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GOLDEN ISLES FINANCIAL HOLDINGS, INC.
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(Name of Registrant as Specified In Its Charter)
Gregory S. Junkin, Paul D. Lockyer, Scott A. Junkin
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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MEMORANDUM
TO: The Shareholders of Golden Isles Financial Holdings, Inc.
("GIFH" or the "Company")
FROM: Gregory S. Junkin and Paul D. Lockyer
RE: Whelchel Group Support of Junkin/Lockyer Actions
DATE: February 18, 1997
THIS MEMORANDUM DISCUSSES PRIOR WRITTEN STATEMENTS MADE OR ENDORSED BY
MEMBERS OF THE WHELCHEL GROUP WHICH DIRECTLY CONTRADICT WHAT THEY HAVE TOLD YOU
SINCE OCTOBER. PLEASE READ THIS MEMORANDUM CAREFULLY.
The Whelchel Group has told you that they removed us from our
positions with GIFH in part because of (1) the Company's entry into the
mortgage banking business which they (incorrectly) claim represented a
deviation from the Company's supposed mission, (2) expansion from local markets
to other markets in the Southeast, (3) losses incurred at the mortgage
subsidiary and (4) the incurring of certain expenses. They state or imply that
they were unaware or disapproved of these matters. In assessing the
credibility of these claims, and the credibility and motivation of the Whelchel
Group itself, please be aware that their claims are INCONSISTENT with and
CONTRADICT their previous statements and actions over the past several years,
including statements made in filings with the Securities and Exchange
Commission ("SEC") and in Annual Reports sent to you. For example, please
carefully consider the following:
1. The entire Board, INCLUDING THE WHELCHEL GROUP, voted for and approved
the creation of the mortgage subsidiary ("FBMC") and the conduct of
its business, including operations outside of the local area.
2. The entire Board, INCLUDING THE WHELCHEL GROUP, voted for and approved
the 1994-95 stock offering. All of the directors, INCLUDING THE
WHELCHEL GROUP, approved the
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Registration Statement of which the offering Prospectus was a part and
which was filed with the SEC. The following statements, among others,
were made in the Prospectus (with emphasis added):
". . . The Company's business plan was to build the Bank as
the anchor of the full-service financial services company that
management intended to create. . . ."
"As a result of the Bank's performance, the Company was in a
position, by 1993, to take the second and third steps in the
business plan referenced above -- namely, to add two
additional operating businesses [the mortgage and consumer
finance subsidiaries] which could add income streams to the
Company. . . ."
"Also, the Company intends ultimately to expand its mortgage
brokerage operation into loan warehousing, underwriting and
servicing. . . ."
3. The Company's Annual Reports for 1995, 1994 and 1993 contain "A
Message To Our Shareholders, Clients and Friends." EACH OF THESE
MESSAGES WAS SIGNED BY J. THOMAS WHELCHEL AND JIMMY D. VEAL, as well
as by us. Here are some excerpts (with emphasis added) from these
"Messages":
a. 1995 Annual Report (Please note that this Report was sent to
shareholders on April 29, 1996, less than six months before
the Whelchel Group removed us and began making contradictory
statements about the reasons.)
". . . . An extremely important challenge for your management
in 1995, and one that will continue . . . . over the next
several years, was managing the balance between creating
current earnings and creating long term residual shareholder
value . . . . In the early years of a growth company current
earnings are sacrificed to some extent to grow the asset base.
As the asset base grows, it should begin to generate increased
earnings . . . .
"We could, of course, create current earnings by constraining
our growth because inherent in growth for a company GIFH's age
is the creation of a disproportionate increase in fixed
expenses necessary to create future earnings and asset value.
But, in order to grow the asset base and future earnings, we
must sacrifice some short term earnings. . . . We believe
your Company has enormous opportunity to create substantial
shareholder value over the next few years by increasing its
asset base today. Delaying or constraining the growth in the
asset base today would substantially delay the returns from
assets and subsequently the residual value of the Company. . .
"We must . . . foster a regional perspective to leverage the
opportunities that exist throughout the Southeastern region of
the United States. . . ."
"GIFH has never been stronger. . . ."
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b. 1994 Annual Report (mailed Spring 1995)
"Two of the challenges we undertook in 1994 to create
shareholder value were . . . and the implementation of the
hoped for cross-selling synergies of our two newest
subsidiaries, First Bank Mortgage Corporation and . . . . We
are pleased to report that both of these challenges were met
with success. . . . .
"On the plus side, FBMC opened its second office in 1994. . .
. Our goal for FBMC is to expand past the mortgage brokerage
business to ultimately become a mortgage bank. It is our plan
to create at least three revenue streams within FBMC - - -
mortgage brokerage fees, mortgage servicing fees and mortgage
banking fees. This will require a step-by-step plan . . . it
is our 1995 goal to establish a warehouse line of credit for
FBMC to . . . . begin servicing our own mortgage loans."
c. 1993 Annual Report (mailed Spring 1994)
". . .[the Bank's] outstanding performance . . . enabled GIFH
to move into Phase II of its business plan. This was done
with the formation of First Bank Mortgage Corporation
("FBMC") and First Credit Corporation. . . .
"[FBMC] will initially provide mortgage brokerage services but
will be built to service its own portfolio as well as others
and ultimately to transact business as a mortgage bank. We
believe the activities of FBMC will allow us to access
business beyond our immediate market . . . . We will not
reach our ultimate goal for FBMC overnight and will grow the
company step by step . . . . through the years."
Remember, all of these quoted statements from the Annual Reports were
contained in "Messages" literally signed by Messrs. Junkin, Lockyer, WHELCHEL
AND VEAL. It appears that the Whelchel Group, and Messrs. Whelchel and Veal in
particular, NOW claim that they were unaware and disapproved of the "direction"
of the Company AND the fact that earnings would be sacrificed in the short term
to build the asset value of the Company.
IF THEY WERE UNAWARE AND DISAPPROVED,
WHY DID MESSRS. WHELCHEL AND
VEAL SIGN THESE MESSAGES IN
THREE ANNUAL REPORTS?
These statements completely contradict the reasons they have given you
for removing us from office and changing the direction of the Company. In
particular, these statements clearly and unambiguously show that, IN
CONTRADICTION TO WHAT THEY HAVE TOLD YOU SINCE OCTOBER 1996:
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- The Whelchel Group consistently supported the creation of the
mortgage banking subsidiary, its business plan and its
expansion throughout the Southeastern United States.
- The entry into the mortgage banking business did not represent
a deviation from GIFH's mission, but rather was fully
consistent with that mission which, as the Whelchel Group
knows (but has not told you), was always intended to be
implemented in phases.
- The entire Board, INCLUDING THE WHELCHEL GROUP, acknowledged
that the mortgage company would incur losses during the early
years or start-up period of its operations, and these losses
should properly be viewed as a valuable investment in GIFH's
future long-term growth. Unfortunately, the Whelchel Group's
precipitous action in dismantling FBMC in December has
jeopardized this investment and, in our view, wasted corporate
assets.
- The entire Board, INCLUDING THE WHELCHEL GROUP (AND IN
PARTICULAR MESSRS. WHELCHEL AND VEAL), were aware of, approved
and recognized (AS RECENTLY AS APRIL 29, 1996) the necessity
of "A DISPROPORTIONATE INCREASE IN FIXED EXPENSES" at this
stage of GIFH's development to position it for future growth
and to build long term value. See the quoted statements from
the 1995 Annual Report, above.
- As recently as April 29, 1996 (less than 6 months before our
removal), MESSRS. WHELCHEL AND VEAL (with us) stated in
writing that "GIFH has never been stronger . . . ." AND, IN
HIS LETTER TO YOU OF OCTOBER 25, 1996 MR. WHELCHEL stated that
"[T]he businesses of Golden Isles Financing Holdings, Inc. on
the whole are very healthy."
The Whelchel Group appears very confused---they claim they did
not know what was going on in the Company even though they sat through
monthly Board meetings for six years.
---WHILE AT THE SAME TIME---
they signed "Messages To Shareholders" which indicated what
"direction" the Company had taken and would be taking, yet still claim
they were not part of the process! Please also keep in mind, as we
pointed out in our letter of January 7 (the text of which is reprinted
as Exhibit "C" to our Proxy Statement), that the Whelchel Group's
false and misleading charges and personal attacks against us are also
inconsistent with and contradict their prior statements and actions on
that subject. In our opinion, the Whelchel Group has engaged in a
pattern of making inconsistent and misleading statements to you and
telling you only part of the story. This behavior raises serious
questions about their credibility, motivation and suitability for
office. In particular, please note that our removal from office
enabled Messrs. Whelchel and Hodges to attain executive offices which
they otherwise would not hold.
We urge you to seriously consider these inconsistencies and
contradictions (and the credibility of the Whelchel Group) in deciding
how to vote your shares at the Special Meeting. You are entitled to
be represented by a Board which will be honest and straightforward
with you and whose decisions will be made with your best interests
(not self-interest) in mind.
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