UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
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 0-22387
DCB FINANCIAL CORP
-------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 31-1469837
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
110 Riverbend Ave., Lewis Center, Ohio 43035
- ---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (740) 657-7000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Shares,
No par value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [X] No [ ]
At February 22, 2004, the aggregate market value of the voting stock held by
nonaffiliates of the registrant, based on a share price of $21 per share (such
price being the average of the bid and asked prices on such date) was
$76,496,931.
At February 22, 2004, the registrant had 3,934,760 common shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II of Form 10-K - Portions of the Annual Report to Shareholders for
the year ended December 31, 2003.
Part III of Form 10-K - Portions of the definitive Proxy Statement for the 2004
Annual Meeting of Shareholders of DCB Financial Corp.
1
PART I
ITEM 1 DESCRIPTION OF BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
DCB Financial Corp ("DCB" or the "Corporation") is a financial services
holding company headquartered in Lewis Center, Ohio. The Corporation
has one wholly-owned subsidiary bank, the Delaware County Bank and
Trust Company (the "Bank").
The Corporation was incorporated under the laws of the State of Ohio in
1997, at the direction of management of the Bank for the purpose of
becoming a bank holding company by acquiring all outstanding shares of
the Bank. The Corporation acquired all such shares of the Bank after an
interim bank merger, which transaction was consummated on March 14,
1997. The Bank is a commercial bank, chartered under the laws of the
State of Ohio, and was organized in 1950.
(b) NARRATIVE DESCRIPTION OF BUSINESS
The Bank provides customary retail and commercial banking services to
its customers, including checking and savings accounts, time deposits,
IRAs, safe deposit facilities, personal loans, commercial loans, real
estate mortgage loans, installment loans, and trust services. The Bank
also provides cash management, bond registrar and paying agent
services. Through its own computer department, the Bank provides data
processing services to other financial institutions; however, such
services are not a significant part of operations or revenue.
The Corporation, through the Bank, grants residential real estate,
commercial real estate, consumer and commercial loans to customers
located primarily in Delaware, Franklin, Licking, Morrow, Marion and
Union Counties, Ohio. General economic conditions in the Corporation's
market area have been sound, including unemployment statistics, which
have generally remained stable. Real estate values, especially in the
Bank's core geographic area, have been stable to rising for the last
five years.
The Bank is not significantly affected by seasonal activity or large
deposits of any individual depositor. At year-end 2003, deposits of
public funds (funds of governmental agencies and municipalities) were
12.6% of total deposits. This amount can fluctuate, but generally not
by a material amount. No material industry or group concentrations
exist in the loan portfolio.
Certain risks are involved in granting loans, primarily related to the
borrowers' ability and willingness to repay the debt. Before the Bank
extends a new loan to a customer, these risks are assessed through a
review of the borrower's repayment capacity, past and current credit
history, the collateral being used to secure the transaction in case
the customer does not repay the debt, the borrower's character and
other factors. Once the decision has been made to extend credit, the
Bank's independent loan review function and credit officer monitors
these factors throughout the life of the loan. All credit relationships
of $575,000 or more are reviewed annually, as are 30% of credit
relationships from $250,000 to $575,000, 20% of credit relationships
from $100,000 to $250,000 (excluding residential mortgages), and 10% of
residential mortgages from $100,000 to $250,000. In addition, any loan
identified as a problem credit by management or during the loan review
is assigned to the Bank's loan "watch list," and is subject to ongoing
monitoring by the loan review and the Bank's credit quality committee
to ensure appropriate action is taken if deterioration occurs.
Commercial, industrial and agricultural loans are primarily variable
rate and include operating lines of credit and term loans made to small
businesses primarily based on their ability to repay the loan from the
business's cash flow. Such loans are typically secured by business
assets such as equipment and inventory and, occasionally, by the
business owner's principal residence. When the borrower is not an
individual, the Bank generally obtains the personal guarantee of the
2
business owner. As compared to consumer lending, which includes
single-family residence, personal installment loans and automobile
loans, commercial lending entails significant additional risks. These
loans typically involve larger loan balances and are generally
dependent on the business's cash flow and, thus, may be subject to
adverse conditions in the general economy or in a specific industry.
Management reviews the borrower's cash flows when deciding whether to
grant the credit to evaluate whether estimated future cash flows will
be adequate to service principal and interest of the new obligation in
addition to existing obligations.
Commercial real estate and farmland loans are primarily secured by
borrower-occupied business real estate and are dependent on the ability
of the related business to generate adequate cash flow to service the
debt. Such loans primarily carry adjustable interest rates. Commercial
real estate loans are generally originated with a loan-to-value ratio
of 80% or less. Management performs much the same analysis when
deciding whether to grant a commercial real estate loan as a commercial
loan.
Residential real estate loans and home equity lines of credit carry
primarily adjustable rates, although fixed-rate loans are originated
and are secured by the borrower's residence. Such loans are made based
on the borrower's ability to repay the debt from employment and other
income. Management assesses the borrower's ability to repay the debt
through a review of credit history and ratings, verification of
employment and other income, review of debt-to-income ratios and other
measures of repayment ability. The Bank generally makes these loans in
amounts of 80% or less of the value of collateral. An appraisal is
obtained from a qualified real estate appraiser for substantially all
loans secured by real estate.
Due to the high level of growth in the Corporation's market area,
construction lending has become a significant part of the Corporation's
overall lending strategy. Construction loans are secured by residential
and business real estate, generally occupied by the borrower on
completion. The Bank's construction lending program is established in a
manner to minimize risk of this type of lending by not making a
significant amount of loans on speculative projects. While not
contractually required to do so, the Bank usually makes the permanent
loan at the end of the construction phase. Construction loans also are
generally made in amounts of 80% or less of the value of collateral.
Consumer installment loans to individuals include loans secured by
automobiles and other consumer assets, including second mortgages on
personal residences. Consumer loans for the purchase of new automobiles
generally do not exceed 85% of the purchase price of the car. Loans for
used cars generally do not exceed average wholesale or trade-in value
as stipulated in a recent auto industry used car price guide. Credit
card and overdraft protection loans are unsecured personal lines of
credit to individuals of demonstrated good credit character with
reasonably assured sources of income and satisfactory credit histories.
Consumer loans generally involve more risk than residential mortgage
loans because of the type and nature of collateral and, in certain
types of consumer loans, the absence of collateral. Since these loans
are generally repaid from ordinary income of an individual or family
unit, repayment may be adversely affected by job loss, divorce, ill
health or by general decline in economic conditions. The Bank assesses
the borrower's ability to make repayment through a review of credit
history, credit ratings, debt-to-income ratios and other measures of
repayment ability.
3
(b) NARRATIVE DESCRIPTION OF BUSINESS (CONTINUED)
Though a very small portion of its lending business, the Bank also
meets the needs of its customers is through its lease-financing
program. The Bank's leasing program involves leasing vehicles to
individuals and businesses. The vehicle lease program includes new and
late model automobiles and light trucks with terms from 12 to 60
months. The Bank also provides lease financing to businesses for
commercial equipment. This line of business represents a very small
portion of the overall leasing program. The Bank's comprehensive
program includes leasing new and used equipment with flexible terms,
though generally the term of a given lease is limited to some extent by
the type of equipment and its useful life. Average lease terms for
commercial equipment leases generally range from 3 to 8 years.
EMPLOYEES
At December 31, 2003, the Bank employed 182 employees, 168 of whom were
full-time. The Bank provides a number of benefits such as health,
dental and life insurance for all, as well as education assistance for
qualified employees. A 401(k) retirement plan is in place for eligible
employees. No employee is represented by a union or collective
bargaining group. Management considers its employee relations to be
good. The Corporation has no employees not also employed by the Bank.
COMPETITION
The Bank operates in a highly competitive industry due to statewide and
interstate branching by banks, savings and loan associations and credit
unions. In its primary market area of Delaware County, Ohio and
surrounding counties, the Bank competes for new deposit dollars and
loans with several other commercial banks, both large regional banks
and smaller community banks, as well as savings and loan associations,
credit unions, finance companies, insurance companies, brokerage firms
and investment companies. According to the most recent market data,
there are approximately nine other deposit taking/lending institutions
competing in the Bank's market. In addition, according to the market
data, the Bank currently ranks first in market share with approximately
40.1% of the market. The ability to generate earnings is impacted in
part by competitive pricing on loans and deposits, and by changes in
the rates on various U.S. Treasury, U. S. Government Agency and State
and political subdivision issues which comprise a significant portion
of the Bank's investment portfolio, and which rates are used as indices
on various loan products. The Bank is competitive with interest rates
and loan fees that it charges, in pricing and variety of accounts it
offers to the depositor. The dominant pricing mechanism on loans is the
Prime interest rate as published in the Wall Street Journal. The
interest spread over Prime depends on the overall account relationship
and the creditworthiness of the borrower. Deposit rates are reviewed
weekly by management and are normally discussed by the Asset/Liability
Committee on a monthly basis. The Bank's primary objective in setting
deposit rates is to remain competitive in the market area while
creating an adequate interest rate margin.
SUPERVISION AND REGULATION
The business in which the Bank and its subsidiaries are engaged is
subject to extensive supervision, regulation and examination by various
bank regulatory authorities and other governmental agencies in the
state and country where the Corporation and its subsidiaries operate.
The Bank is subject to supervision, regulation and periodic examination
by the State of Ohio Superintendent of Financial Institutions and the
Federal Deposit Insurance Corporation ("FDIC"). The supervision,
regulation and examination to which The Bank and its subsidiaries are
subject are intended primarily for the protection of depositors and the
deposit insurance funds that insure the deposits of banks, rather than
for the protection of security holders.
4
Earnings of the Bank are affected by state and federal laws and
regulations, and by policies of various regulatory authorities. These
policies include, for example, statutory maximum lending rates,
requirements on maintenance of reserves against deposits, domestic
monetary policies of the Board of Governors of the Federal Reserve
System, United States fiscal policy, international currency regulations
and monetary policies, certain restrictions on banks' relationships
with many phases of the securities business and capital adequacy and
liquidity restraints. As a financial holding company, the Corporation
is subject to supervision, regulation and periodic examination by the
Federal Reserve Board.
LIABILITY FOR BANKING SUBSIDIARIES
Under Federal Reserve Board policy, a bank holding company is expected
to act as a source of financial and managerial strength for each of its
subsidiary banks and to commit resources to their support. This support
may be required at times when the bank holding company may not have the
resources to provide it. Similarly, under the cross-guarantee
provisions of the Federal Deposit Insurance Act, the FDIC can hold any
FDIC-insured depository institution liable for any loss suffered or
anticipated by the FDIC in connection with (1) the "default" of a
commonly controlled FDIC-insured depository institution; or (2) any
assistance provided by the FDIC to a commonly controlled FDIC-insured
depository institution "in danger of default."
FDICIA
The Federal Deposit Insurance Corporation Act of 1991 (FDICIA), and the
regulations promulgated under FDICIA, among other things, established
five capital categories for insured depository institutions-well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized-and requires federal
bank regulatory agencies to implement systems for "prompt corrective
action" for insured depository institutions that do not meet minimum
capital requirements based on these categories. Unless a bank is well
capitalized, it is subject to restrictions on its ability to offer
brokered deposits and on certain other aspects of its operations. As of
December 31, 2003 the Corporation and the Bank were both considered
well capitalized based on the guidelines implemented by the Federal
Reserve and FDIC.
FINANCIAL MODERNIZATION
The Gramm-Leach-Bliley Act was signed into law on November 12, 1999 and
became effective March 11, 2000. It permits bank holding companies to
become financial holding companies and thereby affiliate with
securities firms and insurance companies and engage in other activities
that are financial in nature. A bank holding company may become a
financial holding company if each of its subsidiary banks is well
capitalized under regulatory prompt corrective action provisions, is
well managed, and has at least a satisfactory rating under the
Community Reinvestment Act (CRA) by filing a declaration that the bank
holding company wishes to become a financial holding company. No
regulatory approval will be required for a financial holding company to
acquire a company, other than a bank or savings association, engaged in
activities that are financial in nature or incidental to activities
that are financial in nature, as determined by the Federal Reserve
Board.
The Gramm-Leach-Bliley Act defines "financial in nature" to include
securities underwriting, dealing and market making; sponsoring mutual
funds and investment companies; insurance underwriting and agency;
merchant banking activities; and activities that the Board has
determined to be closely related to banking. Subsidiary banks of a
financial holding company must continue to be well capitalized and well
managed in order to continue to engage in activities that are financial
in nature without regulatory actions or restrictions, which could
include divestiture of the financial in nature subsidiary or
subsidiaries. In addition, a financial holding
5
company or a bank may not acquire a company that is engaged in
activities that are financial in nature unless each of the subsidiary
banks of the financial holding company or the bank has CRA rating of
satisfactory or better.
(c) AVAILABLE INFORMATION
The Company maintains an Internet web-site at the following internet
address: http://www.dcbfinancialcorp.com. The Company makes available,
free of charge through its internet address, copies of its annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and any amendments to these reports as soon as reasonably
practicable after such materials have been filed with or furnished to
the SEC. Copies of these documents may also be obtained, either in
electronic or paper form, by contacting Donald R. Blackburn, Vice
President of Customer Relations at 740-657-7000.
I DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY; INTEREST
RATES AND INTEREST DIFFERENTIAL
The information required by this item can be found on Pages 10-13 of
the Company's Annual Report to Shareholders. Such information is
incorporated herein by reference.
6
II INVESTMENT PORTFOLIO
The following table sets forth the carrying amount of securities at
December 31, 2003, 2002 and 2001.
(In thousands) 2003 2002 2001
---------- ---------- ----------
AVAILABLE FOR SALE
U.S. government agencies $ 38,597 $ 29,995 $ 43,756
States and political subdivisions 21,076 14,425 7,276
Corporate bonds 8,215 247 208
Mortgage-backed 38,201 49,448 30,587
---------- ---------- ----------
Total debt securities 106,089 94,115 81,827
Other securities 2,458 2,362 2,194
---------- ---------- ----------
$ 108,547 $ 96,477 $ 84,021
========== ========== ==========
HELD TO MATURITY
States and political subdivisions $ -- $ -- $ 6,004
Corporate bonds -- -- 130
Mortgage-backed -- -- 28,584
---------- ---------- ----------
$ -- $ -- $ 34,718
========== ========== ==========
The following table sets forth information regarding scheduled
maturities, fair value and weighted average yields of the Corporation's
debt securities at December 31, 2003. The weighted average yield has
been computed using the historical amortized cost for securities
available for sale. The weighted average yield on tax-exempt
obligations is computed on a taxable equivalent basis based on the
Corporation's marginal federal income tax rate of 34%.
ONE FIVE
ONE THROUGH THROUGH AFTER
YEAR FIVE TEN TEN FAIR VALUE
(In thousands) OR LESS YEARS YEARS YEARS TOTAL
---------- ---------- ---------- ---------- ----------
AVAILABLE FOR SALE
U.S. government agencies $ 1,016 $ 13,084 $ 18,931 $ 5,566 $ 38,597
States and political
subdivisions 1,349 2,288 4,014 13,425 21,076
Corporate bonds -- 140 -- 8,075 8,215
Mortgage-backed 65 5,223 9,103 23,810 38,201
---------- ---------- ---------- ---------- ----------
$ 2,430 $ 20,735 $ 32,048 $ 50,876 $ 106,089
========== ========== ========== ========== ==========
Weighted average yield 3.59% 3.45% 4.40% 6.18% 3.52%
========== ========== ========== ========== ==========
7
III LOAN PORTFOLIO
TYPES OF LOANS
The amounts of gross loans outstanding at December 31, 2003, 2002,
2001, 2000, and 1999 are shown in the following table.
(In thousands) 2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
Commercial and industrial $ 51,709 $ 45,543 $ 52,534 $ 48,262 $ 39,017
Commercial real estate 156,836 144,646 124,537 101,891 82,954
Residential real estate and
home equity 117,098 87,548 88,797 84,987 69,847
Real estate construction 30,120 37,603 34,212 32,493 29,723
Consumer and credit card 44,467 48,409 52,993 51,107 45,059
Lease financing 3,932 6,412 9,520 12,278 11,669
---------- ---------- ---------- ---------- ----------
$ 404,162 $ 370,161 $ 362,593 $ 331,018 $ 278,269
========== ========== ========== ========== ==========
8
III LOAN PORTFOLIO (CONTINUED)
RISK ELEMENTS
NONACCRUAL AND PAST DUE LOANS
The following table summarizes nonaccrual loans and accruing
loans past due greater than 90 days or more at December 31,
2003, 2002, 2001, 2000, and 1999.
(In thousands) 2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
Nonaccrual loans $ 1,614 $ 3,387 $ 3,390 $ 1,278 $ 472
Accruing loans past due
90 days or more 1,252 187 200 205 156
The policy for placing loans on nonaccrual status is to cease
accruing interest on loans when management believes that
collection of interest is doubtful, when loans are past due as
to principal and interest 90 days or more, except that in
certain circumstances interest accruals are continued on loans
deemed by management to be fully collectible. In such cases,
loans are individually evaluated in order to determine whether
to continue income recognition after 90 days beyond the due
dates. When loans are placed on nonaccrual, any accrued
interest is charged against interest income.
The additional amount of interest income that would have been
recorded on nonaccrual loans, had they been current, totaled
$163, $259, and $97 for the years ended December 31, 2003,
2002, and 2001, respectively.
POTENTIAL PROBLEM LOANS
In addition to the loans noted above, management performs a
quarterly analysis of impaired loans. A business loan is
classified as impaired when full payment under the loan terms
is not expected. Impairment is evaluated in total for smaller
balance loans or loans of a similar nature such as residential
mortgage, consumer and credit card loans, and on an individual
basis for other loans. The total value of impaired loans not
included in nonaccrual, past due, or restructured loans at
December 31, 2003 was $63.
LOAN CONCENTRATIONS
At year-end 2003, there were no concentrations of loans
greater than 10% of total loans that are not otherwise
disclosed as a category of loans in Item III.A. above.
OTHER INTEREST-BEARING ASSETS
At year-end 2003, there were no other interest-bearing assets
required to be disclosed under Item III.C.1. or 2. if such assets
were loans.
9
IV SUMMARY OF LOAN LOSS EXPERIENCE
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
The following table sets forth the activity in the
Corporation's allowance for loans losses for the years ended
December 31, 2003, 2002, 2001, 2000, and 1999.
(In thousands) 2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
Balance at beginning of year $ 4,094 $ 3,596 $ 3,334 $ 2,793 $ 1,948
Loans charged off:
Commercial (654) (1,989) (278) (115) (358)
Commercial real estate (60) (73) -- -- --
Residential real estate
and home equity -- (1) -- -- (27)
Real estate construction -- -- -- -- --
Consumer and credit card (631) (513) (487) (391) (441)
Lease financing -- (74) -- -- --
---------- ---------- ---------- ---------- ----------
Total loans charged off (1,345) (2,650) (765) (506) (826)
---------- ---------- ---------- ---------- ----------
Loan recoveries:
Commercial 50 91 28 18 43
Commercial real estate -- -- -- -- --
Residential real estate
and home equity -- -- -- -- 1
Consumer and credit card 114 102 126 118 124
Lease financing -- 5 1 3 8
---------- ---------- ---------- ---------- ----------
Total loan recoveries 164 198 155 139 176
---------- ---------- ---------- ---------- ----------
Net loans charged off (1,181) (2,452) (610) (367) (650)
Provision for loan losses 1,418 2,950 872 908 1,495
---------- ---------- ---------- ---------- ----------
Balance at end of year $ 4,331 $ 4,094 $ 3,596 $ 3,334 $ 2,793
========== ========== ========== ========== ==========
Ratio of net charge-offs to average
average loans outstanding 0.31% 0.66% 0.18% 0.12% 0.25%
========== ========== ========== ========== ==========
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The following schedule is a breakdown of the allowance for
loan losses allocated by type of loan and related ratios.
While management's periodic analysis of the adequacy of
allowance for loan losses may allocate portions of the
allowance for specific problem-loan situations, the entire
allowance is available for any loan charge-offs that occur.
10
Percentage of Percentage of Percentage of
Loans in Each Loans in Each Loans in Each
Allowance Category to Allowance Category to Allowance Category to
(In thousands) Amount Total Loans Amount Total Loans Amount Total Loans
---------- ------------- ---------- ------------- ---------- -------------
December 31, 2003 December 31, 2002 December 31, 2001
----------------- ----------------- -----------------
Commercial and industrial $ 2,345 12.77% $ 2,120 12.30% $ 1,765 14.49%
Commercial real estate 698 38.73 891 39.08 94 34.35
Residential real estate
and home equity 318 28.92 66 23.65 116 24.49
Real estate construction -- 7.44 20 10.16 57 9.44
Consumer and credit card 970 10.98 706 13.08 799 14.62
Lease financing -- .97 55 1.73 68 2.63
Unallocated -- -- 236 -- 697 --
---------- ---------- ---------- ---------- ---------- ----------
Total $ 4,331 100.00% $ 4,094 100.00% $ 3,596 100.00%
========== ========== ========== ========== ========== ==========
December 31, 2000 December 31, 1999
----------------- -----------------
Commercial and industrial $ 1,247 14.61% $ 652 14.08%
Commercial real estate 174 30.73 332 29.90
Residential real estate and
home equity 73 25.89 111 25.09
Real estate construction 24 9.80 45 10.71
Installment and credit card 691 15.73 575 16.57
Lease financing 76 3.23 57 3.65
Unallocated 1,049 -- 1,021 --
---------- ---------- ---------- ----------
Total $ 3,334 100.00% $ 2,793 100.00%
========== ========== ========== ==========
11
V DEPOSITS
SCHEDULE OF AVERAGE DEPOSIT AMOUNTS AND RATES
Average balance of noninterest-bearing demand deposits totaled
$76,430, $73,213, and $61,973, for the years ended December
31, 2003, 2002 and 2001. Please also refer to Page 10 of the
Annual Report to Shareholders.
MATURITY ANALYSIS OF TIME DEPOSITS GREATER THAN $100,000
The following is a schedule of maturities of time certificates
of deposit in amounts of $100,000 or more as of December 31,
2003.
(In thousands)
Three months or less $ 11,685
Over three through six months 32,353
Over six through twelve months 10,893
Over twelve months 9,337
----------
Total $ 64,268
==========
VI RETURN ON EQUITY AND ASSETS
Refer to Page 31 of the Annual Report to Shareholders.
VII SHORT-TERM BORROWINGS
Average outstanding balances of short-term borrowings for the
years ending December 31, 2003, 2002 and 2001 were less than
30% of shareholders' equity at such dates.
12
ITEM 2 PROPERTIES
The Bank owns and operates its main office at 110 Riverbend Avenue, Lewis
Center, Ohio 43035. The Bank also operates 15 branches and 4 other properties
that are owned or leased as noted below:
1. Downtown Delaware Branch Office, 41 N. Sandusky St., Delaware, Ohio 43015
(leased)
2. William Street Drive-Thru Office, 33 W. William St., Delaware, Ohio 43015
(owned)
3. Delaware Center Branch Office, 199 S. Sandusky Street, Delaware, Ohio 43015
(owned)
4. Galena Branch Office, 10 Park Street, Galena, Ohio 43021 (owned)
5. Ostrander Branch Office, 10 West North Street, Ostrander, Ohio 43061 (owned)
6. Green Meadows Branch Office, 9201 Columbus Pike, Lewis Center, Ohio 43035
(own bldg., lease land)
7. Ashley Branch Office, 2 West High Street, Ashley, Ohio 43003 (owned)
8. Buehler's Central Office, 800 West Central Avenue, Delaware, Ohio 43015
(leased)
9. Marysville Downtown Office, 108 South Main Street, Marysville, Ohio 43040
(owned)
10. Marysville Plaza Office, 1169 West Fifth Street, Marysville, Ohio 43040
(leased)
11. Sunbury Office, 75 S. Miller Dr., Sunbury, Ohio 43074 (owned)
12. Highland Lakes Office, 6156 Highland Lakes Avenue, Westerville, Ohio 43085
(leased)
13. Sawmill Parkway Office, 10149 Brewster Lane, Powell, Ohio 43065 (leased)
14. Avery Road Office, 6820 Perimeter Loop Road, Dublin, Ohio 43017 (leased)
15. Willowbrook Branch Office, 100 Willowbrook Way South, Delaware, Ohio 43015
(leased)
16. ATM Express Bank, 554 W. Central Ave., Delaware, Ohio 43015 (leased)
17. ATM Express Bank, Ohio Wesleyan University, Delaware, Ohio 43015 (leased)
18. ATM Express Bank, 8208 Marysville Road West, Ostrander, Ohio 43061 (leased)
19. ATM Express Bank, 1123 Columbus Pike, Delaware, Ohio 43015 (leased)
20. ATM Express Bank, Sunbury IGA, 490 W. Cherry Street, Sunbury, Ohio 43074
(leased)
Management considers its physical properties to be in good operating condition
and suitable for the purposes for which they are being used. All the properties
owned by the Bank are unencumbered by any mortgage or security interest and are,
in management's opinion, adequately insured.
ITEM 3 LEGAL PROCEEDINGS
There is no pending litigation, other than routine litigation incidental to the
business of the Corporation and Bank, or of a material nature involving or
naming the Corporation or Bank as a defendant. Further, there are no material
legal proceedings in which any director, executive officer, principal
shareholder or affiliate of the Corporation is a party or has a material
interest, which is adverse to the Corporation or Bank. There is no routine
litigation in which the Corporation or Bank is involved, which is expected to
have a material adverse impact on the financial position or results of
operations of the Corporation or Bank.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders in the fourth
quarter of 2003.
13
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The information required by this item is set forth in the Company's Annual
Report to Shareholders under the section captioned "Common Stock and Stockholder
Matters." Such information is incorporated herein by reference.
DCB Financial Corp acts as transfer agent for the Corporation's common stock.
ITEM 6 SELECTED FINANCIAL DATA
The information required by this item is set forth in the Company's Annual
Report to Shareholders under the section captioned "Selected Financial
Information and Other Data." Such information is incorporated herein by
reference.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is set forth in the Company's Annual
Report to Shareholders under the section captioned "Management's Discussion and
Analysis of Financial Condition and Results of Operations." Such information is
incorporated herein by reference.
ITEM 7a QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is set forth in the Company's Annual
Report to Shareholders under the section captioned "Asset and Liability
Management and Market Risk" Such information is incorporated herein by
reference.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth on Page 15 of the Company's
Annual Report to Shareholders. Such information is incorporated herein by
reference.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Disclosures required under this Item were previously made pursuant to a report
on Form 8-K filed with the Commission on March 21, 2003.
ITEM 9a CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rules 13a-14(c) and
15d-14(c). Based upon that evaluation, the Chief Executive Officer and the Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to be
included in the Company's periodic SEC filings.
Additionally, there were no significant changes made in the Company's internal
controls or in other factors that could significantly affect these internal
controls subsequent to the date of the evaluation performed by the Company's
Chief Executive Officer and Chief Financial Officer.
14
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is set forth in the Company's Proxy
Statement to Shareholders in connection with its 2004 Annual Meeting, under the
sections captioned "Election of Directors and Information with Respect to
Directors and Officers," "Security Ownership of Certain Beneficial Owners and
Management" and "Compliance with Sections 16(A) of the Securities Exchange Act
of 1934." Such information is incorporated herein by reference.
The Company's Board of Directors has adopted a code of ethics that applies to
its principal executive, principal financial, and principal accounting officers.
A copy of the code of ethics will be provided, at no cost, upon written request
to the attention of Mr. Donald R. Blackburn, Vice President and Secretary, at
the Company's main office address.
ITEM 11 EXECUTIVE COMPENSATION
The information required by this item is set forth in the Company's Proxy
Statement to Shareholders in connection with its 2004 Annual Meeting, under the
section captioned "Executive Compensation and Other Information." Such
information is incorporated herein by reference.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is set forth in the Company's Proxy Statement
to Shareholders in connection with its 2004 annual meeting, under the section
captioned "Security Ownership of Certain Beneficial Owners and Management." Such
information is incorporated herein by reference.
The Company currently has no equity compensation plans or arrangements, such as
stock option or restricted stock arrangements, pursuant to which equity
securities of the Company are authorized for issuance.
EQUITY COMPENSATION PLAN INFORMATION
- ----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO BE FUTURE ISSUANCE UNDER EQUITY
ISSUED UPON EXERCISE OF WEIGHTED-AVERAGE EXERCISE COMPENSATION PLANS
OUTSTANDING OPTIONS, PRICE OF OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (a))
- ----------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c)
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY COMPENSATION PLANS
APPROVED BY SECURITY HOLDERS 0 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY COMPENSATION PLAN
NOT APPROVED BY SECURITY HOLDERS 0 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL 0 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
15
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is set forth in the Company's Proxy Statement
to Shareholders in connection with its 2004 Annual Meeting, under the section
captioned "Certain Relationships and Related Transactions." Such information is
incorporated herein by reference.
ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information required by this item is set forth in the Company's Proxy Statement
to Shareholders in connection with its 2004 annual meeting under the section
captioned "Information Concerning Independent Accountants", and such information
is incorporated herein by reference.
16
PART IV
ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF FORM 10-K
1 The following consolidated financial statements
appear in the 2003 Annual Report to Shareholders and
are incorporated herein by reference.
Report of Independent Auditors Page 39
Consolidated Balance Sheets Page 15
Consolidated Statements of Income Page 16
Consolidated Statement of Comprehensive Income Page 17
Consolidated Statements of Changes in Shareholders' Equity Page 18
Consolidated Statements of Cash Flows Page 19
Notes to Consolidated Financial Statements Pages 21
2 Exhibits
3.1 Articles of Incorporation of DCB Financial
Corp (incorporated by reference to
Registrant's Form S-4, File No. 333-15579,
effective January 10, 1997)
3.2 Code of Regulations of DCB Financial Corp
(incorporated by reference to Registrant's
Form S-4, File No. 333-15579, effective
January 10, 1997)
10.1 Resignation, Release, and Post-Employment
Covenants Agreement by and between DCB
Financial Corp., its wholly-owned subsidiary
The Delaware County Bank and Trust Company,
and Larry D. Coburn (incorporated by
reference to Registrant's report on Form
8-K, filed with the Commission on November
21, 2002)
10.2 Employment agreement with Mr. Whitney
(incorporated by reference to Registrant's
Form 10-K, File No. 0-22387, effective March
25, 1998)
10.3 Employment agreement with Mr. Bernon
(incorporated by reference to Registrant's
Form 10-K, File No. 0-22387, effective March
27, 2000)
10.4 Employment agreement by and between DCB
Financial Corp., its wholly-owned subsidiary
The Delaware County Bank and Trust Company,
and Jeffrey Benton
10.5 Life insurance policies by and between DCB
Financial Corp., its wholly-owned subsidiary
The Delaware County Bank and Trust Company,
and key executives.
11 Statement Regarding Computation of Per Share
Earnings
13 Annual Report to Shareholders
21 Subsidiaries of DCB Financial Corp
23.1 Consent of Independent Auditors
23.2 Consent of Independent Auditors
31.1 Rule 13a-14 (a) Certifications
31.2 Rule 13a-14 (a) Certifications
32.1 Section 1350 Certifications
32.2 Section 1350 Certifications
17
(b) REPORTS FILED ON FORM 8-K
During the fourth quarter of 2003, the Company filed,
on the dates so indicated, the following Reports on
Form 8-K :
(a) Reports on Form 8-K - A report on Form 8-K
was filed on October 22, 2003 (report date:
10/22/03) - third quarter 2003 earnings
release.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DCB FINANCIAL CORP
By: /s/ JEFFREY BENTON
---------------------------------------
Jeffrey Benton, President & CEO
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities on March 15, 2004.
Signatures Title
---------- -----
/s/ JEFFREY BENTON President (Principal Executive Officer),
- --------------------------------- CEO and Director
Jeffrey Benton
/s/ JOHN USTASZEWSKI Principal Financial Officer
- ---------------------------------
John Ustaszewski
/s/ G. WILLIAM PARKER Director, Chairman of the Board
- ---------------------------------
G. William Parker
/s/ JEROME J. HARMEYER Director
- ---------------------------------
Jerome J. Harmeyer
/s/ WILLIAM R. OBERFIELD Director
- ---------------------------------
William R. Oberfield
/s/ EDWARD A. POWERS Director
- ---------------------------------
Edward A. Powers
/s/ MERRILL KAUFMAN Director
- ---------------------------------
Merrill Kaufman
/s/ GARY M. SKINNER Director
- ---------------------------------
Gary M. Skinner
19
/s/ TERRY M. KRAMER Director
- ---------------------------------
Terry M. Kramer
/s/ VICKIE J. LEWIS Director
- ---------------------------------
Vickie J. Lewis
/s/ ADAM STEVENSON Director
- ---------------------------------
Adam Stevenson
/s/ DONALD J. WOLF Director
- ------------------
Donald J. Wolf
20
INDEX TO EXHIBITS
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------ ----------------------- ----
3.1 Amended Articles of Incorporation of DCB Financial Corp
(incorporated by reference to Registrant's Form S-4, File No.
333-15579, effective January 10, 1997) N/A
3.2 Code of Regulations of DCB Financial Corp (incorporated by
reference to Registrant's Form S-4, File No. 333-15579,
effective January 10, 1997) N/A
10.1 Resignation, Release, and Post-Employment Covenants Agreement
by and between DCB Financial Corp., its wholly-owned
subsidiary The Delaware County Bank and Trust Company, and
Larry D. Coburn (incorporated by reference to Registrant's
report on Form 8-K, filed with the Commission on November 21,
2002) N/A
10.2 Employment agreement with Mr. Whitney (incorporated by
reference to Registrant's 1997 Form 10-K, File No. 0-22387,
effective March 25, 1998) N/A
10.3 Employment agreement with Mr. Bernon (incorporated by
reference to Registrant's 1997 Form 10-K, File No. 0-22387,
effective March 27, 2000) N/A
10.4 Employment agreement by and between DCB Financial Corp., its
wholly-owned subsidiary The Delaware County Bank and Trust
Company, and Jeffrey Benton N/A
10.5 Life insurance policies by and between DCB Financial Corp.,
its wholly-owned subsidiary The Delaware County Bank and Trust
Company, and key executives. N/A
11 Statement Regarding Computation of Per Share Earnings 22
13 Annual Report to Shareholders 1
21 Subsidiaries of DCB Financial Corp 41
23.1 Consent of Independent Auditors 42
23.2 Consent of Independent Auditors 43
31.1 Rule 13a-14 (a) Certifications 44
31.2 Rule 13a-14 (a) Certifications 45
32.1 Section 1350 Certifications 46
32.2 Section 1350 Certifications 47
21