SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997.
Commission File No. 0-27448
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
(Exact name of small business issuer as specified in its charter)
Georgia 58-1756713
(State of Incorporation) (I.R.S. Employer Identification No.)
200 Plantation Chase, St. Simons Island, Georgia 31522
(Address of Principal Executive Offices)
(912) 638-0667
(Issuer's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer (1) filed all reports required to be
filed by section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of
shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date.
Common Stock, no par value per share: 2,344,303 shares issued
and outstanding as of May 8, 1997.
Transitional Small Business Disclosure Format:
Yes No X
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Consolidated Balance Sheets
March 31, December 31,
1997 1996
ASSETS (Unaudited) (Audited)
---------- ----------
Cash and due from banks $ 2,583,655 $ 4,250,836
Federal funds sold 3,750,000 8,640,000
---------- ---------
Total cash and cash equivalents $ 6,333,655 $12,890,836
Investment securities:
Securities available-for-sale,
at estimated market values 10,962,780 8,025,653
Securities held-to-maturity
(approximate estimated market
value of $1,853,190 (03-31-97)
and $2,031,272 (12-31-96)) 1,881,480 2,053,844
Loans, net 81,135,997 76,524,126
Loans held-for-sale 397,091 6,323,719
Property and equipment, net 4,032,925 4,135,683
Other assets 1,974,299 2,693,703
----------- -----------
Total Assets $106,718,227 $112,647,564
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits
Non-interest bearing deposits $ 7,822,557 $ 7,153,576
Interest bearing deposits 75,518,026 75,654,592
------------ -----------
Total deposits $ 83,340,583 $82,808,168
------------ -----------
Notes payable 9,294,145 14,135,473
Federal Home Loan Bank borrowings 3,055,143 4,444,643
Federal funds purchased - - - -
Other liabilities 1,249,552 1,510,105
------------ -----------
Total Liabilities $ 96,939,423 $102,898,389
------------ -----------
Commitments and contingencies
Shareholders' Equity:
Common stock, no par value
15 million shares authorized,
2,344,303 shares issued and
outstanding 3/31/97 and
12/31/96. $ 1,094,338 $ 1,094,338
Paid-in-capital 9,990,876 9,972,568
Retained (deficit) (1,290,649) (1,348,848)
Unrealized (loss) on fair value
of securities available-for-sale (15,761) 31,117
----------- -----------
Total Shareholders' Equity $ 9,778,804 $ 9,749,175
----------- -----------
Total Liabilities
and Shareholders' Equity $106,718,227 $112,647,564
----------- -----------
Refer to notes to the financial statements.
<PAGE>
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Consolidated Income Statements
(Unaudited)
Three Months Ended
March 31,
1997 1996
--------- ---------
Interest income $ 2,549,306 $2,260,540
Interest expense 1,354,261 1,108,749
---------- ----------
Net interest income $ 1,195,045 $1,151,791
Provision for possible loan losses (1,033) 163,701
---------- ----------
Net interest income after provision
for possible loan losses $ 1,196,078 $ 988,090
---------- ----------
Other income:
Fee income from mortgage subsidiary $ 0 $ 362,419
Other income 541,512 207,232
---------- ----------
Total other income $ 541,512 $ 569,651
---------- ----------
Salaries and benefits $ 812,145 $ 908,110
Depreciation and amortization 71,858 80,081
Regulatory fees and assessments 14,233 5,416
Supplies and printing 40,353 46,581
Legal & professional 149,214 36,375
Advertising 24,613 61,506
Other operating expenses 479,226 442,414
---------- ----------
Total operating expenses $ 1,591,642 $1,580,483
---------- ----------
Net income/(loss) before taxes $ 145,948 $ (22,742)
Income taxes/(benefit) 87,750 53,836
---------- ----------
Net income/(loss) $ 58,198 $ (76,578)
---------- ----------
Income/(loss) per share $ .025 $ (.030)
---------- ----------
Refer to notes to the financial statements.
<PAGE>
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31,
1997 1996
--------- ----------
Cash flows from operating activities: $ 544,055 $ 395,866
--------- ----------
Cash flows from Investing Activities:
(Incr)/Decr in loans held-for-sale $ 5,926,628 $(7,160,052)
(Purch)/Sale of fixed assets 28,675 (760,113)
(Increase) in loans (4,611,871) (5,222,185)
Securities - available-for-sale
Maturity and paydowns 588,231 664,576
Sale of securities - - - -
Purchase of securities (3,525,358) (511,484)
Securities - held-to-maturity
Maturity and paydowns 172,564 30,875
Purchase of securities - - - -
---------- -----------
Net cash used in investing activities $ (1,421,131) $(12,958,383)
---------- -----------
Cash flows from Financing Activities:
Incr/(Decr) in various borrowings $ (6,230,828) $ 3,601,368
Sale of stock/option amortization 18,308 18,808
Increase in deposits 532,415 7,303,744
----------- ----------
Cash provided from financing
activities $ (5,680,105) $ 10,923,920
----------- ----------
Net decrease in cash and cash
equivalents $ (6,557,181) $(1,638,597)
Cash and cash equivalents,
beginning of period 12,890,836 8,577,228
----------- ----------
Cash and cash equivalents, end of
period $ 6,333,655 $ 6,938,631
----------- ----------
----------- ----------
Refer to notes to the financial statements.
<PAGE>
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Notes to Financial Statements (Unaudited)
March 31, 1997
Note 1 - Basis of Presentation
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form
10-QSB. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the three-month period ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the
year ending December 31, 1997. For further information, refer to
the financial statements and footnotes thereto included in Form
10-KSB for the year ended December 31, 1996.
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation and Reclassification. The consolidated
financial statements include the accounts of the parent company
and the Subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain prior
year amounts have been reclassified to conform to the current year
presentation.
Basis of Accounting. The accounting and reporting policies of
GIFH conform to generally accepted accounting principles and to
general practices in the banking industry. GIFH uses the accrual
basis of accounting by recognizing revenues when earned and
expenses in the period incurred, without regard to the time of
receipt or payment of cash.
Investment Securities. GIFH adopted Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investment in
Debt and Equity Securities (SFAS 115) on January 1, 1994. SFAS
115 requires investments in equity and debt securities to be
classified into three categories:
1. Held-to-maturity securities: These are securities which
GIFH has the ability and intent to hold until maturity.
These securities are stated at cost, adjusted for
amortization of premiums and the accretion of discounts.
2. Trading securities: These are securities which are bought
and held principally for the purpose of selling in the near
future. Trading securities are reported at fair market
value, and related unrealized gains and losses are
recognized in the income statement.
<PAGE>
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Notes to Financial Statements (Unaudited)
March 31, 1997
3. Available-for-sale securities: These are securities which
are not classified as either held-to-maturity or as trading
securities. These securities are reported at fair market
value. Unrealized gains and losses are reported, net of
tax, as separate components of shareholders' equity.
Unrealized gains and losses are excluded from the income
statement.
Loans, Interest and Fee Income on Loans. Loans are stated at the
principal balance outstanding. Unearned discount, unamortized
loan fees and the allowance for possible loan losses are deducted
from total loans in the statement of condition. Interest income
is recognized over the term of the loan based on the principal
amount outstanding. Points on real estate loans are taken into
income to the extent they represent the direct cost of initiating
a loan. The amounts in excess of direct costs are deferred and
amortized over the expected life of the loan.
Loans are generally placed on non-accrual status when principal or
interest becomes ninety days past due, or when payment in full is
not anticipated. When a loan is placed on non-accrual status,
interest accrued but not received is generally reversed against
interest income. If collectibility is in doubt, cash receipts on
non-accrual loans are not recorded as interest income, but are
used to reduce principal.
Allowance for Possible Loan Losses. The provisions for loan
losses charged to operating expense reflect the amount deemed
appropriate by management to establish an adequate reserve to meet
the present and foreseeable risk characteristics of the current
loan portfolio. Management's judgement is based on periodic and
regular evaluation of individual loans, the overall risk
characteristics of the various portfolio segments, past experience
with losses and prevailing and anticipated economic conditions.
Loans which are determined to be uncollectible are charged against
the allowance. Provisions for loan losses and recoveries on loans
previously charged-off are added to the allowance.
GIFH adopted Statement of Financial Accounting Standards No.
114, Accounting by Creditors for Impairment of a Loan, (SFAS 114)
on January 1, 1995. Under the new standard, a loan is considered
impaired, based on current information and events, if it is
probable that GIFH will be unable to collect the scheduled
payments of principal or interest when due according to the
contractual terms of the loan agreement. The measurement of
impaired loans is generally based on the present value of expected
future cash flows discounted at the historical effective interest
rate. All collateral-dependent loans, however, are measured for
impairment based on the fair value of the collateral. The
adoption of SFAS 114 resulted in no change to the allowance for
credit losses at January 1, 1995.
<PAGE>
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Notes to Financial Statements (Unaudited)
March 31, 1997
In October, 1994, FASB issued Statement of Financial Accounting
Standards No. 118, Accounting by Creditors for Impairment of a
Loan - Income Recognition and Disclosure (SFAS 118). SFAS 118
amends SFAS 114 to allow a creditor to use existing methods for
recognizing interest income on an impaired loan, rather than the
methods prescribed in SFAS 114.
In May 1995, FASB issued Statement of Financial Accounting
Standards No. 122, Accounting for Mortgage Servicing Rights, (SFAS
122). SFAS 122 amends SFAS 65, Accounting for Certain Mortgage
Banking Activities, to require that a mortgage banking enterprise
recognize as an asset rights to service mortgage loans for others
regardless of the manner in which those servicing rights are
acquired. It also requires an enterprise to assess its
capitalized mortgage servicing rights for impairment based on the
fair value of those rights. In assessing impairment, Management
believes that the adoption of SFAS 122 will not have a material
impact on the financial position of GIFH.
Property and Equipment. Building, furniture and equipment are
stated at cost, net of accumulated depreciation. Depreciation is
computed using the straight line method over the estimated useful
lives of the related assets. Maintenance and repairs are charged
to mortgage operations, while major improvements are capitalized.
Upon retirement, sale or other disposition of property and
equipment, the cost and accumulated depreciation are eliminated
from the accounts, and gain or loss is included in income from
operations.
Income Taxes. The consolidated financial statements have been
prepared on the accrual basis. When income and expenses are
recognized in different periods for financial reporting purposes
and for purposes of computing income taxes currently payable,
deferred taxes are provided on such temporary differences.
Effective January 1, 1993, GIFH adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes (SFAS
109). Under SFAS 109, deferred tax assets and liabilities are
recognized for the expected future tax consequences of events that
have been recognized in the financial statements or tax return.
Deferred tax assets and liabilities are measured using the enacted
tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be realized or
settled.
Statement of Cash Flows. For purposes of reporting cash flows,
cash and cash equivalents include cash on hand, amounts due from
banks and federal funds sold. Generally, federal funds are
purchased or sold for one day periods.
<PAGE>
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Notes to Financial Statements (Unaudited)
March 31, 1997
Net Income/(Loss) Per Share. Net income/(loss) per share was
computed by dividing net income by the weighted average number of
shares outstanding for each period. Common stock equivalents in
the form of outstanding stock options were included in the
determination of the weighted average number of shares outstanding
only if they were dilutive. Income per share of $.025 for the
three-month period ended March 31, 1997 may not be indicative of
projected earnings/(losses) for the year ending December 31, 1997.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Liquidity and Sources of Capital
Golden Isles Financial Holdings, Inc., St. Simons Island, Georgia
("GIFH" or the "Company") was incorporated under the laws of the
State of Georgia in 1987 for the purpose of becoming a holding
company for its then proposed de novo bank, The First Bank of
Brunswick, Brunswick, Georgia (the Bank). Upon commencement of
the Bank's principal operations on July 2, 1990, GIFH acquired 100
percent of the Bank's voting stock by injecting $4.5 million into
the Bank's capital accounts. Subsequently, an additional $1.1
million was injected into the Bank's capital accounts. Deposits
at the Bank are each insured up to $100,000 by the Federal Deposit
Insurance Corporation.
In late 1993, GIFH formed two subsidiaries, First Credit Service
Corporation, Brunswick, Georgia (FCC) and First Bank Mortgage
Corporation, Brunswick, Georgia (FBMC). FCC engages in consumer
finance and credit related insurance activities. FBMC ceased
operations as of April 30,1997. From inception to March 31, 1997,
GIFH injected $1,785,000 and $2,875,000 into the capital accounts
of FCC and FBMC, respectively. GIFH owns 100 percent of the
voting shares of the Bank, FCC and FBMC.
In the following discussion, unless any information is
specifically identified as reflecting the financial condition of
the Bank, FCC or FBMC, it is intended to reflect the financial
condition of GIFH on a consolidated basis.
Total consolidated assets decreased by $5.9 million to $106.7
million during the three-month period ended March 31, 1997. The
decrease was primarily due to the liquidation of loans and payoff
of notes at FBMC.
Liquidity is the company's ability to meet all deposit withdrawals
immediately, while also providing for the credit needs of
customers. The March 31, 1997 financial statements evidence a
fair liquidity position as total cash and cash equivalents
amounted to $6.3 million, representing 5.9% of total assets.
Investment securities amounted to $12.8 million, representing
12.0% of total assets; these securities provide a secondary source
of liquidity since they can be converted into cash in a timely
manner. Note that the Company's
ability to maintain and expand its deposit base and borrowing
capabilities are a source of liquidity. GIFH's management closely
monitors and maintains appropriate levels of interest earning
assets and interest bearing liabilities, so that maturities of
assets are such that adequate funds are provided to meet customer
withdrawals and loan demand. There are no trends, demands,
commitments, events or uncertainties that will result in or are
reasonably likely to result in GIFH's liquidity increasing or
decreasing in any material way.
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 Bank maintains an adequate level of capitalization as measured
by the following capital ratios and the respective minimum capital
requirements by the Bank's primary regulators.
Bank's Minimum required by
March 31, 1997 regulatory authorities
-------------- ----------------------
Leverage ratio 7.6% 4.0%
Risk weighted ratio 11.2% 8.0%
Note that with respect to the leverage ratio, the regulators
expect a minimum of 5.0 percent to 6.0 percent ratio for banks
that are not rated CAMEL 1. Although the Bank is not rated CAMEL
1, its leverage ratio of 7.6 percent is well above the required
minimum.
Results of Operations
Net income for the three-month period ended March 31, 1997
amounted to $58,198, or $.025 per share. For the same period
ended March 31,1996, net loss amounted to $(76,578), or $(.030)
per share. The primary reason for the improvement was the closing
of FBMC and improved earnings at the Bank. Operating expenses in
the first quarter of 1997 remained close to the level of the
previous year due to the inclusion of approximately $131,000 of
certain expenses related to the March 11, 1997, Special Meeting of
shareholders. It is anticipated that other additional expenses
resulting from the Special Meeting may also be incurred in the
second quarter of 1997. Several other items are of interest when
compared to the results of the same three months of 1996.
A. The net interest yield, defined as net interest income
divided by interest earning assets, has decreased from 6.2%
for the three-month period ended March 31, 1996, to 4.9% for
the three-month period ended March 31, 1997. This decrease
is attributable to FBMC paying off all Prime + 2% warehouse
loans at the Bank.
B. Net interest income which represents the difference between
interest received on interest earning assets and interest
paid on interest bearing liabilities, has increased from
$2,260,540 for the three-month period ending March 31,1996,
to $2,549,306 for the same period one year later,
representing an increase of $288,766, or 12.8%.
The loan loss reserve remained constant though there was loan
growth, due to improvements in the conditions of adversely
classified assets. The allowance for loan losses, as a percentage
of gross loans decreased from 1.85% to 1.73% during the three-month
period ended March 31, 1997. Management considers the
allowance for loan losses to be adequate and sufficient to absorb
possible future losses; however, there can be no assurance that
charge-offs in future periods will not exceed the allowance for
loan losses or that additional provisions to the allowance will
not be required.
GIFH is not aware of any current recommendation by the regulatory
authorities which, if they were to be implemented, would have a
material effect on GIFH's liquidity, capital resources, or results
of operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
As of March 31, 1997, there are no new material pending
legal proceedings to which the Company or any of its subsidiaries
is a party or of which any of their property is the subject.
Item 2. Changes in Securities.
(a) None
(b) None
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders.
The response to this item is incorporated herein by
reference to information appearing under the heading "Item 4.
Submission of Matters to Vote of Security Holders" in the
Registrant's Form 10-KSB for the fiscal year ending December 31,
1996, filed on March 31, 1997.
Item 5. Other Information. None
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit No: Description
27 Financial Data Schedule
(b) Reports on Form 8-K
Filing Date Description of Items Reported Date of Report
1/9/97(1) Change in Registrant's
Certifying Accountant 12/9/96
3/13/97 Other Events, Exhibits 3/13/97
(1) This was amended by Form 8-K/A filed on January 27, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
(Registrants
Date: May 15, 1997
By: /s/ J. Thomas Whelchel
J. Thomas Whelchel
Acting Chairman of the Board of Directors <PAGE>
INDEX TO EXHIBITS
Exhibit Sequential
Number Description Page Number
27 Financial Data Schedule 13
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,583,655
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,750,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,962,780
<INVESTMENTS-CARRYING> 1,881,480
<INVESTMENTS-MARKET> 1,853,190
<LOANS> 81,135,997
<ALLOWANCE> 0
<TOTAL-ASSETS> 106,718,227
<DEPOSITS> 83,340,583
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,249,552
<LONG-TERM> 12,349,288
0
0
<COMMON> 1,094,338
<OTHER-SE> 9,990,876
<TOTAL-LIABILITIES-AND-EQUITY> 106,718,227
<INTEREST-LOAN> 2,282,597
<INTEREST-INVEST> 266,709
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 2,549,306
<INTEREST-DEPOSIT> 990,720
<INTEREST-EXPENSE> 1,354,261
<INTEREST-INCOME-NET> 1,195,045
<LOAN-LOSSES> (1,033)
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,591,642
<INCOME-PRETAX> 145,948
<INCOME-PRE-EXTRAORDINARY> 145,948
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,198
<EPS-PRIMARY> .025
<EPS-DILUTED> .025
<YIELD-ACTUAL> 4.9
<LOANS-NON> 435,881
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,716,608
<CHARGE-OFFS> 90,598
<RECOVERIES> 17,225
<ALLOWANCE-CLOSE> 1,706,834
<ALLOWANCE-DOMESTIC> 1,284,437
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 422,397
</TABLE>
