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 September 30, 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.)
3811 Frederica Road, St. Simons Island, Georgia 31522
(Address of Principal Executive Offices)
(912) 638-0667
(Issuer's Telephone Number, Including Area Code)
200 Plantation Chase, St. Simons Island, Georgia 31522
(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: 2,344,302 shares issued and
outstanding as of October 31, 1996.
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 September 30, December 31,
1997 1996
ASSETS (Unaudited) (Audited)
Cash and due from banks $ 4,795,442 $ 4,250,836
Federal funds sold 1,710,000 8,640,000
___________ ___________
Total cash and cash equivalents $ 6,505,442 $ 12,890,836
Investment securities:
Securities available-for-sale,
at estimated market values 15,575,819 8,025,653
Securities held-to-maturity
(approximate estimated market
value of $1,497,598 (09-30-97)
and $2,031,272 (12-31-96) 1,510,460 2,053,844
Loans, net 85,094,276 76,524,126
Loans held-for-sale 337,011 6,323,719
Property and equipment, net 3,303,929 4,135,683
Other assets 2,542,013 2,693,703
_________ _________
Total Assets $114,868,950 $112,647,564
___________ ___________
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits
Non-interest bearing deposits $ 8,569,419 $ 7,153,576
Interest bearing deposits 81,076,668 75,654,592
__________ __________
Total deposits $ 89,646,087 $82,808,168
__________ __________
Notes payable 9,367,458 14,135,473
Federal Home Loan Bank borrowings 4,095,507 4,444,643
Other liabilities 1,642,682 1,510,105
_________ _________
Total Liabilities $104,751,734 $102,898,389
___________ ____________
Commitments and contingencies
Shareholders' Equity:
Common stock, no par value
15 million shares authorized,
2,344,302 shares issued and
outstanding $ 1,094,338 $ 1,094,338
Paid-in-capital 9,959,245 9,972,568
Retained (deficit) (1,000,377) (1,348,848)
Unrealized gain on fair value
of securities available-for-sale 64,010 31,117
______ ______
Total Shareholders' Equity $ 10,117,216 $ 9,749,175
__________ _________
Total Liabilities and
Shareholders' Equity $114,868,950 $112,647,564
___________ ___________
Refer to notes to the financial statements.
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Consolidated Income Statements
(Unaudited)
Three Months Ended
September 30,
1997 1996
Interest income $ 2,833,365 $2,824,377
Interest expense 1,367,221 1,187,612
_________ __________
Net interest income 1,466,144 1,636,765
Provision for possible loan losses 239,800 255,933
________ _______
Net interest income after provision
for possible loan losses 1,226,344 1,380,832
_________ _________
Other income:
Fee income from mortgage subsidiary -- 230,662
Other income 217,176 39,705
________ _______
Total other income 217,176 270,367
_______ _______
Salaries and benefits 740,694 1,144,284
Depreciation and amortization 108,465 106,313
Regulatory fees and assessments 10,444 1,751
Supplies and printing 28,089 50,137
Legal & professional 38,399 86,680
Advertising 24,515 71,434
Other operating expenses 240,161 495,501
________ _______
Total operating expenses 1,190,767 1,956,100
_________ _________
Net income/(loss) before taxes $ 252,753 $ (304,901)
Income taxes/(benefit) 96,756 (24,459)
______ _______
Net income/(loss) $ 155,997 $ (280,442)
_______ _______
_______ _______
Income/(loss) per share $ .07 $ (.12)
___ _____
___ _____
Refer to notes to the financial statements.
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Consolidated Income Statements
(Unaudited)
Nine Months Ended
September 30,
1997 1996
Interest and fee income $ 8,316,596 $7,456,334
Interest expense 4,058,928 3,504,199
_________ _________
Net interest income 4,257,668 3,952,135
Provision for possible loan losses 432,900 587,685
_______ _______
Net interest income after provision
for possible loan losses $ 3,824,768 $3,364,450
_________ __________
Other income:
Fee income from mortgage subsidiary $ - - $1,078,901
Other income 929,967 540,286
_________ _______
Total other income $ 929,967 $1,619,187
__________ _________
Salaries and benefits $ 2,176,537 $3,186,969
Depreciation and amortization 302,607 281,907
Regulatory fees and assessments 53,779 11,748
Supplies and printing 99,559 156,387
Legal & professional 327,703 167,661
Advertising 78,746 225,682
Other operating expenses 1,146,699 1,367,797
_________ _________
Total operating expenses 4,185,630 5,398,151
_________ _________
Net income\(loss) before taxes 569,105 (414,514)
Income taxes\(benefit) 220,632 12,251
_______ ______
Net income\(loss) $ 348,473 $ (426,765)
_______ _________
_______ _________
Income\(loss) per share .15 $ (.18)
___ _____
___ _____
Refer to notes to the financial satements.
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
1997 1996
Cash flows from operating activities: $ 507,394 $ 467,075
_______ _______
Cash flows from Investing Activities:
(Incr)/decr in loans held-for-sale $ 5,986,708 $ 421,237
(Purch)/Sale of fixed assets 942,146 (1,397,936)
(Increase) in loans (8,522,305) (19,831,828)
Securities - available-for-sale
Maturity and paydowns 1,004,237 2,024,521
Sale of securities 500,000 - -
Purchase of securities (9,054,403) (3,020,143)
Securities - held-to-maturity
Purchase of securities - - - -
Maturity and paydowns 543,384 157,844
_______ _______
Net cash used in investing activities $( 8,600,233) $(21,646,305)
____________ ____________
Cash flows from Financing Activities:
Increase in federal funds purchased $ - - $ 160,000
Incr/(decr) in various borrowings (5,117,151) 10,154,027
Sale of stock/option amortization (13,323) 103,802
Increase in deposits 6,837,919 6,392,917
_________ _________
Cash provided from financing
activities $ 1,707,445 $ 16,810,746
_________ __________
Net decrease in cash and cash
equivalents $ (6,385,394) $(4,368,484)
Cash and cash equivalents,
beginning of period 12,890,836 8,577,228
___________ _________
Cash and cash equivalents, end of
period $ 6,505,442 $ 4,208,744
___________ _________
___________ _________
Refer to notes to the financial statements
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Notes to Financial Statements (Unaudited)
September 30, 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 nine-month period ended September 30, 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.
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,
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Notes to Financial Statements (Unaudited)
September 30, 1997
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.
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 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.
Golden Isles Financial Holdings, Inc.
St. Simons Island, Georgia
Notes to Financial Statements (Unaudited)
September 30, 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
$.15 for the nine-month period ended September 30, 1997 may
not be indicative of projected earnings/(losses) for the
year ending December 31, 1997.
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") was incorporated under the laws of the State of Georgia
in 1987 as a holding company for a 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 additional 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 September 30, 1997, GIFH injected $2,085,000 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.
Liquidity is the company's ability to meet all deposit withdrawals
immediately, while also providing for the credit needs of
customers. The September 30,1997, financial statements evidence a
fair liquidity position as total cash and cash equivalents
amounted to $6.5 million, representing 5.7% of total assets.
Investment securities amounted to $17.1 million, representing
14.9% 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. For the nine-month period ended September 30, 1997,
total deposits increased from $82.8 million to $89.6 million,
representing an increase of 8.2%. Borrowings, have decreased by
$5.1 million since December 31, 1996, mainly due to the pay-off of
FBMC's warehouse line. 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 borrowed $3,500,000 as a term loan to be
used for repayment of the line of credit at Southeastern Bank, and
has 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.
On July 7, 1997, the Company sold its headquarters at 200
Plantation Chase, St. Simons Island, and moved its offices to the
second floor of the Bank branch on St. Simons Island. Proceeds
from the sale were used to pay off the note on the property.
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
Sept. 30, 1997 regulatory authorities
Leverage ratio 7.9% 4.0%
Risk weighted ratio 11.9% 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 7.9 percent is well above the required
minimum.
Results of Operations
Net income for the nine-month period ended September 30, 1997
amounted to $348,473, or $.15 per share. For the nine-month
period ended September 30, 1996 net loss amounted to $(426,765),
or $(.18) per share. The primary reason for the increase in
earnings is attributed to the closing of FBMC and improved
earnings at the Bank and FCC, which was profitable for the second
and third quarters of 1997. Operating expenses for the first nine
months of 1997 were $1,212,521 less than the same period of 1996.
Salaries and benefits were down 31.5% from the same time last
year. Legal, professional and other expenses were higher due to
the inclusion of costs related to the March 11, 1997, Special
Meeting of Shareholders. Several other items are of interest
when compared to the results of the same nine months of 1996.
a. Net interest income, which represents the difference between
interest received on interest earning assets and interest
paid on interest bearing liabilities, has increased from
$3,952,135 for the nine-month period ended September 30,
1996 to $4,257,668 for the same period one year later,
representing an increase of $305,533, or 7.7%. This
increase was attained because total interest earning
assets increased from $86.7 million at September 30,1996,
to $104.4 million at September 30,1997.
b. The net interest margin, defined as net interest income
divided by interest earning assets, has decreased from 6.1%
for the nine-month period ended September 30,1996, to 5.4%
for the nine-month period ended September 30, 1997. This
decrease is attributable to the liquidation of the FBMC
Prime + 2% warehouse portfolio at the Bank.
c. Other income for the nine-month period ended September 30,
1997 and 1996 amounted to $929,967 and $1,619,187
respectively. The decrease in other income is due primarily
to the loss of fee income and other charges that were earned
through FBMC.
d. Operating expenses for the nine-month period ended September
30, 1997 and 1996 amounted to $4,185,630 and $5,398,151
respectively, representing a decrease of $1,212,521, or 22%.
Operating expenses represented an annualized 4.9% and 7.0%
of total assets as of September 30, 1997 and 1996,
respectively. As noted above, year to date 1997 operating
expenses include one time costs associated with the March
11, 1997, Special Meeting.
e. The provision for loan losses was $587,685 for the nine-month
period ended September 30, 1996 and $432,900 for the
nine-month period ended September 30, 1997. The allowance
for loan losses as a percentage of gross loans is 1.8%.
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.
For the three-month period ended September 30, 1997, net income
amounted to $155,997 or $.07 per share. For the same period, one
year earlier, net loss amounted to $(280,442), or $(.12) per
share.
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 September 30, 1997, there are
no 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.
No matter has been submitted to a vote of security holders during
the quarter ended September 30, 1997.
Item 5. Other Information. - None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit No: Description
27 Financial Data Schedule
(b) Reports on Form 8-K - There were no reports
on Form 8-K filed during the quarter ended September
30, 1997.
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.
(Registrant)
Date: November 6, 1997
By:
J. Thomas Whelchel
Chairman
INDEX TO EXHIBITS
Exhibit Sequential
Number Description Page Number
27 Financial Data Schedule 16
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 4,795,442
<INT-BEARING-DEPOSITS> 1,204,712
<FED-FUNDS-SOLD> 1,710,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 15,575,819
<INVESTMENTS-CARRYING> 1,510,460
<INVESTMENTS-MARKET> 1,497,598
<LOANS> 86,587,486
<ALLOWANCE> 1,493,210
<TOTAL-ASSETS> 114,868,950
<DEPOSITS> 89,646,087
<SHORT-TERM> 878,671
<LIABILITIES-OTHER> 1,642,682
<LONG-TERM> 12,584,294
0
0
<COMMON> 1,094,338
<OTHER-SE> 9,022,878
<TOTAL-LIABILITIES-AND-EQUITY> 114,868,950
<INTEREST-LOAN> 7,299,662
<INTEREST-INVEST> 849,028
<INTEREST-OTHER> 167,906
<INTEREST-TOTAL> 8,316,596
<INTEREST-DEPOSIT> 3,130,265
<INTEREST-EXPENSE> 4,058,928
<INTEREST-INCOME-NET> 4,257,668
<LOAN-LOSSES> 432,900
<SECURITIES-GAINS> (1,096)
<EXPENSE-OTHER> 4,185,630
<INCOME-PRETAX> 569,105
<INCOME-PRE-EXTRAORDINARY> 569,105
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 348,473
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
<YIELD-ACTUAL> 5.4
<LOANS-NON> 1,701,720
<LOANS-PAST> 0
<LOANS-TROUBLED> 501,983
<LOANS-PROBLEM> 1,473,159
<ALLOWANCE-OPEN> 1,445,365
<CHARGE-OFFS> 448,513
<RECOVERIES> 63,458
<ALLOWANCE-CLOSE> 1,493,210
<ALLOWANCE-DOMESTIC> 928,491
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 564,719
</TABLE>
