<PAGE>
DRAFT DATE November 10, 1997
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ___________ to __________
Commission file number 333-14355
Decatur First Bank Group, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-2254289
- ----------------------- -----------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
1120 Commerce Drive
Decatur, Georgia 30030
- ------------------------------- -----------------------------------
(Address of principal executive (Zip Code)
offices)
404-373-6548
------------------
(Telephone Number)
Former address was:
755 Commerce Drive
Suite 516
Decatur, Georgia
----------------------------
(Former name, former address
and former fiscal year,
if changed since last report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES XX NO
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
941,544 share of common stock, $5 par value per share, issued and
outstanding as of November 10, 1997.
Transitional Small Business Disclosure Format (check one): YES NO XX
---- ----
<PAGE>
DRAFT DATE November 10, 1997
DECATUR FIRST BANK GROUP, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The financial statements of Decatur First Bank Group, Inc. (the
"Company") are set forth in the following pages.
-2-
<PAGE>
DRAFT DATE November 11, 1997
DECATUR FIRST BANK GROUP, INC.
Balance Sheets
September 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
Assets
------
September 30, December 31,
1997 1996
---- ----
<S> <C> <C>
Cash and due from banks $ 820,979 23,935
Federal funds sold 3,870,000 -
Restricted cash - 260,750
Investment securities available for sale 1,854,517 -
Investment securities held to maturity 3,287,801 -
Loans, net 257,261 -
Premises and equipment 822,254 20,193
Other assets 153,638 134,528
--------- --------
$11,066,450 439,406
========== =======
Liabilities and Stockholders' Equity
------------------------------------
Deposits:
Non-interest bearing deposits $ 369,184 -
Interest bearing deposits 1,655,490 -
---------- --------
Total deposits 2,024,674 -
Subscribers' deposits - 260,750
Note payable - line of credit - 200,000
Other liabilities 40,073 85,134
---------- --------
Total liabilities 2,064,747 545,884
---------- --------
Stockholders' equity:
Preferred stock, no par value; 2,000,000 shares authorized;
no shares issued and outstanding - -
Common stock, par value $5 per share; 10,000,000 shares
authorized; 941,544 and 1 shares issued and outstanding 4,707,720 5
Additional paid-in capital 4,668,036 5
Deficit accumulated during the development stage (375,096) (106,488)
Unrealized gains/losses on securities available for sale 1,043 -
---------- --------
Total stockholders' equity 9,001,703 (106,478)
---------- --------
$11,066,450 439,406
========== ========
</TABLE>
-3-
<PAGE>
DRAFT DATE November 10, 1997
DECATUR FIRST BANK GROUP, INC.
Statements of Operations
For the Nine Months and Three Months Ended September 30, 1997
and the Period from August 2, 1996 (inception) to September 30, 1996
<TABLE>
<CAPTION>
Nine Months Period Three Months Period
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 2,485 - 2,485 -
Interest on investments 120,446 - 120,446 -
Interest on Federal funds sold 51,262 - 8,906 -
--------- -------- -------- --------
Total interest income 174,193 - 131,837 -
--------- -------- -------- --------
Interest expense:
Interest bearing deposits 3,188 - 3,188 -
Other borrowings 21,887 240 6,757 240
--------- -------- -------- --------
Total interest expense 25,075 240 9,945 240
--------- -------- -------- --------
Net interest income (expense) 149,118 (240) 121,892 (240)
Provision for loan losses 5,400 - 5,400 -
--------- -------- -------- --------
Net interest income after
provision for loan losses 143,718 (240) 116,492 (240)
--------- -------- -------- --------
Other income 1,497 - 1,497 -
--------- -------- -------- --------
Other expenses:
Salaries and employee benefits 197,227 32,364 104,203 32,364
Occupancy 51,602 - 19,483 -
Other operating 164,982 10,794 96,832 10,794
--------- -------- -------- --------
Total other expenses 413,811 43,158 220,518 43,158
--------- -------- -------- --------
Net loss $(268,596) 43,398 (102,529) 43,398
========= ======== ======== ========
Proforma net loss per common share (0.29) (0.05) (0.11) (0.05)
========= ======== ======== ========
Proforma shares outstanding 941,544 941,544 941,544 941,544
========= ======== ======== ========
</TABLE>
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<PAGE>
DRAFT DATE November 10, 1997
DECATUR FIRST BANK GROUP, INC.
Statements of Cash Flows
For the Nine Months Ended September 30, 1997
and the Period from August 2, 1996 (inception) to September 30, 1996
<TABLE>
<CAPTION>
September 30, September 30,
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (268,608) (43,398)
Adjustments to reconcile net loss to net cash used in
operating activities:
Provision for loan losses 5,400 -
Change in other assets 124 (5,511)
Change in other liabilities (45,061) 15,458
------------ --------
Net cash used in operating activities (308,145) (33,451)
------------ --------
Cash flows from operating activities:
Purchases of investment securities available for sale (1,853,474) -
Purchases of investment securities held to maturity (3,287,801) -
Change in loans (262,661) -
Purchases of premises and equipment (802,061) -
Organization costs (6,134) (57,808)
Payments for stock offering expenses (13,100) (3,000)
------------ --------
Net cash used in investing activities (6,225,231) (60,808)
------------ --------
Cash flows from financing activities:
Change in deposits 2,024,674 -
Change in note payable - line of credit (200,000) 105,000
Sale of common stock 9,375,756 -
Proceeds from the sale of (redemption of) organizational share (10) 10
------------ --------
Net cash provided by financing activities 11,200,420 105,010
------------ --------
Net change in cash and cash equivalents 4,667,044 10,751
Cash at beginning of period 23,935 -
------------ --------
Cash at end of period $ 4,690,979 10,751
============ ========
Supplemental schedule of non-cash investing and financing activities:
Change in unrealized gains/losses on securities available for sale $ 1,043 -
</TABLE>
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<PAGE>
DRAFT DATE November 10, 1997
DECATUR FIRST BANK GROUP, INC.
Notes to Financial Statements
(1) Organization
------------
Decatur First Bank Group, Inc. (the Company), a bank holding company,
owns 100% of the outstanding common stock of Decatur First Bank (the
Bank), which operates in the Decatur, Georgia area.
Operations through June 30, 1997 relate primarily to expenditures by the
organizers for incorporating and organizing the Company. On September 2,
1997, the Bank opened for business to serve the Decatur/DeKalb County
area as a commercial bank. The Bank is chartered and regulated by the
State of Georgia Department of Banking and Finance and is insured by and
subject to regulation by the Federal Deposit Insurance Corporation.
The Company raised $9,415,000 through an offering of its $5 par value
common stock at $10 per share, of which $8,000,000 was used to capitalize
the Bank.
The interim financial statements included herein are unaudited but
reflect all adjustments which, in the opinion of management, are
necessary for a fair presentation of the financial position and results
of operations for the interim period presented. All such adjustments are
of a normal recurring nature. The results of operations for the period
ended September 30, 1997 are not necessarily indicative of the results of
a full year's operations.
(2) Basis of Presentation
---------------------
The consolidated financial statements include the accounts of the Company
and the Bank. All intercompany accounts and transactions have been
eliminated in consolidation. The financial statements of the Company
through June 30, 1997 were presented as a Development Stage Corporation.
The accounting principles followed by the Company and its subsidiary, and
the method of applying these principles, conform with generally accepted
accounting principles (GAAP) and with general practices within the
banking industry. In preparing financial statements in conformity with
GAAP, management is required to make estimates and assumptions that
affect the reported amounts in the financial statements. Actual results
could differ significantly from those estimates. Material estimates
common to the banking industry that are particularly susceptible to
significant change in the near term include, but are not limited to, the
determination of the allowance for loan losses, the valuation of real
estate acquired in connection with foreclosures or in satisfaction of
loans, and valuation allowances associated with the realization of
deferred tax assets which are based on future taxable income.
(3) Proforma Net Loss Per Common Share
----------------------------------
Proforma net loss per common share is calculated by dividing net loss by
the total number of common shares which were sold in the initial public
offering, and would be considered outstanding for all periods presented,
as prescribed in Staff Accounting Bulletin Topic 1:B.
-6-
<PAGE>
DRAFT DATE November 10, 1997
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
On June 30, 1997, the Company concluded its offering by selling 941,544 shares
of common stock at $10.00 per share. This provided the Company with $9,375,756
in capital after deducting deferred offering expenses of $39,684. Operations
through June 30, 1997 related primarily to organizing the Company and
pre-opening expenditures to prepare for opening the Bank. On September 2, 1997,
the Bank opened for business to serve the Decatur area as a commercial bank.
As of September 30, 1997, the Bank had concluded one full month of operations,
and the Company has total assets of 11,066,450. During this period, total
deposits had grown to $2,024,674 and total loans had grown to $262,661. The Bank
has $5,142,318 in its investment portfolio, with an additional $3,870,000 in
overnight investments at September 30, 1997.
At quarter end the Bank's loan to deposit ratio was 13%. Management's long term
target for the loan to deposit ratio is 75%. The interest rates being paid on
interest bearing deposits and the service charge rates for deposit services are
comparable to local market rates. Management is making a concerted effort to
develop quality loan business in the local market and to manage the deposit
growth consistent with expected loan demand.
The deposit mix at September 30, 1997 was as follows: $369,184 (18% of total
deposits) in non-interest bearing demand deposits; $1,176,398 (58% of total
deposits) in interest checking accounts; $52,788 (3% of total deposits) in
savings accounts; and $426,303 (21% of total deposits) in time deposits. As the
Bank continues to grow, management expects the deposit mix to become more
heavily weighted towards the higher costing time deposits, thus increasing the
average cost of funds and reducing the Bank's net interest margin.
While the Bank continues to build its loan portfolio, excess funds are invested
in short to intermediate term government and agency securities. At September 30,
1997, investment securities held to maturity were $3,287,801 and securities
available for sale were $1,854,517. Overnight interest bearing deposits (federal
funds sold) with other banks were $3,870,000. The current investment portfolio
strategy is primarily to provide liquidity for funding loans and initial
operating expenditures and secondarily for earnings enhancement. Accordingly, no
investment securities have final maturities greater than five years and all are
pledgeable to raise funding through secured borrowing or repurchase agreements.
Premises and equipment (net of depreciation) were $822,254 and consisted
primarily of improvements to the current leased facility as well as furniture
and fixtures acquired.
The Company had an accumulated deficit of $375,096 as of September 30, 1997.
During the first nine months of 1997, the Company incurred a net loss of
$268,596 compared to a net loss of $43,398 through September 30, 1996. The first
three quarters of 1997 reflected one full month of banking operations with
full-time employees in the leased bank site, whereas through September 30, 1996
reflected the costs associated with early stage development of the Company when
it had substantially no earning assets until the fourth quarter and only two
employees until mid 1997.
Net interest income for the nine months ended September 30, 1997 was $149,118
($121,892 in the third quarter). In the comparable period for 1996, the
Company's working capital came from lines of credit guaranteed by the Company's
organizers. The 1996 interest expense was in connection with those lines. All
working capital lines of credit were paid off in July 1997. The Company had
interest expense on interest bearing deposits and the lines of credit of $25,075
for the first nine months of 1997 ($9,945 in the third quarter).
Total interest income in the first three quarters of 1997 was $174,193 ($131,837
in the third quarter). Interest income on loans including fees was $2,485 in the
first three quarters of 1997 (all in the third quarter). Loan interest income
and deposit interest expense in 1997 were not incurred until the Bank opened on
September 2, 1997.
-7-
<PAGE>
DRAFT DATE November 10, 1997
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations, continued
The provision for loan losses for the nine months ended September 30, 1997 was
$5,400 (all in the third quarter). Since the Bank's loan portfolio is only one
month old, the Bank has no historical data about loan losses on its portfolio on
which to base projections for future losses. Current loan quality analysis does
not indicate potential loan losses. Until more substantial evidence about
potential loan losses is developed, management believes the Bank should
establish an allowance for loan losses that will approximate 1.5% of total
loans. At September 30, 1997, the allowance for loan losses was $5,400, which
represented 2.06% of total loans. Management expects the allowance for loan
losses to settle at the 1.5% level in the next 9 to 15 months.
Non-interest income for the nine months ended September 30, 1997 was $1,497 (all
in the third quarter). This consists of service charges on deposit accounts and
miscellaneous service fees.
Non-interest expense for the first three quarters of 1997 was $413,811 ($220,518
in the third quarter) compared to $43,158 for the same period in 1996. Salaries
and benefits increased substantially when the Bank commenced operations in
September 1997 with 12 employees compared to only two employees in 1996.
Occupancy costs are up in 1997 with operations occurring in the rented office
space until the permanent bank building was remodeled. Other operating expenses
for the first nine months increased from $10,794 in 1996 to $164,982 in 1997 and
include many expenses that were not necessary in 1996, such as data processing
services, business development, professional fees, postage, supplies and
communications costs.
Management does not expect the Company to make a quarterly profit until at
least the second half of 1998, while it establishes its position in the local
market and builds its banking services infrastructure. Management continues to
believe that the local market presents good opportunities for business
development to support a growing and profitable community bank. Despite the
anticipated losses in the first years of operations, the Company expects
earnings from loans and investments and other banking services as well as steady
deposit growth to provide sufficient liquidity for both the short and long term.
The Bank intends to manage its loan growth such that deposit flows will provide
funding for all loans as well as cash reserves for working capital and short to
intermediate term, liquid investments.
The Bank has established short-term Federal Funds Purchase lines of credit with
its correspondent bank which totals $2,000,000. This line is unsecured and is
designed to provide the Bank with short-term liquidity. This line may be revoked
at any time by the correspondent bank and is available to the Bank simply as an
accommodation for short-term (two weeks or less) liquidity needs.
In the early years, the investment practices of the Company will limit
investments to highly liquid overnight investments in correspondent banks and
short to intermediate term U.S. Treasury and government agency securities. For
the foreseeable future, the Bank will consider its investment portfolio
primarily as a source for liquidity and secondarily as a source for earnings.
-8-
<PAGE>
DRAFT DATE November 10, 1997
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings to which the Company is a
party or of which any of their property is the subject.
Item 2. Changes in Securities
(a) Not applicable
(b) Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to security holders for a vote during the
three months ended September 30, 1997.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
None
-9-
<PAGE>
DRAFT DATE November 10, 1997
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DECATUR FIRST BANK GROUP, INC.
By:
------------------------------------------------
Judy B. Turner
President, Chief Executive Officer and Principal
Financial Officer
-10-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 820,979
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,870,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,854,517
<INVESTMENTS-CARRYING> 3,287,801
<INVESTMENTS-MARKET> 0
<LOANS> 262,661
<ALLOWANCE> 5,400
<TOTAL-ASSETS> 11,066,450
<DEPOSITS> 2,024,674
<SHORT-TERM> 0
<LIABILITIES-OTHER> 40,073
<LONG-TERM> 0
0
0
<COMMON> 4,707,720
<OTHER-SE> 4,293,983
<TOTAL-LIABILITIES-AND-EQUITY> 11,066,450
<INTEREST-LOAN> 2,485
<INTEREST-INVEST> 120,446
<INTEREST-OTHER> 51,262
<INTEREST-TOTAL> 174,193
<INTEREST-DEPOSIT> 3,188
<INTEREST-EXPENSE> 25,075
<INTEREST-INCOME-NET> 149,118
<LOAN-LOSSES> 5,400
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 413,811
<INCOME-PRETAX> (268,596)
<INCOME-PRE-EXTRAORDINARY> (268,596)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (268,596)
<EPS-PRIMARY> (.29)
<EPS-DILUTED> (.29)
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 5,400
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 5,400
</TABLE>
