UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: SEPTEMBER 30, 2006

OR

o 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	30-1469837
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

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) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ      No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filers o     Accelerated filer þ      Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).

Yes o      No þ

As of November 3, 2006, the latest practicable date, 3,814,708 shares of the registrant’s no par value common stock were issued and outstanding.

DCB FINANCIAL CORP

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2006

Table of Contents

	Page
PART I – FINANCIAL INFORMATION
ITEM 1 – Financial Statements
Consolidated Balance Sheets		3
Consolidated Statements of Income		4
Consolidated Statements of Comprehensive Income		5
Condensed Consolidated Statements of Cash Flows		6
Notes to the Condensed Consolidated Financial Statements		7
ITEM 1A – Risk Factors		15
ITEM 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
ITEM 3 – Quantitative and Qualitative Disclosures About Market Risk		21
ITEM 4 – Controls and Procedures		22
PART II – OTHER INFORMATION		23
SIGNATURES		25
EX-31.1
EX-31.2
EX-32.1
EX-32.2

DCB FINANCIAL CORP

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

Item 1. Financial Statements

	September 30,			December 31,
	2006			2005
	(unaudited)
ASSETS
Cash and due from financial institutions	$	13,156		$	18,069
Federal funds sold		7,975			—
Total cash and cash equivalents		21,131			18,069
Securities available for sale		90,171			96,580
Loans held for sale		778			1,640
Loans		556,127			553,045
Less allowance for loan losses		(5,567	)		(5,535	)
Net loans		550,560			547,510
Real estate owned		41			386
Investment in FHLB stock		3,546			3,327
Premises and equipment, net		9,305			8,854
Investment in unconsolidated affiliates		968			614
Bank owned life insurance		9,266			8,898
Accrued interest receivable and other assets		6,490			5,018
Total assets	$	692,256		$	690,896
LIABILITIES
Deposits
Noninterest-bearing	$	59,325		$	68,977
Interest-bearing		470,497			434,929
Total deposits		529,822			503,906
Federal funds purchased and other short-term borrowings		15,307			25,610
Federal Home Loan Bank advances		86,241			102,925
Accrued interest payable and other liabilities		818			2,201
Total liabilities		632,188			634,642
SHAREHOLDERS’ EQUITY
Common stock, no par value, 7,500,000 shares authorized, 4,273,494 issued at September 30, 2006 and 4,273,200 issued at December 31, 2005		3,780			3,780
Retained earnings		67,677			63,552
Treasury stock, at cost, 458,786 and 447,112 shares at September 30, 2006 and December 31, 2005		(10,841	)		(10,506	)
Accumulated other comprehensive loss		(548	)		(572	)
Total shareholders’ equity		60,068			56,254
Total liabilities and shareholders’ equity	$	692,256		$	690,896

DCB FINANCIAL CORP

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except per share data)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2006		2005		2006			2005
Interest and dividend income
Loans	$	10,399	$	8,581	$	29,759		$	23,634
Taxable securities		860		767		2,585			2,291
Tax-exempt securities		238		206		708			579
Federal funds sold and other		71		5		149			7
Total interest income		11,568		9,559		33,201			26,511
Interest expense
Deposits		4,633		2,676		12,520			6,671
Borrowings		1,098		1,024		3,171			2,849
Total interest expense		5,731		3,700		15,691			9,520
Net interest income		5,837		5,859		17,510			16,991
Provision for loan losses		390		545		1,370			1,535
Net interest income after provision for loan losses		5,447		5,314		16,140			15,456
Noninterest income
Service charges on deposit accounts		691		686		1,990			1,891
Trust department income		165		161		575			513
Net gain (loss) on sale of assets		1		—		(9	)		(32	)
Gains on sale of loans		80		104		255			276
Treasury management fees		132		95		447			310
Data processing servicing fees		92		83		260			232
Earnings on bank owned life insurance		120		120		368			345
Other		146		101		399			685
		1,427		1,350		4,285			4,220
Noninterest expense
Salaries and other employee benefits		2,262		2,124		6,773			6,408
Occupancy and equipment		801		771		2,403			2,493
Professional services		118		53		390			323
Advertising		111		101		304			308
Postage, freight and courier		66		89		267			273
Supplies		70		71		202			196
State franchise taxes		136		110		399			325
Other		552		486		1,595			1,479
		4,116		3,805		12,333			11,805
Income before income taxes		2,758		2,859		8,092			7,871
Federal income tax expense		823		877		2,403			2,370
Net income	$	1,935	$	1,982	$	5,689		$	5,501
Basic and diluted earnings per common share	$	0.51	$	0.51	$	1.49		$	1.41
Dividends per common share	$	0.14	$	0.12	$	0.41		$	0.35

DCB FINANCIAL CORP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2006			2005			2006			2005
Net income	$	1,935		$	1,982		$	5,689		$	5,501
Unrealized gains (losses) on securities available for sale, net of tax benefits		605			(155	)		24			(487	)
Comprehensive income	$	2,540		$	1,827		$	5,713		$	5,014
Accumulated other comprehensive loss	$	(548	)	$	(252	)	$	(548	)	$	(252	)

DCB FINANCIAL CORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

	Nine Months Ended
	September 30,
	2006			2005
Cash flows provided by operating activities	$	5,912		$	5,723
Cash flows provided by (used in) investing activities
Securities available for sale
Purchases		(7,743	)		(23,041	)
Maturities, principal payments and calls		7,669			12,185
Sales		5,996			10,498
Net change in loans		(4,675	)		(61,480	)
Premises and equipment expenditures		(1,167	)		(397	)
Net cash flows provided by (used in) investing activities		80			(62,235	)
Cash flows provided by (used in) financing activities
Net change in deposits		25,916			52,794
Net change in federal funds purchased and other short-term borrowings		(10,303	)		7,668
Net proceeds (repayment) of Federal Home Loan Bank advances		(16,684	)		2,815
Purchase of treasury shares		(335	)		(2,486	)
Proceeds from exercise of stock options		6			—
Cash dividends paid		(1,530	)		(1,370	)
Net cash provided by (used in) financing activities		(2,930	)		59,421
Net change in cash and cash equivalents		3,062			2,909
Cash and cash equivalents at beginning of period		18,069			11,238
Cash and cash equivalents at end of period	$	21,131		$	14,147
Supplemental disclosures of cash flow information:
Cash paid during the period for
Interest on deposits and borrowings	$	15,144		$	8,968
Cash dividends declared but unpaid	$	534		$	465

See notes to the consolidated financial statements.

6.

DCB FINANCIAL CORP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in thousands, except per share data)

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These interim financial statements are prepared without audit and reflect all adjustments which, in the opinion of management, are necessary to present fairly the financial position of DCB Financial Corp (the “Corporation”) at September 30, 2006, and its results of operations and cash flows for the three and nine month periods ended September 30, 2006 and 2005. All such adjustments are normal and recurring in nature. The accompanying consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not purport to contain all necessary financial disclosures required by accounting principles generally accepted in the United States of America that might otherwise be necessary in the circumstances, and should be read in conjunction with the consolidated financial statements, and notes thereto, included in its 2005 Annual Report. Refer to the accounting policies of the Corporation described in the Notes to Consolidated Financial Statements contained in the Corporation’s 2005 Annual Report. The Corporation has consistently followed these policies in preparing this Form 10-Q.

The accompanying consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiary, The Delaware County Bank and Trust Company (the “Bank”). All significant intercompany accounts and transactions have been eliminated in consolidation. Management considers the Corporation to operate within one business segment, banking.

To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions based on available information. These estimates and assumptions affect amounts reported in the financial statements and disclosures provided, and future results could differ. The allowance for loan losses, fair values of financial instruments and status of contingencies are particularly subject to change.

Income tax expense is based on the effective tax rate expected to be applicable for the entire year. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

Earnings per share

Earnings per common share is net income divided by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed including the dilutive effect of additional potential common shares under stock options.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2006		2005		2006		2005
Weighted-average common shares outstanding (basic)		3,814,708		3,864,865		3,816,780		3,909,627
Dilutive effect of assumed exercise of stock options		6,868		2,658		6,543		2,775
Weighted-average common shares outstanding (diluted)		3,821,576		3,867,523		3,823,323		3,912,402

Options to purchase 26,914 shares of common stock with a weighted-average exercise price of $30.70 were outstanding as of September 30, 2006 but were excluded from the computation of common share equivalents for both the three and nine month periods because the exercise price was greater than the average price.

7.

DCB FINANCIAL CORP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in thousands)

Stock option plan

The Corporation’s shareholders approved an Employee Stock Option Plan (the Plan) in May 2004. The Plan grants certain employees the right to purchase shares at a predetermined price. The plan is limited to 300,000 shares. The shares granted to employees vest 20% per year over a five year and expire after ten years. During 2006, 34,529 shares were granted to employees under the plan, at a weighted average price of $29.94. Approximately 10,000 shares will become exercisable during 2006.

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (”SFAS”) No. 123(R), “Share-Based Payment,” which revises SFAS No. 123, “Accounting for Stock-Based Compensation,” and supersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123(R) requires that cost related to the fair value of all equity-based awards to employees, including grants of employee stock options, be recognized in the financial statements.

The Corporation has adopted the provisions of SFAS No. 123(R) effective January 1, 2006, using the modified prospective transition method, as permitted, and therefore, has not restated its financial statements for prior periods. Under this method, the Corporation has applied the provisions of SFAS No. 123(R) to new equity-based awards and to equity-based awards modified, repurchased, or cancelled after January 1, 2006. In addition, the Corporation has recognized compensation cost for the portion of unvested equity-based awards for which the requisite service period has not been rendered as of January 1, 2006. The compensation cost recorded for unvested equity-based awards is based on their grant-date fair value. For the three and nine months ended September 30, 2006, the Company recorded $7 thousand and $20 thousand respectively, in after tax compensation cost ($10 thousand and $31 thousand pretax) for equity-based awards that vested during the three and nine months ended September 30, 2006. The Corporation has $260 thousand of total unrecognized compensation cost related to non-vested equity-based awards granted under the Plan as of September 30, 2006, which is expected to be recognized over a weighted-average contractual period of 5 years.

Prior to January 1, 2006, the Corporation utilized APB Opinion No. 25 and related Interpretations in accounting for the Stock Option Plan. Accordingly, no compensation cost has been recognized in prior periods for the Plan. Had compensation cost for the Corporation’s stock option plan been determined based on the fair value at the grant dates for awards under the plan consistent with the accounting method utilized in SFAS No. 123, the Corporation’s net earnings and earnings per share would have been reported as the pro forma amounts indicated below:

		Three Months			Nine Months
		Ended			Ended
		September 30,			September 30,
		2005			2005
		(In thousands, except per share data)
NET EARNINGS	As reported	$	1,982		$	5,501
	Stock-based compensation, net of tax		(3	)		(9	)
	Pro-forma	$	1,979		$	5,492
EARNINGS PER SHARE
BASIC	As reported	$	0.51		$	1.41
	Stock-based compensation, net of tax		—			(.01	)
	Pro-forma	$	0.51		$	1.40
DILUTED	As reported	$	0.51		$	1.41
	Stock-based compensation, net of tax		—			(.01	)
	Pro-forma	$	0.51		$	1.40

8.

DCB FINANCIAL CORP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in thousands)

Stock option plan (continued)

The fair value of each option is estimated on the date of grant using the modified Black-Scholes options pricing model with the following weighted-average assumptions used for grants in 2006 and 2005: dividend yield of 2.0% for both 2006 and 2005; expected volatility of 10.0% for 2006 and 14.0% for 2005; risk-free interest rates with 4.75% and 4.25% for 2006 and 2005, respectively; and expected lives of 10 years for each grant.

The expected term of the options is based on evaluation of historical and expected future employee exercise behavior. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at the grant date. Volatility is based on historical volatility of the Corporation’s stock.

A summary of the status of the Corporation’s Stock Option Plan as of September 30, 2006 and December 31, 2005 and changes during the periods then ended are presented below:

	Nine Months Ended
	September 30,
	2006
						WEIGHTED
				WEIGHTED		AVERAGE
				AVERAGE		REMAINING
				EXERCISE		CONTRACTUAL
	SHARES			PRICE		LIFE
Outstanding at beginning of year		40,687		$	25.30	8 years
Granted		34,529			29.94	9 years
Exercised		(294	)		20.14
Forfeited		(3,142	)		13.72
Outstanding at end of period		71,780		$	27.19	9 years
Options exercisable at period end		9,657		$	24.49
Weighted-average fair value of options granted during the period				$	6.19
Aggregate intrinsic value of vested options (in 000’s)				$	48
Aggregate intrinsic value of all options (in 000’s)				$	149

9.

DCB FINANCIAL CORP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in thousands)

Stock option plan (continued)

	Year Ended
	December 31,
	2005
				WEIGHTED
				AVERAGE
				EXERCISE
	SHARES			PRICE
Outstanding at beginning of year		15,105		$	23.40
Granted		26,219		$	25.74
Exercised		—			—
Forfeited		(637	)	$	23.40
Outstanding at end of year		40,687		$	25.30
Options exercisable at year-end		2,894		$	23.40
Weighted-average fair value of options granted during the year				$	4.68

The following information applies to options outstanding at September 30, 2006:

NUMBER OUTSTANDING	RANGE OF EXERCISE PRICES
71,780	$	23.40 - $30.70

Newly issued Accounting Standards: In February 2006, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 155, “Accounting for Certain Hybrid Instruments – an amendment of FASB Statements No. 133 and 140,” to simplify and make more consistent the accounting for certain financial instruments. Specifically, SFAS No. 155 amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” to permit fair value remeasurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided that the whole instrument is accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities,” to allow a qualifying special purpose entity to hold a derivative instrument that pertains to a beneficial interest other than another derivative financial instrument.

10.

DCB FINANCIAL CORP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in thousands)

SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006, or January 1, 2007 as to the Corporation, with earlier application allowed. The Corporation is currently evaluating SFAS No. 155, but does not expect it to have a material adverse effect on the Corporation’s financial position or results of operations.

In September 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets – an amendment of SFAS No. 140,” to simplify the accounting for separately recognized servicing assets and servicing liabilities. Specifically, SFAS No. 156 amends SFAS No. 140 to require an entity to take the following steps:

• Separately recognize financial assets as servicing assets or servicing entities, each time it undertakes an obligation to service a financial asset by entering into certain kinds of servicing contracts;

• Initially measure all separately recognized servicing assets and liabilities at fair value, if practicable, and;

• Separately present servicing assets and liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities.

Additionally, SFAS No. 156 permits, but does not require, an entity to choose either the amortization method or the fair value measurement method for measuring each class of separately recognized servicing assets and servicing liabilities. SFAS No. 156 also permits a servicer that uses derivative financial instruments to offset risks on servicing to use fair value measurement when reporting both the derivative financial instrument and related servicing asset or liability.

SFAS No. 156 applies to all separately recognized servicing assets and liabilities acquired or issued after the beginning of an entity’s fiscal year that begins after September 15, 2006, or January 1, 2007 as to the Corporation, with earlier application permitted. The Corporation is currently evaluating SFAS No. 156, but does not expect it to have a material adverse effect on the Corporation’s financial position or results of operations.

In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB 108 was issued to provide consistency between how registrants quantify financial statement misstatements.

Historically, there have been two widely-used methods for quantifying the effects of financial statement misstatements. These methods are referred to as the “roll-over” and “iron curtain” method. The roll-over method quantifies the amount by which the current year income statement is misstated. Exclusive reliance on an income statement approach can result in the accumulation of errors on the balance sheet that may not have been material to any individual income statement, but which may misstate one or more balance sheet accounts. The iron curtain method quantifies the error as the cumulative amount by which the current year balance sheet is misstated. Exclusive reliance on a balance sheet approach can result in disregarding the effects of errors in the current year income statement that results from the correction of an error existing in previously issued financial statements. The Corporation currently uses the roll-over method for quantifying identified financial statement misstatements.

SAB 108 established an approach that requires quantification of financial statement misstatements based on the effects of the misstatement on each of the company’s financial statements and the related financial statement disclosures. This approach is commonly referred to as the “dual approach” because it requires quantification of errors under both the roll-over and iron curtain methods.

SAB 108 allows registrants to initially apply the dual approach either by (1) retroactively adjusting prior financial statements as if the dual approach had always been used or by (2) recording the cumulative effect of initially applying the dual approach as adjustments to the carrying values of assets and liabilities as of January 1, 2006 with an offsetting adjustment recorded to the opening balance of retained earnings. Use of this “cumulative effect” transition method requires detailed disclosure of the nature and amount of each individual error being corrected through the cumulative adjustment and how and when it arose.

11.

DCB FINANCIAL CORP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in thousands)

Management is currently evaluating the requirements of SAB 108 but does not expect it to have a material adverse effect on the Company’s financial position or results of operations.

In July 2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes.” The interpretation clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” Specifically, FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax provision taken or expected to be taken on a tax return. FIN 48 also provides guidance on the related derecognition, classification, interest and penalties, accounting for interim periods, disclosure, and transition of uncertain tax positions. FIN 48 is effective for fiscal years beginning after December 15, 2006, or January 1, 2007 as to the Corporation. The Corporation is currently evaluating the effects of FIN 48.

Application of Critical Accounting Policies

DCB’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and follow general practices within the financial services industry. The application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; as this information changes, the financial statements could reflect different estimates, assumptions, and judgments.

The most significant accounting policies followed by the Corporation are presented in Note 1 of Notes to Consolidated Financial Statements contained in the Corporation’s 2005 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.

12.

DCB FINANCIAL CORP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in thousands)

NOTE 2 — SECURITIES

The amortized cost and estimated fair values of securities available for sale were as follows:

			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	September 30, 2006
U.S. Government and agency obligations	$	21,487	$	3	$	(275	)	$	21,215
State and municipal obligations		25,793		106		(96	)		25,803
Corporate bonds		8,482		38		(1	)		8,519
Mortgage-backed securities		35,182		35		(674	)		34,543
Total debt securities		90,944		182		(1,046	)		90,080
Other securities		58		40		(7	)		91
Total	$	91,002	$	222	$	(1,053	)	$	90,171

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at September 30, 2006:

	(Less than 12 months)							(12 months or longer)
			Estimated		Gross					Estimated		Gross					Estimated		Total
Description of	Number of		Fair		Unrealized			Number of		Fair		Unrealized			Number of		Fair		Unrealized
Securities	investments		value		losses			investments		value		losses			investments		value		losses
U.S. Government and agency obligations		4	$	3,357	$	(15	)		20	$	16,456	$	(260	)		24	$	19,813	$	(275	)
State and municipal obligations		9		2,970		(22	)		25		10,459		(74	)		34		13,429		(96	)
Corporate bonds		1		474		(1	)		—		—		—			1		474		(1	)
Mortgage-backed securities		39		7,081		(63	)		81		23,469		(618	)		120		30,550		(681	)
Total temporarily impaired securities		53	$	13,882	$	(101	)		126	$	50,384	$	(952	)		179	$	64,266	$	(1,053	)

Management has the intent and ability to hold these securities for the foreseeable future and the decline in the fair value is primarily due to an increase in market interest rates. The fair values are expected to recover as the securities approach maturity dates.

Substantially all mortgage-backed securities are backed by pools of mortgages that are insured or guaranteed by the Federal National Mortgage Association (“FNMA”), the Government National Mortgage Association (“GNMA”) or the Federal Home Loan Mortgage Corporation (“FHLMC”).

13.

DCB FINANCIAL CORP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in thousands)

At September 30, 2006, 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 September 30, 2006, 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	$	5,533	$	5,510
Due from one to five years		13,376		13,200
Due from five to ten years		15,817		15,743
Due after ten years		21,035		21,084
Mortgage-backed securities		35,183		34,543
Total debt securities		90,944		90,080
Other securities		58		91
Total	$	91,002	$	90,171

Securities with a carrying amount of $89,727 at September 30, 2006 were pledged to secure public deposits and other obligations.

NOTE 3 — LOANS

Loans were as follows:

	September 30,
	2006
Commercial and industrial	$	49,070
Commercial real estate		200,667
Residential real estate and home equity		201,265
Real estate construction and land development		52,394
Consumer and credit card		51,982
		555,378
Add: Net deferred loan origination costs		749
Total loans receivable	$	556,127

Loans with a carrying amount of $13,798 at September 30, 2006 were pledged to secure other borrowings.

14.

DCB FINANCIAL CORP

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share data)

NOTE 4 — ALLOWANCE FOR LOAN LOSSES

Activity in the allowance for loan losses was as follows:

	Three months ended						Nine months ended
	September 30,						September 30,
	2006			2005			2006			2005
Balance at beginning of period	$	5,792		$	5,370		$	5,535		$	4,818
Provision for loan losses		390			545			1,370			1,535
Loans charged off		(720	)		(315	)		(1,680	)		(830	)
Recoveries		105			48			342			125
Balance at end of period	$	5,567		$	5,648		$	5,567		$	5,648

Nonperforming loans were as follows:

	September 30,		December 31,
	2006		2005
Loans past due 90 days or more and still accruing	$	3,816	$	2,648
Nonaccrual loans		2,091		2,185
Total	$	5,907	$	4,833
Impaired loans (most of which are included in nonperforming loans above) were as follows:
Period-end loans with no allocated allowance for loan losses	$	—	$	—
Period-end loans with allocated allowance for loan losses		2,091		1,655
Total	$	2,091	$	1,655
Amount of the allowance for loan losses allocated	$	560	$	759
Average of impaired loans during the period	$	2,028	$	1,116

Item 1A. Risk Factors

There has been no material change in the nature of the risk factors set forth in the Company’s Form 10-K for the year ended December 31, 2005.

15.

DCB FINANCIAL CORP

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except per share data)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

In the following pages, management presents an analysis of the consolidated financial condition of DCB Financial Corp (the “Corporation”) at September 30, 2006, compared to December 31, 2005, and the consolidated results of operations for the three and nine months ended September 30, 2006, compared to the same period in 2005. This discussion is designed to provide shareholders with a more comprehensive review of the operating results and financial position than could be obtained from reading the consolidated financial statements alone. This analysis should be read in conjunction with the consolidated financial statements and related footnotes and the selected financial data included elsewhere in this report.

FORWARD-LOOKING STATEMENTS

Certain statements in this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to the financial condition and prospects, lending risks, plans for future business development and marketing activities, capital spending and financing sources, capital structure, the effects of regulation and competition, and the prospective business of both the Corporation and its wholly-owned subsidiary The Delaware County Bank & Trust Company (the “Bank”). Where used in this report, the word “anticipate,” “believe,” “estimate,” “expect,” “intend,” and similar words and expressions, related to the Corporation or the Bank or their respective management, identify forward-looking statements. Such forward-looking statements reflect the current views of the Corporation and are based on information currently available to the management of the Corporation and the Bank and upon current expectations, estimates, and projections about the Corporation and its industry, management’s belief with respect thereto, and certain assumptions made by management. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to: (i) significant increases in competitive pressure in the banking and financial services industries; (ii) changes in the interest rate environment which could reduce anticipated or actual margins; (iii) changes in political conditions or the legislative or regulatory environment; (iv) general economic conditions, either nationally or regionally (especially in central Ohio), becoming less favorable than expected resulting in, among other things, a deterioration in credit quality of assets; (v) changes occurring in business conditions and inflation; (vi) changes in technology; (vii) changes in monetary and tax policies; (viii) changes in the securities markets; and (ix) other risks and uncertainties detailed from time to time in the filings of the Corporation with the Commission.

The Corporation does not undertake, and specifically disclaims any obligation, to publicly revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

ANALYSIS OF FINANCIAL CONDITION

The Corporation’s assets totaled $692,256 at September 30, 2006, compared to $690,896 at December 31, 2005, an increase of $1,360, or 0.2%. Since September 30, 2005 assets have increased $15,771 or 2.3% from $676,485. The increase in assets was mainly attributed to loan growth the Corporation experienced within its normal markets, particularly in commercial and real estate construction and land development. The funding that accommodated this loan growth was supplied through deposit growth and other borrowings.

Cash and cash equivalents increased $3,062 from December 31, 2005 to September 30, 2006. Total securities decreased $2,863, or 3.0%, from $96,580 at December 31, 2005 to $90,171 at September 30, 2006. Securities classified as available for sale at September 30, 2006 represented 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 if favorable economic

16.

DCB FINANCIAL CORP
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)

conditions warrant. The Corporation invests primarily in U.S. Treasury notes, U.S. government agencies, municipal bonds, corporate obligations and mortgage-backed securities. The mortgage-backed securities portfolio, totaling $34,543 at September 30, 2006, provides the Corporation with a constant cash flow stream from principal repayments and interest payments. Mortgage-backed securities include Federal Home Loan Mortgage Corporation (“FHLMC”), Government National Mortgage Association (“GNMA”) and Federal National Mortgage Association (“FNMA”) participation certificates. The Corporation held no structured notes during any period presented.

Total loans, including loans held for sale, increased $2,220, or 0.4% from $554,685 at December 31, 2005 to $556,905 at September 30, 2006. The increase is attributed mainly to the continued growth of real estate construction, land development, and commercial real estate loans. The Bank has experienced a decline in loan balances due to unscheduled payoffs in the commercial portfolio due to irrational competitive pricing and, on a positive note, from problem loan resolutions. Other loan categories, in which the Corporation participates, commercial real estate, industrial, and consumer financing, remained relatively stable or experienced small increases in loans outstanding. The Bank’s local market continues to experience increases in the amount of commercial real estate development activity. The Bank has no significant loan concentration in any one industry.

Total deposits increased $25,916, or 5.1%, from $503,906 at December 31, 2005 to $529,822 at September 30, 2006. This growth is mainly attributed to the increase in deposit activity from the Corporation’s larger public fund customers and from an increase in the utilization of various wholesale deposit products available with the capital markets. Utilizing brokered certificates of deposits and money market sweeps, the Corporation is able to provide additional funding for the Company’s loan portfolio. The Bank had approximately $34,994 in brokered certificates of deposit outstanding at September 30, 2006 compared to $23,230 at December 31, 2005. The slower growth of core deposits is attributed to the continued strong competition in the Corporation’s geographic area, where the growth of competitors’ branch locations have made it increasingly difficult to obtain deposits. Management intends to continue to develop new products, and to monitor the rate structure of its deposit products to encourage growth in its deposit liabilities. Noninterest-bearing deposits decreased $9,652, or 14.0%, while interest-bearing deposits increased $35,568, or 8.2%. Total borrowings decreased to $26,987 from $128,535 during the nine months ended September 30, 2005. Typically, the Company utilizes a matched funding methodology for its borrowing and deposit activities. This is done by matching the rates, terms and expected cash flows of its loans to the various liability products. This matching principle is used to not only provide funding, but also as a means of mitigating interest rate risk associated with originating longer-term fixed rate loans. Continued reliance on borrowings outside of normal deposit growth may continue to increase the Corporation’s overall cost of funds.

COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 2006 AND SEPTEMBER 30, 2005

Net Income. Net income for the three months ended September 30, 2005 totaled $1,935, compared to net income of $1,982 for the same period in 2005. Basic and diluted earnings per share was $.51 for both the three months ended September 30, 2006 and 2005.

Net Interest Income. Net interest income represents the amount by which interest income on interest-earning assets exceeds interest paid or accrued on interest-bearing liabilities. Net interest income is the largest component of the Corporation’s income, and is affected by the interest rate environment, the volume, and the composition of interest-earning assets and interest-bearing liabilities.

Net interest income was $5,837 for the three months ended September 30, 2006, compared to $5,859 for the same period in 2005. The $22 decrease in the third quarter 2006 compared to 2005 was mainly attributed to slower growth in loan balances attributed to the current economic environment. The third quarter’s interest margin decreased to 3.56% on a fully tax equivalent basis, from 3.72% during the third quarter 2005.

17.

DCB FINANCIAL CORP
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)

The decline is primarily attributed to funding continued loan growth through higher cost borrowings and deposits associated with the current interest rate environment. The Bank has seen deposit growth primarily in products such as time deposits and money market accounts, which generally carry higher costs compared to checking and savings products. Funding costs may further negatively impact the net interest margin in future periods if the current competitive and rising rate environment remains in effect. The Asset/Liability Management Committee, which is responsible for determining deposit rates, continues to closely monitor the Bank’s cost of funds to take advantage of pricing and cash flow opportunities. Additionally, because of the increased competition in the Bank’s primary marketplace, management has continued to recognize the importance of offering special rates on certain deposit products. These special deposit rates tend to negatively affect the Corporation’s net interest margin.

Provision and Allowance for Loan Losses. The provision for loan losses represents the charge to income necessary to adjust the allowance for loan losses to an amount that represents management’s assessment of the losses known and inherent in the Bank’s loan portfolio. All lending activity contains associated risks of loan losses and the Bank recognizes these credit risks as a necessary element of its business activity.

The provision for loan losses totaled $390 for the three months ended September 30, 2006, compared to $545 for the same period in 2005. This decline is mainly attributed to lower loan growth on a quarter to quarter comparison, mitigated by a reduction in the risk profile of the portfolio. Non-accrual loans for the three months ended September 30, 2006 were $2.091 million compared to $1.885 million for the same period in 2005. Net charge-offs for the three months ended September 30, 2006 increased to $615, compared to $267 for the three months ended September 30, 2005. Annualized net charge-offs for the three months ended September 30, 2006 were 0.44% compared to 0.20% at September 30, 2005. The largest portion of these charge-offs is associated with the Bank’s indirect retail portfolio. Delinquent loans over thirty days from period to period increased to 1.98% at September 30, 2006 from 1.59% at September 30, 2005. Non-accrual loans to total loans declined to 0.38% of loans at September 30, 2006, from 0.40% at September 30, 2005. Management will continue to monitor the credit quality of the lending portfolio and will recognize additional provisions in the future to maintain the allowance for loan losses at an appropriate level. The balance for allowance for loan losses increased to $5,567, or 1.00% of total loans at September 30, 2006, unchanged as a percent of total loans from December 31, 2005.

Noninterest Income. Total noninterest income increased $77, or 5.7%, for the three months ended September 30, 2006, compared to the same period in 2005. The change in noninterest revenues from period to period is mainly attributed to an increase in service charges on deposit accounts coupled with an increase in treasury management fees, offset somewhat by a decline in gains on secondary market loans. Continued softness is expected in the gain on loan sales as product demand has weakened due to the overall decline in the residential real estate market.

Noninterest Expense. Total noninterest expense increased $311, or 8.2%, for the three months ended September 30, 2006, compared to the same period in 2005. The increase was primarily due to increases in salary and employee benefits expenses, and consulting and other professional expenses incurred, offset by a decline in postage, freight and other administrative expenses. The increase in salary and benefits expense is mainly associated with the addition of revenue generating staff in the lending and wealth management divisions, and the addition of compliance and credit personnel utilized for the continued development of the infrastructure supporting the Company’s future growth.

Income Taxes. The increase in income tax expense is primarily attributable to the increase in pre-tax earnings, which was partially offset by an increase in tax-exempt municipal income. The provision for income taxes totaled $823, for an effective tax rate of 29.8%, for the three months ended September 30, 2006 and $877, for an effective tax rate of 30.7%, for the three months ended September 30, 2005.

18.

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 NINE MONTHS
ENDED SEPTEMBER 30, 2006 AND SEPTEMBER 30, 2005

Net Income. Net income for the nine months ended September 30, 2006 totaled $5,689, compared to net income of $5,501 for the same period in 2005. Basic and diluted earnings per share was $1.49 for the nine months ended September 30, 2006 compared to $1.41 for the nine months ended September 30, 2005. The increase in earnings is mainly attributed to the increase in net interest income due to the growth in earning assets and continued monitoring of operating costs.

Net Interest Income. Net interest income was $17,510 for the nine months ended September 30, 2006, compared to $16,991 for the same period in 2005. The $519 increase was mainly attributed to the continued increase in earning assets coupled with the effects of a rising rate environment during the nine month period ended September 30, 2006. However, the Company’s net interest margin continues experiencing pressure due to slower growth in loan balances, coupled with higher cost borrowings and higher cost deposits. To attract the additional deposits needed to fund loan growth, the Company has utilized products such as time deposits and money market accounts, which generally carry higher costs compared to checking and savings products. These higher cost deposit products and other borrowings may continue to be utilized by management, which may further negatively impact the net interest margin in future periods.

Provision and Allowance for Loan Losses. The provision for loan losses totaled $1,370 for the nine months ended September 30, 2006, compared to $1,535 for the same period in 2005. The balance in the provision is reflective of the overall growth in the Corporation’s loan portfolio year over year, mitigated by a reduction in the risk profile of the portfolio. Non-accrual loans at September 30, 2006 totaled $2.091 million, compared to $1.885 million at the same date in 2005. Annualized net charge-offs for the nine months ended September 30, 2006 were 0.32% compared to 0.18% at September 30, 2005. Management will continue to monitor the credit quality of the lending portfolio and will recognize additional provisions in the future to maintain the allowance for loan losses at an appropriate level.

Noninterest Income. Total noninterest income increased $65, or 1.5%, for the nine months ended September 30, 2006, compared to the same period in 2005. The change in noninterest revenues from period to period is attributable to an increase in service charges on deposit accounts coupled with an increase in treasury management fees, both of which were offset by a decrease in other noninterest income. Data processing services and transactional volume from the Bank’s retail products also increased over the previous year’s levels.

Noninterest Expense. Total noninterest expense increased $528, or 4.5%, for the nine months ended September 30, 2006, compared to the same period in 2005. The increase was primarily due to increases in salary and employee benefits expenses, professional services, franchise tax expense and the other noninterest expense category, all of which were partially offset by a decline in occupancy expense. The increase in salary and benefits expense is mainly associated with the addition of revenue generating staff in lending and wealth management, as well as the addition of compliance and credit personnel to improve the Company’s infrastructure. The Corporation’s efficiency ratio decreased slightly to 56.59% for the nine month period ended September 30, 2005 from 55.66% or the same period in 2005.

Income Taxes. The provision for income taxes totaled $2,403 reflecting an effective tax rate of 29.7% for the nine months ended September 30, 2006 and $2,370, or an effective tax rate of 30.1% for the nine months ended September 30, 2005. The decline in the effective tax rate period over period is attributed to an increase in tax-exempt revenue derived from tax exempt securities and the earnings on bank-owned life insurance.

19.

DCB FINANCIAL CORP
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)

LIQUIDITY

Liquidity is the ability of the Corporation to fund customers’ needs for borrowing and deposit withdrawals. The purpose of liquidity management is to assure sufficient cash flow to meet all of the financial commitments and to capitalize on opportunities for business expansion. This ability depends on the financial strength, asset quality and types of deposit and investment instruments offered by the Corporation to its customers. The Corporation’s principal sources of funds are deposits, loan and security repayments, maturities of securities, sales of securities available for sale and other funds provided by operations. The Bank also has the ability to borrow from the FHLB. While scheduled loan repayments and maturing investments are relatively predictable, deposit flows and early loan and mortgage-backed security prepayments are more influenced by interest rates, general economic conditions, and competition. The Corporation maintains investments in liquid assets based upon management’s assessment of (1) need for funds, (2) expected deposit flows, (3) yields available on short-term liquid assets and (4) objectives of the asset/liability management program.

Cash and cash equivalents increased $3,062, or 16.9%, to $21,131 at September 30, 2006 compared to $18,069 at December 31, 2005. Cash and equivalents represented 3.1% of total assets at September 30, 2006 and 2.6% of total assets at December 31, 2005. The Corporation has the ability to borrow funds from the Federal Home Loan Bank and has various correspondent banking relationships to purchase overnight federal funds should the Corporation need to supplement its 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 increased $3,814 between December 31, 2005 and September 30, 2006. The increase was primarily due to period earnings of $5,689, partially offset by the declaration of $1,565 of dividends and the repurchase of 11,684 outstanding shares for a total of $335 thousand.

Tier 1 capital is shareholders’ equity excluding the unrealized gain or loss on securities classified as available for sale. 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 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 11.8% at September 30, 2006, while the Tier 1 risk-based capital ratio was 10.8%. Regulatory minimums call for a total risk-based capital ratio of 8.0%, at least half of which must be Tier 1 capital. The Corporation’s leverage ratio, defined as Tier 1 capital divided by average assets, was 8.7% at September 30, 2006.

The following table sets forth the Corporation’s obligations and commitments to make future payments under contract as of September 30, 2006.

	PAYMENT DUE BY YEAR
			Less than 1						More than
CONCTRACTUAL OBLIGATIONS	Total		year		1-3 years		3-5 years		5 years
FHLB advances	$	86,241	$	10,000	$	13,169	$	11,813	$	51,259
Federal funds purchased and other short-term borrowings		15,307		15,307
Operating lease obligations		7,319		645		1,378		1,049		4,247
Loan and line of credit commitments		150,799		150,799		—		—		—
Total Contractual Obligations	$	259,666	$	176,751	$	14,547	$	12,862	$	55,506

20.

DCB FINANCIAL CORP
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)

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 or Bank, 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 2005 Annual Report includes a table depicting the changes in the Corporation’s interest rate risk as of December 31, 2005, 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, 2005 that would significantly change their ratio of rate sensitive assets to rate sensitive liabilities.

The Corporation’s NPV is more sensitive to rising rates than declining rates. From an overall perspective, such difference in sensitivity occurs principally because, as rates rise, borrowers do not prepay fixed-rate loans as quickly as they do when interest rates are declining. Thus, in a rising interest rate environment, because the Corporation has fixed-rate loans in its loan portfolio, the amount of interest the Corporation would receive on its loans would increase relatively slowly as loans are slowly prepaid and new loans at higher rates are made. Moreover, the interest the Corporation would pay on its deposits would increase rapidly because the Corporation’s deposits generally have shorter periods for repricing. The Corporation can utilize various tools to reduce exposure to changes in interest rates including offering floating versus fixed rate products, or utilizing interest rate swaps. Additional consideration should also be given to today’s current interest rate levels. Several deposit products are within 200 basis points of zero percent and other products within 300 basis points. Should rates 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.

21.

DCB FINANCIAL CORP
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)

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 September 30, 2006, 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 September 30, 2006, 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 quarter ended September 30, 2006, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

22.

DCB FINANCIAL CORP
FORM 10-Q
Quarter ended September 30, 2006

PART II — OTHER INFORMATION

Item 1 — Legal Proceedings:

     There are no matters required to be reported under this item.

Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds:

ISSUER PURCHASES OF EQUITY SECURITIES

							(d)
					(c)		Maximum Number (or
					Total Number of		Approximate Dollar
					Shares (or Units)		Value) of Shares
	(a)				Purchased as Part		(or Units) that May
	Total Number of		(b)		of Publicly		Yet Be Purchased
	Shares (or Units)		Average Price Paid		Announced Plans or		Under the Plans or
Period	Purchased		per Share (or Unit)		Programs(1)		Programs
Month #l 7/1/2006 to 7/31/2006		—		—		—		—
Month #2 8/1/2006 to 8/31/2006		—		—		—		—
Month #3 9/1/2006 to 9/30/2006		—		—		—		—
Total		—		—		—		79,644

(1) On September 17, 2005, the Company announced a repurchase program which authorizes the repurchase of up to 200,000 of its common shares over a two year period commencing September 16, 2005.

Item 3 — Defaults Upon Senior Securities:

     There are no matters required to be reported under this item.

23.

DCB FINANCIAL CORP

FORM 10-Q
Quarter ended September 30, 2006
PART II — OTHER INFORMATION

Item 4 — Submission of Matters to a Vote of Security Holders:

     There are no matters required to be reported under this item.

Item 5 — Other Information:

There is no pending litigation of a material nature, other than routine litigation incidental to the business of the Corporation and Bank, to which the Corporation or any of its affiliates is a party or of which any of their property is the subject. Further, there are no material legal proceedings in which any director, executive officer, principal shareholder or affiliate of the Corporation is a party or has a material interest, which is adverse to the Corporation or Bank. There is no routine litigation in which the Corporation or Bank is involved, which is expected to have a material adverse impact on the financial position or results of operations of the Corporation or Bank.

Item 6 — Exhibits:

     Exhibits – The following exhibits are filed as a part of this report:

Exhibit No.	Exhibit
3.1	Amended and Restated Articles of Incorporation of DCB Financial Corp, incorporated by reference to the Company’s Report on Form 10-Q filed with the Commission on November 14, 2003.
3.2	Amended and Restated Articles of Incorporation of DCB Financial Corp, incorporated by reference to the Company’s Report on Form 10-Q filed with the Commission on November 14, 2003.
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

24

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: November 3, 2006	/s/ Jeffrey Benton
	(Signature)
	Jeffrey Benton
	President and Chief Executive Officer
Date: November 3, 2006	/s/ John A. Ustaszewski
	(Signature)
	John A. Ustaszewski
	Senior Vice President and Chief Financial Officer

25

DCB FINANCIAL CORP

INDEX TO EXHIBITS

EXHIBIT
NUMBER	DESCRIPTION
3.1	Amended and Restated Articles of Incorporation of DCB Financial Corp, incorporated by reference to the Company’s Report on Form 10-Q filed with the Commission on November 14, 2003.
3.2	Amended and Restated Articles of Incorporation of DCB Financial Corp, incorporated by reference to the Company’s Report on Form 10-Q filed with the Commission on November 14, 2003.
31.1	Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification pursuant to 18 U.S.C. 1350, as enacted Pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification pursuant to 18 U.S.C. 1350, as enacted Pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

26