Summary of SOUTHWEST GEORGIA FINANCIAL CORP

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

In addition to historical information, this Form 10-Q report contains forward-looking statements within the meaning of the federal securities laws. The Corporation cautions that there are various factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the Corporation's forward-looking statements; accordingly, there can be no assurance that such indicated results will be realized.

These factors include risks related to:
* the conditions in the financial markets and economic conditions generally;
* the Corporation's ability to raise capital;
* the Corporation's liquidity;
* the Corporation's construction and land development loans;
* asset quality;
* the adequacy of the allowance for loan losses;
* technology difficulties or failures;
* the Corporation's ability to execute its business strategy;
* the loss of key personnel;
* competition;
* changes in regulation and monetary policy;
* losses due to fraudulent and negligent conduct of customers, service providers and employees;
* acquisitions or dispositions of assets or internal restructuring that may be pursued by the Corporation;
* changes in or application of environmental and other laws and regulations to which the Corporation is subject;
* political, legal and local economic conditions and developments;
* financial market conditions and the results of financing efforts;
* changes in commodity prices and interest rates;
* weather, natural disasters and other catastrophic events; and other factors discussed in the Corporation's other filings with the Securities and Exchange Commission.

Readers are cautioned not to place undue reliance on any forward-looking statements made by or on behalf of the Corporation. Any such statement speaks only as of the date the statement was made. The Corporation undertakes no obligation to update or revise any forward-looking statements. Additional information with respect to factors that may cause results to differ materially from those contemplated by such forward-looking statements is included in the Corporation's current and subsequent filings with the Securities and Exchange Commission.

-17- Overview

The Corporation is a full-service community bank holding company headquartered in Moultrie, Georgia. The community of Moultrie has been served by the Bank since 1928. We provide comprehensive financial services to consumer, business and governmental customers, which, in addition to conventional banking products, include a full range of mortgage banking, trust, investment and insurance services. Our primary market area incorporates Colquitt County, where we are headquartered, and Baker, Lowndes, Thomas, and Worth Counties, each contiguous with Colquitt County, and the surrounding counties of southwest Georgia. We have four full service banking facilities, a loan production office, and six automated teller machines.

Our strategy is to:

* maintain the diversity of our revenue, including both interest and noninterest income through a broad base of business,
* strengthen our sales and marketing efforts while developing our employees to provide the best possible service to our customers,
* expand our market share where opportunity exists, and
* grow outside of our current geographic market either through de-novo branching or acquisitions into areas proximate to our current market area.

We believe that investing in sales and marketing in this challenging market will provide us with a competitive advantage. To that end, we have continued with our plans to expand geographically and established a loan production office in Valdosta, Georgia, in the first quarter of 2008. We have established leadership in place in Valdosta and have purchased a permanent site for a branch bank.

The Corporation's profitability, like most financial institutions, is dependent to a large extent upon net interest income, which is the difference between the interest received on earning assets, such as loans, securities and federal funds sold, and the interest paid on interest-bearing liabilities, principally deposits and borrowings. Net interest income is highly sensitive to the fluctuations in interest rates. For example, after holding the overnight borrowing rate for banks at 5.25% for eight months of 2007, the Federal Reserve Bank decreased short-term interest rates by 5% to a range of 0% to 0.25%. Federal fund rates were at this low level during the entire first quarter of 2009.

Our profitability is impacted as well by operating expenses such as salaries and employee benefits, occupancy and income taxes. Our lending activities are significantly influenced by regional and local factors such as changes in population, competition among lenders, interest rate conditions and prevailing market rates on competing uses of funds and investments, customer preferences and levels of personal income and savings in the Corporation's primary market area.

To address interest rate fluctuations out of our control, we manage our balance sheet in an effort to diminish the impact of sudden interest rate changes by broadening our revenue sources to reduce the risk and exposure of our financial results to the impact of changes in interest rates, which is outside of our control. Sources of noninterest income include our insurance agency and Empire, the Corporation's commercial mortgage banking subsidiary, as well as fees on customer accounts, trust and retail brokerage services. Noninterest income was 51% of first quarter 2009 net interest income and 27% of first quarter 2009 total revenue.

-18- We continually focus on asset quality and realized improvement with non- performing assets declining from the previous year. At March 31, 2009, the majority in non-performing assets was one large loan placed on interest nonaccrual in late 2007. This loan was partially charged-off during the fourth quarter of 2008.

Since mid-2007, and particularly during the past three quarters, the financial markets and economic conditions generally were materially and adversely affected by significant declines in the values of nearly all asset classes and by a serious lack of liquidity. This was initially triggered by declines in home prices and the values of subprime mortgages, but spread to all commercial and residential mortgages as property prices declined rapidly and to nearly all asset classes. The effect of the market and economic downturn also spread to other areas of the credit markets and severely affected the availability of liquidity. The magnitude of these declines led to a crisis of confidence in the financial sector as a result of concerns about the capital base and viability of certain financial institutions. During this period, interbank lending and commercial paper borrowing fell sharply, precipitating a credit freeze for both institutional and individual borrowers. Unemployment has also increased significantly.

Critical Accounting Policies

In the course of the Corporation's normal business activity, management must select and apply many accounting policies and methodologies that lead to the financial results presented in the consolidated financial statements of the Corporation. Management considers the accounting policy relating to the allowance for loan losses to be a critical accounting policy because of the uncertainty and subjectivity inherent in estimating the levels of allowance needed to cover probable credit losses within the loan portfolio and the material effect that these estimates have on the Corporation's results of operations. We believe that the allowance for loan losses as of March 31, 2009 is adequate, however, under adversely different conditions or assumptions, future additions to the allowance may be necessary. There have been no significant changes in the methods or assumptions used in our accounting policies that would have resulted in material estimates and assumptions changes. Note 1 to the Consolidated Financial Statements provides a description of our significant accounting policies and contributes to the understanding of how our financial performance is reported.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity management involves the ability to meet the cash flow requirements of customers who may be either depositors wanting to withdraw their funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. In the ordinary course of business, the Corporation's cash flows are generated from interest and fee income as well as from loan repayments and the maturity or sale of other earning assets. In addition, liquidity is continuously provided through the acquisition of new deposits and borrowings or the rollover of maturing deposits and borrowings. The Corporation strives to maintain an adequate liquidity position by managing the balances and maturities of interest-earning assets and interest-earning liabilities so its short-term investments balance, at any given time, will adequately cover any reasonably anticipated immediate need for funds. Additionally, the Bank maintains relationships with correspondent banks that could provide funds on short notice, if needed.

-19- The liquidity and capital resources of the Corporation are monitored on a periodic basis by state and Federal regulatory authorities. As determined under guidelines established by these regulatory authorities, the Bank's liquidity ratios at March 31, 2009, were considered satisfactory. At that date, the Bank's short-term investments were adequate to cover any reasonably anticipated immediate need for funds. Due to the 5% drop in the short-term rate by the Federal Reserve since September 2007, the majority of our callable securities were called by the issuer in 2008. We had $79 million of our callable securities called during the first quarter last year. We have reinvested these proceeds from called investment securities in new loans, new investment securities, and for repayment of our debt obligations. We are not aware of any known trends, events, or uncertainties that will have or that are reasonably likely to have a material adverse effect on the Corporation's liquidity or operations. At March 31, 2009, the Corporation's and the Bank's risk-based capital ratios were considered adequate based on guidelines established by regulatory authorities. During the three months ended March 31, 2009, total capital increased $666 thousand to $24.0 million and decreased $2.9 million from the same period last year due to reporting some losses and making dividend payments. The stock repurchase program, adopted by the Board in January 2000, expired during the first quarter of last year. As part of its capital management planning, the Corporation and its Board of Directors elected not to extend the authorization of the stock repurchase program. Also, the Corporation continues to maintain a healthy level of capital adequacy as measured by its equity-to-asset ratio of 8.80% as of March 31, 2009. The Corporation is not aware of any events or trends likely to result in a material change in capital resources other than the effects of normal operations on the retention of net earnings. Also, the Corporation's management is not aware of any current recommendations by the regulatory authorities which, if they were implemented, would have a material effect on the Corporation's capital resources.

RESULTS OF OPERATIONS

The Corporation's results of operations are determined by its ability to effectively manage interest income and expense, to minimize loan and investment losses, to generate noninterest income and to control noninterest expense. Since interest rates are determined by market forces and economic conditions beyond the control of the Corporation, the ability to generate net interest income is dependent upon the Bank's ability to obtain an adequate spread between the rate earned on interest-earning assets and the rate paid on interest-bearing liabilities. Thus, the key performance measure for net interest income is the interest margin or net yield, which is taxable- equivalent net interest income divided by average earning assets.

Performance Summary

The Corporation's net income after taxes for the three-month period ending March 31, 2009 was $381 thousand, down $358 thousand, or 48.5%, from net income of $739 thousand for the first quarter of 2008, but up measurably when compared with a net loss of $116 thousand in the fourth quarter of 2008. Impacting the first quarter of 2009 was a $186 thousand increase in the provision for loan losses as a result of charge-offs on nonperforming loans and a 54.3% decline in commercial mortgage banking revenue.

-20- On a per share basis, net income for the first quarter was $.15 per diluted share compared with $.29 per diluted share for the same quarter in 2008. The weighted average common diluted shares outstanding for the quarter were 2.548 million, down eight thousand shares from first quarter last year. The decrease in average quarterly diluted shares was due to the expiration of some stock options during 2008.

We measure our performance on selected key ratios, which are provided for the previous five quarterly periods ended March 31, 2009.

                               1st Qtr  4th Qtr   3rd Qtr  2nd Qtr  1st Qtr
                                2009     2008      2008     2008     2008
Return on average total assets    .56%  ( .17)%  ( 3.99)%    1.10%    1.03%
Return on average total equity   6.48%  (2.02)%  (42.53)%   11.43%   10.85%
Average shareholders' equity to
 Average total assets            8.62%   8.61 %    9.37 %    9.60%    9.47%
Net interest margin
  (tax equivalent)               4.07%   4.26 %    4.19 %    3.97%    3.75%

Comparison of Statements of Income for the Quarter

Noninterest income, at 27% of the Corporation's total revenue for the quarter, was $1.2 million for the first quarter, down 28.9% from the same period in 2008. Revenue from mortgage banking services decreased 54.3% to $313 thousand compared with last year's first quarter as the credit crisis has made the mortgage funding environment challenging and has restricted loan opportunities. Regardless of the economic situation, the mortgage banking business has a strong pipeline of projects and also services a $385 million portfolio of non-recourse loans. Revenue from insurance services declined to $299 thousand, a 16.4% decrease over the first quarter of 2008, and income from trust and brokerage services decreased $18 thousand and $30 thousand, respectively, compared with the same period last year. The decrease in revenue from insurance services was partially due to a decrease in contingency fees of $69 thousand compared with the first quarter of 2008.

Total interest income decreased $549 thousand, or 14%, to $3.4 million for the three months ended March 31, 2009 compared with the same period in 2008. The bulk of this decrease was due to the significant lower interest rate environment. During the first quarter of 2009, the Federal Reserve Bank maintained short-term interest rates at a range of 0% to .25% after decreasing 5% since third quarter 2007. Interest and fees on loans declined $129 thousand compared to last year's first quarter. The lower interest rates have reduced interest earned on variable and adjustable rate loans. Interest on deposits in other banks and Federal funds sold decreased $268 thousand, and interest on investment securities decreased $124 thousand. Lower interest on investment securities was mainly due to a $17 million decline in average securities compared with the same period last year.

Total interest expense decreased $617 thousand, or 38.5%, in the first quarter of 2009 compared with the same period in 2008. Interest on deposits decreased $511 thousand, or 39.4%, during the first quarter of 2009 due to lower interest rates compared with the first quarter of 2008. The average rate paid on average time deposits has decreased 144 basis points since March 31, 2008. Interest on total borrowings decreased $106 thousand, or 34.7%, compared with the same quarter in 2008.

-21- The primary source of revenue for the Corporation is net interest income, which is the difference between total interest income on earning assets and interest expense on interest-bearing sources of funds. Net interest income improved slightly to $2.4 million for the first quarter of 2009 compared with $2.3 million in net interest income in the 2008 first quarter. Net interest income after provision for loan losses for the first quarter of 2009 was $2.2 million compared with $2.3 million for the same period in 2008. As previously noted, the provision for loan losses increased to $186 thousand mainly due to charge-offs recognized in the first quarter of 2009 compared with no provision for loan losses during last year's first quarter. This was partially offset by the decrease in total interest expense of $617 thousand. The Corporation's net interest margin was 4.07% for the first quarter of 2009, compared with 3.75% for the same period in 2008. This improvement in margin was impacted by the lower interest rate environment on interest- bearing deposits along with the growth in loans and higher yields on purchased investment securities.

Noninterest expense decreased to $2.9 million from $3.1 million for the first quarter of last year. The largest component of noninterest expense, salaries and employee benefits, decreased to $1.6 million for the first quarter compared with $1.8 million in the same period last year. This decrease was mainly due to a reduction in performance awards and benefit plan expenses. Other operating expense increased $35 thousand to $707 thousand in the first quarter of 2009 due to higher legal expenses and increased insurance assessment to the Federal Deposit Insurance Corporation. Amortization of intangible assets decreased $19 thousand when compared with the first quarter 2008. All of the intangible assets related to the purchase of the commercial mortgage banking subsidiary were fully amortized in 2008. Data processing expense increased $14 thousand to $176 thousand for the first quarter of 2009 due to normal business operations.

Comparison of Financial Condition Statements

At March 31, 2009, total assets were $272.5 million, a 1.8% increase from December 31, 2008. The majority of the increase in assets was a result of a $15.9 million increase in interest bearing deposits in other banks and a $1.7 million increase in premises and equipment. Premises and equipment increased due to the $1.6 million purchase of land in Valdosta, Georgia that will be the site of a branch bank in 2009. These increases were partially offset by a decline of $13.8 million in investment securities. This decrease in investment securities was due to the $12.0 million of callable U.S. Government Agency securities which were called by the issuers during the first quarter of 2009 as well as $2.1 million in principal payments from mortgage-backed securities. The proceeds from these called investment securities were not all reinvested in new securities.

The Corporation's loan portfolio of $149.4 million remained relatively flat from the December 31, 2008, level of $149.0 million. Total loans have grown 19% since March 31, 2008 due to stronger demand in our local market and the addition of our loan production office in Valdosta, Georgia. The Corporation continues to be conservative in its lending practices in order to maintain a quality loan portfolio. Loans, a major use of funds, represent 54.8% of total assets.

Investment securities and short-term investments which include Federal funds sold and interest-bearing deposits in other banks represent 36.3% of total assets. Investment securities decreased $13.8 million and short-term investments increased $15.9 million since December 31, 2008. This resulted in an overall increase in investments of $2.1 million.

-22- Deposits increased to $224.7 million at the end of the first quarter of 2009, up $10.1 million from the end of 2008. The bulk of the first quarter deposit growth was in money markets and in certificates of deposit. At March 31, 2009, total deposits represented 82.5% of total assets.

The following table shows the major contractual obligations for the Corporation.

Long-term debt consists of the following:

                                           March 31,  December 31,   March 31,
                                             2009        2008          2008
Advance from Federal Home Loan Bank
 with a 3.39% fixed rate of interest
 maturing August 20, 2018. (convertible
 to a variable rate at option of Federal
 Home Loan Bank on August 22, 2011).       5,000,000    5,000,000            0

Advance from Federal Home Loan Bank with
 a 3.85% fixed rate of interest maturing
 April 30, 2014, (convertible to a
 variable rate at option of Federal Home
 Loan Bank on April 30, 2009).                     0            0   10,000,000

Advance from Federal Home Loan Bank with
 a 2.78% fixed rate of interest maturing
 September 10, 2018. (convertible to a
 variable rate at option of Federal Home
 Loan Bank on September 10, 2010).         5,000,000    5,000,000            0

Total long-term debt                     $10,000,000  $10,000,000  $10,000,000

The allowance for loan losses represents a reserve for potential losses in the loan portfolio. The adequacy of the allowance for loan losses is evaluated monthly based on a review of all significant loans, with a particular emphasis on nonaccruing, past due, and other loans that management believes require attention.

Other factors used in determining the adequacy of the reserve are management's judgment about factors affecting loan quality and their assumptions about the local and national economy. The allowance for loan losses was 1.63% of total loans outstanding at March 31, 2009, compared with 1.59% of loans outstanding at December 31, 2008 and 1.92% at March 31, 2008. Net charge offs in the 2009 first quarter were $126 thousand compared with net charge offs of $837 thousand in the trailing fourth quarter of 2008 and net recoveries of $3 thousand in the first quarter of 2008. Nonperforming assets totaled $2.5 million at March 31, 2009, or 0.91% of total assets, compared with $3.3 million in nonperforming assets, or 1.15% of total assets at March 31, 2008. The decrease in non-performing assets was primarily related to the partial charge-off of one large commercial real estate loan in our nonaccrual loans category in the fourth quarter of 2008. Management considers the allowance for loan losses as of March 31, 2009, adequate to cover potential losses in the loan portfolio.

-23- Off-Balance Sheet Arrangements

In the normal course of business, we are a party to financial instruments with off-balance-sheet risk to meet the financing needs of our customers and reduce 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 financial statements. 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.

Financial instruments whose contract amounts        March 31,  March 31,
represent credit risk (dollars in thousands):         2009       2008
Commitments to extend credit                        $ 16,928   $ 17,334
Standby letters of credit and financial guarantees  $     10   $     10

The Corporation does not have any special purpose entities or off-balance sheet financing arrangements.

Capital Resources and Dividends

At March 31, 2009, the Corporation's and the Bank's risk-based capital ratios
were considered adequate based on guidelines established by regulatory
authorities.  Our total risk based capital ratio now stands at 15.95%, which
is 60 percent in excess of the regulatory standard for a "well-capitalized"
bank.  Southwest Georgia Financial Corporation's and Southwest Georgia Bank's
risk based capital ratios are shown in the following table.
                    SOUTHWEST GEORGIA FINANCIAL CORPORATION
                           Risk Based Capital Ratios

                            Southwest Georgia
                          Financial Corporation    Regulatory Guidelines
                                                   For Well     Minimum
Risk Based Capital Ratios     March 31, 2009      Capitalized  Guidelines
Tier 1 capital                     14.70%             6.00%      4.00%
Total risk based capital           15.95%            10.00%      8.00%
Tier 1 leverage ratio               8.69%             5.00%      3.00%

                            Southwest Georgia
                                   Bank            Regulatory Guidelines
                                                   For Well     Minimum
Risk Based Capital Ratios     March 31, 2009      Capitalized  Guidelines

Tier 1 capital                     14.20%             6.00%      4.00%
Total risk based capital           15.45%            10.00%      8.00%
Tier 1 leverage ratio               8.38%             5.00%      3.00%

-24- In March of 2009, the Corporation suspended its quarterly cash dividend. The Company paid a cash dividend of $0.07 per common share in January 2009, down from $0.14 per share paid in the fourth quarter of 2008. This decision enables the Corporation to have financial flexibility by retaining equity necessary to support efforts to capture greater market share and expand outside of its historic footprint. Conditions will be evaluated quarterly, and when the economic environment stabilizes, the Corporation will return to the more regular dividend payout schedule to which our shareholders have become accustomed.

-25-