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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: JUNE 30, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 (I.R.S. Employer Identification Number)
incorporation or organization)
110 Riverbend Avenue, Lewis Center, Ohio 43035
(Address of principal executive offices)
(740) 657-7000
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 No X
----- -----
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12B-2 of the Exchange Act).
Yes X No
----- -----
As of August 5, 2005, the latest practicable date, 3,873,196 shares of the
registrant's no par value common stock were issued and outstanding.
DCB FINANCIAL CORP
FORM 10-Q
QUARTER ENDED JUNE 30, 2005
Table of Contents
Page
----
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Consolidated Balance Sheets.............................................. 3
Consolidated Statements of Income ....................................... 4
Consolidated Statements of Comprehensive Income.......................... 5
Condensed Consolidated Statements of Cash Flows.......................... 6
Notes to the Condensed Consolidated Financial Statements................. 7
ITEM 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 14
ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk...... 19
ITEM 4 - Controls and Procedures ........................................ 20
PART II - OTHER INFORMATION.............................................. 21
SIGNATURES............................................................... 24
DCB FINANCIAL CORP
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
Item 1. Financial Statements
June 30, December 31,
2005 2004
----------- ------------
(unaudited)
ASSETS
Cash and due from financial institutions $ 24,294 $ 11,238
Securities available for sale 99,334 98,979
Loans held for sale 2,976 1,122
Loans and leases 524,855 483,305
Less allowance for loan and lease losses (5,370) (4,818)
-------- --------
Net loans and leases 519,485 478,487
Premises and equipment, net 8,562 8,846
Bank owned life insurance 8,701 8,457
Accrued interest receivable and other assets 856 4,556
-------- --------
Total assets $664,208 $611,685
======== ========
LIABILITIES
Deposits
Noninterest-bearing $ 65,134 $ 65,148
Interest-bearing 443,328 389,426
-------- --------
Total deposits 508,462 454,574
Federal funds purchased and other short-term borrowings 5,087 5,215
Federal Home Loan Bank advances 92,425 95,813
Accrued interest payable and other liabilities 3,307 1,822
-------- --------
Total liabilities 609,281 557,424
SHAREHOLDERS' EQUITY
Common stock, no par value, 7,500,000 shares authorized,
4,273,200 shares issued 3,780 3,780
Retained earnings 60,476 57,862
Treasury stock at cost, 400,004 shares at June 30, 2005
and 338,440 at December 31, 2004 (9,232) (7,616)
Accumulated other comprehensive income (loss) (97) 235
-------- --------
Total shareholders' equity 54,927 54,261
-------- --------
Total liabilities and shareholders' equity $664,208 $611,685
======== ========
See notes to the consolidated financial statements.
3
DCB FINANCIAL CORP
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2005 2004 2005 2004
------ ------ ------- -------
INTEREST AND DIVIDEND INCOME
Loans $7,836 $5,540 $15,053 $11,311
Taxable securities 820 668 1,528 1,401
Tax-exempt securities 188 176 372 363
Federal funds sold and other 2 1 3 7
------ ------ ------- -------
Total interest income 8,846 6,385 16,956 13,082
INTEREST EXPENSE
Deposits 2,178 1,150 3,997 2,389
Borrowings 974 649 1,822 1,209
------ ------ ------- -------
Total interest expense 3,152 1,799 5,819 3,598
NET INTEREST INCOME 5,694 4,586 11,137 9,484
Provision for loan and lease losses 520 443 990 821
------ ------ ------- -------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN AND LEASE LOSSES 5,174 4,143 10,147 8,663
NONINTEREST INCOME
Service charges on deposit accounts 634 654 1,205 1,219
Trust department income 187 140 352 337
Net loss on sale of securities -- -- -- (3)
Net loss on sale of assets (20) (40) (32) (63)
Gains on sale of loans 122 39 171 68
Gain on sale of unconsolidated affiliate -- 2,638 -- 2,638
Treasury management fees 113 131 215 255
Data processing servicing fees 76 68 148 131
Other 285 244 806 453
------ ------ ------- -------
1,397 3,874 2,865 5,035
NONINTEREST EXPENSE
Salaries and other employee benefits 2,071 2,078 4,283 4,004
Occupancy and equipment 842 1,018 1,722 1,988
Professional services 88 74 270 139
Advertising 121 100 207 164
Postage, freight and courier 91 91 185 203
Supplies 60 88 125 123
State franchise taxes 107 137 215 264
Other 521 742 992 1,266
------ ------ ------- -------
3,901 4,328 7,999 8,151
------ ------ ------- -------
INCOME BEFORE INCOME TAXES 2,670 3,689 5,013 5,547
Federal income tax expense 786 1,131 1,494 1,683
------ ------ ------- -------
NET INCOME $1,884 $2,558 $ 3,519 $ 3,864
====== ====== ======= =======
Basic and diluted earnings
per common share $ 0.48 $ 0.65 $ 0.89 $ 0.98
====== ====== ======= =======
See notes to the consolidated financial statements.
DCB FINANCIAL CORP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2005 2004 2005 2004
------ ------- ------ ------
Net income $1,884 $ 2,558 $3,519 $3,864
Less reclassification for realized losses on
sale of securities included in operations,
net of tax benefit -- -- -- 2
Unrealized losses on securities
available for sale, net of tax (332) (1,169) (847) (955)
------ ------- ------ ------
Comprehensive income $1,552 $ 1,389 $2,672 $2,911
====== ======= ====== ======
Accumulated other comprehensive loss $ (97) $ (203) $ (97) $ (203)
====== ======= ====== ======
See notes to the consolidated financial statements.
DCB FINANCIAL CORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Six Months Ended
June 30,
-------------------
2005 2004
-------- --------
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net income for the period $ 3,519 $ 3,864
Gain on sale of unconsolidated affiliate -- (2,638)
Increase (decrease) in accrued interest payable and other liabilities 1,485 (4,484)
Other operating activities 3,190 1,012
-------- --------
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES 8,194 (2,246)
CASH FLOWS USED IN INVESTING ACTIVITIES
Securities available for sale
Purchases (15,353) (23,437)
Maturities, principal payments and calls 8,286 10,378
Sales 6,528 21,091
Net change in loans (42,159) (34,020)
Proceeds from sale of unconsolidated affiliate -- 4,394
Premises and equipment expenditures (291) (255)
-------- --------
Net cash flows used in investing activities (42,989) (21,849)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Net change in deposits 53,888 (4,774)
Net change in federal funds and other short-term borrowings (128) 6,229
Proceeds (repayment) of Federal Home Loan Bank advances (3,388) 23,153
Purchases of treasury stock (1,616) --
Cash dividends paid (905) (1,023)
-------- --------
Net cash provided by financing activities 47,851 23,585
-------- --------
Net change in cash and cash equivalents 13,056 (510)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 11,238 20,349
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 24,294 $ 19,839
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for
Interest on deposits and borrowings $ 5,563 $ 3,610
Cash dividends declared but unpaid $ 472 $ 626
See notes to the consolidated financial statements.
6
DCB FINANCIAL CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These interim financial statements are prepared without audit and reflect all
adjustments which, in the opinion of Management, are necessary to present fairly
the financial position of DCB Financial Corp. (the "Corporation") at June 30,
2005, and its results of operations and cash flows for the three and six month
periods ended June 30, 2005 and 2004. All such adjustments are normal and
recurring in nature. The accompanying consolidated financial statements have
been prepared in accordance with the instructions of Form 10-Q and, therefore,
do not purport to contain all necessary financial disclosures required by
accounting principles generally accepted in the United States of America that
might otherwise be necessary in the circumstances, and should be read in
conjunction with the consolidated financial statements and notes thereto of the
Corporation for the year ended December 31, 2004, included in its 2004 Annual
Report. Refer to the accounting policies of the Corporation described in the
Notes to Consolidated Financial Statements contained in the Corporation's 2004
Annual Report. The Corporation has consistently followed these policies in
preparing this Form 10-Q.
The accompanying consolidated financial statements include the accounts of the
Corporation and its wholly-owned subsidiary, The Delaware County Bank and Trust
Company (the "Bank"). All significant intercompany accounts and transactions
have been eliminated in consolidation. Management considers the Corporation to
operate within one business segment, banking.
To prepare financial statements in conformity with accounting principles
generally accepted in the United States of America, management makes estimates
and assumptions based on available information. These estimates and assumptions
affect amounts reported in the financial statements and disclosures provided,
and future results could differ. The allowance for loan and lease losses, fair
values of financial instruments and status of contingencies are particularly
subject to change.
Income tax expense is based on the effective tax rate expected to be applicable
for the entire year. Deferred tax assets and liabilities are the expected future
tax amounts for the temporary differences between carrying amounts and tax bases
of assets and liabilities, computed using enacted tax rates. A valuation
allowance, if needed, reduces deferred tax assets to the amount expected to be
realized.
Earnings per share
Earnings per common share is net income divided by the weighted average number
of shares of common stock outstanding during the period. Diluted earnings per
common share is computed including the dilutive effect of additional potential
common shares under stock options.
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Weighted-average common shares
outstanding (basic) 3,930,024 3,934,760 3,932,379 3,934,760
Dilutive effect of assumed
exercise of stock options 1,950 -- 2,490 --
--------- --------- --------- ---------
Weighted-average common shares
outstanding (diluted) 3,931,974 3,934,760 3,934,869 3,934,760
========= ========= ========= =========
For the three and six months ended June 30, 2005, 3,091 options with a weighted
average exercise price of $27.50 were excluded from the diluted weighted average
common share calculations as the exercise price was greater than the average
market price.
7
DCB FINANCIAL CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)
Stock option plan
The Company's shareholders approved an employee share option plan in May 2004.
This plan grants certain employees the right to purchase shares at a
predetermined price. The plan is limited to 300,000 shares. The shares granted
to employees vest 20% per year over a five year period. The options expire after
ten years. During 2004, 15,105 shares were granted to employees under the plan,
at a price of $23.40. Additionally, during the six month periods ended June 30,
2005, 25,397 shares were granted under the plan at a price ranging from $25.40
to $27.50. Approximately 4,000 share options will become exercisable during
2005.
The Corporation accounts for its stock option plan in accordance with SFAS No.
123, "Accounting for Stock-Based Compensation," which contains a fair-value
based method for valuing stock-based compensation that entities may use, which
measures compensation cost at the grant date based on the fair value of the
award. Compensation is then recognized over the service period, which is usually
the vesting period. Alternatively, SFAS No. 123 permits entities to continue to
account for stock options and similar equity instruments under Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees." Entities that continue to account for stock options using APB
Opinion No. 25 are required to make pro forma disclosures of net earnings per
share, as if the fair-value based method of accounting defined is SFAS No. 123
had been applied.
The Corporation utilizes APB Opinion No. 25 and related Interpretations in
accounting for its stock option plan. Accordingly, no compensation cost has been
recognized for the plan. Had compensation cost for the Corporation's stock
option plan been determined based on the fair value at the grant dates for
awards under the plan consistent with the accounting method utilized in SFAS No.
123, the Corporation's net earnings and earnings per share would have been
reported as the pro forma amounts indicated below:
Three Months Six Months
Ended Ended
June 30, June 30,
2005 2005
------------ ----------
(In thousands, except
per share data)
NET EARNINGS
As reported $1,884 $3,519
Stock-based compensation, net of tax (3) (7)
------ ------
Pro-forma $1,881 $3,512
====== ======
EARNINGS PER SHARE
BASIC
As reported $ 0.48 $ 0.89
Stock-based compensation, net of tax -- --
------ ------
Pro-forma $ 0.48 $ 0.89
====== ======
DILUTED
As reported $ 0.48 $ 0.89
Stock-based compensation, net of tax -- --
------ ------
Pro-forma $ 0.48 $ 0.89
====== ======
8
DCB FINANCIAL CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)
Stock Option Plan (continued)
A summary of the status of the Corporation's stock option plan as of June 30,
2005 and December 31, 2004 and changes during the periods then ended are
presented below:
Six Months Ended
June 30,
2005
-----------------
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
------ --------
Outstanding at beginning of year 15,105 $23.40
Granted 25,397 $26.45
Exercised -- --
Forfeited (154) $23.40
------ ------
Outstanding at end of period 40,348 $24.81
====== ======
Options exercisable at period end 3,944 $23.40
====== ======
Weighted-average fair value of options
granted during the period $ 3.60
======
Year Ended
December 31,
2004
-----------------
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
------ --------
Outstanding at beginning of year -- --
Granted 15,105 $23.40
Exercised -- --
Forfeited -- --
------ ------
Outstanding at end of year 15,105 $23.40
====== ======
Options exercisable at year-end -- $ --
====== ======
Weighted-average fair value of options
granted during the year $ 3.44
======
The following information applies to options outstanding at June 30, 2005:
NUMBER OUTSTANDING RANGE OF EXERCISE PRICES
- ------------------ ------------------------
40,348 $23.40 - $27.50
9
DCB FINANCIAL CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)
Newly issued accounting standards: In December 2004, the Financial Accounting
Standards Board (the "FASB") issued a revision to Statement of Financial
Accounting Standards ("SFAS") No. 123 which establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments
for goods or services, primarily on accounting for transactions in which an
entity obtains employee services in share-based transactions. This Statement,
SFAS No. 123 (R), requires a public entity to measure the cost of employee
services received in exchange for an award of equity instruments based on the
grant-date fair value of the award, with limited exceptions. That cost will be
recognized over the period during which an employee is required to provide
services in exchange for the award - the requisite service period. No
compensation cost is recognized for equity instruments for which employees do
not render the requisite service. Employee share purchase plans will not result
in recognition of compensation cost if certain conditions are met.
Initially, the cost of employee services received in exchange for an award of
equity instruments will be measured based on current fair value; the fair value
of that award will be remeasured subsequently at each reporting date through the
settlement date. Changes in fair value during the requisite service period will
be recognized as compensation cost over that period. The grant-date fair value
of employee share options and similar instruments will be estimated using
option-pricing models adjusted for the unique characteristics of those
instruments (unless observable market prices for the same or similar instruments
are available). If an equity award is modified after the grant date, incremental
compensation cost will be recognized in an amount equal to the excess of the
fair value of the modified award over the fair value of the original award
immediately before the modification.
Excess tax benefits, as defined by SFAS No. 123(R) will be recognized as an
addition to additional paid in capital. Cash retained as a result of those
excess tax benefits will be presented in the statement of cash flows as
financing cash inflows. The write-off of deferred tax assets relating to
unrealized tax benefits associated with recognized compensation cost will be
recognized as income tax expense unless there are excess tax benefits from
previous awards remaining in additional paid in capital to which it can be
offset.
Compensation cost is required to be recognized in the beginning of the first
annual period that begins after June 15, 2005, or January 1, 2006 as to the
Corporation. Management believes the effect on operations will approximate the
economic effects set forth in the pro-forma stock option disclosure set forth
above.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
DCB's consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States and follow general
practices within the financial services industry. The application of these
principles requires management to make estimates, assumptions, and judgments
that affect the amounts reported in the financial statements and accompanying
notes. These estimates, assumptions, and judgments are based on information
available as of the date of the financial statements; as this information
changes, the financial statements could reflect different estimates,
assumptions, and judgments.
The most significant accounting policies followed by the Corporation are
presented in Note 1 of Notes to Consolidated Financial Statements contained in
the Corporation's 2004 Annual Report. These policies, along with the disclosures
presented in the other financial statement notes and in this financial review,
provide information on how significant assets and liabilities are valued in the
financial statements and how those values are determined.
10
DCB FINANCIAL CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)
NOTE 2 - SECURITIES
The amortized cost and estimated fair values of securities available for sale
were as follows:
June 30, 2005
-----------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
U.S. government and agency obligations $25,759 $ 27 $(215) $25,571
States and municipal obligations 22,475 255 (109) 22,621
Corporate bonds 8,140 6 (40) 8,106
Mortgage-backed securities 39,906 199 (299) 39,806
------- ---- ----- -------
Total debt securities 96,280 487 (663) 96,104
Other securities 3,201 33 (4) 3,230
------- ---- ----- -------
Total $99,481 $520 $(667) $99,334
======= ==== ===== =======
The table below indicates the length of time individual securities have been in
a continuous unrealized loss position at June 30, 2005:
(Less than 12 months) (12 months or longer)
-------------------------------- -------------------------------- Total
Description of Number of Fair Unrealized Number of Fair Unrealized Number of Fair Unrealized
Securities investments value losses investments value losses investments value losses
- ----------------------- ----------- ------- ---------- ----------- ------- ---------- ----------- ------- ----------
(Dollars in thousands)
U.S. Government and
agency obligations 18 $15,949 $(116) 8 $ 6,182 $ (99) 26 $22,131 $(215)
State and municipal
obligations 12 5,928 (52) 8 3,350 (57) 20 9,278 (109)
Corporate bonds -- -- -- 1 2,970 (40) 1 2,970 (40)
Mortgage-backed
securities and other 50 21,148 (147) 23 7,212 (156) 73 28,360 (303)
--- ------- ----- --- ------- ----- --- ------- -----
Total temporarily
impaired securities 80 $43,025 $(315) 40 $19,714 $(352) 120 $62,739 $(667)
=== ======= ===== === ======= ===== === ======= =====
Management has the intent and ability to hold these securities for the
foreseeable future and the decline in the fair value is primarily due to recent
increases in market interest rates. The fair values are expected to recover as
securities approach maturity dates.
11
DCB FINANCIAL CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)
Substantially all mortgage-backed securities are backed by pools of mortgages
that are insured or guaranteed by the Federal National Mortgage Association
("FNMA"), the Government National Mortgage Association ("GNMA") or the Federal
Home Loan Mortgage Corporation ("FHLMC").
At June 30, 2005, there were no holdings of securities of any one issuer, other
than the U.S. government and its agencies, in an amount greater than 10% of
shareholders' equity.
The amortized cost and estimated fair value of debt securities at June 30, 2005,
by contractual maturity, are shown below. Actual maturities may differ from
contractual maturities because issuers may have the right to call or prepay
obligations. Mortgage-backed securities are shown separately since they are not
due at a single maturity date.
Available for sale
-------------------
Amortized Fair
Cost Value
--------- -------
Due in one year or less $ 4,193 $ 4,175
Due from one to five years 14,512 14,397
Due from five to ten years 13,813 13,809
Due after ten years 23,856 23,917
Mortgage-backed and related securities 39,906 39,806
------- -------
Total debt securities 96,280 96,104
Other securities 3,201 3,230
------- -------
Total $99,481 $99,334
======= =======
NOTE 3 - LOANS AND LEASES
Loans and leases were as follows:
June 30,
2005
--------
Commercial and industrial $ 51,084
Commercial real estate 184,821
Residential real estate and home equity 183,799
Real estate construction and land development 43,841
Consumer and credit card 59,305
Lease financing, net 1,003
--------
523,853
Add (deduct): Net deferred loan origination costs 1,059
Unearned income on leases (57)
--------
Total loans receivable $524,855
========
12
DCB FINANCIAL CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands)
NOTE 4 - ALLOWANCE FOR LOAN AND LEASE LOSSES
Activity in the allowance for loan and lease losses was as follows:
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
2005 2004 2005 2004
------ ------ ------ ------
Balance at beginning of period $5,115 $4,411 $4,818 $4,331
Provision for loan losses 520 443 990 821
Loans charged off (321) (332) (515) (688)
Recoveries 56 53 77 111
------ ------ ------ ------
Balance at end of period $5,370 $4,575 $5,370 $4,575
====== ====== ====== ======
Nonperforming loans were as follows:
June 30, December 31,
2004 2004
-------- ------------
Loans past due 90 days or more and still accruing $1,808 $1,544
Nonaccrual loans 1,962 1,879
------ ------
Total $3,770 $3,423
====== ======
Impaired loans (most of which are included in
nonperforming loans above) were as follows:
Period-end loans with no allocated allowance for
loan losses $ -- $ --
Period-end loans with allocated allowance for
loan losses 1,721 601
------ -----
Total $1,721 $ 601
====== =====
Amount of the allowance for loan losses allocated $ 781 $ 360
====== =====
Average of impaired loans during the period $1,624 $ 709
====== =====
13
DCB FINANCIAL CORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
INTRODUCTION
In the following pages, management presents an analysis of the consolidated
financial condition of DCB Financial Corp (the "Corporation") at June 30, 2005,
compared to December 31, 2004, and the consolidated results of operations for
the three and six months ended June 30, 2005, compared to the same periods in
2004. This discussion is designed to provide shareholders with a more
comprehensive review of the operating results and financial position than could
be obtained from reading the consolidated financial statements alone. This
analysis should be read in conjunction with the consolidated financial
statements and related footnotes and the selected financial data included
elsewhere in this report.
FORWARD-LOOKING STATEMENTS
Certain statements in this report constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995, such as
statements relating to the financial condition and prospects, lending risks,
plans for future business development and marketing activities, capital spending
and financing sources, capital structure, the effects of regulation and
competition, and the prospective business of both the Corporation and its
wholly-owned subsidiary The Delaware County Bank & Trust Company (the "Bank").
Where used in this report, the word "anticipate," "believe," "estimate,"
"expect," "intend," and similar words and expressions, related to the
Corporation or the Bank or their respective management, identify forward-looking
statements. Such forward-looking statements reflect the current views of the
Corporation and are based on information currently available to the management
of the Corporation and the Bank and upon current expectations, estimates, and
projections about the Corporation and its industry, management's belief with
respect thereto, and certain assumptions made by management. These
forward-looking statements are not guarantees of future performance and are
subject to risks, uncertainties, and other factors that could cause actual
results to differ materially from those expressed or implied by such
forward-looking statements. Potential risks and uncertainties include, but are
not limited to: (i) significant increases in competitive pressure in the banking
and financial services industries; (ii) changes in the interest rate environment
which could reduce anticipated or actual margins; (iii) changes in political
conditions or the legislative or regulatory environment; (iv) general economic
conditions, either nationally or regionally (especially in central Ohio),
becoming less favorable than expected resulting in, among other things, a
deterioration in credit quality of assets; (v) changes occurring in business
conditions and inflation; (vi) changes in technology; (vii) changes in monetary
and tax policies; (viii) changes in the securities markets; and (ix) other risks
and uncertainties detailed from time to time in the filings of the Corporation
with the Commission.
The Corporation does not undertake, and specifically disclaims any obligation,
to publicly revise any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
CRITICAL ACCOUNTING POLICIES
DCB's consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States and follow general
practices within the financial services industry. The application of these
principles requires management to make estimates, assumptions, and judgments
that affect the amounts reported in the financial statements and accompanying
notes. These estimates, assumptions, and judgments are based on information
available as of the date of the financial statements; as this information
changes, the financial statements could reflect different estimates,
assumptions, and judgments. Pursuant to SEC guidance, management of public
companies are encouraged to evaluate and disclose those accounting policies that
are judged to be critical policies. Critical accounting policies are those which
are most critical to the accurate portrayal of the Company's financial condition
and results of operations, and that require management's most difficult,
subjective or complex judgments. Management of the Company considers the
accounting policy relating to the allowance for loan losses to be a critical
accounting policy.
14
DCB FINANCIAL CORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
The procedures for assessing the adequacy of the allowance for loan losses
reflect our evaluation of credit risk after careful consideration of all
information available to us. In developing this assessment, we must rely on
estimates and exercise judgment regarding matters where the ultimate outcome is
unknown such as economic factors, developments affecting companies in specific
industries and issues with respect to single borrowers. Depending on changes in
circumstances, future assessments of credit risk may yield materially different
results, which may require an increase or a decrease in the allowance for loan
losses.
The allowance is regularly reviewed by management to determine whether the
amount is considered adequate to absorb probable losses. This evaluation
includes specific loss estimates on certain individually reviewed loans,
statistical loss estimates for loan pools that are based on historical loss
experience, and general loss estimates that are based upon the size, quality,
and concentration characteristics of the various loan portfolios, adverse
situations that may affect a borrower's ability to repay, and current economic
and industry conditions. Also considered as part of that judgment is a review of
the Bank's trends in delinquencies and loan losses, as well as trends in
delinquencies and losses for the region and nationally, and economic factors.
The allowance for loan losses is maintained at a level believed adequate by
management to absorb probable losses inherent in the loan portfolio.
Management's evaluation of the adequacy of the allowance is an estimate based on
management's current judgment about the credit quality of the loan portfolio.
While the Corporation strives to reflect all known risk factors in its
evaluations, judgment errors may occur.
ANALYSIS OF FINANCIAL CONDITION
The Corporation's assets totaled $664,208 at June 30, 2005, compared to $611,685
at December 31, 2004, an increase of $52,523, or 8.59%. This increase is
attributed to the Corporation's ability to continue to capture a growing share
of the economic development activity with its geographic region. This is
particularly evident within the commercial and residential real estate
portfolios.
Cash and cash equivalents increased $13,056 from December 31, 2004 to June 30,
2005. The increase in cash and cash equivalents is mainly due to transactional
timing issues related to a few large depositors, as management generally
attempts to reduce cash equivalents in lieu of higher earning assets. Total
securities increased $355, or .36%, from $98,979 at December 31, 2004 to $99,334
at June 30, 2005. The Corporation invests primarily in U.S. Treasury notes, U.S.
government agencies, municipal bonds, corporate obligations and mortgage-backed
securities. Mortgage-backed securities include Federal Home Loan Mortgage
Corporation ("FHLMC"), Government National Mortgage Association ("GNMA") and
Federal National Mortgage Association ("FNMA") participation certificates.
At June 30, 2005, all securities were designated as available for sale.
Management classifies securities as available for sale to provide the
Corporation with the flexibility to create funding for the balance sheet as
demand warrants. The mortgage-backed securities portfolio, totaling $39,806 at
June 30, 2005, provides the Corporation with a constant cash flow stream from
principal repayments and interest payments. The Corporation held no structured
notes during any period presented.
Total loans and leases increased $41,550, or 8.60%, to $524,855 at June 30, 2005
from $483,305 at December 31, 2004. The increase is attributed mainly to the
continued advantageous market and economic growth of commercial and residential
real estate, land development and consumer lending categories. Other loan
categories in which the Corporation participates remained relatively stable or
experienced small increases in loans outstanding. The Bank's local market
continues to experience increases in the amount of commercial real estate
development activity. The Bank has no significant loan concentration in any one
industry.
Total deposits increased $53,888, or 11.85%, to $508,462 at June 30, 2005 from
$454,574 at December 31, 2004. Noninterest-bearing deposits decreased $14, or
..02%, while interest-bearing deposits increased $53,902, or 13.84%. This change
is mainly attributed to increased deposit activity from the Bank's larger public
fund customers. The Bank utilizes a variety of alternative funding sources to
compensate for the challenging deposit growth experienced within its markets.
15
DCB FINANCIAL CORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
Utilizing brokered certificates of deposits and money market sweeps, the Bank is
able to provide additional funding for the Company's loan portfolios. The
somewhat slow growth of core deposits is attributed to the competition in the
Bank's geographic area, where the growth of competitors' branch locations had
made it increasingly challenging to obtain deposits. Management intends to
continue to develop new products, and to monitor the rate structure of its
deposit products to encourage the growth within its deposit liabilities. In
addition, the Corporation has used other borrowings, generally FHLB borrowings,
to fund much of its loan growth. Continued reliance on outside funding rather
than deposits could increase the Corporation's overall cost of funds.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2005 AND
JUNE 30, 2004
NET INCOME. Net income for the three months ended June 30, 2005 totaled $1,884,
compared to net income of $2,558 for the same period in 2004. Earnings per share
was $.48 for the three months ended June 30, 2005 compared to $.65 for the three
months ended June 30, 2004. The decrease in earnings is mainly attributed to the
sale of the Corporation's investment in ProCentury during the three months ended
June 30, 2004, which resulted in a pre-tax gain of $2.6 million.
NET INTEREST INCOME. Net interest income represents the amount by which interest
income on interest-earning assets exceeds interest paid or accrued on
interest-bearing liabilities. Net interest income is the largest component of
the Corporation's income, and is affected by the interest rate environment, the
volume, and the composition of interest-earning assets and interest-bearing
liabilities.
Net interest income was $5,694 for the three months ended June 30, 2005,
compared to $4,586 for the same period in 2004. The $1,108 increase in the
second quarter 2005 compared to 2004 was mainly attributed to the continued
increase in earning assets coupled with the rising interest rate environment
over the past year. The Asset/Liability Management Committee, which is
responsible for determining deposit rates, continues to closely monitor the
Bank's cost of funds to take advantage of pricing and cash flow opportunities.
Additionally, because of the increased competition in the Bank's primary
marketplace, management has continued to recognize the importance of offering
special rates on certain deposit products. These special deposit rates tend to
negatively affect the Corporation's net interest margin. It is likely that these
offerings will continue to be offered to secure liquidity while maintaining
market share.
PROVISION AND ALLOWANCE FOR LOAN AND LEASE LOSSES. The provision for loan and
lease losses totaled $520 for the three months ended June 30, 2005, compared to
$443 for the same period in 2004. The growth in the provision is reflective of
the overall growth in the Corporation's loan portfolio. Non-accrual loans
increased to $1.96 million at June 30, 2005 from $1.86 million at the end of the
second quarter 2004, though such non-accrual loans decreased as a percentage of
outstanding loans from .39% in 2004 to .37% in 2005. Net charge-offs declined to
$265 for the three months ended June 30, 2005 from $279 for the same period in
2004. Annualized net charge-offs for the three months ended June 30, 2005 were
21 basis points compared to 26 basis points for the same period in 2004. In
addition, delinquent loans over thirty days declined from period to period,
measuring 1.37% at June 30, 2005 versus 2.00% at June 30, 2004. Management will
continue to monitor the credit quality of the lending portfolio and will
recognize additional provisions in the future to maintain the allowance for loan
and lease losses at an appropriate level. The allowance for loan and lease
losses totaled $5,370, or 1.02% of total loans and leases at June 30, 2005,
compared to $4,818, or 1.00% of total loans and leases at December 31, 2004.
NONINTEREST INCOME AND NONINTEREST EXPENSE. Total noninterest income decreased
$2,477, or 63.94%, for the three months ended June 30, 2005, compared to the
same period in 2004. The decrease was mainly a result of the sale of the
Corporation's entire investment in ProCentury Corporation, a specialty property
and casualty insurance holding company in April 20, 2004. The gain recognized on
the sale of ProCentury investment during the second quarter in 2004 was
partially offset by an increase in the volume of loans sold in the secondary
market, which is mainly attributed to an advantageous market, coupled with the
strong economic growth in Delaware County. In addition, data processing services
and transactional volume from the Bank's retail products remained at or slightly
higher than the previous year's levels.
16
DCB FINANCIAL CORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
Total noninterest expense decreased $427, or 9.87%, for the three months ended
June 30, 2005, compared to the same period in 2004. The decrease was primarily
the result of decreases in occupancy and equipment, supplies, state franchise
taxes, and other operating expenses, offset with an increase in advertising
mainly related to the Corporation's most recent promotions and professional and
consulting services due to expenses incurred related to Section 404 of the
Sarbanes-Oxley Act of 2002.
INCOME TAXES. The change in income tax expense is primarily attributable to the
decrease in net income, coupled with an increase in tax exempt earnings from
both municipal securities and bank owned life insurance during the three months
ended June 30, 2005 as compared to the same period in 2004. The provision for
income taxes totaled $786, for an effective tax rate of 29.44%, for the three
months ended June 30, 2005 and $1,131, for an effective tax rate of 30.66%, for
the three months ended June 30, 2004.
COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND
JUNE 30, 2004
NET INCOME. Net income for the six months ended June 30, 2005 totaled $3,519,
compared to net income of $3,864 for the same period in 2004. Earnings per share
was $.89 for the six months ended June 30, 2005 compared to $.98 for the six
months ended June 30, 2004. The decrease in earnings is mainly attributed to the
sale of the Corporation's investment in ProCentury during the six month period
ended June 30, 2004.
NET INTEREST INCOME. Net interest income was $11,137 for the six months ended
June 30, 2005, compared to $9,484 for the same period in 2004. The $1,653
increase was mainly attributed to the continued increase in earning assets
coupled with the rising rate environment during the six month period ended June
30, 2005. However, the Company's net interest margin continues experiencing some
pressure as much of the continued loan growth has been funded with borrowings
and higher cost deposits. To attract the additional deposits needed to fund loan
growth, the Company has utilized products such as time deposits and money market
accounts, which generally carry higher costs compared to checking and savings
products. These higher cost deposit products and other borrowings may continue
to be utilized by Management, which may further negatively impact the net
interest margin in future periods.
PROVISION AND ALLOWANCE FOR LOAN AND LEASE LOSSES. The provision for loan and
lease losses totaled $990 for the six months ended June 30, 2005, compared to
$821 for the same period in 2004. The growth in the provision is reflective of
the overall growth in the Corporation's loan portfolio, and to a lesser extent,
the increase in non-accrual loans to $1.96 million at June 30, 2005 from $1.86
million at the end of the second quarter 2004. Net charge-offs improved to $438
for the six months ended June 30, 2005 from $577 for the same period in 2004.
Management will continue to monitor the credit quality of the lending portfolio
and will continue additional provisioning in the future to maintain the
allowance for loan and lease losses at an appropriate level.
NONINTEREST INCOME AND NONINTEREST EXPENSE. Total noninterest income decreased
$2,170, or 43.10%, for the six months ended June 30, 2005, compared to the same
period in 2004. The decrease was mainly a result of the sale of the
Corporation's entire investment in ProCentury Corporation, a specialty property
and casualty insurance holding company on April 20, 2004. The gain recognized on
the sale of ProCentury investment during the second quarter in 2004 was
partially offset by an increase in the volume of loans sold in the secondary
market in 2005. In addition, data processing services and transactional volume
from the Bank's retail products remained at or slightly higher than the previous
year's levels.
Total noninterest expense decreased $152, or 1.86%, for the six months ended
June 30, 2005, compared to the same period in 2004. The decrease was primarily
the result of a decline in state franchise taxes, occupancy and equipment
expenses due to certain capitalized assets becoming fully depreciated and a
decrease in other operating expenses for the six
17
DCB FINANCIAL CORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
month period ended June 30, 2005. The Corporation's efficiency ratio improved
to 57.13% for the six month period ended June 30, 2005 from 59.50% or the same
period in 2004.
INCOME TAXES. The provision for income taxes totaled $1,494 reflecting an
effective tax rate of 29.80% for the six months ended June 30, 2005 and $1,683,
or an effective tax rate of 30.34% for the six months ended June 30, 2004. The
decline in the effective tax rate period over period is attributed to an
increase in tax-exempt revenue derived from tax exempt securities and the
earnings on bank-owned life insurance.
LIQUIDITY
Liquidity is the ability of the Corporation to fund customers' needs for
borrowing and deposit withdrawals. The purpose of liquidity management is to
assure sufficient cash flow to meet all of the financial commitments and to
capitalize on opportunities for business expansion. This ability depends on the
financial strength, asset quality and types of deposit and investment
instruments offered by the Corporation to its customers. The Corporation's
principal sources of funds are deposits, loan and security repayments,
maturities of securities, sales of securities available for sale and other funds
provided by operations. The Bank also has the ability to borrow from the FHLB.
While scheduled loan repayments and maturing investments are relatively
predictable, deposit flows and early loan and mortgage-backed security
prepayments are more influenced by interest rates, general economic conditions,
and competition. The Corporation maintains investments in liquid assets based
upon management's assessment of (1) need for funds, (2) expected deposit flows,
(3) yields available on short-term liquid assets and (4) objectives of the
asset/liability management program.
Cash and cash equivalents increased $13,056, or 116.18%, to $24,294 at June 30,
2005 compared to $11,238 at December 31, 2004. Cash and equivalents represented
3.66% of total assets at June 30, 2005 and 1.84% of total assets at December 31,
2004. The Corporation has the ability to borrow funds from the Federal Home Loan
Bank and has various correspondent banking relationships to purchase overnight
federal funds should the Corporation need to supplement its liquidity needs. The
Corporation also has the ability to issue brokered time deposits to supplement
deposits raised from its customer base. Management believes the Corporation's
liquidity position is adequate based on its current level of cash, cash
equivalents, core deposits, the stability of its other funding sources and the
support provided by its capital base.
CAPITAL RESOURCES
Total shareholders' equity increased $666 between December 31, 2004 and June 30,
2005. The increase was primarily due to period earnings of $3,519, offset by the
declaration of $942 in dividends and the repurchase of 61,564 shares at $26.25
per share for a total of $1.62 million.
On June 17, 2005, DCB Financial Corp announced its Board of Directors has
authorized the repurchase of up to 200,000 of its outstanding shares of common
stock over a two year period commencing June 16, 2005. The stock repurchase plan
authorizes the Company to make repurchases from time to time in the open market
or in privately negotiated transactions. On June 16, 2005, prior to this
announcement, the Company had 3,934,760 shares of common stock outstanding. On
June 30, 2005, 138,436 shares remained available for repurchase under the
Corporation's stock repurchase program.
Tier 1 capital is shareholders' equity excluding the unrealized gain or loss on
securities classified as available for sale and intangible assets. Total capital
includes Tier 1 capital plus the allowance for loan losses, not to exceed 1.25%
of risk weighted assets. Risk weighted assets are the Corporation's total assets
after such assets are assessed for risk and assigned a weighting factor defined
by regulation based on their inherent risk.
18
DCB FINANCIAL CORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
The Corporation and its subsidiaries meet all regulatory capital requirements.
The ratio of total capital to risk-weighted assets was 11.04% at June 30, 2005,
while the Tier 1 risk-based capital ratio was 10.05%. Regulatory minimums call
for a total risk-based capital ratio of 8.0%, at least half of which must be
Tier 1 capital. The Corporation's leverage ratio, defined as Tier 1 capital
divided by average assets, was 8.13% at June 30, 2005.
The following table sets forth the Corporation's obligations and commitments to
make future payments under contract as of June 30, 2005.
PAYMENT DUE BY YEAR
--------------------------------------------------------
LESS THAN MORE THAN
CONTRACTUAL OBLIGATIONS TOTAL 1 YEAR 1-3 YEARS 3-5 YEARS 5 YEARS
- ----------------------------------- -------- --------- --------- --------- ---------
FHLB advances $ 92,425 $ 5,000 $23,435 $5,290 $58,700
Federal funds purchased and other
short-term borrowings 5,087 5,087 -- -- --
Operating lease obligations 5,387 354 1,216 692 3,125
Loan and line of credit commitments 117,810 117,810 -- -- --
Other long-term liabilities
reflected on the Corporation's
balance sheet under GAAP -- -- -- -- --
-------- -------- ------- ------ -------
Total contractual obligations $220,709 $128,251 $24,651 $5,982 $61,825
======== ======== ======= ====== =======
In the opinion of management, all loan commitments equal or exceed market rates
of interest at June 30, 2005.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
ASSET AND LIABILITY MANAGEMENT AND MARKET RISK
The Corporation's primary market risk exposure is interest rate risk and, to a
lesser extent, liquidity risk. Interest rate risk is the possibility that the
Corporation's financial condition will be adversely affected due to movements in
interest rates. The income of financial institutions is primarily derived from
the excess of interest earned on interest-earning assets over the interest paid
on interest-bearing liabilities. Accordingly, the Corporation places great
importance on monitoring and controlling interest rate risk. The measurement and
analysis of the exposure of the Corporation's primary operating subsidiary, The
Delaware County Bank and Trust Company, to changes in the interest rate
environment are referred to as asset/liability management. One method used to
analyze the Corporation's sensitivity to changes in interest rates is the "net
portfolio value" ("NPV") methodology.
NPV is generally considered to be the present value of the difference between
expected incoming cash flows on interest-earning and other assets and expected
outgoing cash flows on interest-bearing and other liabilities. For example, the
asset/liability model that the Corporation currently employs attempts to measure
the change in NPV for a variety of interest rate scenarios, typically for
parallel shifts of 100 to 300 basis points in market rates.
The Corporation's 2004 Annual Report includes a table depicting the changes in
the Corporation's interest rate risk as of December 31, 2004, as measured by
changes in NPV for instantaneous and sustained parallel shifts of -100 to +300
basis points in market interest rates. Management believes that no events have
occurred since December 31, 2004 that would significantly change their ratio of
rate sensitive assets to rate sensitive liabilities.
19
DCB FINANCIAL CORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
The Corporation's NPV is more sensitive to rising rates than declining rates.
From an overall perspective, such difference in sensitivity occurs principally
because, as rates rise, borrowers do not prepay fixed-rate loans as quickly as
they do when interest rates are declining. Thus, in a rising interest rate
environment, because the Corporation has fixed-rate loans in its loan portfolio,
the amount of interest the Corporation would receive on its loans would increase
relatively slowly as loans are slowly prepaid and new loans at higher rates are
made. Moreover, the interest the Corporation would pay on its deposits would
increase rapidly because the Corporation's deposits generally have shorter
periods for repricing. The Corporation can utilize various tools to reduce
exposure to changes in interest rates including offering floating versus fixed
rate products, or utilizing interest rate swaps. Additional consideration should
also be given to today's current interest rate levels. Several deposit products
are within 200 basis points of zero percent and other products within 300 basis
points. Should rates decline, fewer liabilities could be repriced down to offset
potentially lower yields on loans. Thus interest rate decreases could also
impact future earnings and the Corporation's NPV.
As with any method of measuring interest rate risk, certain shortcomings are
inherent in the NPV approach. For example, although certain assets and
liabilities may have similar maturities or periods of repricing, they may react
in different degrees to changes in market interest rates. Also, the interest
rates on certain types of assets and liabilities may fluctuate in advance of
changes in market interest rates, while interest rates on other types may lag
behind changes in market rates. Further, in the event of a change in interest
rates, expected rates of prepayment on loans and mortgage-backed securities and
early withdrawal levels from certificates of deposit would likely deviate
significantly from those assumed in making risk calculations.
Item 4. Controls and Procedures
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 as of
June 30, 2005, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective as of June 30, 2005,
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.
There was no change in the Company's internal control over financial reporting
that occurred during the Company's fiscal quarter ended June 30, 2005, that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
20
DCB FINANCIAL CORP
FORM 10-Q
Quarter ended June 30, 2005
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings:
There are no matters required to be reported under this item.
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds:
ISSUER PURCHASES OF EQUITY SECURITIES
(C) (D)
TOTAL NUMBER OF MAXIMUM NUMBER (OR
SHARES (OR UNITS) APPROXIMATE DOLLAR
(A) (B) PURCHASED AS PART VALUE) OF SHARES (OR
TOTAL NUMBER OF AVERAGE PRICE OF PUBLICLY UNITS) THAT MAY YET
SHARES (OR PAID PER SHARE ANNOUNCED PLANS OR BE PURCHASED UNDER
PERIOD UNITS) PURCHASED (OR UNIT) PROGRAMS(1) THE PLANS OR PROGRAMS
- ----------- ---------------- --------------- ------------------ ---------------------
Month #l
4/1/2005 to
4/30/2005 -- -- -- --
Month #2
5/1/2005 to
5/31/2005 -- -- -- --
Month #3
6/1/2005 to
6/30/2005 61,564 $26.25 61,564 138,436
------ ------ ------ -------
Total 61,564 $26.25 61,564 138,436
====== ====== ====== =======
(1) On June 17, 2005, the Company announced a repurchase program which
authorizes the repurchase of up to 200,000 of its common shares over a two
year period commencing June 16, 2005.
21
DCB FINANCIAL CORP
FORM 10-Q
Quarter ended June 30, 2005
PART II - OTHER INFORMATION
Item 3 - Defaults Upon Senior Securities:
There are no matters required to be reported under this item.
Item 4 - Submission of Matters to a Vote of Security Holders:
At the Annual Meeting of Shareholders held on May 19, 2005, there were
2,821,490 voting shares present in person or by proxy, which represented
72% of the Corporation's outstanding shares of 3,934,760 as of the record
date for the meeting. At the Annual Meeting, one proposal was submitted to
the shareholders for a vote. The shareholders of the Corporation were asked
to consider the Corporation's nominees for directors and to elect three (3)
directors to serve for a term of three (3) years. The Corporation's
nominees for director were: Jerome Harmeyer, Vicki J. Lewis, and William R.
Oberfield, each of whom were elected. The results of shareholder voting are
as follows on these matters:
Proposal 1 - Election of Directors:
Director Votes for Votes withheld
- -------------------- --------- --------------
Jerome Harmeyer 2,806,206 15,284
Vicki J. Lewis 2,798,398 23,092
William R. Oberfield 2,801,229 20,261
Directors continuing in office are: Jeffrey T. Benton, Edward Powers, Gary
M. Skinner, and Adam Stevenson, and Donald J. Wolf.
22
DCB FINANCIAL CORP
FORM 10-Q
Quarter ended June 30, 2005
PART II - OTHER INFORMATION
Item 5 - Other Information:
There are no matters required to be reported under this item.
Item 6 - Exhibits:
Exhibits - The following exhibits are filed as a part of this report:
Exhibit No. Exhibit
- ----------- -------
3.1 Amended and Restated Articles of Incorporation of DCB Financial
Corp, incorporated by reference to the Company's Report on Form
10-Q filed with the Commission on November 14, 2003.
3.2 Amended and Restated Code of Regulations of DCB Financial Corp,
incorporated by reference to the Company's Report on Form 10-Q
filed with the Commission on November 14, 2003.
4. Instruments Defining the Rights of Security Holders. (See Exhibits
3.1 and 3.2.)
31.1 Certification pursuant to section 302 of the Sarbanes-Oxley Act of
2002
31.2 Certification pursuant to section 302 of the Sarbanes-Oxley Act of
2002
32.1 Certification pursuant to 18 U.S.C. 1350, as enacted pursuant to
section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification pursuant to 18 U.S.C. 1350, as enacted pursuant to
section 906 of the Sarbanes-Oxley Act of 2002
23
DCB FINANCIAL CORP
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DCB FINANCIAL CORP
(Registrant)
Date: August 5, 2005 /s/ Jeffrey Benton
------------------------------------------
(Signature)
Jeffrey Benton
President and Chief Executive Officer
Date: August 5, 2005 /s/ John A. Ustaszewski
------------------------------------------
(Signature)
John A. Ustaszewski
Vice President and Chief Financial Officer
24
DCB FINANCIAL CORP
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Amended and Restated Articles of Incorporation of DCB Financial Corp,
incorporated by reference to the Company's Report on Form 10-Q filed
with the Commission on November 14, 2003.
3.2 Amended and Restated Code of Regulations of DCB Financial Corp,
incorporated by reference to the Company's Report on Form 10-Q filed
with the Commission on November 14, 2003.
4 Instruments Defining the Rights of Security Holders. (See Exhibits 3.1
and 3.2.)
31.1 Certification of Chief Executive Officer pursuant to section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification pursuant to 18 U.S.C. 1350, as enacted Pursuant to
section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification pursuant to 18 U.S.C. 1350, as enacted Pursuant to
section 906 of the Sarbanes-Oxley Act of 2002.
25