As filed with the Securities and Exchange Commission on May 1,
1997
Registration No. 33-77822
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
Under the
SECURITIES ACT of 1933
(Amendment No. 5)
(Post-Effective)
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
(Name of Small Business Issuer in Its Charter)
Georgia 6021 58-1756713
(State or Other (Primary (I.R.S. Employer
Jurisdiction of Standard Identification No.)
Incorporation Industrial
or Organization) Classification
Code Number)
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)
J. Thomas Whelchel
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)
COPIES OF COMMUNICATION TO:
DANIEL D. DINUR
DINUR & ASSOCIATES, P.C.
ONE LAKESIDE COMMONS
990 HAMMOND DRIVE
SUITE 760
ATLANTA, GA 30328
(770) 395-3170
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: From time to
time after the Registration Statement becomes effective.
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN
OFFERING PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT, PLEASE
CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT REGISTRATION
STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE
462(C) UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST
THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO
RULE 434, PLEASE CHECK THE FOLLOWING BOX. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
<S>
Title of Each
Class of
Securities To
be Registered
<C>
Dollar Amount
To Be
Registered
<C>
Proposed
Maximum
Offering
Price Per
Unit
<C>
Proposed
Maximum
Aggregate
Offering
Price
<C>
Amount of
Registration
Fee
<C>
Common Stock
Issuable
Pursuant to
the Exercise
of Class A
Warrants.
$8,454,136
$9.50
$8,454,136
-0- (1)
(1) All of the registration fee applicable to such securities had been
paid previously in connection with the Form SB-2 filed with the Securities
and Exchange Commission on April 15, 1994, which became effective on
May 31, 1994 (Registration No. 33-77822). Pursuant to Rule 429, the
remaining $5,015.82 fee is being carried over to this Amendment No. 4 to
Form SB-2.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in
accordance with section 8(a) of the Securities Act of 1933 or until the
registration statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
[logo] GOLDEN ISLES FINANCIAL HOLDINGS, INC.
889,909 Shares of Common Stock
Issuable Pursuant To the Exercise of Class A Warrants
Golden Isles Financial Holdings, Inc. ("GIFH" or the "Company") is
a financial services company, whose business is presently
conducted by its wholly-owned subsidiaries, THE FIRST BANK OF
BRUNSWICK 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 initiated by GIFH on May
31, 1994 and concluded on May 11, 1995 (the "1994 Public
Offering"), of up to 1,538,462 units, each unit consisting of one
share of Common Stock and one Warrant (a "Unit"). Each Warrant
issued in the 1994 Public Offering 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. In the
1994 Public Offering, warrant holders purchased 897,230 Units. In
1996, pursuant to the exercise of Warrants, 7,321 shares of Common
Stock were purchased. 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." The securities offered are
registered for trading on the NASDAQ SmallCap Market System under
the symbols "GIFH" for the Common Stock and "GIFHU" for the Units.
See "THE OFFERING-- Determination of The Public Offering Price"
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.
Underwriting
Price to Fees and Proceeds
Public Commissions Company (1)
Per Warrant Share Upon
Exercise . . . . . . . . $ 9.50 (2) $0 $ 9.50
Total for Warrant Shares
Upon Exercise . . . . . $8,454,136 $0 $8,454,136
(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 the
Warrants are outstanding. Per Warrant Share price and
gross proceeds for the sale of all the Warrant Shares in
the second year would be $8.25 and $7,341,749 respectively.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.
CAUTIONARY STATEMENT FOR PURPOSES OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995.
This Prospectus may contain certain "forward-looking statements"
including statements concerning plans, objectives, future events
or performance and assumptions and other statements which are
other than statements of historical fact. Golden Isles Financial
Holdings, Inc. and its subsidiaries caution readers that the
following important factors, among others, may have affected and
could in the future affect the Company's actual results and could
cause the Company's actual results for subsequent periods to
differ materially from those expressed in any forward-looking
statement made by or on behalf of the Company herein: (i) the
effect of changes in laws and regulations, including federal and
state banking laws and regulations, with which the Company must
comply, and the associated costs of compliance with such laws and
regulations either currently or in the future as applicable; (ii)
the effect of changes in accounting policies and practices, as may
be adopted by the regulatory agencies as well as by the Financial
Accounting Standards Board, or of changes in the Company's
organization, compensation and benefit plans; (iii) the effect on
the Company's competitive position within its market area of the
increasing consolidation within the banking and financial services
industries, including the increased competition from larger
regional and out-of-state banking organizations as well as nonbank
providers of various financial services; (iv) the effect of
changes in interest rates; and (v) the effect of changes in the
business cycle and downturns in the local, regional or national
economies.
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 reports, proxy statements 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. The SEC also maintains a Web Site (http://www.sec.gov)
that contains reports, proxy and information statements and other
information regarding registrants, such as GIFH, that file
electronically with the SEC.
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 may 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 literature 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, GIFH's 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. In 1996, GIFH became 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" or the "Company")
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 de novo bank chartered by the State of Georgia.
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 financial services company anchored by a commercial bank. As a
holding company, GIFH is permitted in certain circumstances to (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 Brunswick (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 establish 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 significantly
expanded their respective businesses. In the second half of 1996,
GIFH management decided to eliminate certain elements of FBMC's
business and incorporate the remaining functions within the real
estate lending function of the Bank. By April 24, 1997, FBMC had
transferred its remaining operations to the Bank and closed all of
its offices. FCC currently operates six branch offices.
On April 18, 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. owns 100% of the following
subsidiaries:
The First Bank First Credit First Bank Mortgage
of Brunswick Service Corporation Corporation (1)
(1) FBMC is no longer conducting an active trade or business.
GIFH's management may in the future 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 - 1996 Management Changes and Future Business."
Risk Factors
An investment in GIFH is speculative and involves certain risks.
GIFH derives its income primarily from dividends from its
subsidiaries. GIFH and the Bank operate in a highly regulated
environment, and various governmental regulations and Company
policies affect both the Bank's ability to pay dividends to GIFH
and GIFH's ability to pay dividends to its shareholders. While
GIFH's non-bank subsidiaries are not as regulated as the Bank, FCC
and FBMC (while it is still conducting an active business) face
significant competition in their service areas and are affected
significantly by economic conditions beyond their 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 is minimal. As of the date of this
Prospectus, the Offering Price for the Warrant Shares was greater
than the price at which shares of GIFH's Common Stock could be
purchased in the over-the-counter market. As a result, the
Offering Price of the Warrant Shares may be higher than the actual
value of the Warrant Shares at the time the Warrants are
exercised. 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 889,909 shares of Common Stock
Offering Price $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 2,344,303 shares
Shares to be Outstanding 3,234,212 shares
after the Offering (assuming all Warrants are
exercised).
Use of Proceeds GIFH will use the proceeds of this
offering for the working and
regulatory capital needs and
for the expansion needs of the
Bank and FCC; enhancing the
capital and strength of GIFH;
and, should suitable
opportunities arise, to
acquire and/or establish new
businesses. 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 "Georgia Department"), 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
"SUPERVISION AND REGULATION OF GIFH AND ITS SUBSIDIARIES."
Highly Competitive Industry
In conducting the various aspects of its banking business, the
Bank encounters strong competition in Glynn County, Georgia and
St. Simons Island, Georgia, its primary 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 these competitors have substantially greater resources and
lending limits than the Bank. In addition, recent federal and
Georgia legislation more freely permits interstate banking, and
provides for phased-in authority for banking organizations to
acquire banks across state lines and to acquire or establish
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 and the Bank in the
mortgage lending business varies depending on the particular line
of mortgage banking business and the particular service area. In
general terms, however, FBMC and the Bank face significant
competition in most of its lines of mortgage lending business and
service areas. See "GIFH AND ITS SUBSIDIARIES -- Business
Operations."
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 OF GIFH AND ITS SUBSIDIARIES." 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 and, therefore, the earnings of the Bank and, to a
large extent, GIFH. Such conditions may also affect the demand for
services of FBMC and FCC and their respective ability to
contribute earnings to the 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.
Minimal 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) became registered for trading on the NASDAQ SmallCap Market
System on April 18, 1996. During the first three months of 1997,
trading volume averaged approximately 2,200 shares traded a week.
There is, however, no assurance that such volume is indicative of
future levels of trading volume. The exercise price of the
Warrants was determined by GIFH as part of the 1994 Public
Offering and was based on considering 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, particularly given the fact that as of
April 1, 1997, the Common Stock could be purchased on the over-the
counter market for less than the Offering Price.
Restrictions on Dividends
The Company does not anticipate paying 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. As a bank holding company,
GIFH is subject to legal and regulatory restrictions which affect
its ability to declare and pay dividends. Moreover, the Company
has adopted a policy of not declaring or paying dividends without
the prior consent of the Georgia Department and the Federal
Reserve Bank of Atlanta.
Operating History of Non-banking Subsidiaries
GIFH's non-banking subsidiaries' operations are subject to risks
inherent in the establishment of new businesses and have not yet
been profitable. In 1996, because of costs related to expanding
these non-banking businesses and their inability to increase
revenues fast enough to cover those additional costs, the
non-banking subsidiaries incurred even greater losses than in 1994 and
1995. GIFH expects to reduce certain of these losses by
discontinuing some of FBMC's lines of business and incorporating
the remaining mortgage lending operations within the Bank.
Nonetheless, the mortgage lending business now conducted primarily
within the Bank and FCC's consumer lending business are highly
competitive. Both mortgage and consumer lending businesses may
incur significant expenses and continue not to be profitable, if
ever, for several more years.
Potential for Loan Losses
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, or that the Bank's loan
loss reserve will be adequate to offset actual loan losses.
Use of Proceeds
The proceeds are not allocated at this time to specific needs of
GIFH or any of its subsidiaries, and GIFH anticipates using the
proceeds of this offering for the working and regulatory capital
and for the expansion needs of the Bank and FCC. In addition,
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, repay existing debt, pay holding company expense or
fund permissible holding company activities. In addition,
although GIFH has no current plans, should suitable opportunities
arise, GIFH may use such proceeds to 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 889,909 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
and directors, 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 18, 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.
Market For Common Equity And Related Stockholder Matters
Before April 18, 1996, there was no established market in which
shares of GIFH's Common Stock were regularly traded, nor was there
any uniformly quoted prices for such shares. GIFH, however,
maintained a "buy-sell" list for those desiring to purchase or
sell stock. On April 18, 1996, the Company's Common Stock and
Units began to be traded on the NASDAQ Small Capitalization
market. The price range* of the Company's Common Stock from
January 1, 1996 to December 31, 1996, was as follows:
High Low
1st Quarter $6.00 $5.00
2nd Quarter $7.00 $5.00
3rd Quarter $6.50 $4.75
4th Quarter $6.00 $4.25
The price range* of the Company's Units (consisting of one (1)
share of Common Stock and one (1) Class A Warrant) from January 1,
1996 to December 31, 1996, was as follows:
High Low
1st Quarter $6.50 $5.25
2nd Quarter $7.00 $5.50
3rd Quarter $6.00 $5.50
4th Quarter $6.00 $3.50
* For the period between April 18, 1996 and December 31,
1996, the prices reflect inter-dealer prices, without
retail mark-up, mark-down or commission, and may not
represent actual transactions.
As of April 1, 1997, 2,344,303 shares of GIFH's Common Stock
(including shares of Common Stock held in the form of Units) were
issued and outstanding to 1,005 holders of record.
GIFH has not paid dividends since its inception. As discussed
above, the Bank's ability to pay dividends is subject to numerous
statutory conditions. Thus, to the extent the source of dividends
to be paid by GIFH is dividends from the Bank, GIFH may continue
not to pay dividends in the near future. Moreover, as discussed
above, the Company has adopted a policy under which the Company
and Bank will not declare or pay any cash or property dividend or
any other form of capital distribution without the prior written
consent of the supervisory authorities.
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 889,909 shares of
Common Stock issuable pursuant to the exercise of the Warrants
(plus 7,321 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 2,228,112 shares of Common Stock (adjusted for
the 25% stock split issued on September 30, 1993 and including the
889,909 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, 1997, 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 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, although it has no current plans,
should suitable opportunities arise, GIFH may 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 -- 1996 Management Changes and Future Business."
CAPITALIZATION
The following tables set forth the capitalization of GIFH at
December 31, 1996 and the pro-forma capitalization of GIFH as
adjusted to give effect to the exercise of all of the unexercised
Warrants.
Shareholders' Equity: December 31, 1996 As Adjusted
Common stock
50,000,000 shares
authorized; 2,344,303
shares outstanding(1);
3,234,212 shares
outstanding after exercise
of Warrants (1,2) $ 1,094,338 $ 1,094,338
Paid-in-capital(2) 9,972,568 18,426,704
Retained earnings/(deficit) (1,348,848) (1,348,848)
Unrealized gain, securities
available for sale 31,117 31,117
Total capital $ 9,749,175 $18,203,311
(1) Does not include 32,634 shares subject to options, and
179,879 shares subject to option plans.
(2) Assumes the exercise of all 889,909 unexercised Warrants at
$9.50 the third year.
GIFH AND ITS SUBSIDIARIES
General
Golden Isles Financial Holdings, Inc. (the "Company" or "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.
Upon the approval of its application by the Board of Governors of
the Federal Reserve System (the "Federal Reserve") under the
Federal Bank Holding Company Act of 1956, as amended (the "Federal
Bank Holding Company Act"), the Company became a bank holding
company. The Company used the proceeds of the offering to acquire
all of the capital stock of The First Bank of Brunswick (the
"Bank"), a de novo bank chartered by the State of Georgia.
The Bank opened for business on July 2, 1990, to engage in a
general commercial banking business in its office in Brunswick
(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. In 1995, the Bank opened a second full
service office in St. Simons Island, Georgia.
In September, 1993, the Company received approval from the Federal
Reserve to establish and operate First Bank Mortgage Corporation
("FBMC"), as a wholly-owned subsidiary of GIFH, to engage in
originating, making, acquiring and servicing mortgage loans.
During 1993, FBMC operated from a single branch, which was located
in St. Simons Island, Georgia. In 1995, FBMC opened two
additional branches, one in Savannah (Chatham County), Georgia and
the other in Blairsville (Union County), Georgia. In addition,
during 1994 and 1995 FBMC opened -- and closed within six months
of opening -- branches in Kingsland, Georgia; Tampa, Florida; and
Jacksonville, Florida. On January 1, 1996, FBMC had offices in
St. Simons Island, Georgia; Savannah, Georgia; and Blairsville,
Georgia. In January 1996, FBMC opened an office in Memphis,
Tennessee. FBMC has, until 1996, engaged in various aspects of
the mortgage loan business. As discussed in "BUSINESS OPERATIONS--
FIRST BANK MORTGAGE CORPORATION (FBMC)," in the second half of
1996, the Company decided to eliminate certain aspects of FBMC's
business and incorporate the remaining function within the real
estate lending function of the Bank. As of December 31, 1996,
FBMC had only two offices, on St. Simons Island, Georgia and in
Memphis, Tennessee. As of April 24, 1997, FBMC had transferred
its remaining operations to the Bank and closed its two remaining
offices. Although FBMC is not expected to conduct operations, the
Company will maintain FBMC as a subsidiary for various contractual
and regulatory reasons for the foreseeable future.
In September, 1993, the Company received approval from the Federal
Reserve Board to establish and operate First Credit Service
Corporation ("FCC"), as a wholly-owned subsidiary of GIFH, to
engage in originating, making, acquiring and servicing consumer
loans, as well as offering credit-related insurance on such loans.
FCC has, since then, engaged in the consumer loan business. As of
April 1, 1997, FCC had six Georgia offices, in Brunswick,
Kingsland, Savannah, Waycross, Martinez, and Garden City.
Beginning May 31, 1994, the Company conducted a secondary public
offering of securities (the "Secondary Offering") pursuant to
which GIFH offered for sale a minimum of 769,832 and a maximum of
1,538,462 units (the "Units") at a price of $6.50 per Unit. Each
Unit consists of one share of Common Stock of GIFH and one non-
detachable Class A Warrant to purchase one share of the Common
Stock. Each Class A Warrant expires on May 31, 1998, and entitles
the holder to purchase an additional share of the Common Stock at
a price of $7.25 if exercised on or before May 31, 1996, $8.25 if
exercised on or before May 31, 1997, and $9.50 if exercised on or
before May 31, 1998. The Secondary Offering closed as of March
31, 1995. GIFH accepted subscriptions for a total of 897,230
Units, and received total proceeds in connection with such
subscriptions amounting to $5,831,995. The proceeds were held in
escrow until May 11, 1995, when $5,500,000 was released from
escrow to GIFH. The balance of the proceeds held in escrow was
released to GIFH on July 25, 1995. In 1996, the Company received
$53,077 pursuant to the exercise of 7,321 Class A warrants at
$7.25 per share. As of December 31, 1996, there are 889,909 Class
A Warrants outstanding.
Business Operations
The Holding Company (GIFH)
GIFH owns 100% of the capital stock of the Bank, FBMC and FCC.
The principal role of GIFH is to supervise and coordinate the
activities of its subsidiaries and to provide the subsidiaries
with capital. GIFH derives all of its income from dividends from
its subsidiaries and any interest it earns on funds it holds.
The First Bank of Brunswick (The Bank)
The Bank conducts a general commercial and retail banking
business, emphasizing in its marketing the Bank's local management
and ownership. The Bank accepts demand, savings, and time
deposits of individuals, partnerships and corporations and offers
commercial and retail checking accounts, Super NOW accounts, money
market accounts, individual retirement accounts and certificates
of deposit. The Bank makes various types of level term and
installment loans, both personal and commercial, and makes and
services long-term mortgage loans as well as individual and
business loans. The Bank acts as an issuing agent for U.S.
savings bonds, traveler's checks, money orders and cashier's
checks, and it offers collection teller services, including wire
transfer services. The Bank also offers safe deposit boxes and a
night depository facility. The Bank provides these services from
its main office in Brunswick, Georgia, and its branch in St.
Simons Island, Georgia. Bank deposits are insured by the Federal
Deposit Insurance Corporation ("FDIC"), up to applicable limits.
The Bank (as well as 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, 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 total 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 (the
"Center"), which processed approximately 19,350 law enforcement
officers in 1996. The Center employs approximately 1,600 people.
Management expects the relatively high level of growth and
commercial activity in Glynn County and Camden County to continue,
providing a favorable environment for the Company's 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.
The Bank competes with other commercial banks, savings and loan
associations, credit unions, mortgage banking companies, consumer
finance companies, securities brokerage firms, insurance
companies, money market mutual funds, and other financial
institutions. During 1996, there were seven commercial banks in
the Bank's retail market area, four of which were owned by holding
companies located outside of Glynn and Camden Counties. In
addition, during 1996, the Bank competed with two savings banks
and five credit unions having offices in Glynn and Camden
Counties. Management estimates that as of December 31, 1996,
deposits in Glynn and Camden Counties totaled approximately $972
million, with the Bank having approximately 7.6% of such deposits.
In general terms, federal interstate banking laws (discussed in
Supervision and Regulation, below), as well as other federal and
state laws, have caused and will continue to cause increased
competition from both conventional banking institutions and other
businesses offering financial services and products within the
financial services industry in Georgia. Many of the financial
institutions operating in Georgia have substantially greater
financial resources and offer certain services, such as trust
services, that the Bank does not expect to provide in the near
future. By virtue of the greater total capitalization of such
institutions, they have substantially higher lending limits than
the Bank and substantial advertising and promotional budgets. To
compete, the Bank relies on specialized services, responsive
handling of its customers and personal contacts by officers,
directors and staff.
First Bank Mortgage Corporation (FBMC)
In September, 1993, the Company received approval from the Federal
Reserve to establish and operate FBMC to engage in originating,
making, acquiring and servicing mortgage loans. Beginning with
its inception in September 1993, FBMC engaged in various aspects
of the mortgage business, including retail and equity mortgage
lending, correspondent banking, and, beginning in 1995, warehouse
lending. The mortgage lending line of business consists of
originating and underwriting mortgage loans to individuals with
good credit histories (retail mortgage lending) or substandard
credit histories (equity mortgage lending). With respect to its
retail mortgage lending business, FBMC would act as a broker and
originate and underwrite a mortgage loan for another lender. FBMC
would not use its own funds for these loans and would derive fee
income only. The correspondent banking operation is similar to
the mortgage banking operation, except that instead of originating
loans itself, FBMC would purchase for subsequent resale mortgage
loans originated by various rural banks in southern states such as
Georgia, Arkansas, Tennessee and North Carolina. The warehouse
lending operation consisted of providing a line of credit to other
mortgage lenders, who actually originated the loans to individual
borrowers. FBMC would lend money to mortgage lenders who
generally sell in the secondary market the mortgage loans they
originated, and then would repay FBMC from the proceeds of these
sales. FBMC discontinued its warehouse credit line of business in
the third quarter of 1996, its equity mortgage lending business in
the fourth quarter of 1996, and was in the process of
discontinuing its correspondent banking lines of business as of
December 31, 1996.
As indicated above, management has decided that the Company's
remaining mortgage lending operation (i.e., retail mortgage
lending) can be handled more efficiently and inexpensively within
the framework of the Bank. As a result, as of the date of this
Prospectus, the Company's remaining mortgage function has been
shifted to the Bank and FBMC has ceased to function as an
operating subsidiary. The Company anticipates that for the
foreseeable future, the Bank will act, if at all, strictly as a
broker of mortgage loans with funds provided by other lenders.
The Bank may in the future commit its own capital to originating
or purchasing mortgage loans, or other mortgage lending
activities, if suitable opportunities should arise.
With respect to FBMC's retail mortgage lending line of business,
the mortgage origination business has been extremely competitive
in FBMC's current service areas. In Glynn County, in calendar
year 1996, lenders made approximately $445 million in mortgage
loans, consisting of 4,177 loans. FBMC closed $6 million in
mortgage loans related to Glynn County in 1996, or approximately
1.3% 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 1996 closed approximately 49% of the total dollar
volume of loans secured by real estate; (ii) in Union County, two
large lenders who in 1996 closed approximately 95% of the total
dollar volume of loans secured by real estate; (iii) in Chatham
County, eleven large lenders who in 1996 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 has
been competing with several large mortgage originators. The
Company expects this competition to continue to the extent this
function is incorporated within the Bank.
FBMC financed its operations by means of a $30 million line of
credit from Bank United of Texas. On December 3, 1996, this line
of credit was reduced to $10 million, of which $4,984,465 was
outstanding as of December 31, 1996. As of March 31, 1997, FBMC
had paid off all outstanding amounts and closed out this line of
credit.
First Credit Service Corporation (FCC)
Since its inception in September 1993, FCC has engaged in the
consumer finance business, i.e., it originates, makes, acquires,
and services consumer loans, as well as offers credit related
insurance on such loans, to the general public. The primary areas
serviced by FCC from its six offices are Glynn, Camden, Columbia,
Chatham and Ware/Pierce Counties, Georgia; where FCC operates from
six leased facilities which are described below.
There are 14 consumer finance companies (including FCC) in
Brunswick (Glynn County), with an estimated total outstanding loan
portfolio of $30 million, of which FCC has approximately 10.3%
market share. 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 companies.
Kingsland (Camden County), where FCC opened its second branch in
July 1994, is currently serviced by strong finance companies,
First Family Financial 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. In July 1996, FCC received a GILA license
with respect to the Kingsland branch. 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. In August 1996, the Kingsland
branch was moved to a location in a newer and larger shopping
center. This move will increase its exposure and should increase
the amount of walk-in traffic.
Savannah (Chatham County), 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 Financial and Fleet Finance.
In Martinez (Columbia County), where FCC opened its fifth branch
in February, 1996, by purchasing the assets of an existing finance
company, FCC's primary competitors are American General and
Associate Finance, both of which are located in neighboring
Richmond County, and several banks.
In Garden City (Chatham County), where FCC opened its sixth branch
in August 1996 by purchasing the assets of an existing finance
company, FCC has the same competitors as it does in Savannah.
In its Brunswick, Garden City, Kingsland and Martinez offices, FCC
operates under a Georgia Industrial Loan Act ("GILA") license.
The ability to make consumer loans under a GILA license is a
significant competitive advantage because as a GILA licensee FCC
can charge significantly higher interest rates with respect to
consumer loans of under $3,000. FCC intends to exploit this
competitive advantage to its fullest potential. FCC's ability to
expand its business has been enhanced by the opening, in June
1996, of a $10 million line of credit from CoreStates Bank, N.A.
This replaced an $8.5 million line of credit from BankAmerica
Business Credit, Inc. As of April 1, 1997, there was $5,794,145
outstanding under the CoreStates line of credit.
Employees
As of December 31, 1996, GIFH and its subsidiaries employed the
equivalent of 87 employees.(1) Management believes that its
employee relations are good. There are no collective bargaining
agreements covering any of the employees.
(1) As of March 17, 1997, because of staff reductions primarily
attributable to mortgage operations being shifted from FBMC
to the Bank, the Company employed the equivalent of 78
employees.
1996 Management Changes And Future Business
Prior to October 17, 1996, Mr. Gregory S. Junkin ("Mr. Junkin")
was Chairman of the Board of the Company and Chief Executive
Officer of the Company, FBMC and FCC. Prior to October 17, 1996,
Mr. Paul D. Lockyer ("Mr. Lockyer") was the President and Chief
Executive Officer of the Bank. On October 17, 1996, the Board of
Directors, voted six to two (with Messrs. Junkin and Lockyer
objecting), to remove Messrs. Junkin and Lockyer as officers of
the Company and as officers and directors of all of the Bank,
FBMC and FCC. As described more fully in the Company's Proxy
Statement dated February 17, 1997 (the "Proxy Statement"),
incorporated by reference herein, the Board's decision to
terminate Messrs. Junkin and Lockyer was based primarily upon
excessive losses and expenses incurred by the Company under the
leadership of Messrs. Junkin and Lockyer, and in particular,
continuing losses by FBMC. On October 17, 1996, J. Thomas
Whelchel became Acting Chairman and CEO of the Company and Michael
D. Hodges ("Mr. Hodges") became Acting President and CEO of the
Bank. On February 20, 1997, Mr. Hodges was named President and
CEO of the Bank.
On November 14, 1996, a group led by Mr. Junkin filed a Form 13D
with the SEC indicating that Mr. Junkin, Mr. Lockyer and Mr. Scott
A. Junkin (the "Junkin Group") may constitute a group within the
meaning of Rule 13d-5 of the Securities Exchange Act of 1934 (the
"Act"). In addition, the Junkin Group indicated that they were
dissatisfied with the October 17, 1996, actions of the Company's
Board and may seek the removal of certain members of the Board or
the election of their own nominees to the Board.
On December 5, 1996, the Junkin Group filed a Form 13D/A with the
SEC indicating that they had determined to seek the call of a
special meeting of the shareholders of the Company to act on
proposals that would result in the Junkin Group or their nominees
constituting all or a majority of the members of the Board. On
December 23, 1996, the Junkin Group sent a Request Solicitation
Request to Shareholders seeking sufficient shareholder consents to
require the Company to call a special meeting of the shareholders.
On January 17, 1997, Mr. Junkin delivered to the Company requests
for a special meeting from holders of more then the 25% of the
Company's shares, the amount of shares required to call a special
shareholder's meeting under the Company's bylaws.
On January 29, 1997, the Board called a special meeting of the
shareholders of the Company for March 11, 1997 (the "Special
Meeting"). On January 30, 1997, the Junkin Group issued a notice
of the Special Meeting (the "Notice"). In general, the Notice
indicated that at the special Meeting, the shareholders would be
asked to consider several proposals providing for (i) reducing the
size of the Board from eight to six members, removing four
directors, and electing as directors two persons nominated by the
Junkin Group, or in the alternative, (ii) expanding the Board from
eight to thirteen members, and electing five persons nominated by
the Junkin Group (collectively, the "Junkin Group Proposals").
The effect of the Junkin Group Proposals, if adopted by the
shareholders, would have been to enable Mr. Junkin and Mr. Lockyer
to regain control of the management of the Company.
On January 31, 1997, the Board voted five to two (with Mr. Russell
C. Jacobs, Jr. absent) to solicit proxies of shareholders to vote
against the Junkin Group Proposals. At the Board meeting, all
present directors except Messrs. Junkin and Lockyer voted to
oppose the Junkin Group Proposals. The Junkin Group sent proxies
seeking votes FOR the Junkin Group Proposals under cover of a
Proxy Statement dated February 11, 1997. The Company sent proxies
seeking votes AGAINST the Junkin Group Proposals under cover of
the Proxy Statement. In soliciting votes against the Junkin Group
Proposals, the Board indicated that under their business plan,
among other things, the Company would close FBMC as a separate
entity and concentrate on the prudent growth of the Bank and FCC.
At the Special Meeting on March 11, 1997, the Company's
shareholders voted to reject the Junkin Group Proposals in their
entirety by a vote of 1,476,326 shares voting against (or
withheld), 689,544 shares voting for, and 178,433 shares
abstaining or representing broker non-votes. As a result of the
defeat of the Junkin Group Proposals at the Special Meeting, no
changes were made to the size or membership of the Board of
Directors, and the Company remains committed to its strategy of
focusing on the prudent growth of the Bank (including the mortgage
lending operations transferred from FBMC) and FCC. Nonetheless,
although it has no current plans, should suitable opportunities
arise, GIFH may 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.
PROPERTY
GIFH's corporate 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 may attempt to sub-lease excess space, or to sell the
building.
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. This building could also provide space for
GIFH's corporate offices, if necessary. In addition, the Bank
owns a building located at 3811 Frederica Road, St. Simons Island,
Georgia 31522. The Bank operates a full service branch in this
building, provides space for an operating branch office of FBMC,
and, until September 1996, provided space for FBMC's corporate
offices.
In September 1996, FBMC moved its corporate offices from the
Bank's St. Simons Island facility into an approximately 8,000
square foot office located at 777 Gloucester Street, Suite 300,
Brunswick, Georgia 30512. These offices are subject to a two-year
lease ending in August 1998. As part of the restructuring of the
Company's mortgage lending operations discussed above, FBMC closed
these corporate offices in the fourth quarter of 1996 and vacated
the Gloucester Street premises. As of April 1, 1997, FBMC was
subletting its former Blairsville, Georgia office on a month-to-month
basis and was attempting to sub-lease the Gloucester Street
premises.
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. FCC
conducts business out of various office/retail spaces on either a
month-to-month basis or subject to term leases. All leasing
arrangements by both FBMC and FCC are commercially reasonable,
and, except for FBMC's Frederica Road facility, which it leased
from the Bank, all facilities are leased from non-affiliated third
parties. The locations and lease periods are as follows:
End of
Address Term Current Term
FBMC
Seasons Inn & Plaza
Blairsville, GA 30512 two years July 1998
777 Gloucester Street, Suite 300
Brunswick, GA 30512 two years August 1998
FCC
122 Altama Connector
Brunswick, GA 31525 5 years October 2001
1601 M Highway 40 East
Kingsland, GA 31548 5 years June 2001
6409 Abercorn Street,
Suites A & B-1,
Savannah, GA 31405 5 years May 2000
2507-C Plant Avenue,
Waycross, GA 31501 2 years July 1998
4015-I Washington Road,
Martinez, GA 30907 1 year February 1998
620 Highway 80
Garden City, GA 31408 1 year August 1997
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 its leased
properties could be replaced with other suitable and adequate
facilities available from time to time in the market place.
LEGAL PROCEEDINGS
On December 9, 1996, representatives of the Georgia Department,
the Federal Reserve Bank of Atlanta, and the FDIC attended a
meeting of the Company's Board of Directors to discuss certain
findings resulting from a suspended examination of the Company and
its subsidiaries that took place in November 1996. During the
meeting, the representatives of these regulatory authorities urged
the Board of Directors to commit the Company to address problems
determined during the examination process. In response, the Board
of Directors unanimously adopted a resolution (the "Board
Resolution") the text of which has been included as Schedule 1 to
the Company's Definitive Proxy Statement filed with the Securities
and Exchange Commission ("SEC") on February 18, 1997. In the
Board Resolution, among other things, the Board agreed to:
- develop and submit to the supervisory authorities a
management plan for the parent company and each of its
subsidiaries, which will include, among other things,
the type and number of management positions needed to
manage the affairs of the parent and each subsidiary
and a description of the qualifications required to
perform present and anticipated duties of each
management position, including establishment and
enforcement of sound policies and practices;
- review the results or recommendations from Arthur
Andersen, LLP ("Arthur Andersen") regarding
appropriate internal routine and controls, accounting
systems, policies and procedures, internal loan
review, internal audit and any other areas and develop
appropriate steps or procedures to strengthen noted
weaknesses and report the results of the Board's
review and the Board's plans or procedures to
strengthen noted weaknesses to the supervisory
authorities within 30 days;
- review the scope and adequacy of the annual
independent audit as performed for the prior year end,
and as proposed for 1996, with particular emphasis on
the adequacy of the review of internal routine and
controls, take appropriate steps to expand the scope
of the proposed 1996 independent audit if necessary to
include any of the areas noted by Arthur Andersen, and
report the results of the Board's review to the
supervisory authorities within 60 days;
- notify the external auditor in writing that his or her
responsibility is to the entire Board and then any
findings or recommendations should be made directly to
the entire Board;
- develop a strategic plan for the parent and each
subsidiary covering a three to five year period;
- the Company and bank subsidiary will not declare or
pay any cash or property dividend or any other form of
capital distribution without the prior written consent
of the supervisory authorities; and
- the Company will not incur any additional debt after
this resolution is adopted without prior notification
to the supervisory authorities.
Pursuant to the Board Resolution, the Company submitted its first
progress report to the supervisory authorities on January 10, 1997
("Progress Report"). In the Progress Report, and again on April
10, 1997, the Company requested extensions, which were granted, to
complete its strategic plan and management study. The Company
currently anticipates submitting its strategic plan and management
study to the supervisory authorities by May 31, 1997. The
Progress Report also contained the Company's 90-day interim
operating strategy ("Interim Plan"). The Interim Plan describes
the structure of the Company's board and addresses the Company's
short-term financial goals. In general terms, these goals
include: (i) continuing to reduce expenses at the holding
company; (ii) improving and strengthening the Bank's liquidity and
capital by decreasing the rate of loan growth and selling loan
participation, (iii) improving overall liquidity and capital by
reducing FBMC losses through closing FBMC's offices and
transferring FBMC's remaining operations into the Bank; and (iv)
either negotiating additional credit for financing FCC's growth or
closing unprofitable FCC offices. As of the date of this
Prospectus, the Company continues to operate in accordance with
the Interim Plan. The Company believes it is in compliance with
the reporting requirements of the Board Resolution.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
General
The Company's principal asset is its ownership of the Bank and its
other subsidiary financial institutions. Accordingly, the
Company's results of operations are primarily dependent upon the
results of operations of the Bank, FCC and FBMC. The Bank's
activities consist of attracting deposits from the general public
and applying those funds to the origination of commercial,
consumer and real estate loans (including commercial loans
collateralized by real estate). FCC's activities consist of
originating, making, acquiring and servicing consumer loans. The
Bank's and FCC's profitability depends primarily on net interest
income, which is the difference between interest income generated
from interest-earning assets (i.e., loans and investments) less
the interest expense incurred on interest-bearing liabilities
(i.e., customer deposits and borrowed funds). Net interest income
is affected by the relative amounts of interest-earning assets and
interest-bearing liabilities, and the interest rate paid and
earned on these balances. Net interest income is dependent upon
the Bank's and FCC's interest rate spread, which is the difference
between the average yield earned on its interest-earning assets
and the average rate paid on its interest-bearing liabilities.
When interest-earning assets approximates or exceeds
interest-bearing liabilities, any positive interest rate spread
will generate interest income. The interest rate spread is
impacted by interest rates, deposit flows and loan demand.
Additionally, and to a lesser extent, the Bank's and FCC's
profitability is affected by such factors as the level of
noninterest income and expenses, the provision for loan losses and
the effective tax rate. Noninterest income consists primarily of
loan and other fees and income from the sale of investment
securities. The primary source of income for FBMC is the fees on
originating mortgage loans and the gain on the sale of mortgage
loans to other investors. Noninterest expenses consist of
compensation and benefits, occupancy-related expenses, deposit
insurance premiums paid to the FDIC and other operating expenses.
Results of Operations for Years Ended December 31, 1996 and 1995
The Company's results of operations are determined by its ability
to effectively manage interest income and expense, to minimize
loan and investment losses, to generate noninterest income and to
control noninterest expense. Since interest rates are determined
by market forces and economic conditions beyond the control of the
Company, the ability to generate net interest income is dependent
upon the Bank's and FCC's ability to obtain an adequate spread
between the rate earned on interest-earning assets and the rate
paid on interest-bearing liabilities. Thus, the key performance
measure for net interest income is the interest margin or net
yield, which is taxable-equivalent net interest income divided by
average earning assets.
Net Interest Income
The primary component of consolidated earnings is net interest
income, or the difference between interest income on
interest-earning assets and interest paid on interest-bearing
liabilities. The net interest margin is net interest income
expressed as a percentage of average interest-earning assets.
Interest-earning assets consist of loans, investment securities
and Federal funds sold. Interest-bearing liabilities consist of
deposits and other short-term borrowings. A portion of interest
income is earned on tax-exempt investments, such as state and
municipal bonds. In an effort to state this tax-exempt income and
its resultant yield on a basis comparable to all other taxable
investments, an adjustment is made to analyze this income on a
taxable-equivalent basis.
The Company's net interest margin decreased 36 basis points or
6.12% to 5.52% in 1996 as compared to 5.88% in 1995. The yield on
average interest-earning assets decreased to 10.59% in 1996 as
compared to 10.76% in 1995. The interest rate paid on average
interest-bearing liabilities increased to 5.73% in 1996 as
compared to 5.52% in 1995. Net interest income on a
taxable-equivalent basis was $4,828,000 in 1996 as compared to
$3,842,000 in 1995, representing an increase of $986,000 or
25.66%. The increase resulted from an increase of $1,420,000
generated on increased volume and a reduction of $434,000 due to a
decrease in average yield.
Average interest-earning assets increased $22,216,000 to
$87,504,000 in 1996 from $65,288,000 in 1995, an increase of
34.03%. Average loans increased $23,358,000; average investments
decreased $926,000; and average Federal funds sold decreased
$216,000. The increase in average interest-earning assets was
funded by an increase of $15,770,000, or 27.01%, in average
deposits to $74,158,000 in 1996 from $58,388,000 in 1995.
Approximately 10% of the average deposits were noninterest-bearing
deposits in 1996 and 1995.
Allowance for Loan Losses
The allowance for loan losses represents a reserve for potential
losses in the loan portfolio. The adequacy of the allowance for
loan losses is evaluated periodically based on a review of all
significant loans, with a particular emphasis on nonaccruing, past
due and other loans that management believes require attention.
The provision for loan losses is a charge to earnings in the
current period to replenish the allowance and maintain it at a
level management has determined to be adequate. The provision for
loan losses charged to earnings amounted to $975,000 in 1996 and
$382,000 in 1995, representing an increase of 155.24% in the
provision. The increase in the provision resulted from an
increase in average loans of $23,358,000 or 43.81% and
management's evaluation of the loan portfolios and the potential
loan risk associated with certain loans. Net loan charge-offs
amounted to approximately $248,000 in 1996 as compared to net loan
charge-offs of approximately $320,000 in 1995. The allowance for
loan losses as a percentage of total loans outstanding amounted to
1.85% at December 31, 1996 as compared to 1.26% at December 31,
1995.
The determination of the amounts allocated for loan losses is
based upon management's judgment concerning factors affecting loan
quality and assumptions about the local and national economy.
Management considers the year-end allowances adequate to cover
potential losses in the loan portfolio.
Noninterest Income
Noninterest income amounted to $1,738,000 and $797,000 for the
years ended December 31, 1996 and 1995, respectively. As a percent
of total average assets, noninterest income increased from 1.08%
in 1995 to 1.70% in 1996.
Following is a summary of noninterest income for the years ended
December 31, 1996 and 1995.
1996 1995
Noninterest income
Income from origination and sale
of mortgage loans, less related
expenses $ 906,000 $ 312,000
Service charges on deposit
accounts 438,000 379,000
Insurance commissions 198,000 82,000
Net realized loss on sales
of securities (5,000) (3,000)
Other 201,000 27,000
Total noninterest income $1,738,000 $ 797,000
During 1996, the Company expanded its mortgage banking activities
through FBMC as indicated by an increase of $594,000 in income
from the sale and origination of mortgage loans, less related
expenses. In late 1996, the Company adopted a strategic plan to
restructure its mortgage banking activities. A more detailed
discussion of the restructuring of mortgage banking activities
appears below.
The increase in service charges on deposit accounts of $59,000, or
15.57%, to $438,000 in 1996 from $379,000 in 1995 resulted from an
increase of 27.01% in average deposits in 1996 over 1995.
Noninterest Expense
Noninterest expense amounted to $7,237,000 and $4,226,000 for the
years ended December 31, 1996 and 1995, respectively, representing
an increase of $2,971,000 or 69.64%. As a percent of total average
assets, noninterest expense amounted to 7.10% in 1996 as compared
to 5.72% in 1995.
Following is a summary of noninterest expense for the years ended
December 31, 1996 and 1995.
1996 1995
Noninterest expense
Salaries and employee benefits $ 4,088,000 $ 2,190,000
Equipment expense 509,000 324,000
Occupancy expense 454,000 257,000
Advertising and business
development 331,000 199,000
Legal and professional 318,000 217,000
Supplies and printing 271,000 163,000
Telephone 165,000 77,000
Postage and courier 132,000 82,000
Loss on write-down of furniture
and fixtures 146,000 -
Loss on abandonment of lease 148,000 -
Other operating expenses 675,000 717,000
Total noninterest expense $ 7,237,000 $ 4,226,000
Salaries and employee benefits increased $1,898,000 to $4,088,000
in 1996 from $2,190,000 in 1995, representing an increase of
86.67%. Due to increased activities in the mortgage banking
subsidiary, $795,000 represented increases in salaries and
employee benefits of FBMC. Salaries and employee benefits of the
Bank increased $551,000 and was attributable to an increase of
approximately 22% in Bank employees and to termination
compensation of $145,000 for the Bank's former Chief Executive
Officer who was terminated in October 1996. Salaries and employee
benefits for the FCC increased $360,000 and was attributable to an
increase of approximately 31% in personnel. Equipment and
occupancy expense increased $381,000, or 65.58%, to $962,000 in
1996 from $581,000 in 1995 and was attributable to the addition of
a new building and furnishings for corporate offices and the
refurbishing of the Bank's main office. Advertising and business
development expense increased $132,000, or 33%, to $331,000 in
1996 from $199,000 in 1995. Communication expense representing
telephone, supplies and printing expense increased $196,000, or
32%, to $436,000 in 1996 from $240,000. The increase in
advertising, business development and communications expenses was
attributable to a great extent to expanded activities in the FCC
and FBMC. Legal and professional expense increased $101,000, or
47%, to $318,000 in 1996 from $217,000 in 1995. Approximately
$66,000 of the increase represents the amounts paid to a
consulting firm to examine certain accounting records of the
Company and to develop a strategic plan for the restructuring of
the mortgage banking activities.
In late 1996, the Company determined that it should consider the
restructuring of its mortgage banking activities. A prominent
consulting firm was engaged to review the Company's mortgage
banking activities and to recommend a strategic plan for
restructuring its mortgage banking operations. After reviewing the
report and recommendations of the consulting firm, management
determined that it was in the best interest of the Company to
restructure its mortgage banking activities. Specifically the
Company has developed the following plans:
(1) FBMC will discontinue its mortgage banking activities as
a separate entity and will transfer any retained
mortgage banking activities to the Bank;
(2) The Bank will no longer accept any "sub prime" paper,
also known in the industry as B, C, and D paper;
(3) All loans held for sale by FBMC will be sold to
investors within the first six months of 1997;
(4) For the immediate future, the Bank will only broker
mortgage loans; the Bank will not fund any mortgage
loans held for sale, but will earn an origination fee
for placing the loan with an investor;
(5) Bank's management anticipates that it will continue to
fund mortgage loans for its own portfolio with funds
obtained from the Federal Home Loan Bank or its own
deposits.
In late 1996, FBMC recorded a loss on abandonment of a lease in
the amount of $146,000 and recorded a loss on the write down of
furniture and fixtures in the amount of $146,000. These charges
represent nonrecurring charges directly associated with the
restructuring of the mortgage banking activities. In 1996, FBMC
recorded a net loss after tax benefits of $966,000.
For the year ended December 31, 1996, the Company incurred a net
loss of $1,209,000 compared to net income of $13,000 for the year
ended December 31, 1995.
Liquidity and Capital Resources
Liquidity management involves the matching of the cash flow
requirements of customers who may be either depositors desiring to
withdraw funds or borrowers needing assurance that sufficient
funds will be available to meet their credit needs and the ability
of the Company to meet those needs. The Company seeks to meet
liquidity requirements primarily through management of short-term
investments (principally Federal funds sold) and monthly
amortizing loans. Another source of liquidity is the repayment of
maturing single payment loans. Also, the Bank maintains
relationships with correspondent banks which could provide funds
on short notice, if needed.
Effective March 29, 1997, the Company entered into a credit
facility with American Banking Company, Moultrie, Georgia. Under
the facility the Company will borrow (a) up to $3,500,000 as a
term loan to be used for repayment of the line of credit from
Southeastern Bank and (b) up to $1,000,000 as a revolving line of
credit to be used for working capital. The interest rate with
respect to both loans is .25% over the Suntrust Bank, Atlanta
prime rate. The term loan calls for interest-only payments for
the first 18 months and for quarterly principal and interest
payments over five additional years, principal being repaid on the
basis of a ten year amortization and semi annual payments of
$175,000. The revolving line of credit matures after one year at
which time the outstanding principal would be added to the term
loan and amortized as part of such loan. The loans are secured by
a pledge of the stock of the Bank owned by the Company.
The liquidity and capital resources of the Company and the Bank
are monitored on a periodic basis by state and Federal regulatory
authorities. As determined under guidelines established by these
regulatory authorities, the Bank's liquidity ratio at December 31,
1996 was considered satisfactory. At that date, the Bank's
short-term investments were adequate to cover any reasonable
anticipated immediate need for funds. The Company was aware of no
events or trends likely to result in a material change in their
liquidity. During 1996, the Company's capital decreased by
$1,052,000. After recording an increase in capital of $34,000 for
unrealized gains on securities, net of taxes, an increase of
$123,000 from exercise of stock options and issuance of restricted
stock, and recording a decrease of $1,209,000 for net loss from
operations, total capital decreased $1,052,000 to $9,749,000 from
$10,801,000 at December 31, 1995.
At December 31, 1996, the Company had no binding commitments
outstanding for capital expenditures.
In accordance with risk capital guidelines issued by the Federal
Reserve Board, the Company is required to maintain a minimum
standard of total capital to weighted risk assets of 8%.
Additionally, all member banks must maintain "core" or "Tier 1"
capital of at least 4% of total assets ("leverage ratio"). Member
banks operating at or near the 4% capital level are expected to
have well-diversified risks, including no undue interest rate risk
exposure, excellent control systems, good earnings, high asset
quality, and well managed on- and off-balance sheet activities;
and, in general, be considered strong banking organizations with a
composite 1 rating under the CAMEL rating system of banks. For
all but the most highly rated banks meeting the above conditions,
the minimum leverage ratio is to be 4% plus an additional 100 to
200 basis points.
The following table summarizes the regulatory capital levels of
the Company at December 31, 1996.
Actual Required Excess
Amount Percent Amount Percent Amount Percent
(Dollars in Thousands)
Leverage
capital $ 9,604 9.36% $4,103 4.00% $5,501 5.36%
Risk-based
capital:
Core capital 9,604 11.33 3,390 4.00 6,214 7.33
Total capital 10,669 12.59 6,780 8.00 3,889 4.59
The Bank also met its individual regulatory capital requirements
at December 31, 1996.
STATISTICAL INFORMATION
Distribution of Assets, Liabilities and Shareholders' Equity;
Interest Rates and Interest Differential
The following statistical information is provided for the Company
for the years ended December 31, 1996 and December 31, 1995. This
data should be read in conjunction with the information presented
under the headings "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION" and "FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA" appearing elsewhere in this
Prospectus and incorporated herein by reference.
Average Balances and Net Income Analysis
The following tables set forth the amount of the Company's
interest income or interest expense for each category of
interest-earning assets and interest-bearing liabilities and the
average interest rate for total interest-earning assets and total
interest-bearing liabilities, net interest spread and net yield on
average interest-earning assets. Federally tax-exempt income is
presented on a taxable-equivalent basis assuming a 34% Federal tax
rate.
Year Ended December 31,
1996 1995
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Paid Balance Expense Rate Paid
(Dollars in Thousands)
ASSETS
Interest-earning assets:
Loans, net of
unearned
interest $ 76,679 $8,642 11.27% $53,321 $ 6,331 11.87%
Investment
securities:
Taxable 9,087 521 5.73 9,787 559 5.71
Nontaxable 20 2 7.50 246 18 7.32
Federal funds
sold 1,718 103 6.00 1,934 115 5.95
Total interest-
earning assets 87,504 9,268 10.59 65,288 7,023 10.76
Other assets 4,456 8,536
Total assets $101,960 $73,824
Year Ended December 31,
1996 1995
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Paid Balance Expense Rate Paid
(Dollars in Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Savings and interest-
bearing demand
deposits $13,063 $ 406 3.11% $14,197 $ 438 3.09%
Time deposits 53,259 3,130 5.88 38,144 2,276 5.97
Other short-term
borrowings 4,521 282 6.24 161 10 6.21
Other borrow-
ings 6,699 622 9.28 5,085 457 8.99
Total interest-
bearing
liabilities 77,542 4,440 5.73 57,587 3,181 5.52
Noninterest-bearing liabilities and
stockholders'
equity:
Demand
deposits 7,836 6,047
Other
liabilities 6,055 641
Stockholders'
equity 10,527 9,549
Total noninterest-
bearing
liabilities and
stockholders'
equity 24,418 16,237
Total liabilities
and stockholders'
equity $101,960 $73,824
Interest rate spread 4.86% 5.24%
Net interest income $4,828 $3,842
Net interest margin 5.52% 5.88%
Rate and Volume Analysis
The following table reflects the changes in net interest income
resulting from changes in interest rates and from asset and
liability volume. Federally tax-exempt interest is presented on a
taxable-equivalent basis assuming a 34% Federal tax rate. The
change in interest attributable to rate has been determined by
applying the change in rate between years to average balances
outstanding in the later year. The change in interest due to
volume has been determined by applying the rate from the earlier
year to the change in average balances outstanding between years.
Thus, changes that are not solely due to volume have been
consistently attributed to rate.
Year Ended December 31,
1996 vs. 1995 1995 vs. 1994
Increase Changes Due To Increase Changes Due To
(Decrease) Rate Volume (Decrease) Rate Volume
(Dollars in Thousands)
Increase (decrease) in:
Income from earning assets:
Interest and fees
on loans $2,311 $(462) $2,773 $2,282 $ 960 $1,322
Interest on
securities:
Taxable (38) 2 (40) 836 87 (4)
Nontaxable (16) 1 (17) (11) 3 (14)
Interest on
Federal
funds sold (12) 1 (13) 97 45 52
Total interest
income 2,245 (458) 2,703 2,451 1,095 1,356
Expense from interest-bearing liabilities:
Interest on savings and interest-
bearing demand
deposits (32) 3 (35) 27 2 4
Interest
on time
deposits 854 (48) 902 1,080 611 469
Interest on
short-term
borrowings 272 1 271 (2) 2 (4)
Interest on
debt 165 20 145 263 82 181
Total interest
expense 1,259 (24) 1,283 1,368 718 650
Net interest
income $ 986 $ (434) $ 1,420 $1,083 $ 377 $ 706
Asset/Liability Management
It is the objective of the Company 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 Company are responsible for monitoring policies
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
Company seeks to invest the largest portion of the Company's
assets in commercial, consumer and real estate loans.
The Company'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
Company'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 Company's earnings.
As of December 31, 1996, the Company's cumulative one-year
interest rate sensitivity gap ratio was 83%. This indicates that
the Company's interest-bearing liabilities will reprice during
this period at a rate slightly faster than the Company's
interest-earning assets. Certain assumptions regarding the
interest sensitivity of these assets and liabilities have been
incorporated into this analysis. The Company believes that it
has positioned itself to maintain its net interest margin in the
event of changes in interest rates. There can be no assurance,
however, that this strategy will be successful.
The following table sets forth the distribution of the repricing
of the Company's earning assets and interest-bearing liabilities
as of December 31, 1996, the interest rate sensitivity gap (i.e.,
interest rate sensitive assets less interest rate sensitivity
liabilities), the cumulative interest rate sensitivity gap ratio
(i.e., interest rate sensitive assets divided by interest rate
sensitive liabilities) and the cumulative sensitivity gap ratio.
The table also sets forth the time periods in which earning
assets and liabilities will mature or may reprice in accordance
with their contractual terms. However, the table does not
necessarily indicate the impact of general interest rate
movements on the net interest margin since the repricing of
various categories of assets and liabilities is subject to
competitive pressures and the needs of the Bank's customers. In
addition, various assets and liabilities indicated as repricing
within the same period may in fact reprice at different times
within such period and at different rates.
At December 31, 1996
Maturing or Repricing Within
Zero to Three One
Three Months to Year to Over
Months One Year Five Years Five Years Total
(Dollars in Thousands)
Earning assets:
Interest-bearing
deposits
in banks $ 862 $ - $ - $ - 862
Federal funds
sold 8,640 - - - 8,640
Investment
securities 979 - 6,383 2,717 10,079
Loans 43,030 13,223 16,845 4,871 77,969
Loans held
for sale 6,324 - - - 6,324
59,835 13,223 23,228 7,588 103,874
Interest-bearing liabilities:
Interest-bearing
demand
deposits 12,812 - - - 12,812
Savings 1,261 - - - 1,261
Certificates
less than
$100,000 15,538 28,156 4,279 - 47,973
Certificates
$100,000
and over 4,569 7,512 1,527 - 13,608
Other short-term
borrowings 4,445 - - - 4,445
Other borrow-
ings 13,848 39 248 - 14,135
52,473 35,707 6,054 - 94,234
Interest rate
sensitivity
gap $ 7,362 $ (22,484) $ 17,174 $ 7,588 $9,640
Cumulative
interest rate
sensitivity
gap $ 7,362 $(15,122) $ 2,052 $ 9,640
Interst rate
sensitivity
gap ratio 1.14 0.37 3.84 N/A
Cumulative interest
rate sensitivity
gap ratio 1.14 0.83 1.02 1.10
Investment Portfolio
The Company manages the mix of asset and liability maturities in
an effort to control the effects of changes in the general level
of interest rates on net interest income. See
"--Asset/Liability Management." Except for its effect on the
general level of interest rates, inflation does not have a
material impact on the Company due to the rate variability and
short-term maturities of its earning assets. In particular,
approximately 72% of the loan portfolio is comprised of loans
which mature or reprice within one year or less. Mortgage loans,
primarily with five to fifteen year maturities, are also made on
a variable rate basis with rates being adjusted every one to
five years. Additionally, 10% of the investment portfolio
matures within one year.
Types of Investments
The amortized cost and fair value of investments in securities at
the dates indicated are summarized as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
(Dollars in Thousands)
Securities Available for Sale
December 31, 1996:
U.S. Government and
agency
securities $7,271,589 $45,984 $ (1,290) $7,316,283
Mortgage-backed
securities 706,918 5,532 (3,080) 709,370
$7,978,507 $51,516 $ (4,370) $8,025,653
December 31, 1995:
U.S. Government
and agency
securities $4,947,629 $16,749 $ (6,327) $4,958,051
State and
municipal
securities 225,306 - (81) 225,225
Mortgage-backed
securities 857,559 - (14,149) 843,410
$6,030,494 $16,749 $ (20,557) $6,026,686
Securities Held to Maturity
December 31, 1996:
U.S. Government
and agency
securities $ 250,000 $ - $ (4,375) $ 245,625
Mortgage-backed
securities 1,803,844 - (18,197) 1,785,647
$2,053,844 $ - $(22,572) $2,031,272
December 31, 1995:
U.S. Government
and agency
securities $ 250,000 $ 7,675 $ - $ 257,675
Mortgage-backed
securities 2,023,605 - (25,660) 1,997,945
$2,273,605 $ 7,675 $(25,660) $2,255,620
Maturities
The amounts of investments in securities in each category as of
December 31, 1996 are shown in the following table according to
contractual maturity classifications (1) one year or less, (2)
after one year through five years, (3) after five years through
ten years, and (4) after ten years.
U.S. Treasury
and Other U.S.
Government
Agencies State and
and Political
Corporations Subdivisions
Yield Yield
Amount (1) Amount (1) (2)
(Dollars in Thousands)
Maturity:
One year or less $ 499 5.61% $ - - %
After one year
through five years 8,320 5.96 - -
After five years
through ten years 1,260 6.77 - -
After ten years - - - -
$10,079 6.05% $ - - %
(1) Yields were computed using coupon interest, adding discount
accretion or subtracting premium amortization, as
appropriate, on a ratable basis over the life of each
security. The weighted average yield for each maturity
range was computed using the acquisition price of each
security in that range.
(2) Yields on securities of state and political subdivisions
are stated on a taxable-equivalent basis, using a tax rate
of 34%.
Loan Portfolio
Types of Loans
Management believes that the Company's loan portfolio is
adequately diversified. The loan portfolio contains no foreign
or energy-related loans or significant concentrations in any one
industry, with the exception of real estate mortgage loans, which
constituted approximately 42% of the Company's loan portfolio as
of December 31, 1996. The amount of loans outstanding at the
indicated dates is shown in the following table according to type
of loans.
December 31,
1996 1995
(Dollars in Thousands)
Commercial, financial
and agricultural $26,979,410 $18,501,460
Real estate -
construction 9,295,969 4,718,003
Real estate -
mortgage 32,735,336 28,031,580
Consumer installment 9,065,266 5,984,667
Other 644,999 141,776
78,720,980 57,377,486
Unearned income (751,489) (312,101)
Allowance for loan
losses (1,445,365) (718,057)
Loans, net $76,524,126 $56,347,328
Total loans as of December 31, 1996 are shown in the following
table according to maturity or repricing opportunities (1) one
year or less, (2) after one year through five years, and (3)
after five years.
(Dollars in
Thousands)
Maturity or Repricing Within:
One year or less $ 56,253
After one year through five years 16,845
After five years 4,871
$ 77,969
The following table summarizes loans at December 31, 1996 with
the due dates after one year which (1) have predetermined
interest rates and (2) have floating or adjustable interest
rates.
(Dollars in
Thousands)
Predetermined interest rates $ 21,226
Floating or adjustable interest rates 490
$ 21,716
Records were not available to present the above information in
each category listed in the first paragraph above and could not
be reconstructed without undue burden.
Nonperforming Loans
The following table presents, at the dates indicated, the
aggregate of nonperforming loans for the categories indicated.
December 31,
1996 1995
(Dollars in Thousands)
Loans accounted for on a
nonaccrual basis $ 468 $ 411
Instalment loans and term loans
contractually past due ninety
days or more as to interest
or principal payments and
still accruing 552 8
Loans, the terms of which
have been renegotiated to
provide a reduction or
deferral of interest or principal
because of deterioration in the
financial position of the borrower - -
Loans now current about which there
are serious doubts as to the
ability of the borrower to comply
with present loan repayment terms - 483
In the opinion of management, any loans classified by regulatory
authorities as doubtful, substandard or special mention that
have not been disclosed above do not (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 is aware of any information which causes management
to have serious doubts as to the ability of such borrowers to
comply with the loan repayment terms. Any loans classified by
regulatory authorities as loss have been charged off.
Commitments and Lines of Credit
In the ordinary course of business, the Bank has granted
commitments to extend credit to approved customers. Generally,
these commitments to extend credit have been granted on a
temporary basis for seasonal or inventory requirements and have
been approved by the Bank's Board of Directors. The Bank has
also granted commitments to approved customers for standby
letters of credit. These commitments are recorded in the
financial statements when funds are disbursed or the financial
instruments become payable. The Banks use the same credit
policies for these off balance sheet commitments as they do for
financial instruments that are recorded in the consolidated
financial statements. Commitments generally have fixed
expiration dates or other termination clauses and may require
payment of a fee. Since many of the commitment amounts expire
without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements.
Following is a summary of the commitments outstanding at
December 31, 1996 and 1995.
1996 1995
(Dollars in Thousands)
Commitments to extend credit $ 12,476 $ 10,299
Standby letters of credit 735 504
$ 13,211 $ 10,803
Summary of Loan Loss Experience
The provision for possible loan losses is created by direct
charges to operations. Losses on loans are charged against the
allowance in the period in which such loans, in management's
opinion, become uncollectible. Recoveries during the period are
credited to this allowance. The factors that influence
management's judgment in determining the amount charged to
operating expense are past loan experience, composition of the
loan portfolio, evaluation of possible future losses, current
economic conditions and other relevant factors. The Company's
allowance for loan losses was approximately $1,445,000 at
December 31, 1996, representing 1.85% of year end total loans
outstanding, compared with $718,000 at December 31, 1995, which
represented 1.24% of year end total loans outstanding. The
allowance for loan losses is reviewed quarterly based on
management's evaluation of current risk characteristics of the
loan portfolio, as well as the impact of prevailing and expected
economic business conditions. Management considers the allowance
for loan losses adequate to cover possible loan losses on the
loans outstanding.
Allocation of the Allowance for Loan Losses
The following table sets forth the breakdown of the allowance for
loan losses by loan category for the periods indicated.
Management believes the allowance can be allocated only on an
approximate basis. The allocation of the allowance to each
category is not necessarily indicative of future losses and does
not restrict the use of the allowance to absorb losses in any
other category.
at December 31
1996 1995 1994
Percent of Percent of Percent of
Loans in Loans in Loans in
Category Category Category
to Total to Total to Total
Amount Loans Amount Loans Amount Loans
Commercial, financial,
industrial and
agricultural $ 637 34% $ 269 32% $ 285 35%
Real estate 556 54 348 57 290 55
Consumer 185 12 65 11 50 10
Unallocated 67 - 36 - 31 -
$1,445 100% $ 718 100% $ 656 100%
The following table presents an analysis of the Company's loan
loss experience for the periods indicated:
December 31,
1996 1995
(Dollars in Thousands)
Average amount of loans outstanding $ 76,834 $ 53,321
Balance of reserve for possible loan
losses at beginning of period $ 718 $ 656
Charge-offs:
Commercial, financial and
agricultural (63) (114)
Real estate - (100)
Consumer (208) (124)
Recoveries:
Commercial, financial and
agricultural 7 2
Real estate - -
Consumer 16 16
Net charge-offs (248) (320)
Additions to reserve charged to
operating expenses 975 382
Balance of reserve for possible
loan losses $ 1,445 $ 718
Ratio of net loan charge-offs to
average loans .32% .60%
Deposits
Average amount of deposits and average rate paid thereon,
classified as to noninterest-bearing demand deposits,
interest-bearing demand and savings deposits and time deposits,
for the periods indicated are presented below.
Year Ended December 31,
1996 1995
Amount Rate Amount Rate
(Dollars in Thousands)
Noninterest-bearing demand
deposits $ 7,836 - % $ 6,047 - %
Interest-bearing demand
and savings deposits 13,063 3.11 14,197 3.09
Time deposits 53,259 5.88 38,144 5.97
Total deposits $74,158 $58,388
The amounts of time certificates of deposit issued in amounts of
$100,000 or more as of December 31, 1996, are shown below by
category, which is based on time remaining until maturity of (1)
three months or less, (2) over three through twelve months and
(3) over twelve months.
(Dollars in
Thousands)
Three months or less $ 4,569
Over three through twelve months 7,512
Over twelve months 1,527
Total $ 13,608
Return on Assets and Shareholders' Equity
The following rate of return information for the periods
indicated is presented below.
Year Ended December 31,
1996 1995
Return on assets (1) (1.19)% 0.02 %
Return on equity (2) (11.48) 0.14
Dividends payout ratio (3) - -
Equity to assets ratio (4) 10.32 12.93
(1) Net income divided by average total assets.
(2) Net income divided by average equity.
(3) Dividends declared per share divided by net income per share.
(4) Average equity divided by average total assets.
SUPERVISION AND REGULATION OF GIFH AND ITS SUBSIDIARIES
General
Bank holding companies and banks are extensively regulated under
both Federal and state law. The following is a brief summary of
certain statutes and rules and regulations affecting the Company
and the Bank and to a more limited extent, FBMC and FCC. This
summary is qualified in its entirety by reference to the
particular statute and regulatory provision referred to below and
is not intended to be an exhaustive description of the statutes
or regulations applicable to the business of the Company and its
subsidiaries. The scope of regulation and permissible activities
of the Company and its subsidiaries is subject to change by
future federal and state legislation. Supervision, regulation,
and examination of the Company and the Bank by the bank
regulatory agencies are intended primarily for the protection of
depositors rather than shareholders of the Company.
The Company is a registered holding company under the Federal
Bank Holding Company Act and the Georgia Bank Holding Company Act
and is regulated under such acts by the Federal Reserve and by
the Georgia Department of Banking and Finance (the "Georgia
Department"), respectively.
As a bank holding company, the Company is required to file annual
reports with the Federal Reserve and the Georgia Department and
such additional information as the applicable regulator may
require pursuant to the Federal and Georgia Bank Holding Company
Acts. The Federal Reserve and the Georgia Department may also
conduct examinations of the Company to determine whether the
Company is in compliance with both Bank Holding Company Acts and
the regulations promulgated thereunder.
The federal Bank Holding Company Act also requires every bank
holding company to obtain the prior approval of the Federal
Reserve before acquiring direct or indirect ownership or control
of 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. Acquisitions
of any additional banks would also require prior approval from
the Georgia Department.
The Federal Reserve (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 policy, the Company may be
required to provide financial support to the Bank at a time when,
absent such Federal Reserve policy, the Company may not deem it
advisable to provide such assistance. Similarly, the Federal
Reserve also monitors the financial performance and prospects of
non-bank subsidiaries such as FBMC and FCC with an inspection
process to ascertain whether these non-banking subsidiaries
enhance or detract from the Company'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.
Prior to the enactment of the Interstate Banking and Branching
Efficiency Act of 1994 (the "Riegle-Neal Act"), 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. 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 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 the limits 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.
In response to the Riegle-Neal Act, effective June 1, 1997,
Georgia will permit interstate branching, although only through
merger and acquisition. In addition, Georgia law provides that a
bank may not be acquired by an out-of-state company unless the
bank has been in existence for five years. Georgia has also
adopted the thirty percent concentration limit, but permits state
regulators to waive it on a case-by-case basis.
As a state-chartered bank, the Bank is examined and regulated by
the Georgia Department and the FDIC. The Georgia Department
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, 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.
Pursuant to regulations adopted by the Georgia Department, the
Bank must have the approval of the Commissioner to pay cash
dividends, unless at the time of such payment (i) the total
classified assets at the most recent examination of such bank do
not exceed 80% of the equity capital as reflected by such
examination; (ii) the aggregate amount of dividends declared or
anticipated to be declared in the calendar year does not exceed
50% of the net profits, after taxes but before dividends, for the
previous calendar year; and (iii) the ratio of equity capital to
adjusted total assets is not less than 6%. The Bank is also
subject to the Georgia banking and usury laws restricting the
amount of interest which it may charge in making loans or other
extensions of credit.
With respect to expansion, the Bank is currently prohibited from
establishing branch offices or facilities outside of the county
in which its main office is located, except (i) in adjacent
counties in certain situations, or (ii) by means of merger or
consolidation with a bank which has been in existence for at
least five years. In addition, in the case of a merger or
consolidation, the acquiring bank must have been in existence for
at least 24 months prior to the merger. However, Georgia,
effective July 1, 1996, permits 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 Georgia law 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
law 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 and the FDIC. The
capital adequacy guidelines issued by the Federal Reserve 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 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, 1996, GIFH maintained a Tier 1 and a total
risk-based capital ratio of 11.3% and 12.6%, respectively. See
also the discussion under "Capital Adequacy" in Item 6 below.
Both the risk-based capital guidelines and the leverage ratio are
minimum requirements, applicable only to top-rated banking
institutions. Institutions operating at or near these levels are
expected to have well diversified risk, excellent asset quality,
high liquidity, good earnings and, in general, have to be
considered strong banking organizations, rated Composite 1 under
the CAMEL rating system for banks or the BOPEC rating system for
bank holding companies. Institutions with lower ratings and
institutions with high levels of risk or experiencing or
anticipating significant growth would be expected to maintain
ratios 100 to 200 basis points above the stated minimums.
The Federal Reserve and the FDIC have proposed a revision to
their risk-based capital guidelines to further ensure that those
guidelines take adequate account of interest rate risk. Interest
rate risk is the adverse effect that changes in market interest
rates may have on a bank's financial condition and is inherent to
the business of banking. The agencies have proposed two
alternative methods for assessing a bank's capital adequacy for
interest rate risk. Under the first approach, the banking
agencies would establish minimum capital standards for interest
rate risk based on either a supervisory model or the bank's
internal model of measuring risk. Institutions would be required
to have capital sufficient to cover the amount of measured
exposure in excess of the threshold level. The proposed
threshold level is a decline in net economic value equal to 1.0
percent of assets. Under the second approach, a minimum capital
requirement for interest rate risk would not be set. Instead,
examiners would consider results of quantitative measures of
interest rate risk along with other factors in evaluating an
institution's capital adequacy for interest rate risk.
The Federal Deposit Insurance Corporation Improvement Act of 1991
(the "Act"), enacted on December 19, 1991, provided for a number
of reforms relating to the safety and soundness of the deposit
insurance system, supervision of domestic and foreign depository
institutions and improvement of accounting standards. One aspect
of the Act is the requirement that banks will have to meet
certain safety and soundness standards. In order to comply with
the Act, the Federal Reserve 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.
Monetary Policies
The results of operations of the Bank are affected by credit
policies of monetary authorities, particularly the Federal
Reserve. The instruments of monetary policy employed by the
Federal Reserve 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, 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.
MANAGEMENT
The current Directors and executive officers of GIFH are as
follows:
Name (Age) Position With Company Director Since
L. McRee Harden (41) Director 1988
Michael D. Hodges (43) President and CEO of Bank;
Director 1991
Russell C. Jacobs, Jr. (61) Director 1988
Gregory S. Junkin (55) Director 1987
Claude Kermit Keenum (60) Director 1988
Paul D. Lockyer (44) Director 1987
Jimmy D. Veal (48) Vice Chairman and
Secretary/Treasurer 1987
J. Thomas Whelchel (62) Acting Chairman 1988
and CEO
In addition, C. Ray Acosta (56) and James M. Fiveash (65) have
been nominated for election to the Board and have agreed to serve
if elected. If elected by the shareholders at the 1997 Annual
Meeting (currently scheduled to take place on June 17, 1997),
Messrs. Acosta and Fiveash will fill seats currently held by
Gregory S. Junkin and Paul D. Lockyer.
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 experience of each of the current
directors, nominees for directors and executive officers during
the past five years is set out below.
C. RAY ACOSTA. Mr. Acosta has been employed by Georgia Power
Company since 1964. He has been Region Manager for the Coastal
Region, a 10-county service area, since 1993. Prior to that, he
was District Manager for the Brunswick District from 1977 to
1993. Mr. Acosta is Past President and Campaign Chairman of the
United Way of Brunswick and Glynn County, and past Chairman of
the Brunswick and Glynn County Development Authority. Mr. Acosta
served as a director of the Company from 1987 to 1994.
JAMES M. FIVEASH. Mr. Fiveash is retired and was formerly a
principal of Five Transportation Company. Mr. Fiveash served as
a director of the Company from 1987 to 1994.
L. MCREE HARDEN. Mr. Harden has been a director of the Company
since July 1988, a director of the Bank since February 1990, and
a director of FCC since July 1993. Mr. Harden operates a chain
of approximately 22 convenience stores in south Georgia and
Florida.
MICHAEL D. HODGES. Mr. Hodges has been a director of the
Company since 1991 and a director of the Bank since June 1990.
On February 20, 1997, Mr. Hodges became President and CEO of the
Bank. He also has been Acting President and CEO of the Bank
since October 1996. Prior to that, he had been Senior Vice
President of the Bank since June 1990, with principal
responsibilities for the Bank's loan portfolio.
RUSSELL C. JACOBS, JR. Mr. Jacobs has been a director of the
Company 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 a director of the
Company since March 1987. From March 1987 until October 17,
1996, Mr. Junkin was Chairman and Chief Executive Officer of the
Company. From July 1993 until October 17, 1996, Mr. Junkin was
Chairman and Chief Executive Officer of FCC and FBMC. Mr. Junkin
is now retired.
CLAUDE KERMIT KEENUM. Mr. Keenum has been a director of the
Company since July 1988, a director of the Bank since February
1990, and a director of FCC since July 1995. He 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. Mr. Keenum is currently
President of Southeastern Communication Systems, Inc.
PAUL D. LOCKYER. Mr. Lockyer has been a director of the Company
since December 1987. From July 1995 to October 17, 1996, Mr.
Lockyer was President and Chief Operating Officer of the Company.
From September 1988 through July 1995, he served as Senior Vice
President of the Company. From February 1990 until October 17,
1996, Mr. Lockyer was President, Chief Executive Officer and a
director of the Bank. Mr. Lockyer is now retired.
JIMMY D. VEAL. Mr. Veal has been a Vice Chairman of the Company
since July 1995. He has been a director of the Company since
June 1987 and Secretary/Treasurer of the Company 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 FBMC 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 the Acting Chairman
and CEO of the Company since October 17, 1996. Prior to that,
Mr. Whelchel was a Vice Chairman of the Company between July 1995
and October 1996. From July 1988 through July 1995, he served as
President of the Company. Mr. Whelchel has been a director of
the Company 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 FBMC since July 1993. He is a senior partner in
the Brunswick law firm of Whelchel, Brown, Readdick and
Bumgartner.
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.<PAGE>
<PAGE>
</TABLE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
AWARDS PAYOUTS
Securities
Other Restric- Underly-
Name and Annual ted ing All Other
Principal Compen- Stock Options/ LTIP Compensa-
Position Year Salary Bonus sation Awards(1) SARs Payout tion
(a) (b) (c) (d) (e) (f) (g) (h) (i)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Thomas 1996 $0(11) $0 $0 $0 0 $0 $0
Whelchel
Acting
Chairman
and CEO of
the
Company(2)
Michael D. 1996 $100,861 $0 $0 $0 1,000(4) $0 $0
Hodges, 1995 $ 92,096 $6,000 $0 $10,498(3) 6,921(4) $0 $0
Acting 1994 $ 85,500 $15,000 $0 $4,650(3) 1,408(5) $0 $0
President
and CEO
of the
Bank
subsidiary
(2)
Gregory S. 1996 $125,192 $0 $0 $0 0 $0 $0
Junkin, 1995 $147,211 $0 $0 $99,548(6) 1,500(7) $0 $0
Former 1994 $ 40,558 $0 $0 $42,000(6) 0 $0 $0
Chairman
and CEO of
the
Company(2)
Paul D. 1996 $117,115 $0 $0 $0 0 $0 $145,000(8)
Lockyer, 1995 $107,627 $12,785 $0 $71,500(9) 1,458(10) $0 $0
Former 1994 $100,000 $32,000 $0 $ 6,600(9) 0 $0 $0
President,
COO and
CFO of the
Company(2)
</TABLE>
<PAGE>
(1) In the event that the Company 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) Messrs. Whelchel and Hodges were elected to their respective
positions on October 17, 1996. Messrs. Junkin and Lockyer
were terminated from their respective positions on October
17, 1996. On February 20, 1997, Mr. Hodges became President
and CEO of the Bank.
(3) The aggregate number of shares of restricted stock held by
Michael D. Hodges as of April 24, 1997, is 2,390 shares and
the value as of December 31, 1996 of such shares is $12,548.
All of the 775 shares of restricted stock awarded to Mr.
Hodges in 1994 ("1994 Restricted Stock") vests upon the
earlier of (i) three years from August 17, 1994, the date
the shares were granted to Mr. Hodges, or (ii) a change of
control in the ownership of the Company through the
acquisition of more than 50% of the Company's outstanding
stock by a third party. Mr. Hodges will forfeit the 1994
Restricted Stock if he is not employed by either the Company
or one of its subsidiaries on August 16, 1999, unless Mr.
Hodges' employment is terminated because of the sale of the
Company or a subsidiary through which Mr. Hodges is employed
and Mr. Hodges is not offered other employment within the
Company or one of its subsidiaries. Under the terms of the
award of 1,615 shares of restricted stock awarded to Mr.
Hodges in 1995 ("1995 Restricted Stock") one-seventh of
such shares (i.e., 230.71 shares) became vested 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 becomes neither a
director nor an executive officer of the Company or any
subsidiary of the Company, then he shall forfeit any shares
of 1995 Restricted Stock which have not already vested at
the time of the event which triggers the forfeiture.
(4) 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 the Company
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 the Company; provided, however, that if the
optionee's employment with the Company is terminated for any
reason other than (a) optionee's death or disability, (b)
optionee's voluntary termination of his employment without
the Company's consent, or (c) termination of optionee's
employment by the Company 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).
(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 the
Company 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 the Company.
(6) The aggregate number of shares of restricted stock held by
Gregory S. Junkin as of April 24, 1997, is 22,315 shares and
the value as of December 31, 1996 of such shares is
$117,154. All of the 7,000 shares of restricted stock
awarded to Mr. Junkin in 1994 ("1994 Restricted Stock") 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 the Company
through the acquisition of more than 50% of the Company's
outstanding stock by a third party. Mr. Junkin will forfeit
the 1994 Restricted Stock if he is not in the employment of
either the Company or any of its subsidiaries on August 16,
1997, unless Mr. Junkin's employment is terminated because
of the sale of the Company or a subsidiary through which Mr.
Junkin is employed and Mr. Junkin is not offered other
employment within the Company or one of its 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 became vested 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 becomes neither a
director of the Company nor an executive officer of the
Company or any subsidiary of the Company, 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.
(7) These options are nonstatutory stock options which were
granted to Mr. Junkin pursuant to the Plan in the capacity
as a director of the Company.
(8) This amounts represents a severance payment of $145,000,
pursuant to the termination of Mr. Lockyer's employment on
October 17, 1996.
(9) The aggregate number of shares of restricted stock held by
Paul D. Lockyer as of April 24, 1997, is 12,100 shares and
the value as of December 31, 1996 of such shares is $63,525.
All of the 1,100 shares of restricted stock awarded to Mr.
Lockyer in 1994 ("1994 Restricted Stock") vest upon the
earlier of (i) three years from August 17, 1994, the date
the shares were granted to Mr. Lockyer, or (ii) a change of
control in the ownership of the Company through the
acquisition of more than 50% of the Company's outstanding
stock by a third party. Mr. Lockyer will forfeit the 1994
Restricted Stock if he is not in the employment of either
the Company or any of its subsidiaries on August 16, 1999,
unless Mr. Lockyer's employment is terminated because of the
sale of the Company or a subsidiary through which Mr.
Lockyer is employed and Mr. Lockyer is not offered other
employment within the Company 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) became vested 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 becomes
neither a director of the Company nor an executive officer
of the Company or any subsidiary of the Company, 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.
(10) These options are nonstatutory stock options which were
granted to Mr. Lockyer pursuant to the Plan in his capacity
as a director of the Company. As a result of the termination
of his employment on October 17, 1996, on January 17, 1997,
45,523 incentive and nonstatutory stock options were
forfeited by Mr. Lockyer.
(11) The Compensation Committee of the Board has agreed that
effective October 17, 1996, the date of Mr. Whelchel's
appointment to Acting CEO, the Company will compensate Mr.
Whelchel for the actual time spent by him performing duties
as Acting CEO, at a rate which on an annual basis will not
exceed the compensation level of the previous CEO. As of
April 24, 1997, no amounts had been paid to Mr. Whelchel
under this arrangement.
No stock options were exercised and there were no SARs
outstanding during fiscal year 1996. The following table presents
information regarding the value of unexercised options held as of
December 31, 1996.
<PAGE>
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options/SARs Options/SARs
at FY-End a FY-End
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
(a) (b) (c) (d) (e)
<S> <C> <C> <C> <C>
J. Thomas Whelchel -- -- 1,390(2) $0/$0(1)
Michael D. Hodges -- -- 30,124(3) $24,089/$0(1)
Gregory S. Junkin -- -- 1,500(2) $0/$0(1)
Paul D. Lockyer -- -- 1,458(2) $0/$0(1)
</TABLE>
<PAGE>
(1) Dollar values have been calculated by determining the
difference between the estimated fair market value of the
Company's Common Stock at December 31, 1996 ($5.25) and the
exercise prices of the options.
(2) On January 18, 1996, these options were awarded to Mr.
Whelchel, Mr. Junkin and Mr. Lockyer as compensation with
respect to their services as directors.
(3) Michael D. Hodges has the right to acquire 30,124 shares of
the Company's Common Stock pursuant to stock options issued
by the Company to Mr. Hodges. All of the 30,124 stock
options held by Mr. Hodges were exercisable as of January
20, 1996. Of the 30,124 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, 6,921 are
exercisable at the price of $6.50 per share, and 2,042 are
exercisable at the price of $6.00 per share.
The Company does not have any Long Term Incentive Plans in
effect.
Employment Agreements
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 was to serve as President and Chief Executive
Officer of the Bank and Senior Vice President and Principal
Financial Officer of the Company. 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. On July 2, 1996, the term of the
Lockyer Letter was extended to July 2, 1998. In addition, the
Lockyer Letter was modified to provide severance pay in an amount
equal to twelve months of his then current base salary if Mr.
Lockyer is dismissed for reasons other than fraud or dishonesty.
On October 17, 1996, the Board terminated Mr. Lockyer's
employment. Pursuant to the Lockyer Letter, the Bank paid Mr.
Lockyer $145,000 to fulfill its obligations under the employment
contract.
On February 20, 1997, the Bank and Michael D. Hodges entered into
an employment agreement ("Hodges Agreement") summarizing the terms
of Mr. Hodges' employment with the Bank. Pursuant to the Hodges
Agreement, Mr. Hodges is to serve as President and Chief Executive
Officer of the Bank. Mr. Hodges' base salary was set at $125,000
per year, subject to possible increases. The Hodges Agreement
provides that Mr. Hodges is entitled to bonuses and other benefits
including an automobile. The Bank may terminate Mr. Hodges'
employment with the Bank with or without cause. However, if Mr.
Hodges is dismissed from his employment for reasons other than for
cause, the Bank shall for a period of one year following his
termination continue to pay him his then current base salary. The
initial term of the Hodges Agreement is through February 20, 1999,
and thereafter, shall be annually renewed for successive one-year
periods unless either party gives 90-days notice of non-renewal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
On April 1, 1997, GIFH had 1,005 shareholders of record.
The following table sets forth share ownership information as of
April 1, 1997, 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. Percentage
ownership is calculated based on 2,344,303 outstanding shares.
Security Ownership of Certain Beneficial Owners*
Name and Address Number of Percent of
of Beneficial Owner Shares Class
Leonard W. Golan (1) 188,034 8.0%
21st Floor,
Three First National Plaza
Chicago, Illinois 60602
Gregory S. Junkin
Paul D. Lockyer,
Scott A. Junkin(2)
P.O. Box 30297
Sea Island, Georgia 31561 146,455 7.1%
* Information relating to beneficial ownership of Common Stock is
based upon "beneficial ownership" concepts set forth in rules of
the SEC under Section 13(d) of the Securities Exchange Act of
1934, as amended (the "Act"). Under such rule, a person is deemed
to be a "beneficial owner" of a security if that person has or
shares "voting power", which includes the power to vote or direct
the voting of such security, or "investment power", which includes
the power to dispose of, or to direct the disposition of, such
security. A person is also deemed to be a beneficial owner of any
security of which that person has the right to acquire beneficial
ownership within sixty (60) days. Under the rules, more than one
person may be deemed to be a beneficial owner of the same
securities, and a person may be deemed to be a beneficial owner of
securities as to which he has no beneficial interest. For
instance, beneficial ownership includes spouses, minor children
and other relatives residing in the same household, and trusts,
partnerships, corporations or deferred compensation plans which
are affiliated with the principal.
(1) Mr. Golan's beneficial ownership of the shares of Common
Stock attributed to him stems from his having voting and
investment power with respect to those shares in his
capacity as Trustee of each of the Leonard W. Golan
Insurance Trust dated January 23, 1968, the Carol P. Golan
Insurance Trust dated November 7, 1977, and the Carol P.
Golan QTIP Trust dated April 18, 1995. The number of
shares beneficially owned by Mr. Golan includes the right
to acquire 64,642 shares pursuant to Class A Warrants
owned by Mr. Golan.
(2) Includes shares held by these individuals as a "group" as
such term is used in Section 13(d)(3) of the Act and
includes rights of the members of the group to acquire
13,916 shares pursuant to Class A Warrants and 2,958
shares pursuant to the exercise of vested options.
The following table sets forth share ownership information as of
April 1, 1997, with respect to (i) each current director, nominee
for director and named executive officer of GIFH who beneficially
owns Common Stock, including Common Stock owned in the form of
Units, and (ii) all current 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. Percentage ownership is calculated based on
2,344,303 outstanding shares.
Security Ownership of Management*
Name and Address Number of
of Beneficial Owner Shares Percent of Class
C. Ray Acosta (1) 27,624 1.2%
226 Medinah
St. Simons Island, Georgia 31522
James M. Fiveash (2) 41,250 1.8%
605 King Cotton Row
Brunswick, Georgia 31525
L. McRee Harden(3) 19,385 0.8%
P.O. Box 2369
Darien, Georgia 31305
Michael D. Hodges(4) 38,764 1.6%
207 Dunbarton Drive
St. Simons Island,
Georgia 31522
Russell C. Jacobs, Jr.(5) 16,763 0.7%
308 Oak Grove Island Drive
Brunswick, Georgia 31525
Gregory S. Junkin(6) 105,653 4.5%
200 Plantation Chase
St. Simons Island,
Georgia 31522
C. Kermit Keenum(7) 16,545 0.7%
100 Old Mountain Road
Powder Springs,
Georgia 30073
Paul D. Lockyer(8) 21,058 0.9%
311 Dunbarton Drive
St. Simons Island,
Georgia 31522
Jimmy D. Veal(9) 81,898 3.5%
711 Beachview Drive
Jekyll Island,
Georgia 31527
J. Thomas Whelchel(10) 31,740 1.4%
5 Glynn Avenue
Brunswick, Georgia 31520
All directors and
executive 331,806 13.8%
officers as a group
(8 persons)(11)
* 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 1,187 shares owned by his wife, 125 shares as
custodian for his daughter, Michelle L. Acosta, and 125
shares as custodian for his son, Charles Jacob Acosta.
(2) Includes 5,000 shares owned as custodian for four minor
greatnephews and greatnieces under the Uniform Gifts to
Minors Act.
(3) 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 vested options.
(4) Includes the right to acquire 30,124 shares pursuant to
vested options.
(5) Includes the right to acquire 1,263 shares pursuant to
vested options.
(6) Includes the right to acquire 4,044 shares pursuant to Class
A Warrants, and 1,500 shares pursuant to vested options.
(7) Includes the right to acquire 1,045 shares pursuant to
vested options.
(8) Includes the right to acquire 1,458 shares pursuant to
vested options.
(9) 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 vested options.
(10) Includes 25 shares owned by Mr Whelchel's daughter for which
he disclaims beneficial ownership, and 1,390 shares pursuant
to vested options.
(11) Includes current directors and named executive officers
only.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1996, the bank loaned funds to certain of GIFH's executive
officers and directors or to businesses in which such persons had
an interest. All such loans were: (a) in the ordinary course of
business, (b) on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for
comparable transactions with other persons, and (c) did not
involve more than the normal risk of collectibility or present
other unfavorable features.
On February 19, 1996, GIFH acquired Unit Number 200 of Plantation
Chase Condominium, a two-story, free standing, brick building
containing approximately 5,200 square feet of space (the
"Building"), from 200 Plantation Chase Company, a Georgia general
partnership in which Gregory S. Junkin, Chairman of the Board and
Chief Executive Officer of GIFH, was a 33 percent partner, for a
purchase price of $350,000 (the "Purchase Transaction"). In
accordance with the terms of Section 14-2-862 of the Georgia
Business Corporation Code (O.C.G.A. Section 14-2-862), relating to
conflict of interest transactions, GIFH received authorization to
engage in the Purchase Transaction by the unanimous vote of all of
the uninterested directors of GIFH at a meeting of the Board of
Directors on September 16, 1995. Board approval of the Purchase
Transaction was contingent upon GIFH obtaining an appraisal of the
Building from an independent certified appraiser in the amount of
at least $350,000. Prior to the closing of the Purchase
Transaction, GIFH received a written appraisal indicating that the
market value of the Building as of December 10, 1995 was $355,000.
DESCRIPTION OF SECURITIES
Common Stock
GIFH is authorized to issue up to 50,000,000 shares of Common
Stock, no par value, of which 2,344,303 shares are currently
outstanding, and of which 889,909 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, 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. Moreover, the
Company has adopted a policy of not declaring or paying dividends
without the prior consent of the Georgia Department and the
Federal Reserve Bank of Atlanta.
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, 1995 and 1996, 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 reports of Francis & Company, CPAs, and Mauldin &
Jenkins, LLC, respectively, independent certified public
accountants, appearing elsewhere herein, and upon the authority of
said firms as experts in accounting and auditing.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On December 8, 1996, the certifying accountant for the Company,
Francis & Company, CPAs, of Marietta, Georgia, notified the
Company that it did not wish to be engaged as the Company's
certifying accountant for the year ended December 31, 1996. The
report of Francis & Company accompanying the Company's financial
statements as of and for the years ended December 31, 1995 and
December 31, 1994, did not contain an adverse opinion, or a
disclaimer of opinion, and was not modified with respect to any
uncertainty, audit scope or accounting principles.
On December 9, 1996, the Company engaged Mauldin & Jenkins, LLC of
Albany, Georgia as its new certifying accountant. The Company did
not consult with Mauldin & Jenkins, LLC regarding the application
of accounting principles to a specific completed or contemplated
transaction or the type of audit opinion that might be rendered on
the Company's financial statements.
The decision of the Company to engage new certifying accountants
was approved by its Board of Directors. There were, during the
two most recent fiscal years of the Company and for the period of
January 1, 1996 through December 8, 1996, no disagreements,
whether resolved or unresolved, with Francis & Company with regard
to any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which, if
not resolved to its satisfaction would have caused Francis &
Company to make reference to the subject matter of the
disagreement(s) in connection with its report.
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.
<PAGE>
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This section contains the following items:
Independent Auditors' Reports
Consolidated Balance Sheets at December 31, 1996 and 1995
Consolidated Statements of Income for the years ended
December 31, 1996 and 1995
Consolidated Statement of Changes in Stockholders' Equity
for the years ended December 31, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended
December 31, 1996 and 1995
Notes to Consolidated Financial Statements
<PAGE>
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1996
<PAGE>
TABLE OF CONTENTS
Page
INDEPENDENT AUDITOR'S REPORTS
FINANCIAL STATEMENTS
Consolidated Balance Sheets 77
Consolidated Statements of Operations 79
Consolidated Statements of
Stockholders' Equity 81
Consolidated Statements of Cash Flow 83
Notes to Consolidated Financial
Statements 86
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Golden Isles Financial Holdings, Inc.
and Subsidiaries
St. Simons Island, Georgia
We have audited the accompanying consolidated balance sheet of
Golden Isles Financial Holdings, Inc. and Subsidiaries as of
December 31, 1996 and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audit. The financial
statements of Golden Isles Financial Holdings, Inc. and
subsidiaries for the year ended December 31, 1995 were audited by
other auditors whose report, dated February 23, 1996, expressed an
unqualified opinion on those statements.
We conducted our audit 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
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Golden Isles Financial Holdings, Inc. and subsidiaries
as of December 31, 1996, and the results of their operations and
their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
/S/ MAULDIN & JENKINS, LLC
Albany, Georgia
February 21, 1997
<PAGE>
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,"GIFH") as of December 31, 1995, and the related
consolidated statement of income, changes in shareholders' equity,
and cash flows for the year 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 the results
of its operations and its cash flows for the year then ended, in
conformity with generally accepted accounting principles.
/S/ Francis & Co., CPAs
Atlanta, Georgia
February 23, 1996
<PAGE>
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
1996 1995
Assets
Cash and due from banks $ 3,388,766 $ 3,518,530
Interest-bearing deposits
in banks 862,070 48,698
Federal funds sold 8,640,000 5,010,000
Securities available for sale,
at fair value (Note 2) 8,025,653 6,026,686
Securities held to maturity,
at cost(fair value
$2,031,272 and $2,255,620)
(Note 2) 2,053,844 2,273,605
Loans held for sale 6,323,719 7,842,230
Loans (Note 3) 77,969,491 57,065,385
Less allowance for loan losses 1,445,365
Loans, net 76,524,126 56,347,328
Premises and equipment, net
(Note 4) 4,135,683 3,359,481
Other assets 2,693,703 2,136,532
Total assets $112,647,564 $ 86,563,090
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing demand $ 7,153,576 $ 7,366,505
Interest-bearing demand 12,812,026 12,378,828
Savings 1,261,175 883,626
Time, $100,000 and over 13,608,161 10,454,220
Other time 47,973,230 36,945,063
Total deposits 82,808,168 68,028,242
Notes payable (Note 6) 14,135,473 2,849,683
Federal Home Loan Bank
borrowings (Note 7) 4,444,643 4,185,214
Other liabilities 1,510,105 699,161
Total liabilities 102,898,389 75,762,300
See Notes to Consolidated Financial Statements.
<PAGE>
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
YEARS ENDED DECEMBER 31, 1996 AND 1995
Commitments and contingent liabilities (Note 10)
Stockholders' equity
Common stock, no par value;
50.0 million shares authorized;
2,344,303 and 2,336,982 shares
issued and outstanding $ 1,094,338 $ 1,094,338
Capital surplus 9,972,568 9,849,147
Retained deficit (1,348,848) (140,182)
Unrealized gains (losses) on
securities available for sale,
net of taxes 31,117 (2,513)
Total stockholders' equity 9,749,175 10,800,790
Total liabilities and
stockholders' equity $112,647,564 $86,563,090
See Notes to Consolidated Financial Statements.
<PAGE>
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
Interest income
Interest and fees on loans $ 8,642,292 $ 6,331,387
Interest on taxable securities 514,438 554,782
Interest on nontaxable securities 1,007 12,081
Interest on deposits in other banks 6,355 4,385
Interest on Federal funds sold 102,863 115,145
Total interest income 9,266,955 7,017,780
Interest expense
Interest on deposits 3,535,961 2,713,941
Interest on other borrowings 903,634 466,816
Total interest expense 4,439,595 3,180,757
Net interest income 4,827,360 3,837,023
Provision for loan losses (Note 3) 975,085 382,257
Net interest income after
provision for loan losses 3,852,275 3,454,766
Other income
Income from origination and sale
of mortgage loans, less related
expenses 905,956 311,970
Service charges on deposit accounts 437,732 378,930
Insurance commissions 198,566 81,682
Net realized loss on sales of
securities (4,573) (2,932)
Other 200,597 27,149
Total other income 1,738,278 796,799
See Notes to Consolidated Financial Statements.
<PAGE>
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1995
Other expense
Salaries and employee benefits $4,088,265 $2,190,291
Equipment expense 508,881 324,102
Occupancy expense 453,585 256,894
Advertising and business
development 331,161 198,601
Legal and professional 318,062 217,263
Supplies and printing 271,095 162,764
Telephone 165,383 77,024
Postage and courier 132,171 82,356
Loss on write-down of furniture
and fixtures 145,769 -
Loss on abandonment of lease 148,316 -
Other operating expenses 674,564 716,645
Total other expense $7,237,252 $4,225,940
Income (loss) before
income tax (benefit) (1,646,699) 25,625
Applicable income tax (benefit)
(Note 9) (438,033) 12,728
Net income (loss) $(1,208,666) $ 12,897
Per share of common stock
Net income (loss) $ (0.52) $ 0.01
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1995
<CAPTION>
Unrealized
Gains
(Losses)
on Securities
Available Total
Common Stock Capital Retained for sale Stockholders'
Shares Par Value Surplus Deficit Net of Taxes Equity
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1994 1,377,182 $1,094,338 $4,353,632 $(153,079) $(109,520) $ 5,185,371
Net income - - - 12,897 - 12,897
Proceeds from sale
of stock, net of
stock offering
expense 897,230 - 5,456,457 - - 5,456,457
Issuance of
restricted
stock 62,570 - - - - -
Vesting of restricted
stock - - 39,058 - - 39,058
Net change in unrealized gains
(losses) on securities
available for sale,
net of
taxes - - - - 107,007 107,007
Balance, December 31,
1995 2,336,982 1,094,338 9,849,147 (140,182) (2,513) 10,800,790
Net loss - - - (1,208,666) - (1,208,666)
Proceeds from exercise
of stock
warrants 7,321 - 53,077 - - 53,077
Vesting of restricted
stock - - 70,344 - - 70,344
Net change in unrealized gains
(losses) on securities
available for sale,
net of
taxes - - - - 33,630 33,630
Balance, December 31,
1996 2,344,303 $1,094,338 $9,972,568 $(1,348,848) $31,117 $ 9,749,175
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
OPERATING ACTIVITIES
Net income (loss) $ (1,208,666) $ 12,897
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 367,966 165,593
Amortization 26,677 3,911
Provision for loan losses 975,085 382,257
(Increase) decrease in loans
held for sale, net 1,518,511 (7,842,230)
Loss on write-down of furniture
and fixtures 145,769 -
Loss on abandonment of lease 148,316 -
Net realized loss on securities
transactions 4,573 2,932
Increase in other assets (358,911) (515,576)
Increase in other liabilities 662,628 95,119
Total adjustments 3,490,614 (7,707,994)
Net cash provided by
operating activities 2,281,948 (7,695,097)
INVESTING ACTIVITIES
Increase in interest-bearing
deposits in bank (813,372) (48,698)
Increase in Federal funds sold (3,630,000) (5,010,000)
Available for sale securities:
Proceeds from sales and calls 1,000,000 1,576,061
Proceeds from maturities and
paydowns 2,091,676 1,016,450
Purchases (5,044,262) (1,735,175)
Held to maturity securities:
Proceeds from maturities and
paydowns 219,761 2,162,710
Purchases - (256,114)
Increase in loans, net (21,078,327)(11,499,228)
Purchase of premises and
equipment (1,246,452) (2,358,119)
Purchase of land held for
investment (301,502) -
Purchase of Federal Home Loan
Bank stock (57,800) (447,200)
Net cash used in
investing activities (28,860,278) (6,599,313)
See Notes to Consolidated Financial Statements
<PAGE>
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
FINANCING ACTIVITIES
Net increase in deposits $14,779,926 $17,939,562
Proceeds from issuance of
common stock - 5,456,457
Vesting of restricted stock 70,344 39,058
Proceeds from exercise of stock
warrants 53,077 -
Decrease in federal funds
purchased - (1,130,000)
Increase in Federal Home Loan Bank
borrowings 259,429 4,185,214
Net increase (decrease) in notes
payable 11,285,790 (500,317)
Net cash provided by financing
activities 26,448,566 25,989,974
Net increase (decrease) in cash and due
from banks $ (129,764) $1,695,564
Cash and due from banks at beginning
of year 3,518,530 1,822,966
Cash and due from banks at end
of year $3,388,766 $3,518,530
SUPPLEMENTAL DISCLOSURES
Cash paid for (received from):
Interest $4,897,812 $2,563,574
Income taxes $ (242,332) $ 290,666
NONCASH TRANSACTIONS
Net change in unrealized losses
on securities available for
sale $ (50,954) $ (171,059)
Net transfer of property from
premises and equipment to
other assets $ 102,284 $ -
See Notes to Consolidated Financial Statements.
<PAGE>
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Golden Isles Financial Holdings, Inc. (the "Company") is a bank
holding company whose business is conducted by its wholly-owned
subsidiaries, The First Bank of Brunswick (the "Bank"), First
Credit Service Corporation ("FCC") and First Bank Mortgage
Corporation ("FBMC"). The Bank is a commercial bank located in
Brunswick, Glynn County, Georgia with one branch located on St.
Simons Island, Georgia. The Bank provides a full range of
banking services in its primary market area of Glynn County and
the surrounding southeastern portion of the State of Georgia.
FCC is a finance company with operations in Brunswick,
Savannah, Kingsland, Martinez and Waycross, Georgia. FBMC
engages in the origination, purchase and sale of mortgage loans
through offices in several states in the southeastern United
States.
Basis of Presentation
The consolidated financial statements include the accounts of
the Company and its subsidiaries. Significant intercompany
transactions and accounts are eliminated in consolidation.
The accounting and reporting policies of the Company conform to
generally accepted accounting principles and general practices
within the financial services industry. In preparing the
financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues
and expenses for the period. Actual results could differ from
those estimates.
Reclassification of Certain Items
Certain items in the consolidated financial statements as of
and for the year ended December 31, 1995 have been
reclassified, with no effect on net income, to be consistent
with the classifications adopted for the year ended December
31, 1996.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Cash and Due from Banks
Cash on hand, cash items in process of collection, and amounts
due from banks are included in cash and due from banks.
The Company maintains amounts due from banks which, at times,
may exceed Federally insured limits. The Company has not
experienced any losses in such accounts.
Securities
Securities are classified based on management's intention on
the date of purchase. Securities which management has the
intent and ability to hold to maturity are classified as
securities held to maturity and reported at amortized cost.
All other debt securities are classified as securities
available for sale and carried at fair value with net
unrealized gains and losses included in stockholders' equity
net of tax.
Interest and dividends on securities, including amortization of
premiums and accretion of discounts, are included in interest
income. Realized gains and losses from the sales of securities
are determined using the specific identification method.
Loans Held for Sale
Loans held for sale include primarily mortgage loans and are
carried at the lower of aggregate cost or fair value. The
Company purchases and sells real estate mortgage loans in the
secondary market. Loans originated pending sale are classified
as loans held for sale. All loans are sold subject to a
recourse provision relating only to documentation deficiencies.
Gains and losses resulting from sales of mortgage loans are
recognized in the period the sale occurs, as the recourse
provisions do not significantly affect the earning process.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans
Loans are carried at their principal amounts outstanding less
unearned income and the allowance for loan losses. Interest
income on most loans is credited to income based on the
principal amount outstanding. Interest on some consumer
finance loans is credited to income based on the
sum-of-the-months-digits method, the results of which are not
materially different from generally accepted accounting
principles.
Loan origination fees and certain direct costs of loans are
recognized at the time the loan is recorded. Because net
origination loan fees and costs are not material, the results
of operations are not materially different than the results
which would be obtained by accounting for loan fees and costs
in accordance with generally accepted accounting principles.
The allowance for loan losses is maintained at a level that
management believes to be adequate to absorb potential losses
in the loan portfolio. Management's determination of the
adequacy of the allowance is based on an evaluation of the
portfolio, past loan loss experience, current economic
conditions, volume, growth, composition of the loan portfolio,
and other risks inherent in the portfolio. In addition,
regulatory agencies, as an integral part of their examination
process, periodically review the Company's allowance for loan
losses, and may require the Company to record additions to the
allowance based on their judgment about information available
to them at the time of their examinations.
The accrual of interest on impaired loans is discontinued when,
in management's opinion, the borrower may be unable to meet
payments as they become due. Interest income is subsequently
recognized only to the extent cash payments are received.
A loan is impaired when it is probable the Company will be
unable to collect all principal and interest payments due in
accordance with the terms of the loan agreement. Individually
identified impaired loans are measured based on the present
value of payments expected to be received, using the
contractual loan rate as the discount rate. Alternatively,
measurement may be based on observable market prices or, for
loans that are solely dependent on the collateral for
repayment, measurement may be based on the fair value of the
collateral. If the recorded investment in the impaired loan
exceeds the measure of fair value, a valuation allowance is
established as a component of the allowance for loan losses.
Changes to the valuation allowance are recorded as a component
of the provision for loan losses.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Premises and Equipment
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed principally by the
straight-line method over the estimated useful lives of the
assets.
Other Real Estate Owned
Other real estate owned represents properties acquired through
foreclosure. Other real estate owned is held for sale and is
carried at the lower of the recorded amount of the loan or fair
value of the properties less estimated selling costs. Any
write-down to fair value at the time of transfer to other real
estate owned is charged to the allowance for loan losses.
Subsequent gains or losses on sale and any subsequent
adjustment to the value are recorded as other income or
expenses.
Income Taxes
Income tax expense consists of current and deferred taxes.
Current income tax provisions approximate taxes to be paid or
refunded for the applicable year. Deferred tax assets and
liabilities are recognized on the temporary differences between
the bases of assets and liabilities as measured by tax laws and
their bases as reported in the financial statements. Deferred
tax expense or benefit is then recognized for the change in
deferred tax assets or liabilities between periods.
Recognition of deferred tax balance sheet amounts is based on
management's belief that it is more likely than not that the
tax benefit associated with certain temporary differences, tax
operating loss carryforwards, and tax credits will be realized.
A valuation allowance is recorded for those deferred tax items
for which it is more likely than not that realization will not
occur.
The Company files a consolidated income tax return. Each
entity provides for income taxes based on its contribution to
income taxes (benefits) of the consolidated group.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Earnings Per Common Share
Earnings per common share are computed by dividing net income
by the weighted average number of shares of common stock.
Common stock equivalents in the form of stock options and stock
warrants were not included in the determination of the weighted
average number of shares outstanding because the exercise of
the options and warrants would not have a dilutive effect on
income per share.
NOTE 2. SECURITIES
The amortized cost and fair value of securities are summarized
as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Securities Available for Sale
December 31, 1996:
U.S. Government and
agency securities $7,271,589 $ 45,984 $ (1,290) $7,316,283
Mortgage-backed
securities 706,918 5,532 (3,080) 709,370
$7,978,507 $ 51,516 $ (4,370) $8,025,653
December 31, 1995:
U.S. Government and
agency securities $4,947,629 $ 16,749 $ (6,327) $4,958,051
State and municipal
securities 225,306 - (81) 225,225
Mortgage-backed
securities 857,559 - (14,149) 843,410
$6,030,494 $ 16,749 $(20,557) $6,026,686
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SECURITIES (Continued)
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Securities Held to Maturity
December 31, 1996:
U.S. Government
and agency
securities $ 250,000 $ - $ (4,375) $ 245,625
Mortgage-backed
securities 1,803,844 - (18,197) 1,785,647
$2,053,844 $ - $(22,572) $2,031,272
December 31, 1995:
U.S. Government
and agency
securities $ 250,000 $ 7,675 $ - $ 257,675
Mortgage-backed
securities 2,023,605 - (25,660) 1,997,945
$2,273,605 $ 7,675 $(25,660) $2,255,620
The amortized cost and fair value of securities as of December
31, 1996 by contractual maturity are shown below. Maturities
may differ from contractual maturities in mortgage-backed
securities because the mortgages underlying the securities may
be called or prepaid with or without penalty. Therefore, these
securities are not included in the maturity categories in the
following maturity summary.
<PAGE>
Securities Available Securities Held
for Sale to Maturity
Amortized Fair Amortized Fair
Cost Value Cost Value
Due in one year
or less $ 500,000 $ 499,375 $ - $ -
Due from one
year to
five years 5,771,589 5,806,908 - -
Due from five
to ten years 1,000,000 1,010,000 250,000 245,625
Due after ten
years - - - -
Mortgage-backed
securities 706,918 709,370 1,803,844 1,785,647
$7,978,507 $8,025,653 $2,053,844 $2,031,272
Securities with a carrying value of $637,540 and $1,793,948 at
December 31, 1996 and 1995, respectively, were pledged to
secure public deposits and for other purposes.
Gross losses recognized on sales of securities available for
sale were $4,573 and $2,932 for the years ended December 31,
1996 and 1995, respectively.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
December 31,
1996 1995
Commercial, financial,
and agricultural $26,979,410 $18,501,460
Real estate-construction 9,295,969 4,718,003
Real estate - mortgage 32,735,336 28,031,580
Consumer installment 9,065,266 5,984,667
Other 644,999 141,776
78,720,980 57,377,486
Unearned income (751,489) (312,101)
Allowance for loan losses (1,445,365) (718,057)
Loans, net $76,524,126 $56,347,328
Changes in the allowance for loan losses for the years ended
December 31 were as follows:
1996 1995
Balance, beginning of year $ 718,057 $ 656,231
Provision for loan losses 975,085 382,257
Loans charged off (271,009) (338,681)
Recoveries of loans
previously charged off 23,232 18,250
Balance, end of year $1,445,365 $ 718,057
The Bank had no loans which it considered to be impaired other
than the loans on which the accrual of interest had been
discontinued. The total recorded investment in impaired loans
was $468,174 and $410,912 at December 31, 1996 and 1995,
respectively. These loans had related allowances for loan
losses of approximately $210,000 and $110,000 at December 31,
1996 and 1995, respectively. The average recorded investment
in impaired loans for 1996 and 1995 was $413,355 and $118,959,
respectively. There was no significant amount of interest
income recognized on impaired loans in 1996 or 1995.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)
The Bank has granted loans to certain directors, executive
officers, and related entities of the Company and the Bank.
The interest rates on these loans were substantially the same
as rates prevailing at the time of the transaction and
repayment terms are customary for the type of loan involved.
Changes in related party loans for the year ended December 31,
1996 are as follows:
Balance, beginning of year $ 2,373,753
Advances 1,152,155
Repayments (797,277)
Balance, end of year $ 2,728,631
NOTE 4. PPREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
December 31,
1996 1995
Land $514,235 $ 514,235
Buildings and improvements 2,520,066 2,024,055
Furniture and equipment 1,900,711 1,257,666
4,935,012 3,795,954
Accumulated depreciation 799,329 436,473
$ 4,135,683 $ 3,359,481
NOTE 5. BROKERED DEPOSITS
Brokered deposits of $2,475,985 and $1,373,447 are included in
time deposits at December 31, 1996 and 1995, respectively.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. NOTES PAYABLE
Notes payable at December 31, 1996 and 1995, consisted of the
following:
1996 1995
Southeastern Bank, Darien, Georgia;
$4,500,000 line of credit renewed
through March 27, 1997, interest
payable monthly at prime plus 1%
(9.25%), secured by all the shares
of common stock of the Bank. $ 3,500,000 $ 100,000
NationsBank, N.A.; note payable
dated February 19, 1996 for
$280,000, due in 120 monthly
installments of $3,397, at 8.0%
fixed rate, secured by a deed on
the Company's office building. 266,478 -
CoreStates Bank, N.A.; $10,000,000
line of credit dated April 30, 1996,
interest payable monthly at prime
plus 1/2% (8.75%), secured by qualified
loans receivable of FCC and guaranty
of the Company. 5,350,907 -
BankAmerica Business Credit, Inc.;
$8,500,000 line of credit terminated
in 1996, interest payable monthly at
a floating rate, secured by qualified
loans receivable of FCC and
guaranty of the Company. - 2,708,036
Bank United of Texas; $30,000,000 line
of credit dated May 31, 1996 and
subsequently reduced to $10,000,000,
interest payable monthly at a floating
rate of LIBOR plus 2.375% (7.995%),
secured by qualified mortgage loans
held for sale by FBMC. 4,984,465 -
Wachovia Bank, N.A.; notes payable
dated August 21, 1995 for $43,486,
due in 60 monthly installments of
$915, at 9.25% fixed rate, secured
by two automobiles owned by FBMC. 33,623 41,647
$14,135,473 $2,849,683
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. NOTES PAYABLE (Continued)
At December 31, 1996, the Company was in technical violation
of certain net worth covenants with Bank United of Texas and
CoreStates Bank, N.A. Bank United of Texas has not waived
compliance with the violation but has not declared a default
under the loan agreements. The outstanding balance on this line
at February 21, 1997 was $2,722,113. CoreStates Bank, N.A. has
waived compliance with their violation through March 31, 1997.
The projected five year maturity of notes payable at December
31, 1996 follows:
Year Ending December 31 Amount
1997 $13,863,858
1998 30,960
1999 33,650
2000 32,696
2001 28,014
Later 146,295
$14,135,473
NOTE 7. FEDERAL HOME LOAN BANK BORROWINGS
During 1996 and 1995, the Bank obtained funding for mortgage
loans from the Federal Home Loan Bank of Atlanta. Advances
made during 1996 and 1995 had a weighted average interest rate
of 6.68% and 6.35%, respectively. The Bank's advances from the
Federal Home Loan Bank are collateralized by a blanket floating
lien on qualifying first mortgage loans and pledging of the
Bank's stock in the Federal Home Loan Bank of Atlanta. A
summary of the Bank's FHLB borrowings for the years ended
December 31, 1996 and 1995 follows:
December 31,
1996 1995
Balance, beginning of year $ 4,185,214 $ -
Advances 15,016,600 4,245,000
Repayments (14,757,171) (59,786)
Balance, end of year $ 4,444,643 $ 4,185,214
Advances at December 31, 1996 have maturities in future years
as follows:
Year Ending December 31 Amount
1997 $1,897,271
1998 597,271
1999 597,271
2000 589,271
2001 473,271
Later 290,288
$4,444,643
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. EMPLOYEE BENEFIT PLAN
Effective January 1, 1996, the Company provided a 401(k) plan
for qualified employees to defer up to 10% of their salary with
100% matching contributions from the Company up to 6% of their
salary. Contributions and administrative expenses charged to
expense during 1996 amounted to $161,763.
NOTE 9. INCOME TAXES
The provision for income tax (benefit) consists of the
following:
December 31,
1996 1995
Current $ (215,074) $ 8,152
Deferred (222,959) 4,576
Provision for income tax
(benefit) $ (438,033) $ 12,728
The Company's provision for income tax (benefit) differs from
the amounts computed by applying the Federal income tax
statutory rates to income (loss) before income tax (benefit).
A reconciliation of the differences is as follows:
December 31,
1996 1995
Amount Percent Amount Percent
Income tax (benefit) at
statutory rate $ (559,878) (34%) $ 3,844 15%
Valuation reserve 88,225 5 - -
Other items, net 33,620 2 8,884 35
Provision for income tax
(benefit) $ (438,033) (27%) $ 12,728 50%
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. INCOME TAXES (Continued)
The components of deferred income taxes are as follows:
December 31,
1996 1995
Deferred tax assets:
Loan loss reserves $ 445,750 $ 197,009
Restricted stock 23,916 -
Non accrual loan interest 14,081 -
Write-down on loans held for sale 92,223 -
Unrealized loss on securities
available for sale - 1,295
575,970 198,304
Valuation allowance (259,725) (171,500)
Deferred tax liabilities:
Depreciation 78,654 13,550
Unrealized gain on securities
available for sale 16,030 -
Other 2,673 -
97,357 13,550
Net deferred tax assets $ 218,888 $ 13,254
At December 31, 1996, the Company has a net operating loss
carryforward of approximately $60,000 for Federal income tax
purposes. This carryforward expires in 2011.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Bank has entered into
off-balance-sheet financial instruments which are not
reflected in the financial statements. These financial
instruments include commitments to extend credit and standby
letters of credit. Such financial instruments are included in
the financial statements when funds are disbursed or the
instruments become payable. These instruments involve, to
varying degrees, elements of credit risk in excess of the
amount recognized in the balance sheet.
The Bank's exposure to credit loss in the event of
nonperformance by the other party to the financial
instrument for commitments to extend credit and standby
letters of credit is represented by the contractual amount of
those instruments. A summary of the Bank's commitments is as
follows:
December 31,
1996 1995
Commitments to extend credit $ 12,475,665 $ 10,299,000
Standby letters of credit 735,200 503,950
$ 13,210,865 $ 10,802,950
Commitments to extend credit generally have fixed expiration
dates or other termination clauses and may require payment of a
fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. The credit
risk involved in issuing these financial instruments is
essentially the same as that involved in extending loans to
customers. The Bank evaluates each customer's creditworthiness
on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Bank upon extension of credit, is based
on management's credit evaluation of the customer. Collateral
held varies but may include real estate and improvements,
crops, marketable securities, accounts receivable, inventory,
equipment, and personal property.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
Standby letters of credit are conditional commitments issued by
the Bank to guarantee the performance of a customer to a third
party. Those guarantees are primarily issued to support public
and private borrowing arrangements. The credit risk involved
in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers. Collateral
held varies as specified above and is required in instances
which the Bank deems necessary.
In the normal course of business, the Company is involved in
various legal proceedings. In the opinion of management of the
Company, any liability resulting from such proceedings would
not have a material effect on the Company's financial
statements.
The Company has entered into several operating lease
agreements. The approximate future minimum lease payments
under the lease terms at December 31, 1996, are as follows:
Year Ending December 31, Amount
1997 $ 119,112
1998 91,314
1999 58,370
2000 47,870
2001 27,740
$ 344,406
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. CONCENTRATIONS OF CREDIT
The Company originates primarily commercial, residential, and
consumer loans to customers in and around Glynn County,
Georgia. Through FCC, the Company offers consumer credit to
customers throughout. The ability of the majority of the
Company's customers to honor their contractual loan obligations
is dependent on the economy in the Glynn County area.
Fifty three percent (53%) of the Company's loan portfolio is
concentrated in real estate loans, of which 12% consists of
construction loans. A substantial portion of these loans are
secured by real estate in the Company's primary market area.
Accordingly, the ultimate collectibility of the loan portfolio
is susceptible to changes in market conditions in the Company's
primary market area. The other significant concentrations of
credit by type of loan are set forth in Note 3.
The Bank, as a matter of policy, does not generally extend
credit to any single borrower or group of related borrowers in
excess of 25% of statutory capital, or approximately
$1,500,000.
The Company had a concentration of funds with one correspondent
bank at December 31, 1996 as follows:
Cash and due from bank $ 1,837,759
Federal funds sold 2,529,000
$ 4,366,759
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. RESTRICTED STOCK, STOCK OPTIONS AND STOCK WARRANTS
Restricted Stock
In August 1994, the Company 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. In July 1995, the Company
granted 62,570 shares of restricted stock to eight directors.
All of these shares will be fully vested by the end of the
seventh year from the date of the grant. For the years ended
December 31, 1996 and 1995, $70,344 and $39,058, respectively,
was amortized as restricted stock and the same amount was
credited to paid-in capital.
Stock Options
The shareholders approved the 1991 Incentive Stock Option Plan
("Plan A") and the 1991 Nonstatutory Stock Option Plan ("Plan
B"), under which a total of 125,000 shares of common stock were
reserved for grants under the two plans. The option price for
shares granted under Plan A were at least equal to the fair
value of such shares on the date granted unless the optionee
was a restricted shareholder, in which case the options price
was at least equal to 110% of the fair value of the shares on
the date granted. The option price for shares of common stock
to be issued under Plan B was determined by the Board, but
under no circumstances could the option price be less than the
fair value of the shares on the date granted.
In 1995, Plan A and Plan B were discontinued and replaced by
the 1995 Stock Option Plan. Options granted under the two
prior plans at the date of replacement by the 1995 Stock Option
Plan remained outstanding and can be exercised during the terms
of the option agreements unless such options are forfeited by
the optionee. A summary of the options outstanding under Plan
A and Plan B as of December 31, 1996 follows:
Plan A Plan B
Options outstanding at beginning
of year 53,759 7,406
Options forfeited during the year (26,504) (2,027)
Options outstanding at end of year 27,255 5,379
Shares available for grant None None
Option price per share range $4.00-$6.25 $4.80-$6.25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. RESTRICTED STOCK, STOCK OPTIONS AND STOCK WARRANTS
(Continued)
In July 1995, the shareholders approved the 1995 Stock Option
Plan (the "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 ("Nonqualified
Options"). The 1995 Plan provides that not more than 250,000
shares in the aggregate be issued for Incentive Stock Options
and Nonqualified Options. The exercise price of an Incentive
Stock Option shall not be less than the fair value at the date
of grant. The fair 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 will determine the fair value based upon recent sales
reported to the Company. The exercise price of a Nonqualified
Option shall be determined by the Board on the date granted. A
summary of activity in the 1995 Plan for the years ended
December 31, 1996 and 1995 follows:
1996 1995
Shares reserved 250,000 250,000
Shares under option,
beginning of year 66,663 -
Options granted 62,526 79,163
Options forfeited (59,068) (12,500)
Shares under option, end of year 70,121 66,663
Shares available for grant 179,879 183,337
Option price per share range $6.00 - $6.50 $6.00 - $6.50
As permitted by SFAS No. 123 ("Accounting for Stock-Based
Compensation"), the Company recognizes compensation cost for
stock-based employee compensation awards in accordance with APB
Opinion No. 25, ("Accounting for Stock Issued to Employees").
The Company recognized no compensation cost for stock-based
employee awards for the year ended December 31, 1996. If the
Company had recognized compensation cost in accordance with
SFAS No. 123, there would have been no negative effect on net
income and earnings per share.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. RESTRICTED STOCK, STOCK OPTIONS AND STOCK WARRANTS
(Continued)
Warrants to Purchase Common Stock
In 1994, the Company initiated a public secondary stock
offering to sell 1,538,462 Units at a price of $6.50 per Unit.
Each Unit consisted 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 in 1995 following the sale of
897,230 Units. After deducting related stock offering and
issue expense, net proceeds of $5,456,457 were credited to
paid-in capital. During 1996, warrants to purchase 7,321
shares of common stock were exercised at a price of $7.25 per
share. Proceeds of $53,077 were credited to paid-in capital.
As of December 31, 1996, warrants were outstanding to purchase
an additional 889,909 shares of common stock.
NOTE 13. REGULATORY MATTERS
The Bank is subject to certain restrictions on the amount of
dividends that may be declared without prior regulatory
approval. Under terms of a resolution adopted by the Company's
Board of Directors in December 1996, the Board of Directors of
the Company and of the Bank will not declare or pay any cash or
property dividend or any other form of capital distribution
without the prior written consent of the supervisory
authorities. The resolution adopted by the Board contained
other undertakings and covenants, including the following:
(a) The Company will not incur any additional debt after
adoption of the resolution without prior notification to
the supervisory authorities;
(b) The Company will not reduce its capital by purchasing or
redeeming treasury stock without prior notification to the
supervisory authorities;
(c) The Board will develop a strategic business plan for the
Company and each subsidiary covering a three to five year
period which will provide for maintenance of adequate
liquidity, adequate capital and adequate reserves for loan
losses for the Bank and the Company consolidated entity.
The Company and the Bank are subject to various regulatory
capital requirements administered by the federal banking
agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could
have a direct material effect on the financial statements.
Under capital adequacy guidelines and the regulatory framework
for prompt corrective action, the Company and Bank must meet
specific capital guidelines that involve quantitative measures
of the assets, liabilities, and certain off-balance-sheet items
as calculated under regulatory accounting practices. The
Company and Bank capital amounts and classification are also
subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure
capital adequacy require the Company and the Bank to maintain
minimum amounts and ratios of total and Tier I capital to
risk-weighted assets and of Tier I capital to average assets.
Management believes, as of December 31, 1996, the Company and
the Bank meet all capital adequacy requirements to which it is
subject.
As of December 31, 1996, the most recent notification from the
FDIC categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Bank must maintain minimum
total risk-based, Tier I risk-based, and Tier I leverage ratios
as set forth in the table. There are no conditions or events
since that notification that management believes have changed
the Bank's category.
<PAGE>
NOTE 13. REGULATORY MATTERS (Continued)
The Company and Bank's actual capital amounts and ratios are presented in
the following table.
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital
(to Risk Weighted Assets):
Consolidated $10,669,000 12.6% $6,780,000 8.0% $8,474,000 10.0%
Bank $ 7,286,000 10.4% $5,601,000 8.0% $7,001,000 10.0%
Tier I Capital
(to Risk Weighted Assets):
Consolidated $ 9,604,000 11.3% $3,390,000 4.0% 5,085,000 6.0%
Bank $ 6,407,000 9.2% $2,800,000 4.0% 4,201,000 6.0%
Tier I Capital
(to Average Assets):
Consolidated $ 9,604,000 9.4% $4,103,000 4.0% 5,129,000 5.0%
Bank $ 6,407,000 7.4% $3,469,000 4.0% 4,337,000 5.0%
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. RESTRUCTURING OF MORTGAGE BANKING ACTIVITIES
As provided for in the resolution adopted by the Board of
Directors in December 1996, the Company has developed a
strategic plan which provides for the restructuring of its
mortgage banking activities. The plan provides for the
discontinuance of the mortgage company, FBMC, as a separate
operating entity and the transfer of its operations and certain
employees to the Bank. Upon implementation of the plan, the
wholesale national B, C and D mortgage business will be
discontinued and the Bank will focus on originating or
brokering retail mortgages in the local and surrounding area.
Limited wholesale mortgage activities will be conducted as
market conditions warrant.
NOTE 15. SEGMENT REPORTING
The Company's operations include three primary business
segments: banking, credit financing, and mortgage banking. The
Company, through the Bank, provides traditional banking
services including a full range of commercial and consumer
banking services. Credit financing activities are provided
primarily through FCC and include direct consumer loans and
retail sale financing. Mortgage banking activities are
provided primarily through FBMC and include the origination and
purchase of residential mortgage loans for sale to various
investors and other financial institutions.
<PAGE>
<TABLE>
<CAPTION>
For the Year
Ended
December 31, 1996
Holding Banking Credit Mortgage
Company Subsidiary Financing Banking Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C>
Consolidated
Revenues from
unaffiliated
customers
$ 10,811 8,165,365 $ 1,881,298 $ 947,759 $ - $11,005,233
Revenues from
affiliates
232,084 48,698 1,119 3,508 (285,409) -
Total
Revenues
$ 242,895 $ 8,214,063 $ 1,882,417 $ 951,267 $ (285,409) $ 11,005,233
Income (loss) from
operations before
income tax
(benefit)
$ (876,311) $ 902,771 $ (340,087) $(1,333,072) $ - $ (1,646,699)
Identifiable
assets at
December 31,
1996
$13,578,668 $95,981,034 $9,022,409 $ 8,278,016 $(14,212,563) $112,647,564
Depreciation and
amortization
expense
$ 35,349 $ 233,942 $ 64,454 $ 60,898 $ 394,643
Premises and
equipment
acquisitions
$ 628,811 $ 211,348 $ 167,112 $ 239,181 $ 1,246,452
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments.
In cases where quoted market prices are not available, fair
values are based on estimates using discounted cash flow methods.
Those methods are significantly affected by the assumptions used,
including the discount rates and estimates of future cash flows.
In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many
cases, could not be realized in immediate settlement of the
instrument. The use of different methodologies may have a
material effect on the estimated fair value amounts. Also, the
fair value estimates presented herein are based on pertinent
information available to management as of December 31, 1996 and
1995. Such amounts have not been revalued for purposes of these
financial statements since those dates and, therefore, current
estimates of fair value may differ significantly from the amounts
presented herein.
The following methods and assumptions were used by the Company in
estimating fair values of financial instruments as disclosed
herein:
<PAGE>
Cash and Due From Banks, Interest-Bearing Deposits with Banks and
Federal Funds Sold
The carrying amounts of cash and due from banks, interest-bearing
deposits with banks, and Federal funds sold approximate their
fair value.
Available For Sale and Held To Maturity Securities
Fair values for securities are based on quoted market prices.
Loans Held for Sale
Loans held for sale are carried at the lower of aggregate cost or
fair value. The fair values of loans held for sale are based on
management's assumptions with respect to current economic
conditions and probable future economic events.
Loans
For variable-rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on
carrying values. For other loans, the fair values are estimated
using discounted cash flow methods, using interest rates
currently being offered for loans with similar terms to borrowers
of similar credit quality. Fair values for impaired loans are
estimated using discounted cash flow methods or underlying
collateral values.
Deposits
The carrying amounts of demand deposits and savings deposits
approximate their fair values. Fair values for certificates of
deposit are estimated using discounted cash flow methods, using
interest rates currently being offered on certificates.
Notes Payable
The fair values of the Company's notes payable are estimated
using the discounted cash flow methods using current interest
rates for notes of similar terms.
Federal Home Loan Bank Borrowings
The fair values of the Company's Federal Home Loan Bank (FHLB)
borrowings are estimated using discounted cash flow methods based
on the Company's current incremental borrowing rates for similar
types of borrowing arrangements.
Off-Balance-Sheet Instruments
Fair values of the Company's off-balance sheet financial
instruments are based on fees charged to enter into similar
agreements. However, commitments to extend credit and standby
letters of credit do not represent a significant value to the
Company until such commitments are funded. The Company has
determined that these instruments do not have a distinguishable
fair value and no fair value has been assigned.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
The estimated fair values of the Company's financial instruments were as
follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks,
interest-bearing deposits
with banks and Federal
funds sold $12,890,836 $12,890,836 $ 8,577,228 $ 8,577,228
Securities available
for sale 8,025,653 8,025,653 6,026,686 6,026,686
Securities held to
maturity 2,053,844 2,031,272 2,273,605 2,255,620
Loans held for sale 6,323,719 6,323,719 7,842,230 7,842,230
Loans 76,524,126 76,634,635 56,347,328 56,365,609
Financial liabilities:
Deposits 82,808,168 83,231,777 68,028,242 67,991,865
Note payable 14,135,473 14,133,000 2,849,683 2,849,683
FHLB borrowings 4,444,643 4,458,000 4,185,214 4,185,214
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17. PARENT COMPANY FINANCIAL INFORMATION
The following information presents the condensed balance sheets,
statements of operations and cash flows for Golden Isles
Financial Holdings, Inc. as of and for the years ended December
31, 1996 and 1995:
CONDENSED BALANCE SHEETS
1996 1995
Assets
Cash $ 45,658 $ 659,733
Due from subsidiaries 1,909,297 2,241,178
Investment in subsidiaries 10,563,977 7,678,225
Premises and equipment, net 615,267 24,565
Other assets 444,469 318,279
Total assets $13,578,668 $10,921,980
Liabilities and Stockholders Equity
Liabilities
Notes payable $ 3,766,478 $ 100,000
Other liabilities 63,015 21,190
Total liabilities 3,829,493 121,190
Stockholders' equity 9,749,175 10,800,790
Total liabilities and
stockholders' equity $13,578,668 $10,921,980
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17. PARENT COMPANY FINANCIAL INFORMATION (Continued)
CONDENSED STATEMENTS OF OPERATIONS
1996 1995
Income
Interest $ 234,433 $ 274,342
Other 8,462 -
Total income 242,895 274,342
Expense
Interest 231,436 115,049
General and
administrative 887,770 592,754
Total expense 1,119,206 707,803
Loss before income tax
benefits and equity
in undistributed
income (loss) of
subsidiaries (876,311) (433,461)
Income tax benefits (350,523) (387,433)
Loss before equity in
undistributed
income (loss)
of subsidiaries (525,788) (46,028)
Equity in undistributed
income(loss) of
subsidiaries (682,878) 58,925
Net income (loss) $(1,208,666) $ 12,897
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17. PARENT COMPANY FINANCIAL INFORMATION (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
1996 1995
OPERATING ACTIVITIES
Net income (loss) $(1,208,666) $ 12,897
Adjustments to reconcile
net income (loss) to net
cash provided by (used in)
operating activities:
Depreciation 35,349 3,192
Undistributed (income)
loss of subsidiaries 682,878 (58,925)
Increase (decrease)in other
prepaids, receivables,
deferrals and accruals,
net (84,365) 43,680
Net cash provided by
(used in)operating
activities (574,804) 844
INVESTING ACTIVITIES
Loans to sub-
sidiaries 331,881 870,687
Investment in
subsidiaries (3,535,000) (2,600,000)
Purchase of property
and equipment (626,051) (19,548)
Net cash used in
investing
activities (3,829,170) (1,748,861)
FINANCING ACTIVITIES
Net increase (decrease)
in notes payable 3,666,478 (3,250,000)
Proceeds from sale
of units - 5,456,457
Vesting of restricted
stock 70,344 39,058
Proceeds from exercise
of stock warrants 53,077 -
Net cash provided by
by financing
activities 3,789,899 2,245,515
Net increase (decrease)
in cash (614,075) 497,498
Cash at beginning
of year 659,733 162,235
Cash at end of year $ 45,658 $ 659,733
<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
Risk Factors
The Offering
Restrictions on Future Sale of Units
and Shares
Use of Proceeds
Capitalization
GIFH and its Subsidiaries
Property
Legal Proceedings
Management's Discussion and
Analysis of Financial Condition
and Results of Operations
Statistical Information
Management
Supervision and Regulation of
GIFH and its Subsidiaries
Executive Compensation
Security Ownership of Certain
Beneficial Owners and Management
Certain Relationships and Related
Transactions
Description of Securities
Legal Matters
Experts
Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure
Additional Information
Financial Statements and
Supplementary Data
<PAGE>
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 then
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 Agreement with
Holders of Class A Warrants.
5.1 Opinion of Boone, Papadakis & Dinur, as to the legality of
the securities being registered.
<PAGE>
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 10(i) 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).
10.16 Employment Agreement between the Bank and Michael D.
Hodges dated February 20, 1997 (incorporated by reference
to Exhibit 10(m) to the Registrant's Annual Report on Form
10-KSB for the year ended December 31, 1996).
10.17 Loan Agreement dated March 29, 1997, between American
Banking Company and Golden Isles Financial Holdings, Inc.
(incorporated by reference to Exhibit 10(n) to the
Registrant's Annual Report on Form 10-KSB for the year
ended December 31, 1996).
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, 1996).
23.2 Consent of Francis & Co., CPAs*
23.3 Consent of Boone, Papadakis & Dinur (appears in its
opinion filed as Exhibit 5.1).
23.4 Consent of Mauldin & Jenkins, LLC.*
* Filed with this amendment. All other exhibits have been
previously filed.
<PAGE>
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 10(i) 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).
10.16 Employment Agreement between the Bank and Michael D.
Hodges dated February 20, 1997 (incorporated by reference
to Exhibit 10(m) to the Registrant's Annual Report on Form
10-KSB for the year ended December 31, 1996).
10.17 Loan Agreement dated March 29, 1997, between American
Banking Company and Golden Isles Financial Holdings, Inc.
(incorporated by reference to Exhibit 10(n) to the
Registrant's Annual Report on Form 10-KSB for the year
ended December 31, 1996).
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, 1996).
23.2 Consent of Francis & Company, CPAs*
23.3 Consent of Boone, Papadakis & Dinur (appears in its
opinion filed as Exhibit 5.1).
23.4 Consent of Mauldin & Jenkins, LLC.*
*Filed with this amendment. All other exhibits have been
previously filed.
<PAGE>
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 May 1, 1997.
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
(Registrant)
By: /s/ J. Thomas Whelchel
J. Thomas Whelchel
Acting 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:
Date: May 1, 1997
Signature Title Date
/s/ J. Thomas Whelchel Acting Chairman of the May 1, 1997
J. Thomas Whelchel Board of Directors;
Acting Chief Executive
Officer (principal
executive officer)
/s/ L. McRee Harden Director May 1, 1997
L. McRee Harden
/s/ Michael D. Hodges Director May 1, 1997
Michael D. Hodges
/s/ Russell C. Jacobs, Jr. Director May 1, 1997
Russell C. Jacobs, Jr.
Director May 1, 1997
Gregory S. Junkin
Director May 1, 1997
Claude Kermit Keenum
Director May 1, 1997
Paul D. Lockyer
/s/ Jimmy D. Veal Vice Chairman of the
Jimmy D. Veal Board of Directors;
Secretary and
Treasurer May 1, 1997
<PAGE>
Exhibit 23.2
<PAGE>
FRANCIS & CO., CPAs
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 (Amendment No. 4) 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.
/s/ Francis & Co., CPAs
Atlanta, Georgia
April 29, 1997
<PAGE>
EXHIBIT 23.4
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use of our report dated February 21, 1997
relating to the consolidated financial statements of Golden Isles
Financial Holdings, Inc. included in the Registration Statement
Amendment Number 4 to Form SB-2 and to the reference of our Firm
under the caption "Experts" in the Registration Statement.
/s/ Mauldin & Jenkins, LLC
MAULDIN & JENKINS, LLC
April 28, 1997
Albany, Georgia
