SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ x] Soliciting Material Pursuant to Rule 14a-11(c)
or Rule 14a-12
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
(Name of Registrant as Specified in Its Charter)
Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[ x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which
transaction applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act
Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid
previously. Identify the previous filing by
registration statement number, or the Form or Schedule
and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
On December 30, 1996, the Board of Directors (the
"Board") of Golden Isles Financial Holdings, Inc. (the
"Company") met to determine how to respond to the December
23, 1996, Request Solicitation Statement to Shareholders of
Golden Isles Financial Holdings, Inc. (the "Request
Solicitation") furnished by Gregory S. Junkin, the Company's
former Chairman and Chief Executive Officer ("Mr. Junkin"),
Paul D. Lockyer, the Company's former President
and Chief Financial Officer ("Mr. Lockyer"), and Scott A.
Junkin (collectively, the "Junkin Group"). In the Request
Solicitation, the Junkin Group seeks to obtain shareholder
requests sufficient to call a special meeting of the
Company's shareholders (the "Special Meeting"). By a 6-2
vote, with Mr. Junkin and Mr. Lockyer voting against the
motion, the Board resolved to oppose the Request
Solicitation. As a result, the Board, on behalf of the
Company, have distributed a letter dated January 3, 1997, to
the Company's shareholders (the "Board Letter") expressing
the Company's opposition to the Special Meeting,
particularly in light of the upcoming annual meeting of the
Company's shareholders tentatively planned to be held in May
1997. The Board Letter is attached as Exhibit 1 herein. In
addition, the Board Letter makes reference to certain
resolutions adopted by the Board after a meeting with
representatives of banking regulatory authorities on
December 9, 1996. This Board resolution is attached as
Exhibit 2.
The Board Letter has been distributed to the
shareholders by the Company which acted through the Board.
Exhibit 3 provides information regarding the security
holdings of the members of the Board.
EXHIBIT 1
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
200 PLANTATION CHASE
ST. SIMONS ISLAND, GEORGIA 31522
TEL. (912) 638-0668
FAX (912) 638-4820
January 3, 1997
Dear Shareholders:
By now you have likely received the communication from
Mr. Junkin and Mr. Lockyer outlining their request for you
to execute a card calling a special meeting of shareholders
to vote on removal of the Board of Directors or in the
alternative to expand the Board to allow them to return to
their old jobs. They refer to the Board as the "Whelchel
Group". In fact, this so called group is the entire Board
of Directors of the company, other than Mr. Junkin and Mr.
Lockyer, acting as the Board. They have no support from any
directors, other than themselves. This letter is being
written at the direction of the Board of Directors of your
company.
The correspondence from Mr. Junkin suggests there is a
philosophical difference which lead to his dismissal. The
Board never expressed its intent to become a one community
bank company and does not now. The Board of Directors
supports a strong community bank and operating in areas
familiar to the Board and management. We do not support a
mortgage lending operation in other parts of the country
where we do not understand the market, and that is
demonstrated in the explanation below. The Board believes
our huge losses must stop, our stock value must increase and
expenses must be brought in line. This is not inconsistent
with a successful financial services business which your
company is now operating and which we intend to expand in a
prudent and orderly manner. Other small bank holding
companies in Georgia are experiencing record profits and
share prices have skyrocketed. Your company is losing money
at a time when the environment for financial service
companies is the best in decades. The Board felt the
direction of the company must be changed.
The differences with Mr. Junkin and the reasons for
his dismissal were based, not on philosophical differences,
but upon (1) imprudent use of company funds, (2) failure to
consult with or obtain Board approval before taking
significant action, (3) expending significant company monies
without Board approval, (4) misleading the Board, (5)
exposing the company to substantial risks of loss, (6)
failing to exercise what the Board considers sound
management practices, and (7) failure to control the
expenses and losses. These losses have obviously resulted
in a decrease in the value of your stock. Monies spent
included money each of you invested with expectation for
growth in value. Your investment has not grown in the past
seven years under Mr. Junkin and Mr. Lockyer. The Board
members signing this letter intend to reverse these losses
and to make the company profitable. We cite some of the
specific problems the Board experienced with these two
individuals that lead to our decision.
Your Board employed Arthur Andersen to investigate the
details of some of the transactions and some have been
verified so far.
1. During the years 1995 and 1996, while Mr. Junkin
held the office of Chairman and Chief Executive Officer,
Arthur Andersen found that GIFH companies paid to Concept
Designs, Inc., an interior decorating business located on
St. Simons Island, Georgia, for furniture purchased and
interior decorating costs, a total of $846,827.50. Concept
Designs, Inc. is a company owned in whole or in part,
according to information at hand, by a lady with whom Mr.
Junkin has a personal relationship. Arthur Andersen found
no evidence of competitive bids, alternative proposals from
other interior decorating firms or project budgets. For Mr.
Junkin's office alone, furniture purchases were made from
Concept Designs, Inc. in the amount of $27,781.21. All of
these purchases were made while the company's earnings were
falling or while the company was losing money. The Board of
Directors was not made aware these expenses were being
incurred or that competitive bids were not being obtained.
We do not believe this was a prudent use of your investment
dollars.
2. In August, 1996, without the approval or
knowledge of the Board, Mr. Junkin had First Bank Mortgage
Corporation enter into a two-year lease for office space on
the third floor of First Federal Plaza, at a cost of $8,000
per month. In addition, and as part of the $846,827.50
expenses previously cited, he had Concept Designs, Inc.
furnish and decorate the space at a cost of $186,933.01. At
the time this lease was signed, First Bank Mortgage
Corporation was losing money. It moved from the St. Simons
Island branch bank space which was built exclusively for
First Bank Mortgage Corporation eighteen months earlier and
where it was costing GIFH nothing. That space in the St.
Simons branch is now vacant.
Your Board of Directors would not have approved the
lease, the interior decorating costs or the relocation of
the office.
3. Prior to the time Mr. Junkin became an employee
of GIFH, and apparently working on his private interests, he
directed the company's accountant to add him, his family and
his secretary (who was also not employed by GIFH) to the
company's group health insurance plan. He further directed
that the company pay his entire premium. This the
accountant did. After he became an employee of the company,
he was eligible for coverage under the company plan. Under
that policy, the company would pay part of the premium with
the remainder paid by the employee. Mr. Junkin directed the
company accountant to pay the entire premium for him and his
family, and this was done. The practice of Mr. Junkin, his
family, and secretary being provided insurance while not
employed by GIFH was found and criticized by the bank's
outside auditors. In a meeting with the Board in June,
1993, Mr. Junkin assured the Board this would stop. In
fact, this practice continued until he became a paid
employee, and then the company paid 100% premiums on his
behalf until his dismissal on October 17, 1996. All other
employees paid their share of health insurance premiums for
themselves and their family.
Arthur Andersen is reviewing premium payments to
determine how much was paid on Mr. Junkin's behalf while he
was not an employee and how much was paid on his behalf
above what the GIFH policy provided. The Board did not
consider use of your investment dollars to pay Mr. Junkin's
insurance premiums a proper expense.
4. Without the consent or approval of the Board of
Directors, on March 20, 1996, the company purchased from Mr.
Junkin and his partners furniture located in the Holding
Company building at a cost of $14,000. Arthur Andersen
found no appraisal or independent valuation of this
furniture. At the time this furniture was purchased, the
Holding Company building was being redecorated by Concept
Designs, Inc. at a cost of $174,535.57. After the furniture
was purchased from Mr. Junkin and his partners for $14,000,
some, if not most of it, was removed and is not now in the
possession of the Company. This is, in the opinion of the
Board members signing this letter, an abuse of Mr. Junkin's
management authority.
5. Arthur Andersen found that Mr. Junkin and Mr.
Lockyer were approving each other's expense accounts. In
1995 and through the date of their removal from office, the
Company had reimbursed Mr. Junkin, in addition to his annual
salary of $150,000, in excess of $30,000, mostly for meals
and travel. This included nine (9) trips to Phoenix for what
was identified only as "meeting with shareholders",
"meetings with market makers", "GIFH business". Company
records show there are only four shareholders in Arizona, of
a total of more than 1,000 shareholders. The Board knows of
no GIFH business in Arizona, and the Company has no market
makers there. With one exception on one visit, no names are
given on the reimbursement request which identified any
person he saw there. The number of shares owned by Arizona
residents are, according to Company records, 8569 shares of
total outstanding shares of 2,265,152. These four
shareholders own .00378 percent of total shares. This
practice of company officials approving each other's
personal expense reimbursements and use of company funds in
this manner is considered by the Board to be poor business
judgment and lends itself to abuse.
6. The Board of Directors had been assured by the
management of First Bank Mortgage Corporation, of which Mr.
Junkin was Chairman and Chief Executive Officer, that the
risk of FBMC loan losses was limited to the fraud of people
with whom the company dealt. The Board learned in the
summer of 1996 that First Bank Mortgage Corporation had made
loans to a company in Arkansas in an amount in excess of
$4,000,000, for which we had no salable collateral from
which the loans could be repaid. Also, the Board learned
the Arkansas company did not have adequate financial
resources to justify such a loan without good collateral.
When the Board learned of this, there was in excess of
$2,500,000 in such loans outstanding, the loans were past
due and the borrower did not have the means to repay the
loans. Efforts are ongoing to collect these loans, and there
is still approximately $650,000 owed. We do not know how
much of this balance is ultimately collectible.
The Board considers our company extremely fortunate.
Had this Arkansas borrower failed while these loans were at
their peak, the company and the bank could have collapsed.
7. Under the customary procedures for operating
banks and financial institutions, an audit committee is
established of non-management members of the Board of
Directors for the purpose of oversight of management. There
is an internal auditor that reports directly to this
committee. The purpose of this committee is to be the "eyes
and ears" of the company, and to allow the Board direct
information on the internal affairs of the company without
the information coming from company officers. The auditor
of Golden Isles Financial Holdings, Inc. and the Bank
advised the committee that Mr. Junkin would give him an
agenda for audit committee meetings, and had instructed him
not to deviate from that agenda. The audit committee was
unable to perform its function under these conditions. This
the Board of Directors did not think was proper and it
raised suspicions in our minds.
8. At the stockholders' meeting in May, 1996, Mr.
Junkin stated to shareholders that First Bank Mortgage
Corporation would make a profit of approximately $500,000 in
1996. At the end of September, 1996, it had lost
approximately $500,000. By September 30, 1996, the company
was off budget approximately $600,000 and two of the senior
management had resigned. Given all these events, including
the large past due loan in Arkansas which is still in
default, your Board lost confidence in Mr. Junkin's and Mr.
Lockyer's ability to make a profit in the mortgage business.
Mr. Lockyer even voiced his approval of the Board's
decision after Mr. Junkin was dismissed. In the days
immediately following their removal, Mr. Lockyer told
various members of the Board of Directors, and others, that
the removal of Mr. Junkin was good for the company, and that
he understood that he was brought down by Mr. Junkin's
actions. Mr. Lockyer told various members that Mr. Junkin
was withholding information from the Board, was giving the
Board incorrect information, and had forced him to approve
expense reports with which he disagreed under threat of
losing his job. He told us he was relieved that this was
over, that he could now be his own man again and out from
under the control of Mr. Junkin. He further told us that on
the previous occasion when a motion was made to relieve Mr.
Junkin from his chairmanship, upon which no action was
taken, he started to second that motion because he believed
Mr. Junkin was bad for the company. Oddly, Mr. Lockyer has
now re-affiliated with Mr. Junkin.
The propriety of the Board's action was again
confirmed by action taken by the banking regulators. The
State Department of Banking and the Federal Reserve Board
were originally scheduled to perform an audit of the Holding
Company in January, 1997, but accelerated this audit date to
November 4, 1996. After reviewing the operation of the
Holding Company, First Bank Mortgage Corporation and First
Credit Service Corporation for only two weeks, they
requested a meeting with the Board of Golden Isles Financial
Holdings, Inc., even though the audit had not been
concluded. That meeting was attended by representatives of
the State Department of Banking and Finance, the Federal
Reserve Bank and the Federal Deposit Insurance Corporation.
At the urging from these regulators, your Board of Directors
adopted a lengthy resolution which would, among other
things, make changes to assure proper Board involvement in
the company and bank operations, limit the ability of the
company to borrow money, establish and structure internal
controls of management and control of company funds, and
have the Board report to the regulators on a basis on the
progress of implementing the changes and would notify the
regulators of all management and Board changes. Banking
regulators have the responsibility to oversee the affairs of
financial institutions to assure they are operated in a safe
and sound manner.
The company is still sound and well capitalized. Your
investment is well protected and we intend to keep it that
way. The Board members signing this letter are committed to
making the company safe, sound and profitable. We believe
this is possible without exceeding reasonable risks and
without the huge overhead expense burden we have incurred.
This cannot be done, however, without management being
accountable to your Board of Directors and to our
shareholders. The money which the Board considers was
imprudently spent was the money you invested. We do not
believe the prior management was sensitive enough to the
fact that expenses incurred should be for the benefit of all
the shareholders.
Your Board does not believe it is a wise use of
company funds to hold a special shareholders meeting. Our
regular shareholders meeting will be held in May, 1997 and
at that time our shareholders will have an opportunity to
vote for their directors. Our company needs to be
addressing the business at hand and not be distracted by a
proxy contest at a special meeting and then again at the
regular meeting. In May you will have the benefit of the
audited financial statements and the first quarter 1997 that
should show the results of efforts your Board is taking to
right the ship. We would ask that you mark the green card
received from Mr. Junkin "WITHHOLD REQUEST". You will
receive a notice from the Board which will include a card
which you can complete and mail back which revokes your
previous request for a meeting, if you have previously
mailed in the green card requesting a meeting. We, as a
Board, ask that you complete and return the card when it
comes to you.
/S/ L. Mac Harden
L. Mac Harden
/s/ Kermit Keenum
Kermit Keenum
/s/ Jimmy D. Veal
Jimmy D. Veal
/s/ Michael D. Hodges
Michael D. Hodges
/s/ Russell C. Jacobs, Jr.
Russell C. Jacobs, Jr.
/s/ J. Thomas Whelchel
J. Thomas Whelchel
EXHIBIT 2
RESOLUTION ADOPTED AT
THE SPECIAL MEETING OF THE BOARD OF DIRECTORS OF
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
ON DECEMBER 9, 1996
After consultation with Federal and State banking
regulators, the following resolution was adopted. A motion
to adopt the resolution was made by Michael D. Hodges,
seconded by L. M. Harden and passed unanimously.
1. Within 30 days from the adoption date of this
resolution, the Board will develop and submit to the
supervisory authorities a management plan for the parent
company and each of its subsidiaries. In developing that
plan, the Board will identify the positions considered
necessary at each company along with the responsibilities
and duties of those positions. The plan must include:
a. The type and number of management positions
needed to manage the affairs of the parent and
each subsidiary, including the development of an
organizational chart reflecting the management
structure;
b. A clear and concise description of the required
level of education, experience, and level of
compensation for each management position;
c. An evaluation of each officer currently serving
in a management position to determine whether
those individuals possess the ability,
education, experience and other qualifications
required to perform present and anticipated
duties, including establishment and enforcement
of sound policies and practices;
d. Identification and establishment of such Board
committees at the parent and at each subsidiary
as may be necessary to provide guidance and
oversight to active management;
e. A plan of action to recruit and hire any
additional or replacement personnel with the
requisite ability, experience, and other
qualifications, which the Board deems necessary
to fill management positions;
f. At a minimum, the Board shall review the role of
each company's chairman, chief executive
officer, chief lending officer, and chief
financial officer. One individual may hold more
than one position; however, the duties assigned
to the combined positions shall not be of such
responsibility as to diminish the effectiveness
of any one position;
g. Authorities of each management position and of
each Board committee are to be expressly granted
by the respective Boards of the companies;
h. Upon the resignation, termination and/or hiring
of any management personnel including Board
members, the Board will notify the supervisory
authorities of each such event. Such notice
will include the information on each individual
the Board used in making a decision to hire that
person.
2. The Board will review the results or recommendations
from the current engagement of Arthur Andersen LLP 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. The
results of the Board's review and the Board's review and the
Board's plans or procedures to strength [sic] noted
weaknesses will be supplied to the supervisory authorities
within 30 days.
3. The Board will supply to the supervisory authorities
the results, interim and/or final, of any audit,
investigation, or review conducted at the parent or any
subsidiary, performed in addition to the regular annual
independent audit, within 15 days of receipt.
4. After considering the results and recommendations from
the current engagement of Arthur Andersen LLP, the Board
will 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. Based on the
results of this review, the Board will take appropriate
steps to expand the scope of the proposed 1996 independent
audit if necessary to include any of the areas noted in 2
above not covered in the current engagement of Arthur
Andersen LLP. The results of the Board's review will be
provided to the supervisory authorities within 60 days of
the adoption of this resolution.
5. The Board will 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.
6. The Board will develop a strategic plan for the parent
and each subsidiary covering a three to five year period.
These plans will be supported by annual business plans that
include an annual budgeting process including projected
balance sheets. This budget must take into account the
maintenance of adequate liquidity, adequate capital, and
adequate reserves for loan loss in the bank and in the
consolidated entity. Debt service requirements must be
reflected as well. The strategic plan and the 1997 business
plan and budget will be submitted to the supervisory
authorities for review as soon as possible, but no later
than January 31, 1997.
7. The parent and each of its subsidiaries will charge
off the assets reflected as Loss on the agenda presented to
the Board on December 9, 1996. The Board also commits to
immediately charge off any other losses that come to its
attention through any supervisory authority examination or
inspection, any internal or external audit, or in any other
manner. In addition, each entity will make provisions to
the respective loan loss reserve accounts to bring them to
adequacy before December 31, 1996.
8. The Board will further undertake to assure that the
parent's and each subsidiary's books are stated in
accordance with generally accepted accounting principals by
December 31, 1996. Specifically, the Board will conduct a
review, either independently or through the scope of the
1996 independent audit, of the assets and lease obligations
of the various companies to locate any improperly
capitalized expenses, and to determine that assets and
liabilities are properly booked.
9. The Boards of the parent and of the 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.
10. The parent will not incur any addition debt after this
resolution is adopted without prior notification to the
supervisory authorities. Such notification must occur at
least 15 days prior to the date on which the company wishes
to incur the additional debt. Additional debt does not
include draws on existing debt arrangements. Any debt
incurred or renewed between November 15, 1996 and the date
of adoption of this resolution will be immediately reported
to the supervisory authorities.
11. The company will not reduce its capital by purchasing
or redeeming treasury stock without prior notification to
the supervisory authorities. Such notification must occur
at least 15 days prior to the date on which the company
wishes to purchase or redeem the stock.
12. The Board will review its obligations with respect to
reporting suspicious activity and will file all Suspicious
Activity Reports as required. This item is intended to
cover any matters currently known or that become known to
the Board.
13. Beginning 30 days from the date of adoption and every
30 days thereafter, the Board will report progress on each
item of this resolution to the supervisory authorities.
Each progress report will include copies of any
correspondence from Golden Isles Financial Holdings, Inc. to
the Securities and Exchange Commission and/or to the
company's shareholders.
EXHIBIT 3
SECURITY OWNERSHIP OF DIRECTORS
The following table sets forth share ownership
information as of April 1, 1996, with respect to the members
of the Board of Directors. This information as to
beneficial ownership was furnished to the Company by or on
behalf of the persons named. The determinations of
"beneficial ownership" of the Company's Common Stock are
based upon responses to Company inquiries which cited Rule
13d-3 under the Securities Exchange Act of 1934, as amended.
Such Rule provides that shares shall be deemed so owned
where a person has, either solely or in conjunction with
others, the power to vote or direct the voting of shares
and/or the power to dispose, or to direct the disposition of
shares; or where a person has the right to acquire any such
power within 60 days after the date such "beneficial
ownership" is determined. Unless otherwise indicated, each
of the following persons has sole voting and investment
power with respect to the shares beneficially owned.
Name and Address of Number of Shares Percentage
Participant
L. McRee Harden (1) 19,385 0.87%
P.O. Box 2369
Darien, Georgia 31305
Michael D. Hodges (2) 38,764 1.6%
207 Dunbarton Dr.
St. Simons Island, GA 31522
Russell C. Jacobs, Jr.(3) 16,763 0.7%
211 Suburban Drive
Brunswick, GA 31520
Gregory S. Junkin (4) 105,653 4.5%(9)
P.O. Box 30297
Sea Island, GA 31522
C. Kermit Keenum (5) 16,545 0.7%
100 Old Mountain Road
Powder Springs, GA 30073
Paul D. Lockyer (6) 66,581 2.8%(9)
311 Dunbardon Drive
St. Simons Island, GA 31522
Jimmy D. Veal (7) 81,898 3.4%
711 Beachview Drive
Jekyll Island, GA 31527
J. Thomas Whelchel (8) 31,740 1.4%
5 Glynn Avenue
Brunswick, GA 31520
(1) Includes 1,250 shares owned by his wife for which he
disclaims beneficial ownership. Also includes the
right to acquire 1,385 shares pursuant to vested
options.
(2) Includes the right to acquire 30,124 shares pursuant
to vested options.
(3) Includes the right to acquire 1,263 shares pursuant to
vested options.
(4) Includes the right to acquire 4,044 shares pursuant to
Class A Warrants, and 1,500 shares pursuant to vested
options and 17,500 shares which he holds as nominee
for Mr. Scott Junkin and as to which he does not have
dispositive power.
(5) Includes the right to acquire 1,045 shares pursuant to
vested options.
(6) Includes the right to acquire 46,981 shares pursuant
to vested options.
(7) Includes 9,125 shares owned as custodian for his son,
Daniel D. Veal, 9,125 shares as custodian for his son,
Zachary T. Veal, both under the Uniform Gifts to
Minors Act, and 1,958 shares pursuant to vested
options.
(8) Includes 25 shares owned by Mr. Whelchel's daughter
for which he disclaims beneficial ownership, and 1,390
shares pursuant to vested options.
(9) Since April 1, 1996, the total number of outstanding
Shares has increased to 2,344,302. The percentage
ownership for Mr. Junkin and Mr. Lockyer set forth
below is calculated on the basis of 2,344,302
outstanding Shares.
