Form 8-K

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OSJFZmaLnwFn8CYSNs5X/0uRseTyXsK214FgTjJWC7Gcpqn/igDujaZ/P4yekZmt yClKE2X0WsHeNhDxWwDrNQ== 0000950123-10-097872.txt : 20101029 0000950123-10-097872.hdr.sgml : 20101029 20101029093018 ACCESSION NUMBER: 0000950123-10-097872 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20101028 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20101029 DATE AS OF CHANGE: 20101029 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DCB FINANCIAL CORP CENTRAL INDEX KEY: 0001025877 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 311469837 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-22387 FILM NUMBER: 101149927 BUSINESS ADDRESS: STREET 1: 110 RIVERBEND AVE. CITY: LEWIS CENTER STATE: OH ZIP: 43035 BUSINESS PHONE: 740-657-7000 MAIL ADDRESS: STREET 1: 110 RIVERBEND AVE. CITY: LEWIS CENTER STATE: OH ZIP: 43035 8-K 1 c07425e8vk.htm FORM 8-K Form 8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 28, 2010

DCB FINANCIAL CORP

(Exact name of registrant as specified in its charter)


Ohio	0-22387	31-1469837

(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)


110 Riverbend Avenue, Lewis Center, Ohio		43035

(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (740) 657-7000

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement

DCB Financial Corp (“DCBF”), a registered financial holding company and the parent holding company for The Delaware County Bank & Trust Company (the “Bank”) announces that the Bank has entered into a written agreement (the “Agreement”)with the Ohio Division of Financial Institutions (“ODFI”) and a Consent Order (the “Consent Order”) with the Federal Deposit Insurance Corporation (“FDIC”) effective October 28, 2010 which address matters pertaining to, among other things: management and operations of the Bank; credit risk management practices and credit administration policies and procedures; Bank actions with respect to problem assets; reserves for loan and lease losses; strengthening the capital position of the Bank; the strategic plan and budget for fiscal 2011; staffing; and submitting a funding contingency plan for the Bank that identifies available sources of liquidity and includes a plan for dealing with potential adverse economic and market conditions.

The Consent Order and the Agreement contain substantially similar provisions. Among other things they require the Bank to attain a minimum 9% tier-1 capital ratio within 90 days of the effective date, and total risk-based capital ratio of not less than 13% within that same time period; submission of plans related to the reduction of non-performing assets; and, a review of accounting matters related to subsidiary companies.

Management and the board have already made significant progress towards addressing and resolving these issues which are based on the findings of the ODFI and FDIC during their examination of the Bank as of March 2010. Since the completion of the examination a number of initiatives have been developed and implemented which address the referenced matters, including: strengthening the Bank’s liquidity position and developing improved liquidity analysis and reporting; improving its credit underwriting and monitoring processes; and utilizing significant resources to address its problem loan portfolio in order to reduce the total level of under-performing loans. As noted below, DCBF has also engaged a national recognized consulting firm to provide assistance with respect to capital planning for DCBF and the Bank.

Board Chair Vicki Lewis and Interim President and Chief Executive Officer Dave Folkwein have stated that they look forward to continuing working closely with regulatory agencies to address and resolve the issues facing the Bank, and have already taken significant steps toward addressing and resolving the matters contained in the Agreement and Consent Order. Mr. Folkwein noted, “We are all dedicated to continuing to work hard and to put in long hours to resolve the issues facing the Bank and DCBF in tandem with our regulatory partners. The banking industry is particularly challenged by the current economy, and we will continue to address those challenges head-on.”

Mr. Folkwein added, “The Bank has aggressively managed its problem loan portfolio and as a whole have added significantly to our reserve position which now stands at 2.84% at September 30, 2010. Our customers’ deposits remain insured to the maximum provided by law through the FDIC. Our customers will continue to receive outstanding customer support and fast, friendly service to which they are accustomed.”

The Agreement and Consent Order also provide that The Bank may not declare or pay dividends to DCBF without the prior approval of the FDIC and ODFI. And, as announced earlier this year by DCBF, without the prior approval of the Federal Reserve, DCBF may not declare or pay cash dividends, repurchase any of its shares, make payments on its trust preferred securities or incur or guarantee any debt.

As previously noted, The Bank is required to achieve a tier-1 capital ratio of not less than 9.0% and a total risk-based capital ratio of not less than 13% within 90 days of the effective date of the Agreement and Consent Order, and, to maintain those capital levels during the remaining term of the Agreement and the Consent Order. It may do so by, among other alternatives, raising additional capital, generating sufficient earnings, reducing the bank’s assets, or a combination thereof.

Management has also retained the services of Keefe, Bruyette & Woods (“KBW”), a nationally recognized capital markets specialist, to assist in the development of initiatives to increase the overall capital levels of the Bank and its parent, DCB Financial Corp. With the assistance of KBW and the completion of the initiatives already indentified, Management and the board are committed to meet the terms of the Agreement and the Consent Order on a timely basis. However, there can be no assurances that the Bank will be able to comply.

Additionally, the Bank is required to submit periodic progress reports to the ODFI and the FDIC regarding various aspects of the foregoing actions and requirements, and the Bank board has appointed a compliance committee to monitor and coordinate the Bank’s performance under the Agreement and Consent Order. The Agreement and Consent Order will remain in effect until modified or terminated by the ODFI and/or the FDIC. The Bank entered into the Agreement and the Consent Order without admitting or denying any unsafe or unsound banking practices, violations, rule or regulation.

The Bank remains an eligible depository for public funds as defined by Ohio Revised Code, and, its customers retain full availability of deposit insurance through the FDIC to the maximum provided by law.

Information regarding FDIC insurance can be located at: http://www.fdic.gov/deposit/deposits/index.html

A copy of the Consent Order is attached as Exhibit 10.1, and a copy of the Agreement is attached as Exhibit 10.2, to this Current Report on Form 8-K. The above summary of the Consent Order and the Agreement is qualified in its entirety by reference to documents contained in those Exhibits, which are incorporated herein by this reference.

Item 9.01 Financial Statements and Exhibits


Exhibit
Number		Exhibit Description

	10.1	Consent Order

	10.2	Written Agreement

	99	Press Release Dated October 28, 2010

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
Date: October 28, 2010	By:	/s/ David J. Folkwein
		David J. Folkwein
		Interim-President and CEO

EXHIBIT INDEX


Exhibit
Number		Exhibit Description

	10.1	Consent Order by and between The Delaware County Bank & Trust Company, Lewis Center, Ohio and the Federal Deposit Insurance Corporation, dated effective October 28, 2010

	10.2	Written Agreement by and among the Delaware County Bank & Trust Company, Lewis Center, Ohio, and State of Ohio, Division of Financial Institutions, Columbus, Ohio, dated effective October 28, 2010

	99	Press release dated October 28, 2010 announcing entry into definitive material agreement

Business of DCB Financial Corp

DCB Financial Corp (the “Corporation”) is a financial holding company formed under the laws of the State of Ohio. The Corporation is the parent of The Delaware County Bank & Trust Company, (the “Bank”) a state-chartered commercial bank. The Bank conducts business from its main offices at 110 Riverbend Avenue in Lewis Center, Ohio, and through its 18 full-service branch offices located in Delaware County, Ohio and surrounding communities. 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, night depository facilities and trust and personalized wealth management services. The Bank also provides cash management, bond registrar and payment services. The Bank offers data processing services to other financial institutions; however such services are not a significant part of its current operations or revenues.

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 the audited consolidated financial statements contained in the Corporation’s 2009 Annual Report to Shareholders. 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.

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, as they relate 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.

EX-10.1 2 c07425exv10w1.htm EXHIBIT 10.1 Exhibit 10.1

Exhibit 10.1

FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.


	)
In the Matter of	)	CONSENT ORDER
	)
	)
THE DELAWARE COUNTY BANK	)
AND TRUST COMPANY	)
LEWIS CENTER, OHIO	)	FDIC-10-559b
	)
	)
(STATE CHARTERED	)
INSURED NONMEMBER BANK)	)
	)

The Delaware County Bank and Trust Company, Lewis Center, Ohio (“Bank”), having been advised of its right to a NOTICE OF CHARGES AND OF HEARING detailing the unsafe or unsound banking practices alleged to have been committed by the Bank, and of its right to a hearing on the charges under section 8(b) of the Federal Deposit Insurance Act (“Act”), 12 U.S.C. § 1818(b), and having waived those rights, by and through its duly elected and acting Board of Directors (“Board”), entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF A CONSENT ORDER (“STIPULATION”) with representatives of the Federal Deposit Insurance Corporation (“FDIC”) dated October 22, 2010. Pursuant to the STIPULATION, the Bank has consented, without admitting or denying the charges of unsafe or unsound banking practices, and without admitting or denying any violations of law, rule, or regulation, to the issuance of a CONSENT ORDER (“ORDER”) by the FDIC.

The FDIC has considered this matter and determined to accept the Stipulation.

Therefore, the FDIC HEREBY ORDERS that the Bank, its institution-affiliated parties, as that term is defined in section 3(u) of the Act, 12 U.S.C. § 1813(u), and its successors and assigns take the following affirmative action as follows:

MANAGEMENT

1. (a) Within 60 days from the effective date of this ORDER, the Bank shall have and retain qualified management. Management shall be provided the necessary written authority to implement the provisions of this ORDER. The qualifications of management shall be assessed on its ability to:

	(i)		comply with the requirements of this ORDER;

	(ii)		operate the Bank in a safe and sound manner;

	(iii)		comply with applicable laws, rules, and regulations; and

	(iv)		restore all aspects of the Bank to a safe and sound condition, including capital adequacy, asset quality, management effectiveness, earnings, liquidity, and sensitivity to interest rate risk.

(b) During the life of this ORDER, prior to the addition of any individual to the board of directors or the employment of any individual as a senior executive officer, the Bank shall request and obtain the written approval of the Regional Director of the FDIC, Chicago Region (“Regional Director”). For purposes of this ORDER, “senior executive officer” is defined as in section 32 of the Act (“section 32”), 12 U.S.C. § 1831(i), and section 303.101(b) of the FDIC Rules and Regulations, 12 C.F.R. § 303.101(b).

CAPITAL

2. (a) Within 90 days from the effective date of this ORDER, the Bank shall have and maintain its level of Tier 1 capital as a percentage of its total assets (“capital ratio”) at a minimum of 9 percent and its level of qualifying total capital as a percentage of risk- weighted assets (“total risk based capital ratio”) at a minimum of 13 percent. For purposes of this ORDER, Tier 1 capital, qualifying total capital, total assets, and risk-weighted assets shall be calculated in accordance with Part 325 of the FDIC Rules and Regulations (“Part 325”), 12 C.F.R. Part 325.

(b) If, while this ORDER is in effect, the Bank increases capital by the sale of new securities, the board of directors of the Bank shall adopt and implement a plan for the sale of such additional securities, including the voting of any shares owned or proxies held by or controlled by them in favor of said plan. Should the implementation of the plan involve public distribution of Bank securities, including a distribution limited only to the Bank’s existing shareholders, the Bank shall prepare detailed offering materials fully describing the securities being offered, including an accurate description of the financial condition of the Bank and the circumstances giving rise to the offering, and other material disclosures necessary to comply with Federal securities laws. Prior to the implementation of the plan and, in any event, not less than 20 days prior to the dissemination of such materials, the materials used in the sale of the securities shall be submitted to the FDIC Registration and Disclosure Section, 550 17th Street, N.W., Washington, D.C. 20429 for review. Any changes requested to be made in the materials by the FDIC shall be made prior to their dissemination.

(c) In complying with the provisions of this paragraph, the Bank shall provide to any subscriber and/or purchaser of Bank securities written notice of any planned or existing development or other changes which are materially different from the information reflected in any offering materials used in connection with the sale of Bank securities. The written notice required by this paragraph shall be furnished within 10 calendar days of the date any material development or change was planned or occurred, whichever is earlier, and shall be furnished to every purchaser and/or subscriber of the Bank’s original offering materials.

LOSS CHARGE-OFF

3. As of the effective date of this Order the Bank shall charge off from its books and records any asset classified “Loss” in the FDIC’s Report of Examination dated March 29, 2010 (“ROE”).

PROHIBITION OF ADDITIONAL LOANS TO CLASSIFIED BORROWERS

4. (a) As of the effective date of this ORDER, the Bank shall not extend, directly or indirectly, any additional credit to, or for the benefit of, any borrower who is already obligated in any manner to the Bank on any extensions of credit (including any portion thereof) that has been charged off the books of the Bank or classified “Loss” in the ROE, so long as such credit remains uncollected.

(b) As of the effective date of this ORDER, the Bank shall not extend, directly or indirectly, any additional credit to, or for the benefit of, any borrower whose loan or other credit has been classified “Substandard”, “Doubtful”, or is listed for Special Mention in the ROE, and is uncollected unless the Bank’s board of directors has adopted, prior to such extension of credit, a detailed written statement giving the reasons why such extension of credit is in the best interest of the Bank. A copy of the statement shall be signed by each director, and incorporated in the minutes of the applicable board of directors’ meeting. A copy of the statement shall be placed in the appropriate loan file.

REDUCTION OF DELINQUENCIES AND CLASSIFIED ASSETS

5. (a) Within 60 days from the effective date of this ORDER, the Bank shall adopt, implement, and adhere to, a written plan to reduce the Bank’s risk position in each asset in excess of $250,000 which is more than 30 days delinquent or classified “Substandard” or “Doubtful” in the ROE. The plan shall include, but not be limited to, provisions which:

	(i)		Prohibit an extension of credit for the payment of interest, unless the Board provides, in writing, a detailed explanation of why the extension is in the best interest of the Bank;

	(ii)		Provide for review of the current financial condition of each delinquent or classified borrower, including a review of borrower cash flow and collateral value;

	(iii)		Delineate areas of responsibility for loan officers;

	(iv)		Establish dollar levels to which the Bank shall reduce delinquencies and classified assets within 6 and 12 months from the effective date of this ORDER; and

	(v)		Provide for the submission of monthly written progress reports to the Bank’s board of directors for review and notation in minutes of the meetings of the board of directors.

(b) As used in this paragraph, “reduce” means to: (1) collect; (2) charge off; (3) sell; or (4) improve the quality of such assets so as to warrant removal of any adverse classification by the FDIC.

(d) While this ORDER remains in effect, the plan shall be revised to include assets which become more than 30 days delinquent after the effective date of this ORDER or are adversely classified at any subsequent examinations.

LIQUIDITY PLAN

6. (a) Within 60 days from the date of this Order, the Bank shall formulate and adopt a plan for improving liquidity and reducing the dependency upon volatile liabilities to fund loans and long-term assets (“Liquidity Plan”). The Liquidity Plan shall be forwarded to the Regional Director for review and comment. The Liquidity Plan shall include, but not be limited to, the following:

	(i)		Target percentage levels to which the Bank will reduce the volume of loans and other long-term assets which are funded by potentially volatile liabilities within 6 and 12 months from the date of this Order; and

	(ii)		A contingency funding strategy that conforms to guidance in the FDIC’s Financial Institution Letter (“FIL”) 84-2008, Liquidity Risk Management, and FIL 13-2010, Funding and Liquidity Risk Management.

(b) The contingency funding strategy identified in the Liquidity Plan should, at minimum:

	(i)		Define responsibilities and decision-making authority;

	(ii)		Include an assessment of possible liquidity events;

	(iii)		Detail how management will monitor for liquidity events, typically through stress testing of various scenarios;

	(iv)		Assess the potential for triggering restrictions on access to brokered and high cost deposits;

	(v)		Identify back-up facilities, conditions and limitations to their use, and circumstances where the Bank might use such facilities; and

	(vi)		Ensure access is readily available to back-up facilities.

DIVIDEND RESTRICTION

7. As of the effective date of this ORDER, the Bank shall not declare or pay any dividend without the prior written consent of the Regional Director.

ALLOWANCE FOR LOANS AND LEASE LOSSES

8. (a) After the effective date of this ORDER, and prior to the submission of all Reports of Condition and Income required by the FDIC, the board of directors of the Bank shall review the adequacy of the Bank’s Allowance for Loan and Lease Losses (“ALLL”), provide for an adequate ALLL, and accurately report the same. The minutes of the board meeting at which such review is undertaken shall indicate the findings of the review, the amount of increase in the ALLL recommended, if any, and the basis for determination of the amount of ALLL provided. In making these determinations, the board of directors shall consider the FFIEC Instructions for the Reports of Condition and Income and any analysis of the Bank’s ALLL provided by the FDIC.

(b) ALLL entries required by this paragraph shall be made prior to any capital determinations required by this ORDER.

AFFILIATE TRANSACTIONS

9. (a) As of the effective date of this ORDER, the Bank shall not, directly or indirectly enter into, participate in, or otherwise engage in or allow any extension of credit to any “affiliate” of the Bank or directly or indirectly enter into, participate in, or otherwise engage in or allow any “covered transaction” or “transaction covered” with any “affiliate” of the Bank regardless of whether such “extension of credit”, “covered transaction” or “transaction covered” would be prohibited, limited or otherwise regulated by Sections 23A or 23B of the Federal Reserve Act, 12 U.S.C. §§ 371c and 371c-l (“Sections 23A and 23B”).

(b) This section shall not apply to transactions with affiliates in the ordinary course of business in the areas of data processing; tax allocation; clerical services; or financial advisory and accounting services. These transactions remain subject to the provisions of Sections 23A and 23B.

(c) For purposes of this ORDER, “extension or credit” shall be defined as set forth at 12 C.F.R. § 215.3 and “affiliate,” “covered transaction” and “transaction covered” shall have the meanings set forth in Sections 23A and 23B.

PROFIT PLAN AND BUDGET

10. (a) Within 60 days from the effective date of this ORDER, the Bank shall adopt, implement, and adhere to a written profit plan and a realistic, comprehensive budget for all categories of income and expense for calendar years 2011 and 2012. The plans required by this paragraph shall contain formal goals and strategies, consistent with sound banking practices, to reduce discretionary expenses and to improve the Bank’s overall earnings, and shall contain a description of the operating assumptions that form the basis for major projected income and expense components.

(b) The written profit plan shall address, at a minimum:

	(i)		Realistic and comprehensive budgets;

	(ii)		A budget review process to monitor the income and expenses of the Bank to compare actual figures with budgetary projections;

	(iii)		Identification of major areas in, and means by which, earnings will be improved; and

	(iv)		A description of the operating assumptions that form the basis for and adequately support major projected income and expense components.

(c) Within 30 days from the end of each calendar quarter following completion of the profit plans and budgets required by this paragraph, the Bank’s board of directors shall evaluate the Bank’s actual performance in relation to the plan and budget, record the results of the evaluation, and note any actions taken by the Bank in the minutes of the board of directors’ meeting at which such evaluation is undertaken.

(d) A written profit plan and budget shall be prepared for each calendar year for which this ORDER is in effect.

(e) Copies of the plans and budgets required by this paragraph shall be submitted to the Regional Director.

STRATEGIC PLAN

11. (a) Within 60 days from the effective date of this ORDER, the Bank shall formulate, adopt, and implement a realistic, comprehensive strategic plan. The plan required by this paragraph shall contain an assessment of the Bank’s current financial condition and market area, and a description of the operating assumptions that form the basis for major projected income and expense components. The written strategic plan shall address, at a minimum:

	(i)		Strategies for pricing policies and asset/liability management; and

	(ii)		Financial goals, including pro forma statements for asset growth, capital adequacy, and earnings.

(b) Within 30 days from the end of each calendar quarter following the effective date of this ORDER, the Bank’s board of directors shall evaluate the Bank’s actual performance in relation to the strategic plan required by this paragraph and record the results of the evaluation, and any actions taken by the Bank, in the minutes of the board of directors’ meeting at which such evaluation is undertaken.

(c) The strategic plan required by this ORDER shall be revised 30 days prior to the end of each calendar year during which this ORDER is in effect. Thereafter the Bank shall approve the revised plan, which approval shall be recorded in the minutes of a board of directors’ meeting, and the Bank shall implement and adhere to the revised plan.

(d) Copies of the plan and revisions thereto required by this paragraph shall be submitted to the Regional Director.

CONCENTRATIONS OF CREDIT

12. Within 60 days from the effective date of this ORDER, the Bank shall formulate adopt and implement a written plan to manage each of the concentrations of credit identified on page 53 of the ROE in a safe and sound manner. At a minimum the plan must provide for written procedures for the ongoing measurement and monitoring of the concentrations of credit, and a limit on concentrations commensurate with the Bank’s capital position, safe and sound banking practices, and the overall risk profile of the Bank.

CORRECTION OF VIOLATIONS

13. (a) Within 30 days from the effective date of this ORDER, the Bank shall eliminate and/or correct all violations of law, rule, and regulations listed on pages 22-25 of the ROE.

(b) Within 60 days from the effective date of this ORDER, the board shall receive training regarding laws and regulations governing transactions with affiliates, and within 30 days of completion of such training, the Board shall submit written certification evidencing the training to the Regional Director.

AUDIT

14. Within 60 days from the effective date of this ORDER, the Board shall execute an engagement letter to hire an accounting firm to complete an audit of the intercompany accounts between and among the Bank, DCB Financial, DataTasx and DCB Title Services, LLC (the “Intercompany Audit”). Within sixty (60) days from the date of the execution of the engagement letter with the accounting firm, the Bank shall have the Intercompany Audit completed. At a minimum, the Intercompany Audit should include a thorough review of the appropriateness of accounting methods and procedures used to allocate revenue and expenses among the Bank’s affiliated organizations a reconcilement of intercompany accounts for 2009 and 2010. The Bank’s practices and procedures reviewed in the Intercompany Audit should be in accordance with GAAP and regulatory guidance. The results of the Intercompany Audit shall be sent to the Regional Director within five (5) days of receipt by the Bank.

(b) Within thirty (30) days of the date the Bank receives the Intercompany Audit, the Bank shall make the appropriate adjustments to the Bank’s balance sheet or income statement to reflect the appropriate accounting treatment according to the findings in the Intercompany Audit.

NOTIFICATION TO SHAREHOLDER

15. Following the effective date of this ORDER, the Bank shall send to its shareholder a copy of this ORDER: (1) in conjunction with the Bank’s next shareholder communication; or (2) in conjunction with its notice or proxy statement preceding the Bank’s next shareholder meeting.

MONITORING

16. Within 30 days from the effective date of this ORDER, the Bank’s board of directors shall have in place a program that will provide for monitoring of the Bank’s compliance with this ORDER.

PROGRESS REPORTS

17. Within 30 days from the end of each calendar quarter following the effective date of this ORDER, the Bank shall furnish to the Regional Director written progress reports signed by each member of the Bank’s board of directors, detailing the actions taken to secure compliance with the ORDER and the results thereof.

This ORDER shall be effective upon its issuance by the FDIC.

The provisions of this ORDER shall be binding upon the Bank, its institution-affiliated parties, and any successors and assigns thereof.

The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provision has been modified, terminated, suspended, or set aside by the FDIC.

Pursuant to delegated authority.

Dated: October 27th, 2010.


FEDERAL DEPOSIT INSURANCE CORPORATION

/s/ M. Anthony Lowe M. Anthony Lowe
Regional Director
Chicago Regional Office

EX-10.2 3 c07425exv10w2.htm EXHIBIT 10.2 Exhibit 10.2

Exhibit 10.2

STATE OF OHIO
DIVISION OF FINANCIAL INSTITUTIONS
COLUMBUS, OHIO

Written Agreement by and among

DELAWARE COUNTY BANK & TRUST COMPANY
Lewis Center, Ohio
and
STATE OF OHIO
DIVISION OF FINANCIAL INSTITUTIONS
Columbus, Ohio

WHEREAS, pursuant to Section 1121.02 of the Ohio Revised Code, the Superintendent of the Division of Financial Institutions (the “Division”) has the duty to supervise and regulate banks chartered under the laws of the State of Ohio and in recognition of its goal to maintain the financial soundness of Delaware County Bank & Trust Company, Lewis Center, Ohio (the “Bank”), an Ohio-chartered commercial bank, the Division has agreed to enter into this Written Agreement (the “Agreement”) with the Bank; and

WHEREAS, without admitting or denying any allegations of unsafe or unsound banking practices, and without admitting or denying any violations of law, rule or regulation, the board of directors of the Bank (the “Board”) on behalf of the Bank hereby consent to and execute this Agreement, which includes consenting to compliance with each and every provision of this Agreement by the Bank and its regulated persons, as defined in Ohio Revised Code § 1121.01(B).

NOW, THEREFORE, the Bank and the Division agree as follows:

Board Oversight/Management

1. Within sixty (60) days of the date this Agreement is executed and served upon the Bank (hereinafter the “Effective Date”), the Bank shall have and retain qualified management, which shall include an evaluation by the Board of the Bank’s financial accounting staffing needs and the Board taking any necessary action to adequately staff the Bank with qualified, experienced personnel. Management shall be provided the necessary written authority to implement the provisions of this Agreement. The qualifications of management shall be assessed on the ability to:

(a) Comply with the requirements of this Agreement;

(b) Operate the Bank in a safe and sound manner;

(d) Restore all aspects of the Bank to a safe and sound condition, including capital adequacy, asset quality, management effectiveness, earnings, liquidity, and sensitivity to interest rate risk.

2. (a) In appointing any new director or senior executive officer, or changing the responsibilities of any senior executive officer so that the officer would assume a different senior executive officer position, the Bank shall provide written notice to the Division. For purposes of this Agreement, such notice shall comply with the notice provisions of section 32 of the FDI Act (12 U.S.C. § 1831i) and Subpart H of Regulation Y of the Board of Governors (12 C.F.R. §§ 225.71 et seq.). The Bank shall not appoint any individual to its board of directors or employ or change the responsibilities of any individual as a senior executive officer if the Division notifies the Bank of disapproval within the time limits prescribed by Subpart 1-1 of Regulation Y.

(b) The Bank shall comply with the restrictions on indemnification set forth in Ohio Revised Code § 1701.13(E). The Bank shall further comply with any additional restrictions on indemnification and severance payments set forth in section 18(k) of the FDI Act (12 U.S.C. § 1828(k)) and Part 359 of the Federal Deposit Insurance Corporation’s regulations (12 C.F.R. Part 359) and remain vigilant of any concerns related to indemnification and severance that may impact the safety and soundness of the Bank.

Affiliate Transactions

3. The Bank shall ensure that it complies with Ohio Revised Code §§ 1109.53 through 1109.56 and Sections 23A and 23B of the Federal Reserve Act, 12 U.S.C. §§ 371c and 371c-1 regarding appropriate transactions with affiliates.

4. Within sixty (60) days of the Effective Date of this Agreement, the board shall receive training regarding laws and regulations governing transactions with affiliates. The Board shall submit written certification evidencing this training to the Division by December 31, 2010.

Financial Reporting and Recordkeeping

5. The Bank shall ensure that it has corrected and that it maintains accurate accounting and reporting in accordance with Generally Accepted Accounting Principles (“GAAP”) and other regulatory guidance, including but not limited to compliance with Ohio Revised Code §§ 1109.53 through 1109.56 and Sections 23A and 23B of the Federal Reserve Act, 12 U.S.C. §§ 371c and 371c-1 regarding appropriate transactions with affiliates.

Audit

6. (a) Within sixty (60) days from the Effective Date of this Agreement, the Board shall execute an engagement letter to hire an accounting firm to complete an audit of the intercompany accounts between and among the Bank, DCB Financial, DataTasx and DCB Title Services, LLC (the “Intercompany Audit”). Within sixty (60) days from the date of the execution of the engagement letter with the accounting firm, the Bank shall have the Intercompany Audit completed. At a minimum, the Intercompany Audit should include a thorough review of the appropriateness of accounting methods and procedures used to allocate revenue and expenses among the Bank’s affiliated organizations a reconcilement of intercompany accounts for 2009 and 2010. The Bank’s practices and procedures reviewed in the Intercompany Audit should be in accordance with GAAP and regulatory guidance. The results of the Intercompany Audit shall be sent to the Division within five (5) days of receipt by the Bank.

Asset Improvement

7. (a) Within sixty (60) days of the Effective Date of this Agreement, the Bank shall submit to the Division an acceptable written plan designed to improve the Bank’s position through repayment, amortization, liquidation, additional collateral, or other means on each loan or other asset in excess of two hundred fifty thousand dollars ($250,000) including Other Real Estate Owned (“OREO”) (“Asset Improvement Plans”), that:

(i) Is past due as to principal or interest more than thirty (30) days as of the date of this Agreement;

(ii) Is on the Bank’s problem loan list; or

(iii) Was adversely classified in the Report of Examination.

(b) In developing the Asset Improvement Plan for each loan, the Bank shall, at a minimum, review, analyze, and document the financial position of the borrower, including source of repayment, repayment ability, and alternative repayment sources, as well as the value and accessibility of any pledged or assigned collateral, and any possible actions to improve the Bank’s collateral position.

(c) The Bank shall subsequently prepare an Asset Improvement Plan within thirty (30) days of the date that any additional loan or other asset in excess of $250,000, including OREO, that:

(i) Is a past due loan as to principal or interest for more than thirty (30) days;

(ii) Is a loan on the Bank’s problem loan list; or

(iii) Is a loan adversely classified in any subsequent Report of Examination of the Bank.

(d) Within thirty (30) days after the end of each calendar quarter after the initial Asset Improvement Plans, the Bank shall submit a written progress report to the Division to update each Asset Improvement Plan. The progress reports shall include, at a minimum, the following information:

(i) The carrying value of the loan or other asset;

(ii) Changes in the nature and value of supporting collateral;

(iii) A copy of the Bank’s current problem loan list;

(iv) The Bank’s extension report; and

(v) The Bank’s past due/non-accrual report.

The Board shall review the Asset Improvement Plan progress reports before submission to the Division and shall document the review of these reports in the monthly Board meeting minutes.

(e) As of the Effective Date of this Agreement, the Bank shall not extend, directly or indirectly, any additional credit to, or for the benefit of, any borrower who is already obligated in any manner to the Bank on any extensions of credit (including any portion thereof) that has been charged off the books of the Bank or classified “Loss” in the Report of Examination, so long as such credit remains uncollected.

(f) As of the Effective Date of this Agreement, the Bank shall not extend, directly or indirectly, any additional credit to, or for the benefit of, any borrower whose loan or other credit has been classified “Substandard”, “Doubtful”, or is listed as Special Mention in the Report of Examination, and is uncollected unless the Board has adopted, prior to such extension of credit, a detailed written statement giving the reasons why such extension of credit is in the best interest of the Bank. A copy of the statement shall be signed by each Director, and incorporated in the minutes of the applicable Board meeting. A copy of the statement shall be placed in the appropriate loan file.

(g) Within sixty (60) days from the Effective Date of this Agreement, the Bank shall formulate adopt and implement a written plan to manage in a safe and sound manner each of the concentrations of credit identified in the Report of Examination. At a minimum the plan must provide for written procedures for the ongoing measurement and monitoring of the concentrations of credit, and a limit on concentrations commensurate with the Bank’s capital position, safe and sound banking practices, and the overall risk profile of the Bank.

Allowance for Loan and Lease Losses

8. (a) On a quarterly basis, the Board shall review the adequacy of the Bank’s allowance for loan and lease losses (“ALLL”), provide for an adequate ALLL and accurately report the same. The minutes of the Board meeting at which such review is undertaken shall indicate the findings of the review, the amount of increase in the ALLL recommended, if any, and the basis for determination of the amount of ALLL provided. In making these determinations, the Board shall consider regulatory reporting instructions and relevant supervisory guidance, including the Interagency Policy Statements on the Allowance for Loan and Lease Losses, dated July 2, 2001 and December 13, 2006 and any analysis of the Bank’s ALLL provided by the Division. The Bank shall have an ongoing obligation to provide for an adequate ALLL and accurately report same until this Agreement is terminated.

(b) ALLL entries required by paragraph eight (8) shall be made prior to any capital determinations required by this Agreement.

Capital Plan

9. (a) Within ninety (90) days of the Effective Date of this Agreement, the Bank shall attain a minimum nine percent (9%) Tier 1 capital ratio. The Bank’s Tier 1 capital ratio shall remain above nine percent (9%) at all times while this Agreement is in effect.

(b) If, while this Agreement is in effect, the Bank increases capital by the sale of new securities, the Board shall adopt and implement a plan for the sale of such additional securities, including the voting of any shares owned or proxies held by or controlled by them in favor of said plan. Should the implementation of the plan involve public distribution of Bank securities, including a distribution limited only to the Bank’s existing shareholders, the Bank shall prepare detailed offering materials fully describing the securities being offered, including an accurate description of the financial condition of the Bank and the circumstances giving rise to the offering, and other material disclosures necessary to comply with Federal securities laws. Prior to the implementation of the plan and, in any event, not less than 20 days prior to the dissemination of such materials, the materials used in the sale of the securities shall be submitted to the Division for review. Any changes requested to be made in the materials by the Division shall be made prior to their dissemination.

10. In the event any of the Bank’s Tier 1 capital ratios fall below nine percent (9%) while this Agreement is in effect, the Bank shall notify the Division in writing no more than thirty (30) days after the end of any quarter during which any capital ratio falls below this required percentage. Contemporaneously with the notification, the Bank shall submit an acceptable written plan detailing the Bank’s plan to increase the capital ratio at or above nine percent (9%).

Strategic Plan and Budget

11. (a) Within sixty (60) days of the Effective Date of this Agreement, the Bank shall submit a strategic plan to the Division to improve the Bank’s financial condition and earnings (the “Strategic Plan”). The Strategic Plan shall include, but not be limited to the following:

(i) Identification of the major areas where, and means by which, the Board will seek to improve the Bank’s operating performance;

(ii) An overview of the strategies that will be used to improve the Bank’s areas of operating performance designated by the Board, including but not limited to strategies for pricing policies and asset/liability management, as well as financial goals, including pro forma statements for asset growth, capital adequacy, and earnings;

(iii) A realistic and comprehensive budget for calendar years 2011 and 2012, including income statement and balance sheet projections; and

(iv) A description of the operating assumptions that form the basis for, and adequately support, major projected income, expense, and balance sheet components.

(b) Thereafter, for each calendar year that this Agreement is in effect, the Bank shall submit a Strategic Plan to the Division at least thirty (30) days prior to the beginning of the calendar year.

Dividends

12. (a) The Bank shall not declare or pay any dividends without the prior written approval of the Division as required under Section 1107.15 of Ohio Revised Code.

(b) The Bank shall submit all requests for prior approval of dividends at least thirty (30) days prior to the proposed dividend declaration date. All dividend requests shall include current and projected information, as appropriate, on the Bank’s capital, asset quality, earnings and ALLL needs. The request shall also identify the source(s) of funds for the proposed payment or distribution and any other information necessary for the Division to consider the Bank’s request.

Liquidity

13. (a) On or before December 31, 2010, the Bank shall submit a written plan to the Division detailing plans to reduce reliance on public funds and brokered deposits, as well as a contingency funding strategy that conforms to guidance in the FDIC’s Financial Institution Letter (“FIL”) 84-2008, Liquidity Risk Management, and FIL 13-2010, Funding and Liquidity Risk Management (“Liquidity Plan”).

(b) The contingency funding strategy identified in the Liquidity Plan should, at minimum:

(i) Define responsibilities and decision-making authority;

(ii) Include an assessment of possible liquidity events;

(iii) Detail how management will monitor for liquidity events, typically through stress testing of various scenarios;

(iv) Assess the potential for triggering restrictions on access to brokered and high cost deposits;

(v) Identify back-up facilities, conditions and limitations to their use, and circumstances where the Bank might use such facilities; and

(vi) Ensure access is readily available to back-up facilities.

Compliance with the Agreement

14. (a) Within ten (10) days of the Effective Date of this Agreement, the Board shall appoint a committee to monitor and coordinate the Bank’s compliance with the provisions of this Agreement (“Compliance Committee”). The Compliance Committee shall be comprised of a majority of outside directors who are not executive officers or principal shareholders of the Bank, as defined in sections 215.2(e)(l) and 215.2(m)(l) of Regulation 0 of the Board of Governors (12 C.F.R. §§ 215.2(e)(I) and 215.2(m)(I)). The Compliance Committee shall meet monthly, or more often as necessary, prepare detailed minutes of each committee meeting, and report its findings to the Board on a monthly basis.

(b) The Bank shall submit written progress reports to the Division detailing the form and manner of all actions taken to secure compliance with this Agreement and the results thereof within thirty (30) days after the end of each calendar quarter following the date of this Agreement.

Approval and Implementation of Plans and Programs

15. (a) The Bank and, as applicable, shall submit all written plans required by this Agreement that are acceptable to the Division within the applicable time periods set forth in this Agreement.

(b) Within ten (10) days of approval by the Division, the Bank shall adopt the approved plans and program. Upon adoption, the Bank shall promptly implement the approved plans and programs and thereafter fully comply with them.

(c) During the term of this Agreement, the approved plans and programs shall not be amended or rescinded without the prior written approval of the Division.

Communications

16. All communications regarding this Agreement shall be sent to:

	(a)		Carolyn L. Bradford Superintendent Ohio Division of Financial Institutions 77 S. High Street, 21^st Floor Columbus, Ohio 43215-6120

	(b)		David Folkwein Interim President and CEO Delaware County Bank & Trust Company 110 Riverbend Avenue Lewis Center, Ohio 43035

Miscellaneous

17. Notwithstanding any provision of this Agreement, the Division may, in its sole discretion, grant written extensions of time to the Bank to comply with any provision of this Agreement.

18. The provisions of this Agreement shall be binding upon the Bank and its successors and assigns. Failure to comply with this Agreement could result in further supervisory action against the bank and or any of its regulated persons, including but not limited to the issuance of a cease and desist order pursuant to Section 1121.32 of the Ohio Revised Code, removal from office in accordance with Sections 1121.33 and/or 1121.34 of the Ohio Revised Code and/or civil monetary penalties. Pursuant to Ohio Revised Code § 1121.35, the Division has authority to order that the Bank pay a civil penalty of not more than five thousand dollars ($5,000) per day for each day the Bank fails to comply with the terms of this Agreement. The Division may also order any regulated person, including members of the board of directors, to pay a civil penalty.

Pursuant to Ohio Revised Code Section 1121.35(A)(1)(d), the Division has the authority to order the Bank and any regulated person, including members of the board of directors, to pay a civil penalty of not more than five thousand dollars ($5,000) per day for each day the Bank and/or the regulated person fails to comply with the terms of this. The Division also has the authority pursuant to Ohio Revised Code Section 1121.35(A)(2) to order the Bank and/or any regulated person to pay a civil penalty of not more than twenty-five thousand ($25,000) per day if the failure to comply with this Agreement is a pattern of misconduct, causes more than a minimal loss to the Bank, or if it results in a benefit to the regulated person. A regulated person, such as a member of the board of directors, is personally liable for the payment of any civil penalty, and the Bank may not pay any civil penalties on behalf of a regulated person pursuant to Ohio Revised Code Section 1121.35(E).

19. Each provision of this Agreement shall remain effective and enforceable until stayed, modified, terminated, or suspended in writing by the Division.

20. The provisions of this Agreement shall not bar, estop, or otherwise prevent the Division or any other federal or state agency from taking any other action affecting the Bank, or any of its current or former institution-affiliated parties and their successors and assigns.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the 25^th day of October, 2010. The Agreement will be effective immediately upon service of the Agreement on the Bank.

OHIO DEPARTMENT OF COMMERCE
DIVISION OF FINANCIAL INSTITUTIONS


By:		/s/ Carolyn L. Bradford Carolyn L. Bradford
		Superintendent

DELAWARE COUNTY BANK & TRUST CO.

The undersigned directors of the Delaware County Bank and Trust Co., as directors, each acknowledge that they have read the foregoing Agreement and without admitting or denying any allegations of unsafe or unsound banking practices, and without admitting or denying any violations of law, rule or regulation, approve and consent thereto on behalf of the Bank.


By :	/s/ David Folkwein Director David Folkwein	By:	/s/ Bart Johnson Director Bart Johnson

By:	/s/ Gerald Kremer	By:	/s/ Vicki Lewis

	Director Gerald Kremer		Director Vicki Lewis

By:	/s/ Edward Powers	By:	/s/ Mark Shipps

	Director Edward Powers		Director Mark Shipps

By:	/s/ Adam Stevenson	By:	/s/ Donald Wolf

	Director Adam Stevenson		Director Donald Wolf

EX-99 4 c07425exv99.htm EXHIBIT 99 Exhibit 99

EXHIBIT 99


FOR IMMEDIATE RELEASE		CONTACT: John A. Ustaszewski
Thursday, October 28, 2010		Chief Financial Officer
		(740) 657-7000

DCB FINANCIAL CORP ANNOUNCES
ENTRY INTO MATERIAL DEFINITIVE AGREEMENTS

LEWIS CENTER, Ohio — DCB Financial Corp (“DCBF”), a registered financial holding company and the parent holding company for The Delaware County Bank & Trust Company (the “Bank”) announces that the Bank has entered into a written agreement (the “Agreement”)with the Ohio Division of Financial Institutions (“ODFI”) and a Consent Order (the “Consent Order”) with the Federal Deposit Insurance Corporation (“FDIC”) effective October 28, 2010 which address matters pertaining to, among other things: management and operations of the Bank; credit risk management practices and credit administration policies and procedures; Bank actions with respect to problem assets; reserves for loan and lease losses; strengthening the capital position of the Bank; the strategic plan and budget for fiscal 2011; staffing; and submitting a funding contingency plan for the Bank that identifies available sources of liquidity and includes a plan for dealing with potential adverse economic and market conditions.

Mr. Folkwein added, “The Bank has aggressively managed its problem loan portfolio and as a whole have added significantly to our reserve position which now stands at 2.84% at September 30, 2010. Our customers’ deposits remain insured to the maximum provided by law through the FDIC. Our customers will continue to receive outstanding customer support and the fast, friendly service to which they are accustomed.”

Information regarding FDIC insurance can be located at: http://www.fdic.gov/deposit/deposits/index.html

About DCB Financial Corp

The DCB Financial Corp. (OTC Bulletin Board: DCBF) is a bank holding company headquartered in Lewis Center, Ohio. Through its affiliated companies, the DCB Financial Corp. has been providing a full range of financial services including checking, loans, savings, insurance and investment services to customers for 60 years. For more information about the DCB Financial Corp, please visit www.dcbfinancialcorp.com.

Forward-Looking Statements

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.

####

-----END PRIVACY-ENHANCED MESSAGE-----