U. S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
__________________________
FORM 10-KSB
__________________________
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1995
__________________________
Commission File Number 0-27448
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
A Georgia Corporation
(IRS Employer Identification No. 58-1756713)
200 Plantation Chase
St. Simons Island, Georgia 31522
(912) 638-0667
____________________________
Securities Registered Pursuant to Section 12(b)
of the Securities Exchange Act of 1934:
None
____________________________
Securities Registered Pursuant to Section 12(g)
of the Securities Exchange Act of 1934:
Units (consisting of one (1) share of Common Stock and one (1) Class A
Warrant)
(Title of Class)
Common Stock
(Title of Class)
Class A Warrants
(Title of Class)
____________________________
Check whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding twelve months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ____
Indicate by a check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-KSB or any
amendment to this Form 10-KSB. [X ]
The Registrant's revenues for the fiscal year ended December 31, 1995 were
$7,893,810.
The aggregate market value of the Common Stock of the Registrant held by
nonaffiliates of the Registrant on March 1, 1996, including Common Stock held
in the form of Units, was $12,467,110. As of such date, no organized trading
market existed for the Common Stock and/or Units of the Registrant. The
aggregate market value of the Common Stock held by nonaffiliates was computed
by reference to the estimated fair market value of the Company's Common Stock
as of December 31, 1995 (i.e., $6.50 per share). The estimated fair market
value was determined based upon isolated purchase/sale transactions which
occurred with respect to the Company's Common Stock during fiscal year 1995.
For the purpose of this response, directors, officers and holders of 5% or
more of the Registrant's Common Stock are considered the affiliates of the
Registrant at that date.
The number of shares outstanding of the Registrant's Common Stock as of March
1, 1996, including Common Stock held in the form of Units: 2,336,982 shares of
no par value Common Stock, of which 897,230 shares are held in the form of
Units.
Transitional Small Business Disclosure Format:
Yes No X
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
Item 1.Description of Business
A.Business Development.
Golden Isles Financial Holdings, Inc. ("GIFH") was incorporated under
the laws of the State of Georgia on September 8, 1987, but conducted only
organizational activities until its initial public offering closed on January
31, 1990. GIFH used the proceeds of that offering to acquire all of the
capital stock of The First Bank of Brunswick, Brunswick, Georgia (the "Bank"),
a state-chartered Georgia bank.
The Bank opened for business on July 2, 1990, to engage in a general
commercial banking business in Glynn County, Georgia. Since that date, the
Bank has engaged in a general commercial banking business, emphasizing the
banking needs of individuals and small-to medium sized businesses in its
primary service area. Prior to 1995, the Bank had only one branch, which was
located in Brunswick, Georgia. In 1995, the Bank opened a second full service
branch in St. Simons Island, Georgia.
In September, 1993, GIFH received approval to establish and operate
First Bank Mortgage Corporation ("FBMC"), as a wholly-owned subsidiary of
GIFH, to engage in originating, making, acquiring and servicing mortgage
loans. FBMC has, since then, engaged in the mortgage loan business. During
1993, FBMC operated from a single branch, which was located in St. Simons
Island, Georgia. In 1995, FBMC opened two additional branches, one in
Savannah (Chatham County), Georgia and the other in Blairsville (Union
County), Georgia. In addition, in January 1996, FBMC opened a fourth office,
which is located in Memphis, Tennessee. All of these branches remain
operational as of March 1, 1996.(1)
In 1995, in addition to expanding to new locations, FBMC also revised
and expanded the scope of its business. Prior to 1995, FBMC was simply a
mortgage broker, i.e., it brokered loans which were underwritten and funded by
other lenders. Commencing in 1995, FBMC began to underwrite and fund mortgage
loans originating in its own offices, by various mortgage brokers and by
rural banks in Georgia, Arkansas, Tennessee and North Carolina, and to provide
warehouse lines of credit for other mortgage lenders.
Also in September, 1993, GIFH received approval to establish and operate
First Credit Service Corporation ("FCC"), as a wholly-owned subsidiary of
GIFH, to engage in originating, making, acquiring and servicing consumer
loans, as well as offering credit-related insurance on such loans. FCC has,
since then, engaged in the consumer loan business. During 1993, FCC had only
one operating branch, which was located in Brunswick, Georgia. In 1994, FCC
opened a second branch in Kingsland, Georgia. In 1995, FCC opened two
additional branches, one in Savannah, Georgia and the other in Waycross,
Georgia, and in February, 1996, a fourth branch, in Martinez, Georgia.
Beginning May 31, 1994, the Company conducted a secondary public
offering of securities (the "Secondary Offering") pursuant to which GIFH
offered for sale a minimum of 769,832 and a maximum of 1,538,462 units (the
"Units") at a price of $6.50 per Unit. Each Unit consists of one share of
Common Stock of GIFH and one non-detachable Class A Warrant to purchase one
share of the Common Stock. Each Class A Warrant expires on May 31, 1998, and
entitles the holder to purchase an additional share of the Common Stock at a
price of $7.25
(1)In 1994, FBMC also opened a branch in Kingsland, Georgia, and, in 1995,
FBMC opened branches in Tampa, Florida and Jacksonville, Florida. However,
due to insufficient personnel to operate the Kingsland, Tampa and Jacksonville
branches, each of such offices was closed after being in operation for less
than six months.
if exercised on or before May 31, 1996, $8.25 if exercised on or before May
31, 1997, and $9.50 if exercised on or before May 31, 1998. The Secondary
Offering closed as of March 31, 1995. GIFH accepted subscriptions for a total
of 897,230 Units, with total proceeds received by GIFH in connection with such
subscriptions amounting to $5,831,995. The proceeds were held in escrow until
May 11, 1995, whereupon $5,500,000 was released from escrow to GIFH. The
balance of the proceeds held in escrow was released to GIFH on July 25, 1995.
B. Business.
1. Services Offered by GIFH's Subsidiaries.
The Bank conducts a general commercial and retail banking business,
emphasizing in its marketing the Bank's local management and ownership. The
Bank accepts the usual types of demand, savings, and time deposits of
individuals, partnerships and corporations and offers commercial and retail
checking accounts, Super NOW accounts, money market accounts, individual
retirement accounts and certificates of deposit. The Bank makes various types
of level term and installment loans, both personal and commercial, and makes
and services long-term mortgage loans, as well as individual and business
loans. The Bank acts as an issuing agent for U.S. savings bonds, traveler's
checks, money orders and cashier's checks, and it offers collection teller
services, including wire transfer services. The Bank also offers safe deposit
boxes and a night depository facility. The Bank provides these services from
two branches, one in Brunswick, Georgia, and the other in St. Simons Island,
Georgia.
Since its inception in September 1993, FBMC has been engaged in the
mortgage business. In 1995, FBMC expanded the scope of its busines to
include: (i) retail mortgage lending; (ii) equity mortgage lending; (iii)
correspondent bank operation; and (iv) warehouse lending. The retail mortgage
lending line of business consists of originating, underwriting and funding
mortgage loans to individuals with good credit histories. These loans are
originated in all four of FBMC's offices. The equity mortgage lending line of
business consists of underwriting and funding mortgage loans to individuals
with less than perfect credit. These equity mortgage loans are originated in
FBMC's Savannah office. In addition, FBMC employs four account executives who
solicit equity mortgage loans from mortgage brokers throughout the Southeast.
The correspondent bank operation consists of purchasing, processing,
underwriting and funding mortgage loans which originate from various rural
banks in Georgia, Arkansas, Tennessee and North Carolina. The correspondent
bank operation is conducted through FBMC's Blairsville office. The warehouse
lending operation consists of providing lines of credit to other mortgage
lenders. This line of business is operated from FBMC's St. Simons Island
office. Mortgage loans funded by FBMC are sold in the secondary market.
Since its inception in September 1993, FCC has engaged in the consumer
finance business, i.e., it originates, makes, acquires, and services consumer
loans, as well as offers credit related insurance on such loans, to the
general public. The primary areas serviced by FCC are Glynn, Camden,
Columbia, Chatham and Ware/Pierce Counties, Georgia. FCC operates from
several leased facilities which are described in Item 2 below.
GIFH owns 100% of the capital stock of the Bank and of both FBMC and
FCC. The principal role of GIFH is to supervise and coordinate the activities
of its subsidiaries and to provide the subsidiaries with capital. GIFH
derives all of its income from dividends from its subsidiaries and any
interest it earns on funds it holds.
2. Market Area and Competition.
The Bank, FBMC and FCC derive many of their customers from and conduct a
significant portion of their business transactions within a primary service
area encompassing the mainland of Glynn County, St. Simons Island and Camden
County, Georgia. The population of Glynn County was 61,807 in 1987, 64,737 in
1990 and is projected to reach 74,546 by the year 2000. Total dwelling units
are expected to increase from 24,085 in 1987 to 31,182 in the year 2000. The
population of Camden County was 30,167 in 1990 and is projected to approach
42,000 by the year 2,000. The area includes well-known resort, retirement and
convention destinations, with local industry oriented towards tourism and
leisure activities. In addition, however, the economy of Glynn County is
fairly diversified, the top five industries ranked by total employment being:
a pulp mill, seafood processing, restaurants, hotel/motels and chemical
processing. The economy of Camden County is also fairly diversified, the top
five industries ranked by employment being: paper and allied products, food
products, chemicals and related products, lumber and wood products and
apparel. In addition, the U.S. Navy has a major base at Kings Bay in Camden
County, which serves as the home port of nuclear submarines and related
vessels. The local economy is also supported by the Federal Law Enforcement
Training Center, which processed approximately 22,000 federal agents in 1995.
The center employs approximately 1,600 people and represents numerous federal
agencies.
Management expects the relatively high level of growth and increased
commercial activity experienced by Glynn County and adjacent Camden County to
continue, providing a favorable environment for its operating subsidiaries.
However, there is no assurance that population growth and ongoing economic
development will continue, or that the subsidiaries will be able to exploit
the growth and development profitably even if they continue.
The Bank
The Bank competes as a financial intermediary with other commercial
banks, savings and loan associations, credit unions, mortgage banking
companies, consumer finance companies, securities brokerage firms, insurance
companies, money market mutual funds, and other financial institutions.
During 1995, there were five commercial banks in the Bank's retail market
area, three of which were owned by holding companies located outside Glynn
County. In addition, during 1995, the Bank competed with two savings banks
and five credit unions having offices in Glynn County. Management estimates
that as of December 31, 1995, deposits in Glynn County totaled $850 million
with the Bank having approximately 8.1% of such deposits.
Banks affiliated with out-of-state financial institutions have entered
Georgia in recent years to offer limited financial services, including lending
and deposit gathering activities. Moreover, on March 16, 1994, the Georgia
legislature adopted a reciprocal interstate banking law which became effective
on July 1, 1995. In essence, the new law permits bank holding companies
headquartered in states outside of Georgia to acquire Georgia banks, provided
that Georgia bank holding companies may likewise make bank acquisitions in the
reciprocal state. In addition, on September 29, 1994, the United States
Congress adopted the Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 (the "Riegle-Neal Act"). The Riegle-Neal Act provides phased-in
authority for banking organizations to acquire banks across state lines and
for the acquisition or establishment of interstate branches. Pursuant to the
Riegle-Neal Act, effective September 29, 1995, an adequately capitalized and
adequately managed bank holding company headquartered in a state outside of
Georgia may acquire a Georgia bank without regard to whether such acquisition
is permissible under Georgia law.
In general terms, regional interstate banking laws, federal interstate
banking laws and initiatives enacted or currently being considered by the
United States Congress, as well as other federal and state laws, have caused
and will continue to cause increased competition from both conventional
banking institutions and other businesses offering financial services and
products within the financial services industry in Georgia. Many of the
financial institutions operating in Georgia have substantially greater
financial resources and offer certain services, such as trust services, that
the Bank does not expect to provide in the near future. By virtue of the
greater total capitalization of such institutions, they have substantially
higher lending limits than the Bank and substantial advertising and
promotional budgets. To compete, the Bank relies on specialized services,
responsive handling of customer needs and personal contacts by officers,
directors and staff.
FBMC
With respect to FBMC's retail mortgage lending line of business, the
mortgage origination business is extremely competitive in FBMC's current
service areas. In Glynn County, in calendar year 1995, approximately $241
million in mortgage loans, consisting of 2,900 loans, were made by lenders.
FBMC closed $17 million in mortgage loans related to Glynn County in 1995, or
approximately 7.0% of the total volume. FBMC's major competitors in
connection with this line of business, are (i) in Glynn County, three large
lenders who in 1995 closed approximately 58% of the total dollar volume of
loans secured by real estate; (ii) in Union County, two large lenders who in
1995 closed approximately 95% of the total dollar volume of loans secured by
real estate; (iii) in Chatham County, eleven large lenders who in 1995 closed
at least 50% of the total dollar volume of loans secured by real estate; and
(iv) in Shelby County, Tennessee, five large lenders who in 1995 closed
approximately 56% of the total dollar volume of loans secured by real estate.
In other words, in each of its service areas, with respect to the retail
mortgage lending line of business, FBMC is competing with several large
mortgage originators.
With respect to its warehouse line of credit line of business, FBMC's
competitors are companies such as GE Capital Mortgage Services, CoreStates,
and Fleet Mortgage. With respect to FBMC's equity mortgage loan line of
business in its service area, FBMC's major competitors are companies such as
Ford Credit, Equicon and GE Capital Mortgage Services. As a new entrant, FBMC
is currently a relatively minor player in these lines of businesses. However,
unlike in the retail mortgage lending line of business, the relevant "service
area" in these lines of business is the entire Southeastern United States. As
a result, management believes that FBMC is well positioned to expand its share
of this huge market through superior quality of service, personal attention
and taking advantage of "niche" opportunities.
FBMC does not have significant competition in its correspondent banking
line of business. As a result, management believes that this line of business
will grow significantly in the foreseeable future.
FCC
There are thirteen consumer finance companies in Brunswick (including
FCC), with an estimated total outstanding loan portfolio of $28 million.
Additionally, numerous credit unions, banks and savings and loan associations
make consumer loans in FCC's market. Among consumer finance companies which
presently operate in this service area, American General Finance, Commercial
Credit and First Family Financial together hold at least 50% market share.
FCC competes most directly with these three companies.
Kingsland, where FCC opened its second branch in July 1994, is currently
serviced by two other relatively strong finance companies, First Family
Finance and Pioneer Credit, and a few other smaller companies. However,
Kingsland is a market with unusual opportunities, not only because of its
anticipated growth through the remainder of the decade, but also because much
of its population is currently serviced out of Jacksonville rather than
through local lenders. Management believes that FCC's branch in Kingsland can
effectively compete with the Florida-based lenders who control a significant
portion of the market share in Camden County.
Savannah, where FCC opened its third branch in June 1995, is currently
serviced by thirty-five consumer finance companies, with an estimated total
outstanding loan portfolio of approximately $85 million. Several credit
unions and banks are also involved in the Savannah consumer lending market.
In Savannah, FCC competes most directly with Ford Motor Credit, Associate
Finance, American General Finance and Commercial Credit.
Waycross (Ware/Pierce County), where FCC opened its fourth branch in
August 1995, is currently serviced by ten consumer finance companies. FCC's
main competitors in this service area are Security Pacific, First Family
Finance and Fleet Finance.
In Martinez (Columbia County), where FCC opened its fifth branch in
February, 1996, FCC's primary competitors are American General and Associate
Finance, both of which are located in neighboring Richmond County, and several
banks.
In its Brunswick and Martinez offices, FCC operates under a Georgia
Industrial Loan Act ("GILA") license. In early March 1996, FCC applied for a
GILA license for its Kingsland office and expects to receive approval for such
license shortly. The ability to make consumer loans under a GILA license is a
significant competitive advantage, which FCC intends to exploit to its fullest
potential. Generally, FCC's ability to expand its business has been enhanced
by the increase, effective May 16, 1995, in the line of credit from
BankAmerica Business Credit, Inc. from $4 million to $8.5 million.
3. Distribution of Assets, Liabilities and Shareholders' Equity; Interest
Rates and Interest Differential.
The following is a presentation of the average consolidated balance
sheets of GIFH for the years ended December 31, 1995 and 1994. This
presentation includes all major categories of interest-earning assets and
interest-bearing liabilities.
AVERAGE CONSOLIDATED ASSETS
Year Ended December 31,
1995 1994
(in thousands)
Tax exempt securities $ 307 $466
Taxable securities 9,787 9,863
Federal funds sold 1,934 497
Net loans 53,321 40,194
Total earning assets 65,349 51,020
Other assets 8,475 3,533
Total assets $73,824 $54,553
AVERAGE CONSOLIDATED LIABILITIES AND SHAREHOLDERS' EQUITY
Year Ended December 31,
1995 1994
(in thousands)
Non-interest bearing deposits $ 6,047 $4,919
NOW and money market deposits 13,361 13,265
Savings deposits 836 805
Time deposits 38,144 27,405
Federal funds purchased 161 251
Borrowings 5,085 2,632
Other liabilities 641 279
Total liabilities 64,275 49,556
Shareholders' equity 9,549 4,997
Total liabilities and
shareholders' equity $73,824 $54,553
The following is a presentation of an analysis of the net interest earnings of
GIFH for 1995, with respect to each major category of interest-earning asset
and each major category of interest-bearing liability.
Year Ended December 31, 1995
(in thousands)
Average
Average
Amount Interest
Yield/Rate
Assets
Tax-exempt securities(5) $ 307 $ 12 4.46%
Taxable securities 9,787 578 5.91%
Federal funds sold 1,934 115 5.95%
Net loans(1, 2) 53,321 6,332 11.88%
Total earning assets $65,349 $7,037 10.77%
Liabilities
NOW and money market
deposits $13,361 $ 414 3.10%
Savings deposits 836 24 2.87%
Time deposits 38,144 2,276 5.97%
Federal funds purchased 161 10 6.21%
Borrowings 5,085 457 8.99%
Total interest-
bearing liabilities $57,587 $3,181 5.52%
Interest spread(3) 5.25
Net interest income $3,856
Net yield on interest earning
assets(4) 5.90%
(1) At December 31, 1995, loans aggregating $411 were on non-accrual
status.
(2) Interest earned on net loans includes $288 in loan fees and loan
service fees. FCC earned $937 in interest income during 1995.
(3) Interest spread is computed by subtracting the average rate, or cost of
funds (5.52%) from the average yield on earning assets (10.77%).
(4) Net yield on interest earning assets is computed by dividing net
interest income ($3,856) by total earning assets ($65,349).
(5) The yield on tax exempt securities is computed by using the tax
equivalent basis.
The following is a presentation of an analysis of the net interest
earnings of GIFH for 1994, with respect to each major category of
interest-earning asset and each major
category of interest-bearing liability.
Year Ended December 31, 1994
(in thousands)
Average
Average
Amount Interest
Yield/Rate
Assets
Tax-exempt securities(5) $466 $19 6.18%
Taxable securities 9,863 476 4.83%
Federal funds sold 497 18 3.62%
Net loans(1, 2) 40,194 4,049 10.07%
Total earning assets $51,020 $4,562 8.96%
Liabilities
NOW and money market
deposits $13,265 $391 2.95%
Savings deposits 805 20 2.48%
Time deposits 27,405 1,196 4.36%
Federal funds purchased 251 12 4.78%
Borrowings 2,632 194 7.37%
Total interest-
bearing liabilities $44,358 $1,813 4.09%
Interest sprea(3) 4.87%
Net interest income $2,749
Net yield on interest earning assets(4) 5.39%
(1) All loans were accruing interest at December 31, 1994.
(2) Interest earned on net loans includes $220 in loan fees and loan
service fees. FCC earned $465 in interest income during 1994.
(3) Interest spread is computed by subtracting the average rate, or cost of
funds (4.09%) from the average yield on earning assets (8.94%).
(4) Net yield on interest earning assets is computed by dividing net
interest income ($2,749) by total earning assets ($51,020).
(5) The yield on tax exempt securities is computed by using the tax
equivalent basis.
4. Rate/Volume Analysis of Net Interest Income.
The following shows the effect on interest income, interest expense and
net interest income due to changes in average balances and rates for the years
therein indicated. The effect of a change in average balances has been
determined by multiplying the average rate in the earlier period by the
difference in average balances between both time periods.
The change in interest due to volume and rate has been allocated in
proportion to the relationship of the absolute dollar amounts of the change in
each.
Year Ended December 31, 1995
Compared to
Year Ended December 31, 1994
Increase (decrease) due to:
Volume Rate Total
Interest earned on:
(in thousands)
Tax-exempt securities $ (4) $ (3) $ (7)
Taxable securities (4) 106 102
Federal funds sold 79 18 97
Net loans 1,472 811 2,283
Total interest income $1,543 $ 932 $2,475
Interest paid on:
NOW and money market
depos its $ 3 $ 20 $ 23
Savings deposits 1 3 4
Time deposits 556 524 1,080
Federal funds purchased (4) 2 (2)
Borrowings 213 50 263
Total interest expense 769 599 1,368
Change in net interest income
$ 774 $333 $1,107
Year Ended December 31, 1994
Compared to
Year Ended December 31, 1993
Increase (decrease) due to:
Volume Rate Total
Interest earned on:
(in thousands)
Tax-exempt securities $18 $-- $18
Taxable securities 112 (23) 89
Federal funds sold (15) 6 (9)
Net loans 1,098 366 1,464
Total interest income $1,213 $349 $1,562
Interest paid on:
NOW and money market
deposits $40 $(18) $22
Savings deposits 7 (1) 6
Time deposits 349 (4) 345
Federal funds purchased 9 1 10
Borrowings 182 1 183
Total interest expense 587 (21) 566
Change in net interest income
$626 $370 $996
5. Deposits Analysis.
The Bank offers a full range of interest-bearing and non-interest
bearing accounts, including commercial and retail checking accounts,
negotiable order of withdrawal ("NOW") accounts, individual retirement
accounts, regular interest-bearing savings accounts and certificates of
deposit with a range of maturity date options. The sources of deposits are
residents, businesses and employees of businesses within the Bank's market
area. Customers are obtained through the personal solicitation of the Bank's
officers and directors, direct mail solicitation and advertisements published
in the local media. From time to time, the Bank purchases large denomination
certificates of deposit from financial institutions located outside of the
Bank's primary area. Generally, this takes place when these funds can be
obtained at rates which are significantly lower than rates the Bank must pay
to obtain deposits locally. At no time do these deposits exceed 15% of total
deposits.
The Bank pays competitive interest rates on time and savings deposits up
to the maximum permitted by law or regulation. In addition, the Bank has
implemented a service charge fee schedule competitive with other financial
institutions in the Bank's market area, covering such matters as maintenance
fees on checking accounts, per item processing fees on checking accounts,
returned check charges and the like.
The following table presents, for the periods indicated, the average
amount of and average rate paid on each of the indicated deposit categories.
Year Ended December 31, 1995
Average Average Rate
Amount Paid
(in thousands)
Deposit Category
Non-interest bearing demand deposits $ 6,047 Not Applicable
NOW and money market deposits 13,361 3.10%
Savings deposits 836 2.87%
Time deposits 38,144 5.97%
Total deposits $58,388 4.65%
Year Ended December 31, 1994
Average Average Rate
Amount Paid
(in thousands)
Deposit Category
Non-interest bearing demand deposits $4,919 Not Applicable
NOW and money market deposits 13,265 2.95%
Savings deposits 805 2.48%
Time deposits 27,405 4.36%
Total deposits $46,394 3.46%
The following table indicates outstanding amounts of time certificates of
deposit of $100,000 or more, and respective maturities, at December 31, 1995.
Time Certificates
of Deposit
(in thousands)
3 months or less $3,630
3 to 6 months 2,540
6 to 12 months 2,505
over 12 months 1,779
Total $10,454
6. Loan Portfolio Analysis.
Loans made by the Bank accounted for approximately 91.6% of the
consolidated loan portfolio at December 31, 1995, and loans made by FCC
accounted for the remaining 8.4%. At December 31, 1994, loans made by the
Bank accounted for approximately 92.75% of the consolidated loan portfolio,
and loans made by FCC accounted for the remaining 7.25%. GIFH engages in a
full complement of lending activities, including commercial,
consumer/installment and real estate loans.
Commercial lending is directed principally towards businesses whose
demands for funds fall within GIFH's legal lending limits and which are
potential deposit customers of the Bank. These loans include loans obtained
for a variety of business purposes, and are made to individual, partnership,
or corporate borrowers. GIFH places particular emphasis on loans to small and
medium sized businesses.
GIFH's consumer loans consist primarily of installment loans to
individuals for personal, family and household purposes, including automobile
loans and pre-approved lines of credit to individuals. This category of loans
includes lines of credit and term loans secured by second mortgages on
residences for a variety of purposes, including home improvements, education
and other personal expenditures.
GIFH's real estate loans consist of residential and commercial first and
second mortgages.
The following table presents various categories of loans contained in
the consolidated Company's loan portfolio as of December 31, 1995 and 1994 and
the total amount of all loans for such periods.
As of December 31,
1995 1994
(in thousands)
Type of Loan
Domestic:
Commercial, financial and
agricultural $17,455 $15,833
Real estate - construction 4,719 2,843
Real estate - mortgage 27,966 22,292
Installment and other
loans to individuals 6,793 4,931
Other 206 --
Subtotal $57,139 $45,899
Allowance for loan
losses and unearned interest (718) (669)
Total (net of allowance) $56,421 $45,230
The following is a presentation of an analysis of maturities of loans
as of December 31, 1995.
Due in Due
Due in one after
one year to five five
or less years years Total
(in thousands)
Commercial, financial
and agricultural $10,161 $4,622 $2,672 $17,455
Real estate - construction 3,989 730 -- 4,719
Total $14,150 $5,352 $2,672 $22,174
In GIFH's experience, some receivables will be paid prior to contractual
maturity and others will be converted, extended or renewed. Therefore, the
tabulation of contractual payments should not be regarded as a forecast of
future cash collections.
The following is an analysis of sensitivities of loans to changes in
interest rates as of December 31, 1995. The figures exclude installment and
other personal loans.
Due in Due in one Due after
one year to five five
or less years years Total
(in thousands)
Type of Loan
Fixed rate loans $ 1,671 $2,313 $ 442 $ 3,861
Variable-rate loans 12,479 3,039 2,230 18,313
To $14,150 $5,352 $2,672 $22,174
The following table presents information regarding non-accrual, past due
and restructured loans as of December 31, 1995 and 1994:
As of December 31,
1995 1994
(in thousands)
Loans accounted for on a non-accrual basis:
Amount $411 $--
Accruing loans which are contractually past due 90 days or more
as to principal and interest:
Amount $8 $--
Loans defined as "troubled debt restructurings":
Amount $-- $--
Loans now current, but for which there are serious doubts as to
the borrower's ability to comply with existing terms:
Amount $483 $1,337
As of December 31, 1995, there were no loans classified for
regulatory purposes as doubtful, substandard or special mention that have not
been disclosed in the above table, which:
(i) represent or result from trends or uncertainties which
management reasonably expects will materially impact future
operating results, liquidity or capital resources; or
(ii) represent material credits about which management possesses
knowledge, causing them to doubt receipt of payment in
accordance with present loan repayment terms.
At December 31, 1995, GIFH had loans with aggregate balances of $483
thousand for which payments presently are current. The borrowers for those
loans, however, are experiencing financial difficulties. These loans, which
are on the "watch" list, are subject to constant management attention and
their classification is reviewed on a quarterly basis.
Loans are generally placed on non-accrual status when principal or
interest becomes 90 days past due, or when payment in full is not anticipated.
When a loan is placed on non-accrual status, interest accrued and not received
in the current year is reversed against the current year's income. All
interest accrued in prior years and still unpaid is charged against the
allowance for loan losses. Cash receipts on non-accrual loans are applied to
reduce principal, rather than to principal and interest as in accruing loans.
The balance classified as non-accruing represents the net realizable value of
the account, which is the most realistic estimate of the amount GIFH expects
to collect in final settlement. If the account balance exceeds the estimated
net realizable value, the excess is written-off at the time this determination
is made.
At December 31, 1995, loans amounting to $411 were on non-accrual
status. With the exception of the loans discussed above, there are no other
loans which are not herein disclosed about which management possesses
knowledge causing them to doubt receipt of payment in accordance with present
loan repayment terms.
7. Summary of Loan Loss Experience.
An analysis of the Bank's loss experience, including a breakdown for
possible loan losses, is furnished in the following table for the years ended
December 31, 1995 and 1994.
Year Ended December 31,
1995 1994
(in thousands)
Balance at beginning of period $ 656 $476
Charge-offs (338) (44)
Recoveries 18 3
Net charge-offs (320) (41)
Provision charged to operations 382 221
Balance at end of period $718 $656
Total loans at end of year $57,159 $45,900
Ratio of allowance for loan losses to total loans
outstanding during the period 1.26% 1.43%
Rato of net charge-offs to average loans
outstanding during the period. .60% .10%
At December 31, 1995 and 1994, the allowance was allocated as follows.
Percent of Percent oF
Loans in Each Loans in Each
Category to Category to
Amount Total Loans Amount Total Loans
1995 1994
(in thousands)
Commercial, financial
and agricultural $269 30.5% $285 34.5%
Real estate - const 60 8.3% 40 6.2%
Real estate - mortgage 288 48.9% 250 48.6%
Installment and other
loans to individuals 65 11.9% 50 10.7%
Unallocated 6 .4% 31 --
Other 30 -- --
Total $718 100.0% $656 100.0%
8. Loan Loss Reserve.
In considering the adequacy of GIFH's allowance for possible loan
losses, management has focused on the fact that as of December 31, 1995, 30.5%
of outstanding loans are in the category of commercial and construction loans.
Management generally considers commercial loans to have a greater risk than
other categories of loans in GIFH's loan portfolio. At December 31, 1995,
91.0% of these commercial and construction loans, however, were made on a
secured basis. The related collateral consists primarily of improved
commercial real estate and equipment. Thus, management believes that the
secured condition of the preponderant portion of its commercial loan portfolio
greatly reduces any risk of loss inherently present in commercial loans.
GIFH's consumer loan portfolio is also secured. At December 31, 1995,
the majority of GIFH's consumer loans were secured by collateral primarily
consisting of automobiles, boats and second mortgages on real estate.
Management believes that these loans involve less risk than other categories
of loans.
Real estate mortgage loans constitute 48.9% of outstanding loans.
Management does not consider these loans to have undue credit risk because
these loans are generally secured and represent commercial and residential
real estate mortgages for which the Bank will lend a maximum of 80% of the
collateral's appraised value.
The allowance for loan losses reflects an amount which, in management's
judgment, is adequate to provide for potential loan losses. Management's
determination of the proper level of the allowance for loan losses is based on
an ongoing analysis of the credit quality and loss potential of the portfolio,
actual loan loss experience relative to the size and characteristics of the
portfolio, changes in composition and risk characteristics of the portfolio
and anticipated impacts of national and regional economic policies and
conditions. Senior management and the Board of Directors of the Bank review
the adequacy of the allowance for loan losses on a monthly basis.
Management considers the year-end allowance appropriate and adequate to
cover possible losses in the loan portfolio; however, management's judgment is
based upon a number of assumptions about future events, which are believed to
be reasonable, but which may or may not prove valid. Thus, there can be no
assurance that charge-offs in future periods will not exceed the allowance for
loan losses or that additional increases in the loan loss allowance will not
be required.
9. Investments.
As of December 31, 1995, investment securities comprised approximately
10.3% of GIFH's assets and net loans comprised approximately 65.2% of GIFH's
assets. The Bank invests primarily in obligations of the United States or
obligations guaranteed as to principal and interest by the United States, as
well as in mortgage-backed securities. In addition, the Bank enters into
Federal Funds transactions with its principal correspondent banks, and acts as
a net seller of such funds. The sale of Federal Funds amounts to a short-term
loan from the Bank to another bank.
The following table presents, for the years ended December 31, 1995 and
1994, the approximate market value of GIFH's investments, classified by
category and by whether they are considered available-for-sale or
held-to-maturity (in thousands):
Investment Category
Available-for-Sale: December 31,
1995 1994
Obligations of U.S. Treasury and other
U.S. Agencies $4,958 $4,954
Mortgage-Backed Securities 843 1,367
Federal Home Loan Bank Stock 600 152
State, County and Municipal Securities
225 459
Total $6,626 $6,932
Investment Category December 31,
1995 1994
Held-to-Maturity:
Obligations of U.S. Treasury and
other U.S. Agencies $ 250 $1,736
Mortgage-Backed Securities 2,024 2,444
Total $2,274 $4,180
The following table indicates, for the year ended December 31, 1995,
the amount of investments, appropriately classified, due in (i) one year or
less, (ii) one to five years, (iii) five to ten years, and (iv) over ten
years.
Investment Category
Available-for-Sale: AmountAverage Weighted Yield
Obligations of U.S. Treasury and other
U.S. Agencies
0 to 1 year $1,696 5.30%
Over 1 through 5 years 3,262 5.48%
Mortgage-Backed Securities:
Over 1 through 5 years 169 5.44%
Over 5 through 10 years 204 5.47%
Over 10 years 470 6.52%
State, County and Municipal Securities:
0 to 1 year 225 5.20%
Federal Home Loan Bank Stock:
No Maturity 600 6.00%
Total $6,626 5.52%
Investment Category
Held-to-Maturity: AmountAverage Weighted Yield
Obligations of U.S. Treasury and
other U.S. Agencies
Over 5 through 10 years $ 250 6.40%
Mortgage - Backed Securities:
Over 1 through 5 years 527 5.74%
Over 5 through 10 years 500 5.40%
Over 10 years 997 5.17%
Total $2,274 5.49%
10. Return on Equity and Assets.
Return on average consolidated assets and average consolidated equity
for the years ended December 31, 1995 and 1994 are as follows:
1995 1994
Return on average assets .02% .45%
Return on average equity .14% 4.92%
Equity to assets ratio 12.93% 9.16%
Dividend payout ratio1 --% - - %
11. Asset /Liability Management.
It is the objective of the Bank to manage assets and liabilities to
provide a satisfactory, consistent level of profitability within the framework
of established cash, loan investment, borrowing and capital policies. Certain
of the officers of the Bank are responsible for monitoring polices and
procedures that are designed to ensure acceptable composition of the
asset/liability mix, stability and leverage of all sources of funds while
adhering to prudent banking practices. It is the overall philosophy of
management to support asset growth primarily through growth of core deposits
of all categories made by individuals, partnerships and corporations.
Management of the Bank seeks to invest the largest portion of the Bank's
assets in commercial, consumer and real estate loans.
The Bank's asset/liability mix is monitored on a daily basis. A monthly
report reflecting interest-sensitive assets and interest-sensitive liabilities
is prepared and presented to the Bank's Board of Directors. The objective of
this policy is to control interest-sensitive assets and liabilities so as to
minimize the impact of substantial movements in interest rates on the Bank's
earnings.
12. Employees.
As of March 1, 1996, GIFH and its subsidiaries employed 92 full-time
personnel and 6 part-time personnel. Management believes that its employee
relations are good. There are no collective bargaining agreements covering
any of the employees.
1 Cash dividends were not declared in either 1995 or 1994.
13. Supervision and Regulations.
GIFH and its subsidiaries operate in a highly regulated environment, and
their business activities are governed by statute, regulation and
administrative policies. The business activities of GIFH and the Bank are
supervised by the Federal Reserve Board, the Federal Deposit Insurance
Corporation ("FDIC"), and the Georgia Department of Banking and Finance (the
"Department").
GIFH is regulated by the Federal Reserve Board under the federal Bank
Holding Company Act of 1956, which requires every bank holding company to
obtain the prior approval of the Federal Reserve Board before acquiring more
than 5% of the voting shares of any bank or all or substantially all of the
assets of a bank, and before merging or consolidating with another bank
holding company. The Federal Reserve Board (pursuant to regulation and
published statements) has maintained that a bank holding company must serve as
a source of financial strength to its subsidiary banks. In adhering to the
Federal Reserve Board policy, GIFH may be required to provide financial
support to a subsidiary bank at a time when, absent such Federal Reserve Board
policy, GIFH may not deem it advisable to provide such assistance.
The Federal Reserve Board also monitors the financial performance and
prospects of FBMC and FCC with an inspection process the purpose of which is
to ascertain whether these non-banking subsidiaries enhance or detract from
GIFH's ability to serve as a source of strength for the Bank. There is
otherwise no federal regulation of the activities of FBMC and FCC.
A bank holding company is generally prohibited from acquiring control of
any company which is not a bank and from engaging in any business other than
the business of banking or managing and controlling banks. However, there are
certain activities which have been identified by the Federal Reserve Board to
be so closely related to banking as to be a proper incident thereto and thus
permissible for bank holding companies, including the following activities:
acting as investment or financial advisor to subsidiaries and certain outside
companies; leasing personal and real property or acting as a broker with
respect thereto; providing management consulting advice to nonaffiliated banks
and non-bank depository institutions; operating collection agencies and credit
bureaus; acting as a futures commission merchant; providing data processing
and data transmission services; acting as an insurance agent or underwriter
with respect to limited types of insurance; performing real estate appraisals;
arranging commercial real estate equity financing; providing securities
brokerage services; and underwriting and dealing in obligations of the United
States, the states and their political subdivisions.
Prior to September 29, 1995, interstate expansion of bank holding
companies was prohibited, unless such acquisition was specifically authorized
by a statute of the state in which the target bank was located. However, the
Riegle-Neal Act, which was adopted by the United States Congress on September
29, 1994, has, as hereinafter described, significantly eased the prior
restrictions on the interstate acquisition of banks by bank holding companies.
Pursuant to the Riegle-Neal Act, effective September 29, 1995, an
adequately capitalized and adequately managed bank holding company may acquire
a bank across state lines, without regard to whether such acquisition is
permissible under state law. A bank holding company is considered to be
"adequately capitalized" if it meets all applicable federal regulatory capital
standards.
While the Riegle-Neal Act precludes a state from entirely insulating its
banks from acquisition by an out-of-state holding company, a state may still
provide that a bank may not be acquired by an out-of-state company unless the
bank has been in existence for a specified number of years, not to exceed five
years. Additionally, the Federal Reserve Board is directed not to approve an
application for the acquisition of a bank across state lines if (I) the
applicant bank holding company, including all affiliated insured depository
institutions, controls, or after the acquisition would control, more than ten
percent of the total amount of deposits of all insured depository institutions
in the United States (the "ten percent concentration limit") or (ii) the
acquisition would result in the holding company controlling thirty percent or
more of the total deposits of insured depository institutions in any state in
which the holding company controlled a bank or branch immediately prior to the
acquisition (the "thirty percent concentration limit"). States may waive the
thirty percent concentration limit, or may make same more or less restrictive,
so long as they do not discriminate against out-of-state bank holding
companies.
The Riegle-Neal Act also provides that, beginning on June 1, 1997, banks
located in different states may merge and operate the resulting institution as
a bank with interstate branches. However, a state may (i) prevent interstate
branching through mergers by passing a law prior to June 1, 1997 that
expressly prohibits mergers involving out-of-state banks or (ii) permit such
merger transactions prior to June 1, 1997. Under the Riegle-Neal Act, an
interstate merger transaction may involve the acquisition of a branch of an
insured bank without the acquisition of the bank itself, but only if the law
of the state in which the branch is located permits this type of transaction.
Under the Riegle-Neal Act, a state may impose certain conditions on a
branch of an out-of-state bank resulting from an interstate merger so long as
such conditions do not have the effect of discriminating against out-of-state
banks or bank holding companies, other than on the basis of a requirement of
nationwide reciprocal treatment. The ten percent concentration limit and the
thirty percent concentration limit described above, as well as the rights of
the states to modify or waive the thirty percent concentration limit, apply to
interstate bank mergers in the same manner as they apply to the acquisition of
out-of-state banks. A bank resulting from an interstate merger transaction
may retain and operate any office that any bank involved in the transaction
was operating immediately before the transaction. After completion of the
transaction, the resulting bank may establish or acquire additional branches
at any location where any bank involved in the transaction could have
established or acquired a branch. The Riegle-Neal Act also provides that the
appropriate federal banking agency may approve an application by a bank to
establish and operate an interstate branch in any state that has in effect a
law that expressly permits all out-of-state banks to establish and operate
such a branch.
As of March 28, 1996, the Georgia legislature had not enacted any
legislation directly responding to the Riegle-Neal Act.
GIFH is also regulated by the Department under the Georgia Bank Holding
Company Act, which requires every Georgia bank holding company to obtain the
prior approval of the Department before acquiring more than 5% of the voting
shares of any bank or all or substantially all of the assets of a bank, or
before merging or consolidating with any other bank holding company. A
Georgia bank holding company is generally prohibited from acquiring ownership
or control of 5% or more of the voting shares of a bank unless the bank being
acquired is either a bank for purposes of the federal Bank Holding Company Act
of 1956, or a federal or state savings and loan association or savings bank or
federal savings bank whose deposits are insured by the Federal Savings and
Loan Insurance Corporation and such bank has been in existence and
continuously operating as a bank for a period of five years or more prior to
the date of application to the Department for approval of such acquisition.
On March 16, 1994, the legislature of the State of Georgia enacted an
interstate banking statute which, effective July 1995, replaced the regional
interstate banking statute previously governing acquisitions of and by
Georgia-based bank holding companies. Under the new statute, acquisitions of
and by Georgia banks and bank holding companies are, under certain
circumstances and on a reciprocal basis, allowed to take place in all fifty
states, as opposed to only the twelve states which were previously covered by
the regional interstate banking statute. The regional interstate legislation
has had the effect, and the national interstate legislation is likely to have
the effect, of increasing competition among financial institutions in GIFH's
market area and in the State of Georgia generally.
As a state-chartered bank, the Bank is examined and regulated by the
Department. Pursuant to regulations adopted by the Department, the Bank must
have the approval of the Commissioner to pay cash dividends, unless at the
time of such payment (i) the total classified assets at the most recent
examination of such bank do not exceed 80% of the equity capital as reflected
by such examination; (ii) the aggregate amount of dividends declared or
anticipated to be declared in the calendar year does not exceed 50% of the net
profits, after taxes but before dividends, for the previous calendar year; and
(iii) the ratio of equity capital to adjusted total assets is not less than
6%. The Bank is also subject to the Georgia banking and usury laws
restricting the amount of interest which it may charge in making loans or
other extensions of credit.
With respect to expansion, the Bank is currently prohibited from
establishing branch offices or facilities outside of the county in which its
main office is located, except (i) in adjacent counties in certain situations,
or (ii) by means of merger or consolidation with a bank which has been in
existence for at least five years. In addition, in the case of a merger or
consolidation, the acquiring bank must have been in existence for at least 24
months prior to the merger. However, the Georgia legislature has recently
adopted legislation which, if signed into law by the Governor of the State of
Georgia, will, effective July 1, 1996, permit the subsidiary bank(s) of any
bank holding company then engaged in the banking business in the State of
Georgia to establish, de novo, upon receipt of required regulatory approval,
an aggregate of up to three additional branch banks in any county within the
State of Georgia. Effective July 1, 1998, this same legislation will permit,
with required regulatory approval, the establishment of de novo branches in an
unlimited number of counties within the State of Georgia by the subsidiary
bank(s) of bank holding companies then engaged in the banking business in the
State of Georgia. This legislation, if enacted into law, could result in
increased competition in the Bank's market area. Although it is anticipated
that the Governor of the State of Georgia will approve the above-described
legislation, as of March 28, 1996, he had not signed same into law.
Both GIFH and the Bank are subject to regulatory capital requirements
imposed by the Federal Reserve Board and the FDIC. The capital adequacy
guidelines issued by the Federal Reserve Board are applied to bank holding
companies on a consolidated basis with the banks owned by the holding company.
The FDIC's risk-based capital guidelines apply directly to a state bank
regardless of whether it is a subsidiary of a bank holding company. Under
both agencies' requirements, banking organizations must have capital (as
defined in the rules) equivalent to 8% of risk-weighted assets. The risk
weights assigned to assets are based primarily on credit risk. For example,
securities with an unconditional guarantee by the United States government are
assigned the least risk category. A risk weight of 50% is assigned to loans
secured by owner-occupied one-to-four family residential mortgages. The
aggregate amount of assets assigned to each risk category is multiplied by the
risk weight assigned to that category to determine the weighted values, which
are added together to determine total risk-weighted assets.
Both the Federal Reserve Board and the FDIC also require the maintenance
of minimum capital leverage ratios to be used in tandem with the risk-based
guidelines in assessing the overall capital adequacy of banks and bank holding
companies. Under these rules, banking institutions are required to maintain a
ratio of "Tier 1" capital to total assets (net of goodwill) of 3%. Tier 1
capital includes common stockholders' equity, noncumulative perpetual
preferred stock, and minority interests in the equity accounts of consolidated
subsidiaries.
As of December 31, 1995, GIFH maintained a Tier 1 and a total risk-based
capital ratio of 15.7% and 16.7%, respectively. See also the discussion under
"Capital Adequacy" in Item 6 below.
Both the risk-based capital guidelines and the leverage ratio are
minimum requirements, applicable only to top-rated banking institutions.
Institutions operating at or near these levels are expected to have well
diversified risk, excellent asset quality, high liquidity, good earnings and,
in general, have to be considered strong banking organizations, rated
Composite 1 under the CAMEL rating system for banks or the BOPEC rating system
for bank holding companies. Institutions with lower ratings and institutions
with high levels of risk or experiencing or anticipating significant growth
would be expected to maintain ratios 100 to 200 basis points above the stated
minimums.
The Federal Reserve Board and the FDIC have proposed a revision to their
risk-based capital guidelines to further ensure that those guidelines take
adequate account of interest rate risk. Interest rate risk is the adverse
effect that changes in market interest rates may have on a bank's financial
condition and is inherent to the business of banking. The agencies have
proposed two alternative methods for assessing a bank's capital adequacy for
interest rate risk. Under the first approach, the banking agencies would
establish minimum capital standards for interest rate risk based on either a
supervisory model or the bank's internal model of measuring risk.
Institutions would be required to have capital sufficient to cover the amount
of measured exposure in excess of the threshold level. The proposed threshold
level is a decline in net economic value equal to 1.0 percent of assets.
Under the second approach, a minimum capital requirement for interest rate
risk would not be set. Instead, examiners would consider results of
quantitative measures of interest rate risk along with other factors in
evaluating an institution's capital adequacy for interest rate risk.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"Act"), enacted on December 19, 1991, provided for a number of reforms
relating to the safety and soundness of the deposit insurance system,
supervision of domestic and foreign depository institutions and improvement of
accounting standards. One aspect of the Act is the requirement that banks
will have to meet certain safety and soundness standards. In order to comply
with the Act, the Federal Reserve Board and the FDIC implemented regulations
defining operational and managerial standards relating to internal controls,
loan documentation, credit underwriting, interest rate exposure, asset growth,
director and officer compensation, asset quality, earnings and stock
valuation.
The scope of regulation and permissible activities of GIFH and its
subsidiaries is subject to change by future federal and state legislation.
14. Monetary Policies.
The results of operations of the Bank are affected by credit policies of
monetary authorities, particularly the Federal Reserve Board. The instruments
of monetary policy employed by the Federal Reserve Board include open market
operations in U.S. Government securities, changes in the discount rate on
member bank borrowings, changes in reserve requirements against member bank
deposits and limitations on interest rates which member banks may pay on time
and savings deposits. In view of the changing conditions in the national
economy and the money markets, as well as the effect of action by monetary and
fiscal authorities, including the Federal Reserve Board, no prediction can be
made as to possible future changes in interest rates, deposit levels, loan
demand or the business and earnings of the Bank.
Item 2. Description of Property.
GIFH's executive officers are housed in a two-story, free standing
building which is part of an office condominium complex at 200 Plantation
Chase, St. Simons Island, Georgia 31522. GIFH purchased the building in
February, 1996. The building is subject to a mortgage in favor of NationsBank
to secure a loan from NationsBank to GIFH in the original principal amount of
$280,000. GIFH intends to use the building only as executive offices for
itself and to hold it for investment.
The Bank owns the building which houses its main branch and support
service facilities. It is located at 2812 Cypress Mill Road, Brunswick,
Georgia 31521, adjacent to the Brunswick Mall. The one and one-half story
free standing structure is configured for retail banking operations as well as
for executive offices for officers of the Bank. The Bank also owns a building
on St. Simons Island from which it operates a full service branch and provides
space on a month-to-month basis for FBMC's corporate offices and an operating
branch office of FBMC. The building is located at 3811 Frederica Road, St.
Simons Island, Georgia 31522.
FCC's corporate offices are located at 3423 Fourth Street, Building 5,
Unit B, Brunswick, Georgia 31520. Those offices are subject to a three-year
lease ending in August, 1998. Both FBMC and FCC conduct business out of
various office/retail spaces on either a month-to-month basis or subject to
term leases. All leasing arrangements are commercially reasonable, and,
except for FBMC's Frederica Road facility which it leases from the Bank, all
facilities are leased from non-affiliated third parties. The locations and
lease periods are as follows:
FBMC
Address Term End of Current Term
1034-A Young Harris Highway, Blairsville, GA 30512
one year August 1996
6401 Poplar Avenue, Suite 324, Memphis, TN 38119
one year December 1996
349 Mall Boulevard, Suite 217, Savannah, GA 31406
monthly month-to-month
3811 Frederica Road, St. Simons Island, GA 31522
monthly month-to-month
FCC
Address Term End of Current Term
4999 Altama Avenue, Unit #1, Brunswick, GA 31525
three year August 1996
2475 Highway 40 East, Suite 103, Kingsland, GA 31548
three year May 1997
6409 Abercorn Street, Suites A & B-1, Savannah, GA 31405
five year May 2000
2507-C Plant Avenue, Waycross, GA 31501
one year July 1996
4015-I Washington Road, Martinez, GA 30907
monthly month-to-month
Management of GIFH believes that all of its properties are suitable and
adequate for their intended purposes, and that GIFH has adequate insurance in
place as would be considered prudent for their uses. Management further
believes that all of the properties leased for terms, as well as those
occupied on a month-to-month basis, could be replaced with other suitable and
adequate facilities available from time to time in the market place.
Item 3. Legal Proceedings.
On March 19, 1996, GIFH executed a Memorandum of Undertaking (the
"Memorandum") with the Commissioner of Securities of the State of Georgia (the
"Commissioner"). The Memorandum constituted a response by GIFH, which
response has been accepted by the Commissioner to the contention by the
Commissioner to the effect that a contest conducted by GIFH during 1994-1995,
designed to encourage certain employees of GIFH and its subsidaries to help in
the success of the Secondary Offering, "created an environment where
participating employees solicited one or more sales...in a way which might
have violated Georgia statutes and/or rules and regulations relating to
licensing of securities salesmen". (Emphasis added). In the Memorandum, GIFH
denied that any such violations have occurred and agreed "not to conduct
similar sales contests in the future." As part of its agreement to the
Memorandum, GIFG paid $2,500 to reimburse the Commissioner for a portion of
its costs incurred in this matter.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security-holders during the fourth
quarter of the fiscal year covered by this report.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
As of March 1, 1996, there was no established market in which shares of
GIFH's Common Stock were regularly traded, nor was there any uniformly quoted
prices for such shares. As of March 1, 1996, 2,336,982 shares of GIFH's
Common Stock (including shares of Common Stock held in the form of Units) were
issued and outstanding to 1,054 holders of record.
GIFH has not paid dividends since its inception. Under the provisions
of the Financial Institutions Code of Georgia, the Bank may not pay dividends
in any year unless
(i) the aggregate amount of dividends declared in the calendar year does not
exceed 50% of the net profits, after taxes but before dividends, for the
previous calendar year;
(ii) total classified assets at the Bank's most recent examination do not
exceed 80% of the Bank's equity capital as reflected at such
examination; and
(iii) the Bank's ratio of equity capital to adjusted total assets is not less
than six percent.
Thus, to the extent the source of dividends to be paid by GIFH is
dividends from the Bank, GIFH may continue not to pay dividends in the near
future.
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Discussion of the financial condition and results of operations of GIFH
should be read in conjunction with the GIFH's consolidated financial
statements and related notes which are included elsewhere herein.
Results of Operations
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
For the years ended December 31, 1995 and 1994, net income amounted to
$12,897 and $246,222 respectively. For 1995 and 1994, income per share of
common stock amounted to $.01 and $.18 respectively.
GIFH's average annual earning assets increased from $51.0 million at
December 31, 1994 to $65.3 million at December 31, 1995, representing an
increase of $14.3 million, or 28.0%. Below are the various components of
earning assets for the periods indicated:
December 31,
1995 1994
(in thousands)
Federal funds sold $ 1,934 $ 497
Securities 10,094 10,329
Net loans 53,321 40,194
Total earning assets $65,349 $51,020
As a consequence of the increase in earning assets, the net interest
income also increased from $2.7 million for the year ended December 31, 1994
to $3.8 million for the year ended December 31, 1995. Additionally, the net
yield on earning assets increased from 5.39% for the year ended December 31,
1994 to 5.90% for the year ended December 31, 1995. Below are the various
components of interest income and expense, as well as their yield/costs for
the periods indicated:
Years Ended
December 31, 1995 December 31, 1994
Interest Yield Interest Yield
Income/expense Cost Income/expense Cost
Interest income:
Federal funds sold $ 115 5.95% $ 18 3.62%
Securities 590 5.87 495 4.89
Loans 6,332 11.88 4,049 10.07
Total $7,037 10.77% $4,562 $8.96%
Interest expense:
NOW and money market
deposits $ 414 3.10% $ 391 2.95%
Savings Deposits 24 2.87 20 2.48
Time Deposits 2,276 5.97 1,196 4.36
Borrowings 467 8.90 206 7.22
Total $3,181 5.52% $1,813 4.09%
Net interest income $3,856 $2,749
Net yield on earning assets 5.90% 5.39%
Presented below is a brief description of the performance of each
subsidiary of GIFH.
GIFH's original subsidiary, the Bank, increased its profits from
$454,507 in 1994 to $626,162 in 1995, an increase of 37.8%.
During 1995, FBMC revised and expanded its business to include: (i) the
underwriting and funding of mortgage loans from its own offices; (ii) the
underwriting and funding of mortgage loans which originated through other
mortgage brokers; (iii) the purchasing, processing, underwriting and funding
of mortgage loans originated elsewhere; and (iv) the making of funds available
to other mortgage lenders through warehouse lines of credit. Two new offices
were established during 1995 to accommodate FBMC's expansion in activities,
resulting in a net increase in losses from $(90,920) to $(381,833). Below is
pertinent financial information for the years ended December 31, 1995 and
1994.
December 31,
1995 1994
Total revenues $ 525,075 $224,317
Expenses:
Salaries and benefits $ 392,163 $132,903
Commissions paid 132,649 83,213
Other expenses 382,096 99,121
Total expenses $ 906,908 $315,237
Net (loss) $(381,833) $(90,920)
During 1995, FCC established two additional offices, bringing to four
the number of branches it now operates in Southeast Georgia. Net loans grew
from $3.3 million at December 31, 1994 to $5.4 million at December 31, 1995, a
67.4% annual growth rate. To fund the growth in loans, FCC obtained an $8.5
million line of credit with BankAmerica Business Credit Corporation.
Additionally, FCC has a $3.0 million line of credit with its parent company.
The cost of establishing these two additional offices, which was incurred in
the second half of 1995, is reflected in the loss of $(185,404) compared with
a loss of $(42,673) in the previous year. Below is pertinent financial
information for the years ended December 31, 1995 and 1994.
December 31,
1995 1994
Total revenues $1,021,923 $529,311
Expenses:
Salaries and benefits $ 375,695 $206,617
Interest expense 395,999 162,132
Provision for loan losses 125,007 60,006
Other expenses 310,626 143,229
Total expenses $1,207,327 $571,984
Net (loss) $ (185,404) $(42,673)
Net Interest Income
GIFH's results of operations are determined by its ability to manage
effectively interest income and expense, to minimize loan and investment
losses, to generate non-interest income and to control non-interest expense.
Since interest rates are determined by market forces and economic conditions
beyond the control of GIFH, the ability to generate net interest income is
dependent upon GIFH's ability to maintain an adequate spread between the rate
earned on earning assets and the rate paid on interest-bearing liabilities,
such as deposits and borrowings. Thus, net interest income is the key
performance measure of income.
GIFH's net interest income for 1995 was $3,856,073 as compared to
$2,749,016 for 1994. Average yields on earning assets were 10.77% and 8.96%
for the years ended December 31, 1995 and 1994, respectively. The average
costs of funds for 1995 increased to 5.52% from the 1994 cost of 4.09%. The
net interest yield is computed by subtracting interest expense from interest
income and dividing the resulting figure by average interest-earning assets.
Net interest yields for the years ended December 31, 1995 and 1994 amounted to
5.90% and 5.39%, respectively. The increase in net interest yield is
primarily due to the fact that the yield on earning assets grew at a faster
rate than the growth in interest expense. Net interest income for 1995 as
compared to 1994, increased by $1,107,057. The increase is due to two
factors: (i) the growth in average annual earning assets from $51.0 million
in 1994 to $65.3 million in 1995; and (ii) a growth rate of the yield on
earning assets outpaced the growth rate of the cost of funds.
Non-Interest Income
Non-interest income for the years ended December 31, 1995 and 1994,
amounted to $856,981 and $624,361, respectively. As a percentage of average
assets, non-interest income increased from 1.14% in 1994 to 1.16% in 1995.
The following table summarizes the major components of non-interest
income for the periods therein indicated:
Non-Interest Income
Years Ended December 31,
1995 1994
Fee income from FBMC $391,202 $224,317
Service fees on deposit accounts 378,930 288,258
(Loss) on sale of securities (2,932) - -
Insurance commissions 81,682 65,191
Miscellaneous, other 8,099 46,595
Total non-interest income $856,981 $624,361
Non-Interest Expense
Non-interest expense increased from $2,678,438 during 1994 to $4,305,172
in 1995. The increase in non-interest expense is primarily due to the
increase in staff and other overhead related to the expansion in each of
GIFH's subsidiaries in the second half of 1995. As a percent of total average
annual assets, non-interest expense increased from 4.91% in 1994 to 5.83% in
1995. Below are the components of non-interest expense for the years 1995 and
1994.
Non-Interest Expense
Years Ended December 31,
1995 1994
Salaries and other
personnel benefits $2,190,291 $1,367,171
Advertising and business development 198,601 124,877
Depreciation, amortization 169,507 90,661
Lease expense 191,110 119,599
Other expenses 1,555,663 976,130
Total non-interest expense $4,305,172 $2,678,438
For the year ended December 31, 1995, the allowance for loan losses
increased from $656,231 to $718,057. The allowance for loan losses as a
percent of gross loans, however, declined from 1.43% at December 31, 1994 to
1.26% at December 31, 1995. As of December 31, 1995, management considers the
allowance for loan losses to be adequate 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.
Liquidity and Interest Rate Sensitivity
Net interest income, GIFH's primary source of earnings, fluctuates with
significant interest rate movements. To lessen the impact of these margin
swings, the balance sheet should be structured so that repricing opportunities
exist for both assets and liabilities in roughly equivalent amounts at
approximately the same time intervals. Imbalances in these repricing
opportunities at any point in time constitute interest rate sensitivity.
Interest rate sensitivity refers to the responsiveness of interest-bearing
assets and liabilities to changes in market interest rates. The rate
sensitive position, or gap, is the difference in the volume of rate sensitive
assets and liabilities, at a given time interval. The general objective of
gap management is to manage actively rate sensitive assets and liabilities so
as to reduce the impact of interest rate fluctuations on the net interest
margin. Management generally attempts to maintain a balance between rate
sensitive assets and liabilities as the exposure period is lengthened to
minimize GIFH's overall interest rate risks. The asset mix of the balance
sheet is continually evaluated in terms of several variables: yield, credit
quality, appropriate funding sources and liquidity. To effectively manage the
liability mix of the balance sheet, one must focus on expanding the various
funding sources. The interest rate sensitivity position at year-end 1995 is
presented below. Since all interest rates and yields do not adjust at the
same velocity, the gap is only a general indicator of rate sensitivity.
December 31, 1995
(To the Nearest Thousand)
After After After
three six one year
Within months months but within After
three but within but within five five
months six months one year years years Total
EARNING ASSETS
Loans available
-for-sale $ 7,842 $ -- $ -- $ - $ -- $ 7,842
Loans 11,159 5,460 12,377 16,400 11,743 57,139
US Government and
agency securities 1,125 498 298 3,958 3,021 8,900
Federal funds sold
5,010 -- -- -- -- 5,010
Total earning assets
$25,136 $5,958 $12,675 $20,358 $14,764 $78,891
SUPPORTING SOURCES OF FUNDS
Borrowings
$ 42 $ -- $ 398$ -- $ 6,595 $ 7,035
Interest-bearing
demand deposits and
savings
13,263 -- -- -- -- 13,263
Certificates,
Less than $100M
10,762 5,281 12,832 8,070 -- 36,945
Certificates, $100M
and over
3,630 2,540 2,505 1,779 -- 10,454
Total interest-
bearing liabilities
$27,697 $7,821 $15,735 $16,444 $ -- $67,697
Interest rate
sensitivity gap
$(2,561) $(1,863) $(3,060) $ 3,914 $14,764 $11,194
Cumulative gap
(2,561) (4,424) (7,484) (3,570) 11,194 11,194
Interest rate
sensitivity gap
ratio
.91 .76 .81 1.24 -- 1.17
Cumulative interest
rate sensitivity
gap ratio
.91 .88 .85 .95 1.17 1.17
As evidenced by the above table, GIFH is liability sensitive from zero
to five years and asset
sensitive thereafter. In a declining interest rate environment, a liability
sensitive position (a gap ratio
of less than 1.0) is generally more advantageous since liabilities are
repriced sooner than assets.
Conversely, in a rising interest rate environment, an asset sensitive
position (a gap ratio over 1.0) is
generally more advantageous, as earning assets are repriced sooner than
liabilities. With respect to GIFH,
an increase in interest rates will result in lower earnings for the first
five years and higher earnings
thereafter. Conversely, a decline in interest rates will increase income
for the first five years and
reduce it for the period after five years. This, however, assumes
that all other factors affecting income
remain constant.
<PAGE>
As GIFH continues to grow, management will continuously structure its
rate sensitivity position to best hedge against rapidly rising or falling
interest rates. The relevant Asset/Liability committees meet on a quarterly
basis and develop management's strategy for the upcoming period. Such
strategy includes anticipations of future interest rate movements.
Liquidity represents the ability to provide steady sources of funds for
loan commitments and investment activities and to maintain sufficient funds to
cover deposit withdrawals and payment of debt and operating obligations.
These funds can be obtained by converting assets to cash or by attracting new
deposits. GIFH's primary source of liquidity comes from its ability to
maintain and increase deposits in the Bank. Deposits grew by $17.9 million in
1995. Below are the pertinent liquidity balances and ratios for the years
ended December 31, 1995 and 1994.
December, 31
1995 1994
Cash and cash equivalents $8,577,228 $1,822,966
Loans available-for-sale $7,842,230 - -
CDs, over $100,000 to
total deposits ratio 15.4% 16.9%
Loan to deposit ratio 84.0% 91.6%
Securities to total assets ratio 10.3% 18.4%
Brokered deposits $1,373,000 $3,966,000
Large denomination certificates during 1995 have increased approximately
$2.0 million, but reliance on such certificates to fund normal banking
operations has declined in relation to other sources of funds. At December
31, 1995 and 1994, large denomination certificates accounted for 15.4% and
16.9%, respectively, of total deposits. Large denomination CDs are generally
more volatile than other deposits. As a result, management continually
monitors the competitiveness of the rates it pays on its large denomination
CDs and periodically adjusts its rates in accordance with market demands.
Significant withdrawals of large denomination CDs may have a material adverse
effect on the Bank's liquidity. Management believes that since a majority of
the above certificates were obtained from Bank customers residing in Glynn
County, Georgia, the volatility of such deposits is lower than if such
deposits were obtained from depositors residing outside of Glynn County, as
outside depositors are more sensitive to interest rate fluctuations.
Securities, particularly securities available-for-sale, provide a
secondary source of liquidity. Approximately $1.9 million of the $8.9 million
in the Bank's securities portfolio are scheduled to mature during 1996.
Moreover, mortgage-backed securities are reducing in principal balance
monthly, thus providing a steady source of liquidity. Additionally, several
securities have call dates prior to their maturity dates, thus enhancing
GIFH's liquidity posture. Another secondary source of liquidity are loans
available-for-sale. These loans generally sell within 90 days. As of
December 31, 1995, GIFH had $7.8 million in loans available-for-sale.
Brokered deposits are deposits instruments, such as certificates of
deposits, deposit notes, bank instrument contracts and certain municipal
investment contracts that are issued through brokers and dealers who then
offer and/or sell these deposit instruments to one or more investors. As of
December 31, 1995 and 1994, brokered deposits amounted to $1.4 million and
$4.0 million, respectively.
Management knows of no trends, demands, commitments, events or
uncertainties that should result in or are reasonably likely to result in
GIFH's liquidity increasing or decreasing in any material way in the
foreseeable future.
Capital Adequacy
There are now two primary measures of capital adequacy for banks and
bank holding companies: (i) risk-based capital guidelines; and (ii) the
leverage ratio.
The risk-based capital guidelines measure the amount of a bank's
required capital in relation to the degree of risk perceived in its assets and
its off-balance sheet items. Under the risk-based capital guidelines, there
are two "tiers" of capital. Tier 1 capital consists of common shareholders'
equity, non-cumulative and cumulative (bank holding companies only), perpetual
preferred stock and minority interests. Goodwill is subtracted from the
total. Tier 2 capital consists of the allowance for loan losses, hybrid
capital instruments, term subordinated debt and intermediate term preferred
stock. Banks are required to maintain a minimum risk-based capital ratio of
8.0%, with at least 4.0% consisting of Tier 1 capital.
The second measure of capital adequacy relates to the leverage ratio.
The Federal banking regulators established a 3.0% minimum leverage ratio
requirement. Note that the leverage ratio is computed by dividing Tier 1
capital into total assets. Banks that are not rated CAMEL 1 by their primary
regulator should maintain a minimum leverage ratio of 3.0% plus an additional
cushion of at least 1 to 2 percent, depending upon risk profiles and other
factors.
A new rule was recently adopted by the Federal Reserve Board, the OCC
and the FDIC that adds a measure of interest rate risk to the determination of
supervisory capital adequacy. In connection with this new rule, the agencies
also proposed a measurement process to measure interest rate risk. Under this
proposal, all items reported on the balance sheet, as well as off-balance
sheet items, would be reported according to maturity, repricing dates and cash
flow characteristics. A bank's reporting position would be multiplied by
duration-based risk factors and weighted according to rate sensitivity. The
net risk weighted position would be used in assessing capital adequacy. The
objective of this complex proposal is to determine the sensitivity of a bank
to various rising and declining interest rate scenarios. This proposal is
under consideration by the Federal banking regulators.
The table below illustrates the subsidiary Bank's and GIFH's regulatory
capital ratios at December 31, 1995.
Minimum
December 31, Regulatory
Bank 1995 Requirement
Tier 1 Capital 10.3% 4.0%
Tier 2 Capital 1.0% n/a
Total risk-based capital ratio 11.3% 8.0%
Leverage ratio 8.0% 3.0%
Company - Consolidated
Tier 1 Capital 15.7% 4.0%
Tier 2 Capital 1.0% n/a
Total risk-based capital ratio 16.7% 8.0%
Leverage ratio 12.5% 3.0%
The above ratios indicate that the capital positions of GIFH and the
Bank are sound and that GIFH is well positioned for future growth.
Accounting Matters
Statement of Financial Accounting Standard No. 107, "Disclosures about
Fair Value of Financial Instruments" ("SFAS 107") requires the disclosure on
financial instruments of estimated fair values for those assets and
liabilities capable of being so estimated. Fair value estimates are made at a
specific point in time and are based on relevant market information which is
continuously changing. For entities with less than $150 million in assets,
SFAS 107 shall be effective for fiscal years ending after December 15, 1995.
GIFH adopted SFAS 107. The adoption of SFAS 107 did not have a significant
impact on GIFH's consolidated financial condition or results of operations.
Statement of Financial Accounting Standard No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments"
("SFAS 119") requires issuers and holders of derivative financial instruments
to disclose new information about these instruments. Derivatives are
financial instruments that derive their value from changes in a benchmark
based on stock prices, interest rates, commodity prices or some other agreed
upon base. Option contracts and forward contracts are two basic forms of
derivatives. For entities with less than $150 million in assets, SFAS 119
shall be effective for fiscal years ending after December 15, 1995. GIFH
adopted SFAS 119. The adoption of SFAS 119 did not have a material impact on
GIFH's consolidated financial condition or results of operations.
Statement of Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("SFAS 121") establishes accounting standards for the impairment of long-lived
assets and certain identifiable intangibles, and goodwill related to those
assets. SFAS 121 requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. In performing the review for recoverability, the entity should
estimate the future cash flows expected to results from the use of the asset
and its eventual disposition. SFAS 121 requires the above assets and
intangibles to be reported at the lower of (i) carrying amount or (ii) fair
value less selling costs. SFAS 121 is effective for fiscal years beginning
after December 15, 1995. As of December 31, 1995, GIFH had not adopted SFAS
121.
Statement of Financial Accounting Standard No. 122, "Accounting for
Mortgage Servicing Rights", ("SFAS 122") requires a mortgage banking
enterprise to recognize rights to service mortgage loans for others as a
separate asset. A mortgage banking enterprise that acquires mortgage
servicing rights through either the purchase or origination of mortgage loans
and sells or securities those loans with servicing rights retained should
allocate the total cost of the mortgage loans to (i) the mortgage servicing
rights and (ii) the loans (without the mortgage servicing rights). The above
allocation should be based on the relative fair values of (i) and (ii) above,
if it is practicable to estimate those fair values. In the event one may not
estimate the above fair values, the entire cost of purchasing or originating
the loans should be allocated to the loans and no cost should be allocated to
the mortgage servicing rights. The provisions of SFAS 122 shall be applied
prospectively in fiscal years beginning after December 15, 1995. As of
December 31, 1995, GIFH had not adopted SFAS 122.
Item 7.
Financial Statements and Supplementary Date.
The following financial statements are contained in this Item 7:
Independent Auditors' Report
Consolidated Balance Sheets at December 31, 1995 and 1994
Consolidated Statements of Income for the years ended December 31, 1995 and
1994
Consolidated Statement of Changes in Stockholders' Equity for the years ended
December 31, 1995 and 1994
Consolidated Statements of Cash Flow for the years ended December 31, 1995 and
1994
Notes to Consolidated Financial Statements
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Consolidated Financial Statements
for the years ended
December 31, 1995 and 1994
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT . . . . . . . . . . . . . . . 1
FINANCIAL STATEMENTS
Consolidated Balance Sheets . . . . . . . . . . . . . 2
Consolidated Statements of Income . . . . . . . . . . 3
Consolidated Statements of
Changes in Shareholders' Equity . . . . . . . . . . . 4
Consolidated Statements of Cash Flows . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . 6
Independent Auditors' Report
Board of Directors
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia 31522
We have audited the accompanying consolidated balance sheets of Golden
Isles Financial Holdings, Inc. and subsidiaries (collectively, the "GIFH") as
of December 31, 1995 and 1994, and the related consolidated statements of
income, changes in shareholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of GIFH's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of GIFH at December 31, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
Atlanta, Georgia
February 23, 1996
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Consolidated Balance Sheets
ASSETS
December 31,
1995 1994
Cash and due from banks $ 3,567,228 $ 1,822,966
Federal funds sold (Note 3) 5,010,000 - -
Total cash and cash equivalents $ 8,577,228 $ 1,822,966
Securities (Notes 2, 4 & 5):
Available-for-sale, at market values 6,626,386 6,932,447
Held-to-maturity (Market values of
$2,255,620 and $3,939,924 at December
31, 1995 and 1994, respectively) 2,273,605 4,180,201
Loans, net (Notes 2, 6, 7 & 18) 56,420,884 45,230,357
Loans held-for-sale 7,842,230 - -
Property and equipment, net (Notes 2 & 8) 3,359,481 1,166,955
Other assets 1,463,276 1,025,167
Total Assets $86,563,090 $60,358,093
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits
Non-interest bearing deposits $ 7,366,505 $ 5,522,946
Interest bearing deposits 60,661,737 44,565,734
Total deposits (Note 9) $68,028,242 $50,088,680
Notes payable (Note 10) 2,849,683 3,350,000
Federal funds purchased (Note 3) - - 1,130,000
Federal Home Loan Bank
borrowings (Note 10) 4,185,214 - -
Other liabilities 699,161 604,042
Total Liabilities $75,762,300 $55,172,722
Commitments and Contingencies
(Notes 11, 17, 18 & 19)
Shareholders' Equity (Notes 15, 16 & 21):
Common stock, zero par value per share;
50.0 million (1995) and 15.0 million
(1994) shares authorized; 2,336,982 (1995)
and 1,377,182 (1994) shares
issued and outstanding $ 1,094,338 $ 1,094,338
Paid-in-capital 9,849,147 4,353,632
Retained earnings (deficit) (140,182) (153,079)
Unrealized (loss) on
securities available-for-sale (2,513) (109,520)
Total Shareholders' Equity $10,800,790 $ 5,185,371
Total Liabilities and
Shareholders' Equity $86,563,090 $60,358,093
Refer to notes to the consolidated financial statements.
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Consolidated Statements of Income
Years ended December 31,
1995 1994
Interest income:
Interest and fees on loans $6,331,387 $4,048,656
Interest on investment securities 590,298 495,228
Interest on federal funds sold 115,145 17,675
Total interest income $7,036,830 $4,561,559
Interest expense:
Interest on deposits
and liabilities (Note 12) 3,180,757 1,812,543
Net interest income 3,856,073 2,749,016
Provision for possible loan losses (Note 7) 382,257 221,036
Net interest income after
provision for possible loan losses 3,473,816 2,527,980
Other income:
Fee income from mortgage subsidiary $ 391,202 $ 224,317
Service fees on deposit accounts 378,930 288,258
(Loss) on sale of securities (2,932) - -
Insurance commissions 81,682 65,191
Miscellaneous, other 8,099 46,595
Total other income $ 856,981 $ 624,361
Other expense:
Salaries $1,828,712 $1,024,272
Employee benefits 361,579 342,899
Advertising and business development 198,601 124,877
Lease expense 191,110 119,599
Depreciation and amortization 169,507 90,661
Other operating expenses (Note 13) 1,555,663 976,130
Total other expense $4,305,172 $2,678,438
Income before income tax 25,625 473,903
Income tax (benefit) (Notes 2 & 14) 12,728 227,681
Net income $ 12,897 $ 246,222
Net income per share (Note 2) $ .01 $ .18
Weighted average number
of shares outstanding (Note 2) 1,857,082 1,377,182
Refer to notes to the consolidated financial statements.
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Consolidated Statements of Changes in Shareholders' Equity
For the years ended December 31, 1995 and 1994
Unrealized Gain
on Securities
Common Stock Paid-in- Retained Available-for-
Shares Par Value Capital Earnings Sale, net Total
Balance,
December 31, 1993
1,367,922 $1,094,338 $4,347,365 $ (399,301) $ 25,065 $ 5,067,467
Net income, 1994
- - - - - - 246,222 - - 246,222
Net unrealized
(loss) - securities
- - - - - - - - (134,585) (134,585)
Restricted stock
9,260 - - 6,267 - - - - 6,267
Balance,
December 31, 1994
1,377,182 $1,094,338 $4,353,632 $ (153,079) $(109,520) $ 5,185,371
Net income, 1995
- - - - - - 12,897 - - 12,897
Sale of stock
897,230 - - 5,456,457 - - - - 5,456,457
Net unrealized
gain - securities
- - - - - - - - 107,007 107,007
Restricted stock
62,570 - - 39,058 - - - - 39,058
Balance,
December 31, 1995
2,336,982 $1,094,338 $9,849,147 $ (140,182) $( 2,513) $10,800,790
Refer to notes to the consolidated financial statements.
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Consolidated Statements of Cash Flows
For the years ended
December 31,
1995 1994
Cash flows from operating activities:
Net Income $ 12,897 $ 246,222
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 165,593 86,742
Amortization 3,911 3,919
Loss on sale and paydowns of securities 2,932 - -
Provisions for loan losses 382,257 180,380
Increase in other assets (442,020) (542,471)
Increase in other liabilities 95,119 328,024
Net cash provided by operating activities $ 220,689 $ 302,816
Cash flows from investing activities:
Available-for-sale securities:
Proceeds from sale of securities $ 1,576,061 $ - -
Proceeds from maturities and paydowns 1,016,450 1,016,622
Purchase of securities (2,182,375) (589,319)
Held-to-maturity securities:
Proceeds from maturities and paydowns 2,162,710 1,766,819
Purchase of securities (256,114) (4,237,753)
Increase in loans held-for-sale (7,842,230) - -
Net increase in loans (11,572,784) (11,667,194)
Purchase of premises and equipment (2,358,119) (136,723)
Net cash used in investing activities $(19,456,401) $(13,847,548)
Cash flows from financing activities:
Increase in deposits $ 17,939,562 $ 8,997,711
Proceeds from issuance of common stock 5,456,457 - -
Issuance of restricted stock 39,058 6,267
(Decrease) in federal funds purchased (1,130,000) 1,130,000
Increase in notes payable 3,684,897 2,750,000
Net cash provided from financing activities $ 25,989,974 $ 12,883,978
Net increase in cash and cash equivalents $ 6,754,262 $ (660,754)
Cash and cash equivalents, beginning of year 1,822,966 2,483,720
Cash and cash equivalents, end of year $ 8,577,228 $ 1,822,966
Supplemental Information:
Income taxes paid $ 12,728 $ 204,886
Interest paid $ 2,563,574 $ 1,472,090
Refer to notes to the consolidated financial statements.
Note 1 - Organization of the Business
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. During 1995 and 1994, GIFH injected an additional
$750,000 and $350,000, respectively, 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, St. Simons Island, Georgia ("FCC") and First Bank Mortgage
Corporation, St. Simons Island, 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
(together, the "Subsidiaries").
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.
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 amount in excess of direct costs is 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 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 Right," ("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 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 Per Share. Net income per share was computed by dividing
net income by the weighted average number of shares outstanding. Common stock
equivalents in the form of outstanding stock warrants and options were not
included in the determination of the weighted average number of shares
outstanding due to their immaterial impact on dilution of income per share.
Note 3 - Federal Funds Sold or Purchased
The Bank is required to maintain legal cash reserves in a minimum
amount, computed by applying prescribed percentages to its various types of
deposits. When the Bank's cash reserves are in excess of the required amount,
the Bank may lend the excess to other banks on a daily basis. In cases where
the Bank's cash reserves fall below the required amounts, the Bank may borrow
these funds from other banks. As of December 31, 1995, the Bank lent an
aggregate of $5,010,000 to eleven unrelated institutions and, as of December
31, 1994, the Bank borrowed $1,130,000 from an unrelated institution through
the use of the federal funds market.
Note 4 - Securities Available-for-Sale
The amortized costs and estimated market values of securities
available-for-sale as of December 31, 1995 follow:
Gross Estimated
Unrealized Market
Description Cost Gains Losses Value
U.S. Treasury
securities $2,806,927 $ 8,012 $ (2,463) $2,812,476
U.S. Government
agencies 2,140,702 8,737 (3,864) 2,145,575
State, County and
Municipal
securities 225,306 - - (81) 225,225
Other securities 599,700 - - - - 599,700
Mortgage backed
securities 857,559 - - (14,149) 843,410
Total securities $6,630,194 $ 16,749 $ (20,557) $6,626,386
The amortized costs and estimated market values of securities
available-for-sale as of December 31, 1994 were as follows:
Gross Estimated
Amortized Unrealized Market
Description Cost Gains Losses Value
U.S. Treasury
securities $2,635,161 $ 56 $ (55,315) $2,579,904
U.S. Government
agencies 2,445,817 - - (71,741) 2,374,076
State, County and
Municipal securities 463,975 - - (5,149) 458,826
Other securities 152,500 - - - - 152,500
Mortgage backed
securities 1,400,933 - - (33,792) 1,367,141
Total securities $7,098,386 $ 56 $(165,997) $6,932,447
The amortized costs and estimated market values of securities
available-for-sale at December 31, 1995 by contractual maturity are shown
below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
Estimated
Amortized Market
Cost Value
Due in one year or less $1,922,781 $1,921,381
Due after one year
through five years 3,250,154 3,261,895
FHLB stock (no maturity) 599,700 599,700
Mortgage backed securities 857,559 843,410
Total securities $6,630,194 $6,626,386
For the year ended December 31, 1995, proceeds from the sale of
securities classified as available-for-sale were $1,575,082. GIFH realized a
loss of $2,932 on those sales. No securities were sold during 1994.
At December 31, 1995 and 1994, available-for-sale securities with an
amortized cost of $1,297,612 and $482,710, respectively, were pledged to
secure public deposits. The current value of the pledged securities is
adequate to meet the pledging requirements.
Note 5 - Securities Held-to-Maturity
The amortized costs and estimated market values of securities
held-to-maturity as of December 31, 1995 follow:
Gross Estimated
Amortized Unrealized Market
Description Cost Gains Losses Value
U.S. Government
agencies $ 250,000 $ 7,675 $ - - $ 257,675
Mortgage backed
securities 2,023,605 - - (25,660) 1,997,945
Total securities $2,273,605 $ 7,675 $ (25,660) $2,255,620
The amortized costs and estimated market values of securities
held-to-maturity as of December 31, 1994 follow:
Gross Estimated
Amortized Unrealized Market
Description Cost Gains Losses Value
U.S. Government
agencies $1,736,295 $ 9,932 $ (72,154) $1,674,073
Mortgage backed
securities 2,443,906 - - (178,055) 2,265,851
Total securities $4,180,201 $ 9,932 $(250,209) $3,939,924
The amortized costs and estimated market values of securities
held-to-maturity at December 31, 1995, by contractual maturity,
are shown below.
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.
Estimated
Amortized Market
Cost Value
Due after five years
through ten years $ 250,000 $ 257,675
Due after ten years - - - -
Mortgage backed securities 2,023,605 1,997,945
Total securities $2,273,605 $2,255,620
At December 31, 1995, securities categorized as held-to-maturity with an
amortized cost of $496,336 were pledged to secure public deposits. The
current value of the pledged securities is adequate to meet necessary pledging
requirements. No held-to-maturity securities were pledged at December 31,
1994.
Note 6 - Loans
The composition of net loans by major loan category, as of
December 31, 1995 and 1994, is as follows:
1995 1994
Commercial, financial, agricultural $17,455,100 $15,832,778
Real Estate - construction 4,718,583 2,843,157
Real Estate - mortgage 27,965,579 22,292,250
Consumer installment 6,813,360 4,899,852
Other 206,725 31,500
Loans, gross $57,159,347 $45,899,537
Deduct:
Unearned fees 20,406 12,949
Allowance for loan losses 718,057 656,231
Loans, net $56,420,884 $45,230,357
At December 31, 1995 and 1994, loans in the amount of $5,523,129 and
$3,281,514, respectively, made by FCC are included in the above loan summary.
At December 31, 1995, GIFH had approximately $410,912 in loans on
non-accrual status. Had these loans accrued interest, net income for
the year
ended December 31, 1995 would have increased by $10,460. All loans were
accruing interest at December 31, 1994.
Note 7 - Allowance for Possible Loan Losses
The allowance for possible loan losses is a valuation reserve
available to absorb future loan charge-offs. The allowance is increased by
provisions charged to operating expenses and by recoveries of loans which were
previously written-off. The allowance is decreased by the aggregate loan
balances which were deemed uncollectible during the year.
The activity within the allowance for loan losses account is
summarized as follows:
Years ended December 31,
1995 1994
Balance, beginning of year $ 656,231 $475,851
Add:
Provision during the year 382,257 221,036
Recoveries of previously
charged-off amounts 18,250 3,703
$1,056,738 $700,590
Deduct: Amount charged-off (338,681) (44,359)
Balance, end of year $ 718,057 $656,231
At December 31, 1995 and 1994, $115,397 and $54,522, respectively,
were included in the allowance for loan losses for loans made by FCC.
Note 8 - Property and Equipment
Land, building, furniture, equipment and leasehold improvements are
stated at cost less accumulated depreciation. Components of property and
equipment included in the consolidated balance sheets at December 31, 1995 and
1994, as well as their estimated useful lives are as follows:
Estimated
December 31, useful
1995 1994 life
Land $ 514,235 $ 170,833
Building $2,009,380 $ 867,542 31.5
Less: Accumulated depreciation 164,522 123,777 years
Total building $1,844,858 $ 743,765
Furniture and equipment, at cost $1,257,664 $ 382,481 5 to 7
Less: Accumulated depreciation 267,601 137,259 years
Total furniture and equipment $ 990,063 $ 245,222
Leasehold improvements, at cost $ 14,675 $ 13,073 3
Less: Accumulated depreciation 4,350 5,938 years
Total leasehold improvements $ 10,325 $ 7,135
Total land, building, furniture,
equipment and leasehold
improvements, net $3,359,481 $1,166,955
When property or equipment is retired or sold, the cost and
accumulated depreciation are removed from the respective accounts. Any
resulting gain or loss is reflected in operating income or expense. Repairs
and maintenance are charged to operations, while improvements are capitalized.
Depreciation is charged to operations over the estimated useful lives of the
assets. Depreciation expense amounted to $165,593 in 1995 and $86,742 in
1994.
Note 9 - Deposits
The following is a detail of the deposit accounts at December 31, 1995
and 1994:
December 31,
1995 1994
Deposits:
Demand deposits $ 7,366,505 $ 5,522,946
NOW and Super NOW accounts 5,002,181 4,527,913
Money market accounts 7,376,647 7,873,751
Savings 883,626 841,083
Time, less than $100,000 36,945,063 22,840,749
Time, $100,000 and over 10,454,220 8,482,238
Total deposits $68,028,6242 $50,088,680
Note 10 - Notes Payable
On October 19, 1995, GIFH renewed a $3.0 million line of credit
("LOC"). The LOC extends for a period of one year at a rate of prime plus 1%.
It is secured by 100% of the Bank's common stock. At December 31, 1995 and
1994, GIFH had $100,000 and $3,000,000 in borrowings, respectively against the
LOC.
On March 14, 1995, FCC obtained a $4.0 million line of credit from
BankAmerica Business Credit, Inc. ("BABC"). On May 16, 1995, the above line
of credit was increased to $8.5 million. The interest rate is: (i) prime
plus 2.0% for the period when the unpaid balance is less than $2.5 million and
(ii) prime plus 1.75% for the period when the unpaid balance is higher than
$2.5 million. Additionally, .125% is charged for the unused portion of the
line of credit. The above line is secured by the loans made by FCC, by the
stock of FCC and by a guaranty executed by GIFH. The maturity date of the
line of credit is March 14, 1997. At December 31, 1995, the outstanding
balance on the above line of credit was $2,708,036.
During 1995, the Bank obtained a line of credit from the Federal Home
Loan Bank of Atlanta. The Bank received four advances totaling $4,245,000
with a weighted average interest rate of 6.35%. The loans are secured by real
estate mortgage loans made by the Bank. At December 31, 1995, the outstanding
balance on the above line of credit was $4,185,214. Principal payments on the
above line are: (i) 1996 : $297,571; (ii) 1997 : $3,207,571 and (iii)
thereafter : $770,072.
On June 14, 1994 GIFH obtained a loan for $350,000 at a rate of prime
plus 1%. The loan was secured by FCC's common stock. As of December 31,
1995, this loan was paid-off.
Note 11 - Commitments and Contingencies
Please refer to Note 17 concerning lease arrangements. Note 18
discusses employment contracts with two executive officers and Note 19 details
financial instruments with off balance-sheet risk.
Note 12 - Interest on Deposits and Liabilities
A summary of interest expense for the years ended December 31, 1995
and 1994 follows:
December 31,
1995 1994
Interest on NOW and Super NOW accounts $ 127,066 $ 82,093
Interest on money market accounts 287,085 309,266
Interest on savings accounts 24,309 20,001
Interest on CDs under $100,000 1,665,335 872,638
Interest on CDs $100,000 and over 610,146 322,944
Interest on federal funds purchased 10,050 12,056
Interest on other borrowings 456,766 193,545
Total interest on
deposits and liabiliti $3,180,757 $1,812,543
Note 13 - Other Operating Expenses
A summary of other operating expenses for the years ended December 31,
1995 and 1994 follows:
December 31,
1995 1994
Repairs and maintenance $ 126,972 $ 74,641
Utilities and telephone 124,041 58,742
Supplies and printing 162,764 111,429
Postage and armored courier 82,356 66,029
Legal and professional 217,263 138,428
Commissions paid 132,649 85,549
Regulatory assessments 73,563 99,698
Loan collections and closings 63,721 55,159
All other operating expenses 572,334 286,455
Total other operating expenses $1,555,663 $976,130
Note 14 - Income Taxes
As of December 31, 1995 and 1994, GIFH's provision for income taxes
consisted of the following:
December 31,
1995 1994
Current $ 8,152 $ 197,335
Deferred 4,576 44,614
Benefit of loss carryforward - - (14,268)
Federal income tax expense $ 12,728 $ 227,681
Deferred income taxes consist of the following:
1995 1994
Provision for loan losses $ 8,717 $ 47,409
Depreciation expense (6,031) 3,166
Contribution carryover 1,890 (5,961)
$ 4,576 $ 44,614
GIFH's provision for income taxes differs from the amounts computed by
applying the federal income tax statutory rates to income before income taxes.
A reconciliation of federal statutory income taxes to GIFH's actual income tax
provision (benefit) is as follows:
Year ended December 31,
1995 1994
Income taxes at statutory rate $ 3,844 $161,127
Increase/(Decrease)
resulting from:
Valuation allowance
for deferred assets - - 47,409
Benefit of net operating
loss carry-forward - - (14,268)
Tax exempt interest (1,812) - -
Other 10,696 33,413
$ 12,728 $ 227,681
Note 15 - Warrants, Restricted Stock and Stock Option Plans
In August, 1994, GIFH's Board granted 9,260 shares of restricted stock
to four key employees. Of the above shares, 7,000 will vest in August, 1997
and the remaining 2,260 shares will vest in August, 1999. The cost of the
restricted stock is being amortized over the vesting periods. For the year
ended December 31, 1995 and 1994, $16,712 and $6,267, respectively was
amortized as restricted stock expense and the same amount was credited to
paid-in-capital.
In July, 1995, GIFH's Board granted 62,570 shares of restricted stock
to eight directors. All shares will be fully vested by the end of the seventh
year from the date of the grant. For the year ended December 31, 1995,
$22,346 was amortized as restricted stock expense and the same amount was
credited to paid-in-capital.
GIFH's shareholders have approved the a 1991 Incentive Stock Option
Plan ("Plan A") and a 1991 Nonstatutory Stock Option Plan ("Plan B"). A total
of 125,000 shares of common stock has been reserved for grants under the two
plans. The option price for shares granted under Plan A were equal to or
greater than the fair market value of such shares on the date on which the
options are granted unless the optionee is a restricted shareholder, in which
case the option price shall be equal to or greater than 110% of the fair
market value of the shares on the date such options are granted. The option
price for shares of common stock to be issued under Plan B shall be determined
by the Board of Directors (the "Board"), in its sole discretion, but in no
event shall such option price be less than 100% of the fair market value of
the shares on the date such options are granted. The fair market value of
shares of common stock related to options granted under both Plans A and B
shall be determined by the Board, in its sole discretion, exercised in good
faith. Plan A and Plan B were terminated in 1995.
Prior to termination, the following table summarized the status of the
above plans.
Plan A Plan B
Shares originally reserved 60,625 64,375
Options exercised 3,750 - -
Options granted and outstanding 53,759 13,656
Options terminated 3,116 50,719
Options price per share range $4.00 $4.80
to to
$6.25 $6.25
In July, 1995, the shareholders approved a 1995 Stock Option Plan
("1995 Plan") which replaced Plan A and Plan B. Options are one of two types:
(i) those which qualify for treatment as incentive stock options under Section
422 of the Internal Revenue Code of 1986, as amended ("Incentive Stock
Options") or (ii) those which do not so qualify ("Non-qualified Options").
The 1995 Plan provides that not more than 250,000 shares in the
aggregate be issued for Incentive Stock Options and Non-qualified Options.
The exercise price of an Incentive Stock Option shall not be less than the
"fair market value" at the date of grant. The fair market value shall be
determined from the trading price on a national securities exchange, NASDAQ,
or over the counter markets, if so traded. If not so traded, the Board of
Directors will determine the market price based upon recent sales reported to
GIFH. The exercise price of a Non-qualified Option shall be determined by the
Board of Directors on the date such option is granted.
The following summarizes the activity within the 1995 Plan:
Options reserved 250,000
Options granted, 1995 79,163
Options forfeited, 1995 12,500
Options outstanding, December 31, 1995 66,663
Options available for grant at
December 31, 1995 183,337
Price per option $6.00 to 6.50
Note 16 - Secondary Stock Offering
Effective May 31, 1994, GIFH initiated a public offering to issue and
sell to the public 1,538,462 Units at a price of $6.50 per Unit. Each Unit
consists of one share of common stock and one Class A Warrant to purchase
common stock. Each of the Class A Warrants expires in three years and
entitles the holder to purchase an additional share of common stock at a price
of $7.25 in year one, $8.25 in year two and $9.50 in year three. The public
offering was closed during 1995 following the sale of 897,230 Units. Once all
direct costs relating to the secondary offering (legal, accounting,
regulatory, printing, etc.) were deducted from the sale proceeds, GIFH
injected the net proceeds of $5,456,457 into its equity accounts.
Note 17 - Leases
GIFH has entered into several operating lease agreements through the
Subsidiaries.
The approximate future minimum lease payments under the lease terms
are as follows at December 31, 1995:
January 1 to December 31, 1996 $138,834
January 1 to December 31, 1997 47,728
January 1 to December 31, 1998 37,070
January 1 to December 31, 1999 19,800
January 1 to December 31, 2000 7,425
Thereafter - -
Total future minimum lease commitments $250,857
Total lease payments for the above leases aggregated $191,110 and
$119,599 during 1995 and 1994, respectively.
Note 18 - Related Party Transactions
Payments to Directors. Directors of GIFH/Subsidiaries do not receive
compensation in the form of directors' fees. Those directors who devote 100%
of their time to the affairs of GIFH/Subsidiaries, however, are compensated in
the form of salaries. GIFH also paid a law firm, whose partner is on the
Board, $5,510 and $5,484 in legal fees during 1995 and 1994, respectively.
Stock Option Plan. The Bank's President and Senior Vice President for
Lending ("VP"), who both serve on the Boards of GIFH and the Bank, are
entitled under certain circumstances to stock options. As of December 31,
1995, the Bank's President and one of the Sr. Vice Presidents had been granted
options to purchase 43,393 and 28,082 shares of GIFH's common stock,
respectively. Please refer to Note 15 for additional information regarding
the stock option plan.
Restricted Stock. During the years ended December 31, 1995 and 1994,
three Board members who are also employed by GIFH/Subsidiaries were awarded
27,930 and 8,875 shares of restricted stock, respectively. Please refer to
Note 15 for additional information regarding restricted stock.
Employment Agreements. In June, 1992, GIFH renewed and modified an
employment agreement with its director who serves as the President and CEO of
the Bank. The agreement is for a term of twenty five months, and has a
renewal option of twenty four additional months. The agreement provides for
health insurance, stock incentives and other customary benefits, including the
use of an automobile. During the years ended December 31, 1995 and 1994, GIFH
incurred approximately $149,475 and $124,793, respectively, in salary and
various benefits relating to this employment agreement.
In January, 1990, GIFH entered into an employment agreement with its
director who serves as the Senior Vice President for Lending at the Bank. The
agreement has no termination date and provides health insurance, as well as
other customary benefits, including an automobile allowance. During the years
ended December 31, 1995 and 1994, GIFH incurred approximately $115,396 and
$106,639, respectively, in salary and various benefits relating to this
employment agreement.
There exists other employment agreements with several employees of
GIFH's subsidiaries, the majority of which expire by December 31, 1997.
Loans from and Deposits in Subsidiaries. Certain directors, executive
officers and companies with which they are affiliated, are customers of and
have banking transactions with the Bank in the ordinary course of business.
As of December 31, 1995 and 1994, loans outstanding to directors, their
related interests, and executive officers aggregated $2,373,753 and
$2,275,207, respectively. These loans were made on the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with persons in an arm's-length transaction.
A summary of loan transactions with executive officers and directors,
including their affiliates, during 1995 and 1994 follows:
1995 1994
Balance, beginning of year $ 2,275,207 $1,749,265
New loans 2,056,716 646,414
Less: loan payments (1,958,170) (120,472)
Balance, end of year $ 2,373,753 $2,275,207
Deposits by directors and their related interests, as of December 31,
1995 and 1994 approximated $243,716 and $483,903, respectively.
Loans and Advances. On October 12, 1994, GIFH extended a $100,000
unsecured line of credit to FBMC at a rate of prime plus 2%. The line of
credit was increased to $150,000 on FebruaRY 24, 1995, to mature March 1,
1996. As of December 31, 1995, this line had no outstanding balance; $87,000
was outstanding on this line at December 31, 1994.
On November 22, 1995, GIFH extended a $500,000 unsecured line of
credit to FBMC at the prime rate of interest. This line matures on June 1,
1996. As of December 31, 1995, $336,941 was outstanding.
On October 19, 1994, GIFH extended a $3.0 million loan to FCC at a
rate of prime plus 1.125%. The loan is unsecured and carried a one-year term.
This loan was renewed on October 19, 1995 for an additional year. As of
December 31, 1995 and 1994, $1,841,812 and $3,000,000 were outstanding,
respectively.
On November 7, 1994, the Bank extended a $475,000 line of credit to
FCC at a rate of prime plus 2%. The loan was secured by assignment of the
loans receivable accounts of FCC. As of December 31, 1994, $272,661 was the
outstanding balance on this loan. There was no outstanding balance at
December 31, 1995, as the line of credit matured November 15, 1995.
Note 19 - Financial Instruments with Off-Balance Sheet Risk
In the ordinary course of business and to meet the financing needs of
its customers, GIFH is a party to financial instruments with off-balance sheet
risk. These financial instruments include commitments to extend credit and
standby letters of credit which involve, to varying degrees, elements of
credit and interest rate risk in excess of the amounts recognized in the
balance sheets. The contract amount of these instruments reflects the extent
of involvement the Bank has in particular classes of financial instruments.
GIFH's exposure to credit loss in the event of nonperformance by the
other party to the financial instruments for commitments to extend credit and
standby letters of credit is represented by the contractual amounts of those
instruments. GIFH uses the same credit policies in making commitments and
obligations as it does for on-balance sheet instruments.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any material condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require the payment of a fee. At December 31,
1995 and 1994, unfunded commitments to extend credit were approximately
$10,299,000 and $11,616,000, respectively. GIFH evaluates each customer's
credit worthiness on a case-by-case basis. The amount of collateral obtained,
if deemed necessary by GIFH upon extension of credit, is based on management's
credit evaluation of the borrower. Collateral varies but may include accounts
receivable, inventory, property, plant and equipment and income producing
commercial properties.
At December 31, 1995 and 1994, commitments under letters of credit
aggregated $503,950 and $706,940, respectively. The credit risk involved in
issuing letters of credit is essentially the same as that involved in
extending loan facilities to customers. Collateral varies but may include
accounts receivable, inventory, equipment, marketable securities and property.
Since most of the letters of credit are expected to expire without being drawn
upon, they do not necessarily represent future cash requirements.
GIFH, through the Subsidiaries, makes consumer, commercial and residential
loans to customers located in and around Glynn County, Georgia. GIFH has no
significant concentration of credit risk with any individual borrower. A
substantial portion of GIFH's loan portfolio is, however, collateralized by
real estate located in and around Glynn County, Georgia.
Note 20 - Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures
About Fair Value of Financial Instruments" ("SFAS 107"), requires the
disclosure of estimated fair values for all financial instruments,
both on-and-off balance sheet assets and liabilities, whose values
may be practically
estimated, along with pertinent information on those financial instruments
whose values may not be so estimated.
Fair value estimates are made at a specific point in time and are
based on relevant market information which is continuously changing. Because
no quoted market prices exist for a significant portion of GIFH's consolidated
financial instruments, fair values for such instruments are based on
management's assumptions with respect to future economic conditions, estimated
discount rates, estimates of the amount and timing of future cash flows,
expected loss experience and other factors. These estimates are subjective in
nature involving uncertainties and matters of significant judgment. Therefore,
they cannot be determined with precision. Note that changes in the assumption
could significantly affect the estimates. The following disclosures should
not be considered a substitute for the liquidation value of GIFH and the
Subsidiaries, but rather a good-faith estimate of the increase or decrease in
value of financial instruments held by GIFH since purchase, origination or
issuance. GIFH has not undertaken any steps to value any assets or
liabilities that are not considered financial instruments. For example,
premises, equipment, core deposits, intangibles and goodwill are not
considered financial instruments.
The following methods and assumptions were used by GIFH in estimating
the fair value of its consolidated financial instruments.
1. Cash and due from banks and interest bearing deposits with other
banks: Fair value equals the carrying value of such assets.
2. Investment securities and investment securities
available-for-sale: Fair values for investment securities are based
on quoted market
prices.
3. Federal funds sold and securities purchased under agreements to
resell: Due to the short term nature of these assets, the carrying values of
these assets approximate their fair value.
4. Loans: For variable rate loans, (those repricing within six
months or less) fair values are based on carrying values. Fixed rate
commercial loans, other installment loans and certain real estate mortgage
loans were valued using discounted cash flows. The discount rate used to
determine the present value of these loans was based on interest rates
currently being charged by GIFH on comparable loans as to credit risk and
term. Loans that are held-for-sale are valued at the lower of cost or
estimated fair value.
5. Off-balance sheet instruments: GIFH's loan commitments are
negotiated at current market rates and are relatively short-term in nature
and, as a matter of policy, GIFH generally makes commitments for fixed rate
loans for relatively short periods of time. Therefore, the estimated value of
GIFH's loan commitment approximates carrying amount.
Loans that are held-for-sale are valued at the lower of cost or
estimated fair value.
6. Deposit liabilities: The fair values of demand deposits are, as
required by SFAS 107, equal to the carrying value of such deposits. Demand
deposits include non-interest bearing deposits, savings accounts, NOW accounts
and money market demand accounts.
Discounted cash flows have been used to value fixed rate term deposits
and variable rate term deposits having reached an interest rate floor. The
discount rate used is based on interest rates currently being offered by GIFH
on comparable deposits as to amount and term.
7. Short-term borrowings: The carrying value of federal funds
purchased, securities sold under agreements to repurchase and other short-term
borrowings approximates their carrying values.
8. FHLB and other borrowings: The fair value of GIFH's fixed rate
borrowings are estimated using discounted cash flows, based on GIFH's current
incremental borrowing rates or similar types of borrowing arrangements. The
carrying amount of GIFH's variable rate borrowings approximates their fair
values.
At December 31, 1995
Carrying Estimated
Amount Fair Value
Assets:
Cash and due from banks $ 3,567,228 $ 3,567,228
Investment securities
available-for-sale 6,626,386 6,626,386
Investment securities
held-to-maturity 2,273,605 2,255,620
Federal funds sold and
securities purchased
under agreements to resell 5,010,000 5,010,000
Loans held-for-sale 7,842,230 7,842,230
Loans 56,420,884 56,439,165
Liabilities:
Non-interest
bearing deposits 7,366,505 7,366,505
Interest bearing deposits 60,661,737 60,625,360
FHLB and other borrowings 7,034,897 7,034,897
Note 21 - Dividends
The declaration of dividends is within the discretion of the Board of
Directors and depends upon business conditions, earnings, the financial
condition of GIFH and the Subsidiaries and regulatory requirements. GIFH and
its subsidiary Bank are restricted through Federal and State banking rules and
regulations in their ability to pay dividends. Additionally, the Board has
stated that cash dividends may not be declared until such time as GIFH has
attained cumulative profits.
Note 22 - Subsequent Events
On February 19, 1996, GIFH acquired a two-story, free standing, brick
building containing approximately 5,200 square feet of space (the "Building"),
from 200 Plantation Chase Company, a Georgia general partnership in which
GIFH's Chairman and Chief Executive Officer was a partner, for a purchase
price of $350,000. GIFH received authorization to engage in the above
transaction by the unanimous vote of all of the uninterested directors of
GIFH. An independent appraiser valued the Building at $355,000 as of December
10, 1995.
Note 23 - Parent Company Financial Information
This information should be read in conjunction with the other notes to the
consolidated financial statements.
Parent Company Balance Sheets
December 31,
Assets 1995 1994
Cash $ 659,733 162,235
Receivables from Subsidiaries 2,241,178 3,111,865
Investments in Subsidiaries 7,678,225 4,912,296
Premises and equipment, net 24,565 8,209
Offering costs - - 302,800
Other assets 318,279 120,858
Total Assets $10,921,980 $8,618,263
Liabilities and Shareholders' Equity
Notes payable $ 100,000 $3,350,000
Miscellaneous liabilities 21,190 82,892
Total Liabilities $ 121,190 $3,432,892
Common stock $ 1,094,338 $1,094,338
Paid-in-capital 9,849,147 4,353,632
Retained earnings (140,182) (153,079)
Unrealized gain (loss) on
securities held for sale (2,513) (109,520)
Total Capital $10,800,790 $5,185,371
Total liabilities and capital $10,921,980 $8,618,263
Parent Company Statements of Income
Year ended December 31,
1995 1994
Interest income $ 274,342 $ 77,960
Expense:
Interest expense 115,049 73,846
General and administrative 592,754 148,243
Total expense $ 707,803 $ 222,089
(Loss) before income taxes
and equity in undistributed
earnings of Subsidiaries (433,461) (144,129)
Income tax (benefit) (387,433) (69,438)
Equity in undistributed
earnings of subsidiaries 58,925 320,913
Net income $ 12,897 $ 246,222
Parent Company Statements of Cash Flows
Year ended December 31,
1995 1994
Cash flows from operating activities:
Net income $ 12,897 $ 246,222
Adjustments to reconcile net
income to net cash provided by
operating activities:
Equity in undistributed net
(earnings) of Subsidiaries (58,925) (320,913)
Depreciation 3,192 809
Increase in other prepaids, receivables
deferrals and accruals, net 43,680 (177,551)
Net cash provided by
operating activities $ 844 $(251,433)
Cash flows from investing activities:
Loans to subsidiaries $ 870,687 $(3,087,000)
Investment in Subsidiary (2,600,000) (350,000)
Purchase of equipment (19,548) (9,018)
Net cash provided to investing activities $(1,748,861) $(3,446,018)
Cash flows from financing activities:
Notes payable $(3,250,000) $ 3,350,000
Proceeds from sale of units 5,456,457 - -
Proceeds from issuance of restricted stock 39,058 6,267
Net cash provided from
financing activities $ 2,245,515 $ 3,356,267
Net increase in cash $ 497,498 $ (341,184)
Cash, beginning of year 162,235 503,419
Cash, end of year $ 659,733 $ 162,235
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.
Not Applicable. GIFH did not change accountants during the two most
recent fiscal years, and it continues to use the independent accounting firm
of Francis & Company, CPAs.
PART III
Item 9.
Directors, Executive Officers, Promoters and Control Persons; Compliance with
Section 16(a) of the Exchange Act.
The Directors and executive officers of GIFH are as follows:
Name (Age) Position With Company Director Since
L. McRee Harden (40) Director 1988
Michael D. Hodges (42) Director 1991
Russell C. Jacobs, Jr. (60)
Director 1988
Gregory S. Junkin (54) Chairman and
Chief Executive Officer 1987
Claude Kermit Keenum (59) Director 1988
Paul D. Lockyer (43) President and Director 1987
Jimmy D. Veal (47) Vice Chairman and
Secretary/Treasurer 1987
J. Thomas Whelchel (61) Vice Chairman 1988
Members of the Board of Directors serve for a period of one year, or until their
death, resignation, removal or replacement under GIFH's governing instruments by
a duly elected and qualified candidate.
A brief account of the business and civic experience of each of the
directors and executive officers is set out below. Unless otherwise indicated,
each individual has held the indicated position for at least
the past five years.
L. Mcree Harden. Mr. Harden has been a director of GIFH since July 1988,
a director of The First Bank of Brunswick since February 1990, and a director of
the First Credit Service Corporation since July 1993. Mr. Harden is self
employed with interests in six convenience stores, a car wash and a package
store.
Michael D. Hodges. Mr. Hodges has been a director of GIFH since 1991 and
a director of The First Bank of Brunswick since June 1990. He also has been
Senior Vice President of the Bank since June 1990 with principal
responsibilities
for all lending functions.
Russell C. Jacobs, Jr. Mr. Jacobs has been a director of GIFH since July
1988, a director of The First Bank of Brunswick since February 1990, and a
director of First Bank Mortgage Corporation since July 1993.
Mr. Jacobs is self-employed as an agent for the Equitable Financial
Companies and as a registered
representative with Equico Securities, Inc. Mr. Jacobs holds both the Chartered
Life Underwriter ("CLU") and Chartered Financial Consultant ("CHFC")
designations.
Gregory S. Junkin. Mr. Junkin has been Chairman and Chief Executive
Officer of GIFH since March 1987, a director of The First Bank of Brunswick
since
February 1990, and Chairman and Chief Executive Officer and a director of both
First Credit Service Corporation and First Bank Mortgage Corporation since July
1993. Mr. Junkin has been involved in the investment business for thirty-five
years. From 1961 until 1965, Mr. Junkin held various positions with the
Department of Member Firms of the New York Stock Exchange, Inc. In 1965, Mr.
Junkin joined Reynolds Securities, Inc., the predecessor firm to Dean Witter
Reynolds, Inc., where he held various compliance, sales and management positions
until 1973. Mr. Junkin joined The Balcor Company, a national real estate
investment company, in 1973, the year it was founded. He was a principal of
GIFH, which was sold to a subsidiary of American Express Company in 1982. Mr.
Junkin was Vice Chairman of GIFH until February 1987, at which time he became a
consultant to that company. He remained in that capacity until the expiration
of his employment contract in January 1988.
Claude Kermit Keenum. Mr. Keenum has been a director of GIFH since July
1988 and a director of The First Bank of Brunswick since February 1990. He
became a director of First Credit Service Corporation in 1995. Mr. Keenum was
the superintendent of the Glynn County School System from 1980 to 1989 and the
superintendent of the Cobb County School System in metropolitan
Atlanta from 1989
to 1992. He is currently President of Southeastern Communication Systems, Inc.
Paul D. Lockyer. Mr. Lockyer has been President and Chief Operating
Officer of GIFH since July 1995. From September 1988 through July 1995, he
served as Senior Vice President of GIFH. Mr. Lockyer has been Chief Financial
Officer of GIFH since September 1988, and a director of GIFH since
December 1987.
He has been President, Chief Executive Officer, and a director of The First Bank
of Brunswick since February 1990. He has also been a director of First Credit
Service Corporation and First Bank Mortgage Corporation since July 1993.
Jimmy D. Veal. Mr. Veal has been Vice Chairman of GIFH since July 1995.
He has been a director of GIFH since June 1987 and Secretary/Treasurer of GIFH
since September 1992. He is Vice Chairman and has been a director of The First
Bank of Brunswick since February 1990, and Secretary/Treasurer and a director of
both First Credit Service Corporation and First Bank Mortgage Corporation since
July 1993. He is Secretary/ Treasurer and a director of Motel Properties, Inc.,
a corporation that owns and operates four motels in Glynn County and two in
Camden County.
J. Thomas Whelchel. Mr. Whelchel has been Vice Chairman of GIFH since July
1995. From July 1988 through July 1995, he served as President of GIFH. Mr.
Whelchel has been a director of GIFH since July 1988, and Chairman and a
director
of The First Bank of Brunswick since February 1990. Mr. Whelchel has also been
a director of both First Credit Service Corporation and First Bank Mortgage
Corporation since July 1993. He is a senior partner in the Brunswick law firm
of Whelchel, Brown, Readdick and Bumgartner.
Item 10. Executive Compensation.
A. Named Executive Officers.
The following table sets forth the compensation paid to the
named executive officers of GIFH and its subsidiaries for each of GIFH's last
three completed fiscal years.
SUMMARY COMPENSATION TABLE
ANNUAL LONG TERM COMPENSATION
COMPENSATION AWARDS PAYOUTS
Securities
Name and Other Restricted Underlying
All Other
Principal Annual Stock Options/ LTIP Compensa-
Position
Year Salary Bonus Compensation Awards(1) SARs Payouts tion
(a (b) (c) (d) (e) (f) (g) (h) (i
Gregory S. Junkin,
1995 $147,211 $0 $0 $99,548(2) 0 $0 $0
Chairman and CEO
1994 $ 40,558 $0 $0 $42,000(2) 0 $0 $0
of GIFH
1993 $0 $0 $0 $0 0 $0 $0
Paul D. Lockyer,
1995 $107,627 $12,785 $0 $71,500(3) 14,862(7) $0 $0
President, COO and
1994 $100,000 $32,000 $0 $ 6,600(3) 2,027(5) $0 $0
CFO of GIFH
1993 $ 93,108 $6,916 $0 $0 1,504(6) $0 $0
Michael D. Hodges,
1995 $ 92,096 $ 6,000 $0 $10,498(4) 6,921(7) $0 $0
Senior V.P. of the
1994 $ 85,500 $15,000 $0 $ 4,650(4) 1,408(5) $0 $0
Bank
1993 $ 82,160 $ 4,611 $0 $0 1,003(6) $0 $0
(1) In the event that GIFH declares a dividend on its outstanding shares of
Common Stock, then such dividend will be equally applicable to the
restricted stock reported in this column (f).
(2) The aggregate number of shares of restricted stock held by Gregory S.
Junkin as of December 31, 1995 is 22,315 shares and the value of such
shares is $145,048. All of the restricted stock awarded to Mr. Junkin in
1994 (7,000 shares) will vest upon the earlier of (i) three years from
August 17, 1994, the date the shares were granted to Mr. Junkin, or (ii)
a change of control in the ownership of GIFH through the acquisition of
more than 50% of GIFH's outstanding stock by a third party. The restricted
stock awarded to Mr. Junkin in 1994 will be forfeited if he is not in the
employment of either GIFH or any of its subsidiaries on August 16, 1997,
unless Mr. Junkin's employment is terminated because of the sale of GIFH
or a subsidiary through which Mr. Junkin is employed and Mr. Junkin is not
offered other employment within GIFH or one of its remaining subsidiaries.
With respect to the shares of restricted stock granted to Mr. Junkin in
1995 (15,315 shares), one-seventh of such shares (i.e., 2,187.86 shares)
will vest on July 25, 1996, and an additional one-seventh of such shares
will vest on July 25 of each year thereafter until all such shares have
vested. If at any time Mr. Junkin shall cease to be a director of GIFH or
any subsidiary of GIFH, or an executive officer of GIFH or any subsidiary
of GIFH, than he shall forfeit any of the restricted shares granted to him
in 1995 which have not already vested at the time of the event which
triggers the forfeiture.
(3) The aggregate number of shares of restricted stock held by Paul D. Lockyer
as of December 31, 1995 is 12,100 shares and the value of such shares is
$78,650. None of the restricted stock awarded to Mr. Lockyer in 1994
(1,100 shares) will vest in under three years from the date of grant unless
there occurs, within such time period, a change of control in the ownership
of GIFH through the acquisition of more than 50% of GIFH's outstanding
stock by a third party. The restricted stock awarded to Mr. Lockyer in
1994 will be forfeited if he is not in the employment of either GIFH or one
of its subsidiaries on August 16, 1999, unless Mr. Lockyer's employment is
terminated because of the sale of GIFH or a subsidiary through which Mr.
Lockyer is employed and Mr. Lockyer is not offered other employment within
GIFH or one of its subsidiaries. With respect to the shares of restricted
stock granted to Mr. Lockyer in 1995 (11,000 shares), one-seventh of such
shares (i.e., 1,571.43 shares) will vest on July 25, 1996, and an
additional one-seventh of such shares will vest on July 25 of each year
thereafter until all such shares have vested. If at any time Mr. Lockyer
shall cease to be a director of GIFH or any subsidiary of GIFH, or an
executive officer of GIFH or any subsidiary of GIFH, then he shall forfeit
any of the restricted shares granted to him in 1995 which have not already
vested at the time of the event which triggers the forfeiture.
(4) The aggregate number of shares of restricted stock held by Michael D.
Hodges as of December 31, 1995 is 2,390 shares and the value of such shares
is $15,535. None of the restricted stock awarded to Mr. Hodges in 1994
(775 shares) will vest in under three years from the date of grant unless
there occurs, within such time period, a change of control in the ownership
of GIFH through the acquisition of more than 50% of GIFH's outstanding
stock by a third party. The restricted stock awarded to Mr. Hodges in 1994
will be forfeited if he is not in the employment of either GIFH or one of
its subsidiaries on August 16, 1999, unless Mr. Hodges' employment is
terminated because of the sale of GIFH or a subsidiary through which Mr.
Hodges is employed and Mr. Hodges is not offered other employment within
GIFH or one of its subsidiaries. With respect to the shares of restricted
stock granted to Mr. Hodges in 1995 (1,615 shares), one-seventh of such
shares (i.e., 230.71 shares) will vest on July 25, 1996, and an additional
one-seventh of such shares will vest on July 25 of each year thereafter
until all such shares have vested. If at any time Mr. Hodges shall cease
to be a director of GIFH or any subsidiary of GIFH, or an executive officer
of GIFH or any subsidiary of GIFH, then he shall forfeit any of the
restricted shares granted to him in 1995 which have not already vested at
the time of the event which triggers the forfeiture.
(5) These options are nonstatutory stock options which have been granted
pursuant to that certain 1991 Incentive Stock Option Plan and 1991
Nonstatutory Stock Option Plan adopted by GIFH on May 30, 1991 (the
"Plan"). The Plan provides for the granting of certain nonstatutory stock
options that are not intended to qualify as incentive stock options within
the meaning of Section 422(b) of the Internal Revenue Code. These
nonstatutory stock options shall be vested and may be exercised by the
individual to whom such options have been granted during the period such
individual serves as an officer or any other key employee of GIFH. For
additional information regarding these nonstatutory stock options, see (i)
the Plan (Exhibit 10(b) hereto), (ii) that certain Stock Option Agreement
dated February 22, 1994, between GIFH and Paul D. Lockyer (Exhibit 10(c)
hereto), and (iii) that certain Stock Option Agreement dated February 22,
1994, between GIFH and Michael D. Hodges (Exhibit 10(d) hereto).
(6) These options are incentive stock options which have been granted pursuant
to the Plan. The Plan provides for the granting of certain stock options
that are intended to qualify as incentive stock options within the meaning
of Section 422(b) of the Internal Revenue Code. These incentive stock
options shall be vested and may be exercised by the individual to whom such
options have been granted during the period such individual serves as an
officer or any other key employee of GIFH after January 28, 1993. For
additional information regarding these incentive stock options, see (i) the
Plan (Exhibit 10(b) hereto), (ii) that certain Stock Option Agreement dated
January 28, 1993, between GIFH and Paul D. Lockyer (Exhibit 10(e) hereto),
and (iii) that certain Stock Option Agreement dated January 28, 1993,
between GIFH and Michael D. Hodges (Exhibit 10(f) hereto). As a result
GIFH's five-for-four stock split which took place on September 21, 1993,
the number of stock options reflected in the Summary Compensation Table as
being issued to Messrs. Lockyer and Hodges in 1993 is greater than the
number of stock options granted to Messrs. Lockyer and Hodges under the
Option Agreements described in this footnote (6).
(7) These options are incentive stock options which have been granted pursuant
to that certain Golden Isles Financial Holdings, Inc. 1995 Stock Option
Plan adopted by GIFH on July 25, 1995 (the "1995 Plan"). The 1995 Plan
provides for the granting of certain options that are intended to qualify
as incentive stock options within the meaning of Section 422(b) of the
Internal Revenue Code, as well as certain nonstatutory stock options that
are not intended to qualify as incentive stock options within the meaning
of Section 422(b) of the Internal Revenue Code. These incentive stock
options were granted on July 25, 1995, and vested immediately upon being
granted. These options may be exercised at any time before the earlier of
(i) July 25, 2005; or (ii) the date upon which the optionee ceases to be
an employee of GIFH; provided, however, that if the optionee's employment
with GIFH is terminated for any reason other than (a) optionee's death or
disability, (b) optionee's voluntary termination of his employment without
GIFH's consent, or (c) termination of optionee's employment by GIFH for
cause, then, in such event, optionee may exercise these incentive stock
options for up to three months after termination of his employment (but in
no event later than July 25, 2005). For additional information regarding
these incentive stock options, see (i) the 1995 Plan (Exhibit 10(g)
hereto), and (ii) that certain form of Option Agreement dated as of July
25, 1995, entered into between GIFH and each of Paul D. Lockyer and Michael
D. Hodges (Exhibit 10(h) hereto).
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
Number of Percent of
Securities Total Options/
Underlying SARs Granted to
Options/SARs Employees inExercise or Base Expiration
Name Granted Fiscal Year Price Date
(a) (b) (c) (d) (e)
Gregory S. Junkin
0 0.00% -- --
Paul D. Lockyer
14,862 18.77% $6.50/Share 7/25/05
Michael D. Hodges
6,921 8.74% $6.50/Share 7/25/05
These options have been granted pursuant to the 1995 Plan.
The following table presents information regarding the value of unexercised
options held at December 31, 1995. No stock options were exercised and there
were no SARs outstanding during fiscal year 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
Number of Value
of
Securities Unexercised
Underlying in-the-Money
Unexercised Options/SARs
Options/SARs at at FY-End
Shares Acquired Value Exercisable/
Exercisable/
Name on Exercise Realized Unexercisable
Unexercisable
(a) (b) (c) (d) (e)
Gregory S. Junkin -- -- -- --
Paul D. Lockyer
-- -- 43,393(1) $65,864/$0(3)
Michael D. Hodges
-- -- 28,082(2) $49,133/$0(3)
(1) Paul D. Lockyer has the right to acquire 43,393 shares of GIFH's Common
Stock pursuant to stock options issued by GIFH to Mr. Lockyer. All of the
43,393 stock options held by Mr. Lockyer were exercisable as of December
31, 1995. Of the 43,393 stock options, 25,000 are exercisable at the
price of $4.00 per share, 1,504 are exercisable at the price of $4.60 per
share, 2,027 are exercisable at the price of $6.25 per share, and 14,862
are exercisable at the price of $6.50 per share.
(2) Michael D. Hodges has the right to acquire 28,082 shares of GIFH's Common
Stock pursuant to stock options issued by GIFH to Mr. Hodges. All of the
28,082 stock options held by Mr. Hodges were exercisable as of December
31, 1995. Of the 28,082 stock options, 18,750 are exercisable at the
price of $4.00 per share, 1,003 are exercisable at the price of $4.60 per
share, 1,408 are exercisable at the price of $6.25 per share, and 6,921
are exercisable at the price of $6.50 per share.
(3) Dollar values have been calculated by determining the difference between
the estimated fair market value of GIFH's Common Stock at December 31,
1995 ($6.50) and the exercise prices of the options.
GIFH does not have any Long Term Incentive Plans in effect.
On June 5, 1992, the Bank issued a letter to Paul D. Lockyer (the
"Lockyer Letter") summarizing the terms of Mr. Lockyer's employment with the
Bank. Pursuant to the terms of the Lockyer Letter, Mr. Lockyer is to serve as
President and Chief Executive officer of the Bank and Senior Vice President and
Principal Financial Officer of GIFH. Mr. Lockyer's base salary was set at
$80,500 per year, subject to possible annual increases. The Lockyer Letter
confirms that Mr. Lockyer is entitled to certain stock options and that he is to
be provided with a company vehicle. Mr. Lockyer may terminate his employment
with the Bank upon 90 days advance notice. The Board of Directors of the Bank
may terminate Mr. Lockyer's employment with the Bank with or without cause.
However, if Mr. Lockyer is dismissed from his employment for reasons other than
fraud or dishonesty, he is entitled to severance pay in an amount equal to six
months of his then current base salary. The term of the Lockyer Letter was
effective through July 2, 1994, subject to automatic extension to July 2, 1996
unless either party notified the other to the contrary. As of July 2, 1994, Mr.
Lockyer's employment by the Bank was automatically extended. For additional
information regarding the Lockyer Letter, see the Lockyer Letter (Exhibit 10(i)
hereto).
On June 5, 1992, the Bank issued a letter to Michael D. Hodges (the
"Hodges Letter") summarizing the terms of Mr. Hodges' employment with the Bank.
Pursuant to the terms of the Hodges Letter, Mr. Hodges is to serve as Senior
Vice
President of the Bank. Mr. Hodges' base salary was set at $75,500 per year,
subject to possible annual increases. The Hodges Letter confirms that Mr.
Hodges
is entitled to certain stock options and that he is to receive a monthly
automobile allowance of $300. Mr. Hodges may terminate his employment with the
Bank upon 90 days advance notice. The Chief Executive Officer or the Board of
Directors of the Bank may terminate Mr. Hodges employment with the Bank with our
without cause. However, if Mr. Hodges is dismissed from his employment for
reasons other than fraud or dishonesty, he is entitled to severance pay in an
amount equal to six months of his then current base salary. The term of the
Hodges Letter was effective through July 2, 1994, subject to automatic extension
to July 2, 1996 unless either party notified the other to the contrary. As of
July 2, 1994, Mr. Hodges' employment by the Bank was automatically extended.
For
additional information regarding the Hodges Letter, see the Hodges Letter
(Exhibit 10(j) hereto).
B. Directors.
GIFH has no arrangement for the compensation of its directors for any
services as a director, including committee participation or special
assignments.
No director of GIFH received compensation during the last fiscal year for his
services as such.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
On March 13, 1996, GIFH had 1,054 shareholders of record.
The following table sets forth share ownership information as of
March 1, 1996, with respect to any person known to GIFH to be a beneficial owner
of more than 5% of GIFH's Common Stock, including Common Stock owned in the form
of Units. The information as to beneficial ownership was furnished to GIFH by
or on behalf of the persons named. Unless otherwise indicated, each of the
shareholders has sole voting and investment power with respect to the shares of
Common Stock beneficially owned.
Security Ownership of Certain Beneficial Owners*
Name and Address Number of Percent of
of Beneficial Owner Shares Class
Leonard W. Golan (1) 200,102 8.3%
21st Floor, Three First National Plaza
Chicago, Illinois 60602
___________________________________________________________________________
* Information relating to beneficial ownership of Common Stock is based upon
"beneficial ownership" concepts set forth in rules of the SEC under Section
13(d)
of the Securities Exchange Act of 1934, as amended (the "Act").
Under such rule,
a person is deemed to be a "beneficial owner" of a security if that person has
or shares "voting power", which includes the power to vote or direct the voting
of such security, or "investment power", which includes the power to dispose of,
or to direct the disposition of, such security. A person is also deemed to be
a beneficial owner of any security of which that person has the right to acquire
beneficial ownership within sixty (60) days. Under the rules, more than one
person may be deemed to be a beneficial owner of the same securities, and a
person may be deemed to be a beneficial owner of securities as to which he has
no beneficial interest. For instance, beneficial ownership includes spouses,
minor children and other relatives residing in the same household, and trusts,
partnerships, corporations or deferred compensation plans which are affiliated
with the principal.
(1) Mr. Golan's beneficial ownership of the shares of Common Stock attributed
to him stems from his having voting and investment power with respect to
those shares in his capacity as Trustee of each of the Leonard W. Golan
Insurance Trust dated January 23, 1968, the Carol P. Golan Insurance Trust
dated November 7, 1977, and the Carol P. Golan QTIP Trust dated April 18,
1995. The number of shares beneficially owned by Mr. Golan includes the
right to acquire 64,642 shares pursuant to Class A Warrants which are a
component of the 64,642 Units beneficially owned by Mr. Golan.
The following table sets forth share ownership information as of
March 1, 1996, with respect to (i) each director and named executive officer of
GIFH who beneficially owns Common Stock, including Common Stock owned
in the form
of Units, and (ii) all directors and named executive officers of GIFH
as a group.
The information as to beneficial ownership was furnished to GIFH by or on behalf
of the persons named. Unless otherwise indicated, each of the shareholders has
sole voting and investment power with respect to the shares beneficially owned.
Security Ownership of Management*
Name and Address Number of
of Beneficial Owner Shares Percent of Class
L. McRee Harden(1) 19,385 0.8%
P.O. Box 2369
Darien, Georgia 31305
Michael D. Hodges(2) 38,764 1.6%
207 Dunbarton Drive
St. Simons Island, Georgia 31522
Russell C. Jacobs, Jr.(3) 16,763 0.7%
308 Oak Grove Island Drive
Brunswick, Georgia 31525
Gregory S. Junkin(4) 105,653 4.5%
200 Plantation Chase
St. Simons Island, Georgia 31522
C. Kermit Keenum(5) 16,545 0.7%
100 Old Mountain Road
Powder Springs, Georgia 30073
Paul D. Lockyer(6) 66,581 2.8%
311 Dunbarton Drive
St. Simons Island, Georgia 31522
Jimmy D. Veal(7) 81,898 3.4%
711 Beachview Drive
Jekyll Island, Georgia 31527
J. Thomas Whelchel(8) 31,740 1.4%
5 Glynn Avenue
Brunswick, Georgia 31520
All directors and executive 377,329 15.5%
officers as a group
(8 persons)
* Information relating to beneficial ownership of Common Stock is based
upon "beneficial ownership" concepts set forth in rules of the SEC under
Section 13(d) of the Act. Under such rule, a person is deemed to be a
"beneficial owner" of a security if that person has or shares "voting power",
which includes the power to vote or direct the voting of such security, or
"investment power", which includes the power to dispose of, or to direct the
disposition of, such security. A person is also deemed to be a beneficial
owner of any security of which that person has the right to acquire beneficial
ownership within sixty (60) days. Under the rules, more than one person may
be deemed to be a beneficial owner of the same securities, and a person may be
deemed to be a beneficial owner of securities as to which he has no beneficial
interest. For instance, beneficial ownership includes spouses, minor
children and other relatives residing in the same household, and trusts,
partnerships, corporations or deferred compensation plans which are affiliated
with the principal.
(1) Includes 1,250 shares owned by his wife for which he disclaims
beneficial ownership. Also includes the right to acquire 1,385 shares
pursuant to nonstatutory options granted by the Board of Directors.
(2) Includes the right to acquire 19,753 shares pursuant to incentive
options issued under the Plan, 1,408 shares pursuant to nonstatutory
options issued under the Plan, 6,921 shares pursuant to incentive
options issued under the 1995 Plan, and 2,042 shares pursuant to
nonstatutory options granted by the Board of Directors.
(3) Includes the right to acquire 1,263 shares pursuant to nonstatutory
options granted by the Board of Directors.
(4) Includes the right to acquire 4,044 shares pursuant to Class A Warrants
which are a component of the 4,044 Units owned by Mr. Junkin, and 1,500
shares purusant to nonstatutory options granted by the Board of Directors.
(5) Includes the right to acquire 1,045 shares pursuant to nonstatutory
options granted by the Board of Directors.
(6) Includes the right to acquire 26,504 shares pursuant to incentive
options issued under the Plan, 2,027 shares pursuant to nonstatutory
options issued under the Plan, 14,862 shares pursuant to incentive
options issued under the 1995 Plan, and 1,458 shares pursuant to
nonstatutory options granted by the Board of Directors.
(7) Includes 9,125 shares owned as custodian for his son, Daniel D. Veal,
9,125 shares owned as custodian for his son, Zachary T. Veal, both under
the Uniform Gifts to Minors Act, and 1,958 shares pursuant to
nonstatutory options granted by the Board of Directors.
(8) Includes 25 shares owned by Mr Whelchel's daughter for which he
disclaims beneficial ownership, and 1,390 shares pursuant to
nonstatutory options granted by the Board of Directors.
Item 12. Certain Relationships and Related Transactions.
During 1995, the Bank loaned funds to certain of GIFH's executive
officers and directors or to businesses in which such persons had an interest.
All such loans were: (a) in the ordinary course of business, (b) on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons,
and (c) did not involve more than the normal risk of collectibility or present
other unfavorable features.
On February 19, 1996, GIFH acquired Unit Number 200 of Plantation
Chase Condominium, a two-story, free standing, brick building containing
approximately 5,200 square feet of space (the "Building"), from 200 Plantation
Chase Company, a Georgia general partnership in which Gregory S. Junkin,
Chairman of the Board and Chief Executive Officer of GIFH, was a 33 percent
partner, for a purchase price of $350,000 (the "Purchase Transaction"). In
accordance with the terms of Section 14-2-862 of the Georgia Business
Corporation Code (O.C.G.A. Section 14-2-862), relating to conflict of interest
transactions, GIFH received authorization to engage in the Purchase
Transaction by the unanimous vote of all of the uninterested directors of GIFH
at a meeting of the Board of Directors on September 16, 1995. Board approval
of the Purchase Transaction was contingent upon GIFH obtaining an appraisal of
the Building from an independent certified appraiser in the amount of at least
$350,000. Prior to the closing of the Purchase Transaction, GIFH did receive
a written appraisal indicating that the market value of the Building as of
December 10, 1995 was $355,000.
Item 13. Exhibits List and Reports on Form 8-K.
A. Exhibits Required Under Item 601 of Regulation S-B.
Exhibit No. Description
3(a) Restatement and Amendment of the Articles of Incorporation of GIFH,
effective August 24, 1995 (filed as Exhibit 3.(i) to GIFH's
Quarterly Report on Form 10-QSB for the quarter ended September 30, 1995 (File
Number 33-19735-A), filed with the Commission on November 13, 1995 and
incorporated herein by reference).
3(b) Bylaws of GIFH (filed as Exhibit 3.(ii) to GIFH's Quarterly Report on
Form 10-QSB for the quarter ended September 30, 1995 (File No. 33-19735-
A), filed with the Commission on November 13, 1995 and incorporated
herein by reference).
10(a) Loan and Security Agreement dated March 14, 1995, between BankAmerica
Business Credit, Inc. and First Credit Service Corporation (filed as
Exhibit 10(b) to GIFH's Annual Report on Form 10-KSB
(File Number 33-19735-A), filed with the Commission on March 31, 1995 and
incorporated
herein by reference).
10(b) The Golden Isles Financial Holdings, Inc. 1991 Incentive Stock Option
Plan and The Golden Isles Financial Holdings, Inc. 1991 Nonstatutory
Stock Option Plan (filed as Exhibit 10(a) to GIFH's Annual Report on
Form 10-KSB (File Number 33-19735-A), filed with the Commission on
March
31, 1994 and incorporated herein by reference).
10(c) Stock Option Agreement Under Golden Isles Financial Holdings, Inc.
1991
Incentive Stock Option Plan and 1991 Nonstatutory Stock Option Plan
dated February 22, 1994, between Golden Isles Financial Holdings, Inc.
and Paul D. Lockyer (filed as Exhibit 10(e) to GIFH's Annual Report on
Form 10-KSB (File Number 33-19735-A), filed with the Commission
on March
31, 1995 and incorporated herein by reference).
10(d) Stock Option Agreement Under Golden Isles Financial Holdings, Inc.
1991
Incentive Stock Option Plan and 1991 Nonstatutory Stock Option Plan
dated February 22, 1994, between Golden Isles Financial Holdings, Inc.
and Michael D. Hodges (filed as Exhibit 10(f) to GIFH's
Annual Report on
Form 10-KSB (File Number 33-19735-A), filed with
the Commission on March
31, 1995 and incorporated herein by reference).
10(e) Stock Option Agreement Under Golden Isles Financial Holdings, Inc.
1991
Incentive Stock Option Plan and 1991 Nonstatutory Stock Option Plan
dated January 28, 1993, between Golden Isles Financial Holdings, Inc.
and Paul D. Lockyer (filed as Exhibit 10(g) to the Registrant's Annual
Report on Form 10-KSB (File Number 33-19735-A), filed with the
Commission on March 31, 1995 and incorporated herein by reference)
10(f) Stock Option Agreement Under Golden Isles Financial Holdings, Inc.
1991
Incentive Stock Option Plan and 1991 Nonstatutory Stock Option Plan
dated January 28, 1993, between Golden Isles Financial Holdings, Inc.
and Michael D. Hodges (filed as Exhibit 10(h) to the Registrant's
Annual
Report on Form 10-KSB (File Number 33-19735-A), filed with the
Commission on March 31, 1995 and incorporated herein by reference).
10(g) Golden Isles Financial Holdings, Inc. 1995 Stock Option Plan (filed as
Exhibit 10.(i)to the Registrant's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1995 (File Number 33-19735-A), filed with the
Commission on November 13, 1995 and incorporated herein by reference).
10(h) Form of Option Agreement, dated July 25, 1995, entered into between
GIFH
and each of Paul D. Lockyer and Michael D. Hodges (filed as Exhibit 10.(iii)
to the Registrant's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1995 (File Number 33-19735-A), filed with the Commission on
November 13, 1995 and incorporated herein by reference).
10(i) Employment Agreement between the Bank and Paul D. Lockyer by letter
dated June 5, 1992 (filed as Exhibit 10.3 to the Registrant's
Registration Statement on Form SB-2 (File Number 33-77822), filed with
the Commission on May 27, 1994 and incorporated herein by reference).
10(j) Employment Agreement between the Bank and Michael D. Hodges by letter
dated June 5, 1992 (filed as Exhibit 10(j) to the Registrant's Annual
Report on Form 10-KSB (File Number 33-19735-A), filed with the
Commission on March 31, 1995 and incorporated herein by reference).
10(k) Form of Restricted Stock Grant Agreement, dated July 25, 1995, entered
into between the Company and each of its directors and named executive
officers (filed as Exhibit 10.(ii) to the Registrant's Quarterly Report on
Form 10-QSB for the quarter ended September 30, 1995 (File No. 33-19735-A),
filed with the Commission on November 13, 1995 and incorporated herein by
reference).
10(l)Sales Contract dated November 29, 1995 between 200 Plantation Chase
Company, a Georgia general partnership, and the Registrant.
21 Subsidiaries of GIFH.
27 Financial Data Schedule.
99(a) Amendment No. 2 to Registrant's Registration Statement on Form SB-2
(File
No. 33- 77822), filed with the Commission on April 29, 1995, is incorporated
herein by reference.
B. Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter of the year ended
December 31, 1995.
SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the Exchange
Act, 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)
By: /s/ Gregory S. Junkin
Gregory S. Junkin
Chairman of the Board of Directors
Date: March 30, 1996
In accordance with the requirements of the Exchange Act, this report has
been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:
Signature Title Date
/s/ Gregory S. Junkin Chairman of the Board of March 30, 1996
Gregory S. Junkin Directors; Chief Executive
Officer (principal executive
officer)
/s/ J. Thomas Whelchel Vice Chairman of the Board
J. Thomas Whelchel of Directors March 30, 1996
/s/ Paul D. Lockyer Director;
President, Chief Operating
March 30,1996
Paul D. Lockyer Officer and Chief Financial Officer
/s/ L. McRae Harden Director March 30, 1996
L. McRae Harden
/s/ Michael D. Hodges Director March 30, 1996
Michael D. Hodges
/s/ Russell C. Jacobs, Jr. Director March 30, 1996
Russell C. Jacobs, Jr.
/s/ Claude Kermit Keenum Director March 30, 1996
Claude Kermit Keenum
/s/ Jimmy D. Veal Vice Chairman of the Board of
Jimmy D. Veal Directors; Secretary and Treasurer March 30, 1996
INDEX TO EXHIBITS
Exhibit Sequential
Number Description Page Number
10(l) Sales Contract between 200 Plantation Chase Company
and the Registrant
21 Subsidiaries of GIFH
27 Financial Data Schedule
EXHIBIT 10(l)
SALES CONTRACT
THIS SA2LES CONTRACT is made as of this 29th of November between 200
Plantation Chase Company, a Georgia General Partnership (referred to herein as
"Seller") and Golden Isles Financial Holdings, Inc., a Georgia Corporation
(referred to herein as the "Buyer").
1. Effective Date. The "Effective Date" of this Contract shall be
the date set forth above; provided, however, that this Contact shall be null and
void if Seller does not deliver to Buyer a copy of this Contract, which has been
fully executed by Seller, by hand-delivery or telecopy by 5:00 p.m. on December
8, 1995, in which event all earnest money shall promptly be returned to Buyer.
2. Property. Seller agrees to sell and Buyer agrees to buy the
property described on Exhibit "A" attached hereto, together with all
improvements
thereon (the "Property"), subject to the terms set forth below.
3. Purchase Price; Earnest Money. The purchase price of the Property
is $350,000 payable in cash or by certified funds or wire transfer at closing.
Seller acknowledges receipt of $5,000 by check as earnest money, which is to be
deposited in escrow to be applied against the purchase price at closing or as
otherwise provided herein.
4. Inspection.
(a) Seller's Documents. Within 10 days of the Effective Date, Seller
shall provide Buyer with copies of all legal plats, site plans, topographical
surveys, soil compaction tests, environmental soil assessments and any other
similar items relating to the Property in seller's possession. In
the event that
the sale does not close for any reason, Buyer shall promptly return all such
documents to Seller.
(b) Inspection Contingency. Until 60 days after the Effective Date
hereof (the "Inspection Deadline"), Buyer and Buyer's agents and designees (at
Buyer's sole cost and expense) shall have the right to (i) conduct all
investigations as to title, zoning and legal matters with respect to
the Property
and Buyer's intended use of the Property (including, without limitation,
verifying adequate utility service and obtaining all appropriate permits and
licenses with respect to Buyer's intended use of the Property), (ii) enter the
Property for the purposes of inspecting the Property and conducting all tests,
surveys and studies deemed necessary by Buyer, and (iii) make any other
investigations as Buyer may, in its sole discretion, require to assess the
condition and value of the Property and its suitability for Buyer's intended
purpose. Such investigations shall be during normal business hours on normal
business days; provided, however, that such activities shall not interfere with
the ordinary use of the Property by Seller. In the event Buyer determines that
the Property is not suitable and satisfactory to Buyer for any reason,
in Buyer's
sole and arbitrary discretion, Buyer shall have the right to terminate this
Contract on or before 5:00 p.m. Eastern Standard Time on the Inspection Deadline
date and the earnest money shall promptly be returned to Buyer.
(c) Indemnity. Buyer hereby indemnifies and holds Seller harmless
from and against any and all liabilities, damages, losses, costs and expenses
(including reasonable attorney's fees and expenses), suffered, incurred or
sustained by Seller as a result of, by reason of or in connection with the entry
by Buyer or Buyer's agents or designees onto the Property or the activities of
such parties with respect to the Property. This indemnity shall survive any
termination of this Contract.
5. Representations and Warranties. Seller represents and warrants
to Buyer as follows, which representations and warranties shall survive closing:
(a) Title. Seller has and shall convey to Buyer at closing marketable
title to the Property (meaning a title which a title insurance company licensed
to do business in the state of Georgia will insure at its regular rates, subject
only to standard exceptions which are satisfactory to Buyer, unless otherwise
specified herein).
(b) Environmental. To the best of Seller's knowledge, no portion of
the Property consists of filled land or is classified by the U.S. Corps of
Engineers as "wetlands". The Property does not contain any hazardous wastes,
hazardous substances, hazardous materials, toxic substances, hazardous air
pollutants or toxic pollutants as those terms are used in the Clean Water Act,
the Clean Air Act, the Resource Conservation and Recovery Act, the Toxic
Substances Control Act, the Hazardous Materials Transportation Act and the
Comprehensive Environmental Response Compensation Liability Act, as amended, and
their state and local counterparts ("Environmental Laws"). Seller shall not
permit any such materials to be brought onto the Property or if so brought on or
found located thereon, shall immediately insure that same be immediately
removed,
with proper disposal, and all required environmental cleanup procedures of any
nature shall be diligently undertaken pursuant to all such Environmental Laws.
Seller (with respect to the Property) is in full compliance with all
Environmental Laws and any plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder with respect
to the Property. No proceeding of any nature has been commenced or threatened
or notices received by Seller concerning any violation of any Environmental Law.
6. Closing. In the event that this Contract is not terminated as set
forth above, the sale of the Property shall be consummated within 30 days after
the Inspection Deadline (unless the parties mutually agree otherwise). At
closing, (a) Seller shall deliver to Buyer a general warranty deed conveying
marketable title to the Property, subject only to (i) zoning ordinances
affecting
the Property allowing Buyer's intended use, (ii) general utility, sewer, and
drainage easements of record upon which any improvements to the Property do not
encroach, and (iii) other encumbrances of record which Buyer has
consented to and
which will not be affected by Buyer's intended use of the Property;
and (b) Buyer
and Seller shall deliver all other documents and items (including, without
limitation, an I.R.C. 1445 foreign/non-foreign seller affidavit) and take such
other actions as are needed to close the transaction. Seller shall pay all
liens, loans, and encumbrances due on the Property, as well as all transfer tax
on Seller's deed. Buyer shall pay for all intangible taxes due, if any. Taxes,
insurance premiums and other customary charges shall
be prorated through closing.
7. Covenants.
(a) Cooperation. Seller shall use Seller's best efforts to assist
Buyer, upon Buyer's request, in obtaining any zoning modifications and easements
on or over adjacent property (including, without limitation, easements for
utilities and storm water drainage) in order to enable Buyer to use the Property
as it intends, and shall fully cooperate in granting such easements to Buyer in
the event that Seller owns any real property adjacent to the Property.
8. Remedies.
(a) Default by Buyer. In the event that the closing does not occur
due to the default of Buyer, Seller's sole remedy shall be that the earnest
money
shall be promptly delivered to Seller as full liquidated damages for such
default. The parties acknowledge that Seller's actual damages in the event of
a default by Buyer under this Contract will be difficult to ascertain, and that
liquidated damages represented the parties' best estimate of such damages.
(b) Default by Seller. In the event that the closing does not occur
due to the default of Seller, the earnest money shall be promptly delivered to
Buyer and Buyer shall be entitled to pursue any rights and remedies as may be
provided for or allowed by law or in equity. Seller acknowledges that money
damages may not adequately compensate Buyer in the event of a default by Seller
and, accordingly, that Buyer's remedies shall include, without limitation, the
remedy of specific performance.
9. Special Stipulations. This Contract and the sale of the Property
shall be further subject to the special stipulations, if any, set forth on
Exhibit "B." If there is any conflict between such stipulations and the terms
hereof, the stipulations shall control to the extent of the conflict.
10. Miscellaneous.
(a) Time. Time is of the essence of this Contract.
(b) Interpretation. Seller and Buyer acknowledge that both parties
participated equally in the negotiation of this Contract and that no court
construing this Contract shall construe it more stringently against one party
than against the other. In the event that any court of competent jurisdiction
shall declare any covenant hereof to be invalid, prohibited, or unenforceable,
the remaining covenants and obligations of this Contract shall remain
independent, divisible, and enforceable. Any such unenforceable or prohibited
provision or provisions may be modified in a court of law to the fullest extent
allowed by the law of such jurisdiction so as to allow such provision or
provisions to be written in such a manner and to such an extent as to be
enforceable in such jurisdiction under the circumstances. The headings in this
Contract are inserted for convenience only and are in no way intended to
interpret, define or limit the scope of any provision hereof.
(c) Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been given
and delivered if (i) delivered personally, (ii) if mailed by registered or
certified mail, return receipt requested, postage prepaid (in which event the
second business day after the date of mailing shall be deemed the date such
notice is given), or delivered by a nationally recognized express
courier service
(in which event notice shall be deemed to have been given on the
date of delivery
to such courier service), or (iii) if transmitted by facsimile transmission to
the recipient's facsimile number (in which event the
confirmation of transmission
shall be deemed conclusive evidence of such delivery), in each case as follows:
Buyer:
Golden Isles Financial Holdings, Inc.
2812 Cypress Mill Road
P.O. Box 160
Brunswick, GA 31521
Telephone: (912) 267-9500
Telecopy: (912) 264-9226
Seller:
200 Plantation Chase Company
200 Plantation Chase
St. Simons Island, GA 31522
(d) Assignment; Binding Effect. This Contract may be assigned by
Buyer to any other party without the consent of Seller, provided that Buyer's
intended use shall not materially change. This Contract shall inure to the
benefit of and be binding upon the parties and their respective heirs,
representatives, successors and assigns.
(e) Entire Agreement; Amendment; Waiver. This Contract contains
the entire agreement between the parties hereto relating to the matters
provided herein. This Contract shall not be modified or amended in any manner
except by an instrument in writing executed by the parties. Any term or
condition of this Contract may be waived at any time by the party which is
entitled to the benefit thereof, but only if such waiver is evidenced in
writing signed by such party. No waiver of any breach shall be deemed a
waiver of any preceding or succeeding breach, nor of any other breach of a
provision contained in this Contract.
(f) Governing Law. This Contract shall be governed by and
construed in accordance with the laws of the State of Georgia.
(g) Counterparts. This Contract may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Contract to be executed
as of the respective dates set forth below.
BUYER:
GOLDEN ISLES FINANCIAL INDIVIDUAL SELLER(S):
HOLDINGS, INC.
By:
Paul D. Lockyer
Date: December , 1995
President
Date: November 29, 1995
Date: December , 1995
Date: December , 1995
EXHIBIT A
ALL that certain lot, tract or parcel of land situate, lying and being on St.
Simons Island, in Glynn County, Georgia, and being UNIT NUMBER 200 OF
PLANTATION CHASE CONDOMINIUM, as shown on that certain location plat prepared
by Joe Biletzskov, Georgia Registered Surveyor Number 1672, recorded in
Condominium Plat Cabinet 19-A, Plat No. 1229, in the Office of the Clerk of
Superior Court of Glynn County, Georgia. The Unit is a part of the property
described in "Exhibit A" to the Declaration of Condominium for Plantation
Chase Condominium dated May 5, 1986, and recorded in Deed Book 27-K, page 461,
et seq., aforesaid records.
The Unit includes an undivided 33.333 percent interest in the common elements
of Plantation Chase Condominium, (as such common elements are defined in said
Declaration), together with all of the right, title and interest of Grantor in
said Unit and the appurtenances thereto under said Declaration.
The above-described location plat, the Declaration of Condominium, and any
recorded amendments thereto are incorporated herein by reference and made a
part hereof.
EXHIBIT B
SPECIAL STIPULATIONS
1. This contract is contingent upon Golden Isles Financial Holdings, Inc.'s
ability to secure a 15 year fixed rate loan at not more than 10% interest in
an amount of not less than $280,000.
2. At closing Seller will provide Buyer with a certification from a local
pest control company which states property is completely free from any type of
insect infestation.
3. Seller agrees to repair any rotted wood existing on exterior of subject
building prior to closing.
4. This contract is subject to Buyer's ability to obtain an appraisal from
a local certified appraiser which substantiates the building's value to be at
least $350,000.
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
The First Bank of Brunswick,
a Georgia corporation
First Bank Mortgage Corporation,
a Georgia corporation
First Credit Service Corporation,
a Georgia corporation.
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<PERIOD-END> DEC-31-1995
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<FED-FUNDS-SOLD> 5,010,000
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0
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<LOAN-LOSSES> 382,257
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,305,172
<INCOME-PRETAX> 25,625
<INCOME-PRE-EXTRAORDINARY> 12,897
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,897
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
<YIELD-ACTUAL> 5.90
<LOANS-NON> 410,912
<LOANS-PAST> 8,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 483,000
<ALLOWANCE-OPEN> 656,231
<CHARGE-OFFS> 338,681
<RECOVERIES> 18,250
<ALLOWANCE-CLOSE> 718,057
<ALLOWANCE-DOMESTIC> 688,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 30,057
</TABLE>
