Stockholders' Equity / Regulatory Matters

12 Months Ended

Dec. 31, 2015

Stockholders Equity Regulatory Matters

Stockholders' Equity / Regulatory Matters

15. STOCKHOLDERS’ 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 stockholders 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, 2015, approximately $1,707,807 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, 2015, the Bank had a total reserve requirement of $2,758,000, but the Bank had sufficient vault cash to cover any required reserve balance at the Federal Reserve Bank.

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 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, 2015 and 2014, the Corporation and the Bank meets all capital adequacy requirements to which they are subject.

As of December 31, 2015, 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, Tier I risk-based and Tier I leverage ratios as set forth in the following tables. 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, 2015 and 2014, are also presented in the table.

As a result of regulatory limitations at December 31, 2015, approximately $31,438,937 of the parent company’s investments in net assets of the subsidiary bank of $33,146,744, 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, 2015 and 2014, are set forth in the following tables. The Corporation’s leverage ratio at December 31, 2015, was 9.13%.

As of December 31, 2015	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-
weighted assets)	$37,230,740	14.07%	$11,907,692	> 4.50%	$17,199,999	>   6.50%
Total capital (to risk-
weighted assets)	$40,262,982	15.22%	$21,169,230	> 8.00%	$26,461,534	> 10.00%
Tier I capital (to risk-
weighted assets)	$37,230,740	14.07%	$15,876,922	> 6.00%	$21,169,230	>   8.00%
Leverage (tier I capital
to average assets)	$37,230,740	9.13%	$16,316,153	> 4.00%	$20,395,191	>  5.00%
Southwest Georgia Bank
Common equity Tier 1 (to risk-
weighted assets)	$34,279,795	12.99%	$11,874,310	> 4.50%	$17,151,781	>   6.50%
Total capital (to risk-
weighted assets)	$37,312,037	14.14%	$21,109,884	> 8.00%	$26,387,355	> 10.00%
Tier I capital (to risk-
weighted assets)	$34,279,795	12.99%	$15,832,413	> 6.00%	$21,109,884	>   8.00%
Leverage (tier I capital
to average assets)	$34,279,795	8.43%	$16,274,473	> 4.00%	$20,343,091	>   5.00%

As of December 31, 2014	Actual		For Capital Adequacy Purposes		To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount	Ratio	Amount	Ratio	Amount	Ratio
Southwest Georgia Financial Corporation
Total capital (to risk-
weighted assets)	$37,845,154	15.70%	$19,288,109	> 8.00%	$24,110,136	> 10.00%
Tier I capital (to risk-
weighted assets)	$34,830,148	14.45%	$  9,644,054	> 4.00%	$14,466,082	>  6.00%
Leverage (tier I capital
to average assets)	$34,830,148	9.14%	$15,246,906	> 4.00%	$19,058,633	>  5.00%
Southwest Georgia Bank
Total capital (to risk-
weighted assets)	$36,510,112	15.18%	$19,236,387	> 8.00%	$24,045,483	> 10.00%
Tier I capital (to risk-
weighted assets)	$33,503,088	13.93%	$  9,618,193	> 4.00%	$14,427,290	>  6.00%
Leverage (tier I capital
to average assets)	$33,503,088	8.81%	$15,211,031	> 4.00%	$19,013,789	>  5.00%