Southwest Georgia Financial Corp. :SGB-US: Earnings Analysis: Q3, 2017 By the Numbers : November 20, 2017

Southwest Georgia Financial Corp. reports financial results for the quarter ended September 30, 2017.

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, Cullen/Frost Bankers, Inc. and State Bank Financial Corporation (LION-US, ABCB-US, UCBI-US, ASB-US, RNST-US, HBHC-US, CFR-US and STBZ-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 5.36 million, Net Earnings of USD 0.95 million.
  • Net interest income margins widened from 79.03% to 81.92% compared to the same period last year.
  • Net loan assets changed 14.95% compared to same period last year and 2.21% from previous period, total deposits changed 5.63% compared to same period last year and -1.65% from previous period.
  • Year-on-year change in operating cash flow of -14.99% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline from worsening in operating margins as well as 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):

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 5.36 5.44 5.35 5.06 5.06
Revenue Growth (%YOY) 5.92 9.03 4.47 8.99 10.59
Earnings (mil) 0.95 1.07 1.07 1 0.97
Earnings Growth (%YOY) -2.18 6.11 1.69 18.86 13.47
Net Margin (%) 17.77 19.72 19.92 19.82 19.24
EPS 0.37 0.42 0.42 0.39 0.38
Return on Equity (%) 2.34 2.7 2.74 2.59 2.51
Return on Assets (%) 0.8 0.91 0.93 0.9 0.9

Access our Ratings and Scores for Southwest Georgia Financial Corp.

Market Share Versus Profits

Revenues History
Earnings History

SGB-US’s change in revenue this period compared to the same period last year of 5.92% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that SGB-US is holding onto its market share. Also, for comparison purposes, revenues changed by -1.59% and earnings by -11.36% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year earnings decline has not come as a result of decline in net interest income margins or because of any loan loss provisions. Both net interest income margins and net interest income after provisions margins have actually improved. In fact, net interest income margins went from 79.03% to 81.92% and net interest income after provisions margins improved from 78.14% to 80.52% over this period. In addition, loan loss provisions as a percentage of net interest income were 1.71% this period , and 1.13% 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 (Qtr YOY)
Total Deposits Growth Rate History (Qtr 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 14.95% compared to the same period last year and 2.21% from the previous period. Total deposits changed 5.63% compared to the same period last year and -1.65% from the previous period.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

SGB-US’s change in operating cash flow of -14.99% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s decline in earnings has been influenced by the following factors: (1) Contraction of operating margins from 25.17% to 22.64% and (2) One-time items that contributed to a decrease in pretax margins from 25.17% to 22.64%

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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