<PAGE>
As filed with the Securities
and Exchange
Commission on May __, 1998
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. 6)
(Post-Effective)
(GOLDEN ISLES FINANCIAL HOLDINGS, INC.)
(Name of Small Business Issuer in Its Charter)
Georgia 6021 58-1756713
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Organization) Industrial Classification Identification
Code Number) No.)
3811 FREDERICA ROAD
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
3811 Frederica Road
St. Simons Island, GA
(912) 638-0667
(Name, address, including zip code, and
telephone number,
including area code, of agent for service)
COPIES OF COMMUNICATION TO:
ROBERT A. WEBER, JR.
MARTIN, SNOW, GRANT & NAPIER
240 THIRD STREET
P. O. BOX 1606
MACON, GA 31202-1606
(912) 749-1700
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 THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(d) UNDER
THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBERS 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. [ ]
CALCULATION OF REGISTRATION FEE
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Title of Each Dollar Amount Proposed Proposed Amount of
Class of To Be Registered Maximum Maximum Registration Fee
Securities To Offering Price Aggregate
be Registered Per Unit Offering Price
Common Stock $8,454,136 $9.50 $8,454,136 -0- (1)
Issuable Pursuant
to the Exercise of
Class A Warrants
</TABLE>
(1) All of the registration fee applicable to such securities has 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. 6 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.
<PAGE>
[FRONT OF REGISTRATION STATEMENT OUTSIDE FRONT COVER OF PROSPECTUS.]
[LOGO OF GOLDEN ISLES FINANCIAL HOLDINGS, INC. APPEARS HERE]
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. No Warrants
were exercised during 1997. 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.
<TABLE>
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Underwriting Fees Proceeds to
Price to Public and 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
</TABLE>
(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, 1998.
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.
[INSIDE FRONT AND OUTSIDE BACK COVER PAGES OF PROSPECTUS.]
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<PAGE>
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.
The Common Stock and Units offered hereby of GIFH are traded on the NASDAQ
Small-Capitalization market under the symbols GIFH and GIFHU, respectively.
Reports and other information concerning GIFH may be inspected at such exchange
at The NASDAQ Stock Market, NASDAQ Regulatory Filings, 1735 K Street, N.W.,
Washington, D.C. 20006-1500.
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.
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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.
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TABLE OF CONTENTS PAGE
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Prospectus Summary.............................................. 5
Risk Factors.................................................... 7
The Offering.................................................... 11
Restrictions on Future Sale of Units and Shares................. 12
Use of Proceeds................................................. 13
Capitalization.................................................. 14
GIFH and its subsidiaries....................................... 14
Property........................................................ 21
Legal Proceedings............................................... 22
Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 25
Supervision and Regulation of GIFH and its Subsidiaries......... 45
Management...................................................... 50
Executive Compensation.......................................... 53
Security Ownership of Certain Beneficial Owners and Management.. 59
Certain Relationships and Related Transactions.................. 62
Description of Securities....................................... 62
Legal Matters................................................... 65
Experts......................................................... 65
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................ 65
Additional Information.......................................... 65
Financial Statements and Supplementary Data..................... 66
</TABLE>
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<PAGE>
[FIRST PAGE INSIDE FRONT COVER OF PROSPECTUS.]
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.
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,
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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(1)
of Brunswick Service Corporation
(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."
The Offering
Securities Offered 889,909 shares of Common Stock
Offering Price $9.50 per share for the year ending May 31, 1998 subject
to adjustment and certain securities law restrictions.
Shares Outstanding
as of March 17, 1998 2,313,645 shares
Shares to be Outstanding
after the Offering 3,203,544 shares (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".
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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 not as regulated as
the Bank, FCC faces significant competition in its service areas and is affected
significantly by economic conditions beyond its 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.
Although the Offering Price for the Warrant Shares has recently been near or
equal to the price at which shares of GIFH's Common Stock could be purchased on
the NASDAQ SmallCap Market System, there is no guarantee that such price
equivalence will continue, and the Offering Price of the Warrant Shares may in
fact 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. Below, GIFH has sought to identify and describe various material
risks of which it is aware. Prospective investors should carefully consider
along with 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. FCC is also
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
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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 the Bank
in the mortgage lending business, a portion of which was transferred to the Bank
upon FBMC ceasing operations, varies depending on the particular line of
mortgage banking business and the particular service area. In general terms,
however, the Bank faces 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 FCC and its 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. Nevertheless there is a very limited
market for shares of Common Stock and the Units. 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 21, 1998, the Common
Stock could be purchased through the NASDAQ SmallCap Market System for slightly
less than the Offering Price.
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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 was able 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
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<PAGE>
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.
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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. For a proper exercise to occur, a Warrant
holder must first notify GIFH of his or her intent to exercise the Warrants held
by him or her by delivering a check and GIFH in an amount equal to the number of
Warrants to be exercised multiplied by the per Warrant exercise price of $9.50.
Thus, if a holder wished to exercise 100 Warrants, he would deliver a check for
$950.00 (100 x $9.50 = $950.00) to GIFH, along with a written statement
describing the holder's wishes. Upon receipt of the check and written request,
GIFH will deliver to each such holder this revised prospectus, filed as post-
effective Amendment No. 6 to Registration Statement on Form SB-2 with the
Securities and Exchange Commission on May 1, 1998, reflecting material changes
in events since May 11, 1995, the date on which the 1994 Public Offering was
concluded. Holders will then have ten days from the receipt of the revised
Prospectus in which to rescind, in whole or in part, their election to exercise
Warrants. Assuming no such rescission is made, GIFH will at the conclusion of
such ten-day period deliver certificates representing shares of the Common Stock
purchased by exercise of the Warrants. If a rescission is made, GIFH will
return the holder's check, or, if only a partial rescission is made, GIFH will
return those funds representing Warrant shares as to which a rescission is made
and certificates for shares of Common Stock for which no rescission is made.
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.
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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. However, on April 18, 1996, the Company Common Stock
began to be traded on the NASDAQ Small Capitalization market (NASDAQ-"GIFH").
The high-low range for trades in the Company's Common Stock and Units, for each
quarter during 1997 and 1996 in which trades were reported, were as follows:
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1997
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QUARTER COMMON STOCK UNITS
High Low High Low
1st 6 3/4 4 3/4 6 1/4 4 1/4
2nd 6 3/4 6 6 5 5/8
3rd 7 3/4 6 3/8 6 3/4 6
4th 7 1/2 6 1/2 7 1/4 6 1/2
1996
QUARTER COMMON STOCK UNITS
High Low High Low
1st 6 5 6 1/2 5 1/4
2nd 7 5 7 5 1/2
3rd 6 1/2 4 3/4 6 5 1/2
4th 6 4 1/2 6 3 1/2
</TABLE>
As of March 17, 1998, 2,313,645 shares of GIFH's Common Stock (including shares
of Common Stock held in the form of Units) were issued and outstanding to 952
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 3,203,544 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
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<PAGE>
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 March 17, 1998, 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 37,415 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."
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<PAGE>
CAPITALIZATION
The following tables set forth the capitalization of GIFH at December 31, 1997
and the pro-forma capitalization of GIFH as adjusted to give effect to the
exercise of all of the unexercised Warrants.
<TABLE>
<CAPTION>
Shareholders' Equity: December 31, 1997 As Adjusted
<S> <C> <C>
Common stock
50,000,000 shares authorized;
2,313,645 shares outstanding(1);
3,203,544 shares outstanding
after exercise of Warrants (1,2) $ 1,094,338 $ 1,094,338
Paid-in-capital(2) 9,959,244 18,413,380
Accumulated deficit (360,699) (360,699)
Unrealized gain, securities
available for sale 56,922 56,922
Total capital $10,749,805 $19,203,941
</TABLE>
(1) Does not include 114,077 shares subject to options, and 168,557 shares
subject to grant as option under plans.
(2) Assumes the exercise of all 889,909 unexercised Warrants at $9.50 between
April 1, 1997 and May 31, 1998.
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
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<PAGE>
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. Until 1996, FBMC 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
December 31, 1996, FCC had six Georgia offices in Brunswick, Kingsland,
Savannah, Waycross, Martinez, and Garden City. The Waycross and Garden City
offices of FCC, however, were closed, respectively in December and September of
1997. As of April 1, 1998, FCC continued its operations from four Georgia
offices, in Brunswick, Kingsland, Savannah, and Martinez.
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, 1997, there are 889,909 Class A Warrants outstanding.
-15-
<PAGE>
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 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 2000. 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") in Brunswick, 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
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<PAGE>
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. As of June 30, 1997, there were a total of 10
FDIC-insured institutions operating in the Glynn and Camden County markets.
Management estimates that as of June 30, 1997, FDIC-insured deposits in Glynn
and Camden Counties totaled approximately $1.026 billion, with the Bank having
approximately 8.77% 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. From 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 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.
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<PAGE>
As indicated above, management decided that the Company's remaining mortgage
lending operation (i.e., retail mortgage lending) could be handled more
efficiently and inexpensively within the framework of the Bank. As a result,
the Company's remaining mortgage function was shifted to the Bank and FBMC
ceased to function as an operating subsidiary. The Company anticipates that for
the foreseeable future, the Bank will act 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 if suitable opportunities
arise. See Management's Discussion and Analysis of Financial Condition and
Results of Operations - Noninterest Expense.
FBMC had 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. This
line of credit expired in May, 1997, at which time the balance owing by the
Company had been reduced to $0.
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 four offices are Glynn, Camden,
Columbia, and Chatham Counties, Georgia; where FCC operates from four leased
facilities which are described below in the Section title "Property."
There are 12 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 a branch in July 1994, is currently
serviced by 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 a 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
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<PAGE>
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.
In Martinez (Columbia County), where FCC opened a 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.
As noted above, FCC closed its Garden City and Waycross offices, respectively,
in September and December, 1997.
In its Brunswick, Savannah, 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 December 31, 1997, there was $6,867,458
outstanding under the CoreStates line of credit.
Employees
As of December 31, 1997, GIFH and its subsidiaries employed the equivalent of 67
full-time employees. Management believes that its employee relations are good.
There are no collective bargaining agreements covering any of the 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; Mr. Whelchel
continues to serve as Chairman and CEO of the Company.
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
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<PAGE>
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, although at the 1997 Annual
Meeting of Shareholders held subsequent to the Special Meeting, Messrs. Junkin
and Lockyer were not nominated for reelection to the Board; Messrs. James M.
Fiveash and Charles Ray Acosta were nominated to fill these directors' positions
and were duly elected directors of the Company at the 1997 Annual Meeting of
Shareholders. The Company remains committed to its strategy of focusing on the
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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
As of July 1997, GIFH relocated its executive offices to the second floor of the
Bank's St. Simons branch. GIFH leases this space from the Bank on a month-to-
month basis. Previously, GIFH's executive offices were housed in a two-story,
freestanding building which was part of an office condominium complex at 200
Plantation Chase, St. Simons Island, Georgia 31522. GIFH purchased the building
in February 1996 and sold it in July 1997.
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. 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. As noted above, the Bank also leases space within the St. Simons
branch to GIFH for use as executive 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 its
corporate offices in the fourth quarter of 1996 and vacated the Gloucester
Street premises. As of March 19, 1998, FBMC was subletting its former
Blairsville, Georgia office on a month-to-month basis and was attempting to sub-
lease the Gloucester Street premises. FBMC's Frederica Road office has been
vacated, and is being used for storage until other arrangements therefor can be
made.
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 GIFH, FBMC, and FCC are commercially reasonable, and, except for
FBMC's Frederica Road facility, which it leased from the Bank, and GIFH's
executive office space at the Frederica Road facility, which it leases from the
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Bank, all facilities are leased from non-affiliated third parties. The
locations and lease periods are as follows:
Address Term End of Current Term
- ------- ---- -------------------
GIFH
3811 Frederica Road
St. Simons Island, GA 31522 month-to-month
FBMC
Seasons Inn & Plaza
Blairsville, GA 30512 two years July 1998
777 Gloucester Street, Suite 300
Brunswick, GA 30512 two years August 1998
3811 Frederica Road
St. Simons Island, GA 31522 month-to-month
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
4015-I Washington Road,
Martinez, GA 30907 1 year February 1999
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 the properties leased for terms, as well as those occupied on a month-to-
month basis, 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
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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 thereafter submitted its strategic plan and management study
to the supervisory authorities. The Progress Report also contained the
Company's 90-day interim operating strategy ("Interim Plan"). The Interim Plan
described the structure of the Company's board and addressed 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
-23-
<PAGE>
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. On July 25, 1997, the Georgia Department of Banking and Finance
("DBF") notified the Board of GIFH in writing that, in agreement with the
Federal Reserve Bank of Atlanta, it had determined that the Board Resolution had
proved effective in addressing and remedying the problems determined during the
examination process. As such, DBF terminated GIFH's obligation to file progress
reports under the Board Resolution, and further stated that it would not object
to termination of the resolution.
Except as hereinabove disclosed, neither the Company nor its subsidiaries are
parties to nor is any of their property the subject of, any material litigation,
other than is incidental to the normal operations of its business, which would
have a material effect upon the operations or financial condition of the Company
or its subsidiaries.
-24-
<PAGE>
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 services companies. Accordingly, the Company's
results of operations are primarily dependent upon the results of operations of
the Bank and FCC and, to a lesser extent, 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 has been the fees on
originating mortgage loans and the gain on the sale of mortgage loans to other
investors. It is anticipated that future income from origination of mortgage
loans will be earned by the Bank. Noninterest expenses consist of compensation
and benefits, occupancy-related expenses and other operating expenses. These
expenses will eventually be absorbed by the Bank.
Results of Operations For Years Ended December 31, 1997 and 1996
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.
-25-
<PAGE>
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 8 basis points or 1.45% to
5.44% in 1997 as compared to 5.52% in 1996. The yield on average
interest-earning assets increased 2 basis points to 10.61% in 1997 as compared
to 10.59% in 1996. The interest rate paid on average interest-bearing
liabilities increased 17 basis points to 5.90% in 1997 as compared to 5.73% in
1996. Net interest income on a taxable-equivalent basis was $5,612,000 in 1997
as compared to $4,828,000 in 1996, representing an increase of $784,000 or
16.24%. The increase resulted from an increase of $ 521,000 generated on
increased volume and an increase of $263,000 due to changes in interest rates.
Average interest-earning assets increased $15,705,000 to $ 103,209,000
in 1997 from $87,504,000 in 1996, an increase of 17.95%. Average loans increased
$8,255,000; average investments increased $6,144,000; and average Federal funds
sold increased $1,326,000. The increase in average interest-earning assets was
funded by an increase of $11,842,000, or 15.97%, in average deposits to
$86,000,000 in 1997 from $74,158,000 in 1996. Approximately 9% of the average
deposits were noninterest-bearing deposits in 1997. Approximately 10.6% of the
average deposits were noninterest-bearing deposits in 1996.
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 $540,000 in 1997 and $975,000 in 1996, representing a decrease of
44.62% in the provision. During 1997, the Company charged off certain loans for
which a reserve for losses had been recorded in 1996. As a result net loan
charge-offs amounted to approximately $472,000 in 1997 as compared to net loan
charge-offs of approximately $248,000 in 1996. The allowance for loan losses as
a percentage of total loans outstanding amounted to 1.70% at December 31, 1997
as compared to 1.85% at December 31, 1996.
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.
-26-
<PAGE>
Noninterest Income
Noninterest income amounted to $1,280,000 and $1,738,000 for the years
ended December 31, 1997 and 1996, respectively. As a percent of total average
assets, noninterest income decreased from 1.70% in 1996 to 1.15% in 1997.
Following is a summary of noninterest income for the years ended
December 31, 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Noninterest income
Income from origination and sale of mortgage loans, less related expenses $ 346,000 $ 906,000
Service charges on deposit accounts 468,000 438,000
Insurance commissions 319,000 198,000
Net realized loss on sales of securities (1,000) (5,000)
Other 148,000 201,000
---------- ----------
Total noninterest income $1,280,000 $1,738,000
========== ==========
</TABLE>
During 1997, the Company suspended its mortgage banking activities
through FBMC as indicated by a decrease of $560,000 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 $30,000, or
6.85%, to $468,000 in 1997 from $438,000 in 1996 resulted from an increase of
15.97% in average deposits in 1997 over 1996.
Noninterest Expense
Noninterest expense amounted to $5,278,000 and $7,237,000 for the years
ended December 31, 1997 and 1996, respectively, representing a decrease of
$1,959,000 or 27.07%. As a percent of total average assets, noninterest expense
amounted to 4.75% in 1997 as compared to 7.10% in 1996.
Following is a summary of noninterest expense for the years ended
December 31, 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Noninterest expense
Salaries and employee benefits $ 2,748,000 $ 4,088,000
Equipment expense 472,000 509,000
Occupancy expense 355,000 454,000
Advertising and business development 163,000 331,000
Legal and professional 542,000 318,000
Supplies and printing 172,000 271,000
Telephone 102,000 165,000
Postage and courier 105,000 132,000
Loss on write-down of furniture and fixtures - 146,000
Loss on abandonment of lease - 148,000
Other operating expenses 619,000 675,000
----------- -----------
Total noninterest expense $ 5,278,000 $ 7,237,000
=========== ===========
</TABLE>
-27-
<PAGE>
Noninterest Expense (Continued)
Salaries and employee benefits decreased $1,340,000 to $2,748,000 in
1997 from $4,088,000 in 1996, representing a decrease of 32.78%. Due to
decreased activities in the mortgage banking subsidiary, several employees in
that subsidiary and the parent company were terminated. Severance pay and other
termination benefits were paid to some of the terminated employees and included
in the salaries and employee benefits expense in 1996. Equipment and occupancy
expense decreased $136,000, or 14.12%, to $827,000 in 1997 from $963,000 in 1996
and was attributable to the disposition of depreciable assets and the reduction
of other occupancy and equipment expenses as a result of the curtailment of
mortgage banking activities in 1997. Legal and professional expenses increased
$224,000 to $542,000 in 1997 from $318,000 in 1996 principally because of
substantial legal expenses incurred to defend the Company against a proxy fight
by dissident shareholders in the spring of 1997. All other noninterest expenses
decreased $707,000 due primarily to the curtailment of mortgage banking
activities and the restructuring of other Company operations during 1997.
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.
-28-
<PAGE>
Noninterest Expense (Continued)
The Company has not yet completed the restructuring of its mortgage
banking activities. However, it has suspended the operations of FBMC, the
subsidiary which previously conducted the mortgage banking activities, until the
mortgage banking activities are reorganized within the Bank.
For the year ended December 31, 1997, the Company realized net income
of $988,000 as compared to a net loss of $1,209,000 for the year ended December
31, 1996.
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.
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, 1997 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 1997,
the Company's capital increased $1,001,000 to $10,750,000 at December 31, 1997
as compared to $9,749,000 at December 31, 1996. The increase in capital resulted
from retained earnings of $988,000, an increase in unrealized gains on
securities available for sale of $26,000, net of related taxes, and a net
decrease of $13,000 related to the vesting and forfeiture of restricted stock.
At December 31, 1997, 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.
-29-
<PAGE>
Liquidity and Capital Resources (Continued)
The following table summarizes the regulatory capital levels of the
Company at December 31, 1997.
<TABLE>
<CAPTION>
Actual Required Excess
------------------------- ------------------------- --------------------
Amount Percent Amount Percent Amount Percent
----------- ------------ ----------- ------------ ---------- --------
(Dollars in Thousands)
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Leverage capital $ 10,609 9.5% $ 4,455 4.0% $ 6,154 5.5%
Risk-based capital:
Core capital 10,609 12.8 3,310 4.0 7,299 8.8
Total capital 11,649 14.1 6,620 8.0 5,029 6.1
</TABLE>
The Bank also met its individual regulatory capital requirements at
December 31, 1997.
Year 2000 Issue Costs
Based on estimates by management of the Company, the Company expects to
incur approximately $350,000 to modify its information systems appropriately to
accurately process information in the year 2000 and beyond. The Company
continues to evaluate appropriate courses of corrective action, including
replacement of certain systems whose associated costs would be recorded as
assets and amortized. Management expects that the costs to convert the Company's
information systems to year 2000 compliance will not have a material impact on
the Company's consolidated financial statements.
-30-
<PAGE>
SELECTED STATISTICAL INFORMATION OF
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
The following statistical information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operation" and the financial statements and related notes included elsewhere
in this Annual Report and in the documents 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.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------
1997 1996
---------------------------------------- ---------------------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Paid Balance Expense Rate Paid
------------- ------------ ------------- ------------ ----------- ------------
(Dollars in Thousands)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans, net of unearned interest $ 84,934 $ 9,823 11.57 % $ 76,679 $ 8,642 11.27 %
Investment securities:
Taxable 15,231 959 6.30 9,087 521 5.73
Nontaxable - - - 20 2 7.50
Federal funds sold 3,044 167 5.49 1,718 103 6.00
------------- ------------ ------------ -----------
Total interest-earning assets 103,209 10,949 10.61 87,504 9,268 10.59
------------- ------------ ------------ -----------
Noninterest-earning assets:
Cash 2,281 3,932
Allowance for loan losses (1,471) (1,029)
Other assets 7,203 11,553
------------- ------------
8,013 14,466
------------- ------------
Total assets $ 111,222 $ 101,960
============= ============
</TABLE>
-31-
<PAGE>
Average Balances and Net Income Analysis (Continued)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------
1997 1996
------------------------------------- ------------------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Paid Balance Expense Rate Paid
------------- ---------- ----------- ------------- ----------- ----------
(Dollars in Thousands)
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Savings and interest-bearing demand deposits $ 12,503 $ 353 2.82% $ 13,063 $ 406 3.11%
Time deposits 65,717 3,904 5.94 53,259 3,130 5.88
Other short-term borrowings 3,706 239 6.45 4,521 282 6.24
Other borrowings 8,576 841 9.81 6,699 622 9.28
------------ --------- ------------ ----------
Total interest-bearing liabilities 90,502 5,337 5.90 77,542 4,440 5.73
------------ --------- ------------ ----------
Noninterest-bearing liabilities and stockholders' equity:
Demand deposits 7,780 7,836
Other liabilities 2,690 6,055
Stockholders' equity 10,250 10,527
------------ ------------
Total noninterest-bearing
liabilities
and stockholders' equity 20,720 24,418
------------ ------------
Total liabilities and stockholders'
equity $ 111,222 $ 101,960
============ ============
Interest rate spread 4.71% 4.86%
====== ======
Net interest income $ 5,612 $ 4,828
========= ==========
Net interest margin 5.44% 5.52%
====== ======
</TABLE>
-32-
<PAGE>
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.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------
1997 vs. 1996 1996 vs. 1995
---------------------------------------- -----------------------------------------
Changes Due To Changes Due To
Increase -------------------------- Increase ---------------------------
(Decrease) Rate Volume (Decrease) Rate Volume
------------ ------------ ------------ ------------- ------------- -------------
(Dollars in Thousands)
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in:
Income from earning assets:
Interest and fees on loans $ 1,181 $ 251 $ 930 $ 2,311 $ (462) $ 2,773
Interest on securities:
Taxable 438 86 352 (38) 2 (40)
Nontaxable (2) - (2) (16) 1 (17)
Interest on Federal funds 64 (15) 79 (12) 1 (13)
------------ ------------ ------------ ------------- ------------- -------------
Total interest income 1,681 322 1,359 2,245 (458) 2,703
------------ ------------ ------------ ------------- ------------- -------------
Expense from interest-bearing liabilities:
Interest on savings and interest-
bearing demand deposits (53) (36) (17) (32) 3 (35)
Interest on time deposits 774 42 732 854 (48) 902
Interest on short-term borrowings (43) 8 (51) 272 1 271
Interest on debt 219 45 174 165 20 145
------------ ------------ ------------ ------------- ------------- -------------
Total interest expense 897 59 838 1,259 (24) 1,283
------------ ------------ ------------ ------------- ------------- -------------
Net interest income $ 784 $ 263 $ 521 $ 986 $ (434) $ 1,420
============ ============ ============ ============= ============= =============
</TABLE>
-33-
<PAGE>
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, 1997, the Company's cumulative one-year interest
rate sensitivity gap ratio was 80%. 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,
1997, 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.
-34-
<PAGE>
Asset/Liability Management (Continued)
<TABLE>
<CAPTION>
At December 31, 1997
---------------------------------------------------------------------
Maturing or Repricing Within
---------------------------------------------------------------------
Zero to Three One
Three Months to Year to Over
Months One Year Three Years Three Years Total
------------ -------------- ------------ ------------- -------------
(Dollars in Thousands)
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earning assets:
Interest-bearing deposits in banks $ 23 $ - $ - $ - $ 23
Federal funds sold 2,330 - - - 2,330
Investment securities 528 1,754 6,256 8,250 16,788
Loans 51,417 10,921 9,016 17,590 88,944
Loans held for sale 307 - - - 307
------------ -------------- ------------ ------------- -------------
54,605 12,675 15,272 25,840 108,392
------------ -------------- ------------ ------------- -------------
Interest-bearing liabilities:
Interest-bearing demand deposits 10,000 - - - 10,000
Savings 1,124 - - - 1,124
Certificates less than $100,000 11,966 32,136 8,279 394 52,775
Certificates, $100,000 and over 3,290 12,425 3,925 - 19,640
Other short-term borrowings 3,879 - - - 3,879
Other borrowings 9,367 - - - 9,367
------------ -------------- ------------ ------------- -------------
39,626 44,561 12,204 394 96,785
------------ -------------- ------------ ------------- -------------
Interest rate sensitivity gap $ 14,979 $ (31,886) $ 3,068 $ 25,446 $ 11,607
============ ============== ============ ============= =============
Cumulative interest rate sensitivity gap $ 14,979 $ (16,907) $ (13,839) $ 11,607
============ ============== ============ =============
Interest rate sensitivity gap ratio 1.38 0.28 1.25 65.58
============ ============== ============ =============
Cumulative interest rate sensitivity gap ratio 1.38 0.80 0.86 1.12
============ ============== ============ =============
</TABLE>
-35-
<PAGE>
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 70% 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, 14% 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:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------------- ------------ ------------ ---------------
(Dollars in Thousands)
------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities Available for Sale
December 31, 1997:
U. S. Government and agency securities $ 16,043 $ 84 $ (3) $ 16,124
Mortgage-backed securities 658 7 (1) 664
--------------- ------------ ------------ ---------------
$ 16,701 $ 91 $ (4) $ 16,788
=============== ============ ============ ===============
December 31, 1996:
U. S. Government and agency securities $ 7,271 $ 46 $ (1) $ 7,316
Mortgage-backed securities 707 6 (3) 710
--------------- ------------ ------------ ---------------
$ 7,978 $ 52 $ (4) $ 8,026
=============== ============ ============ ===============
Securities Held to Maturity
December 31, 1996:
U. S. Government and agency securities $ 250 $ - $ (5) $ 245
Mortgage-backed securities 1,804 - (18) 1,786
--------------- ------------ ------------ ---------------
$ 2,054 $ - $ (23) $ 2,031
=============== ============ ============ ===============
</TABLE>
-36-
<PAGE>
Maturities
The amounts of investments in securities in each category as of
December 31, 1997 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.
<TABLE>
<CAPTION>
U. S. Treasury
and Other U. S.
Government Agencies State and
and Corporations Political Subdivisions
Yield Yield
Amount (1) Amount (1) (2)
--------------- ------------ -------------- -----------
(Dollars in Thousands)
---------------------------------------------------------
<S> <C> <C> <C> <C>
Maturity:
One year or less $ 2,253 6.11 % $ - - %
After one year through five years 14,287 6.41 - -
After five years through ten years 248 5.70 - -
--------------- ------------ -------------- -----------
$ 16,788 6.36 % $ - - %
=============== ============ ============== ===========
</TABLE>
(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%.
-37-
<PAGE>
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, 1997. The amount of loans outstanding at the
indicated dates is shown in the following table according to type of loans.
<TABLE>
<CAPTION>
December 31,
------------------------------------
1997 1996
---------------- -----------------
(Dollars in Thousands)
------------------------------------
<S> <C> <C>
Commercial, financial and agricultural $ 19,961 $ 26,980
Real estate - construction 9,442 9,296
Real estate - mortgage 50,059 32,735
Consumer instalment 9,615 9,065
Other 581 645
---------------- -----------------
89,658 78,721
Unearned income (714) (752)
Allowance for loan losses (1,513) (1,445)
---------------- -----------------
Loans, net $ 87,431 $ 76,524
================ =================
</TABLE>
Total loans as of December 31, 1997 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.
<TABLE>
<CAPTION>
(Dollars in
Thousands)
---------------
<S> <C>
Maturity or Repricing Within:
One year or less $ 62,338
After one year through five years 14,401
After five years 12,205
---------------
$ 88,944
===============
</TABLE>
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.
-38-
<PAGE>
Types of Loans (Continued)
The following table summarizes loans at December 31, 1997 with the due
dates after one year which (1) have predetermined interest rates and (2) have
floating or adjustable interest rates.
<TABLE>
<CAPTION>
(Dollars in
Thousands)
---------------
<S> <C>
Predetermined interest rates $ 26,606
Floating or adjustable interest rates -
---------------
$ 26,606
===============
</TABLE>
Nonperforming Loans
The following table presents, at the dates indicated, the aggregate of
nonperforming loans for the categories indicated.
<TABLE>
<CAPTION>
December 31,
---------------------------
1997 1996
------------- -------------
(Dollars in Thousands)
---------------------------
<S> <C> <C>
Loans accounted for on a nonaccrual basis $ 1,174 $ 468
Instalment loans and term loans contractually past due ninety days or more 418 552
as to interest or principal payments and still accruing
Loans, the terms of which have been renegotiated to provide a reduction 335 -
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
</TABLE>
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.
-39-
<PAGE>
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 Bank uses the
same credit policies for these off balance sheet commitments as it does 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,
1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
(Dollars in Thousands)
---------------------------------
<S> <C> <C>
Commitments to extend credit $ 8,365 $ 12,476
Standby letters of credit 592 735
--------------- ---------------
$ 8,957 $ 13,211
=============== ===============
</TABLE>
-40-
<PAGE>
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 $1,513,000 at December 31,
1997, representing 1.70% of year end total loans outstanding, compared with
$1,445,000 at December 31, 1996, which represented 1.85% of year end total loans
outstanding. The allowance for loan losses is reviewed monthly 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.
<TABLE>
<CAPTION>
At December 31,
------------------------------------------------------------------------------
1997 1996 1995
------------------------ -------------------------- ------------------------
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
----------- ----------- ----------- ------------- ---------- ------------
(Dollars in Thousands)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial,
industrial and agricultural $ 460 22 % $ 637 34 % $ 269 32 %
Real estate 472 66 556 54 348 57
Consumer 505 12 185 12 65 11
Unallocated 76 _ 67 _ 36 _
_
----------- ----------- ----------- ------------- ---------- ------------
$ 1,513 100 % $ 1,445 100 % $ 718 100 %
=========== =========== =========== ============= ========== ============
</TABLE>
-41-
<PAGE>
Allocation of the Allowance for Loan Losses (Continued)
The following table presents an analysis of the Company's loan loss
experience for the periods indicated:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1997 1996
------------- -------------
(Dollars in Thousands)
-----------------------------
<S> <C> <C>
Average amount of loans outstanding $ 84,934 $ 76,679
============= =============
Balance of reserve for possible loan losses at
beginning of period $ 1,445 $ 718
------------- -------------
Charge-offs:
Commercial, financial and agricultural (186) (63)
Real estate (43) -
Consumer (316) (208)
Recoveries:
Commercial, financial and agricultural 21 7
Real estate - -
Consumer 52 16
------------- -------------
Net charge-offs (472) (248)
------------- -------------
Additions to reserve charged to operating expenses 540 975
------------- -------------
Balance of reserve for possible loan losses $ 1,513 $ 1,445
============= =============
Ratio of net loan charge-offs to average loans .56% .32%
============= =============
</TABLE>
-42-
<PAGE>
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.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
1997 1996
----------------------------- -----------------------------
Amount Rate Amount Rate
--------------- ------------ --------------- ------------
(Dollars in Thousands)
------------------------------------------------------------
<S> <C> <C> <C> <C>
Noninterest-bearing demand deposits $ 7,780 - % $ 7,836 - %
Interest-bearing demand and savings deposits 12,503 2.82 13,063 3.11
Time deposits 65,717 5.94 53,259 5.88
--------------- ---------------
Total deposits $ 86,000 $ 74,158
=============== ===============
</TABLE>
The amounts of time certificates of deposit issued in amounts of
$100,000 or more as of December 31, 1997, 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.
<TABLE>
<CAPTION>
(Dollars in
Thousands)
---------------
<S> <C>
Three months or less $ 3,290
Over three through twelve months 12,425
Over twelve months 3,925
---------------
Total $ 19,640
===============
</TABLE>
-43-
<PAGE>
RETURN ON ASSETS AND SHAREHOLDERS' EQUITY
The following rate of return information for the periods indicated is
presented below.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
Return on assets (1) 0.89 % (1.19) %
Return on equity (2) 9.64 (11.48)
Dividends payout ratio (3) - -
Equity to assets ratio (4) 9.22 10.32
</TABLE>
(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.
-44-
<PAGE>
SUPERVISION AND REGULATION OF GIFH AND ITS SUBSIDIARIES
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, 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 FCC with an
inspection process to ascertain whether these such non-banking subsidiary
enhances or detracts 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
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
-45-
<PAGE>
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 permitted
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.
-46-
<PAGE>
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.
-47-
<PAGE>
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, 1997, GIFH maintained Tier 1 and total risk-based capital
ratios of 12.8% and 14.1%, respectively. See also the discussion under
"Liquidity and Capital Resources" in Management's Discussion and Analysis,
above, and in Note 14 to the Consolidated Financial Statements 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
-48-
<PAGE>
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.
-49-
<PAGE>
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 Directors and executive officers of GIFH are as follows:
<TABLE>
<CAPTION>
Director
Name (Age) Position With Company Since
- ---------- --------------------- --------
<S> <C> <C>
L. McRee Harden (41) Director 1988
Michael D. Hodges (43) President and CEO of Bank; Director 1991
Russell C. Jacobs, Jr. (61) Director 1988
James M. Fiveash (66) Director 1997
Claude Kermit Keenum (60) Director 1988
Charles Ray Acosta (57) Director 1997
Jimmy D. Veal (48) Vice Chairman and 1987
Secretary/Treasurer
J. Thomas Whelchel (62) Chairman and CEO 1988
</TABLE>
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 directors and
executive officers during the past five years is set out below.
-50-
<PAGE>
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 is the Secretary and Treasurer of Friendly Express, Inc., a
company which operates a chain of approximately 28 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.
James M. Fiveash. Mr. Fiveash initially served as a director of the Company
from 1989 until his resignation in 1994, and was elected as a director of the
Company at the 1997 Annual Meeting of Shareholders and also serves as a director
of FCC. Mr. Fiveash is retired, and serves as part-time president of The
Fiveash Company, which is in the business of renting trucking terminals.
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 was most recently President
of Southeastern Communication Systems, Inc. and Keenum's Educational Services,
Inc., and is now retired.
Charles R. 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 was one of the
original directors of the Company and served as a director of the Company from
1987 to 1994. He also served as a director of the Bank from 1990 to 1994. Mr.
Acosta was reelected as a director of the Company at the 1997 Annual Meeting of
Shareholders.
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
-51-
<PAGE>
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 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.
-52-
<PAGE>
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.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
SECURITIES
OTHER ANNUAL RESTRICTED/1/ UNDERLYING LTIP ALL OTHER
NAME AND POSITION YEAR SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS/SARS(#) PAYOUTS COMPENSATION
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. THOMAS WHELCHEL 1997 91,872/5/ ----- ----- ----- ----- ----- -----
CHAIRMAN AND CEO 1996 ------ ----- ----- ----- 1,390/4/ ----- -----
OF THE COMPANY/6/ 1995 ------ ----- ----- 61,950/2/ ----- ----- -----
MICHAEL D. HODGES 1997 120,919 ----- ----- ----- ----- ----- -----
PRESIDENT 1996 100,861 ----- ----- ----- 2,042/4/ ----- -----
FIRST BANK OF 1995 92,096 6,000 ----- 10,498/3/ 6,921/4/ ----- -----
BRUNSWICK/6/
JAMES T. LAYMAN 1997 109,262 ----- ----- ----- ----- ----- -----
PRESIDENT 1996 99,667 ----- ----- ----- 3,523/4/ ----- -----
FIRST CREDIT 1995 91,179 12,749 ----- ----- 5,000/4/ ----- -----
CORPORATION
GREGORY S. JUNKIN 1997 ----- ----- ----- ----- ----- ----- -----
FORMER CHAIRMAN 1996 125,192 ----- ----- ----- ----- ----- -----
AND CEO OF THE 1995 147,211 ----- ----- 99,548/7/ 1,500/8/ ----- -----
COMPANY/6/
PAUL D. LOCKYER 1997 ----- ----- ----- ----- ----- ----- -----
FORMER PRESIDENT, 1996 117,115 ----- ----- ----- ----- ----- $145,000/9/
COO, AND CFO OF 1995 107,627 12,785 ----- 71,500/10/ 1,458/11/ ----- -----
THE COMPANY/6/
</TABLE>
- ------------
/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.
-53-
<PAGE>
/2/ The aggregate number of shares of restricted stock held by J. Thomas
Whelchel as of December 31, 1997, is 10,325 shares and the value of such shares
is $17,905 based on the terms of the following vesting schedule. Under the
terms of the award of these restricted shares to Mr. Whelchel in 1995 ("1995
Restricted Stock") one-seventh of such shares (1,475) became vested on July 25,
1996; another one-seventh became vested on July 25, 1997; 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. Whelchel 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 has not already
vested at the time of the event which triggers such forfeiture.
/3/ The aggregate number of shares of restricted stock held by Michael D.
Hodges as of December 31, 1997, is 2,390 shares and the value of such shares is
$2,792, based on the following schedule. Of the shares of restricted stock, 775
were awarded to Mr. Hodges in 1994 ("1994 Restricted Stock"), all of which vest
upon the earlier of (i) five years from August 17, 1994, the date the shares
were granted to Mr. Hodges or (ii) a change in 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 termination 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 of 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 (230
shares) became vested on July 25, 1996; another one-seventh became vested on
July 25, 1997; 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 has not already vested at the time of the event which triggers such
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 non
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 with 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/ Mr. Whelchel served as acting CEO of the Company without a written
agreement, and the compensation committee of the Board agreed to compensate Mr.
Whelchel for his time spent as CEO of the Company. The amount stated as his
salary for 1997 is the amount settled upon by the compensation committee.
/6/ 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.
/7/ The aggregate number of shares of restricted stock held by Gregory S.
Junkin as of April 24, 1997, was 22,315 shares and the value as of December 31,
1996 of such shares was $117,154. All of the 7,000 shares of restricted stock
awarded to Mr. Junkin in 1994 ("1994 Restricted Stock") were to 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. As a result of the termination of his employment on
October 16, 1997, see note 6 above, Mr. Junkin forfeited the 7,000 shares of
1994 Restricted Stock. 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. As a result of the termination
of his employment on October 17, 1996, Mr. Junkin forfeited the restricted
shares granted to him in 1995 which had not already vested (i.e., 13,127.14
shares) at the time of his termination.
/8/ 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, and
were forfeited as a result of termination of his employment on October 17, 1996.
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/9/ This amount represents a severance payment of $145,000, pursuant to the
termination of Mr. Lockyer's employment on October 17, 1996.
/10/ The aggregate number of shares of restricted stock held by Paul D.
Lockyer as of April 24, 1997, was 12,100 shares and the value as of December 31,
1996 of such shares was $63,525. All of the 1,100 shares of restricted stock
awarded to Mr. Lockyer in 1994 ("1994 Restricted Stock") were to 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. As a result of the termination of his employment on
October 17, 1996, Mr. Lockyer forfeited the 1,100 shares of 1994 Restricted
Stock. 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. As a result of the termination of his employment on
October 17, 1996, Mr. Lockyer forfeited the restricted shares granted to him in
1995 which had not already vested (i.e., 9,428.57 shares) at the time of his
termination.
/11/ These options are nonstatutory stock options which were granted to Mr.
Lockyer pursuant to the Plan in the capacity as a director of the Company. As a
result of the termination of his employment on October 17, 1996, 45,523
incentive and nonstatutory stock options were forfeited by Mr. Lockyer on
January 17, 1997.
OPTION/SAR GRANTS. There was no grant of any stock option or stock
appreciation right ("SAR") during the last completed fiscal year to any of the
individuals for whom compensation information has been provided in the above
summary compensation table.
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<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of securities Value of Unexercised
underlying Unexercised in-the-money options
Shares acquired on Value Realized Options/SARS at FY-End SARs at FY-End
Name exercise (#) (#) (Exercisable/Unexercisable) (Exercisable/Unexercisable)
- ---- ------------------ -------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
J. Thomas Whelchel ------ ------ 1,390/0/2/ 4,691.25/0/1/
Michael D. Hodges ------ ------ 30,124/0/3/ 136,760.21/0/1/
James T. Layman ------ ------ 4,523/5,000/4/ 13,399.63/14,375/1/
Gregory S. Junkin ------ ------ ------/5/ ------
Paul D. Lockyer ------ ------ ------/5/ ------
</TABLE>
No stock options were exercised by the listed individuals and there were no
outstanding SARs during fiscal year 1997.
The Company does not have any Long Term Incentive Plans in effect.
/1/ Dollar values have been calculated by determining the difference between
the estimated fair market value of the Company's common stock at March 19, 1998
($9.38) and the exercise prices of the options.
/2/ On January 18, 1996, these options were awarded to Mr. Whelchel as
compensation with respect to his services as a director.
/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.
/4/ Of these options, 1,000 were granted on February 22, 1994 with an
exercise price of $6.25 per share, and expire on February 22, 2004; 5,000 were
granted on July 25, 1995 with an exercise price of $6.50 per share, but are not
yet vested or subject to exercise; 292 were granted on January 19, 1996 at an
exercise price of $6.00 per share, and expire on January 19, 2006; and 3,231
were granted on February 15, 1996 at an exercise price of $6.50 per share, and
expire February 15, 2006.
/5/ Options previously granted Messrs. Junkin and Lockyer were forfeited
upon termination of their employment with the Company on October 17, 1996. See,
e.g., notes 8 and 11 to Summary Compensation Table, above.
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<PAGE>
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.
Mr. Whelchel served as Acting President and CEO of the Company beginning October
17, 1996, and throughout 1997 without any written employment agreement, but with
the understanding, however, that the compensation committee of the Board would
determine the sum to be paid to him for his services. The recommendation by the
compensation committee was approved by the full Board, and the compensation paid
to Mr. Whelchel as disclosed in the Summary Compensation Table above. Mr.
Whelchel has agreed to continue to serve as Chairman CEO of the Company with no
compensation for an indefinite period.
On December 26, 1996, FCC and James T. Layman entered into a written employment
agreement ("Layman Agreement") summarizing the terms of Mr. Layman's employment
with FCC. Pursuant to the Layman Agreement, Mr. Layman is to serve as President
and Chief Executive Officer of FCC. Mr. Layman's base salary was set at $95,000
per year, subject to possible annual increases. The Layman Agreement provides
that Mr. Layman is entitled to bonuses and other benefits including an
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automobile. The Layman Agreement is effective through December 31, 2001, and
may be modified by the mutual consent of Mr. Layman and FCC. Should there be a
change in control of the Company, the Layman Agreement remains in force and
effect.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
On March 17, 1998, GIFH had 952 shareholders of record.
The following table sets forth share ownership information as of March 17, 1998,
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 2,313,645
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 8.13%
21st Floor,
Three First National Plaza
Chicago, Illinois 60602
Although Gregory S. Junkin, Paul D. Lockyer, and Scott A. Junkin filed a
Schedule 13d with the Securities and Exchange Commission on November 14, 1996
indicating that they may together constitute a "group" owning in excess of five
percent of the Common Stock of the Company, the Company is unaware of the
current beneficial share ownership figures for those individuals, and whether
those persons continue to consider themselves as possibly constituting a "group"
within the meaning of Rule 13d-5 of the 34 Act. Accordingly, the Company can not
provide for liable beneficial ownership information for such persons.
* 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
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<PAGE>
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.
The following table sets forth share ownership information as of March 17, 1998,
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 2,313,645 outstanding shares.
Security Ownership of Management*
<TABLE>
<CAPTION>
<S> <C> <C>
Percent
Name and Address -------
of Beneficial Owner Number of Shares of Class
- ----------------------------------------------- ---------------- --------
L. McRee Harden (1) 19,385 .84%
P.O. Box 2369
Darien, GA 31305
Michael D. Hodges (2) 50,033 2.16%
207 Dunbarton Drive
St. Simons Island, GA 31522
Russell C. Jacobs, Jr. (3) 16,763 .73%
308 Oak Grove Island Drive
Brunswick, GA 31525
C. Kermit Keenum (4) 16,545 .72%
100 Old Mountain Road
Powder Springs, GA 30073
Jimmy D. Veal (5) 81,898 3.54%
711 Beachview Drive
Jekyll Island, GA 31527
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
Percent
Name and Address -------
of Beneficial Owner Number of Shares of Class
- ----------------------------------------------- ---------------- --------
J. Thomas Whelchel (6) 31,740 1.37%
5 Glynn Avenue
Brunswick, GA 31520
Charles R. Acosta (7)
226 Medinah 27,624 1.19%
St. Simons Island, GA 31522
James M. Fiveash (8)
605 King Cotton Row 40,000 1.73%
Brunswick, GA 31525
All Directors and Executive
Officers as a Group 283,988 12.27%
(8 persons)
</TABLE>
* 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 1,250 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 1,045 shares pursuant to vested options.
(5) 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.
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(6) Includes 25 shares owned by Mr Whelchel's daughter for which he disclaims
beneficial ownership, and 1,390 shares pursuant to vested options.
(7) Includes 1,437 shares beneficially owned by Mr. Acosta.
(8) Includes 6,000 shares owned individually by Mr. Fiveash and 34,000 shares
beneficially owned by him.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1997, 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 2,313,645 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
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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.
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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
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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, 1996 and 1997, and for the years then ended, have been included herein in
reliance upon the report of Mauldin & Jenkins, LLC, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm 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, 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. There have
been no changes in or disagreements with Mauldin & Jenkins, as the Company's
principal accountants, for the years ended December 31, 1996 and 1997.
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
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<PAGE>
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.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
THIS SECTION CONTAINS THE FOLLOWING ITEMS:
Independent Auditor's Report
Consolidated Balance Sheet -- December 31, 1997 and 1996
Consolidated Statements of Income -- Years Ended December 31, 1997 and 1996
Consolidated Statements of Stockholder's Equity -- Years Ended December 31,
1997 and 1996
Consolidated Statements of Cash Flows -- Years Ended December 31, 1997 and
1996
Notes to Consolidated Financial Statements
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GOLDEN ISLES FINANCIAL HOLDINGS, INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Consolidated financial statements:
Independent Auditor's Report
Consolidated Balance Sheets - December 31, 1997 and 1996
Consolidated Statements of Income - Years ended December 31, 1997 and
1996
Consolidated Statements of Stockholders' Equity - Years ended December
31, 1997 and 1996
Consolidated Statements of Cash Flows - Years ended December 31, 1997 and
1996
Notes to Consolidated Financial Statements
F-1
<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 sheets of
Golden Isles Financial Holdings, Inc. and Subsidiaries as of December 31, 1997
and 1996 and the related consolidated statements of operations, stockholders'
equity and cash flows for the years 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 audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audits
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 financial position of Golden
Isles Financial Holdings, Inc. and subsidiaries as of December 31, 1997 and
1996, and the results of their operations and their cash flows for the years
then ended, in conformity with generally accepted accounting principles.
/s/ Mauldin & Jenkins, LLC
Albany, Georgia
January 23, 1998
F-2
<PAGE>
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Assets 1997 1996
------ ----------------- -----------------
<S> <C> <C>
Cash and due from banks $ 3,202,087 $ 3,388,766
Interest-bearing deposits in banks 22,674 862,070
Federal funds sold 2,330,000 8,640,000
Securities available for sale, at fair value 16,787,502 8,025,653
Securities held to maturity, at cost
(fair value $2,031,272 in 1996) - 2,053,844
Loans held for sale 307,457 6,323,719
Loans 88,944,391 77,969,491
Less allowance for loan losses 1,512,953 1,445,365
----------------- -----------------
Loans, net 87,431,438 76,524,126
----------------- -----------------
Premises and equipment, net 3,195,582 4,135,883
Other assets 2,256,116 2,693,703
----------------- -----------------
Total assets $ 115,532,856 $ 112,647,564
================= =================
Liabilities and Stockholders' Equity
------------------------------------
Deposits
Noninterest-bearing demand $ 7,251,295 $ 7,153,576
Interest-bearing demand 10,000,471 12,812,026
Savings 1,123,621 1,261,175
Time, $100,000 and over 19,640,192 13,608,161
Other time 52,775,178 47,973,230
----------------- -----------------
Total deposits 90,790,757 82,808,168
Notes payable 9,367,468 14,135,473
Federal Home Loan Bank borrowings 3,879,171 4,444,643
Other liabilities 745,665 1,510,105
----------------- -----------------
Total liabilities 104,783,051 102,898,389
----------------- -----------------
Stockholders' equity
Common stock, no par value; 50,000,000
shares authorized; 2,313,645 and 2,344,303
shares issued and outstanding 1,094,338 1,094,338
Capital surplus 9,959,244 9,972,588
Accumulated deficit (360,699) (1,348,848)
Unrealized gains on securities available
for sale, net of taxes 56,922 31,117
----------------- -----------------
Total stockholders' equity 10,749,805 9,749,175
----------------- -----------------
Total liabilities and stockholders' equity $ 115,532,856 $ 112,647,564
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Interest income
Interest and fees on loans $ 9,822,973 $ 8,642,292
Interest on securities 948,967 515,445
Interest on deposits in other banks 10,079 6,355
Interest on Federal funds sold 166,636 102,863
-------------- --------------
Total interest income 10,948,655 9,266,955
-------------- --------------
Interest expense
Interest on deposits 4,256,949 3,535,961
Interest on other borrowings 1,080,207 903,634
-------------- --------------
Total interest expense 5,337,156 4,439,596
-------------- --------------
Net interest income 5,611,499 4,827,360
Provision for loan losses 539,500 975,085
-------------- --------------
Net interest income after provision for loan losses 5,071,999 3,852,275
-------------- --------------
Other income
Income from origination and sale of mortgage loans,
less related expenses 345,933 905,956
Service charges on deposit accounts 468,348 437,732
Insurance commissions 319,067 198,566
Net realized loss on sales of securities (432) (4,573)
Other 147,506 200,597
-------------- --------------
Total other income 1,280,422 1,738,278
-------------- --------------
Other expense
Salaries and employee benefits 2,747,868 4,088,265
Equipment expense 471,519 508,881
Occupancy expense 355,103 453,585
Advertising and business development 163,508 331,161
Legal and professional 541,963 318,062
Supplies and printing 171,746 271,095
Telephone 102,055 165,383
Postage and courier 104,934 132,171
Loss on write-down of furniture and fixtures - 145,769
Loss on abandonment of lease - 148,316
Other operating expenses 619,010 674,564
-------------- --------------
Total other expense 5,277,706 7,237,252
-------------- --------------
Income (loss) before income tax (benefit) 1,074,715 (1,646,699)
Applicable income tax (benefit) 86,566 (438,033)
-------------- --------------
Net income (loss) $ 988,149 $ (1,208,666)
============== ==============
Per share of common stock
Net income (loss) - basic $ 0.43 $ (0.52)
============== ==============
Net income (loss) - diluted $ 0.42 $ (0.51)
============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unrealized
Gains
(Losses)
on Securities
Common Stock Available Total
------------------------ Capital Accumulated for Sale, Stockholders'
Shares Par Value Surplus Deficit Net of Taxes Equity
----------- ------------ ------------ ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
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
Net income - - - 988,149 - 988,149
Vesting of restricted
stock - - 32,466 - - 32,466
Forfeiture of
restricted stock (30,658) - (45,790) - - (45,790)
Net change in
unrealized gains
(losses) on
securities available
for sale,
net of taxes - - - - 25,805 25,805
----------- ------------ ------------ ------------- -------------- --------------
Balance, December 31,
1997 2,313,645 $ 1,094,338 $ 9,959,244 $ (360,689) $ 56,922 $ 10,748,805
========== ============ ============ ============= ============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
1997 1996
---------------- ----------------
OPERATING ACTIVITIES
Net income (loss) $ 988,149 $ (1,208,666)
---------------- ----------------
<S> <C> <C>
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 378,169 367,966
Amortization 29,352 26,677
Provision for loan losses 539,500 975,085
Provision for deferred taxes (217,148) (218,396)
Net loss on disposal of premises and equipment 116,514 -
Net realized loss on securities transactions 432 4,573
Gain on sale of other assets (43,498) -
Loss on write-down of furniture and fixtures - 145,769
Loss on abandonment of lease - 148,316
Decrease in loans held for sale, net 6,016,262 1,518,511
Increase (decrease) in warehousing account, net (503,229) 885,170
Increase in interest receivable (227,072) (162,343)
Increase (decrease) in interest payable (21,670) 52,164
(Increase) decrease in taxes receivable 335,725 (106,862)
Increase in taxes payable 25,428 -
Net change in other prepaids and accruals (208,026) (126,016)
---------------- ----------------
6,220,739 3,490,614
---------------- ----------------
Net cash provided by operating activities 7,208,888 2,281,948
---------------- ----------------
INVESTING ACTIVITIES
(Increase) decrease in Federal funds sold 6,310,000 (3,630,000)
(Increase) decrease in interest-bearing deposits in bank 839,396 (813,372)
Available for sale securities:
Proceeds from sales and calls 4,335,150 1,000,000
Proceeds from maturities and paydowns 728,560 2,091,676
Purchases (12,276,431) (5,044,262)
Held to maturity securities:
Proceeds from maturities and paydowns 543,348 219,761
Increase in loans, net (11,446,812) (21,078,327)
(Purchase) redemption of Federal Home Loan Bank
stock, net 105,000 (57,800)
Purchase of premises and equipment (87,498) (1,246,452)
Proceeds from sales of premises and equipment 532,916 -
Purchase of land held for investment - (301,502)
Proceeds from sales of other assets 385,000 -
---------------- ----------------
Net cash used in investing activities (10,031,335) (28,860,278)
---------------- ----------------
</TABLE>
F-6
<PAGE>
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---------------- ----------------
<S> <C> <C>
FINANCING ACTIVITIES
Net increase in deposits $ 7,982,589 $ 14,779,926
Net increase (decrease) in notes payable (4,768,015) 11,285,790
Net increase (decrease) in Federal Home Loan
Bank borrowings (565,472) 259,429
Vesting (forfeiture) of restricted stock, net (13,324) 70,344
Proceeds from exercise of stock warrants - 53,077
---------------- ----------------
Net cash provided by financing activities 2,635,778 26,448,566
---------------- ----------------
Net decrease in cash and due from banks (186,679) (129,764)
Cash and due from banks at beginning of year 3,388,766 3,518,530
---------------- ----------------
Cash and due from banks at end of year $ 3,202,087 $ 3,388,766
================ ================
SUPPLEMENTAL DISCLOSURES
Cash paid for (received from):
Interest $ 5,358,826 $ 4,897,812
Income taxes $ (57,439) $ (242,332)
NONCASH TRANSACTIONS
Net change in unrealized gain on securities
available for sale $ (39,100) $ (50,954)
Transfer of securities held to maturity to
available for sale $ 1,510,460 $ -
Net transfer of property from premises and
equipment to other assets $ - $ 102,284
</TABLE>
See Notes to Consolidated Financial Statements.
F-7
<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, Martinez and Kingsland, Georgia.
FBMC was engaged in the origination, purchase and sale of mortgage
loans through offices in several states in the southeastern United
States. Its operations have been suspended until the mortgage
function is reorganized within the Bank.
Basis of Presentation
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.
The Company's consolidated financial statements include the accounts
of the Company and its subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation.
The principles which significantly affect the determination of
financial position, results of operations and cash flows are
summarized below.
Reclassification of Certain Items
Certain items in the consolidated financial statements as of and for
the year ended December 31, 1996 have been reclassified, with no
effect on net income, to be consistent with the classifications
adopted for the year ended December 31, 1997.
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Due from Banks
For purposes of reporting cash flows, cash and due from banks
includes cash on hand and amounts due from banks (including cash
items in process of clearing). Cash flows from loans originated by
the Banks, deposits, interest-bearing deposits and Federal funds
purchased and sold are reported net.
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. In 1997, the Company transferred its entire securities to
securities available for sale. There were no securities held to
maturity at December 31, 1997.
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.
F-9
<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 most loans are
recognized at the time the loan is recorded. Loan origination fees
and costs incurred for other loans are deferred and recognized as
income over the life of the loan. 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.
F-10
<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.
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings Per Common Share
Basic earnings per share are calculated on the basis of the weighted
average number of common shares outstanding. Diluted earnings per
share are computed by dividing net income by the sum of the weighted
average number of common shares outstanding and potential common
shares. Earnings per common share for the prior periods have been
restated to reflect the adoption of SFAS 128.
Current Accounting Developments
In June 1996, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ("SFAS No. 125"). This statement
provides standards for distinguishing transfers of financial assets
that are sales from those that are secured borrowings, and provides
guidance on the recognition and measurement of asset servicing
contracts and on debt extinguishments. As issued, SFAS No. 125 is
effective for transactions occurring after December 31, 1996.
However, as a result of an amendment to SFAS No. 125 by the FASB in
December 1996, certain provision of SFAS No. 125 are deferred for an
additional year. Adoption of the new accounting standard is not
expected to have a material impact on the Company's financial
statements.
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share".
This statement simplifies the standards for computing earnings per
share previously set forth in APB Opinion No. 15, "Earnings per
Share", and makes them comparable to international earnings per Share
("EPS") standards. It replaces the presentation of primary EPS with a
presentation of basic EPS. It also requires dual presentation of
basic and diluted EPS on the face of the income statement for all
entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation. Basic EPS excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS pursuant to APB Opinion No. 15. This
statement is effective for financial statements issued for periods
ending after December 15, 1997. The adoption of this statement did
not have a material impact on the Company's financial statements.
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Current Accounting Developments (Continued)
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income". This statement establishes standards for reporting and
display of comprehensive income and its components (revenues.
expenses, gains and losses) in a full set of general-purpose
financial statements. This statement requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements.
This statement does not require a specific format for that financial
statement but requires that an enterprise display an amount
representing total comprehensive income for the period in that
financial statement. This statement requires that an enterprise
classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance or other
comprehensive income by their nature in a financial statement and
display the accumulated balance or other comprehensive income
separately from retained earnings and additional paid-in capital in
the equity section of a statement of financial position. This
statement is effective for fiscal years beginning after December 15,
1997. The adoption of this statement is not expected to have a
material impact on the Company's financial statements.
In June 1997, The FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." This statement
requires that a public business enterprise report financial and
descriptive information about its reportable operating segments.
Operating segments are components of an enterprise about which
separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. Generally, financial
information is required to be reported on the basis that it is used
internally for evaluating segment performance and deciding how to
allocate resources to segments. The statement requires that a
business enterprise report a measure of segment profit or loss,
certain specific revenue and expense items and segment assets. It
requires reconciliations of total segment revenues, total segment
profit or loss, total segment assets and other amounts disclosed for
segments to corresponding amounts in the enterprise's general purpose
financial statements. It requires that the enterprise report
information about the revenues derived from the enterprise's products
or services, about the countries in which the enterprise earns
revenues and hold assets and about major customers. This statement is
effective for financial statements for periods beginning after
December 15, 1997. The adoption of this statement is not expected to
have a material impact on the Company's financial statements.
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 2. SECURITIES
On October 2, 1997, the Bank transferred its entire portfolio of
securities held to maturity to its portfolio of securities available
for sale. The amortized cost and fair value of the securities
transferred was $1,510,460 and $1,497,598, respectively. This transfer
resulted in a net unrealized loss of $12,862, which was reflected in
stockholders' equity at $8,489, and net of related taxes of $4,373.
The amortized cost and fair value of securities are summarized as
follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Securities Available for Sale
December 31, 1997:
U. S. Government and agency
securities $ 16,042,798 $ 83,842 $ (2,859) $ 16,123,781
Mortgage-backed securities 658,458 6,446 (1,183) 663,721
---------------- -------------- --------------- ----------------
$ 16,701,256 $ 90,288 $ (4,042) $ 16,787,502
================ ============== =============== ================
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
================ ============== =============== ================
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
================ ============== =============== ================
</TABLE>
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 2. SECURITIES (Continued)
The amortized cost and fair value of securities as of December 31, 1997
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.
<TABLE>
<CAPTION>
Securities Available for Sale
-----------------------------------
Amortized Fair
Cost Value
---------------- ----------------
<S> <C> <C>
Due in one year or less $ 2,247,517 $ 2,252,973
Due from one year to five years 13,545,281 13,622,370
Due from five to ten years 250,000 248,438
Mortgage-backed securities 658,458 663,721
---------------- ----------------
$ 16,701,256 $ 16,787,502
================ ================
</TABLE>
Securities with a carrying value of $1,154,390 and $637,540 at December
31, 1997 and 1996, respectively, were pledged to secure public deposits
and for other purposes.
Gains and losses on sales of securities available for sale consist of
the following:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
Gross gains on sales of securities $ 10,093 $ -
Gross losses on sales of securities (10,525) (4,573)
--------------- ---------------
Net realized loss on sales of
securities available for sale $ (432) $ (4,573)
=============== ===============
</TABLE>
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------------
1997 1996
-------------------- -------------------
<S> <C> <C>
Commercial, financial, and agricultural $ 19,960,719 $ 26,979,410
Real estate - construction 9,442,036 9,295,969
Real estate - mortgage 50,059,539 32,735,336
Consumer installment 9,614,709 9,065,266
Other 581,187 644,999
-------------------- -------------------
89,658,190 78,720,980
Unearned income (713,799) (751,489)
Allowance for loan losses (1,512,953) (1,445,365)
-------------------- -------------------
Loans, net $ 87,431,438 $ 76,524,126
==================== ===================
</TABLE>
Changes in the allowance for loan losses for the years ended December
31 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------- -------------------
<S> <C> <C>
Balance, beginning of year $ 1,445,365 $ 718,057
Provision for loan losses 539,500 975,085
Loans charged off (544,139) (271,009)
Recoveries of loans previously charged off 72,227 23,232
------------------- -------------------
Balance, end of year $ 1,512,953 $ 1,445,365
=================== ===================
</TABLE>
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 $1,330,048 and $468,174 at
December 31, 1997 and 1996, respectively. These loans had related
allowances for loan losses of approximately $199,500 and $210,000 at
December 31, 1997 and 1996, respectively. The average recorded
investment in impaired loans for 1997 and 1996 was $554,433 and
$413,355, respectively. There was no significant amount of interest
income recognized on impaired loans in 1997 or 1996.
F-16
<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, 1997 are as follows:
<TABLE>
<S> <C>
Balance, beginning of year $ 2,728,631
Advances 1,347,654
Repayments (1,811,056)
-------------------
Balance, end of year $ 2,265,229
===================
</TABLE>
NOTE 4. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1997 1996
------------------ -----------------
<S> <C> <C>
Land $ 514,235 $ 514,235
Buildings and improvements 2,107,856 2,520,066
Furniture and equipment 1,576,712 1,900,711
------------------ -----------------
4,198,803 4,935,012
Accumulated depreciation 1,003,221 799,329
------------------ -----------------
$ 3,195,582 $ 4,135,683
================== =================
</TABLE>
NOTE 5. BROKERED DEPOSITS
Brokered deposits of $6,100,856 and $2,475,985 are included in time
deposits at December 31, 1997 and 1996, respectively.
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 6. NOTES PAYABLE
Notes payable at December 31, 1997 and 1996, consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
------------------ -----------------
<S> <C> <C>
American Banking Company ("ABC"), Moultrie, Georgia; $ 2,500,000 $ -
$3,500,000 term note dated March 29, 1997, interest payable
quarterly at prime plus 1/4% (8.75%), through September 30,
1998, then quarterly principal and interest payments over
five years, principal being repaid on the basis of a ten
year amortization and semi-annual payments of $175,000 with
a balloon payment due at the end of the five years, secured
by 100% of the outstanding stock of the Bank.
ABC; $1,000,000 operating line of credit dated March 29, 1997, - -
interest payable quarterly at prime plus 1/4% (8.75%), to
expire March 25, 1998 with any outstanding balance added to
and amortized with the balance of the ABC term note above,
secured by 100% of the outstanding stock of the Bank.
Southeastern Bank, Darien, Georgia; $4,500,000 line of credit - 3,500,000
refinanced by the Company with ABC in March 1997.
CoreStates Bank, N.A.; $10,000,000 line of credit dated June 6,867,458 5,350,907
24, 1996, due on demand with interest payable monthly at
prime plus 1/2% (9.0%), secured by qualified loans
receivable of FCC and guaranty of the Company.
Bank United of Texas; $30,000,000 line of credit expired in May - 4,984,465
1997.
NationsBank, N.A.; note payable dated February 19, 1996 for - 266,478
$280,000. Balance paid in full in July 1997.
Wachovia Bank, N.A.; notes payable dated August 21, 1995 for - 33,623
$43,486. Balance paid in full in February 1997.
------------------ -----------------
$ 9,367,458 $ 14,135,473
================== =================
</TABLE>
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 6. NOTES PAYABLE (Continued)
The projected five year maturity of notes payable at December
31, 1997 follows:
<TABLE>
<CAPTION>
Year Ending December 31 Amount
----------------------- --------------
<S> <C>
1998 $ 6,867,458
1999 350,000
2000 350,000
2001 350,000
2002 350,000
Later 1,100,000
--------------
$ 9,367,458
==============
</TABLE>
NOTE 7. FEDERAL HOME LOAN BANK BORROWINGS
During 1997 and 1996, the Bank obtained funding for mortgage loans from
the Federal Home Loan Bank of Atlanta. Advances made during 1997 and
1996 had a weighted average interest rate of 6.31% and 6.68%,
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, 1997 and 1996 follows:
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1997 1996
------------------ -----------------
<S> <C> <C>
Balance, beginning of year $ 4,444,643 $ 4,185,214
Advances 2,808,000 15,016,600
Repayments (3,373,472) (14,757,171)
------------------ -----------------
Balance, end of year $ 3,879,171 $ 4,444,643
================== =================
</TABLE>
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 7. FEDERAL HOME LOAN BANK BORROWINGS (Continued)
Advances at December 31, 1997 have maturities in future years
as follows:
<TABLE>
<CAPTION>
Year Ending December 31 Amount
----------------------- -------------
<S> <C>
1998 $ 878,671
1999 611,671
2000 603,671
2001 487,671
2002 1,145,687
Later 151,800
-------------
$ 3,879,171
=============
</TABLE>
NOTE 8. EMPLOYEE BENEFIT PLAN
The Company provides a 401(k) plan for qualified employees to defer up
to 10% of their salary with matching contributions from the Company
made at the discretion of the Board of Directors. Contributions and
administrative expenses charged to expense during 1997 and 1996
amounted to $55,999 and $161,763, respectively.
NOTE 9. INCOME TAXES
The provision for income tax (benefit) consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
Current $ 353,256 $ (215,074)
Deferred 42,577 (222,959)
Benefit of operating loss carryforward (49,542) -
Reversal of valuation allowance on deferred tax assets (259,725) -
----------------- -----------------
$ 86,566 $ (438,033)
================= =================
</TABLE>
F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 9. INCOME TAXES (Continued)
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:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------
1997 1996
---------------------------- ---------------------------
Amount Percent Amount Percent
--------------- ---------- --------------- ---------
<S> <C> <C> <C> <C>
Income tax (benefit) at statutory rate $ 365,403 34 % $ (559,878) (34) %
Valuation reserve (259,725) (24) 88,225 5
Net operating loss carryforward (49,542) (5) - -
Other items, net 30,430 3 33,620 2
--------------- ---------- --------------- ---------
Provision for income tax (benefit) $ 86,566 8 % $ (438,033) (27) %
=============== ========== =============== =========
</TABLE>
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1997 1996
----------------- ------------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 457,205 $ 445,750
Restricted stock 19,386 23,916
Non accrual loan interest receivable 18,280 14,081
Loans held for sale 60,936 92,223
----------------- ------------------
555,807 575,970
----------------- ------------------
Valuation allowance - (259,725)
----------------- ------------------
Deferred tax liabilities:
Premises and equipment 103,742 78,654
Unrealized gain on securities available for sale 29,324 16,029
Other - 2,674
----------------- ------------------
133,066 97,357
----------------- ------------------
Net deferred tax assets $ 422,741 $ 218,888
================= ==================
</TABLE>
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 10. EARNINGS (LOSS) PER COMMON SHARE
The following is a reconciliation of net income (loss) (the numerator)
and the weighted average shares outstanding (the denominator) used in
determining basic and diluted earnings per share.
<TABLE>
<CAPTION>
Year Ended December 31, 1997
-------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------------- ---------------- -----------------
<S> <C> <C> <C>
Basic earnings per share
Net income $ 988,149 2,323,984 $ 0.43
=================
Effect of Dilutive Securities
Stock options - 11,071
----------------- ----------------
Dilutive earnings per share
Net income $ 988,149 2,335,055 $ 0.42
================= ================ =================
<CAPTION>
Year Ended December 31, 1996
-------------------------------------------------------
Loss Shares Per Share
(Numerator) (Denominator) Amount
----------------- ---------------- -----------------
<S> <C> <C> <C>
Basic loss per share
Net loss $ (1,208,666) 2,341,296 $ (0.52)
=================
Effect of Dilutive Securities
Stock options - 6,651
----------------- ----------------
Dilutive loss per share
Net loss $ (1,208,666) 2,347,947 $ (0.51)
================= ================ =================
</TABLE>
F-22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 11. 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:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1997 1996
------------ -------------
<S> <C> <C>
Commitments to extend credit $ 8,364,777 $ 12,475,665
Standby letters of credit 592,000 735,200
------------ -------------
$ 8,956,777 $ 13,210,865
============ =============
</TABLE>
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.
F-23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 11. 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, 1997, are as follows:
<TABLE>
<CAPTION>
Year Ending December 31, Amount
------------------------ ----------------
<S> <C>
1998 $ 97,747
1999 59,835
2000 45,835
2001 27,503
----------------
$ 230,920
================
</TABLE>
F-24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 12. 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 southeast
Georgia. 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.
Approximately sixty-six percent (66%) of the Company's loan portfolio
is concentrated in real estate loans, of which 11% 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, 1997 as follows:
<TABLE>
<S> <C>
Cash and due from bank $ 2,534,663
Federal funds sold 800,000
-----------------
$ 3,334,663
=================
</TABLE>
F-25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 13. 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, 8,100 were forfeited in
1997, and the remaining 1,160 shares will vest in August 1999. In
July 1995, the Company granted 62,570 shares of restricted stock to
eight directors. In 1997, 22,558 of these shares were forfeited. All
of the remaining 40,012 shares will be fully vested by the end of the
seventh year from the date of the grant. The cost of the restricted
stock is being amortized over the vesting periods. For the years
ended December 31, 1997 and 1996, $32,466 and $70,344, respectively,
was amortized as restricted stock and the same amount was credited to
capital surplus. The cost recovery associated with the restricted
shares that were forfeited in 1997 was $45,790. This cost recovery
was debited to capital surplus.
Stock Options
The Company has options outstanding under three stock option plans.
The 1991 Incentive Stock Option Plan ("Plan A") and the 1991
Nonstatutory Stock Option Plan ("Plan B") were discontinued in 1995
and replaced by the 1995 Stock Option Plan (the "1995 Plan".) Options
granted under the two prior plans at the date of replacement by the
1995 Plan remain outstanding and can be exercised during the terms of
the option agreements unless such options are forfeited by the
optionee. 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.
Options granted under the 1995 Plan 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 ("Nonqualify
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.
F-26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 13. RESTRICTED STOCK, STOCK OPTIONS AND STOCK WARRANTS (Continued)
A summary of the status of the three plans at December 31, 1997, and
1996 and changes during the years ended on those dates is as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------ -----------------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Number Price Number Price
------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Under option, beginning of the year 102,755 $ 5.75 127,828 $ 5.46
Granted 15,000 7.00 62,526 6.14
Exercised - - - -
Forfeited (3,678) 6.06 (87,599) 5.59
------------- -------------
Under option, end of year 114,077 5.91 102,755 5.75
============= =============
Exercisable at end of year 98,077 82,755
============= =============
Weighted-average fair value per
option of options granted
during year 3.24 3.40
============= =============
</TABLE>
Additional information about options outstanding at December 31, 1997
is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------------------------- -------------------------------
Weighted- Weighted- Weighted-
Range of Average Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life in Years Price Outstanding Price
--------------- -------------- --------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 4.00 22,500 3.4 $ 4.00 22,500 $ 4.00
4.60 4,755 5.1 4.60 4,755 4.60
6.00 17,488 8.1 6.00 17,488 6.00
6.25 5,379 6.1 6.25 5,379 6.25
6.50 48,955 7.7 6.50 32,955 6.50
7.00 15,000 10.0 7.00 15,000 7.00
-------------- -------------
114,077 7.0 5.91 98,077 5.91
============== =============
</TABLE>
F-27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 13. RESTRICTED STOCK, STOCK OPTIONS AND STOCK WARRANTS (Continued)
As permitted under generally accepted accounting principles, grants
under the plans are accounted for following the provisions of APB
Opinion No. 25 and its related interpretations. Accordingly, no
compensation cost has been recognized for grants made to date. Had
compensation cost been determined based on the fair value method
prescribed in FASB Statement No. 123, reported net income (loss) and
earnings (loss) per share would have been reduced to:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------
1997 1996
--------------------------------- ---------------------------------
Basic Basic
Net Net Income Net Net Loss
Income Per Share Loss Per Share
---------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
As reported $ 988,149 $ 0.43 $ (1,208,666) $ (0.52)
Stock based
compensation, net
of related tax effect (36,440) (0.02) (50,151) (0.02)
---------------- --------------- ---------------- ----------------
As adjusted $ 951,709 $ 0.41 $ (1,258,817) $ (0.54)
================ =============== ================ ================
<CAPTION>
December 31,
-------------------------------------------------------------------
1997 1996
--------------------------------- --------------------------------
Diluted Diluted
Net Net Income Net Net Loss
Income Per Share Loss Per Share
----------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
As reported $ 988,149 $ 0.42 $ (1,208,666) $ (0.51)
Stock based
compensation, net
of related tax effect (36,440) (0.02) (50,151) (0.02)
----------------- --------------- --------------- ---------------
As adjusted $ 951,709 $ 0.40 $ (1,258,817) $ (0.53)
================= =============== =============== ===============
</TABLE>
The fair value of the options granted in 1997 was based upon the
discounted value of future cash flows of the options using the
following assumptions:
<TABLE>
<S> <C>
Risk-free interest rate 6.13%
Expected life of the options 10 years
Expected dividend rate 0.00%
Expected volatility 13.27%
</TABLE>
F-28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 13. 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. No warrants were
exercised in 1997. 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, 1997,
warrants were outstanding to purchase an additional 889,909 shares of
common stock.
NOTE 14. REGULATORY MATTERS
The Bank is subject to certain restrictions on the amount of dividends
that may be declared without prior regulatory approval. At December 31,
1997, approximately $637,000 of the Bank's retained earnings were
available for dividend declaration without regulatory approval.
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, 1997, the Company and the Bank meet all capital adequacy
requirements to which it is subject.
F-29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 14. REGULATORY MATTERS (Continued)
As of December 31, 1997, 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.
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, 1997
Total Capital
(to Risk Weighted
Assets):
Consolidated $ 11,648,800 14.1% $ 6,620,000 8.0% $ 8,275,000 10.0%
Bank $ 9,137,100 12.7% $ 5,767,500 8.0% $ 7,209,400 10.0%
Tier I Capital
(to Risk Weighted
Assets):
Consolidated $ 10,608,500 12.8% $ 3,310,000 4.0% $ 4,965,000 6.0%
Bank $ 8,232,200 11.4% $ 2,883,800 4.0% $ 4,325,700 6.0%
Tier I Capital
(to Average Assets):
Consolidated $ 10,608,500 9.5% $ 4,454,500 4.0% $ 5,568,100 5.0%
Bank $ 8,232,200 8.3% $ 3,965,400 4.0% $ 4,956,800 5.0%
</TABLE>
F-30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 14. REGULATORY MATTERS (Continued)
<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>
NOTE 15. RESTRUCTURING OF MORTGAGE BANKING ACTIVITIES
The Company has developed and is in the process of implementing a
strategic plan to restructure its mortgage banking activities.
Accordingly, the Company has suspended the mortgage banking activities
of FBMC in an effort to down size and restructure its operations and
eventually transfer its operations to the Bank. The Bank will focus on
originating and brokering retail mortgages in the local and surrounding
area. The wholesale national B, C and D mortgage business has been
discontinued.
F-31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 16. 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.
<TABLE>
<CAPTION>
For the Year Ended Holding Banking Credit Mortgage
December 31, 1997 Company Subsidiary Financing Banking Eliminations Consolidated
------------------------------ -------------- --------------- -------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenues from unaffiliated
customers $ 7,964 $ 9,212,319 $ 2,611,451 $ 397,343 $ - $ 12,229,077
Revenues from affiliates 171,524 57,882 - 19,410 (248,816) -
-------------- --------------- -------------- ------------- -------------- --------------
Total revenues $ 179,488 $ 9,270,201 $ 2,611,451 $ 416,753 $ (248,816) $ 12,229,077
============== =============== ============== ============= ============== ==============
Income (loss) from operations
before income tax (benefit) $ (869,035) $ 1,857,716 $ 116,527 $ (30,493) $ - $ 1,074,715
============== =============== ============== ============= ============== ==============
Identifiable assets at
December 31, 1997 $ 13,579,609 $ 104,890,874 $ 10,520,731 $ 1,519,364 $ (14,977,722) $ 115,532,856
============== =============== ============== ============= ============== ==============
Depreciation and amortization
expense $ 35,416 $ 238,296 $ 95,663 $ 38,146 $ 407,521
============== =============== ============== ============= ==============
Premises and equipment
acquisitions $ - $ 66,310 $ 21,188 $ - $ 87,498
============== =============== ============== ============= ==============
<CAPTION>
For the Year Ended
December 31, 1996
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
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>
F-32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 17. 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, 1997
and 1996. 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:
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.
F-33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 17. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
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
For variable-rate notes that reprice frequently, fair values are
based on carrying values. For fixed rate notes payable, fair values
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.
F-34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 17. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
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.
The estimated fair values of the Company's financial instruments were
as follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
----------------------------------- ----------------------------------
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 $ 5,554,761 $ 5,554,761 $ 12,890,836 $ 12,890,836
Securities available for sale 16,787,502 16,787,502 8,025,653 8,025,653
Securities held to maturity - - 2,053,844 2,031,272
Loans held for sale 307,457 307,457 6,323,719 6,323,719
Loans 87,431,438 86,519,047 76,524,126 76,634,635
Financial liabilities:
Deposits 90,790,757 90,899,387 82,808,168 83,231,777
Note payable 9,367,458 9,367,458 14,135,473 14,133,000
FHLB borrowings 3,879,171 3,929,155 4,444,643 4,458,000
</TABLE>
F-35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 18. 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, 1997 and
1996:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
1997 1996
----------------- -----------------
<S> <C> <C>
Assets
Cash $ 574,899 $ 45,658
Due from subsidiaries 1,550,000 1,909,297
Investment in subsidiaries 11,380,327 10,563,977
Premises and equipment, net 51,156 615,267
Other assets 23,227 444,469
----------------- -----------------
Total assets $ 13,579,609 $ 13,578,668
================= =================
Liabilities and Stockholders' Equity
------------------------------------
Liabilities
Notes payable $ 2,500,000 $ 3,766,478
Other liabilities 329,804 63,015
----------------- -----------------
Total liabilities 2,829,804 3,829,493
----------------- -----------------
Stockholders' equity 10,749,805 9,749,175
----------------- -----------------
Total liabilities and stockholders' equity $ 13,579,609 $ 13,578,668
================= =================
</TABLE>
F-36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 18. PARENT COMPANY FINANCIAL INFORMATION (Continued)
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1997 1996
----------------- -----------------
<S> <C> <C>
Income
Interest $ 171,549 $ 234,433
Other 7,939 8,462
----------------- -----------------
Total income 179,488 242,895
----------------- -----------------
Expense
Interest 261,580 231,436
General and administrative 786,943 887,770
----------------- ---------------
Total expense 1,048,523 1,119,206
----------------- ---------------
Loss before income tax benefits and
equity in undistributed income (loss) of subsidiaries (869,035) (876,311)
Income tax benefits (366,639) (350,523)
----------------- -----------------
Loss before equity in undistributed income (loss)
of subsidiaries (502,396) (525,788)
Equity in undistributed income (loss) of subsidiaries 1,490,545 (682,878)
----------------- -----------------
Net income (loss) $ 988,149 $ (1,208,666)
================= =================
</TABLE>
F-37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 18. PARENT COMPANY FINANCIAL INFORMATION (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1997 1996
----------------- -----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 988,149 $ (1,208,666)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation 35,416 35,349
Undistributed (income) loss of subsidiaries (1,490,545) 682,878
Net loss on disposal of premises and equipment 64,715 -
Loss on sale of other assets 1,502 -
Change in other prepaids, receivables, deferrals and
accruals, net 386,529 (84,365)
----------------- -----------------
Net cash used in operating activities (14,234) (574,804)
----------------- -----------------
INVESTING ACTIVITIES
Net increase in due from to subsidiaries 59,297 331,881
Investment in (return of) capital of subsidiaries 1,000,000 (3,535,000)
Purchase of premises and equipment - (626,051)
Proceeds from sales of premises and equipment 463,980 -
Proceeds from sale of other assets 300,000 -
----------------- -----------------
Net cash provided by (used in) investing activities 1,823,277 (3,829,170)
----------------- -----------------
FINANCING ACTIVITIES
Net increase (decrease) in notes payable (1,266,478) 3,666,478
Vesting of restricted stock (13,324) 70,344
Proceeds from exercise of stock warrants - 53,077
----------------- -----------------
Net cash provided by (used in) financing activities (1,279,802) 3,789,899
----------------- -----------------
Net increase (decrease) in cash 529,241 (614,075)
Cash at beginning of year 45,658 659,733
----------------- -----------------
Cash at end of year $ 574,899 $ 45,658
================= =================
</TABLE>
F-38
<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.
-67-
<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.
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).
-1-
<PAGE>
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).
-2-
<PAGE>
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,
1997).
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.*
24.1 Power of Attorney.*
* Filed with this amendment. All other exhibits have been previously filed.
-3-
<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, 1998.
GOLDEN ISLES FINANCIAL HOLDINGS, INC.
(Registrant)
By: /s/ J. Thomas Whelchel
----------------------------------------------
J. Thomas Whelchel
Chairman of the Board of Directors
-1-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential Page No.
<S> <C> <C>
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
</TABLE>
-1-
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential Page No.
<S> <C> <C>
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).
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential Page No.
<S> <C> <C>
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).
</TABLE>
-3-
<PAGE>
23.4 Consent of Mauldin & Jenkins, LLC.*
24.1 Power of Attorney.*
*Filed with this amendment. All other exhibits have been previously filed.
-4-
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use of our report dated January 23, 1998, 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 29,1998
Albany, Georgia
-1-
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Michael D. Hodges and J. Thomas Whelchel, and each of
them, his attorney-in-fact, each with full power of substitution, for him in his
name, place and stead, in any and all capacities, to sign Post Effective
Amendment No. 6 to the Registration Statement on Form SB-2, initially filed with
the Commission on April 15, 1994, and to file the same, with exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission and hereby ratifies and confirms all that each of said attorneys-in-
fact, or his substitute or substitutes, may do or cause to be done by virtue
hereof.
Signature Date
--------- ----
/s/ C. Ray Acosta April 30, 1997
----------------------
C. Ray Acosta
/s/ James M. Fiveash April 30, 1997
----------------------
James M. Fiveash
/s/ L. McRee Harden April 30, 1997
----------------------
L. McRee Harden
/s/ Michael D. Hodges April 30, 1997
----------------------
Michael D. Hodges
/s/ Russell C. Jacobs, Jr. April 30, 1997
--------------------------
Russell C. Jacobs, Jr.
/s/ C. Kermit Keenum April 30, 1997
-----------------------
C. Kermit Keenum
/s/ Jimmy D. Veal April 30, 1997
-----------------------
Jimmy D. Veal
/s/ J. Thomas Whelchel April 30, 1997
-----------------------
J. Thomas Whelchel
