As filed with Securities and Exchange Commission on May 1, 1996
Registration No. 33-77822
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Post-effective)
Amendment No. 3 to
FORM SB-2
REGISTRATION STATEMENT
Under the
SECURITIES ACT of 1933
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
(Name of small business issuer in its charter)
Georgia
(State or other jurisdiction of
incorporation or organization)
6021
(Primary Standard Industrial
Classification Code Number)
58-1756713
(IRS Employer Identification No.)
200 Plantation Chase, St. Simons Island, Georgia 31522
(912) 638-0667
(Address, including zip code, and telephone number, including
area code, of principal executive offices and principal place of business)
Paul D. Lockyer
200 Plantation Chase
St. Simons Island, GA 31522
(912) 638-0667
(Name, address, including zip code, and
telephone number, including area code, of
agent for service)
COPY TO:
Daniel D. Dinur
Dinur & Associates, P.C.
One Lakeside Commons
990 Hammond Drive
Suite 760
Atlanta, GA 30328
(770) 395-3170
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. x
GOLDEN ISLES
FINANCIAL HOLDINGS, INC.
896,968 Shares of Common Stock
Issuable Pursuant To the Exercise of Class A Warrants
Golden Isles Financial Holdings, Inc. ("GIFH") is a diversified
financial services company, whose business is presently conducted by its
wholly-owned subsidiaries, The First Bank of Brunswick, First Bank Mortgage
Corporation, and First Credit Service Corporation. The shares of GIFH's no
par value Common Stock (the "Common Stock") being offered will be issued upon
the exercise of GIFH's Class A Warrants ("Warrants"). The Warrants were
purchased by the Warrant holders in the secondary public offering of up to
1,538,462 units, each unit consisting of one share of Common Stock and one
Warrant (a "Unit") initiated by GIFH on May 31, 1994 and concluded on May 11,
1995 (the "1994 Public Offering"). Each Warrant expires on May 31, 1998 and
entitles the holder to purchase an additional share of Common Stock ("Warrant
Share") at a price of $7.25 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, subject to adjustment and to certain securities law restrictions.
Any holder who does not exercise his or her Warrants prior to their expiration
will forfeit the right to purchase the underlying shares of Common Stock. The
Warrants are not detachable or transferable separate from the Common Stock in
the Unit. See "THE OFFERING." There is no active public market for the
securities offered. See "USE OF PROCEEDS" for information related to the
determination of the offering prices.
The securities offered hereby involve significant risk. See "Risk Factors."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC") OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SEC OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price Underwriting Fees and Proceeds
To Public Commissions to Company (1)
Per Warrant Share
Upon Exercise $9.50 (2) $0 $9.50
Total for Warrant
Shares Upon Exercise $8,521,196 $0 $8,521,196
(1) Assuming no fees or commissions are paid and allocating all expenses of
the 1994 Public Offering and of this Offering to the proceeds of the 1994
Public Offering.
(2) Assuming all Warrant Shares are sold in the third year of the Warrants.
Per Warrant Share price and gross proceeds for the sale of all the Warrant
Shares in the first year would be $7.25 and $6,503,018, respectively, and in
the second year $8.25 and $7,399,986 respectively.
The date of this Prospectus is May 1, 1996.<PAGE>
AVAILABLE INFORMATION
GIFH is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith,
files periodic reports and other information with the Securities and Exchange
Commission (the "SEC"). Such reports and other information may be inspected
and copied at the public reference facilities maintained by the SEC at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's
Regional Offices in New York (Room 1100, 26 Federal Plaza, New York, New York
10007), and Chicago (Room 1204, 219 South Dearborn Street, Chicago, Illinois
60604). Copies of these materials may be obtained from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
This Prospectus does not contain all of the information set forth in
GIFH's
Registration Statement, as amended, (the "Registration Statement") of which
this Prospectus is a part, including exhibits thereto, which has been filed
with the SEC in Washington, D.C. For further information with respect to
GIFH, the Units, the Warrants and the Common Stock, reference is hereby made
to the Registration Statement and the exhibits thereto. Copies of the
Registration Statement and the exhibits thereto may be obtained, upon payment
of the fee prescribed by the SEC, or may be examined without charge at the
offices of the SEC.
SUPPLEMENTAL LITERATURE
In addition to and apart from this Prospectus, GIFH will utilize certain
supplemental literature in connection with the offering of the Warrant Shares.
This literature may include a brochure describing GIFH and its subsidiaries;
Annual Reports of GIFH's prior years; a brochure, audiovisual materials and
taped presentations highlighting and explaining various features of this
offering; letters to existing shareholders discussing highlights of this
offering; and articles and publications concerning the financial services
industry, the commercial banking industry, the consumer finance industry and
the mortgage loan industry. GIFH may also respond to specific questions from
prospective investors. Business reply cards, introductory letters and seminar
invitation forms may be sent to prospective investors. Notwithstanding the
foregoing, the offering is made only by means of this Prospectus. Except as
described herein, GIFH has not authorized the use of other supplemental
literature in connection with the offering. Although the information
contained in such literature does not conflict with any of the information
contained in this Prospectus, such material does not purport to be complete,
and should not be considered as part of this Prospectus or the Registration
Statement of which this Prospectus is a part, or as incorporated in this
Prospectus or the Registration Statement by reference or as forming the basis
of the offering of the shares described herein.
REPORTS TO SHAREHOLDERS
Effective January 11, 1996, the Common Stock, Units and Warrants were
registered with the SEC under Section 12 of the Exchange Act. As a result,
GIFH is required to furnish annual reports to its shareholders, including
financial statements that have been audited and an opinion thereon rendered by
an independent certified public accountant. GIFH's fiscal year ends on
December 31.
GIFH is and has been since 1989 subject to the reporting requirements of
the Exchange Act. The reports filed with the SEC include annual reports on
Form 10-KSB and quarterly reports on Form 10-QSB. Beginning in 1996, GIFH is
also subject to the proxy disclosure rules of Section 14 of the Exchange Act
and the insider trading rules of Section 16 of the Exchange Act.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the financial
statements and notes thereto appearing elsewhere in this Prospectus.
The Company
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. As a bank holding company, GIFH is subject to
regulation by the Board of Governors of the Federal Reserve System under the
Bank Holding Company Act of 1956.
As a bank holding company GIFH has been able to create and expand a
full-service financial company anchored by a commercial bank. As a holding
company, GIFH can (a) assist the Bank in maintaining its required capital
ratios and loan money or infuse capital to its other subsidiary companies as
needed, (b) issue stock for cash, property or services and in reorganization
transactions and (c) engage in certain non-banking activities which the
Federal Reserve Board has deemed to be closely related to banking, such as:
making and servicing consumer loans, operating an industrial bank or loan
company, performing fiduciary services, leasing personal property, providing
investment and financial advice, providing data processing and data
transmission services, acting as an insurance agent for certain types of
credit insurance and for property and casualty insurance sold in connection
with extensions of credit, underwriting credit insurance directly related to
the holding company system, providing courier services, providing management
and consulting services for financial institutions, conducting mortgage
banking operations, performing real estate appraisals, providing brokerage
services which do not include underwriting or provision of investment advice
or research services, and selling money orders, traveler's checks and U.S.
savings bonds.
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 1993, GIFH established First Bank Mortgage Corporation ("FBMC") and
First Credit Service Corporation ("FCC"), as wholly-owned subsidiaries. FBMC
has engaged in originating and, since 1995, in making and acquiring mortgage
loans. FCC has engaged in originating, making, acquiring and servicing
consumer loans, as well as offering credit-related insurance on such loans.
Unlike the Bank, FBMC and FCC each may and has established offices outside
Glynn County and outside the State of Georgia without federal regulatory
approvals. In the second half of 1995 and early 1996, using the proceeds from
the 1994 Public Offering, FBMC and FCC have signficantly expanded their
respective business; FBMC currently operates four branch offices and FCC
currently operates five branch offices.
On April 17, 1996, GIFH's Common Stock and Units became registered for
trading on the NASDAQ SmallCap Market System under the symbols "GIFH" for the
Common Stock and "GIFHU" for the Units.
The corporate structure of GIFH and its subsidiaries is currently as
follows:
Golden Isles Financial Holdings, Inc.
:
:
:
-----------------------------------------------------------
: : :
: : :
First Bank Mortgage The First Bank Of First Credit
Corporation Brunswick Corporation
It is the intention of GIFH's management in the future to continue to
establish or acquire other businesses involving commercial banking, mortgage
origination and consumer finance, as well as other financial services if, in
the opinion of management, such businesses offer economic and synergistic
opportunities for GIFH. See "GIFH AND ITS SUBSIDIARIES - Future Business."
Risk Factors
An investment in GIFH is speculative and involves certain risks. GIFH
and the Bank operate in a highly regulated environment. FCC's and FBMC's
operating environments are not as regulated. GIFH derives its income
primarily from dividends from its subsidiaries, and its subsidiaries face
significant competition in their service areas and are affected significantly
by economic conditions over which they have no control. The Common Stock has
only very recently been registered for trading on the NASDAQ SmallCap Market
System and an active market for the securities being offered has yet to be
developed. As a result, the offering price of the Warrant Shares may not
reflect current value. There may be additional risks in connection with this
investment. GIFH has sought to identify material risks of which it is aware
in its discussion under "Risk Factors" elsewhere in this Prospectus.
Prospective investors should carefully consider the matters discussed
thereunder.
The Offering
Securities Offered:
896,968 shares of Common Stock
Offering Price:
$7.25 per share for the period ending May 31, 1996; $8.25 per share for the
year ending May 31, 1997; and $9.50 per share for the year ending May 31,
1998, in each case subject to adjustment and certain securities law
restrictions.
Shares Outstanding Prior to the Offering
2,337,244 shares
Shares to be Outstanding after the Offering
3,234,212 shares (assuming all Warrants are exercised)
Use of Proceeds
GIFH will use the proceeds of this offering: (1) for the working capital
needs, regulatory capital needs and expansion needs of the Bank, FBMC, and
FCC; and (2) for acquisitions, establishment of new businesses and severally
enhancing the capital and strength of GIFH. See "USE OF PROCEEDS."
RISK FACTORS
An investment in the securities offered hereby involves certain risks. Prior
to making an investment decision with respect to the shares, prospective
investors should carefully consider, along with the other matters discussed in
this Prospectus, the following risk factors:
Regulation
GIFH and the Bank operate in a highly regulated environment and are subject to
supervision by several governmental regulatory agencies, including the Georgia
Department of Banking and Finance, the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), the Federal Deposit Insurance
Corporation ("FDIC"), and the SEC. FBMC and FCC also are regulated by the
Federal Reserve Board. Laws and regulations currently applicable to GIFH and
its subsidiaries may be changed at any time, and there is no assurance that
such changes will not adversely affect the business of GIFH and its
subsidiaries. See "GIFH AND ITS SUBSIDIARIES -- Supervision and Regulation."
Competition
In the conduct of the various aspects of its banking business, the Bank
encounters strong competition in Glynn County and St. Simons Island, its
service area, from other commercial banks, savings institutions, credit
unions, mortgage banking firms, consumer finance companies, securities
brokerage firms, money market mutual funds and other financial institutions.
A number of these competitors are well established in the area. Some of them
have substantially greater resources and lending limits than the Bank. In
addition, the Georgia Legislature has passed legislation that more freely
permits interstate banking, and the United States Congress adopted federal
legislation providing for phased-in authority for banking organizations to
acquire banks across state lines and for the acquisition or establishment of
interstate branches. Although not entirely clear, the combined effect of such
legislation is likely to increase competition in the commercial banking
industry in the Bank's service area.
In its current service areas FCC faces significant competition from
numerous other existing consumer finance companies, as well as credit unions,
banks and savings and loan associations. The degree of competition
encountered by FBMC in its business varies depending on the particular line of
mortgage banking business and the particular service area. In general terms,
however, FBMC faces significant competition in most of its lines of business
and service areas. See "GIFH AND ITS SUBSIDIARIES -- Competition."
Economic Conditions
The success of GIFH and its subsidiaries depends, to a significant
extent, upon economic and political conditions, both local and national. Like
all regulated financial institutions, the Bank, FBMC and FCC are affected by
monetary policies implemented by the Federal Reserve Board and other federal
instrumentalities. A primary instrument of monetary policy employed by the
Federal Reserve Board is the restriction or expansion of the money supply
through open market operations. This instrument of monetary policy frequently
causes volatile fluctuations in interest rates, and it can have a direct,
adverse effect on the operating results of financial institutions. Borrowing
by the United States government to finance the government debt may also cause
fluctuations in interest rates and have similar effects on the operating
results of such institutions. See "SUPERVISION AND REGULATION." Conditions
such as inflation, recession, unemployment, high interest rates, short money
supply and other factors beyond the control of GIFH and its subsidiaries may
adversely affect the Bank's deposit levels and loan demand as well as the
demand for services of FBMC and FCC and, therefore, the earnings of the Bank
and, to a large extent, GIFH. Although management of GIFH believes that the
diversified economy of a significant part of the service areas provides the
opportunity for favorable economic development, there is no assurance that
favorable economic development will occur or that management's expectations of
corresponding growth will be achieved.
Pricing and Absence of a Developed Trading Market
GIFH has in effect a registration statement with the SEC to register the
sale of the shares of Common Stock under federal securities laws. The shares
of Common Stock (as well as the Units) have very recently been registered for
trading on the NASDAQ SmallCap Marketing System. As a result, there is the
potential for the development in the future of a trading market on the
over-the-counter market for the Common Stock.
There is, however, no assurance that
such development will indeed occur. The exercise price of the Warrants was
determined by GIFH as part of the 1994 Public Offering and was based on
consideration of a variety of factors. See "THE OFFERING - Determination of
the Public Offering Price." While GIFH believes it has been reasonable in its
approach to pricing, there can be no assurance that the offering price
reflects current value.
Dividend Policy
GIFH has no plans to pay any cash dividends to its shareholders in the
foreseeable future. It will be the policy of GIFH's Board of Director to
retain any earnings for the time necessary for the planned growth of GIFH and
to ensure the success of its operations and the operations of its
subsidiaries. As a bank holding company, GIFH is subject to legal and
regulatory restrictions on the payment of dividends. The Board has resolved
not to pay dividends until at least all start-up losses of the Bank are
recovered and a cumulative profit has been made and both GIFH and the Bank are
cumulatively profitable on a consolidated basis.
Operating History of Non-Banking Subsidiaries
GIFH's non-banking subsidiaries' operations were subject to risks
inherent in the establishment of new businesses and were not profitable in
1994. In 1995, because of the costs of expansion and their inability to grow
business fast enough to cover those additional costs, the non-banking
subsidiaries incurred even greater losses. In addition, these subsidiaries
are engaging in businesses which are highly competitive, and they may incur
significant expenses and continue not to be profitable, if ever, for several
more years.
Adequacy of Loan Loss Reserve
Banks in competitive markets are susceptible to risks associated with
their loan portfolios. The Bank's loan customers may include a
disproportionate number of individuals and entities seeking to establish a new
banking relationship because they are dissatisfied with the amount or terms of
credit offered by their current banks, or they may have demonstrated less than
satisfactory performance in previous banking relationships. Although
management is aware of, and has been taking the steps it believes are
necessary to protect the Bank from, the potential risks associated with
extending credit to customers with whom the Bank has not had a prior lending
relationship, there can be no assurance that the Bank will not incur excessive
loan losses.
Use of Proceeds
The proceeds are not allocated at this time to specific needs of GIFH or
any of its subsidiaries. Within the discretion of GIFH's management, subject
to applicable law and regulations, GIFH may use such proceeds, among other
uses, to inject additional capital into the Bank and its other subsidiaries,
pay holding company expenses, fund permissible holding company activities and
expand the businesses of its subsidiaries by acquiring or opening other
financial services businesses. There is no assurance that in the exercise of
such discretion management will make choices that will ultimately be proven to
have been the most appropriate among possible choices.
THE OFFERING
General
GIFH is offering for sale 896,968 shares of Common Stock issuable
pursuant to the exercise of Warrants. The Warrant Shares are being offered by
GIFH on a best efforts basis through its officers, who will receive no
commissions or other remuneration in connection with their sales efforts.
Purchase of Shares Through Exercise of Warrants
Common Stock issuable pursuant to the exercise of Warrants may be
purchased from GIFH through the proper exercise of the Warrants by the
registered holder thereof in accordance with the terms and conditions of the
warrant certificate and as described in this Prospectus. Certificates
representing shares of Common Stock purchased by exercise of Warrants will be
delivered promptly to the warrant holder after proper exercise.
Determination of the Public Offering Price
On April 17, 1996, GIFH's Common Stock and Units became registered for
trading on the NASDAQ SmallCap Market System. However, the price for shares
of Common Stock underlying the Warrants was set by GIFH at the time of the
offering of Units which included the Warrants based on the history of
operations of the Bank, earnings of the Bank, prospective earnings of the
Bank, FBMC and FCC, the market prices of and demand for securities of
institutions engaged in similar activities, and on trades of stock at the time
known to management.
As of April 1, 1996, 2,337,244 shares of Common Stock (including shares
of Common Stock held in the form of Units) were issued and outstanding to
1,054 holders of record. In addition, 190,354 shares were subject to options
granted to officers and key employees of the Bank.
RESTRICTIONS ON FUTURE SALE OF UNITS AND SHARES
Upon completion of this offering of Warrant Shares, and assuming all of
the Warrants are exercised there will be 3,234,212 shares of Common Stock
issued and outstanding. The 897,230 shares of Common Stock issuable pursuant
to the exercise of the Warrants (including 262 shares already so issued) will
be immediately freely tradeable without restriction or further registration
under the Securities Act of 1933, as amended (the "Securities Act"), except
for any such securities purchased in this offering by an "affiliate" of GIFH
(in general, a director, officer or principal shareholder). The 2,220,791
shares of Common Stock (adjusted for the 25% stock split issued on September
30, 1993 and including the 897,230 shares which with the Warrants are
tradeable as Units) previously issued under effective registration statements
already are freely tradeable in the same manner. Securities purchased from an
affiliate of GIFH in a private transaction, as well as securities purchased
directly from GIFH in a private transaction, such as through the exercise of
an option or an "Organizer Warrant" granted in connection with GIFH's initial
registered public offering, would be "restricted securities" under Rule 144.
As of April 1, 1996, 44,375 shares of Common Stock have been sold by GIFH
pursuant to the exercise of options and organizer Warrants (as adjusted for
the September 1993 25% stock split) and 71,830 shares of Common Stock have
been issued under restricted stock grants. These restricted securities and
all securities held by affiliates are subject to resale restrictions under the
Securities Act, but may be eligible for sale without registration in
accordance with the provisions of Rule 144. The Units and the shares of
Common Stock underlying the Warrants would not be restricted securities when
purchased under an effective registration statement.
Restricted Securities under Rule 144
Under the Securities Act, the holder of "restricted" securities may not
sell those securities without registration of such sale under the Securities
Act, unless an exemption from registration is available. Rule 144 provides
such an exemption. Subject to the satisfaction of certain other conditions,
such as the availability to the public of certain current information about
GIFH, a person, including an affiliate of GIFH, who has beneficially owned
restricted shares of Common Stock for at least two years is entitled to sell
under Rule 144, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of
Common Stock, or if the Common Stock were ever quoted on NASDAQ or listed on
an exchange, the average weekly trading volume during a specified four-week
period preceding the sale. A person who is not an affiliate of GIFH and who
has beneficially owned restricted shares of Common Stock for at least three
years is entitled to sell such shares under Rule 144 without regard to the
volume limitations or public information requirements described above.
Affiliates may sell nonrestricted securities under Rule 144 without regard to
the length of their holding period but subject to the volume limitations and
other restrictions.
Rule 144 also requires that the securities must be sold in "brokers'
transactions," as defined in the Securities Act, and the person selling the
securities may not solicit orders or make any payment in connection with the
offer or sale of securities to any person other than the broker who executed
the order to sell the securities. This requirement may make the sale of the
Common Stock by affiliates of GIFH pursuant to Rule 144 difficult if no active
trading market develops in the Common Stock. The requirement does not apply
to sales of restricted securities held by non-affiliates for at least three
years.
The Warrants are not exercisable unless, at the time of exercise, GIFH
has a current prospectus covering the shares of Common Stock issuable upon
exercise of the Warrants and such shares have been registered, qualified or
deemed to be exempt under the securities laws of the state of residence of the
exercising holder of the Warrants. GIFH will use its best efforts to have all
the shares of Common Stock issuable upon exercise of the Warrants registered
or qualified on or before the exercise date and to maintain a current
prospectus relating thereto until the expiration of the Warrants. However,
there is no assurance that it will be able to do so, because purchasers in
jurisdictions in which the Units are not registered or otherwise qualified for
sale may buy or have bought Units in shareholder transactions after the 1994
Public Offering or may move to jurisdictions in which the shares underlying
the Warrants are not registered or qualified during the period that the
Warrants are exercisable. In this event, GIFH would be unable to issue shares
to those persons desiring to exercise their Warrants unless and until the
shares could be qualified for sale in jurisdictions in which such purchasers
reside, or an exemption from such qualification exists in such jurisdictions,
and Warrant holders would have no choice but to attempt to sell the Units in a
jurisdiction where such sale is permissible or allow the Warrants to expire
unexercised.
USE OF PROCEEDS
The proceeds of this offering will be available to GIFH immediately and
will be allocated among the subsidiaries of GIFH and retained for general
corporate purposes. For instance, FCC currently funds its operations through
short-term borrowing. Proceeds from the exercise of the Warrants could be
used to inject capital into FCC, replacing the debt as a funding source, and
enhance FCC's ability to borrow money from lenders to fund its operations on
terms more favorable than those which are currently available to it.
Moreover, GIFH intends to seek to acquire one or more commercial banks in
growing service areas and with operations complementary to the Bank, as well
as to enter other non-banking financial services activities. See "GIFH AND
ITS SUBSIDIARIES - Future Business."
CAPITALIZATION
The following tables set forth the capitalization of GIFH at December
31, 1995 and the pro-forma capitalization of GIFH as adjusted to give effect
to the exercise of all of the Warrants.
Shareholders' Equity: December 31, 1995 As Adjusted
Common stock
50,000,000 shares authorized;
2,336,982 shares outstanding (1);
3,234,212 shares outstanding
after exercise of Warrants (1,2) $ 1,094,338 $ 1,094,338
Paid-in-capital(2) 9,849,147 18,372,832
Retained earnings/(deficit) (140,182) (140,182)
Unrealized gain, securities
available for sale (2,513) (2,513)
Total capital $10,800,790 $19,324,475
(1) Does not include 134,078 shares subject to options, and 183,337 shares
subject to option plans.
(2) Assumes the exercise of all Warrants at $9.50 the third year. Does not
reflect Warrants to purchase 262 shares having been exercised at a price of
$7.25 per share after December 31, 1995, but before the date of this
prospectus.
DILUTION
At December 31, 1995 GIFH had a net tangible book value of $10,800,790, or
$4.62 per share. Net tangible book value per share represents the amount of
total tangible assets less liabilities, divided by 2,336,982, the number of
shares of Common Stock outstanding at December 31, 1995. The following table
illustrates the per share dilution resulting from the sale of Common Stock as
a result of the excercise of all Warrants, assuming all were exercised during
the second year. Note also that "dilution" is the difference between the
Warrant exercise price and the net tangible book value per share after giving
effect to the offering.
Public offering price per share $8.25
Net tangible book value per share, before offering 4.62
Increase attributable to sale of shares 1.01
Net tangible book value per
share, after offering 5.63
Dilution to new investors $2.62
Note that the net tangible book value per share, before Warrant exercise, is
based on GIFH's December 31, 1995 book value. Increases or decreases which
may occur in GIFH's net book value for the period until the Warrants are
exercised were not considered in the above table since they are not known.
The exercise price of the Warrants through May 31, 1996 is $7.25. If all of
the Warrants were exercised by that date, then dilution to investors would be
$1.90 per share. The exercise price of the Warrants in the third year is
$9.50. If GIFH's net book value did not change during the term of the
Warrants, and if all of the Warrants were exercised in the third year, then
dilution to investors would be $3.52 per share. Note also that Warrants to
purchase 262 shares were exercised at a price of $7.25 per share after
December 31, 1995, the date upon which the foregoing dilution table is
calculated, but the effect of that transaction would not cause a material
change in the above presentation of dilution.
GIFH AND ITS SUBSIDIARIES
General
Golden Isles Financial Holdings, Inc. was organized on September 8,
1987, under the Georgia Business Corporation Code as a bank holding company
for the purpose of engaging in those financial services activities permitted
by the Federal Reserve Board which would ultimately allow GIFH to become a
full-service financial services company. GIFH's first operating activity upon
the completion of its initial public offering of common stock in January,
1990, was to acquire 100% of the capital stock of The First Bank of Brunswick,
which it organized. The Bank was chartered under the laws of the State of
Georgia in 1990, and opened for business on July 2, 1990. GIFH's business
plan was to build the Bank as the anchor of the full-service financial
services company that management intended to create. From the time the Bank
opened for business to date, its performance has exceeded the original
projections set forth in its charter application in terms of asset, deposit
and loan growth.
As a result of the Bank's performance, GIFH was in a position, by 1993,
to take the second and third steps in the business plan referenced above -
namely, to add two additional operating businesses which could add income
streams to GIFH and create substantial cross-selling opportunities of various
financial products among GIFH's subsidiaries.
Established in September 1993, FBMC engages in the mortgage brokerage
and banking business, originating, making, acquiring and servicing mortgage
loans, while FCC engages in originating, making, acquiring and servicing
consumer loans, as well as offering credit related insurance on such loans.
In the performance of its principal role of supervising and coordinating
the activities of its subsidiaries and of providing the subsidiaries with
capital, GIFH conducted the 1994 Public Offering. The net proceeds of such
offering (consisting of approximately $5,465,000) have been used, partially,
to expand the business of the subsidiaries, with the remainder available for
future expansion. See "GIFH AND ITS SUBSIDIARIES-Future Business".
In April 1996, GIFH entered into a so-called "networking arrangement"
with Royal Alliance Associates, Inc. ("Royal Alliance"), a registered
broker-dealer with headquarters in New York. Under
the arrangement, Royal Alliance
will be allowed to conduct a securities investment advisory business in
designated areas of GIFH's facilities in return for lease payments to GIFH
computed as a function of the commission and other income generated by Royal
Alliance in such facilities.
The executive offices of GIFH are located at 200 Plantation Chase, St.
Simons Island, Georgia 31522.
The First Bank of Brunswick
The Bank was chartered under the laws of the State of Georgia in 1990
and opened for business that same year. The Bank operates a main banking
office at 2812 Cypress Mill Road, Brunswick, Georgia 31520. In 1995, the Bank
opened a second full-service branch in St. Simons Island, Georgia. As of
December 31, 1995, the Bank had total assets of $80.1 million and total
deposits of $68.9 million.
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. All of the services which the Bank
offers are generally offered by other full service banks.
First Bank Mortgage Corporation
FBMC was incorporated in Georgia on August 12, 1993. FBMC's main office
is on St. Simons Island, Georgia, and it also operates at three additional
branch locations in Savannah, Georgia, Blairsville, Georgia and Memphis,
Tennessee. FBMC is currently engaged in the mortgage banking business,
including: (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.
In December 1995, FBMC received final approval from the Federal National
Mortgage Association ("Fannie Mae") to conduct confirming mortgage business
with Fannie Mae. On April 18, 1996, FBMC has received a commitment from Bank
United of Texas FSB for a $30 million line of credit. Both of these events,
management believes, have the potential to significantly enhance the volume of
FBMCs business.
First Credit Service Corporation
FCC was incorporated in Georgia on August 26, 1993. FCC operates out
of five offices in Brunswick, Kingsland, Savannah, Waycross and Martinez,
Georgia. In addition to making, originating and servicing consumer loans
secured by real estate, automobile titles and personal property, FCC also
serves as agent or broker for insurance directly related to the extension of
credit. On March 14, 1995, FCC obtained a line of credit from BankAmerica
Business Credit, Inc. (an affiliate of Bank of America NT&SA), which is
currently in the amount of $8.5 million (the "Line of Credit"), to use for
working capital purposes. The Line of Credit is guaranteed by GIFH, with such
guarantee being secured by a lien on the shares of the Common Stock of FCC
owned by GIFH.
Facilities
GIFH's executive offices 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.
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.
Employees
As of March 1, 1996, GIFH and its subsidiaries employed 92 full-time
personnel and six part-time personnel. There are no collective bargaining
agreements covering any of the employees.
Service Area
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.
Competition
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. There
are five commercial banks in the Bank's retail market area, three of which are
owned by holding companies located outside Glynn County. In addition, the
Bank competes 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. However, effective September 29, 1995,
under the Federal Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 (the "Riegle-Neal Act"), 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 addition, on April 8, 1996, the Governor of
the State of Georgia signed into law a measure under which Georgia based banks
can establish de neve branches in up to three additional counties thus
repealing the branch banking prohibition which existed in Georgia for several
decades.
In general terms, federal and state banking laws and initiatives enacted
or currently being considered, 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 national 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 also
national 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. Indeed, in this line of business, FBMC
has made penetrations into several Southeastern states in addition to Georgia,
namely, North Carolina, South Carolina, Tennessee, Florida, Mississippi and
Arkansas. 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 futurein a "service area", which
includes all of the Southeastern states.
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 in early May 1996. The ability to make consumer loans under a GILA
license is a significant competitive advantage, which FCC intends to exploit
to its fullest potential.
Future Business
In the second half of 1995 and thus far in 1996, GIFH has deployed the
capital raised through the 1994 Public Offering in an aggressive expansion of
the business of all three of its subsidiaries. Specifically, the Bank opened
a new branch on St. Simons Island and FCC opened new branch offices in
Savannah, Waycross (Ware/Pierce County) and Martinez (Columbia County), a
suburb of Augusta, all in Georgia. FBMC increased GIFH's penetration of
coastal and Southeast Georgia by opening branch offices in Blairsville, as
well as in Savannah. In addition to strengthening its franchise as a
full-service financial services company in coastal and Southeast
Georgia, GIFH has
also, through FBMC, made initial inroads into the Southeastern states' market
as a whole by acquiring an existing mortgage banking operation in Memphis,
Tennessee, and aggressively expanding its correspondent bank mortgage
business--where FBMC purchases, processes, underwrites and funds mortgage
loans originated by rural banks in Arkansas, Tennessee, North Carolina, as
well as Georgia--and warehouse line of credit business.
These efforts are consistent with GIFH's strategy to build a solid base
of branch offices delivering a variety of financial services throughout
coastal and Southeast Georgia and, at the same time, in carefully selected
situations, to take advantage of "niche" opportunities to make a penetration
into the Southeastern states' market as a whole. These efforts are also
consistent with GIFH's strategy to emphasize the expansion of its non-banking
financial services businesses which generate non-interest fee income.
Management believes that it would be advantageous for GIFH to continue
the existing aggressive expansion program--notwithstanding the investment in
personnel and facilities and the resulting negative effect on net earnings
such expansion may cause--for the next twelve to eighteen months. Legislative
and economic changes affecting the Southeastern United States, a region which
is projected to continue to lead the nation in the rate of economic growth for
the foreseeable future, should continue to cause consolidation in the
financial services industry in this region during such period. During a
period of consolidation, opportunities to expand by acquisition of an existing
business or filling a void left by the exit of an existing business are more
likely to occur than in a stable environment and management believes that GIFH
will have increased opportunities in this regard. Although management has not
targeted a specific bank or a specific region, legislative changes make it
more likely than before that an expansion might include the acquisition of one
or more commercial banks whose franchises are complementary to the Bank's,
either geographically or in terms of other synergies.
In summary, management continues to believe that several separate and
distinct entities offering various financial products to a broad range of
consumers not only creates greater economic potential for GIFH, but also
eliminates some of the risk of a particular financial product falling out of
consumer favor. Management believes that the proceeds of this offering will
increase GIFH's chances in reaching the goal of operating as a financial
services conglomerate, with assets of $200 million, or more than double its
current size, and beyond.
SUPERVISION AND REGULATION OF GIFH AND ITS SUBSIDIARIES
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 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, 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 <PAGE>
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, Georgia legislation, which has very
recently been 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 could result in increased competition in
the Bank's market area.
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 "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS.".
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 capitalsufficient 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.
Effect of Governmental 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.
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 to encourage
certain employees of GIFH and its subsidaries to help in the success of GIFH's
1994 Public 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, GIFH paid $2,500 to
reimburse the Commissioner for a portion of its costs incurred in this
proceeding.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Discussion of the financial condition and results of operations of the
consolidated Company should be read in conjunction with GIFH's Consolidated
Financial Statements, related notes and statistical information 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 fu6nds 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 20 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 $391,2 $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.
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.
STATISTICAL INFORMATION
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 spread(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.<PAGE>
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
deposits $ 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
<PAGE>
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
Deposits
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
Loan Portfolio
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 $10,16 $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
Total
$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.
Summary of Loan 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 - construction 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%
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.
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.
<PAGE>
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%
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 --% - - %
1 Cash dividends were not declared in either 1995 or 1994.
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.
MANAGEMENT
Directors and Executive Officers
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 (60) 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 Bank since February 1990, and a director of FCC 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 Bank since June 1990. He also has been Senior Vice
President of the Bank since June 1990 with principal responsibilities for
Brunswick-based loan production.
Russell C. Jacobs, Jr. Mr. Jacobs has been a director of GIFH since
July 1988, a director of the Bank since February 1990, and a director of FBMC
since July 1993. He also has been a Vice Chairman of the Bank since July
1995. 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 Bank since February 1990,
and Chairman and Chief Executive Officer and a director of both FCC and FBMC
since July 1993. Mr. Junkin has been involved in the investment business for
thirt-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 that company, which was sold to a subsidiary of American
Express Company in 1982. Mr. Junkin was Vice Chairman of The Balcor Company
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, a director of the Bank since February 1990, and a director of FCC since
July 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
FCC and FBMC 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 has been a Vice Chairman of the Bank since July
1995, a director of the Bank since July 1990, and Secretary/Treasurer and a
director of both FCC and FMBC 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 Bank since February 1990. Mr. Whelchel has also been a
director of both FCC and FMBC since July 1993. He is a senior partner in the
Brunswick law firm of Whelchel, Brown, Readdick and Bumgartner.
Interest of Management in Certain Transactions
The Bank has made loans in the ordinary course of its business to
officers and directors of GIFH, and also to their relatives, spouses, and
entities in which they may have had an interest. Each of these loans has been
made in strict compliance with state and federal statutes and rules and
regulations of the FDIC and the Georgia Department of Banking and Finance. All
of these loans were made in the ordinary course of business, on substantially
the same terms, including interest rates and collateral, as those prevailing
at the time for comparable transactions with other persons, and did not
involve more than the normal risk of collectibility or present other features
unfavorable to the Bank. All transactions between GIFH or the Bank and
officers, directors and other affiliates in the future are to be on terms not
less favorable than could be obtained from parties who are not affiliates and
will be subject to approval by a majority of the disinterested among the
independent directors.
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.
EXECUTIVE COMPENSATION
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
Name and Year Salary Bonus Other Restricted Securites LTIP All
Principal Annual Stock Underlying Payouts Compensation
Position Compensation Awards(1) Options/SARs
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Gregory S. Junkin, Chairman and CEO of Gifh
1995 $147,211 $0 $0 $99,548(2) 0 $0 $0
1994 $40,558 $0 $0 $42,000(2) 0 $0 $0
1993 $0 $0 $0 $0 0 $0 $0
Paul D. Lockyer, President, COO and CFO of GIFH
1995 $107,627 $12,785 $0 $71,500(3) 14,862(7) $0 $0
1994 $100,000 $32,000 $0 $6,600(3) 2,027(5) $0 $0
1993 $93,108 $6,916 $0 $0 1,504(6) $0 $0
Michael D. Hodges, Senior V.P. of the Bank
1995 $92,096 $6,000 $0 $10,498(40 6,921(7) $0 $0
1994 $85,500 $15,000 $0 $4,650(4) 1,408(5) $0 $0
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, (ii) that certain Stock Option
Agreement dated February 22, 1994, between GIFH and Paul D. Lockyer, and (iii)
that certain Stock Option Agreement dated February 22, 1994, between GIFH and
Michael D. Hodges, which are Exhibits 10.1, 10.7 and 10.8, respectively, to
the Registration Statement, as amended.
(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, (ii) that certain Stock Option Agreement dated January 28, 1993, between
GIFH and Paul D. Lockyer, and (iii) that certain Stock Option Agreement dated
January 28, 1993, between GIFH and Michael D. Hodges, which are Exhibits 10.1,
10.9 and 10.10, respectively, to the Registration Statement, as amended. 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, 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, which are Exhibits 10.12 and 10.13, respectively, to the
Registration Statement, as amended.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
Gregory S. Junkin
Number of Securities Underlying Options/SARs Granted 0
Percent of Total Options/SARs Granted to Employees in Fiscal Year 0.0%
Exercise or Base Price --
Expiration Date --
Paul D. Lockyer
Number of Securities Underlying Options/SARs Granted 14,862
Percent of Total Options/SARs Granted to Employees in Fiscal Year 18.77%
Exercise or Base Price $6.50/Share
Expiration Date 7/25/05
Michael D. Hodges
Number of Securities Underlying Options/SARs Granted 6,921
Percent of Total Options/SARs Granted to Employees in Fiscal Year 8.74%
Exercise or Base Price $6.50/Share
Expiration Date 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
Gregory S. Junkin
Shares Acquired on Exercise --
Value Realized --
Number of Securities Underlying Unexercised Options/SARs at FY-End
Exercisable/Unxercisable --
Value of Unexercised in-the-Money Options/SARs at FY-End
Exercisable/Unexercisable --
Paul D. Lockyer
Shares Acquired on Exercise --
Value Realized --
Number of Securities Underlying Unexercised Options/SARs at FY-End
Exercisable/Unxercisable 43,393(1)
Value of Unexercised in-the-Money Options/SARs at FY-End
Exercisable/Unexercisable $65,864/$0(3)
Michael D. Hodges
Shares Acquired on Exercise --
Value Realized --
Number of Securities Underlying Unexercised Options/SARs at FY-End
Exercisable/Unxercisable 43,393(1)
Value of Unexercised in-the-Money Options/SARs at FY-End
Exercisable/Unexercisable $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).
Remuneration of Directors
GIFH has no permanent arrangement for the compensation of its directors
for any services as a director, including committee participation or special
assignments. In 1995, however, certain directors were awarded restricted
shares of Common Stock for their past services. Mr. Hodges received 1,615
shares, Messrs. Harden, Jacobs, Keenum and Whelchel each received 3,000
shares, and Messrs. Lockyer, Junkin and Veal each received 3,615* shares. The
shares are subject to forfeiture if the recipient does not continue serving
GIFH in certain capacities. The restrictions will lapse evenly over a period
of seven years from the effective date of the grant. The plan was approved by
the shareholders at the 1995 Annual Meeting.
In January 1996, GIFH's Board of Directors granted nonqualified stock
options to directors of the Company for services rendered during fiscal year
1995 on the Boards of Directors and committees of the Company and its various
subsidiaries. The following table presents information regarding such option
grants:
Name Number of Exercise Expiration
Securities Price Date
Underlying
Options
L. McRee Harden 1,385 $6.00 1/19/06
Michael D. Hodges 1,042 $6.00 1/19/06
Russell C. Jacobs, Jr. 1,263 $6.00 1/19/06
Gregory S. Junkin 1,500 $6.00 1/19/06
C. Kermit Keenum 1,045 $6.00 1/19/06
Paul D. Lockyer 1,458 $6.00 1/19/06
Jimmy D. Veal 1,958 $6.00 1/19/06
J. Thomas Whelchel 1,390 $6.00 1/19/06
- - -In addition, Mr. Veal was awarded 11,700 restricted shares and Mr. Whelchel
was awarded 7,325 restricted shares, respectively, in their capacity as
officers of the Company. The estimated value of restricted shares stated
herein as awarded to Messrs. Hodges, Lockyer and Junkin in their capacity as
directors is included in column "f" of the Summary Compensation Table on page
41 hereof.
The options listed above were granted pursuant to the 1995 Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
On April 1, 1996, GIFH had 1,054 shareholders of record.
The following table sets forth share ownership information as of April 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 (i) 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, and (ii) his claiming beneficial ownership of certain shares
registered in the name of his son, John F. Golan. The number of shares
beneficially owned by Mr. Golan includes the right to acquire 64,642 shares
pursuant to Class A Warrants 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, 1,042 shares pursuant to nonstatutory options granted by the
Board of Directors, and 1,000 shares pursant to incentive 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, 1,458 shares pursuant to nonstatutory options granted by
the Board of Directors, and 2,130 shares pursuant to incentive 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.
DESCRIPTION OF SECURITIES
Common Stock
GIFH is authorized to issue up to 50,000,000 shares of Common Stock, no
par value, of which 2,337,244 shares are currently outstanding, and of which
896,968 shares are being offered under this Prospectus. The holders of Common
Stock have the following rights: (i) the right to share ratably in the
distribution of dividends, as and when declared by the Board of Directors out
of funds legally available therefor; (ii) the right to cast one vote per share
on all matters voted on by shareholders generally, including the election of
directors and approval of mergers; and (iii) in the event of liquidation,
dissolution or winding up of GIFH, the right to share ratably in all assets
remaining after payment of liabilities. The shares of Common Stock are not
convertible or redeemable and do not carry any cumulative voting rights (thus
shareholders holding more than 50% of the outstanding shares are able to elect
all members of the Board of Directors). The currently outstanding shares of
Common Stock are, and the shares of Common Stock to be issued hereunder will
be, upon issuance by GIFH against receipt of the purchase price therefor,
fully paid and nonassessable by GIFH.
Reference is made to GIFH's articles of incorporation and bylaws filed as
exhibits to the Registration Statement, and to the Georgia Business
Corporation Act, for more complete information concerning the rights,
privileges and liabilities of the holders of GIFH's Common Stock.
Dividends
GIFH has not paid any dividends on its Common Stock during the last two
fiscal years, and it does not anticipate paying dividends on its Common Stock
at any time in the near future. The Board of Directors has determined not to
pay any dividends until all start-up losses of the Bank are recovered and a
cumulative profit has been made and GIFH and the Bank are cumulatively
profitable on a consolidated basis.
GIFH's only sources of income are dividends and other payments received
from its subsidiaries and investment income. Under the provisions of the
Financial Institutions Code of Georgia, the Bank may declare cash dividends
only if (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 most recent
examination do not exceed 80% of the equity capital as reflected at such
examination; and (iii) the ratio of equity capital to adjusted total assets
shall not be less than six percent.
Indemnification of Directors and Officers
GIFH's bylaws provide that it may indemnify any person who is a party to
any litigation or proceeding by reason of the fact that he is or was a
director, officer, employee or agent of GIFH, or served as such with another
entity at the request of GIFH, against expenses actually and reasonably
incurred in defending or settling such litigation, if such person is
successful in such defense and except if such persons actions fail to meet
certain qualifications. Under some circumstances GIFH may pay expenses in
advance.
No indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of GIFH pursuant
to the foregoing provisions, or otherwise. GIFH has been advised that in the
opinion of the SEC such indemnification is against public policy as expressed
in such Act and is, therefore, unenforceable.
GIFH has procured a directors and officers liability policy with a
coverage limit of $3.5 million. Such a policy and the indemnification
provisions help GIFH and its subsidiaries attract and retain qualified
individuals to serve as officers and directors by limiting their personal
exposure for such services. The insurance policy also acts to limit GIFH's
and its subsidiaries' exposure to liability for the indemnification offered to
officers and directors.
Limitations on Director Liability
The articles of incorporation of GIFH and its subsidiaries limit certain
liabilities of the directors of GIFH to GIFH or its shareholders. The
articles do not eliminate the liability of a director for any appropriation,
in violation of his duties, of any business opportunity of GIFH or the
subsidiaries, acts or omissions not taken in good faith or which involved
intentional misconduct or a knowing violation of law, the types of liabilities
set forth in Official Code of Georgia Annotated Sections 14-2-832 (unlawful
distributions), or any transaction from which the director derived an improper
personal benefit.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered
hereby has been passed upon for GIFH by Boone, Papadakis & Dinur.
EXPERTS
The financial statements of Golden Isles Financial Holdings, Inc. at
December 31, 1994 and 1995, and for the years then ended, included herein and
elsewhere in the registration statement have been included herein and in the
Registration Statement in reliance upon the report of Francis & Company,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
GIFH has filed with the Securities and Exchange Commission, Washington,
D.C. 20549, a registration statement and amendments thereto under the
Securities Act with respect to the shares offered hereby. This Prospectus
does not contain all of the information set forth in the Registration
Statement, as amended. For further information with respect to GIFH and the
shares, reference is hereby made to the Registration Statement and the
exhibits thereto. The Registration Statement may be inspected by anyone
without charge at the SEC's principal office at 450 Fifth Street, N.W.,
Washington, D.C., and copies of all or any part of the Registration Statement
may be obtained upon payment of the prescribed fees, from the SEC's principal
office in Washington, D.C.
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheets F-3
Consolidated Statements of Income F-4
Consolidated Statements of
Changes in Shareholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
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.
FRANCIS & CO., CPA's
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 liabilities
$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.
<PAGE>
[OUTSIDE BACK COVER PAGE]
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made hereby. If given or made, such
information and representations must not be relied upon as having been
authorized by Golden Isles Financial Holdings, Inc. This Prospectus does not
constitute an offer to sell or solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction. Neither the delivery of
this Prospectus nor any sale made hereunder shall under any circumstances
create any implication that there has been no change in the affairs of Golden
Isles Financial Holdings, Inc. since the date hereof.
TABLE OF CONTENTS
Page
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . 5
The Offering . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Restrictions on Future Sale of Units and Shares. . . . . . . . . .7
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 8
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . .9
Dilution . . . . .9
GIFH and its Subsidiaries. . . . . . . . . . . . . . . . . . . . 10
Supervision and Regulation of GIFH and its Subsidiaries. . . . . 15
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 18
Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . 19
Statistical Information. . . . . . . . . . . . . . . . . . . . . 26
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Executive Compensation . . . . . . . . . . . . . . . . . . . . . 41
Security Ownership of Certain Beneficial Owners and Management . . . . .45
Description of Securities. . . . . . . . . . . . . . . . . . . . 47
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 48
Experts. . . . . 48
Additional Information . . . . . . . . . . . . . . . . . . . . . 49
Index to Financial Statements. . . . . . . . . . . . . . . . . F-1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Golden Isles Financial Holdings, Inc.:
We hereby consent to the use in this Registration Statement No.
33-77822 on Form SB-2 of our report dated February 23, 1996,
relating to the consolidated financial statements of Golden Isles Financial
Holdings, Inc., Brunswick, Georgia, and subsidiaries, and to the reference
to our Firm under the caption Experts in the prospectus.
Atlanta, Georgia
April 29, 1996
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 26. Recent Sales of Unregistered Securities
In August 1994 GIFH granted 8,975 shares of restricted Common Stock to
three directors of the Company and 285 shares to a Senior Vice President of
its subsidiary bank. In July 1995 GIFH granted 62,750 shares of restricted
Common Stock to eight directors (part of which shares were granted to four
of the directors in their capacity as officers). In both instances the shares
were issued for past services without any prior obligation on the part of
GIFH to do so, and no person paid any additional consideration for the
shares. The forfeiture restrictions lapse as to the shares over a period of
three to seven years from the dates of grant. The grants are intended to
encourage continued association of these individuals with GIFH or its
subsidiaries. If the grants constitute sales of the securities, then GIFH
claims the shares were issued pursuant to an exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended. Such exemption was
available due to the nature of the individuals' sophistication in business
matters, relationship to the issuer and access to information about GIFH.
Item 27. Exhibits
The following documents are filed as exhibits to this Registration
Statement:
3.1 Restatement and Amendment of the Articles of Incorporation of GIFH,
effective August 24, 1995 (incorporated by reference to 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).
3.2 Bylaws of GIFH (incorporated by reference to 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).
4.1 See Exhibits 3.1 and 3.2 for provisions in the Company's Articles of
Incorporation and Bylaws defining the rights of holders of the Company's
Common Stock.
4.2 Form of Class A Stock Purchase Warrants and Agreements with Holders of
Class A Warrants.
5.1 Opinion of Boone, Papadakis & Dinur, as to the legality of the
securities being registered.
10.1 The Golden Isles Financial Holdings, Inc. 1991 Incentive Stock Option
Plan and The Golden Isles Financial Holdings, Inc. 1991 Nonstatutory
Stock Option Plan (incorporated by reference to Exhibit 10(a) to the
Company's Annual Report on Form 10-KSB for the year ended December
31, 1992).
10.2 Promissory note and stock pledge of the Company dated September 30,
1993 Nonstatutory Stock Option Plan (incorporated by reference to
Exhibit 10(a) to the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1992).
10.3 Employment agreement between the Bank and Paul D. Lockyer by letter
dated June 5, 1992.
10.4 Loan and Security Agreement dated March 14, 1995, between BankAmerica
Business Credit, Inc. and First Credit Service Corporation (incorporated
by reference to Exhibit 10(b) to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1994).
10.5 HUD-1 Settlement Statement (incorporated by reference to Exhibit 10(c)
to the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1994).
10.6 AIA Document A101 Standard Form of Agreement Between Owner and Contractor
between First National Bank of Brunswick and Newcastle Construction, Inc.
(incorporated by reference to Exhibit 10(d) to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1994).
10.7 Stock Option Agreement dated February 22, 1994, between Golden Isles
Financial Holdings, Inc. and Paul D. Lockyer (incorporated by reference
to Exhibit 10(e) to the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1994).
10.8 Stock Option Agreement dated February 22, 1994, between Golden Isles
Financial Holdings, Inc. and Michael D. Hodges (incorporated by
reference to Exhibit 10(f) to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1994).
10.9 Stock Option Agreement dated January 28, 1993, between Golden Isles
Financial Holdings, Inc. and Paul D. Lockyer (incorporated by
reference to Exhibit 10(g) to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1994.
10.10 Stock Option Agreement dated January 28, 1993, between Golden Isles
Financial Holdings, Inc. and Michael D. Hodges (incorporated
by reference to Exhibit 10(h) to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1994).
10.11 Employment Agreement between the Bank and Michael D. Hodges by letter
dated June 5, 1992 (incorporated by reference to Exhibit 10(j) to the
Company's Annual Report on Form 10-KSB for the year ended December
31, 1994).
10.12 Golden Isles Financial Holdings, Inc. 1995 Stock Option Plan
(incorporated by reference to Exhibit 10(j) to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended September 30,
1995).
10.13 Form of Option Agreement, dated July 25, 1995, entered into between
GIFH and each of Paul D. Lockyer and Michael D. Hodges (incorporated
by reference to Exhibit 10(iii) to the Registrant's Quarterly Report
on Form 10-QSB for the quarter ended September 30, 1995).
10.14 Form of Restricted Stock Grant Agreement, dated July 25, 1995, entered
into between the Company and each of its directors and named executive
officers (incorporated by reference to Exhibit 10(ii) to the
Registrant's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1995).
10.15 Sales Contract dated November 19, 1995 between 200 Plantation Chase
Company, a Georgia general partnership, and the Registrant (incorporated)
by reference to Exhibit 10(l) to the Registrant's Annual Report on
Form 10-KSB for the year ended December 31, 1995).
21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21
to the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1994).
23.2 Consent of Francis & Company, Certified Public Accounts.*
23.3 Consent of Boone, Papadakis & Dinur (appears in its opinion filed
as Exhibit 5.1).
*Filed with this amendment. All other exhibits have been previously filed.
EXHIBIT INDEX
Exhibit Sequential Page No.
3.1 Restatement and Amendment of the Articles of Incorporation of GIFH,
effective August 24, 1995 (incorporated by reference to 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).
3.2 Bylaws of GIFH (incorporated by reference to 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).
4.1 See Exhibits 3.1 and 3.2 for provisions in the Company's Articles of
Incorporation and Bylaws defining the rights of holders of the
Company's Common stock.
4.2 Form of Class A Stock Purchase Warrants and Agreement with Holders of
Class A Warrants.
5.1 Opinion of Boone, Papadakis & Dinur, as to the legality of the securities
being registered.
10.1 The Golden Isles Financial Holdings, Inc. 1991 Incentive Stock Option
Plan and The Golden Isles Financial Holdings, Inc. 1991 Nonstatutory
Stock Option Plan (incorporated by reference to Exhibit 10(a) to the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1992).
10.2 Promissory note and stock pledge of the Company dated September 30, 1993
in favor of Southeastern Bank (incorporated by reference to Exhibit
10(b) to the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1993).
10.3 Employment agreement between the Bank and Paul D. Lockyer by letter
dated June 5, 1992.
10.4 Loan and Security Agreement dated March 14, 1995, between BankAmerica
Business Credit, Inc. and First Credit Service Corporation
(incorporated by reference to Exhibit 10(b) to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1994).
10.5 HUD-1 Settlement Statement (incorporated by reference to Exhibit 10(c)
to the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1994).
10.6 AIA Document A101 Standard Form of Agreement Between Owner and
Contractor between First National Bank of Brunswick and Newcastle
Construction, Inc. (incorporated by reference to Exhibit 10(d) to the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1994).
10.7 Stock Option Agreement dated February 22, 1994, between Golden Isles
Financial Holdings, Inc. and Paul D. Lockyer (incorporated by reference
to Exhibit 10(e) to the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1994).
10.8 Stock Option Agreement dated February 22, 1994, between Golden Isles
Financial Holdings, Inc. and Michael D. Hodges (incorporated by
reference to Exhibit 10(f) to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1994).
10.9 Stock Option Agreement dated January 28, 1993, between Golden Isles
Financial Holdings, Inc. and Paul D. Lockyer (incorporated by reference
to Exhibit 10(g) to the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1994).
10.10 Stock Option Agreement dated January 28, 1993, between Golden Isles
Financial Holdings, Inc. and Michael D. Hodges (incorporated by
reference to Exhibit 10(h) to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1994).
10.11 Employment Agreement between the Bank and Michael D. Hodges by letter
dated June 5, 1992 (incorporated by reference to Exhibit 10(j) to the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1994).
10.12 Golden Isles Financial Holdings, Inc. 1995 Stock Option Plan
(incorporated by reference to Exhibit 109i) to the Registrant's Quarterly
Report on Form 10-QSB for the quarter ended September 30, 1995).
10.13 Form of Option Agreement, dated July 25, 1995, entered into between
GIFH and each of Paul D. Lockyer and Michael D. Hodges (incorporated by
reference to Exhibit 10(iii) to the Registrant's Quarterly Report on
Form 10-QSB for the quarter ended September 30, 1995).
10.14 Form of Restricted Stock Grant Agreement, dated July 25, 1995, entered
into between the Company and each of its directors and named executive
officers (incorporated by reference to Exhibit 10(ii) to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended September 30, 1995).
10.15 Sales Contract dated November 29, 1995 between 200 Plantation Chase
Company, a Georgia general partnership, and the Registrant (incorporated
by reference to Exhibit 10(l) to the Registrant's Annual Report on
Form 10-KSB for the year ended December 31, 1995).
21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21
to the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1994).
23.2 Consent of Francis & Company, Certified Public Accounts.*
23.3 Consent of Boone, Papadakis & Dinur (appears in its opinion filed as
as Exhibit 5.1).
*Filed with this amendment. All other exhibits have been previously filed.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this amendment
to registration statement to be signed on its behalf by the undersigned, in
St. Simons Island, Georgia, on , 1996.
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
(Registrant)
By: /s/ Gregory S. Junkin
Chairman of the Board of Directors
In accordance with the requirements of the Securities Act of 1933, this
amendment to registration statement has been signed by the following persons
in the capacities and on the dates stated:
Signature Title Date
/s/ Gregory S. Junkin Chairman of the Board of April 25, 1966
Gregory S. Junkin Directors; Chief Executive
Officer (principal executive
officer)
/s/ Paul D. Lockyer Director; President, Chief April 25, 1996
Paul D. Lockyer Operating Officer and Chief
Financial Officer
/s/ Jimmy D. Veal Vice Chairman of the Board of April 25, 1996
Jimmy D. Veal Directors; Secretary and
Treasurer
Vice Chairman of the Board of , 1996
J. Thomas Whelchel Directors
/s/ L. McRee Harden Director April 25, 1996
L. McRee Harden
/s/ Michael D. Hodges Director April 25, 1996
Michael D. Hodges
/s/ Russell C. Jacobs, Jr. Director April 25, 1996
Russell C. Jacobs, Jr.
Director , 1996
Claude Kermit Keenum
Atlanta, Georgia
April 29, 1996
