-----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, SHfLgU3wWAd5teAaMVHy7GaOGrUNrinR2HKsLUfoNIOOeVrP/pUfZsEQZ3n96ECh i+GHWSVqR5AaZTfG9EEgyg== 0000950128-03-000947.txt : 20030814 0000950128-03-000947.hdr.sgml : 20030814 20030814164823 ACCESSION NUMBER: 0000950128-03-000947 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030814 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22387 FILM NUMBER: 03848426 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 10-Q 1 l02337ae10vq.txt DCB FINANCIAL CORP. 10-Q/QTR END 6-30-2003 Page 1 of 25 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, 2003 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 X No --------- ----------- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12B-2 of the Exchange Act). Yes No X --------- ----------- As of August 4, 2003, the latest practicable date, 3,934,760 shares of the registrant's no par value common stock were issued and outstanding. DCB FINANCIAL CORP FORM 10-Q QUARTER ENDED JUNE 30, 2003 - -------------------------------------------------------------------------------- Table of Contents PART I - FINANCIAL INFORMATION ITEM 1 - Financial Statements Page ---- Consolidated Balance Sheets................................................ 3 Consolidated Statements of Income and Comprehensive Income................. 4 Condensed Consolidated Statements of Cash Flows............................ 6 Notes to the Consolidated Financial Statements............................. 7 ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations....................................... 11 ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk........ 16 ITEM 4 - Controls and Procedures .......................................... 17 PART II - OTHER INFORMATION................................................ 18 SIGNATURES .............................................................. 20 DCB FINANCIAL CORP CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands) - -------------------------------------------------------------------------------- Item 1. Financial Statements --------------------
June 30, December 31, 2003 2002 ------------- -------------- (unaudited) ASSETS Cash and due from financial institutions $ 28,026 $ 28,622 Federal funds sold 1,285 3,881 ------------- -------------- Total cash and cash equivalents 29,311 32,503 Securities available for sale 90,531 96,477 Loans held for sale 3,602 6,442 Loans and leases receivable 388,042 370,581 Less allowance for loan and lease losses (4,302) (4,094) ------------- -------------- Net loans and leases receivable 383,740 366,487 Premises and equipment, net 11,776 12,615 Investment in unconsolidated affiliates 1,951 1,951 Accrued interest receivable and other assets 7,020 6,523 ------------- -------------- Total assets $ 527,931 $ 522,998 ============= ============== LIABILITIES Deposits Noninterest-bearing $ 82,880 $ 73,531 Interest-bearing 359,530 365,092 ------------- -------------- Total deposits 442,410 438,623 Federal funds purchased and other short-term borrowings 2,000 2,000 Federal Home Loan Bank advances 27,568 27,802 Accrued interest payable and other liabilities 7,192 2,045 ------------- -------------- Total liabilities 479,170 470,470 SHAREHOLDERS' EQUITY Common stock, no par value, 7,500,000 shares authorized, 4,273,200 shares issued at June 30, 2003 and December 31, 2002 3,780 3,780 Retained earnings 51,142 49,303 Treasury stock, 338,440 shares at June 30, 2003 and 104,966 shares at December 31, 2002, at cost (7,616) (2,152) Accumulated other comprehensive income 1,455 1,597 ------------- -------------- Total shareholders' equity 48,761 52,528 ------------- -------------- Total liabilities and shareholders' equity $ 527,931 $ 522,998 ============= ==============
- -------------------------------------------------------------------------------- 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, --------------------------------- --------------------------------- 2003 2002 2003 2002 --------------- -------------- -------------- --------------- INTEREST AND DIVIDEND INCOME Loans, including fees $ 5,735 $ 6,202 $ 11,529 $ 12,432 Taxable securities 729 1,490 1,562 3,002 Tax-exempt securities 163 148 313 287 Federal funds sold and other 22 12 56 30 --------------- -------------- -------------- --------------- Total interest income 6,649 7,852 13,460 15,751 INTEREST EXPENSE Deposits 1,635 2,263 3,478 4,560 Borrowings 224 285 433 642 --------------- -------------- -------------- --------------- Total interest expense 1,859 2,548 3,911 5,202 NET INTEREST INCOME 4,790 5,304 9,549 10,549 Provision for loan and lease losses 355 500 688 800 --------------- -------------- -------------- --------------- NET INTEREST INCOME AFTER PROVISION FOR lOAN AND LEASE LOSSES 4,435 4,804 8,861 9,749 NONINTEREST INCOME Service charges 787 757 1,476 1,456 Trust department income 152 116 307 301 Net gains on sales of securities 4 -- 17 15 Net gains on sale of real estate 293 -- 293 -- Net gains on sale of loans 391 179 877 380 Cash management fees 114 140 241 260 Data processing servicing fees 112 110 235 183 Other 178 205 387 348 --------------- -------------- -------------- --------------- 2,031 1,507 3,833 2,943 NONINTEREST EXPENSE Salaries and other employee benefits 2,141 2,186 4,206 4,376 Occupancy and equipment 987 1,049 1,966 1,839 Professional services 339 164 410 233 Advertising 65 100 143 198 Postage, freight and courier 96 116 169 251 Supplies 63 63 100 134 State franchise taxes 121 150 241 283 Other 877 697 1,518 1,421 --------------- -------------- -------------- --------------- 4,689 4,525 8,753 8,735 --------------- -------------- -------------- --------------- INCOME BEFORE INCOME TAXES 1,777 1,786 3,941 3,957 Income tax expense 569 618 1,235 1,334 --------------- -------------- -------------- --------------- NET INCOME $ 1,208 $ 1,168 $ 2,706 $ 2,623 =============== ============== ============== ===============
See notes to the consolidated financial statements. - -------------------------------------------------------------------------------- 4. DCB FINANCIAL CORP CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (Dollars in thousands, except per share data) - --------------------------------------------------------------------------------
Net income $ 1,208 $ 1,168 $ 2,706 $ 2,623 Less reclassification for realized gains on sale of securities included in operations, net of tax (3) - (11) (10) Unrealized gains (losses) on securities available for sale, net of tax (79) 544 (131) 202 ---------------- -------------- --------------- --------------- Comprehensive income $ 1,126 $ 1,712 $ 2,564 $ 2,815 =============== ============== ============== =============== Basic and diluted earnings per common share $ 0.31 $ 0.28 $ 0.67 $ 0.63 =============== ============== ============== ===============
- -------------------------------------------------------------------------------- See notes to the consolidated financial statements. 5. DCB FINANCIAL CORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) - --------------------------------------------------------------------------------
Six Months Ended June 30, --------------------------- 2003 2002 ------------ ----------- CASH FLOWS PROVIDED BY OPERATING ACTIVITIES $ 11,188 $ 3,404 CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES Securities available for sale Purchases (34,055) (24,560) Maturities, principal payments and calls 25,056 19,832 Sales 14,158 1,081 Securities held to maturity Purchases - (1,321) Maturities, principal payments and calls - 7,902 Net change in loans (17,064) (9,175) Proceeds from sale of real estate 340 - Premises and equipment expenditures (127) (645) ------------ ----------- Net cash flows used in investing activities (11,692) (6,886) CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES Net change in deposits 3,787 6,464 Net change in federal funds and other short-term borrowings - (2,174) Proceeds from Federal Home Loan Bank advances 7,031 7,000 Repayment of Federal Home Loan Bank advances (7,265) (2,694) Purchase of treasury stock (5,540) (201) Sale of treasury stock 67 27 Cash dividends paid (768) (668) ------------ --------- Net cash provided by (used in) financing activities (2,688) 7,754 ------------ ----------- Increase (decrease) in cash and cash equivalents (3,192) 4,272 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 32,503 17,945 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 29,311 $ 22,217 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for Interest on deposits and borrowings $ 3,972 $ 5,241 Income taxes $ 356 $ 2,583
- -------------------------------------------------------------------------------- See notes to the consolidated financial statements. 6. DCB FINANCIAL CORP NOTES TO CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) - -------------------------------------------------------------------------------- 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, 2003, and its results of operations and cash flows for the three and six month periods ended June 30, 2003 and 2002. 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 consolidated financial statements, and notes thereto, of the Corporation for the year ended December 31, 2002, included in its 2002 Annual Report. Refer to the accounting policies of the Corporation described in the notes to consolidated financial statements contained in the Corporation's 2002 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"). The financial statements of the Bank include accounts of its wholly-owned subsidiaries, DCB Corporation and 362 Corp. All significant intercompany accounts and transactions have been eliminated in consolidation. Management considers the Corporation to operate in one 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 common share is net income divided by the weighted average number of shares of common stock outstanding during the period. The weighted average number of common shares outstanding was 3,966,049 and 4,066,646 for the three and six months ended June 30, 2003. The weighted average number of common shares outstanding was 4,172,294 and 4,175,231 for the three and six months ended June 30, 2002. The Corporation had no potentially dilutive securities during the three and six month periods ending June 30, 2003 and 2002. 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 to the consolidated financial statements contained in the Corporation's 2002 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. - -------------------------------------------------------------------------------- 7. DCB FINANCIAL CORP NOTES TO CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) - -------------------------------------------------------------------------------- NOTE 2 - SECURITIES The amortized cost and estimated fair values of securities available for sale were as follows:
Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value ---- ----- ------ ----- --------------------June 30, 2003----------------- U.S. government agencies $ 27,677 $ 578 $ - $ 28,255 Corporate bonds 235 23 - 258 States and political subdivisions 18,472 831 (23) 19,280 Mortgage-backed and related securities 39,560 812 (34) 40,338 ---------- ---------- ----------- ---------- Total debt securities 85,944 2,244 (57) 88,131 Other securities 2,383 17 - 2,400 ---------- ---------- ---------- ---------- Total securities available for sale $ 88,327 $ 2,261 $ (57) $ 90,531 ========== ========== =========== ==========
Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value ---- ----- ------ ----- ------------------December 31, 2002--------------- U.S. government agencies $ 29,263 $ 735 $ (3) $ 29,995 States and political subdivisions 14,041 390 (6) 14,425 Corporate bonds 236 11 - 247 Mortgage-backed and related securities 48,177 1,291 (20) 49,448 ---------- ---------- ----------- ---------- Total debt securities 91,717 2,427 (29) 94,115 Other securities 2,341 31 (10) 2,362 ---------- ---------- ----------- ---------- Total securities available for sale $ 94,058 $ 2,458 $ (39) $ 96,477 ========== ========== =========== ==========
- -------------------------------------------------------------------------------- 8. DCB FINANICIAL CORP NOTES TO CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (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") and the Federal Home Loan Mortgage Corporation ("FHLMC"). At June 30, 2003, 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, 2003, 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 $ 2,349 $ 2,395 Due from one to five years 3,334 3,508 Due from five to ten years 23,227 23,700 Due after ten years 17,474 18,190 Mortgage-backed and related securities 39,560 40,338 ---------- ---------- $ 85,944 $ 88,131 ========== ==========
- -------------------------------------------------------------------------------- 9. DCB FINANCIAL CORP NOTES TO CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) - ------------------------------------------------------------------------------- NOTE 3 - LOANS AND LEASES RECEIVABLE Loans and leases receivable were as follows:
June 30, December 31, 2003 2002 ----------- ------------ Commercial and industrial $ 52,170 $ 45,543 Commercial real estate 145,515 144,646 Residential real estate and home equity 97,369 87,548 Real estate construction and land development 38,293 37,603 Consumer and credit card 48,773 48,409 Lease financing, net 5,219 6,412 ----------- ------------ 387,339 370,161 Add (deduct): Net deferred loan origination costs 1,221 1,132 Unearned income on leases (518) (712) ------------ ------------ Total loans and leases receivable $ 388,042 $ 370,581 ============ ============
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, ----------------------------- ----------------------------- 2003 2002 2003 2002 ------------ ------------ ------------ ------------ Beginning balance $ 4,226 $ 3,742 $ 4,094 $ 3,596 Provision for loan losses 355 500 688 800 Loans charged off (297) (476) (554) (668) Recoveries 18 27 74 65 ------------ ------------ ------------ ------------ Balance - June 30 $ 4,302 $ 3,793 $ 4,302 $ 3,793 ============ ============ ============ ============
Nonperforming loans were as follows:
June 30, December 31, 2003 2002 ---------------- ----------------- Loans past due 90 days or more and still accruing $ 1,426 $ 187 Nonaccrual loans 2,850 3,387 Impaired loans (most of which are included in nonperforming loans above) were as follows: Period-end loans with no allocated allowance for loan losses $ - $ 464 Period-end loans with allocated allowance for loan losses 2,413 3,735 ---------------- ----------------- Total $ 2,413 $ 4,199 ================ ================= Amount of the allowance for loan losses allocated $ 930 $ 1,088 ================ ================= Average of impaired loans during the period $ 3,551 $ 5,204 ================ =================
- -------------------------------------------------------------------------------- 10. DCB FINANICIAL 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, 2003 compared to December 31, 2002, and the consolidated results of operations for the three and six months ended June 30, 2003 compared to the same periods in 2002. This discussion is designed to provide shareholders with a more comprehensive review of the operating results and financial position than could be obtained from an examination of the 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. ANALYSIS OF FINANCIAL CONDITION The Corporation's assets totaled $527,931 at June 30, 2003, compared to $522,998 at December 31, 2002, an increase of $4,933, or .94%. The increase in assets was primarily the result of an increase in loans and leases receivable during the period, partially offset by a decrease in investment securities. Cash and cash equivalents decreased $3,192 from December 31, 2002 to June 30, 2003. - -------------------------------------------------------------------------------- 11. DCB FINANCIAL CORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- Total securities decreased $5,946, or 6.16%, from $96,477 at December 31, 2002 to $90,531 at June 30, 2003. The decrease was the result of the proceeds from sales, maturities, calls and principal repayments not being reinvested in order to fund loan growth. 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. Securities classified as available for sale at June 30, 2003 totaled $90,531, or 100% of the total securities portfolio. Management classifies securities as available for sale to provide the Corporation with the flexibility to move funds into loans as demand warrants. The mortgage-backed and related securities portfolio, at fair value totaling $40,338 at June 30, 2003, provides the Corporation with a constant cash flow stream from principal repayments and interest payments. The Corporation held no derivative securities or structured notes during any period presented. Total loan and lease receivables increased by $17,461, or 4.71%, from $370,581 at December 31, 2002 to $388,042 at June 30, 2003. The increase is attributed mainly to the continued growth of commercial and residential real estate loans. Other loan categories in which the Corporation participates, commercial, industrial, and consumer financing, remained relatively stable or experienced small declines 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 $3,787, or .86%, from $438,623 at December 31, 2002 to $442,410 at June 30, 2003. Noninterest-bearing deposits increased $9,349, or 12.71%, partially offset by interest-bearing deposits decreasing $5,562, or 1.52%. During the second quarter of 2003, the Corporation began offering free checking accounts to its customers which do not pay interest, which accounts for the change in the makeup of the deposit accounts. Lastly, the decrease in interest-bearing deposits was primarily in the Corporation's "Bank Investment" deposit accounts, which offers a variable interest rate tied to the 3 Month Treasury Bill. The Corporation replaced this product with other deposit account options. During 2003, the Board entered into an agreement with certain shareholders (the "shareholder group") whereby the Corporation acquired 237,274 of its common shares at an approximate total cost of $6,135 including approximately $427 of legal and other pre-tax period costs charged to operations. Pursuant to the agreement, the shareholder group also withdrew from a proxy contest and agreed to withdraw now and in the future from offering various proposals to change control of the Corporation through sale or otherwise. The Corporation recorded the acquired treasury shares at fair value. COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2003 AND JUNE 30, 2002 NET INCOME. Net income for the three months ended June 30, 2003 totaled $1,208, compared to net income of $1,168 for the same period in 2002. Earnings per share was $.31 for the three months ended June 30, 2003 compared to $.28 for the three months ended June 30, 2002. This increase in net income is mainly attributed to increased non-interest income and a decline in the provision for loan losses, partially offset by a decline in net interest margin. 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. - -------------------------------------------------------------------------------- 12. DCB FINANCIAL CORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- Net interest income was $4,790 for the three months ended June 30, 2003, compared to $5,304 for the same period in 2002. The $514 decrease in the second quarter 2003 compared to 2002 was mainly attributed to a declining interest rate environment which caused the yields on the loan and investment portfolios to decline more than funding costs. 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. PROVISION AND ALLOWANCE FOR LOAN AND LEASE LOSSES. The provision for loan and lease losses represents the charge to income necessary to adjust the allowance for loan and lease losses to an amount that represents management's assessment of the losses inherent in the Corporation's loan portfolio. All lending activity contains associated risks of loss which the Corporation recognizes as a necessary element of its business activity. To assist in identifying and managing potential loan losses, the Corporation maintains a loan review function that regularly evaluates individual credit relationships as well as overall loan-portfolio conditions. One of the primary objectives of this loan review function is to make recommendations to management as to the appropriate level of the loss allowance based on a methodology developed by management and approved by the board of directors. On a monthly basis credit reporting is made through a board level committee. The provision for loan and lease losses totaled $355 for the three months ended June 30, 2003, compared to $500 for the same period in 2002. The decrease in the provision was due to a decrease in net charge-offs partially offset by continued growth in the loan portfolio. Net charge-offs for the three months ended June 30, 2003 were $279 compared to net charge-offs of $449 for the same quarter in 2002. The charge offs in the second quarter mainly consisted of personal loans, and four commercial loans. Management will continue to monitor the credit quality of the lending portfolio and will recognize additional provisions in the future as necessary, in the opinion of management, to maintain the provisions for loan and lease losses at an appropriate level. At June 30, 2003, management believes that all known and inherent losses in the loan and lease portfolio have been provided. The allowance for loan and lease losses totaled $4,302, or 1.11% of total loans and leases, at June 30, 2003 compared to $4,094, or 1.10% of total loans and leases, at December 31, 2002. The allowance was 101% of nonperforming loans at June 30, 2003, a decline from 115% at December 31, 2002, resulting from a decline in non-accrual loans offset by an increase in loans greater than 90 days delinquent and still accruing. NONINTEREST INCOME AND NONINTEREST EXPENSE. Total noninterest income increased $524, or 34.77%, for the three months ended June 30, 2003, compared to the same period in 2002. The increase was the result of an increase in transactional volume from the Bank's retail products, gain on the sale of property, and due to a large increase in the volume of loans sold in the secondary market. During the quarter the Corporation sold land, originally purchased for branch expansion, since the site no longer met the Bank's geographic requirements of its long-term strategy. Total noninterest expense increased $164, or 3.62%, for the three months ended June 30, 2003, compared to the same period in 2002. The increase was primarily the result of an increase in professional and legal fees related to shareholder matters offset by decreases in various noninterest expenses. During the period, the Corporation expressed a slight decline in salary and benefits expense as it introduced efficiency standards within the organization. INCOME TAXES. The provision for income taxes totaled $569, for an effective tax rate of 32.02%, for the three months ended June 30, 2003 and $618, for an effective tax rate of 34.60%, for the three months ended June 30, 2002. The decline in the effective tax rate is attributed to an increase in tax exempt revenue derived from tax-exempt securities and the earnings on bank-owned life insurance. - -------------------------------------------------------------------------------- 13. DCB FINANCIAL CORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND JUNE 30, 2002 NET INCOME. Net income for the six months ended June 30, 2003 totaled $2,706, compared to net income of $2,623 for the same period in 2002. Earnings per share was $.67 for the six months ended June 30, 2003 compared to $.63 for the six months ended June 30, 2002. The increase in earnings per share is a result of increased income coupled with a decrease in outstanding shares. NET INTEREST INCOME. Net interest income was $9,549 for the six months ended June 30, 2003, compared to $10,549 for the same period in 2002. The $1,000 decrease for the six months ended June 30, 2003, compared to the same period in 2002 was mainly attributed to a declining interest rate environment that has caused the spreads earned on the loan and investment portfolios to decline. PROVISION AND ALLOWANCE FOR LOAN AND LEASE LOSSES. The provision for loan and lease losses totaled $688 for the six months ended June 30, 2003, compared to $800 for the same period in 2002. The decrease in the provision was due to a decrease in net charge-offs and a decline in nonaccrual loans, partially offset by continued growth in the loan portfolio. Nonaccrual loans decreased from $3,387 at December 31, 2002 to $2,850 at June 30, 2003. Net charge-offs for the six months ended June 30, 2003 were $480 compared to net charge-offs of $603 for the same period in 2002. Management will continue to monitor the credit quality of the lending portfolio and will recognize additional provisions in the future, as necessary, in the opinion of management, to maintain the provisions for loan and lease losses at an appropriate level. The charge offs for 2003 mainly consisted of personal loans and the many charges from commercial loans that defaulted in 2002 but have now completed workout activities. NONINTEREST INCOME AND NONINTEREST EXPENSE. Total noninterest income increased $890, or 30.24%, for the six months ended June 30, 2003, compared to the same period in 2002. The increase was the result of an increase in transactional volume from the Bank's retail products, gain on the sale of real estate, and a large increase in the volume of secondary market loan sales. The increase in secondary market activity generally reflects management's preference to avoid fixed-interest rate risk in the current loan rate environment. Total noninterest expense increased $18, or .21%, for the six months ended June 30, 2003, compared to the same period in 2002. The increase was primarily the result of an increase in professional and legal fees related to shareholder matters offset by declines salaries and benefits. INCOME TAXES. The provision for income taxes totaled $1,235, for an effective tax rate of 31.34%, for the six months ended June 30, 2003 and $1,334, for an effective tax rate of 33.71%, for the six months ended June 30, 2002. The decline in the effective tax rate 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 - -------------------------------------------------------------------------------- 14. DCB FINANCIAL CORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- 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. The Corporation's liquidity requirements are reported to and closely monitored by the ALCO Committee, which ensures the strategic liquidity plan is being closely followed. Cash and cash equivalents decreased $3,192, or 9.82%, to $29,311 at June 30, 2003 compared to $32,503 at December 31, 2002. Cash and equivalents represented 5.55% of total assets at June 30, 2003 and 6.22% of total assets at December 31, 2002. The Corporation has the ability to borrow funds at the holding company and through its banking subsidiary. DCB Financial has a $7.5 million revolving line of credit through a local institution priced at competitive market rates. The Bank has the ability to borrow through the Federal Home Loan Bank and has various correspondent banking partners to purchase overnight federal funds should the need arise to supplement its future liquidity needs. 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 decreased $3,767 between December 31, 2002 and June 30, 2003. The reduction was primarily due to the Corporation's purchase of treasury shares at a recorded fair value of $5,540, a $142 after-tax reduction in accumulated other comprehensive income and the declaration of $868 in dividends, all of which were partially offset by period earnings of $2,706. 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. The Corporation and its subsidiaries meet all regulatory capital requirements. The ratio of total capital to risk-weighted assets was 11.87% at June 30, 2003, while the Tier 1 risk-based capital ratio was 10.88%. 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 9.09% at June 30, 2003. IMPACT OF NEW ACCOUNTING STANDARDS In November 2002, the Financial Accounting Standards Board (the FASB) issued FASB Interpretation ("FIN No. 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others." FIN No. 45 requires a guarantor entity, at the inception of a guarantee covered by the measurement provisions of the interpretation, to record a liability for the fair value of the obligation undertaken in issuing guarantee. The Corporation has financial letters of credit. Financial letters of credit require the Corporation to make payment in the customer's financial condition deteriorates, as defined in the agreements. FIN No. 45 requires the Corporation to record an initial liability generally equal to the fees received for these letters of credit, when guaranteeing obligations unless it becomes probable that the Corporation would have to perform under the - -------------------------------------------------------------------------------- 15. DCB FINANCIAL CORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------- guarantee. FIN No. 45 applies prospectively to letters of credit the Corporation issues or modifies subsequent to December 31, 2002. The Corporation adopted FIN No. 45 on January 1, 2003, without material effect on its financial statements. The Corporation defines the initial fair value of these letters of credit as the fee received from the customer. The maximum potential undiscounted amount of future payments of these letters of credit as of June 30, 2003 are $2.4 million which expire through March 18, 2004. Amounts due under these letters of credit would be reduced by any proceeds that the Corporation would be able to obtain in liquidating the collateral for the loans, which varies depending on the customer. In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities." FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns, or both. FIN 46 also requires disclosures about variable interest entities that a company is not required to consolidate, but in which it has a significant variable interest. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements apply to existing entities in the first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when variable interest entity was established. The Corporation is currently evaluating the impact of FIN 46 and expects no material effect on its financial statements. 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 2002 Annual Report includes a table depicting the changes in the Corporation's interest rate risk as of December 31, 2002, 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, 2002 that would significantly change their ratio of rate sensitive assets to rate sensitive liabilities. - -------------------------------------------------------------------------------- 16. 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 repaid 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. Additional consideration should also be given to today's current interest rate levels. Most deposit products are within 100 basis points of zero percent and other products within 200 basis points. Should rates continue to decline, fewer liabilities could be repriced down to offset potentially lower yields on loans. Thus 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, 2003, 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, 2003, 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, 2003, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. - -------------------------------------------------------------------------------- 17. DCB FINANCIAL CORP FORM 10-Q Quarter ended June 30, 2003 PART II - OTHER INFORMATION - -------------------------------------------------------------------------------- Item 1 - Legal Proceedings: There are no matters required to be reported under this item. Item 2 - Changes in Securities: There are no matters required to be reported under this item. 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: There were no matters submitted to a vote of the security holders during the period covered by this report. Item 5 - Other Information: There are no matters required to be reported under this item. Item 6 - Exhibits and Reports on Form 8-K: (a) 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 Registrant's filing on Form S-4 on November 5, 1996. File No. 333-15579.) 3.2 Code of Regulations of DCB Financial Corp. (Incorporated by reference to the Registrant's filing on Form S-4 on November 5, 1996. File No. 333-15579.) 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
- -------------------------------------------------------------------------------- 18. DCB FINANCIAL CORP FORM 10-Q Quarter ended June 30, 2003 PART II - OTHER INFORMATION - -------------------------------------------------------------------------------- (a) Reports on Form 8-K - A report on Form 8-K/A was filed on April 4, 2003 (report date: 3/13/03) - amend current report, items 4 and 7, change in the Corporation's certifying accountant. (b) Reports on Form 8-K - A report on Form 8-K was filed on April 21, 2003 (report date: 4/18/03) - purchase and standstill agreement. (c) Reports on Form 8-K - A report on Form 8-K was filed on April 28, 2003 (report date: 4/28/03) - first quarter 2003 earnings release. - -------------------------------------------------------------------------------- 19. 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 4, 2003 /s/ Jeffrey Benton --------------- ----------------------------------------------- (Signature) Jeffrey T. Benton President and Chief Executive Officer Date: August 4, 2003 /s/ John A. Ustaszewski -------------- ----------------------------------------------- (Signature) John A. Ustaszewski Vice President and Chief Financial Officer - -------------------------------------------------------------------------------- 20. DCB FINANCIAL CORP INDEX TO EXHIBITS - --------------------------------------------------------------------------------
EXHIBIT NUMBER DESCRIPTION PAGE NUMBER - ------ ----------- ----------- 3.1 Amended and Restated Articles of Incorporation of NA DCB Financial Corp. (Incorporated by reference to the Registrant's filing on Form S-3 on November 5, 1996. File No. 333-15579.) 3.2 Code of Regulations of DCB Financial Corp. NA (Incorporated by reference Registrant's filing Form S-4 on November 6, 1996. File No. 333-15579). 4 Instruments Defining the Rights of Security NA Holders. (See Exhibits 3.1 and 3.2.) 11 Statement re: computation of per share earnings Reference is hereby made to Consolidated Statements of Income on page 4 and Note 1 of Notes to Consolidated Financial Statements on page 6, hereof. 31.1 Certification of Chief Executive Officer pursuant Page 22 to section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer pursuant to Page 23 section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification pursuant to 18 U.S.C. 1350, as enacted Page 24 Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification pursuant to 18 U.S.C. 1350, as enacted Page 25 Pursuant to section 906 of the Sarbanes-Oxley Act of 2002
- -------------------------------------------------------------------------------- 21. EX-31.1 3 l02337aexv31w1.txt EXHIBIT 31.1 DCB FINANCIAL CORP EXHIBIT 31.1 - ------------ CERTIFICATIONS I, Jeffrey Benton, President and Chief Executive Officer of DCB Financial Corp, certify that: 1. I have reviewed this quarterly report on Form 10-Q of DCB Financial Corp; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [THIS PARAGRAPH INTENTIONALLY LEFT BLANK.] (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 4, 2003 /s/ Jeffrey Benton -------------- -------------------------------------------- (Signature) Jeffrey Benton Title: President and Chief Executive Officer - -------------------------------------------------------------------------------- 22. EX-31.2 4 l02337aexv31w2.txt EXHIBIT 31.2 DCB FINANCIAL CORP EXHIBIT 31.2 - ------------ CERTIFICATIONS I, John A. Ustaszewski Vice President and Chief Financial Officer of DCB Financial Corp, certify that: 1. I have reviewed this quarterly report on Form 10-Q of DCB Financial Corp; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [THIS PARAGRAPH INTENTIONALLY LEFT BLANK.] (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 4, 2003 /s/ John A. Ustaszewski ------------------ -------------------------------- (Signature) John A. Ustaszewski Title: Vice President and Chief Financial Officer - -------------------------------------------------------------------------------- 23. EX-32.1 5 l02337aexv32w1.txt EXHIBIT 32.1 DCB FINANCIAL CORP EXHIBIT 32.1 - ------------ CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ENACTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of DCB Financial Corp (the "Company") on Form 10-Q for the period ending June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jeffrey Benton, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Jeffrey Benton Jeffrey Benton President and Chief Executive Officer August 4, 2003 - -------------------------------------------------------------------------------- 24. EX-32.2 6 l02337aexv32w2.txt EXHIBIT 32.2 EXHIBIT 32.2 - ------------ CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ENACTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of DCB Financial Corp (the "Company") on Form 10-Q for the period ending June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John A. Ustaszewski, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ John A. Ustaszewski John A. Ustaszewski Vice-President and Chief Financial Officer August 4, 2003 - -------------------------------------------------------------------------------- 25. -----END PRIVACY-ENHANCED MESSAGE-----