SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996.
OR
TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-27448
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
(Exact name of small business issuer as specified in its charter)
Georgia 58-1756713
(State of Incorporation) (I.R.S. Employer Identification No.)
200 Plantation Chase, St. Simons Island, Georgia 31522
(Address of Principal Executive Offices)
(912) 638-0667
(Issuer's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer (1) filed all reports required to
be filed by section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter
period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number
of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
Common Stock, no par value per share: 2,337,244 shares
issued and outstanding as of August 13, 1996, of which 896,968
shares are combined with a nondetachable Class A Warrant to
purchase one additional share of Common Stock.
Transitional Small Business Disclosure Format: Yes No X
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Consolidated Balance Sheets
June 30, December 31,
1996 1995
ASSETS (Unaudited) (Unaudited)
Cash and due from banks 4,616,009 3,567,228
Federal funds sold 5,280,000 5,010,000
Total cash and cash equivalents 9,896,009 8,577,228
Investment securities:
Securities available-for-sale,
at estimated market values 7,408,345 6,626,386
Securities held-to-maturity
(approximate estimated market
value of 2,120,984 (06-30-96)
and 2,255,620 (12-31-95) 2,179,174 2,273,605
Loans, net 71,254,752 56,420,884
Loans held-for-sale 12,519,161 7,842,230
Property and equipment, net 4,399,699 3,359,481
Other assets 1,276,916 1,463,276
Total Assets 108,934,056 86,563,090
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits
Non-interest bearing deposits 7,315,763 7,366,505
Interest bearing deposits 64,374,053 60,661,737
Total deposits 71,689,816 68,028,242
Notes payable 7,285,514 2,849,683
Federal Home Loan Bank borrowings 4,281,429 4,185,214
Other liabilities 14,969,298 699,161
Total Liabilities 98,226,057 75,762,300
Commitments and contingencies
Shareholders' Equity:
Common stock, no par value
15 million shares authorized,
2,337,244 shares (06-30-96)
2,336,982 (12-31-95) shares
issued and outstanding 1,094,338 1,094,338
Paid-in-capital 9,936,041 9,849,147
Retained (deficit) (286,503) (140,182)
Unrealized (loss) on fair value
of securities available-for-sale (35,877) (2,513)
Total Shareholders' Equity 10,707,999 10,800,790
Total Liabilities
and Shareholders' Equity 108,934,056 86,563,090
Refer to notes to the financial statements.<PAGE>
Golden Isles Financial Holdings,
Inc. St. Simons Island, Georgia
Consolidated Income Statements
(Unaudited)
Three Months Ended
June 30,
1996 1995
Interest income 2,371,417 1,762,615
Interest expense 1,207,838 857,234
Net interest income 1,163,579 905,381
Provision for possible loan losses 168,051 91,592
Net interest income after provision
for possible loan losses 995,528 813,789
Other income:
Fee income from mortgage subsidiary 485,820 79,440
Other income 293,349 109,149
Total other income 779,169 188,589
Salaries and benefits 1,134,575 415,576
Depreciation and amortization 95,513 26,844
Regulatory fees and assessments 4,581 24,560
Supplies and printing 59,669 32,617
Legal & professional 44,606 41,751
Advertising 92,742 18,343
Other operating expenses 429,882 317,284
Total operating expenses 1,861,568 876,975
Net income (loss) before taxes (86,871) 125,403
Income taxes/(benefit) (17,126) 73,313
Net income/(loss) (69,745) 52,090
Income (loss) per share (.03) .03
Refer to notes to the financial statements.
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Consolidated Income Statements
(Unaudited)
Six Months Ended
June 30,
1996 1995
Interest income 4,631,957 3,253,788
Interest expense 2,316,587 1,521,123
Net interest income 2,315,370 1,732,665
Provision for possible loan losses 331,752 155,863
Net interest income after provision
for possible loan losses 1,983,618 1,576,802
Other income:
Fee income from mortgage subsidiary 848,239 151,467
Other income 500,581 193,474
Total other income 1,348,820 344,941
Salaries and benefits 2,042,685 806,970
Depreciation and amortization 175,594 54,726
Regulatory fees and assessments 9,997 49,120
Supplies and printing 106,250 56,256
Legal & professional 80,981 79,913
Advertising 154,248 41,702
Other operating expenses 872,296 525,631
Total operating expenses 3,442,051 1,614,318
Net income (loss) before taxes (109,613) 307,425
Income taxes 36,710 201,701
Net income (loss) (146,323) 105,724
Income (loss) per share (.06) .07
Refer to notes to the financial statements.
Golden Isles Financial Holdings,
Inc. St. Simons Island, Georgia
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
1996 1995
Cash flows from operating activities: 660,682 476,838
Cash flows from Investing Activities:
Increase in loans held-for-sale (4,676,931) - -
Purchase of fixed assets (1,209,045) (1,389,333)
(Increase) in loans (15,165,620) (5,653,759)
Securities - available-for-sale
Maturity and paydowns 1,724,521 572,143
Sale of securities - - 728,116
Purchase of securities (2,506,480) (587,116)
Securities - held-to-maturity
Maturity and paydowns 94,431 751,564
Purchase of securities - - - -
Net cash used in investing activities (21,739,124) (5,578,385)
Cash flows from Financing Activities:
Increase in various borrowings 18,648,755 (758,005)
Sale of stock/option amortization 86,894 5,500,362
Increase in deposits 3,661,574 5,033,302
Cash provided from financing activities 22,397,223 9,775,659
Net increase in cash and cash equivalents 1,318,781 4,674,112
Cash and cash equivalents,
beginning of period 8,577,228 1,822,966
Cash and cash equivalents, end of period 9,896,009 6,497,078
Refer to notes to the financial statements.
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Notes to Financial Statements (Unaudited)
June 30, 1996
Note 1 - Basis of Presentation
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the six-month
period ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996.
For further information, refer to the financial statements and
footnotes thereto included in Form 10-KSB for the year ended December
31, 1995.
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation and Reclassification. The consolidated
financial statements include the accounts of the parent company and the
Subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation. Certain prior year amounts have
been reclassified to conform to the current year presentation.
Basis of Accounting. The accounting and reporting policies of
GIFH conform to generally accepted accounting principles and to general
practices in the banking industry. GIFH uses the accrual basis of
accounting by recognizing revenues when earned and expenses in the
period incurred, without regard to the time of receipt or payment of
cash.
Investment Securities. GIFH adopted Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investment in Debt
and Equity Securities (SFAS 115) on January 1, 1994. SFAS 115
requires investments in equity and debt securities to be classified
into three categories:
1. Held-to-maturity securities: These are securities which
GIFH has the ability and intent to hold until maturity.
These securities are stated at cost, adjusted for
amortization of premiums and the accretion of discounts.
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Notes to Financial Statements (Unaudited)
June 30, 1996
2. Trading securities: These are securities
which are bought and held principally for
the purpose of selling in the near
future. Trading securities are reported
at fair market value, and related
unrealized gains and losses are
recognized in the income statement.
3. Available-for-sale securities: These are
securities which are not classified as
either held-to-maturity or as trading
securities. These securities are
reported at fair market value.
Unrealized gains and losses are reported,
net of tax, as separate components of
shareholders' equity. Unrealized gains
and losses are excluded from the income
statement.
Loans, Interest and Fee Income on Loans.
Loans are stated at the principal balance
outstanding. Unearned discount, unamortized
loan fees and the allowance for possible loan
losses are deducted from total loans in the
statement of condition. Interest income is
recognized over the term of the loan based on
the principal amount outstanding. Points on
real estate loans are taken into income to the
extent they represent the direct cost of
initiating a loan. The amounts in excess of
direct costs are deferred and amortized over
the expected life of the loan.
Loans are generally placed on non-accrual
status when principal or interest becomes
ninety days past due, or when payment in full
is not anticipated. When a loan is placed on
non-accrual status, interest accrued but not
received is generally reversed against interest
income. If collectibility is in doubt, cash
receipts on non-accrual loans are not recorded
as interest income, but are used to reduce
principal.
Allowance for Possible Loan Losses. The
provisions for loan losses charged to operating
expense reflect the amount deemed appropriate
by management to establish an adequate reserve
to meet the present and foreseeable risk
characteristics of the current loan portfolio.
Management's judgement is based on periodic and
regular evaluation of individual loans, the
overall risk characteristics of the various
portfolio segments, past experience with losses
and prevailing and anticipated economic
conditions. Loans which are determined to be
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Notes to Financial Statements (Unaudited)
June 30, 1996
uncollectible are charged against the allowance.
Provisions for loan losses and recoveries on loans
previously charged-off are added to the allowance.
GIFH adopted Statement of Financial Accounting
Standards No. 114, Accounting by Creditors for Impairment
of a Loan, (SFAS 114) on January 1, 1995. Under the new
standard, a loan is considered impaired, based on current
information and events, if it is probable that GIFH will be
unable to collect the scheduled payments of principal or
interest when due according to the contractual terms of the
loan agreement. The measurement of impaired loans is
generally based on the present value of expected future
cash flows discounted at the historical effective interest
rate. All collateral-dependent loans, however, are
measured for impairment based on the fair value of the
collateral. The adoption of SFAS 114 resulted in no change
to the allowance for credit losses at January 1, 1995.
In October, 1994, FASB issued Statement of Financial
Accounting Standards No. 118, Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosure
(SFAS 118). SFAS 118 amends SFAS 114 to allow a creditor
to use existing methods for recognizing interest income on
an impaired loan, rather than the methods prescribed in
SFAS 114.
Mortgage Loan Administration. GIFH, through FBMC,
purchases and sells real estate mortgage loans in the
secondary market as part of normal operations. Loans
originated pending sale are classified as loans held-for-sale. Such loans
are valued at the lower of cost or market. All loans sold are subject to a
recourse provision relating only to documentation deficiencies, which GIFH
may correct. Gains and losses resulting from sales of these
loans are recognized in the period the sale occurs, as the
recourse provisions are not considered to significantly
affect the earnings process.
In May 1995, FASB issued Statement of Financial
Accounting Standards No. 122, Accounting for Mortgage
Servicing Rights, (SFAS 122). SFAS 122 amends SFAS 65,
Accounting for Certain Mortgage Banking Activities, to
require that a mortgage banking enterprise recognize as an
asset rights to service mortgage loans for others
regardless of the manner in which those servicing rights
are acquired. It also requires an enterprise to assess its
capitalized mortgage servicing rights for impairment based
on the fair value of those rights. In assessing
impairment, mortgage servicing rights that are capitalized
after the adoption of SFAS 122 should be stratified based
on one or more of the predominant
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Notes to Financial Statements (Unaudited)
June 30, 1996
risk characteristics of the underlying loans. Impairment
should then be recognized through a valuation allowance for
each impaired stratum. SFAS 122 will apply to GIFH for the
calendar year beginning January 1, 1996. Management
believes that the adoption of SFAS 122 will not have a
material impact on the financial position of GIFH.
Property and Equipment. Building, furniture and
equipment are stated at cost, net of accumulated
depreciation. Depreciation is computed using the straight
line method over the estimated useful lives of the related
assets. Maintenance and repairs are charged to operations,
while major improvements are capitalized. Upon retirement,
sale or other disposition of property and equipment, the
cost and accumulated depreciation are eliminated from the
accounts, and gain or loss is included in income from
operations.
Income Taxes. The consolidated financial statements
have been prepared on the accrual basis. When income and
expenses are recognized in different periods for financial
reporting purposes and for purposes of computing income
taxes currently payable, deferred taxes are provided on
such temporary differences.
Effective January 1, 1993, GIFH adopted Statement of
Financial Accounting Standards No. 109, Accounting for
Income Taxes (SFAS 109). Under SFAS 109, deferred tax
assets and liabilities are recognized for the expected
future tax consequences of events that have been recognized
in the financial statements or tax return. Deferred tax
assets and liabilities are measured using the enacted tax
rates expected to apply to taxable income in the years in
which those temporary differences are expected to be
realized or settled.
Statement of Cash Flows. For purposes of reporting
cash flows, cash and cash equivalents include cash on hand,
amounts due from banks and federal funds sold. Generally,
federal funds are purchased or sold for one day periods.
Net Income/(Loss) Per Share. Net income/(loss) per
share was computed by dividing net income by the weighted
average number of shares outstanding for each period.
Common stock equivalents in the form of outstanding stock
options were included in the determination of the weighted
average number of shares outstanding only if they were
dilutive. Loss per share of (.06) the for six-month period
ended June 30, 1996 may not be indicative of projected
earnings/(losses) for the year ending December 31, 1996.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Liquidity and Sources of Capital
Golden Isles Financial Holdings, Inc., St. Simons Island,
Georgia (GIFH) was incorporated under the laws of the State
of Georgia in 1987 for the purpose of becoming a holding
company for its then proposed de novo bank, The First Bank
of Brunswick, Brunswick, Georgia (the Bank). Upon
commencement of the Bank's principal operations on July 2,
1990, GIFH acquired 100 percent of the Bank's voting stock
by injecting 4.5 million into the Bank's capital accounts.
Deposits at the Bank are each insured up to 100,000 by the
Federal Deposit Insurance Corporation.
In late 1993, GIFH formed two subsidiaries, First Credit
Service Corporation, Brunswick, Georgia (FCC) and First
Bank Mortgage Corporation, Brunswick, Georgia (FBMC). FCC
engages in consumer finance and credit related insurance
activities, while FBMC engages in the origination,
processing, purchase and sale of mortgage loans, as well as
in making funds available to other mortgage lenders through
warehouse lines of credit. GIFH owns 100 percent of the
voting shares of the Bank, FCC and FBMC.
Total consolidated assets increased by 22.4 million to
108.9 million during the six-month period ended June 30,
1996. The increase was funded primarily through a 3.7
million increase in deposits and an 18.7 million increase
in notes payable and other borrowings. The new funds were
utilized primarily to increase (i) the loan portfolio by
14.8 million, (ii) loans available for sale by 4.7 million,
(iii) property and equipment by 1.1 million, and (iv) the
investment portfolio by .7 million.
Liquidity is the company's ability to meet all deposit
withdrawals immediately, while also providing for the
credit needs of customers. The June 30, 1996 financial
statements evidence a satisfactory liquidity position as
total cash and cash equivalents amounted to 9.9 million,
representing 9.1% of total assets. Investment securities
amounted to 9.6 million, representing 8.8% of total assets;
these securities provide a secondary source of liquidity
since they can be converted into cash in a timely manner.
Additionally, at June 30, 1996, GIFH had 12.5 million in
loans held-for-sale. These loans are generally converted
into cash within 90 days from origination. Note that the
company's ability to maintain and expand its deposit base
and borrowing capabilities are a source of liquidity. For
the six-month period ended June 30, 1996, total deposits
increased from 68.0 million to 71.7 million, representing
an annualized increase of 10.8%. Also, for the six-month
period ended June 30, 1996, GIFH was able to increase its
borrowings from 7.0 million to 25.7 million, a net increase
of 18.7 million. GIFH's management closely monitors and
maintains<PAGE>
appropriate levels of interest earning assets and interest
bearing liabilities, so that maturities of assets are such
that adequate funds are provided to meet customer
withdrawals and loan demand. There are no trends, demands,
commitments, events or uncertainties that will result in or
are reasonably likely to result in GIFH's liquidity
increasing or decreasing in any material way.
The Bank maintains an adequate level of capitalization as
measured by the following capital ratios and the respective
minimum capital requirements by the Bank's primary
regulators.
Bank's Minimum required by
June 30, 1996 regulatory authorities
Leverage ratio 7.8% 4.0%
Risk weighted ratio 11.3% 8.0%
Note that with respect to the leverage ratio, the
regulators expect a minimum of 5.0 percent to 6.0 percent
ratio for banks that are not rated CAMEL 1. Although the
Bank is not rated CAMEL 1, its leverage ratio of 7.8
percent is well above the required minimum.
Results of Operations
Net loss for the six-month period ended June 30, 1996
amounted to (146,323), or (.06) per share. For the six-month period ended
June 30, 1995, net income amounted to 105,724, or .07 per share. The
primary reason for the decline in income is attributed to the increased costs
associated with the expanding operations of FCC and FBMC.
Four major items are of a particular interest when one
compares the June 30, 1996 results to those of June 30, 1995.
a. Net interest income, which represents the difference
between interest received on interest earning assets
and interest paid on interest bearing liabilities,
has increased from 1,732,665 for the six-month period
ended June 30, 1995 to 2,315,370 for the same period
one year later, representing an increase of 582,705,
or 33.6%. This increase was attained because total
interest earning assets increased from 63.7 million
at June 30, 1995 to 86.1 million at June 30, 1996.
b. The net interest yield, defined as net interest
income divided by interest earning assets, has
declined from 5.43% for the six-month period ended
June 30, 1995 to 5.38% for the six-month period ended
June 30, 1996. The decrease is attributed to higher
cost of funds.
c. Other income for the six-month period ended June 30,
1996 and 1995 amounted to 1,348,820 and 344,941,
respectively. The significant increase in other
income is due primarily to the increase in fee income and other
charges that are earned through FBMC.
d. Operating expenses for the six-month period ended
June 30, 1996 and 1995 amounted to 3,442,051 and
1,614,318, respectively, representing an increase of
1,827,733, or 113%. Operating expenses represented
an annualized 6.3% and 4.6% of total assets as of
June 30, 1996 and 1995, respectively.
At December 31, 1995, the allowance for loan losses
amounted to 718,057. By June 30, 1996, the allowance had
grown to 1,010,294. The allowance for loan losses, as a
percentage of gross loans, increased from 1.26% to 1.40%
during the six-month period ended June 30, 1996.
Management considers the allowance for loan losses to be
adequate and sufficient to absorb possible future losses;
however, there can be no assurance that charge-offs in
future periods will not exceed the allowance for loan
losses or that additional provisions to the allowance will
not be required.
GIFH is not aware of any current recommendation by the
regulatory authorities which, if they were to be
implemented, would have a material effect on GIFH's
liquidity, capital resources, or results of operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. Except as otherwise
provided in Item 3 of Part I of Form 10-KSB of GIFH for the
fiscal year ended December 31, 1995, there are no material
pending legal proceedings to which GIFH or any of its
subsidiaries is a party or of which any of their property
is the subject.
Item 2. Changes in Securities.
(a) None.
(b) None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of
Security-Holders. No matter was submitted to a vote of
security-holders during the quarter ended June 30, 1996.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K - There were no
reports on Form 8-K filed during the quarter ended
June 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
(Registrant)
Date: August 13, 1996
By: /s/ Paul D. Lockyer
Paul D. Lockyer
President, Chief Operating Officer and
Chief Financial Officer
INDEX TO EXHIBITS
Exhibit Sequential
Number Description Page Number
27 Financial Data Schedule 16
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 4,616,009
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,280,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 7,408,345
<INVESTMENTS-CARRYING> 2,179,174
<INVESTMENTS-MARKET> 2,120,984
<LOANS> 72,293,323
<ALLOWANCE> 1,038,571
<TOTAL-ASSETS> 108,934,056
<DEPOSITS> 71,689,816
<SHORT-TERM> 7,285,514
<LIABILITIES-OTHER> 853,298
<LONG-TERM> 18,397,429
0
0
<COMMON> 1,094,338
<OTHER-SE> 9,613,661
<TOTAL-LIABILITIES-AND-EQUITY> 108,934,056
<INTEREST-LOAN> 4,094,828
<INTEREST-INVEST> 537,129
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 4,631,957
<INTEREST-DEPOSIT> 1,882,870
<INTEREST-EXPENSE> 2,316,587
<INTEREST-INCOME-NET> 2,315,370
<LOAN-LOSSES> 331,752
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,442,051
<INCOME-PRETAX> (109,613)
<INCOME-PRE-EXTRAORDINARY> (109,613)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (146,323)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
<YIELD-ACTUAL> 5.4
<LOANS-NON> 206,480
<LOANS-PAST> 45,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 718,057
<CHARGE-OFFS> 48,752
<RECOVERIES> 9,237
<ALLOWANCE-CLOSE> 1,010,294
<ALLOWANCE-DOMESTIC> 985,294
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 25,000
</TABLE>
