DEF 14A 1 proxy02.txt PROXY STATEMENT SOUTHWEST GEORGIA FINANCIAL CORPORATION P.O. Box 3488 201 First Street, S.E. Moultrie, Georgia 31768 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To Be Held on May 28, 2002 The annual meeting of shareholders of Southwest Georgia Financial Corporation ("the Company") will be held on Tuesday, May 28, 2002, at 4:30 p.m. at the Colquitt County Arts Center, 401 Seventh Avenue, S.W., Moultrie, Georgia, for the purposes of considering and voting upon: 1. The election of ten directors to constitute the Board of Directors to serve until the next annual meeting and until their successors are elected and qualified; and 2. Such other matters as may properly come before the meeting or any adjournment thereof. Only shareholders of record at the close of business on April 8, 2002, will be entitled to notice of and to vote at the meeting or any adjournment thereof. A Proxy Statement and a Proxy solicited by the Board of Directors are enclosed herewith. Please sign, date and return the Proxy promptly in the enclosed business reply envelope. If you attend the meeting you may, if you wish, withdraw your Proxy and vote in person. Also enclosed is the Company's 2001 Annual Report to Shareholders, which contains financial data and other information about the Company. By Order of the Board of Directors, /s/John H. Clark JOHN H. CLARK Chairman and Chief Executive Officer April 12, 2002 PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED SELF- ADDRESSED ENVELOPE. SOUTHWEST GEORGIA FINANCIAL CORPORATION P.O. Box 3488 201 First Street, S.E. Moultrie, Georgia 31768 PROXY STATEMENT This Proxy Statement is furnished in connection with the solicitation of Proxies by the Board of Directors of Southwest Georgia Financial Corporation (the "Company") for use at the Annual Meeting of Shareholders of the Company to be held on May 28, 2002, and any adjournment thereof, for the purposes set forth in the accompanying notice of the meeting. The expenses of this solicitation, including the cost of preparing and mailing this Proxy Statement, will be paid by the Company. Copies of solicitation materials may be furnished to banks, brokerage houses, and other custodians, nominees, and fiduciaries for forwarding to beneficial owners of shares of the Company's Common Stock, and normal handling charges may be paid for such forwarding service. In addition to solicitations by mail, directors and regular employees of the Company may solicit Proxies in person or by telephone. It is anticipated that this Proxy Statement and the accompanying Proxy will first be mailed to shareholders on April 12, 2002. The record of shareholders entitled to vote at the Annual Meeting of Shareholders was taken as of the close of business on April 8, 2002. On that date, the Company had outstanding and entitled to vote 2,395,093 shares of Common Stock, par value $1.00 per share. Any Proxy given pursuant to this solicitation may be revoked by any shareholder who attends the meeting and gives oral notice of his or her election to vote in person, without compliance with any other formalities. In addition, any Proxy given pursuant to this solicitation may be revoked prior to the meeting by delivering a signed writing revoking it or a duly executed Proxy bearing a later date to the Secretary of the Company at Southwest Georgia Financial Corporation, P.O. Box 3488, Moultrie, Georgia 31776-3488. If the Proxy is properly completed and returned by the shareholder and is not revoked, it will be voted at the meeting in the manner specified thereon. If the Proxy is returned but no choice is specified thereon, it will be voted for all the persons named below under the caption "Information about Nominees for Director". The Company will furnish without charge a copy of its Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2001, including financial statements and schedules, to any record or any beneficial owner of its Common Stock as of April 8, 2002, who requests a copy of such report. Any request for the Form 10-K report should be in writing addressed to: Mr. George R. Kirkland Southwest Georgia Financial Corporation P.O. Box 3488 Moultrie, Georgia 31776-3488 If the person requesting the report was not a shareholder of record on April 8, 2002, the request must include a representation that the person was a beneficial owner of Common Stock on that date. Copies of any exhibits to the Form 10-K will also be furnished on request and upon the payment of the Company's expense in furnishing the exhibits. -1- VOTING SECURITIES AND PRINCIPAL HOLDERS The following table sets forth as of March 8, 2002, beneficial ownership of the Company's Common Stock by each "person" (as that term is defined by the Securities and Exchange Commission) known by the Company to be the beneficial owner of more than 5% of the Company's voting securities and by all directors and officers of the Company as a group.
Name And Address of Number of Shares Beneficial Owner Owned Beneficially Percent of Class The Employee Stock Ownership Plan 404,819 16.90% and Trust of Southwest Georgia Financial Corporation 201 First Street, S.E. Moultrie, Georgia 31768 All Directors, Officers, and Nominees as a Group (29 Persons)(1) 632,275 25.72%
(1) Includes 44,495 shares owned by two directors who will retire at the Company's 2002 Annual meeting. NOMINATION AND ELECTION OF DIRECTORS The bylaws of the Company provide that the Board of Directors shall consist of not less than five nor more than twenty-five directors. The exact number of directors is currently set at ten by Board resolution. The number of directors may be increased or decreased within the foregoing range from time to time by the Board of Directors or resolution of the shareholders. The terms of office for directors continue until the next Annual Meeting of Shareholders and until their successors are elected and qualified or until earlier resignation, removal from office, or death. Each Proxy executed and returned by a shareholder will be voted as specified thereon by the shareholder. If no specification is made, the Proxy will be voted for the election of the nominees named below to constitute the entire Board of Directors. In the event that any nominee withdraws or for any reason is not able to serve as a director, the Proxy will be voted for such other person as may be designated by the Board of Directors as substitute nominee, but in no event will the Proxy be voted for more than ten nominees. Management of the Company has no reason to believe that any nominee will not serve if elected. Directors are elected by a plurality of the votes cast by the holders of the shares entitled to vote in the election at a meeting at which a quorum is present. A quorum is present when the holders of a majority of the shares outstanding on the record date are present at a meeting in person or by proxy. An abstention would not be considered to be one of the "votes cast" for purposes of the first sentence of this paragraph, but would be included in determining whether a majority of the outstanding shares is represented for determining whether a quorum is present at a meeting. -2- INFORMATION ABOUT NOMINEES FOR DIRECTOR The following information as of March 8, 2002, has been furnished by the respective nominees for Director. Except as otherwise indicated, each nominee has been or was engaged in his present or last principal employment, in the same or a similar position, for more than five years.
Number of Shares Name Information Owned Beneficially (Age) About Nominee (Percent of Class)(1) John H. Clark Chief Executive Officer and 101,043 (64) Chairman of the Board of (4.21%) (2) Southwest Georgia Bank (the "Bank") and the Company. Mr. Clark was named the Chief Executive Officer and Chairman of the Board for both the Bank and the Company in April 1999. Previously, he has served as Chief Executive Officer and Vice Chairman of the Board of the Company since 1996 and as President and Director of the Bank since 1978 and President and Director of the Company since 1980. Cecil H. Barber A Director of the Bank and the 24,293 (37) Company since 1999, Mr. Barber is (1.01%) (3) Vice President of Barber Contracting, a general contracting company. DeWitt Drew President and Chief Operating 11,344*(4) (45) Officer of the Bank and Company. Mr. Drew was named President and Chief Operating Officer in May 2001. Previously, he has served as Executive Vice President of the Bank and Company since 1999. Prior to employment with the Bank and Company, Mr. Drew was employed by the Citizens Bank and Savings Company in Russellville, Alabama as Senior Vice President and Loan Administrator since 1993. Michael J. McLean A Director of the Bank and Company 73,941 (55) since 1999, Mr. McLean is owner (3.08%) (5) since 2000 and partner since 1975 of McLean Engineering Company, Inc., a consulting engineering firm. Richard L. Moss A Director of the Bank since 1980 and 25,728 (50) of the Company since 1981, Mr. Moss is (1.07%)(6) President of Moss Farms. Lee C. Redding A Director of the Bank and the 27,889 (55) Company since 1995, Mr. Redding (1.16%)(7) is a dentist and owner of a family dental practice since 1976. Roy H. Reeves A Director of the Bank and the 23,403*(8) (42) Company since 1991, Mr. Reeves is managing partner with Reeves Properties, L.P., a property rental company. -3- Johnny R. Slocumb A Director of the Bank and the 33,215 (49) Company since 1991, Mr. Slocumb is (1.39%) (9) owner of The Slocumb Company, a company which offers real estate and insurance services. Violet K. Weaver A Director of the Bank and the 36,746 (66) Company since 1999, Mrs. Weaver is (1.53%) (10) a retired President of the Bank and Company. Mrs. Weaver was promoted to this position in April 2000. Previously, she has served in various other positions with the Bank since 1959 and the Company since 1981. C. Broughton Williams A Director of the Bank and the 14,768*(11) (65) Company since 1999, Mr. Williams is a retired Senior Vice President of the Bank and the Company. He is owner of Williams Consulting & Development Company, and managing partner of F&W Properties, L.L.C.
* Less than one percent (1%) (1) Based on 2,395,093 shares outstanding as of March 8, 2002, plus shares underlying outstanding stock options exercisable within 60 days of the record date, which are deemed to be outstanding for purposes of calculating the percentage owned by a holder. (2) Includes 65,930 shares allocated to the account of Mr. Clark in the Employee Stock Ownership Plan and Trust, over which shares Mr. Clark exercises voting power and 20,355 shares owned of record by Mr. Clark's wife as to which Mr. Clark disclaims beneficial ownership. Includes 2,500 presently exercisable stock options granted to Mr. Clark. (3) Includes 2,500 presently exercisable stock options granted to Mr. Barber. (4) Includes 10,000 presently exercisable stock options granted to Mr. Drew. (5) Includes 47,606 shares of which Mr. McLean holds the voting power of attorney for E. J. McLean, Jr. and 20,000 shares of which Mr. McLean holds the voting power of attorney for Robert A. Cooper, Jr. Includes 2,500 presently exercisable stock options granted to Mr. McLean. (6) Includes 2,500 presently exercisable stock options granted to Mr. Moss. (7) Includes 12,406 shares held jointly with Mr. Redding's wife and 3,841 shares owned of record by Mr. Redding's wife as to which Mr. Redding disclaims beneficial ownership. Includes 2,500 presently exercisable stock options granted to Mr. Redding. (8) Includes 9,000 shares which are owned by Reeves Properties, L.P. Mr. Reeves possesses shared investment power and the power to vote as to all shares owned by the limited partnership. Includes 2,500 presently exercisable stock options granted to Mr. Reeves. (9) Includes 2,500 presently exercisable stock options granted to Mr. Slocumb. (10) Includes 29,497 shares allocated to the account of Mrs. Weaver in the Employee Stock Ownership Plan and Trust, over which shares Mrs. Weaver exercises voting power. Includes 5,000 presently exercisable stock options granted to Mrs. Weaver. (11) Includes 2,500 presently exercisable stock options granted to Mr. Williams. -4- There are no family relationships between any director, executive officer, or nominee for director of the Company or any of its subsidiaries. Meetings and Committees of the Board of Directors The Board of Directors held 12 regular meetings during 2001. All of the directors attended at least seventy-five percent (75%) of the Board and committee meetings held during their tenure as directors. The Company has a personnel committee of the Board of Directors. This committee is composed of five members, John H. Clark, Robert M. Duggan, Lee C. Redding, DeWitt Drew, and Violet K. Weaver. The committee, which recommends compensation levels for the Bank's employees, held four meetings during 2001. The Company has an audit committee of the Board of Directors which is also the standing audit committee for the Bank's Board of Directors. This committee is composed of four members, Michael J. McLean, Richard L. Moss, Cecil H. Barber, and Earl D. Moore, who will retire as a director at the end of this tenure. The Company has no standing nominating committee of the Board of Directors or committee performing similar functions. EXECUTIVE COMPENSATION The Company did not pay any remuneration to its officers during the year ended December 31, 2001. The following table sets forth the annual and other compensation paid or accrued for each of the last three fiscal years, including directors' fees, for John H. Clark, who is Chairman of the Board of Directors and Chief Executive Officer of the Company and the Bank, Violet K. Weaver, who is a retired President of the Company and the Bank, and DeWitt Drew, who is President and Chief Operating Officer of the Company and the Bank. No other executive officers of the Company were paid $100,000 or more in salary, bonus, and directors' fees during 2001. Summary Compensation Table
Long Term Compensation Annual Compensation Awards ------------------------------- ---------- Name and Principal Securities Position During Underlying All Other 2001 Year Salary Bonus Other Options(#) Compensation John H. Clark 2001 $187,500 $35,000 $ 0(1) 0 $22,484(2) Chairman and CEO 2000 182,000 33,000 0(1) 0 23,584 of the Company 1999 176,250 50,000 750(1) 0 30,768 Company and the Bank DeWitt Drew 2001 106,000 6,000 3,000(1) 0 10,900(3) President and 2000 90,000 10,000 3,000(1) 0 210 COO of the 1999 22,500 10,000 125(1) 10,000 199 Company and the Bank Violet K. Weaver 2001 108,000 12,000 1,800(1) 0 13,798(4) Retired President 2000 91,750 5,500 1,800(1) 0 11,579 Of The Company 1999 82,000 6,930 1,800(1) 0 13,579 and the Bank
(1) Amount represents fair market value of discount on stock purchased under the Company's stock plan (Directors and Officers Stock Purchase Plan) for officers and directors, which allows a participant to receive Common Stock in lieu of salary and directors' fees, up to certain limits, with a value of 150% of the cash compensation foregone by each participant. -5- (2) Mr. Clark's "other compensation" includes Bank's contributions to defined contribution plan of $17,000, contribution to supplementary retirement plan of $3,900, and premiums for group term life insurance of $1,584. (3) Mr. Drew's "other compensation" includes Bank's contributions to defined contribution plan of $10,540 and premiums for group term life insurance of $360. (4) Mrs. Weaver's "other compensation" includes Bank's contribution to defined contribution plan of $10,750 and premiums for group term life insurance of $3,048. There were no grant or exercise of stock options in the 2001 fiscal year to the persons named in the Summary Compensation Table. Fiscal Year-End Option Value Table The following table sets forth the value of options held at the 2001 fiscal year end by the persons named in the Summary Compensation Table. Fiscal Year-end Option Values
Number of Securities Value of Unexercised Underlying Unexercised In-the-Money Options Options at FY-End (#) at FY-End ($) Name Exercisable/Unexercisable Exercisable/Unexercisable John H. Clark 2,500/0 0/0 (1) DeWitt Drew 10,000/0 10,000/0 Violet K. Weaver 5,000/0 0/0 (1)
(1) Company's common stock price at year end was less than the exercise price. Pension Plan Table The following table sets forth the estimated annual benefits payable upon retirement under the Company's Pension Plan (including amounts attributable to the Company's Supplemental Retirement Plan) in the specified compensation and years of service classifications indicated below. The compensation covered by the Pension Plan includes total annual compensation including bonuses and overtime pay. The portion of compensation which is considered covered compensation under the Pension Plan for Mr. Clark equals the annual salary and bonus amounts indicated in the Summary Compensation Table. As of January 1, 2002, the credited full years of service under the Pension Plan for Mr. Clark was 22 years. DeWitt Drew was credited with 2 full years of service and Violet K. Weaver was credited with 42 full years of service under the Pension Plan. -6-
Estimated annual normal retirement benefit assuming a straight lifetime annuity and the years of service indicated (3) Average Annual Compensation 15 years 20 years 25 years 30 years 35 years Pension Plan $ 100,000 $43,964 $46,952 $49,468 $51,081 $52,234 $ 150,000 66,864 71,652 75,548 77,968 79,697 $ 200,000 (1) 76,025 81,533 85,980 88,723 90,682 $ 250,000 (1) 76,025 81,533 85,980 88,723 90,682 Supplemental Retirement Plan $ 200,000 (2) 13,740 14,820 15,648 16,132 16,478 $ 250,000 (2) 36,640 39,520 41,728 43,019 43,940
(1) For the year ended December 31, 2001, the maximum covered compensation is limited by federal law at $170,000. (2) For Mr. Clark, who is covered under the Company's Supplemental Retirement Plan, any excess annual retirement benefit which could not be paid under the Pension Plan because of the federal law limitation described in footnote will be payable under the Supplemental Retirement Plan. (3) The benefits listed in the Pension Plan Table are not subject to any deduction for Social Security or other offset amounts. Compensation of Directors The Board of Directors of the Bank consists of the same members as the Board of Directors of the Company. In 2001, the Chairman, Vice Chairman, and each Director of the Bank received an annual fee of $9,000, $6,000, and $3,000, respectively, and $250 per Bank's Board meeting attended. Also, each outside Director of the Bank received $100 per Bank's Board committee meeting attended. The Directors of the Company are not compensated for membership on the Company's Board of Directors. Also, any director who elects to fully participate in the Directors and Officers Stock Purchase Plan can receive up to $3,000 annually from the Bank for the purpose of purchasing the Company's Common Stock. The Company has established a Key Individual Stock Option Plan which provides for the issuance of options to executive officers and directors of the Company. The Company granted 2,500 non-qualified options to Earl D. Moore, a retiring outside director, under the Key Individual Stock Option Plan in fiscal year 2001 at an exercise price of $15.20. The plan provides for the grant of non-qualified stock options to directors of the Company. The plan is administered by the Personnel Committee of the Board of Directors. Employment Contracts and Termination of Employment and Change in Control Arrangements On December 23, 1997, the Company amended the employment agreement (the "Agreement") with John H. Clark, dated November 21, 1989. This amendment extended the term (the "Term") of the Agreement to January 2, 2003, or until the Agreement is earlier terminated, and amended the termination payment schedule. Under the Agreement the Board of Directors of the Bank or Company has discretion to determine Mr. Clark's compensation, based upon the financial successes of and the contribution of Mr. Clark to the Bank and the Company. Benefits of the kind customarily granted to other executives of the Bank and Company, including disability insurance, medical insurance for life, and life insurance, identical to that provided to Mr. Clark at the -7- commencement of the Term, until age 65 will be granted to Mr. Clark under the Agreement. Also, after age 65 Mr. Clark will be granted under the Agreement with life insurance comparable to that provided to retirees at the commencement of the Term. In determining Mr. Clark's compensation under the Agreement, the Board subjectively considers Mr. Clark's tenure with the Bank and Company and the growth in assets and the results of operations of the Company during Mr. Clark's tenure. Mr. Clark's employment may be terminated for cause if Mr. Clark violates or breaches any material term of the Agreement, habitually neglects his duties, or is convicted of a felony. If Mr. Clark is terminated for cause, the Bank and the Company will have no further financial obligation to Mr. Clark. If Mr. Clark's employment terminates for any reason, Mr. Clark agrees not to provide banking services or solicit certain bank customers within certain geographical limits within five years of such termination. In consideration for such non-compete agreement and services rendered, if Mr. Clark's employment is terminated without cause prior to the end of the Term, Mr. Clark will receive a termination payment annually during the remainder of the Term. The amount of such annual payment will depend upon the year of termination and can vary from an annual payment of $115,000 for the remaining five years of the Term to a single payment of $140,000, if Mr. Clark were terminated during the last year of the Term. Compensation Committee Interlocks and Insider Participation The members who served during 2001 on the Personnel Committee which recommends compensation levels for the Company's executives and other employees were John H. Clark, Robert M. Duggan, Lee C. Redding, DeWitt Drew, and Violet K. Weaver. During 2001 the Company's Chief Executive Officer and Chairman, John H. Clark; a former President and serving Director, Violet K. Weaver, and the President and Chief Operating Officer, DeWitt Drew, as members of the Personnel Committee, participated in deliberations concerning executive compensation, other than deliberations concerning their own compensation. Committee Report on Executive Compensation The Personnel Committee (the "Committee") of the Board of Directors consists of five members, two outside directors, and three inside directors who are also executive officers of the Company. The Committee reviews, evaluates, and approves compensation and benefits for all officers and also reviews general policy matters relating to compensation and benefits of the other employees. A role of the executive officers on the Committee is to provide the Committee with competitive information with respect to salaries and other compensation of other financial institutions, review each individual officer's performance, and make recommendations to the Committee for salaries of officers other than themselves. The Personnel Committee's intent is to maintain the following standards: Attract, motivate, reward, and retain high-performing and dedicated management employees. Balance competitive need, corporate, individual, and business unit performance, and affordability. Provide competitive financial security for executives and dependents in the event of death, disability, or retirement. -8- Base Salary and Bonus Executive officer base salary and bonus awards are determined with reference to Company-wide, divisional, and individual performance for the previous fiscal year based on a wide range of measures, which includes comparisons with competitors' performance and internal goals set before the start of each fiscal year and by comparison to the level of executive officers' compensation of other financial institutions of comparable size. No relative weights were assigned for these factors. Comparisons with competitors' performance included some but not all of the institutions included in the Independent Bank Index, to which the Company's total return is compared in this Proxy Statement. The Committee believes that the most meaningful performance and pay equity comparisons are made against companies of similar size and similar business interests. In keeping with this belief, the Committee consistently participates in and uses compensation and benefit surveys from the Georgia Bankers Association and the Bank Administration Institute. Stock Options Effective March 19, 1997, the Company established a Key Individual Stock Option Plan which provides for the issuance of options to key employees and directors of the Company. In April 1997, the plan was approved by the Company's shareholders, and it will be effective for ten years after such date. A maximum of 150,000 shares of common stock have been authorized for issuance with respect to options granted under the plan. The Company granted incentive options to acquire 5,000 shares, in the aggregate, to 5 employees under the Key Individual Stock Option Plan in fiscal year 2001 at an exercise price of $15.91. The plan provides for the grant of incentive stock options and non-qualified stock options to key employees and directors of the Company. The plan is administered by the Personnel Committee of the Board of Directors. Compensation of Chief Executive Officer In keeping with the Committee's belief that the most meaningful performance and pay equity comparisons are made against companies of similar size and business interests, the Committee consistently uses the Federal Financial Institution Examining Council Peer Group Report. The earnings performance for the Company placed it in the 71st percentile when compared to other similar one-bank holding companies in the peer group. The Chief Executive Officer's base salary and bonus for 2001 were determined with reference to the same measures used for all executive officers of the Company, but the primary measurement is Company-wide performance. The Company did not meet its target goals on all of the Company's performance measures. The Committee believes the returns on assets (ROA) and equity (ROE) are the most appropriate measures for evaluating the Company's results. In 2001, the Company's net income was 4 percent lower than the previous year's net income, the ROA was 1.34 percent, and ROE was 10.49 percent, compared to ROA of 1.44 percent and ROE of 11.08 percent in 2000. Therefore, in view of the Company's performance compared to its peer group (ranked in the top 30 percent), the Chief Executive Officer's compensation level and annual increase were set appropriately. In December 1997, the Company amended the employment agreement with Mr. Clark dated November 21, 1989. This amendment extended the term of the employment agreement to January 2, 2003 or until the employment agreement is earlier terminated, and amended the termination payment schedule as described earlier under "Employment Contracts and Termination of Employment and Change in Control Agreement". Robert M. Duggan Lee C. Redding Violet K. Weaver John H. Clark DeWitt Drew Performance Graph The following graph compares the cumulative total shareholder return of the Company's Common Stock with The Carson Medlin Company's Independent Bank Index and the S&P 500 Index. The Independent Bank Index is the compilation of the total return to shareholders over the past five years of a group of 23 independent community banks located in the southeastern states of Florida, Georgia, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia. The comparison assumes $100 was invested January 1, 1996, and that all semi-annual and quarterly dividends were reinvested each period. This comparison takes into consideration changes in stock price, cash dividends, stock dividends, and stock splits. The comparisons in the graph are required by the Securities and Exchange Commission and are not intended to forecast or be indicative of possible future performance of the Company's Common Stock.
1996 1997 1998 1999 2000 2001 SOUTHWEST GEORGIA FINANCIAL CORPORATION 100 116 141 86 93 111 INDEPENDENT BANK INDEX 100 148 154 140 139 165 S&P 500 INDEX 100 133 171 207 188 166
OTHER MATTERS RELATING TO EXECUTIVE OFFICERS, DIRECTORS, AND PRINCIPAL SHAREHOLDERS The Bank from time to time has had, and expects to have in the future, banking transactions in the ordinary course of business with officers and directors of the Company and their related interests, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons. Such transactions -10- have not involved more than the normal risk of collectibility or presented other unfavorable features. At December 31, 2001, loans to officers, directors, and principal shareholders of the Company and the Bank and to certain of their related interests amounted to $1,891,000. REPORT OF THE AUDIT COMMITTEE The Board of Directors, in its business judgment, has determined that all four members of the Audit Committee are "independent", as required by applicable listing standards of the American Stock Exchange. The Committee operates pursuant to an Audit Committee Charter that was adopted by the Board on May 24, 2000. The Company's management is responsible for its internal accounting controls and the financial reporting process. The Company's independent accountants, Draffin & Tucker, are responsible for performing an audit of the Company's consolidated financial statements in accordance with auditing standards generally accepted in the United States and for expressing an opinion as to their conformity with generally accepted accounting principals. The Audit Committee's responsibility is to monitor and oversee these processes. In keeping with that responsibility, the Audit Committee has reviewed and discussed the Company's audited consolidated financial statements with management and the independent accountants. In addition, the Audit Committee has discussed with the Company's independent accountants the matters required to be discussed by Statement on Auditing Standards No. 61, "Communications with Audit Committee," as currently in effect. In addition, the Audit Committee has received the written disclosures from the independent accountants required by Independence Standards Board Standard No.1, "Independence Discussions with Audit Committees," and has discussed with the independent accountants their independence. The members of the Audit Committee are not professionally engaged in the practice of auditing or accounting and are not experts in the fields of accounting or auditing. None of the members is expert in respect of auditor independence. Members of the Committee rely without independent verification on the information provided to them and on the representations made by management and the independent accountants. Accordingly, the Audit Committee's oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee's considerations and discussions referred to above do not assure that the audit of the Company's financial statements has been carried out in accordance with generally accepted auditing standards, that the financial statements are presented in accordance with generally accepted accounting principals or that the Company's auditors are in fact "independent". Based on the reports and discussions described in this report, and subject to the limitations on the role and responsibilities of the Committee referred to above and in the Audit Committee Charter, the Committee recommended to the Board of Directors that the audited consolidated financial statements of the Company be included in the Annual Report on Form 10-K for the year ending December 31, 2001, for filing with the Securities and Exchange Commission. This report is respectfully submitted by the Audit Committee of the Board of Directors. Cecil H. Barber Michael J. McLean Richard L. Moss Earl D. Moore -11- INFORMATION CONCERNING THE COMPANY'S ACCOUNTANTS Draffin & Tucker was the principal independent public accountant for the Company during the year ended December 31, 2001. Representatives of Draffin & Tucker are expected to be present at the annual meeting and will have the opportunity to make a statement if they desire to do so and to respond to appropriate questions. The Company anticipates that Draffin & Tucker will be the Company's accountants for the current fiscal year. Audit Fees The aggregate fees billed for professional services by Draffin & Tucker for the audit of the Company's annual financial statements for 2001 and for reviews of the Company's quarterly financial statements during fiscal year 2001 was $40,000. All Other Fees The aggregate fees billed for all other professional services by Draffin & Tucker during 2001 was $6,500. Draffin & Tucker billed no fees to the Company during 2001 for financial information systems design or implementation. SHAREHOLDER PROPOSALS Proposals of shareholders intended to be presented at the Company's 2003 Annual Meeting of Shareholders must be received by December 12, 2002, in order to be eligible for inclusion in the Company's Proxy Statement and Proxy for that meeting. The Company must be notified of any other matter intended to be presented by a shareholder at the 2003 Annual Meeting not later than February 25, 2003, or else proxies may be voted on such proposal at the discretion of the persons named in the Proxy OTHER MATTERS THAT MAY COME BEFORE THE MEETING Management of the Company knows of no matters other than those stated above that are to be brought before the meeting. If any other matters should be presented for consideration and voting, however, it is the intention of the persons named as proxies in the enclosed Proxy to vote in accordance with their judgment as to what is in the best interest of the Company. By order of the Board of Directors, /s/John H. Clark John H. Clark Chairman and Chief Executive Officer April 12, 2002 COMMON STOCK OF SOUTHWEST GEORGIA FINANCIAL CORPORATION THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE 2002 ANNUAL MEETING OF SHAREHOLDERS. The undersigned hereby appoint(s) Michael J. McLean and John J. Cole, Jr., or either of them with power of substitution to each, as Proxies of the undersigned to vote the Common Stock of the undersigned at the Annual Meeting of Shareholders of SOUTHWEST GEORGIA FINANCIAL CORPORATION (the "Company") to be held on May 28, 2002, and any adjournment thereof. 1. Election of Directors (Please check either A or B) A. _____ I (we) grant authority to vote FOR all nominees for director listed below except as marked to the contrary in the space provided: Cecil H. Barber; John H. Clark; DeWitt Drew; Michael J. McLean; Richard L. Moss; Lee C. Redding; Roy H. Reeves; Johnny R. Slocumb; Violet K. Weaver; and C. Broughton Williams, Jr. Instructions: To withhold authority to vote for any of the individual nominees listed above, write the name(s) of the nominee(s) on the lines provided below. ___________________________________________________________ ___________________________________________________________ B. _____ I (we) withhold authority to vote for all of the nominees listed above. THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" THE ELECTION AS DIRECTORS OF THE PERSONS NAMED IN THE PROXY AND ACCOMPANYING PROXY STATEMENT AND, UNLESS INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED,THIS PROXY WILL BE SO VOTED. 2. Other Matters to Come Before the Meeting I (we) grant the Proxies authority to vote in accordance with their best judgment with respect to any other matters that may properly come before the meeting. X__________________________ X__________________________ Please sign this Proxy exactly as name appears at left. In the case of joint tenants, each joint owner must sign. Note: When signing as an attorney, trustee, administrator or guardian, please give your title as such. Date Signed: ________________ COMMON STOCK OF SOUTHWEST GEORGIA FINANCIAL CORPORATION DIRECTIONS FOR VOTING COMMON STOCK ALLOCATED TO A PARTICIPANT'S ACCOUNT PURSUANT TO THE SOUTHWEST GEORGIA FINANCIAL CORPORATION EMPLOYEE STOCK OWNERSHIP TRUST A PROXY IS SOLICITED FROM SOUTHWEST GEORGIA BANK TRUST DEPARTMENT AS TRUSTEE BY THE BOARD OF DIRECTORS FOR THE 2002 ANNUAL MEETING OF SHAREHOLDERS. The undersigned participant in the Employee Stock Ownership Plan ("ESOP") hereby directs Southwest Georgia Bank Trust Department as Trustee of the Southwest Georgia Financial Corporation Employee Stock Ownership Trust to vote those shares of Common Stock of Southwest Georgia Financial Corporation allocated to the undersigned's account in connection with the Annual Meeting of Shareholders of SOUTHWEST GEORGIA FINANCIAL CORPORATION (the "Company") to be held on May 28, 2002, and any adjournment thereof. 1. Election of Directors (Please check either A or B) A. _____ I grant authority to vote FOR all nominees for director listed below except as marked to the contrary in the space provided: Cecil H. Barber; John H. Clark; DeWitt Drew; Michael J. McLean; Richard L. Moss; Lee C. Redding; Roy H. Reeves; Johnny R. Slocumb; Violet K. Weaver; and C. Broughton Williams, Jr. Instructions: To withhold authority to vote for any of the individual nominees listed above, write the name(s) of the nominee(s) on the lines provided below. _______________________________________________________ _______________________________________________________ B. _____ I withhold authority to vote for all of the nominees listed above. THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" THE ELECTION AS DIRECTORS OF THE PERSONS NAMED IN THE PROXY AND ACCOMPANYING PROXY STATEMENT AND, UNLESS INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED,THIS PROXY WILL BE SO VOTED. 2. Other Matters to Come Before the Meeting I grant the Trustee authority to vote in accordance with their best judgment with respect to any other matters that may properly come before the meeting. X_______________________________ Please sign this Proxy exactly as name appears at left. Note: When signing as an attorney, trustee, administrator or guardian, please give your title as such. Date Signed: _____________________