Southwest Georgia Financial Corp. :SGB-US: Earnings Analysis: 2016 By the Numbers : January 27, 2017

Southwest Georgia Financial Corp. reports financial results for the year ended December 31, 2016.

We analyze the earnings along side the following peers of Southwest Georgia Financial Corp. – Fidelity Southern Corporation, Ameris Bancorp, United Community Banks, Inc., Associated Banc-Corp, Renasant Corporation, Hancock Holding Company and Cullen/Frost Bankers, Inc. (LION-US, ABCB-US, UCBI-US, ASB-US, RNST-US, HBHC-US and CFR-US) that have also reported for this period.

Highlights

  • Net interest income margins widened from 76.90% to 78.14% compared to the same period last year.
  • Net loan assets changed 16.81% compared to same period last year and 16.81% from previous period, total deposits changed 9.58% compared to same period last year and 9.58% from previous period.
  • Earnings growth from operating margin improvements as well as from one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 20.22 18.35 18.25 17.97 17.66
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 4.03 3.37 2.9 2.77 1.94
Earnings Growth (YOY) 19.57 16.18 4.74 42.97 32.71
Net Margin 19.95 18.39 15.91 15.43 10.98
EPS 1.58 1.32 1.14 1.09 0.76
Return on Equity 10.82 9.58 8.83 9.05 6.64
Return on Assets 0.93 0.85 0.78 0.77 0.59

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Earnings Growth Analysis

The company’s earnings growth was influenced by the following factors: (1) Year-on-year improvements in net interest income margins from 76.90% to 78.14% and (2) improvement in loan loss provisions. As a result, net interest income after provisions margins improved from 76.13% to 77.35% compared to the same period last year. Loan loss provisions as a percentage of net interest income were 1.01% this period and 1.00% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (HY YOY)
Total Deposits Growth Rate History (HY YOY)

The firm’s improvement in net interest income margins was influenced by both the relative increase in the levels of net loan assets and the level of total deposits as a percentage of equity. On an absolute basis, net loan assets changed 16.81% compared to the same period last year and 16.81% from the previous period. Total deposits changed 9.58% compared to the same period last year and 9.58% from the previous period.

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating margins from 22.77% to 25.46% and (2) one-time items. The company’s pretax margins are now 25.65%, compared to 22.89% for the same period last year.

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

Access our Ratings and Scores for Southwest Georgia Financial Corp.

Company Profile

Southwest Georgia Financial Corp. is a bank holding company, which provides banking services to individuals and businesses through the Southwest Georgia Bank. It offers consumer and commercial checking accounts, NOW accounts, savings accounts, certificates of deposit, lines of credit, VISA business accounts, money transfers, and mortgage banking services. It operates through the following segments: Retail and Commercial Banking Services, Insurance Services, Wealth Strategies Services, and Financial Management Services. 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 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, Individual Retirement Account administration, and retail brokerage services. The Financial Management Services segment manages investment securities portfolio. The company was founded in 1980 and is headquartered in Moultrie, GA.

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