Pension Cost
|
|
|
2019
|
|
|
|
2018
|
|
|
|
2017
|
|
Service cost
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Interest cost on benefit obligation
|
|
|
639,233
|
|
|
|
657,845
|
|
|
|
712,228
|
|
Expected return on plan assets
|
|
|
(646,186
|
)
|
|
|
(721,735
|
)
|
|
|
(716,622
|
)
|
Other - net
|
|
|
580,372
|
|
|
|
482,679
|
|
|
|
587,821
|
|
Net periodic pension cost
|
|
|
573,419
|
|
|
|
418,789
|
|
|
|
583,427
|
|
Partial recognition of loss due to settlement
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Total
|
|
$
|
573,419
|
|
|
$
|
418,789
|
|
|
$
|
583,427
|
|
Other changes in plan assets and
benefit obligations recognized in comprehensive income:
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
Net loss (gain)
|
|
$
|
(1,248,748
|
)
|
|
$
|
40,601
|
|
|
$
|
(503,167
|
)
|
Prior service costs
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Total recognized in other comprehensive income (loss)
|
|
|
(1,248,748
|
)
|
|
|
40,601
|
|
|
|
(503,167
|
)
|
Net periodic pension cost
|
|
|
573,419
|
|
|
|
418,789
|
|
|
|
583,427
|
|
Partial recognition of loss due to settlement
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Total recognized in net periodic pension cost and other comprehensive income
|
|
$
|
(675,329
|
)
|
|
$
|
459,390
|
|
|
$
|
(80,260
|
)
|
After adopting ASC Topic
960, Employer’s Accounting for Defined Benefit Pension Plan and Other Postretirement Plans, and freezing its pension retirement
plan, the Corporation decreased the accrued liability by $1,375,329 in 2019 and increased $40,601 in 2018. Also, changes were
made to other comprehensive income (loss) of $1,086,510 for 2019 and ($32,075) for 2018 on an after-tax basis. During 2019, the
fair value of the plan assets increased $632,723.
At December 31, 2019, the plan
assets included cash and cash equivalents, certificates of deposits with banks, U.S. government agency securities, corporate notes,
and equity securities.
Assumptions used to determine
the benefit obligation as of December 31, 2019 and 2018 respectively were:
|
|
2019
|
|
2018
|
Weighted-Average Assumptions as of December 31
|
|
|
|
|
Discount rate
|
|
|
5.70
|
%
|
|
|
5.70
|
%
|
Rate of compensation increase
|
|
|
N/A
|
|
|
|
N/A
|
|
For the years ended December 31,
2019, 2018, and 2017, the assumptions used to determine net periodic pension costs are as follows:
|
|
2019
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.70
|
%
|
|
|
5.70
|
%
|
|
|
5.70
|
%
|
Expected return on plan assets
|
|
|
7.00
|
%
|
|
|
7.00
|
%
|
|
|
7.00
|
%
|
Rate of compensation increase
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
The expected rate of return represents
the average rate of return to be earned on plan assets over the period the benefits included in the benefit obligation are to be
paid. In determining the expected rate of return, the Corporation considers long-term compound annualized returns of historical
market data as well as actual returns on the Corporation’s plan assets, and applies adjustments that reflect more recent
capital market experience.
The Corporation’s pension
plan investment objective is both security and long-term stability, with moderate growth. The investment strategies and policies
employed provide for investments, other than “fixed-dollar” investments, to prevent erosion by inflation. Sufficient
funds are held in a liquid nature (money market, short-term securities) to allow for the payment of plan benefits and expenses,
without subjecting the funds to loss upon liquidation. In an effort to provide a higher return with lower risk, the fund assets
are allocated between stocks, fixed income securities, and cash equivalents. All plan investments and transactions are in compliance
with ERISA and any other law applicable to employee benefit plans. The targeted investment portfolio is allocated up to 45% in
equities, 50% to 90% in fixed-income investments, and up to 20% in cash equivalent investments.
All the Corporation’s equity
investments are in mutual funds with a Morningstar rating of 3 or higher, have at least $300 million in investments, and have been
in existence 5 years or more. Fixed income securities include issues of the U.S. government and its agencies and corporate notes.
Any corporate note purchased has a rating (by Standard & Poor’s or Moody’s) of “A” or better. The average
maturity of the fixed income portion of the portfolio does not exceed 10 years.
Pension Asset Allocation and
Fair Value Measurement as of December 31
|
|
2019
|
|
2018
|
|
|
Fair Value
|
|
Level 1
|
|
%
|
|
Fair Value
|
|
Level 1
|
|
%
|
Investment at fair value as determined by quoted market price:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
0
|
%
|
|
$
|
3,482,765
|
|
|
$
|
3,482,765
|
|
|
|
36
|
%
|
Fixed income
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
%
|
|
|
1,096,033
|
|
|
|
1,096,033
|
|
|
|
11
|
%
|
Total
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
0
|
%
|
|
$
|
4,578,798
|
|
|
$
|
4,578,798
|
|
|
|
47
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment at estimated fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
$
|
4,967,299
|
|
|
$
|
4,967,299
|
|
|
|
48
|
%
|
|
$
|
4,521,110
|
|
|
$
|
4,521,110
|
|
|
|
47
|
%
|
Cash and cash equivalent
|
|
|
5,345,178
|
|
|
|
5,345,178
|
|
|
|
52
|
%
|
|
|
579,846
|
|
|
|
579,846
|
|
|
|
6
|
%
|
Total
|
|
$
|
10,312,477
|
|
|
$
|
10,312,477
|
|
|
|
100
|
%
|
|
$
|
5,100,956
|
|
|
$
|
5,100,956
|
|
|
|
53
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,312,477
|
|
|
$
|
10,312,477
|
|
|
|
100
|
%
|
|
$
|
9,679,754
|
|
|
$
|
9,679,754
|
|
|
|
100
|
%
|
All of the pension plan’s
investments were reported as Level 1 assets and received Level 1 fair value measurement.
ASC Topic 820, Fair Value Measurements
and Disclosures, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.
The hierarchy consists of three broad levels: Level 1 inputs consist of unadjusted quoted prices in active markets for identical
assets and have the highest priority, and Level 3 inputs have the lowest priority. These levels are:
Level 1 - The fair values
of mutual funds, preferred stock, corporate notes, and U.S. government agency securities were based on quoted market prices. Money
market funds and certificates of deposit were reported at fair value.
Level 2 - Valuation is
based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets
that were not active, and model-based valuation techniques for which all significant assumptions were observable in the market.
Level 3 - Valuation is
generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable
assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation
techniques include use of option pricing models, discounted cash flow models and similar techniques.
Estimated Contributions
The Corporation expects to contribute
$500,000 to its pension plan in 2020.
Estimated Future Benefit Payments
The following benefit payments,
which reflect expected future service and decrements as appropriate, are expected to be paid for fiscal years beginning:
|
2020
|
|
|
|
1,055,000
|
|
|
2021
|
|
|
|
1,031,000
|
|
|
2022
|
|
|
|
1,051,000
|
|
|
2023
|
|
|
|
1,021,000
|
|
|
2024
|
|
|
|
997,000
|
|
|
Years 2025 – 2029
|
|
|
|
4,484,000
|
|
The estimated amortization amount
for 2020 is a net loss of $504,825, no prior service cost or credit, and no net transition asset or obligation.
Southwest Georgia Bank 401(K)
Plan
In place of the Corporation’s frozen defined benefit pension
retirement plan, the Corporation offers its employees a 401(K) Plan. This 401(K) plan is a qualified defined contribution plan
as provided for under Section 401(K) of the Internal Revenue Code. This plan is a “safe–harbor” plan meaning
that the Corporation will match contributions dollar for dollar for the first four percent of salary participants defer into the
plan. The plan does allow for discretionary match in excess of the four percent and that the participants are allowed to defer
the maximum amount of salary. The Corporation matched the employee participants for the first four percent of salary contributing
to the plan $206,731, $219,006, and $204,565 for the years ended December 31, 2019, 2018, and 2017, respectively.
Employee Stock Ownership Plan
The Corporation has a nondiscriminatory
Employee Stock Ownership Plan and Trust (the “ESOP”) administered by a trustee. The plan was established to purchase
and hold Southwest Georgia Financial Corporation stock for all eligible employees. Contributions to the plan are made solely by
the Corporation and are at the discretion of the Board of Directors. The annual amount of the contribution is determined by taking
into consideration the financial conditions, profitability, and fiscal requirements of the Corporation. There were contributions
of $450,000, $475,000, and $425,000 for the years ended December 31, 2019, 2018, and 2017, respectively. Contributions to eligible
participants are based on percentage of annual compensation. As of December 31, 2019, the ESOP holds 251,119 shares of the Corporation’s
outstanding common stock. There were 201,780 released shares allocated to the participants. The 49,339 unreleased shares are pledged
as collateral for a $911,718 debt incurred from repurchasing participants’ shares. Dividends paid by the Corporation on ESOP
shares are allocated to the participants based on shares held. ESOP shares are included in the Corporation’s outstanding
shares and earnings per share computation.
Directors Deferred Compensation
Plan
The Corporation has a voluntary
deferred compensation plan for the Board of Directors administered by an insurance company (the “Directors’ Deferred
Compensation Plan”). The plan stipulates that if a director participates in the Plan for four years, the Corporation will
pay the director future monthly income for ten years beginning at normal retirement age, and the Corporation will make specified
monthly payments to the director’s beneficiaries in the event of his or her death prior to the completion of such payments.
The plan is funded by life insurance policies with the Corporation as the named beneficiary. This plan is closed to new director
enrollment and participation.
Directors and Executive Officers
Stock Purchase Plan
The Corporation has adopted a
stock purchase plan for the executive officers and directors of Southwest Georgia Financial Corporation. Under the plan, participants
may elect to contribute up to $900 monthly of salary or directors’ fees and receive corporate common stock with an aggregate
value of two times their contribution. The expense incurred during 2019, 2018, and 2017 on the part of the Corporation totaled
$248,780, $248,800, and $265,900, respectively.
Dividend Reinvestment and Share Purchase Plan
The Corporation maintains a dividend
reinvestment and share purchase plan. The purpose of the plan is to provide shareholders of record of the Corporation’s common
stock, who elect to participate in the plan, with a simple and convenient method of investing cash dividends and voluntary cash
contributions in shares of the common stock without payment of any brokerage commissions or other charges. Eligible participants
may purchase common stock through automatic reinvestment of common stock dividends on all or partial shares and make additional
voluntary cash payments of not less than $5 nor more than $5,000 per month.
The participant’s price
of common stock purchased with dividends or voluntary cash payments will be the average price of all shares purchased in the open
market, or if issued from unissued shares or treasury stock the price will be the average of the high and low sales prices of the
stock on the NYSE American LLC on the dividend payable date or other purchase date. During the years ended December 31, 2019, 2018,
and 2017, shares issued through the plan were 5,986, 5,726, and 5,286, respectively, at an average price of $20.96, $22.63, and
$21.18, per share, respectively. These numbers of shares and average price per share are not adjusted by stock dividends.
Equity Incentive Award
The Corporation has a 2013 Omnibus
Incentive Plan (the “Incentive Plan”) that was approved by our shareholders at the Corporation’s 2014 Annual
Meeting. The Incentive Plan was established to attract, retain and motivate the Corporation’s employees, consultants, advisors
and directors, to promote the success of our business by linking their personal interests to those of our shareholders and to encourage
stock ownership on the part of management. Under the Incentive Plan, the Corporation may issue a maximum aggregate amount of 125,000
shares of common stock pursuant to (i) stock options, which includes incentive stock options and non-qualified stock options, (ii)
stock appreciation rights, (iii) restricted stock awards, (iv) restricted stock units, (v) incentive awards, (vi) other stock-based
awards and (vii) dividend equivalents.
The Corporation may also grant
cash-based awards under the Incentive Plan. During 2019, the Corporation granted 4,456 shares of restricted stock awards of which
none are vested. The Corporation granted 13,316 shares of restricted stock awards during 2018 of which 2,606 vested and 1,163 were
forfeited during 2019. The Corporation granted 4,271 shares of restricted stock awards during 2017 of which 714 vested and 559
were forfeited during 2019. In addition, participants sold 349 shares back to the plan during 2019.
The following table summarizes
the movements in the Corporation’s outstanding restricted stock awards:
|
|
|
Number
of
Shares
|
|
|
|
Amount
|
|
Non-vested balance, December 31, 2017
|
|
|
4,271
|
|
|
$
|
88,153
|
|
Granted
|
|
|
13,316
|
|
|
|
306,032
|
|
Vested
|
|
|
(854
|
)
|
|
|
(17,627
|
)
|
Non-vested balance, December 31, 2018
|
|
|
16,733
|
|
|
$
|
376,558
|
|
Granted
|
|
|
4,456
|
|
|
|
93,576
|
|
Vested
|
|
|
(3,320
|
)
|
|
|
(74,622
|
)
|
Repurchased from participants
|
|
|
349
|
|
|
|
11,928
|
|
Forfeited by participants
|
|
|
(1,722
|
)
|
|
|
(38,266
|
)
|
Non-vested balance, December 31, 2019
|
|
|
16,496
|
|
|
$
|
369,174
|
|
Awards are being amortized to
expense over the five-year vesting period.
10. INCOME TAXES
Components of income tax expense for 2019, 2018, and 2017 are as
follows:
|
|
2019
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
Current expense
|
|
$
|
1,201,933
|
|
|
$
|
28,779
|
|
|
$
|
1,101,902
|
|
Deferred taxes (benefit)
|
|
|
(55,347
|
)
|
|
|
639,637
|
|
|
|
517,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income taxes
|
|
$
|
1,146,586
|
|
|
$
|
668,416
|
|
|
$
|
1,619,900
|
|
The reasons for the difference
between the federal income taxes in the consolidated statements of income and the amount and percentage computed by the applying
the combine statutory federal and state income tax rate to income taxes are as follows:
|
|
2019
|
|
2018
|
|
2017
|
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
Taxes at statutory income tax rate
|
|
$
|
1,351,733
|
|
|
|
21.0
|
|
|
$
|
1,116,262
|
|
|
|
21.0
|
|
|
$
|
1,845,313
|
|
|
|
34.0
|
|
Reductions in taxes resulting
from exempt income
|
|
|
(209,892
|
)
|
|
|
(3.3
|
)
|
|
|
(272,486
|
)
|
|
|
(5.1
|
)
|
|
|
(524,347
|
)
|
|
|
(9.7
|
)
|
Other timing differences
|
|
|
4,745
|
|
|
|
0.1
|
|
|
|
(175,360
|
)
|
|
|
(3.3
|
)
|
|
|
298,934
|
|
|
|
5.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income taxes
|
|
$
|
1,146,586
|
|
|
|
17.8
|
|
|
$
|
668,416
|
|
|
|
12.6
|
|
|
$
|
1,619,900
|
|
|
|
29.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The sources of timing differences
for tax reporting purposes and the related deferred taxes recognized in 2019, 2018, and 2017 are summarized as follows:
|
|
2019
|
|
2018
|
|
2017
|
Intangible asset amortization
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
172,816
|
|
Deferred gain on covered transaction
|
|
|
(1,115
|
)
|
|
|
5,004
|
|
|
|
9,352
|
|
Nonaccrual loan interest
|
|
|
155
|
|
|
|
8,369
|
|
|
|
(6,896
|
)
|
Recognition of AMT tax credit carryforward
|
|
|
0
|
|
|
|
332,776
|
|
|
|
0
|
|
Foreclosed assets expenses
|
|
|
4,760
|
|
|
|
41,530
|
|
|
|
(42,075
|
)
|
Bad debt expense in excess of tax
|
|
|
(36,850
|
)
|
|
|
(80,902
|
)
|
|
|
423,203
|
|
Accretion of discounted bonds
|
|
|
10,546
|
|
|
|
16,805
|
|
|
|
14,772
|
|
Gain on disposition of discounted bonds
|
|
|
0
|
|
|
|
(4,188
|
)
|
|
|
(28,215
|
)
|
Book and tax depreciation difference
|
|
|
(43,664
|
)
|
|
|
357,266
|
|
|
|
(24,959
|
)
|
Other timing differences
|
|
|
10,821
|
|
|
|
(37,023
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred taxes
|
|
$
|
(55,347
|
)
|
|
$
|
639,637
|
|
|
$
|
517,998
|
|
ASC 740, Income Taxes, requires
organizations to recognize the effect of a change in tax rates at the date of enactment by adjusting its deferred tax liabilities
and assets to the new tax rate. With the Jobs and Tax Cut Act of 2017 being signed into law in December 2017, our deferred taxes
were revalued resulting in additional income tax expense of $419,359 at December 31, 2017, leaving $98,639 as the actual current
period timing difference.
|
|
December 31
|
|
|
2019
|
|
2018
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Nonaccrual loan interest
|
|
$
|
319
|
|
|
$
|
474
|
|
Deferred gain on covered transaction
|
|
|
10,415
|
|
|
|
9,300
|
|
Foreclosed assets expenses
|
|
|
5,403
|
|
|
|
10,163
|
|
Intangible asset amortization
|
|
|
125,883
|
|
|
|
125,883
|
|
Bad debt expense in excess of tax
|
|
|
756,913
|
|
|
|
720,063
|
|
Realized loss on other-than-temporarily impaired equity securities
|
|
|
214,353
|
|
|
|
214,353
|
|
Deferred directors compensation
|
|
|
122,235
|
|
|
|
133,057
|
|
Capital loss carryforward
|
|
|
32,878
|
|
|
|
32,878
|
|
Pension plan
|
|
|
154,879
|
|
|
|
443,698
|
|
Unrealized losses on securities available for sale
|
|
|
0
|
|
|
|
137,761
|
|
Total deferred tax assets
|
|
|
1,423,278
|
|
|
|
1,827,630
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Accretion on bonds and gain on discounted bonds
|
|
|
78,853
|
|
|
|
68,307
|
|
Book and tax depreciation difference
|
|
|
532,235
|
|
|
|
575,899
|
|
Unrealized gains on securities available for sale
|
|
|
302,004
|
|
|
|
0
|
|
Total deferred tax liabilities
|
|
|
913,092
|
|
|
|
644,206
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
510,186
|
|
|
$
|
1,183,424
|
|
11. RELATED PARTY TRANSACTIONS
The ESOP held 251,119 shares of
the Corporation’s stock as of December 31, 2019, of which 49,339 shares have been pledged to secure the ESOP’s debt
to the Corporation. In the normal course of business, the Bank has made loans at prevailing interest rates and terms to directors
and executive officers of the Corporation and its subsidiaries, and to their affiliates. The aggregate indebtedness to the Bank
of these related parties approximated $1,381,000 and $1,567,000 at December 31, 2019 and 2018, respectively. During 2019, approximately
$346,000 of such loans were made, and repayments totaled approximately $532,000. None of these above mentioned loans were restructured,
nor were any related party loans charged off during 2019 or 2018. Also, during 2019 and 2018, directors and executive officers
had approximately $2,502,000 and $2,015,000, respectively, in deposits with the Bank.
12.
COMMITMENTS, CONTINGENT LIABILITIES, AND FINANCIAL INSTRUMENTS WITH
OFF-BALANCE SHEET
RISK
In the normal course of business, various claims and lawsuits may
arise against the Corporation. Management, after reviewing with counsel all actions and proceedings, considers that the aggregate
liability or loss, if any, will not be material.
The Corporation is a party to financial instruments with off-balance
sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own risk exposure to
fluctuations in interest rates. These financial instruments include commitments to extend credit in the form of loans or through
letters of credit. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts
recognized in the Consolidated Balance Sheets. The contract or notional amounts of the instruments reflect the extent of involvement
the Corporation has in particular classes of financial instruments.
Commitments to extend credit are contractual obligations to lend
to a customer as long as all established contractual conditions are satisfied. Commitments generally have fixed expiration dates
or other termination clauses and may require payment of a fee by a customer.
Standby letters of credit and financial guarantees are conditional
commitments issued by the Corporation to guarantee the performance of a customer to a third party. Standby letters of credit and
financial guarantees are generally terminated through the performance of a specified condition or through the lapse of time.
The Corporation’s exposure to credit loss in the event of
nonperformance by the other party to commitments to extend credit and standby letters of credit is represented by the contractual
or notional amounts of these instruments. As these off-balance sheet financial instruments have essentially the same credit risk
involved in extending loans, the Corporation generally uses the same credit and collateral policies in making these commitments
and conditional obligations as it does for on-balance sheet instruments. Since many of the commitments to extend credit and standby
letters of credit are expected to expire without being drawn upon, the contractual or notional amounts do not represent future
cash requirements.
The contractual or notional amounts of financial instruments having
credit risk in excess of that reported in the Consolidated Balance Sheets are as follows:
|
|
Dec. 31, 2019
|
|
Dec. 31, 2018
|
|
|
|
|
|
Financial instruments whose contract amounts represent credit risk:
|
|
|
|
|
|
|
|
|
Commitments to extend credit
|
|
$
|
55,934,489
|
|
|
$
|
39,418,110
|
|
Standby letters of credit and financial guarantees
|
|
$
|
1,255,000
|
|
|
$
|
4,342,849
|
|
The
Corporation has no lease obligations that require capitalization. The rental agreement for the loan production office in Tifton,
Georgia ended July 31, 2018. The Corporation’s remaining lease is an operating lease for postage services, which expires
December 2020.
The
following table shows scheduled future cash payments under this obligation as of December 31, 2019.
|
|
Payments Due by Period
|
|
|
Total
|
|
Less
than 1
Year
|
|
1-3
Years
|
|
4-5
Years
|
|
After 5
Years
|
Operating leases
|
|
$
|
5,148
|
|
|
$
|
5,148
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
Rental expenses were $0, $9,100, and $15,600 for the years ended
December 31, 2019, 2018, and 2017, respectively.
13. FAIR VALUE MEASUREMENTS AND DISCLOSURES
The Corporation utilizes fair
value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities
available for sale are recorded at fair value on a recurring basis. From time to time, the Corporation may be required
to record at fair value other assets on a nonrecurring basis, such as impaired loans and foreclosed real estate. Additionally,
the Corporation is required to disclose, but not record, the fair value of other financial instruments.
Fair Value Hierarchy:
Under ASC Topic 820, the Corporation
groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded
and the reliability of the assumptions used to determine fair value. These levels are:
Level 1
|
Valuation is based upon quoted prices for identical instruments traded in active markets.
|
Level 2
|
Valuation is based upon quoted
prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active,
and model-based valuation techniques for which all significant assumptions are observable in the market.
|
Level 3
|
Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.
|
Following
is a description of valuation methodologies used for assets and liabilities which are either recorded or disclosed at fair value.
Cash and Cash Equivalents:
For disclosure purposes for cash and due from banks,
interest bearing deposits in other banks and federal funds sold, the carrying amount is a reasonable estimate of fair value.
Certificates of Deposit in Other
Banks:
For disclosure purposes for certificates
of deposit in other banks, the carrying amount is a reasonable estimate of fair value.
Investment Securities Available
for Sale:
Investment securities available
for sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If
quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques
such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other
factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the
New York Stock Exchange and U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter market funds. Level
2 securities include mortgage-backed securities issued by government sponsored enterprises and state, county and municipal bonds. Other
securities classified as available for sale are reported at fair value utilizing Level 2 inputs. Securities classified as Level
3 include asset-backed securities in less liquid markets.
Investment Securities Held to
Maturity:
Investment securities held to
maturity are not recorded at fair value on a recurring basis. For disclosure purposes, fair value measurement is based upon quoted
prices, if available.
Federal Home Loan Bank Stock:
For disclosure purposes, the carrying
value of other investments approximate fair value.
Loans:
The Corporation does not record
loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and a specific allocation
is established within the allowance for loan losses. Loans for which it is probable that payment of interest and principal
will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan
is identified as individually impaired, management measures impairment in accordance with ASC Topic 310, Accounting by
Creditors for Impairment of a Loan. The fair value of impaired loans is estimated using one of three methods, including
collateral value, market value of similar debt, and discounted cash flows. Those impaired loans not requiring an allowance
represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. In
accordance with ASC Topic 820, impaired loans where an allowance is established based on the fair value of collateral require classification
in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current
appraised value, the Corporation records the impaired loan as nonrecurring Level 2. When an appraised value is not available
or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable
market price, the Corporation records the impaired loan as nonrecurring Level 3.
For disclosure purposes, the fair
value of fixed rate loans which are not considered impaired, is estimated by discounting the future cash flows using the current
rates at which similar loans would be made to borrowers with similar credit ratings. For unimpaired variable rate loans, the carrying
amount is a reasonable estimate of fair value for disclosure purposes.
Foreclosed Assets:
Other real estate properties are
adjusted to fair value upon transfer of the loans to other real estate. Subsequently, other real estate assets are carried at the
lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral
or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an
observable market price or a current appraised value, the Corporation records the other real estate as nonrecurring Level 2. When
an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised
value and there is no observable market price, the Corporation records the other real estate asset as nonrecurring Level 3.
Bank Owned Life Insurance:
For disclosure purposes, for cash surrender value of
life insurance, the carrying value is a reasonable estimate of fair value.
Deposits:
For disclosure purposes, the fair
value of demand deposits, savings accounts, NOW accounts and money market deposits is the amount payable on demand at the reporting
date, while the fair value of fixed maturity certificates of deposit is estimated by discounting the future cash flows using current
rates at which comparable certificates would be issued.
FHLB Advances:
For disclosure purposes, the
fair value of the FHLB fixed rate borrowing is estimated using discounted cash flows, based on the current incremental borrowing
rates for similar types of borrowing arrangements.
Commitments
to Extend Credit and Standby Letters of Credit:
Because commitments to extend
credit and standby letters of credit are made using variable rates and have short maturities, the carrying value and the fair value
are immaterial for disclosure.
Assets Recorded at Fair Value on a Recurring Basis:
The table below presents the recorded
amount of assets measured at fair value on a recurring basis as of December 31, 2019 and 2018.
December 31, 2019
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government treasury securities
|
|
$
|
4,027,190
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
4,027,190
|
|
U.S. government agency securities
|
|
|
0
|
|
|
|
38,498,127
|
|
|
|
0
|
|
|
|
38,498,127
|
|
State and municipal securities
|
|
|
0
|
|
|
|
4,534,320
|
|
|
|
0
|
|
|
|
4,534,320
|
|
Residential mortgage-backed securities
|
|
|
0
|
|
|
|
20,766,227
|
|
|
|
0
|
|
|
|
20,766,227
|
|
Total
|
|
$
|
4,027,190
|
|
|
$
|
63,798,674
|
|
|
$
|
0
|
|
|
$
|
67,825,864
|
|
December 31, 2018
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government treasury securities
|
|
$
|
954,570
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
954,570
|
|
U.S. government agency securities
|
|
|
0
|
|
|
|
45,207,005
|
|
|
|
0
|
|
|
|
45,207,005
|
|
State and municipal securities
|
|
|
0
|
|
|
|
7,377,935
|
|
|
|
0
|
|
|
|
7,377,935
|
|
Residential mortgage-backed securities
|
|
|
0
|
|
|
|
4,774,067
|
|
|
|
0
|
|
|
|
4,774,067
|
|
Total
|
|
$
|
954,570
|
|
|
$
|
57,359,007
|
|
|
$
|
0
|
|
|
$
|
58,313,577
|
|
Assets Recorded at Fair Value
on a Nonrecurring Basis:
The Corporation may be required, from time to time, to measure certain
assets at fair value on a nonrecurring basis in accordance with GAAP. These include assets that are measured at the
lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at fair
value on a nonrecurring basis are included in the table below as of December 31, 2019 and 2018.
December 31, 2019
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Foreclosed assets
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
273,873
|
|
|
$
|
273,873
|
|
Impaired loans
|
|
|
0
|
|
|
|
0
|
|
|
|
1,716,998
|
|
|
|
1,716,998
|
|
Total assets at fair value
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,990,871
|
|
|
$
|
1,990,871
|
|
December
31, 2018
|
|
|
Level 1
|
|
|
|
Level 2
|
|
|
|
Level 3
|
|
|
|
Total
|
|
Foreclosed assets
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
127,605
|
|
|
$
|
127,605
|
|
Impaired loans
|
|
|
0
|
|
|
|
0
|
|
|
|
3,838,151
|
|
|
|
3,838,151
|
|
Total assets at fair value
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
3,965,756
|
|
|
$
|
3,965,756
|
|
Foreclosed properties that are
included above as measured at fair value on a nonrecurring basis are those properties that resulted from a loan that had been
foreclosed and charged down or have been written down subsequent to foreclosure. Foreclosed properties are generally recorded
at the appraised value less estimated selling costs in the range of 15 – 20%. Loans that are reported above as being measured
at fair value on a nonrecurring basis are generally impaired loans that have been either partially charged off or have specific
reserves assigned to them. Nonaccrual impaired loans that are collateral dependent are generally written down to a range of 80
– 85% of appraised value which considers the estimated costs to sell. Specific reserves are established for impaired loans
based on appraised value of collateral or discounted cash flows.
The carrying amount and estimated
fair values of the Corporation’s assets and liabilities which are required to be either disclosed or recorded at fair value
at December 31, 2019 and 2018, are as follows:
|
|
|
|
Estimated Fair Value
|
December 31, 2019
|
|
Carrying
Amount
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
(Dollars in thousands)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
37,631
|
|
|
$
|
37,631
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
37,631
|
|
Certificates of deposit in other banks
|
|
|
2,730
|
|
|
|
2,730
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,730
|
|
Investment securities available for sale
|
|
|
67,826
|
|
|
|
4,027
|
|
|
|
63,799
|
|
|
|
0
|
|
|
|
67,826
|
|
Investment securities held to maturity
|
|
|
25,487
|
|
|
|
0
|
|
|
|
26,118
|
|
|
|
0
|
|
|
|
26,118
|
|
Federal Home Loan Bank stock
|
|
|
1,715
|
|
|
|
0
|
|
|
|
1,715
|
|
|
|
0
|
|
|
|
1,715
|
|
Loans, net
|
|
|
394,461
|
|
|
|
0
|
|
|
|
386,405
|
|
|
|
1,717
|
|
|
|
388,122
|
|
Bank owned life insurance
|
|
|
6,913
|
|
|
|
0
|
|
|
|
6,913
|
|
|
|
0
|
|
|
|
6,913
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
473,434
|
|
|
|
0
|
|
|
|
458,402
|
|
|
|
0
|
|
|
|
458,402
|
|
Federal Home Loan Bank advances
|
|
|
28,493
|
|
|
|
0
|
|
|
|
28,780
|
|
|
|
0
|
|
|
|
28,780
|
|
|
|
|
|
Estimated Fair Value
|
December 31, 2018
|
|
Carrying
Amount
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
(Dollars in thousands)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
35,499
|
|
|
$
|
35,499
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
35,499
|
|
Certificates of deposit in other banks
|
|
|
2,732
|
|
|
|
2,732
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,732
|
|
Investment securities available for sale
|
|
|
58,314
|
|
|
|
955
|
|
|
|
57,359
|
|
|
|
0
|
|
|
|
58,314
|
|
Investment securities held to maturity
|
|
|
36,827
|
|
|
|
0
|
|
|
|
37,010
|
|
|
|
0
|
|
|
|
37,010
|
|
Federal Home Loan Bank stock
|
|
|
1,820
|
|
|
|
0
|
|
|
|
1,820
|
|
|
|
0
|
|
|
|
1,820
|
|
Loans, net
|
|
|
373,321
|
|
|
|
0
|
|
|
|
362,373
|
|
|
|
3,838
|
|
|
|
366,211
|
|
Bank owned life insurance
|
|
|
6,779
|
|
|
|
0
|
|
|
|
6,779
|
|
|
|
0
|
|
|
|
6,779
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
455,640
|
|
|
|
0
|
|
|
|
456,245
|
|
|
|
0
|
|
|
|
456,245
|
|
Federal Home Loan Bank advances
|
|
|
31,629
|
|
|
|
0
|
|
|
|
31,591
|
|
|
|
0
|
|
|
|
31,591
|
|
Limitations:
Fair value estimates
are made at a specific point in time, based on relevant market information and information about the financial statement element.
These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates
included herein are based on existing on- and off-balance-sheet financial instruments without attempting to estimate the value
of anticipated future business and the fair value of assets and liabilities that are not required to be recorded or disclosed at
fair value like premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and
losses can have a significant effect on fair value estimates and have not been considered in the estimates.
14. SUPPLEMENTAL FINANCIAL
DATA
Components of other income and
other operating expense in excess of one percent of gross interest income for the respective periods are as follows:
|
|
Years Ended December 31
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank card interchange fees
|
|
$
|
653,726
|
|
|
$
|
576,359
|
|
|
$
|
600,619
|
|
Gain on sale of fixed assets
|
|
$
|
250,460
|
|
|
$
|
(97,503
|
)
|
|
$
|
(1,594
|
)
|
Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other professional fees
|
|
$
|
499,797
|
|
|
$
|
287,273
|
|
|
$
|
317,147
|
|
Advertising & public relations
|
|
$
|
248,422
|
|
|
$
|
264,269
|
|
|
$
|
192,016
|
|
Director & board committee fees
|
|
$
|
301,842
|
|
|
$
|
241,523
|
|
|
$
|
278,821
|
|
FDIC insurance assessment
|
|
$
|
118,269
|
|
|
$
|
233,878
|
|
|
$
|
247,963
|
|
Telephone expense
|
|
$
|
309,012
|
|
|
$
|
284,586
|
|
|
$
|
180,559
|
|
15. SHAREHOLDERS’ EQUITY
/ REGULATORY MATTERS
Dividends paid by the Bank subsidiary
are the primary source of funds available to the parent company for payment of dividends to its shareholders and other needs. Banking
regulations limit the amount of dividends that may be paid without prior approval of the Bank’s regulatory agency. At December
31, 2019, approximately $2,750,464 of the Bank’s net assets were available for payment of dividends without prior approval
from the regulatory authorities.
The Federal Reserve Board requires
that banks maintain reserves based on their average deposits in the form of vault cash and average deposit balances at the Federal
Reserve Banks. For the year ended December 31, 2019, the Bank had a total reserve requirement of $0.
The Corporation (on a consolidated
basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure
to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by such agencies
that, if undertaken, could have a direct material effect on the Corporation’s and Bank’s financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and the Bank must meet specific
capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated
under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank
holding companies.
Quantitative measures established
by regulation to ensure capital adequacy require the Corporation and the Bank to maintain minimum amounts and ratios (set forth
in the following table) of Total, Common Equity Tier I, and Tier I capital (as defined in the regulations) to risk-weighted assets
(as defined) and of Tier I capital to average assets (as defined). As of December 31, 2019 and 2018, the Corporation met all capital
adequacy requirements.
As of December 31, 2019, the most
recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action.
To be categorized as well
capitalized, an institution must maintain minimum Total risk-based, Common Equity Tier I risk-based, Tier I risk-based and Tier
I leverage ratios as set forth in the following tables. Under the Basel III rules, the Bank must hold a capital conservation buffer
above the minimum regulatory risk-based capital ratios. The capital conservation buffer for 2019 is 2.50%. There are no conditions
or events since the notification that management believes have changed the Bank’s category. The Corporation’s and
the Bank’s actual capital amounts and ratios as of December 31, 2019 and 2018, are also presented in the table.
As a result of regulatory limitations
at December 31, 2019, approximately $45,371,590 of the parent company’s investments in net assets of the subsidiary bank
of $48,122,054, as shown in the accompanying condensed balance sheets in Note 16, was restricted from transfer by the subsidiary
bank to the parent company in the form of cash dividends.
The Corporation’s and the
Bank’s ratios under the above rules at December 31, 2019 and 2018, are set forth in the following tables.
As of December 31, 2019
|
|
Actual
|
|
For
Capital
Adequacy Purposes
|
|
To Be Well
Capitalized Under
Prompt
Corrective
Action Provisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
Southwest Georgia
Financial Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity Tier 1 (to risk-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
risk- weighted assets)
|
|
$
|
48,412,803
|
|
|
|
12.35
|
%
|
|
$
|
17,634,437
|
|
|
|
>4.50%
|
|
|
N/A*
|
|
|
N/A*
|
|
Total capital (to risk-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
weighted assets)
|
|
$
|
52,017,151
|
|
|
|
13.27
|
%
|
|
$
|
31,350,110
|
|
|
|
>8.00%
|
|
|
N/A*
|
|
|
N/A*
|
|
Tier I capital (to risk-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
weighted assets)
|
|
$
|
48,412,803
|
|
|
|
12.35
|
%
|
|
$
|
23,512,853
|
|
|
|
>6.00%
|
|
|
N/A*
|
|
|
N/A*
|
|
Leverage (tier I capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to average assets)
|
|
$
|
48,412,803
|
|
|
|
8.81
|
%
|
|
$
|
21,991,645
|
|
|
|
>4.00%
|
|
|
N/A*
|
|
|
N/A*
|
|
*N/A - As of December 31, 2019,
the Corporation met the definition under the Basel III Capital Rules of a small bank holding company and, therefore,
was exempt from consolidated risk-based and leverage capital adequacy guidelines for bank holding companies.
(1) Not including capital conservation
buffer.
As of December 31, 2018
|
|
Actual
|
|
For Capital
Adequacy
Purposes
|
|
To Be Well
Capitalized Under
Prompt Corrective
Action
Provisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
Southwest Georgia
Financial Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity Tier 1 (to risk-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
risk- weighted assets)
|
|
$
|
45,802,434
|
|
|
|
11.97
|
%
|
|
$
|
17,217,892
|
|
|
|
>4.50%
|
|
|
|
N/A*
|
|
|
|
N/A*
|
|
Total capital (to risk-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
weighted assets)
|
|
$
|
49,231,303
|
|
|
|
12.87
|
%
|
|
$
|
30,609,586
|
|
|
|
>8.00%
|
|
|
|
N/A*
|
|
|
|
N/A*
|
|
Tier I capital (to risk-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
weighted assets)
|
|
$
|
45,802,434
|
|
|
|
11.97
|
%
|
|
$
|
22,957,189
|
|
|
|
>6.00%
|
|
|
|
N/A*
|
|
|
|
N/A*
|
|
Leverage (tier I capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to average assets)
|
|
$
|
45,802,434
|
|
|
|
8.62
|
%
|
|
$
|
21,265,996
|
|
|
|
>4.00%
|
|
|
|
N/A*
|
|
|
|
N/A*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southwest Georgia Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity Tier 1 (to risk-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
risk- weighted assets)
|
|
$
|
43,680,743
|
|
|
|
11.44
|
%
|
|
$
|
17,180,290
|
|
|
|
>4.50%(1)
|
|
|
$
|
24,815,974
|
|
|
|
> 6.50%
|
|
Total capital (to risk-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
weighted assets)
|
|
$
|
47,109,612
|
|
|
|
12.34
|
%
|
|
$
|
30,542,738
|
|
|
|
>8.00%(1)
|
|
|
$
|
38,178,422
|
|
|
|
>10.00%
|
|
Tier I capital (to risk-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
weighted assets)
|
|
$
|
43,680,743
|
|
|
|
11.44
|
%
|
|
$
|
22,907,053
|
|
|
|
>6.00%(1)
|
|
|
$
|
30,542,738
|
|
|
|
> 8.00%
|
|
Leverage (tier I capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to average assets)
|
|
$
|
43,680,743
|
|
|
|
8.24
|
%
|
|
$
|
21,206,909
|
|
|
|
>4.00%
|
|
|
$
|
26,508,636
|
|
|
|
> 5.00%
|
|
*N/A - As of December 31, 2018,
the Corporation met the definition under the Basel III Capital Rules of a small bank holding company and, therefore,
was exempt from consolidated risk-based and leverage capital adequacy guidelines for bank holding companies.
(1) Not including capital conservation
buffer.
16.
PARENT COMPANY FINANCIAL DATA
Southwest Georgia Financial Corporation’s
condensed balance sheets as of December 31, 2019 and 2018, and its related condensed statements of operations and cash flows for
the years ended are as follows:
Condensed
Balance Sheets
as
of December 31, 2019 and 2018
(Dollars
in thousands)
|
|
2019
|
|
2018
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
Cash
|
|
|
1,370
|
|
|
$
|
776
|
|
Investment in consolidated wholly-owned bank
subsidiary, at equity
|
|
|
48,122
|
|
|
|
41,497
|
|
Loans
|
|
|
912
|
|
|
|
640
|
|
Other assets
|
|
|
94
|
|
|
|
708
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
50,498
|
|
|
$
|
43,621
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
7
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
Common stock, $1 par value, 5,000,000 shares authorized,
|
|
|
|
|
|
|
|
|
2,548,510 shares and 2,545,776 shares issued for 2019 & 2018
|
|
|
2,549
|
|
|
|
2,546
|
|
Additional paid-in capital
|
|
|
18,479
|
|
|
|
18,419
|
|
Retained earnings
|
|
|
28,910
|
|
|
|
24,841
|
|
Accumulated other comprehensive loss
|
|
|
553
|
|
|
|
(2,187
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders’ equity
|
|
|
50,491
|
|
|
|
43,619
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity
|
|
$
|
50,498
|
|
|
$
|
43,621
|
|
16.
PARENT COMPANY FINANCIAL DATA (continued)
Condensed
Statements of Income and Expense
for
the years ended December 31, 2019, 2018, and 2017
(Dollars
in thousands)
|
|
2019
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend received from bank subsidiary
|
|
$
|
2,245
|
|
|
$
|
1,200
|
|
|
$
|
2,000
|
|
Interest income
|
|
|
80
|
|
|
|
45
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income
|
|
|
2,325
|
|
|
|
1,245
|
|
|
|
2,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
373
|
|
|
|
189
|
|
|
|
172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and equity in
|
|
|
|
|
|
|
|
|
|
|
|
|
Undistributed income of bank subsidiary
|
|
|
1,952
|
|
|
|
1,056
|
|
|
|
1,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit – allocated from
|
|
|
|
|
|
|
|
|
|
|
|
|
consolidated return
|
|
|
82
|
|
|
|
40
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before equity in undistributed
|
|
|
|
|
|
|
|
|
|
|
|
|
income of subsidiary
|
|
|
2,034
|
|
|
|
1,096
|
|
|
|
1,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in undistributed income of subsidiary
|
|
|
3,256
|
|
|
|
3,551
|
|
|
|
1,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
5,290
|
|
|
|
4,647
|
|
|
|
3,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings – beginning of year
|
|
|
24,841
|
|
|
|
33,020
|
|
|
|
30,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to correct immaterial misstatement
of investment in bank subsidiary in prior periods
|
|
|
0
|
|
|
|
(129
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividend declared
|
|
|
(1,221
|
)
|
|
|
(1,196
|
)
|
|
|
(1,121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement of treasury stock
|
|
|
0
|
|
|
|
(11,501
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings – end of year
|
|
$
|
28,910
|
|
|
$
|
24,841
|
|
|
$
|
33,020
|
|
16.
PARENT COMPANY FINANCIAL DATA (continued)
Condensed
Statements of Cash Flows
for
the years ended December 31, 2019, 2018, and 2017
(Dollars
in thousands)
|
|
2019
|
|
2018
|
|
2017
|
Cash flow from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
5,290
|
|
|
$
|
4,647
|
|
|
$
|
3,807
|
|
Adjustments to reconcile net income to net
|
|
|
|
|
|
|
|
|
|
|
|
|
cash used by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in undistributed earnings of subsidiary
|
|
|
(3,256
|
)
|
|
|
(3,551
|
)
|
|
|
(1,865
|
)
|
Stock-based compensation – restricted stock
|
|
|
75
|
|
|
|
18
|
|
|
|
0
|
|
Changes in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
(15
|
)
|
|
|
3
|
|
|
|
(25
|
)
|
Other liabilities
|
|
|
5
|
|
|
|
2
|
|
|
|
0
|
|
Net cash provided for operating activities
|
|
|
2,099
|
|
|
|
1,119
|
|
|
|
1,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in loans
|
|
|
(272
|
)
|
|
|
(535
|
)
|
|
|
80
|
|
Net cash provided (used) for investing activities
|
|
|
(272
|
)
|
|
|
(535
|
)
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividend paid to shareholders
|
|
|
(1,221
|
)
|
|
|
(1,196
|
)
|
|
|
(1,121
|
)
|
Payment to repurchase common stock
|
|
|
(12
|
)
|
|
|
(306
|
)
|
|
|
(122
|
)
|
Net cash used for financing activities
|
|
|
(1,233
|
)
|
|
|
(1,502
|
)
|
|
|
(1,243
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash
|
|
|
594
|
|
|
|
(918
|
)
|
|
|
754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash – beginning of year
|
|
|
776
|
|
|
|
1,694
|
|
|
|
940
|
|
Cash – end of year
|
|
$
|
1,370
|
|
|
$
|
776
|
|
|
$
|
1,694
|
|
17. EARNINGS PER SHARE
Earnings per share are based on
the weighted average number of common shares outstanding during the year.
|
|
December 31,
|
|
|
2019
|
|
2018
|
|
2017
|
Net income
|
|
$
|
5,290,240
|
|
|
$
|
4,647,119
|
|
|
$
|
3,807,492
|
|
Net income available to common shareholders
|
|
$
|
5,290,240
|
|
|
$
|
4,647,119
|
|
|
$
|
3,807,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of common shares outstanding
|
|
|
2,545,672
|
|
|
|
2,545,565
|
|
|
|
2,547,421
|
|
Effect of dilutive restricted stock
|
|
|
0
|
|
|
|
0
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of common shares outstanding used to calculate diluted earnings per common share
|
|
|
2,545,672
|
|
|
|
2,545,565
|
|
|
|
2,547,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share - basic
|
|
$
|
2.08
|
|
|
$
|
1.83
|
|
|
$
|
1.49
|
|
Earnings per share - diluted
|
|
$
|
2.08
|
|
|
$
|
1.83
|
|
|
$
|
1.49
|
|
18. QUARTERLY DATA
SOUTHWEST GEORGIA FINANCIAL CORPORATION
|
QUARTERLY DATA
|
(UNAUDITED)
|
(Dollars in thousands)
|
|
|
For the Year 2019
|
|
|
Fourth
|
|
Third
|
|
Second
|
|
First
|
Interest and dividend income
|
|
$
|
6,572
|
|
|
$
|
6,355
|
|
|
$
|
6,147
|
|
|
$
|
5,962
|
|
Interest expense
|
|
|
1,013
|
|
|
|
1,150
|
|
|
|
1,095
|
|
|
|
1,196
|
|
Net interest income
|
|
|
5,559
|
|
|
|
5,205
|
|
|
|
5,052
|
|
|
|
4,766
|
|
Provision for loan losses
|
|
|
112
|
|
|
|
379
|
|
|
|
250
|
|
|
|
116
|
|
Net interest income after provision for loan losses
|
|
|
5,447
|
|
|
|
4,826
|
|
|
|
4,802
|
|
|
|
4,650
|
|
Noninterest income
|
|
|
1,081
|
|
|
|
1,192
|
|
|
|
1,307
|
|
|
|
1,237
|
|
Noninterest expenses
|
|
|
4,918
|
|
|
|
4,221
|
|
|
|
4,550
|
|
|
|
4,416
|
|
Income before income taxes
|
|
|
1,610
|
|
|
|
1,797
|
|
|
|
1,559
|
|
|
|
1,471
|
|
Provision for income taxes
|
|
|
278
|
|
|
|
365
|
|
|
|
261
|
|
|
|
243
|
|
Net income
|
|
$
|
1,332
|
|
|
$
|
1,432
|
|
|
$
|
1,298
|
|
|
$
|
1,228
|
|
Earnings per share of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
.53
|
|
|
$
|
.56
|
|
|
$
|
.51
|
|
|
$
|
.48
|
|
Diluted
|
|
$
|
.53
|
|
|
$
|
.56
|
|
|
$
|
.51
|
|
|
$
|
.48
|
|
|
|
For the Year 2018
|
|
|
Fourth
|
|
Third
|
|
Second
|
|
First
|
Interest and dividend income
|
|
$
|
5,900
|
|
|
$
|
5,640
|
|
|
$
|
5,292
|
|
|
$
|
5,062
|
|
Interest expense
|
|
|
1,116
|
|
|
|
867
|
|
|
|
725
|
|
|
|
614
|
|
Net interest income
|
|
|
4,784
|
|
|
|
4,773
|
|
|
|
4,567
|
|
|
|
4,448
|
|
Provision for loan losses
|
|
|
226
|
|
|
|
249
|
|
|
|
140
|
|
|
|
215
|
|
Net interest income after provision for loan losses
|
|
|
4,558
|
|
|
|
4,524
|
|
|
|
4,427
|
|
|
|
4,233
|
|
Noninterest income
|
|
|
1,175
|
|
|
|
978
|
|
|
|
1,060
|
|
|
|
994
|
|
Noninterest expenses
|
|
|
4,357
|
|
|
|
4,149
|
|
|
|
4,132
|
|
|
|
3,996
|
|
Income before income taxes
|
|
|
1,376
|
|
|
|
1,353
|
|
|
|
1,355
|
|
|
|
1,231
|
|
Provision for income taxes
|
|
|
253
|
|
|
|
209
|
|
|
|
207
|
|
|
|
(1
|
)
|
Net income
|
|
$
|
1,123
|
|
|
$
|
1,144
|
|
|
$
|
1,148
|
|
|
$
|
1,232
|
|
Earnings per share of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
.44
|
|
|
$
|
.45
|
|
|
$
|
.45
|
|
|
$
|
.48
|
|
Diluted
|
|
$
|
.44
|
|
|
$
|
.45
|
|
|
$
|
.45
|
|
|
$
|
.48
|
|
19. SEGMENT REPORTING
The Corporation operations are
divided into four reportable business segments: The Retail and Commercial Banking Services, Insurance Services, Wealth Strategies
Services, and Financial Management Services. These operating segments have been identified primarily based on the Corporation’s
organizational structure.
The Retail and Commercial Banking
Services segment serves consumer and commercial customers by offering a variety of loan and deposit products, and other traditional
banking services.
The Insurance Services segment
offers clients a full spectrum of commercial and personal lines insurance products including life, health, property, and casualty
insurance.
The Wealth Strategies Services
segment provides personal trust administration, estate settlement, investment management, employee retirement benefit services,
and the Individual Retirement Account (IRA) administration. Also, this segment offers full-service retail brokerage which includes
the sale of retail investment products including stocks, bonds, mutual funds, and annuities.
The Financial Management Services
segment is responsible for the management of the investment securities portfolio. It also is responsible for managing financial
risks, including liquidity and interest rate risk.
The accounting policies of the
segments are the same as those described in the summary of significant accounting policies. The Corporation evaluates performance
based on profit or loss from operations after income taxes not including nonrecurring gains or losses.
The Corporation’s reportable
segments are strategic business units that offer different products and services. They are managed separately because each segment
appeals to different markets and, accordingly, requires different technology and marketing strategies.
The Corporation allocates capital
and funds used or funds provided for each reportable business segment. Also, each segment is credited or charged for the cost of
funds provided or used. These credits and charges are reflected as net intersegment interest income (expense) in the table below.
The Corporation does allocate income taxes to the segments. Other revenue represents noninterest income, exclusive of the net gain
(loss) on disposition of assets and expenses associated with administrative activities which are not allocated to the segments.
Those expenses include audit, compliance, investor relations, marketing, personnel, and other executive or parent company expenditures.
The Corporation does not have
operating segments other than those reported. Parent Company and the Administrative Offices financial information is included in
the “Other” category, and is deemed to represent an overhead function rather than an operating segment. The Administrative
Offices include audit, marketing, information technology, personnel, and the executive office.
The Corporation does not have
a single external customer from which it derives 10% or more of its revenue and operates in one geographical area.
Information about reportable business
segments, and reconciliation of such information to the consolidated financial statements for the years ended December 31, 2019,
2018, and 2017, are as follows:
Segment Reporting
|
For the year ended December 31, 2019
|
|
|
Retail and Commercial Banking
|
|
Insurance Services
|
|
Wealth Strategies
|
|
Financial Management
|
|
Inter-segment Elimination
|
|
Other
|
|
Totals
|
Net Interest Income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
external customers
|
|
$
|
18,365
|
|
|
$
|
—
|
|
|
$
|
(11
|
)
|
|
$
|
2,170
|
|
|
$
|
—
|
|
|
$
|
59
|
|
|
$
|
20,583
|
|
Net intersegment interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income (expense)
|
|
|
1,885
|
|
|
|
27
|
|
|
|
(1
|
)
|
|
|
(1,932
|
)
|
|
|
(17
|
)
|
|
|
38
|
|
|
|
—
|
|
Net interest income
|
|
|
20,250
|
|
|
|
27
|
|
|
|
(12
|
)
|
|
|
238
|
|
|
|
(17
|
)
|
|
|
97
|
|
|
|
20,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses
|
|
|
857
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
external customers
|
|
|
1,832
|
|
|
|
1,715
|
|
|
|
581
|
|
|
|
421
|
|
|
|
—
|
|
|
|
268
|
|
|
|
4,817
|
|
Intersegment noninterest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (expense)
|
|
|
(26
|
)
|
|
|
26
|
|
|
|
30
|
|
|
|
—
|
|
|
|
(30
|
)
|
|
|
—
|
|
|
|
—
|
|
Total Noninterest Income
|
|
|
1,806
|
|
|
|
1,741
|
|
|
|
714
|
|
|
|
421
|
|
|
|
(30
|
)
|
|
|
268
|
|
|
|
4,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,048
|
|
|
|
36
|
|
|
|
20
|
|
|
|
59
|
|
|
|
—
|
|
|
|
37
|
|
|
|
1,200
|
|
Amortization of intangibles
|
|
|
—
|
|
|
|
4
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
Other Noninterest expenses
|
|
|
11,607
|
|
|
|
1,286
|
|
|
|
635
|
|
|
|
800
|
|
|
|
—
|
|
|
|
2,574
|
|
|
|
16,902
|
|
Total Noninterest expenses
|
|
|
12,655
|
|
|
|
1,326
|
|
|
|
655
|
|
|
|
859
|
|
|
|
—
|
|
|
|
2,611
|
|
|
|
18,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax income
|
|
|
8,544
|
|
|
|
442
|
|
|
|
(56
|
)
|
|
|
(200
|
)
|
|
|
(47
|
)
|
|
|
(2,246
|
)
|
|
|
6,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes
|
|
|
1,545
|
|
|
|
81
|
|
|
|
(11
|
)
|
|
|
(47
|
)
|
|
|
—
|
|
|
|
(421
|
)
|
|
|
1,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
6,999
|
|
|
$
|
361
|
|
|
$
|
(45
|
)
|
|
$
|
(153
|
)
|
|
$
|
(47
|
)
|
|
$
|
(1,825
|
)
|
|
$
|
5,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
643,471
|
|
|
$
|
2,327
|
|
|
$
|
205
|
|
|
$
|
169,895
|
|
|
$
|
(261,868
|
)
|
|
$
|
1,106
|
|
|
$
|
555,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures of Fixed Assets
|
|
$
|
578
|
|
|
$
|
6
|
|
|
$
|
17
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts included in the “Other” column are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company
|
|
|
|
|
|
$
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Office
Noninterest Income:
|
|
|
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive office miscellaneous income
|
|
|
|
|
|
|
268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company corporate expenses
|
|
|
|
|
|
|
352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive office expenses not allocated
to segments
|
|
|
|
|
|
|
2,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company income taxes (benefit)
|
|
|
|
|
|
|
(82
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive office income taxes not allocated
to segments
|
|
|
|
|
|
|
(339
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income:
|
|
|
|
|
|
$
|
(1,825
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company assets,
after intercompany elimination
|
|
|
|
|
|
$
|
1,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Reporting
|
For the year ended December 31, 2018
|
|
|
Retail and Commercial Banking
|
|
Insurance Services
|
|
Wealth Strategies
|
|
Financial Management
|
|
Inter-segment Elimination
|
|
Other
|
|
Totals
|
Net Interest Income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
external customers
|
|
$
|
16,334
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,193
|
|
|
$
|
—
|
|
|
$
|
45
|
|
|
$
|
18,572
|
|
Net intersegment interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income (expense)
|
|
|
1,818
|
|
|
|
20
|
|
|
|
(7
|
)
|
|
|
(1,831
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net interest income
|
|
|
18,152
|
|
|
|
20
|
|
|
|
(7
|
)
|
|
|
362
|
|
|
|
—
|
|
|
|
45
|
|
|
|
18,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses
|
|
|
830
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
external customers
|
|
|
1,765
|
|
|
|
1,604
|
|
|
|
665
|
|
|
|
259
|
|
|
|
—
|
|
|
|
(86
|
)
|
|
|
4,207
|
|
Intersegment noninterest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (expense)
|
|
|
(20
|
)
|
|
|
20
|
|
|
|
31
|
|
|
|
—
|
|
|
|
(31
|
)
|
|
|
—
|
|
|
|
—
|
|
Total Noninterest Income
|
|
|
1,745
|
|
|
|
1,624
|
|
|
|
696
|
|
|
|
259
|
|
|
|
(31
|
)
|
|
|
(86
|
)
|
|
|
4,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
845
|
|
|
|
37
|
|
|
|
18
|
|
|
|
56
|
|
|
|
—
|
|
|
|
81
|
|
|
|
1,037
|
|
Amortization of intangibles
|
|
|
—
|
|
|
|
16
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16
|
|
Other Noninterest expenses
|
|
|
10,974
|
|
|
|
1,158
|
|
|
|
624
|
|
|
|
752
|
|
|
|
—
|
|
|
|
2,073
|
|
|
|
15,581
|
|
Total Noninterest expenses
|
|
|
11,819
|
|
|
|
1,211
|
|
|
|
642
|
|
|
|
808
|
|
|
|
—
|
|
|
|
2,154
|
|
|
|
16,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax income
|
|
|
7,248
|
|
|
|
433
|
|
|
|
47
|
|
|
|
(187
|
)
|
|
|
(31
|
)
|
|
|
(2,195
|
)
|
|
|
5,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes
|
|
|
1,184
|
|
|
|
68
|
|
|
|
3
|
|
|
|
(210
|
)
|
|
|
—
|
|
|
|
(377
|
)
|
|
|
668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
6,064
|
|
|
$
|
365
|
|
|
$
|
44
|
|
|
$
|
23
|
|
|
$
|
(31
|
)
|
|
$
|
(1,818
|
)
|
|
$
|
4,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
628,222
|
|
|
$
|
1,971
|
|
|
$
|
267
|
|
|
$
|
132,033
|
|
|
$
|
(229,108
|
)
|
|
$
|
1,448
|
|
|
$
|
534,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures of Fixed Assets
|
|
$
|
3,321
|
|
|
$
|
2
|
|
|
$
|
8
|
|
|
$
|
57
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts included in the “Other” column are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company
|
|
|
|
|
|
$
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive office miscellaneous income
|
|
|
|
|
|
|
(86
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company corporate expenses
|
|
|
|
|
|
|
188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive office expenses not allocated
to segments
|
|
|
|
|
|
|
1,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company income taxes (benefit)
|
|
|
|
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive office income taxes not allocated
to segments
|
|
|
|
|
|
|
(337
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income:
|
|
|
|
|
|
$
|
(1,818
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company assets,
after intercompany elimination
|
|
|
|
|
|
$
|
1,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Reporting
|
For the year ended December 31, 2017
|
|
|
Retail and Commercial Banking
|
|
Insurance Services
|
|
Wealth Strategies
|
|
Financial Management
|
|
Inter-segment Elimination
|
|
Other
|
|
Totals
|
Net Interest Income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
external customers
|
|
$
|
15,119
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,099
|
|
|
$
|
—
|
|
|
$
|
26
|
|
|
$
|
17,244
|
|
Net intersegment interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income (expense)
|
|
|
1,817
|
|
|
|
16
|
|
|
|
(6
|
)
|
|
|
(1,827
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net interest income
|
|
|
16,936
|
|
|
|
16
|
|
|
|
(6
|
)
|
|
|
272
|
|
|
|
—
|
|
|
|
26
|
|
|
|
17,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses
|
|
|
300
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
external customers
|
|
|
2,099
|
|
|
|
1,525
|
|
|
|
612
|
|
|
|
75
|
|
|
|
—
|
|
|
|
1
|
|
|
|
4,312
|
|
Intersegment noninterest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (expense)
|
|
|
(16
|
)
|
|
|
16
|
|
|
|
32
|
|
|
|
—
|
|
|
|
(32
|
)
|
|
|
—
|
|
|
|
—
|
|
Total Noninterest Income
|
|
|
2,083
|
|
|
|
1,541
|
|
|
|
644
|
|
|
|
75
|
|
|
|
(32
|
)
|
|
|
1
|
|
|
|
4,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
685
|
|
|
|
33
|
|
|
|
24
|
|
|
|
56
|
|
|
|
—
|
|
|
|
83
|
|
|
|
881
|
|
Amortization of intangibles
|
|
|
—
|
|
|
|
16
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16
|
|
Other Noninterest expenses
|
|
|
10,328
|
|
|
|
1,119
|
|
|
|
592
|
|
|
|
780
|
|
|
|
—
|
|
|
|
2,113
|
|
|
|
14,932
|
|
Total Noninterest expenses
|
|
|
11,013
|
|
|
|
1,168
|
|
|
|
616
|
|
|
|
836
|
|
|
|
—
|
|
|
|
2,196
|
|
|
|
15,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax income
|
|
|
7,706
|
|
|
|
389
|
|
|
|
22
|
|
|
|
(489
|
)
|
|
|
(32
|
)
|
|
|
(2,169
|
)
|
|
|
5,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes
|
|
|
1,784
|
|
|
|
86
|
|
|
|
(2
|
)
|
|
|
306
|
|
|
|
—
|
|
|
|
(554
|
)
|
|
|
1,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
5,922
|
|
|
$
|
303
|
|
|
$
|
24
|
|
|
$
|
(795
|
)
|
|
$
|
(32
|
)
|
|
$
|
(1,615
|
)
|
|
$
|
3,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
567,723
|
|
|
$
|
1,687
|
|
|
$
|
177
|
|
|
$
|
138,598
|
|
|
$
|
(219,840
|
)
|
|
$
|
727
|
|
|
$
|
489,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenditures of Fixed Assets
|
|
$
|
1,888
|
|
|
$
|
48
|
|
|
$
|
2
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts included in the “Other” column are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company
|
|
|
|
|
|
$
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive office miscellaneous income
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company corporate expenses
|
|
|
|
|
|
|
172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive office expenses not allocated
to segments
|
|
|
|
|
|
|
2,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company income taxes (benefit)
|
|
|
|
|
|
|
(88
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive office income taxes not allocated
to segments
|
|
|
|
|
|
|
(466
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income:
|
|
|
|
|
|
$
|
(1,615
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company assets,
after intercompany elimination
|
|
|
|
|
|
$
|
727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20. ADJUSTMENT TO RETAINED
EARNINGS
During year-end processing for
2018, the Corporation discovered that its Directors’ Deferred Compensation Plan accrual and the income related to the Cash
Surrender Value of related policies to fund the plan had not been calculated properly for a number of years. Once discovered, the
proper calculations were made and confirmed. The net effect on prior periods presented was determined to be immaterial and was
therefore charged to 2018 Retained Earnings without restating prior periods. See the Consolidated Statements of Changes in Shareholders'
Equity for the treatment of the correction. After this adjustment, the 2018 Consolidated Balance Sheets reflect the net present
value of payments due under this plan and the 2018 Consolidated Statements of Income reflect the correct current year expense associated
with changes in the net present value of payments due under this plan.
21. SUBSEQUENT EVENTS
On February 26, 2020, Southwest
Georgia Financial Corporation declared a quarterly cash dividend of $0.12 per common share. The dividend was paid on March 19,
2020, to shareholders of record on March 9, 2020.
In February 2020, the Corporation
began the process of settlement of its defined benefit pension plan. As part of this process, an additional contribution was made.
These transactions resulted in a charge of $3.4 million to expense.
In early 2020, an outbreak of a novel strain of coronavirus (COVID-19) emerged globally. As a result, events
have occurred domestically in the United States and globally, including mandates from federal, state and local authorities, leading
to an overall decline in economic activity. The ultimate impact of COVID-19 on the financial performance of the Company cannot
be reasonably estimated at this time.
The Corporation performed an evaluation
of subsequent events through March 26, 2020, the date upon which the Corporation’s financial statements were available for
issue. The Corporation has not evaluated subsequent events after this date.